Moroccan banking sector continues to display solid fundamentals (CCSRS)

Moroccan banking sector continues to display solid fundamentals (CCSRS)
Moroccan banking sector continues to display solid fundamentals (CCSRS)

The Committee for Coordination and Monitoring of Systemic Risks (CCSRS) held its 19th meeting on Tuesday, July 2, at the headquarters of Bank Al-Maghrib in Rabat.

The CCSRS reviewed and approved during this session the financial stability report for the year 2023 and provides an update on the progress of the financial stability roadmap covering the period 2022-2024, specifies a press release.

The Committee also reviewed the conclusions of the work of its monthly subcommittee as well as the results of the assessment of systemic risks and noted in this regard that the monitoring indicators continue to show the solidity and resilience of the Moroccan financial sector, continued the same source.

The analysis of the situation of the financial system in light of observed and expected economic and financial developments enabled the Committee to note the following main findings:

– The global economy, despite monetary tightening, geopolitical tensions and conflicts in Ukraine and the Middle East, “showed notable resilience in 2023, accompanied by a tangible easing of inflationary pressures”. However, these prospects are slowing down, particularly due to the strong uncertainties surrounding them. In this context, the national economy recorded a marked improvement in its growth, with a rate increasing from 1,5% in 2022 at 3,4% in 2023.

Suffering from low agricultural production, “this rate should return, according to Bank Al-Maghrib’s projections, to 2,8% this year before accelerating to 4,5% in 2025, driven by the continued strengthening of non-agricultural activities.”

At the level of external accounts, the current account deficit narrowed in 2023 to 0,6% of GDP and should remain contained, 1,7% of GDP in 2024 and 2,7% in 2025. Under these conditions, the official reserve assets of Bank Al-Maghrib “would continue to strengthen to ensure coverage of nearly 5 and a half months of imports of goods and services.”

As for public finances, the budget deficit would continue its post-covid reduction, stabilizing at 4,4% of GDP in 2024 before easing to 4,1% in 2025, while the Treasury’s debt would see a slight increase in 70,1% of GDP in 2024 before decreasing to 68,5% in 2025.

– In this situation and after a progression of 2,7% in 2023, bank credit to the non-financial sector should record an acceleration of its pace at 4,4% at the end of this year and 5,2% in 2025.

Given the increase in outstanding debts, the loss rate of the banking sector has established itself at 8,5% by the end of 2023 and 8,8% by the end of May 2024. The coverage rate of these receivables by provisions remained around 68%.

The banking sector “continues to display solid fundamentals”. In terms of profitability, the aggregate result of banks at the end of 2023 recorded a rebound of 20,4% after a contraction of 13% in 2022, mainly thanks to the sharp recovery in the result of market operations.

In terms of solvency, the banks achieved, on a social basis, an average solvency ratio of 15,5% and an average Tier 1 capital ratio of 12,9%higher than the regulatory minimums of 12% et 9% respectively.

On a consolidated basis, these ratios stand respectively at 13,5% et 11,6%. In addition, the macro-stress test exercise of
solvency “continues to demonstrate the resilience of the banking sector in the face of scenarios simulating the deterioration of macroeconomic conditions”. The short-term liquidity ratio “remains at a comfortable level”, above the regulatory threshold of 100%.

– As for the financial market infrastructures“they continue to demonstrate strong resilience, both financially and operationally, and still present a low level of risk to financial stability.”

– Concerning the insurance sectordespite the rise in interest rates, “it was able to maintain its growth although at a slower pace”. Its turnover reached 55.9 billion DH at the end of 2023, a slight increase of 3,9% carried mainly by that of 5,8% from the non-life branch.

Growth in the life sector, slowed in particular by the savings segment, has, for its part, slowed significantly 1,8% against an average of 11,9% over the past ten years.

In terms of profitability, the sector achieved a net accounting result of 4.2 billion DH progressing by 6,2%thus bringing the return on equity (ROE) rate to 9,6%.

The ratio of unrealized gains on investments improved to 9,3%in a context of recovery of the stock market, which had a positive impact on the solvency margin of the sector which reached 330,4% against 312,7% a year ago. This margin, calculated under the current prudential regime, remains above the regulatory threshold but at this stage only covers the subscription risk.

Furthermore, the stress test exercises carried out highlight the overall resilience of insurance companies to unfavourable macroeconomic and technical conditions.

– On the stock marketthe MASI index has been on an upward trend, recording a gain of 10%with a drop in volatility to 6,87% on average in the first half of 2024 against 9,4% in the second half of 2023. The overall market valuation is at a relatively high level with a PER (price earning ratio) estimated at 20.7xclose to the average of the last five years.

For its part, the market liquidity ratio shows an improvement at 11,53% at the end of May against 8,7% a year ago.

– On the bond marketBDT rates remained broadly stable in the first half of 2024, but significantly lower compared to the first half of 2023. The outstanding amount of private debt at the end of April 2024 increased by 3,54% year-on-year, to stand at 262.9 billion DHissued at the amount of 80% by financial institutions and public companies.

The net debt of non-financial issuers through public appeals for savings “remains at a generally controlled level despite a slight increase in 2023”. It stands at 53% equity for listed issuers and 80% for unlisted issuers.

The total net assets of UCITS settled in 609.7 billion DH as of May 31, 2024, up by 8,9% compared to the end of 2023. Net subscriptions since the beginning of the year amount to 34.6 billion DHoriented at the height of 54% to the “medium and long term bonds” category.

Concerning the other categories of OPC, the overall net assets of the OPCI amounts to 87.4 billion DH at the end of March 2024, up by 42,6% year-on-year.

The outstanding amount of securitization funds increased, from one year to the next, by 24,7% at the end of March 2024 with total securitized assets of 17.4 billion DHThe overall net assets of the OPCCs reached 2.55 billion DH by the end of March 2024, an increase of 3,3% year-on-year.

Furthermore, the Committee welcomed the efforts made to complete the compliance of the national system for combating money laundering and the financing of terrorism with the recommendations of the FATF. This compliance was endorsed by the MENAFATF at its plenary meeting held in Manama in May 2024, it concluded.

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