Fitch Ratings: Morocco’s Banks Credit Recovers After Hiatus

finance & economy - October 13, 2021

Rabat – According to Fitch Ratings, a US-based international credit ratings agency, Morocco’s banks’ credit fundamentals are slowly recovering from the unprecedented effects of the global COVID-19 crisis.

The agency predicts that the sector in the North African country will have a much higher profitability in 2021, as compared to the lows in 2020, although recovering to pre-pandemic levels may take at least another year.

“We expect modest asset-quality deterioration following the ending of borrower support measures and stale capitalization. Downside risks include high unemployment and cash flow pressure for corporates and households, which will continue to weigh on banks’ financial profiles,” reads the report.

According to the trading economics site, the unemployment rate in Morocco rose to 12.8% in the second quarter of 2021, compared to 12.3% during the same period a year earlier.

The report further stated that the sector’s profitability declined in 2020 as a result of banks prudently increasing their provisions.

Simultaneously, loan impairment charges (LICs) consumed 62% of pre-impairment operating profits compared to 25% in 2019, thus, the agency anticipates a moderate level of LICs in 2021, which will help relieve the strain on profitability metrics.

Significant forbearance measures and private-sector credit growth, which was encouraged by extensive state-guaranteed loan programs, prevented the asset- quality metrics from deteriorating in 2020.

The average impaired loans ratio fell slightly in the first quarter of 2021 after recording a 9.7% increase at the end of 2020, preceding by 8.7% at the end of 2019.

“The main risks to asset quality are from the banks’ exposures to vulnerable sectors, such as tourism, industry and trade (30% of sector loans) and retail (about 33%),” the report explained.

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