Fitch agency: Moroccan Banks Net Income Reaches Record Levels 2023

Moroccan banks’ profitability continued to recover strongly in 1st half of 2023, with aggregate net income reaching record levels, says Fitch rating agency, noting that the positive trend should continue in 2nd semester due to higher interest rates and loan book growth.
The seven largest banks’ aggregate net income increased by 28% yoy in 1st half of 2023, driven by higher revenue, with net interest income growing by 7% as lending rates reached their highest levels since 2017, says Fitch Ratings in its latest report.
Moroccan pan-African banks such as Attijariwafa Bank, Groupe Banque Centrale Populaire and Bank of Africa had a steeper increase in aggregate net interest income (11%), reflecting larger interest rate rises elsewhere in Africa, says Fitch.
The International rating agency expects positive operating jaws to continue as higher interest rates continue to feed into banks’ revenues. The Agency says Moroccan banks are positively geared to rising interest rates as they are largely funded by low-cost current and savings account deposits (77% of sector deposits at end-3rQ2023), although asset repricing is slower than in many emerging markets due to relatively long maturities.
Easing inflation and cost-saving measures should help reduce cost-to-income ratios further. The seven largest banks’ average ratio decreased to about 45% in 1st half 2023 from about 50% in 2022.
The banks’ annualized impairment charges increased 18% in 1st semester of 2023 compared with full-year 2022, taking the average annualized cost of risk to 110bp of gross loans.
This increase in impairment charges was due to provisioning for asset-quality risk stemming from high inflation, rising interest rates and modest real GDP growth in Morocco. Pan-African banks also strengthened provisions to reflect increased country risks for some of their operations elsewhere in Africa.
The banks’ average annualized return on average equity (ROAE) improved to 10.8% in 1st semester 2023 from 8.7% recorded in 2022). A further improvement is expected in 2024 but persistent high impairment charges will hold back a stronger recovery”
According to Fitch, the earthquake that struck Morocco in September will have a negligible impact on the banks’ profitability given their very limited exposure to the worst-affected regions.