Moroccan Banking Institutions: Resilience and Recovery in 2024

2023-12-20 12:57:18

This report, which analyzes the seven largest Moroccan banking institutions, explains that they have built up solid provision reserves since 2020 and are well positioned for a continued recovery of their profitability in 2024, as interest rates rise.

The report projects Morocco’s average real GDP growth of 3.3% for 2024-2025, despite high inflation (4.3% in October 2023) and interest rates above the historical average. Fitch Ratings analysts, however, identify significant risk factors, including an economic slowdown in the euro zone (Morocco’s main trading partner) and the persistence of high energy and food prices.

Unconsolidated bank credit increased by 5% in September, with a similar increase for business loans (5.7%). In contrast, consumer loans saw modest growth of less than 2%, held back by high interest rates.

Credit performance remained stable at the end of the first half of 2023, with an average stage 3 loan ratio of 9.6%. Although a slight deterioration is expected for 2023 and 2024, it should be manageable with prudent underwriting standards. Bank profitability saw a notable improvement in the first half of 2023, a trend that is expected to continue in 2024 thanks to rising interest rates.

The average Tier 1 capital ratio fell slightly to 10.3% at the end of the first half of 2023. Despite this, some banks are considering strengthening their regulatory capital through the issuance of capital instruments. Category 1 and 2. Liquidity conditions are expected to remain healthy, supported by strong customer deposits, around 77% of which are low-cost current and savings accounts.

In conclusion, despite persistent macroeconomic challenges, Moroccan banks appear well equipped to navigate a complex economic environment, with stable growth prospects and prudent risk management.

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