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Expanding in Africa is a strategic plan that was adopted by Morocco’s largest banks, namely Attijariwafabank, BCP, and BMCE Bank. According to Moody’s, an American rating agency, the three banks' expansion in Africa is uneven depending on the profile of each one of them. To put in other words, the three financial institutions have been following the same universal banking strategies even while expanding in Africa, however, and despite the similarities, differences emerge when it comes to each one’s capacity to handle the risk following these expansions.
The report entitled «Attijariwafa, BCP, BMCE –Peer comparison- large Moroccan banks expand in Africa with uneven levels of risk absorption buffers» issued on the 26th of July by Moody’s explains thoroughly how the abovementioned banks are different. And this applies to «their capacity to withstand further credit challenges» when investing in Africa.
The agency then furthers its analysis by comparing the profile granted to each one of the three banks. For example, Attijariwafabank is ranked «LT LC deposit rating Ba1, positive, ba3 baseline credit assessment –BCA», while BMCE Bank is rated «LT LC deposit rating Ba1, stable, b1 BCA» and BCP accounts as a «LT LC deposit rating Ba1, positive, ba3 BCA», states Moody’s in a press release.
African expansion
The African expansion was pioneered by Attijariwafabank and BMCE Bank. According to the comparison report, «proportions of loans sourced from the region on their books at 23% and 25%, respectively ” while BCP «has a more modest exposure of 12%.»
Comparing the three banks, the report indicates that they have focused their operations on corporate banking. As a result, BMCE Bank of Africa sourced «47% of its net banking income from Africa, compared with 28% for Attijariwafabank and 17% for BCP», which was considered positive by the rating agency.
Differences between the three banks emerge even more here, as Attijariwafabank's net profit ratios succeed the one of its peers, thanks to its stability and lower operating costs. Speaking to Moody’s VP Senior Credit Officer, Oliver Pannis, declared that «all three banks face elevated levels of problem loans, but Moody's expects loan performance to stabilize within the next 12 to 18 months at all three banks as Morocco's economy strengthens and the banks get better at managing risk at their foreign subsidiaries.»
Comparing the three banks
Attijariwafabank remains one of the lowest to be exposed to risk when it comes to its African expansion. The report argues that the bank’s non-performing loans ratio is only «7% as of December 2016, compared with 7.7% for BCP and 8.3% for BMCE Bank».
When it comes to funding, BCP is, leading the triplet thanks to its large network which allows it to have a higher deposit base. On the other hand, BMCE Bank has more liquid assets than the others.
The three banks will all have to face the consequences of their risky ventures but each in its own way according to the analysis provided by Moody’s. Another analysis issued by Fitch stated similar views mentioning the risky expansions and the big risk appetite that Moroccan banks display.
