Fitch affirms 2 Moroccan banks ratings -BMCI & BMCE

Fitch Ratings has affirmed Morocco-based Banque Marocaine pour le Commerce et l’Industrie’s (BMCI) National Long-term rating at ‘AAA(mar)’ with Stable Outlook, Short-term rating at ‘F1+(mar)’ and Support Rating at ‘2’ . Fitch has also affirmed BMCE Bank’s Support Rating at ‘3’. A full list of rating actions is at the end of this comment. BMCI’s National and Support Ratings are based on support from its main (66.7%) shareholder, BNP Paribas (BNPP; ‘A+’/Stable/’F1+’). Given BNPP’s strong capacity and history of support to group entities, Fitch believes that there is high probability of support to BMCI from BNPP if required. Nevertheless BMCI’s Support Rating is constrained by Morocco’s Country Ceiling of ‘BBB’. BMCI is well integrated into the group. BNPP controls BMCI’s supervisory board, is broadly present in the bank’s senior management, and tightly oversees its risks. In Fitch’s view BNPP remains committed to developing retail banking in North Africa and BMCI fits into BNPP’s strategy. The bank’s profitability has been historically satisfactory reflecting the resilient Moroccan economic environment, the bank’s prudent strategy and tight control of operating costs. Asset quality indicators remained adequate at end-H111 and compared favourably to other major Moroccan banks, despite the integration of BNPP’s consumer business in Morocco (Cetelem Maroc) into BMCI’s consumer arm (BMCI Credit Conso), which resulted in a moderate increase in impaired loans. BMCI’s material concentration by obligor (the top 20 on- and off-balance sheet obligors net of BNPP guarantees accounted for 1.5x BMCI’s Fitch core capital at end-H111) could result in a rapid asset quality deterioration in case of an economic downturn. Although supported by a large client deposit base (72% of funding at end-H111), BMCI’s funding structure is increasingly reliant on markets through certificate of deposit issuance. However, BMCI’s liquidity risk is mitigated by the holding of a portfolio of securities eligible for repos with the local central bank (MAD4.1bn at end-H111) and by BNPP’s standby credit line. BMCI’s Fitch Core Capital ratio (12.14% at end-H111) is reasonable, but undermined by BMCI’s loan book concentration. BMCE Bank’s Support Rating of ‘3’ reflects Fitch’s view that the Moroccan authorities would provide support to BMCE Bank if needed, given its strong franchise in the country. Nevertheless the probability of support is moderate considering Morocco’s sovereign financial strength (‘BBB-‘/Stable). BMCE is the third-largest bank by total assets in Morocco. It is largely owned by FinanceCom, a local private company (37.6% stake at end-H111), and France’s Banque Federative du Credit Mutuel (BFCM; ‘A+’/Stable/’F1+’), which holds a 24.6% stake. Fitch does not have visibility of FinancCom’s business and financial standing to assess its ability and willingness to support BMCE. BFCM has a high ability to support BMCE. However, Fitch views its willingness to support BMCE as modest at this stage. The ratings actions are as follows: BMCI National Long-term rating: affirmed at ‘AAA (mar) ‘; Outlook Stable National Short-term rating affirmed at ‘F1+ (mar)’; Support Rating: affirmed at ‘2’ BMCE Support Rating: affirmed at ‘3’ Additional information is available on www.fitchratings.com. BMCI’s ratings were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings. BMCE Bank’s ratings were unsolicited and have been provided by Fitch as a service to investors. Applicable criteria, ‘Global Financial Institutions Rating Criteria’, dated 16 August 2011, ‘National Ratings Criteria’, dated 19 January 2011, and ‘Country Ceilings’ dated 15 August 2011 are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Financial Institutions Rating Criteria National Ratings Criteria Country Ceilings