Moroccan banks doing well in Africa

AwB is planning to introduce a new acquisition operation in Africa at the end of this year, starting with Rwanda, Kenya and Ethiopia.
Sunday 27/01/2019
An appetite for risk. Headquarters of Moroccan bank Attijariwafa in Casablanca.   (AFP)
An appetite for risk. Headquarters of Moroccan bank Attijariwafa in Casablanca. (AFP)

CASABLANCA - Moroccan banks are doing well in Africa but risks remain high, analysts said.

“Moroccan banks are showing an increased interest in Africa and are displaying a correlative bigger appetite for risk, exposing themselves to low-grade domestic sovereign bonds in countries that rely on commodity exports,” warned US-based intelligence consultancy Stratfor.

Stratfor said Moroccan banks’ behaviour could be attributed to the country’s competitive domestic market that leaves them with limited market growth.

A 2017 report by Fitch Ratings pointed out Moroccan banks’ susceptibility to economic volatility because of weak asset quality and above-average acceptance of risk.

“Morocco’s three largest banks, Attijariwafa Bank (AwB), Banque Marocaine du Commerce Exterieur (BMCE) and Banque Populaire (BP) are expanding into other African markets, which involves exposure to domestic sovereign bonds rated significantly lower than Moroccan sovereign bonds (BBB-) and riskier operating environments — a drag on their credit profiles,” Fitch Ratings said.

Financial expert Lotfi Abourizk warned that the investment risk that Moroccan banks are taking in Africa remains high. “Political crises and conflicts and economic downturns in African countries could easily expose Moroccan banks heavy losses,” Abourizk said.

“The risk of being nationalised, a price fall of commodities, the depreciation of devaluation of a currency are among the most important factors that can affect the banks’ performances.”

Hicham Bensaid Alaoui, director of the Euler Hermes Acmar Risk Department, singled out political instability in an interview with Moroccan magazine TelQuel: “Unfortunately, the African continent is known for more or less overt coups d’etat, which can affect banks’ investments.”

Bank Al-Maghrib Governor Abdellatif Jouahri warned in 2015 that AwB, BMCE and BP were “engaging in an abusive expansion” in Africa and urged them to increase vigilance.

Jouahri called on the three financial institutions to boost their position in African subsidiaries that are already in place rather than embark on new operations in other countries.

AwB acquired Barclays Bank Egypt in 2017 for $500 million, the Financial Times reported.

Attijariwafa Bank Egypt’s asset volume rose almost $360 million in the third quarter of 2018, an increase of 23% year-on-year.

The three Moroccan banks posted total profits of $280 million from their subsidiaries across Africa in 2017.

Abourizk said Moroccan banks benefited from a fast-growing African market that has a huge potential despite high risks, unlike the domestic market where competition is fierce.

AwB is planning to introduce a new acquisition operation in Africa at the end of this year, starting with Rwanda, Kenya and Ethiopia, said Youssef Rouissi, the bank’s deputy general manager for global investment banks.

“We have opportunities in Rwanda. We are also studying others in Kenya and Ethiopia,” said Rouissi on the sidelines of last November’s investment conference in South Africa. “The idea is to acquire banks that are among the top five banks in all markets.”

AwB’s growing interest in Anglophone African countries came after Moroccan King Mohammed VI’s strategic vision to strengthen south-south cooperation to promote the development of African countries.

The importance of the African market was highlighted by King Mohammed VI’s visit to at least 14 African countries since October 2016 to boost bilateral cooperation.

Some 85% of Morocco’s outward foreign direct investment is absorbed by sub-Saharan Africa, the African Development Bank stated.

Bensaid stressed the need to develop a politico-economic diplomacy that allows to better know these countries and reassure investors, including via the embassies of Morocco on the spot and royal trips in Africa.