Sunday 10, September 2017 by Georgina Enzer

BMCE Bank’s ratings affirmed

Capital Intelligence Ratings (CI Ratings or CI), the international credit rating agency, today affirmed the ratings of BMCE Bank, based in Casablanca, Morocco.

BMCE’s Financial Strength Rating (FSR) is maintained at ‘BBB-’. It is supported by steady if modest profitability, the increased market share of customer deposits, and improved liquidity. The FSR remains constrained by a high level of NPLs, modest but improving loan-loss coverage and below peer group returns. The Outlook for the FSR is affirmed at ‘Stable’. The FSR could come under downward pressure if loan asset quality or capital adequacy weakened. However, in regard to the latter, the CAR is expected to increase at end 2017. BMCE’s Long and Short-Term Foreign Currency Ratings (FCR) are affirmed at ‘BBB-’ and ‘A3’, respectively, with a 'Stable' Outlook. The FCRs are constrained by CI Ratings’ internal assessment of sovereign credit risk. The Support Rating is maintained at ‘2', reflecting the Bank’s franchise, important market share of customer deposits and likely support from BMCE’s shareholders initially – and from the Central Bank.

BMCE holds a good banking position in the Moroccan banking sector, controlling a significant share of sector assets, deposits and loans, ranking third largest for loans and customer deposits in Morocco. The Bank continued to gain market share in customer deposits in 2016. BMCE’s income performance was steady in 2016 on the back of higher net and non-interest income. However, profitability dipped slightly due to a narrower margin, higher operating expenses and a still high cost of risk despite being lower in 2016. BMCE’s returns remain modest due to low yield on its earning assets and a resulting low overall margin. At the consolidated level, BMCE benefits from its African banking operations but returns are similar.

There continue to be challenges regarding loan asset quality, nonetheless the rate of increase in NPLs has fallen. The NPL ratio is slightly better than the peer group average at the Bank level but in line with the sector on a consolidated basis. Loan-loss provisioning improved slightly but effective coverage is low. The latter is, however, stronger on a consolidated balance sheet basis. The capital adequacy position exceeds regulatory standards but in CI’s view additional capital is needed to further support the balance sheet. On this note, BMCE has issued in 2017 a perpetual subordinated debt which qualifies as Tier 1 capital and is also issuing further supplementary subordinated paper.

Liquidity ratios improved in 2016. Loan-based liquidity ratios were enhanced as customer deposit growth outpaced that of loan growth. The Bank’s customer deposit base grew at a faster rate than the sector in 2016 with market share gained. Liquid assets were also higher and are at a comfortable level.

Established in 1959 as a state-owned institution specialising in trade finance, BMCE Bank was privatised in 1995. While the Bank has long been a depository for retail deposits, it is now targeting that sector for lending and services. BMCE’s total assets amounted to MAD205 billion (USD20.1 billion) at end 2016. BMCE Bank is the flagship domestic Moroccan bank of the BMCE Group. It has a strong position in all areas of retail, commercial and corporate banking in Morocco. At the Group level, consolidated companies include BMCE International Bank, the London-based institution, BMCE International Madrid, and Bank of Africa (Luxembourg).

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