The majority of banks listed on the Casablanca stock exchange have shown a downward trend since the beginning of the year. An analyst explains to us that this fall is not fundamental since the activity evolved well at the beginning of the year. Nevertheless, fears are beginning to surround the sector.
The listed sector index “Banks” shows a 8.4% drop, accumulated since the beginning of this year until the close of trading on Monday, June 27. Opposite, the MASI dropped 10.3% during the same period.
It should be noted that three banking stocks are among the ten largest market capitalisations. These are Attijariwafa Bank (AWB), Bank of Africa (BoA) and Banque Populaire (BCP). When they fall, this has a significant impact on the market.
All the values that make up this index fell, with the exception of Crédit du Maroc (CDM) which advanced by 16.5% during the same period. This share benefited from the announcement of the bank’s acquisition by the Holmarcom group.
BoA resisted the decline, posting a small decline of 0.5%. It was BMCI that posted the biggest drop (-23.8%). For their part, AWB, BCP and CIH lost 12.7%, 9.2% and 5.6% respectively.
What are the reasons behind the decline in bank stocks? “The decline in this sector is not fundamental. There are no factual or solid elements that feed it, ”answers an analyst contacted by LeBoursier.
“Bank stocks are impacted by the general decline in the market. Half of the stocks that make up the banking sector are large caps. They are therefore found in all the portfolios managed by fund managers, and with a large weighting. In times of decline and lack of visibility, fund managers reduce the weighting of these stocks,” he adds.
But a prioriand based on the results published for the first quarter, business in the sector is doing well. “The factual element on which we can base ourselves to analyze the evolution of this sector are the results published for the first quarter. The sector posted good results at the start of the year. Almost all listed banks recorded an increase in NBI. The sector’s cost of risk is improving and overall net income is up 28%. »
“This shows that the activity has not been impacted by the current economic situation, at least in the first quarter of the year”, further comments our interlocutor.
Risk factors are present
Some fears nevertheless surround the sector for the rest of the year, due to the economic situation marked in particular by an increase in inflation.
“We currently lack visibility. The situation is becoming more complicated on an international scale and the risk of inflation is increasing. It should be noted that the banking sector is among those most exposed to the slowdown in economic growth. An economic slowdown leads to a drop in demand for credit,” continues our analyst.
“If a rate hike – which would be triggered by a possible increase in the key rate – is added to this equation, it should weigh on activity in the sector, which would then suffer from a drop in demand. »
Bank stocks retain good upside potential
BMCE Capital Global Research (BKGR) covers 5 of the 6 listed stocks, namely AWB, CDM, CIH, BCP and BMCI. In its latest Stock Guide, this research firm recommends that investors accumulate AWB, BCP and CIH, and keep BMCI and CDM. The five banks account for 26% of the total capitalization presented in the Stock Guide.
The research company has set a target price of 500 dirhams for AWB, against 425.05 dirhams (observed at the close of trading on Monday). The stock thus retains an upside potential of 17.6%.
Price evolution of AWB
For its part, BCP should reach a target price of 280 dirhams against 225 dirhams, i.e. a potential increase of 9.8%.
Evolution of the price of BCP
For their part, CIH, BMCI and CDM should respectively reach a target price of 370 dirhams, 568 dirhams and 726 dirhams. These securities thus retain an upside potential of 15.6%, 15.2% and 3.8%.
CIH price evolution
Evolution of the price of BMCI
Evolution of the price of BCP