Moroccan banks’ profitability fell in 2020 due to increased provisioning and Covid-19 fund donations

Four of Morocco’s rated banks saw their aggregate net profit decline by 53% in 2020 due to increased provisioning amid the global health crisis and one-off Covid-19 national fund donations, American rating agency Moody’s reported.

This comes as «a result of increased provisioning costs in anticipation of higher credit losses, lower transaction volumes amid stringent lockdown measures», Moody’s explained.

In a report published, this week, Moody’s Investors Services revealed that «the four rated banks Attijariwafa bank (AWB, Ba1 negative), Groupe Banque Centrale Populaire (GBCP, Ba1 negative, b1), Bank of Africa – BMCE Group (BOA, Ba1 negative, b1) and Credit du Maroc (CDM, Ba1 stable, ba3), reported an aggregate net profit of MAD6.5 billion ($0.7billion) in 2020, down 53% from MAD13.9 billion ($1.4 billion) in 2019».

«Bottom-line profitability will remain under pressure in the medium term», says Mik Kabeya, VP-Senior Analyst at Moody's and the co-author of the report. «We expect net interest income to increase by 3%-5% during 2021 from 2020 levels and noninterest income to continue its slow recovery but remain constrained».

The agency expects the cost of risk to remain elevated in 2021, but lower than in 2020. It also predicts that these banks will return to pre-pandemic levels in 2023. «Moody's expects a gradual return to normal growth levels (around 6% year-on-year) for the Moroccan banks, and only a slow and steady recovery in bottom-line profitability, although capital levels will remain modest over the medium term», it concluded.