Nasdaq
By Samia Errazzouki
Morocco’s Credit Immobilier et Hotelier (CIH) bank is positioning for growth as the North African country prepares to introduce a more flexible exchange rate system and expand its Islamic banking sector, its chief executive said.
As part of financial reforms, the kingdom is preparing to introduce a flexible exchange rate system this year, including possibly widening the official bands for fluctuation of the dirham by around 5 percent as a first phase.
Earlier this year, Morocco’s Central Bank also approved requests to open Islamic Banks, including regulatory approval for CIH, who has partnered with Qatar International Islamic Bank (QIIB) to open its Islamic bank dubbed Umnia Bank. “I can announce that our Islamic bank is ready to go, we are simply waiting for its birth certificate to be released in the Official Bulletin to begin the activities,” CIH CEO Ahmed Rahhou told Reuters in an interview.
CIH’s assets make up less than 5 percent of Morocco’s banking sector, reporting a 434.5 million dirham ($43.12 million) net profit in 2016. Earlier this year, Fitch rated CIH BB+ with a stable outlook, the bank’s first rating from Fitch. CIH and its majority shareholder, Caisse de Depot de Gestion (CDG), a public sector establishment, will hold 60 percent of the shares in Umnia Bank, while QIIB will hold the remaining 40 percent shares, Rahhou said.
CIH is among five banks to receive regulatory approval from the Central Bank to open Islamic banks in the country after Morocco long rejected Islamic banking due to concerns about the influence of Islamist movements. Islamic finance is also seen as a way to draw more foreign investment to the domestic financial market. Moroccan dirham exchange rate is currently fixed by a peg that is 60 percent weighted to the euro and 40 percent to the dollar.
The central bank is planning to ease the peg and allow the currency to trade within a narrow range. As an emerging bank, CIH hopes to use the liberalization of Morocco’s currency regime to position itself as a key intermediary between the central bank and the market, the chief executive said. “There will be certified banks authorized by the central bank as intermediaries and we will do all that we can to be among the banks to have this privilege,” Rahhou said.
Economic and financial reforms, including the passing of the budget, were delayed after the country was left without a government for six months due to stalled party negotiations following October’s election. On Wednesday, King Mohammed VI appointed the government under the leadership of Islamist Prime Minister Saad Eddine El Othmani in a coalition of six parties. “The government has to move fast to make up for lost time,” said Mohammed Boussaid, Minister of Finance and Economy.
Morocco has already done more than most North African countries to make tough changes required by international lenders to curb its deficit, such as ending fuel subsidies and freezing public sector hiring. The IMF last year said that it agreed with authorities that the current situation was suitable to move toward a flexible exchange rate and an inflation-targeting regime despite the risks from global financial instability.
(Reporting by Patrick Markey) ((pat.markey@thomsonreuters.com; +213-661-692993; Reuters Messaging: pat.markey.thomsonreuters.com@reuters.net))
