Fitch Ratings highlights resilience of Moroccan banks

Credit fundamentals of major Moroccan banks are recovering slowly from the negative impacts generated by the covid-19 pandemic, says Fitch Ratings.

The global health crisis caused a 6.3 pc Moroccan GDP contraction in 2020, the worst contraction in 25 years. “The banks’ asset quality and profitability weakened noticeably in 2020. Nonetheless, their credit profiles were fairly resilient owing to a raft of government support measures”, adds the international ratings agency.

It expects a moderate economic recovery in 2021 with a 5.3 pc real GDP growth and an unemployment rate of 11.5 pc, while strained corporate and households’ cash-flows will continue to weigh on banks’ financial profiles and present some downside risks.

However, the banks’ profitability in 2021 is expected to be well above the lows of 2020 but recovery is likely to take at least another year, underline the experts of Fitch agency. They expect modest asset-quality deterioration following the ending of borrower support measures and stale capitalization.

Sector profitability fell sharply in 2020 due to banks prudently increasing provisions in anticipation of weaker operating conditions, say the analysts of the ratings agency.

The deterioration of asset-quality metrics in 2020 was contained by substantial forbearance measures and private-sector credit growth, affirms Fitch agency.

The banks’ average impaired loans ratio fell slightly in 1H21 but “we expect it to increase moderately in 2H21 following the expiry of borrower support measures”, says Fitch Ratings, stressing that capital buffers over minimum regulatory requirements will should be stable in 2021.