Moroccan banks are challenged by weak asset quality, according to Fitch Ratings

In a new report, American credit rating agency Fitch Ratings revealed that Moroccan banks’ ability to work successfully is hindered by «weak asset quality and capital adequacy».

«All Moroccan banks' IDRs (negotiable certificate that a bank issues) are driven by our assumption that the banks would receive support, if needed, from the Moroccan sovereign (BBB-/Stable) or their institutional shareholders», explained Fitch Ratings on its website.

The agency reports that Morocco’s banks average impaired loans/gross loans ration is below 10%, which is worrying. Fitch believes that the percentage is «much higher than in developed markets».

The rating agency sees that the profitability, funding and liquidity of banks in the kingdom are «sound in contrast to their weak asset quality and capital adequacy», stressing that «major banks reported an average 2% annualized operating return on risk-weighted assets in 1H18, supported by reasonable margins (average 3.6%) and cost/income ratios (53%). Stable deposits provide the majority of banks' funding».