Moroccan bank provisions appear conservative ahead of weaker asset quality, Fitch Ratings says

According to American credit rating agency Fitch Ratings, provisions built by Moroccan banks in 1H20 «appear conservative ahead of faster asset-quality deterioration, amid ongoing weak operating conditions and progressive reduction of forbearance measures and support for borrower».

In a new report released Thursday, Fitch Ratings explained that the uncertain course of the coronavirus pandemic and the new lockdown measures in some European countries constitute risks to the economic recovery and asset quality for Morocco banks.

The same source indicates that banks have increased their provisions to face credit losses as the pandemic is ongoing. «Contributions to Morocco's pandemic relief fund further undermined banks' profitability and the average ratio of annualised operating profit/risk-weighted assets fell to 0.9%, compared with about 2% in recent years», it explained.

Fitch Ratings expects loan impairment charges to moderate in 2H20 and 2021 and asset quality to deteriorate.

In October, Fitch Ratings downgraded Morocco’s Long-Term Foreign-Currency (LTFC) Issuer Default Rating (IDR) to ‘BB+’ from ‘BBB-’. The decision made the Kingdom the latest sovereign to lose investment-grade status.