Moroccan Banks Set for Recovery in 2023 After Pandemic Slump, Moody’s Reports

In 2020, the increase in non-performing loans, the drop in transaction volumes and others have reduced the profitability of the Moroccan banking sector, says Moody’ Investors Service in its report published on Tuesday, April 20, 2020. The four Moroccan banks, namely Attijariwafa bank, Groupe Banque Centrale Populaire, Bank of Africa - BMCE Group and Crédit du Maroc, posted a total net profit of 6.5 billion dirhams in 2020, compared to 13.9 billion dirhams in 2019, a drop of 53%. Given this situation, "final profitability will remain under pressure in the medium term," said Mik Kabeya, Senior VP Analyst at Moody’s and co-author of the report, noting that "we expect net interest income to increase by 3% to 5% in 2021 compared to 2020 levels while non-interest income will continue its slow recovery but remain limited," reports Ecoactu.

However, it is certain that the cost of risk will remain on the rise in 2021, without however reaching the 2020 level. Thus, the banks will continue with a prudent approach, in order to reach the pre-crisis level in 2023, the report stressed. However, in 2020, the banking sector recorded a 3.9% increase in loans compared to 5.3% in 2019, despite the difficulties on the market, but thanks to the participation of loans granted under support programs such as "Daman Oxygène" and "Damane Relance" set up by the Moroccan government for small and medium-sized enterprises (SMEs) and which helped consolidate net interest income. In addition, the easing of lockdowns in sub-Saharan Africa has helped mitigate the impacts of the pandemic.

Furthermore, the four banks posted a 3.0% net interest margin in 2020 compared to 2019. In addition, the entire sector showed a Tier 1 ratio and a total capital ratio of 10.1% and 13.1% in 2020, compared to 10.4% and 13.3% in 2019. "However, as we forecast a gradual return to normal growth levels (around 6% year-on-year) and a slow and steady recovery in profitability, we expect capital levels to remain modest in the medium term," the report concludes.