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Morocco’s banking sector: the pace of credit distribution will slow down in 2021

The banking system in Morocco has managed to show resilience in the face of the various challenges posed by Covid-19, thanks to the prudential regulations put in place over the past decade. This has not prevented banks from tightening their lending criteria. According to the latest study by CDG Capital, the pace of growth in bank lending is expected to slow in 2021.



The year 2020 was marked by the outbreak of the Covid-19 pandemic, affecting a large number of operators and sectors in the process. The banking system in Morocco has not been spared. During the health crisis, it had to deal with the acceleration of outstanding debts, tensions on liquidity, and the slowing down of credit distribution.

This resulted in a sharp drop in the results of listed banks due to a significant increase in the cost of risk and the impact of the banks’ contribution to the Covid-19 fund.

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The gross outstanding loans recorded an increase in 2020

In this weakened economic context, the gross outstanding loans recorded an increase of 4.4% compared to the end of 2019 to reach $108.4 million (957.4 MMDH) at the end of 2020. This trend, whose trajectory is opposed to that of GDP, is mainly explained by the various support and stimulus measures introduced by the Central Bank and the government (about 53 MMDH of credits were distributed under these financing programs guaranteed by the CGC during 2020).

Indeed, debit and cash loans contributed to 40% of the increase in gross outstanding loans, followed by miscellaneous claims on customers which contributed to 35% of this increase (mainly driven by loans granted under repurchase agreements). Adjusted for this last category, gross loans outstanding rose by only 3.4%.

The analysis by bank reveals that the strongest increase in the distribution of loans during 2020 concerned the CIH group with an increase of 20.9%, followed by the BMCE Bank of Africa and Attijariwafa bank groups with respective increases of 8.7% and 4%, according to the statistics of the Professional Grouping of Banks in Morocco (GPBM).

The good performance of the CIH group is in line with the continuation of its growth dynamics observed over the last five years as part of the strategy of diversification of its portfolio. On the other hand, the solvency of households and companies has been strongly affected by the Covid-19 pandemic, leading to a sharp increase in outstanding loans (from $6.02 million (53.2 MMDH) to $6.72 million (59.4 MMDH) for the listed sector).

In this sense, the outstanding provisions have increased by 9.2% to $4.58 billion (40.5 billion dirhams), which implies a provisioning rate of 68.2% at the end of 2020. This growth dynamic observed at the level of the sector concerned the majority of banks, with the exception of BCP which saw its outstanding provisions decrease, and consequently its cost of risk decrease by 3%. In this wake, the cost of risk of the listed sector has exploded by 81.9% to reach $985,000 (8.7 MMDH) in 2020 against $543,450 (4.8 MMDH) in 2019.

In the end, the net result has shown a decline of 44.2% to $702,000 (6.2 MMDH). This depreciation of results has not failed to affect the profitability ratios of the various banks. Indeed, the ROE and ROA ratios of the listed sector have recorded respective decreases of 5.3% and 0.5% to settle at 5.1% and 0.6% at the end of 2020.

Nevertheless, in the face of all these disruptions, “the banking system has shown great resilience and seems to be well equipped to meet these various challenges,” argues CDG Capital. Indeed, the prudential regulations of the last ten years, which have pushed banks to strengthen their capital base, are now bearing fruit, proving their solidity so far.

This would suggest a positive evolution of the results of the banking sector. Indeed, the good performance of the NBI and the cost structure, coupled with the non-recurrence of the contribution to the Covid-19 fund, should largely compensate for the continued pressure on the cost of risk. Moreover, if the beginnings of an economic recovery are confirmed, CDG Capital’s analysts still expect a slowdown in the growth rate of bank loans.

“Admittedly, they should benefit from a fairly favorable backdrop, with the resumption of economic growth, the continuation of support and stimulus measures and a monetary policy that remains generally accommodating. However, the continued deterioration of asset quality should push banks to be more demanding by tightening their risk criteria for granting loans,” explain the analysts. Banks could thus tend to tighten their risk criteria for granting loans, thus allocating their capital only to the most creditworthy loans.

In addition, “the implementation of other measures (the reduction of the distribution of dividends and the optimization of costs etc.) are necessary to allow banks to reconstitute their capital”, believes the investment bank. It should be noted that the banking sector will soon enter a new phase characterized by the withdrawal of the various support measures of the CGC guarantee scheme and by a low interest rate environment.

The end of the guarantee scheme will probably result in a revaluation of the credit risk premium as well as a change in the banks’ reading of risk and their credit strategies, after a year marked by a strong evolution of cash flow credits. “We remain attentive to the impact of the low level of rates on the result of the market activities and its impact on the results”, conclude the analysts of CDG Capital.


(Featured image by Toa Heftiba via Unsplash)

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Michael Jermaine Cards is a business executive and a financial journalist, with a focus on IT, innovation and transportation, as well as crypto and AI. He writes about robotics, automation, deep learning, multimodal transit, among others. He updates his readers on the latest market developments, tech and CBD stocks, and even the commodities industry. He does management consulting parallel to his writing, and has been based in Singapore for the past 15 years.