Interview: Othman Benjelloun
Have the new regulations improved performance?
OTHMAN BENJELLOUN: In cooperation with Bank Al Maghrib, Moroccan banks have made major efforts to raise provisions, which have reached Dh24bn (€2.13bn), with voluntary additions provided by banks. Since 2011, supplementary provisions have been in place to cope with unexpected defaults from the private sector. This large-scale initiative was made possible by the solid foundations of the Moroccan banking system. Banks listed on the Casablanca Stock Exchange registered a consolidated net income of Dh6bn (€533m) in the first half of 2013, growing at 6%, and a return on equity of over 12% at the end of 2012. The 5.4% non-performing loan ratio seen in June 2013 should be controllable given the high potential of the Moroccan economy. Regulatory measures taken by the central bank, particularly regarding the solvency ratio, which was increased to 12% as of June 2013, and the minimum Tier 1 capital adequacy ratio, set at 9%, have reinforced the sector. By the end of 2012, the average Tier 1 and solvency ratios were 10.2% and 12.9%, respectively.
What complementary measures should be adopted to achieve an efficient liquidity rate?
O. BENJELLOUN: The pursuit of development projects in recent years has required financing. Accordingly, in 2013, the need for financing stood at 8.1% of GDP, resulting in a loan-to-deposit ratio close to 106%. To accompany economic development, the kingdom’s banks, which until 2008 knew only an excess of liquidity, have benefitted from constant support from the central bank, which has ensured regular money supply. A drop in the monetary reserve rate from 4% to 2% was also recently completed. Measures that could boost banks’ long-term finances include: (i) the promotion of low-income banking; (ii) fostering salary saving (Plan d’Epargne Entreprise); (iii) expansion of obligatory and complimentary pension schemes; (iv) development of insurance capitalisation products; (v) offering additional products related to capital markets; and (vi) promotion of banking penetration and financial inclusion, especially for the informal sector.
What strategies have been carried out to improve the banking penetration rate?
O. BENJELLOUN: Over the past decade the network of branches across Morocco has increased, with the creation of more than 2600 new counters, allowing the banking penetration rate to top 58%, in contrast with 24% in 2002. Simultaneously, the entry of a new player – Barid Bank – has helped increase banking network coverage due to its openings in rural areas.
The main domestic banks have also launched structural transformation programmes. By focusing more on the clients’ needs, the process has already resulted in more efficient banking penetration and the adaptation of products or services to meet local requirements. This set of measures is expected to help the sector meet the goal of 65% banking penetration by 2015, as set by the central bank.
To what extent does the issue of national bonds in 2013 facilitate issuances from Moroccan banks?
O. BENJELLOUN: Morocco’s sovereign lending has opened the doors of the international debt market to other public and private issuers. This has been welcomed due to the performance of these entities and has provided a solid financial foundation for the kingdom. The sovereign lending has also emphasised the soundness of Morocco’s banking sector, the resilience of its economic growth, and the stability and democratic character of the kingdom’s political institutions. Furthermore, Casablanca Finance City, and its capacity to attract new foreign investment flows, represents an excellent opportunity to accelerate the deepening of capital markets and nourish financial development in the kingdom. Ultimately, international borrowing by Morocco and its banking sector, shows that Moroccan money is still sought after and should continue to get a favourable welcome from international investors.
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