Strong Profitability for Moroccan Banks Through 2026, Boosted by Credit Growth, Says Fitch

Sectoral loan growth averaged 4.5% over the period 2019-2024 and 5% in 2024 and 2025. According to Fitch Ratings, it is expected to reach 6% in 2025. This forecast exceeds, according to the financial rating agency, the median for the Middle East and North Africa region. It should be noted that the seven largest Moroccan banks recorded an increase in their aggregate net income of 19% over one year.

Moroccan banks are expected to maintain their high profitability in 2025 and 2026. This is what the American rating agency Fitch Ratings says. In a report dedicated to the national banking system, it assures that the growth of sectoral loans was 4.5% on average over the period 2019-2024 and 5% over the period 2024-2025. It predicts that it will reach 6% in 2025. The growth anticipated by the agency is supported by a favorable economic environment and stimulated by major infrastructure and industrial projects.

However, this forecast remains confronted with the issue of bad debts which continue their upward trend. Their volume has more than doubled over the last decade. It thus reached 98 billion dirhams at the end of September 2024, or 8.6% of the sector’s credits and approximately 7% of GDP.

On the macroeconomic front, the agency is counting on GDP growth of 3.8% over the period 2025-2026. These forecasts are close to those of the HCP (see also pages 8 and 9). Structural reforms could also be positive for bank credit, in particular the creation of a secondary market for non-performing loans, which should be adopted by Parliament this year.

This forecast exceeds, according to Fitch, the median for the Middle East and North Africa region. It should be noted that the seven largest Moroccan banks recorded, in the third quarter of 2024, an increase in their aggregate net income of 19% over one year. This trend is expected to continue, driven by an increase in business volumes and a decrease in provisions for doubtful debts.

Moroccan Banks: $100 MM for Infrastructure and Industrial Projects

By some estimates, major infrastructure and industrial projects could require more than $100 billion ($100 billion) of financing over the 2025-2030 period. Fitch believes that these projects, which are projected to cost $34 billion in 2025 alone, will drive demand for credit, particularly for investment loans, whose outstanding amount increased by 14% in the first ten months of 2024, which will increase Moroccan banks profitability.

This will support credit growth, which is expected to average 6-7% per year over the next few years. Operating conditions in Morocco are more favorable than in most African countries. This is reflected in Fitch’s BB rating for the operating environment of domestically focused banks. This is the second highest score in terms of operating environment among African banking sectors.

However, structural constraints limit the potential for an increase in this score, notably the low GDP/capita in Morocco ($4,021 in 2024), the strong dependence on agriculture (12% of GDP and 30% of employment), and the high unemployment rate (13%).

Benefits of a 20% reduction in bad debts

Furthermore, non-agricultural sectors, such as tourism and construction, should compensate for these weaknesses in 2025 and 2026, notably thanks to the organization of major sporting events.

Fitch estimates that a 20% reduction in bad loans held by the six largest Moroccan banks could improve their Common Equity Tier 1 (CET1) ratio by an average of 185 points, with improvements ranging from 120 points to 320 points. An improvement that banks could use to finance their growth.

The rating agency also points out that capitalization remains a negative factor. Upward revisions of capital scores are expected with the reduction in the weight of bank defaults.

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(Featured image by Idriss Meliani via Unsplash)

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