Moody’s affirms BMCE’s deposit ratings; changes the outlook to stable from negative

Casablanca, Morocco (Capital Markets in Africa)  — Moody’s Investors Service has today affirmed and changed the outlook to stable from negative on the Ba1 long-term local-currency deposit rating and senior unsecured debt rating of BMCE Bank. Concurrently, Moody’s affirmed BMCE’s ba3 baseline credit assessment (BCA), its Ba2 long-term foreign currency deposit rating, the short-term local and foreign-currency Not-prime ratings and its B1 foreign subordinate debt rating.

In light of the revised bank rating methodology, published on 16 March 2015, Moody’s ratings affirmation on BMCE reflects the following considerations: (1) Moody’s view of BMCE’s “Weak+” macro profile which is affected by the higher-risk operating environment of the bank’s activities in sub-Saharan Africa; (2) the bank’s moderate earnings generating capacity, which although supported by a strong franchise in Morocco, is challenged by high provisioning requirements relating to its growing exposure in sub-Saharan Africa; (3) relatively weak asset quality that will continue to constrain the bank’s ability to generate capital internally; (4) modest loss-absorption capacity, particularly in the context of growing sub-Saharan operations, high loan concentrations and low provisioning coverage; and (4) its relatively stable funding profile. The rating affirmation also reflects our assessment of a very high probability of government support in case of need.

The stabilisation of the ratings outlook reflects our view that the stabilisation of the Moroccan operating environment combined with improving asset quality on the sub-Saharan asset portfolio reduce the possible tension on the bank’s limited loss-absorption capacity. The stabilisation also incorporates our assessment of the bank’s more selective loan growth, which increasingly focuses on the retail and SME segment, therefore reducing gradually portfolio concentrations. This shift will also strengthen BMCE’s access to low-cost and stable deposit funding which also benefits the bank’s margins. As a result, and although Moody’s continues viewing the bank’s capital ratios as weaker than global peers with a ba3 BCA, the rating agency expects the bank’s capital to remain stable over the next 12 to 18 months.

Moody’s has withdrawn the outlook on BMCE’s subordinated debt for its own business reasons. Please refer to Moody’s Investors Service’s Policy for Withdrawal of Credit Ratings, available on its website, www.moodys.com.

Moody’s has also assigned Counterparty Risk Assessment (CR Assessment) of Ba1(cr)/NP(cr) to BMCE, in line with its new bank rating methodology.