the net profit of the 6 listed banks was up 20.1% in the 1st quarter of 2022, but risks remain

the net profit of the 6 listed banks was up 20.1% in the 1st quarter of 2022, but risks remain

(Agence Ecofin) – In Morocco, the upward trend in the net profits of commercial banks is likely to continue according to indicators and analysts. But risks related to the international situation remain and deserve the attention of the kingdom’s financial groups.

The profitability of the 6 Moroccan banks listed on the Casablanca Stock Exchange improved during the 1er quarter of 2022, can we see on the basis of the financial communications of these institutions and the calculations of theEcofin Agency. Their consolidated net profit reached $334 million over the period. It represents twice that of the same period in 2020, and is up 20.1% compared to that of the first quarter of 2021.

In this wake, the net margin ratio, which assesses the share of each unit of turnover converted into net profit, reached 18.6%. It is also almost twice that of the first quarter of 2020 (9.7%). This development follows the reopening of the Moroccan economy, after two years disrupted by covid-19, and during which the kingdom’s banks have built up significant provisions to protect themselves against credit risks.

The decrease in provisions for bad debts has indeed played an important role in the performance of the Moroccan banks analyzed. According to data provided by Capital IQ, the data platform of the S&P Global Ratings group, these provisions fell 22.3% compared to those of the same period in 2021 to reach $270.8 million. We also noted a reduction in interest charges of around 10%, which provided a counterweight to the fall in interest income and commission income.

This poor performance on the two different business segments of Moroccan banks reinforces the position of the Fitch Ratings Agency which, on Wednesday June 15, estimated that despite the improvement in margins, risks remain. “We expect this positive trend to continue, but it could be slowed down as adverse global economic conditions ripple through the local economy and put pressure on asset quality,” can we read in the document.

In reality, the situation of global inflation and the rise in value of the US dollar are pushing many African central banks, including those of Morocco, to raise their key rates. For the banks, this is a positive thing because it generates more interest income. In Morocco, for example, most loans to the economy have a maturity that does not exceed 12 months. When the time comes to renegotiate, the new rates may go up.

But this opportunity also contains the risk of seeing the provisions for bad debts start to rise again. If businesses and households face economic difficulties again, they may not easily repay their debts.

The last thing to watch out for by Moroccan banks is the presence of some of them in sub-Saharan Africa. In the WAEMU zone in particular, inflation poses a risk to the profitability of banks and, according to Moody’s, the sanctions imposed on Mali will affect the income of banks established there, including Attijariwafa (Banque internationale pour le Mali), Bank of Africa Mali and Banque Atlantique Mali (BCP Group)

Idriss Linen


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