Attijariwafa Bank is the leading bank in Morocco in terms of outstanding loans, with a 26.1% market share, and the number two bank in terms of collected deposits, with 25.1% of the market as of December 2014. The bank operates 3265 branches in Morocco. The group also conducts business outside Morocco, having begun a regional expansion in 2005. Attijariwafa is now positioned in Tunisia, which comprises 5.4% of the group’s consolidated net income, and in nine French-speaking sub-Saharan countries, which comprise 9.7% of the group’s consolidated net income. The bank is a universal bank operating in all banking business segments: retail banking, consumer loans, mortgages and investment banking, and it is also the majority shareholder of Wafa Assurance, the leading insurance company in Morocco. The main shareholder of the bank is Société Nationale d’Investissement, with 47.8% of its capital, while 28.6% of Attijariwafa’s capital is held by institutional investors and its free float represents 13.8%.

Growth Story

By the end of 2014, Attijariwafa Bank increased its consolidated deposits by 8.5%. Outstanding loans experienced a positive trend, increasing 1.7%. Regarding the group’s profit and loss, net banking income registered a progression of 8.8%, driven by two main factors: 1) income from market activities, up 41% year-on-year following the strong decrease in the yield curve; and 2) net interest margins, which grew 4.2% to Dh11bn (€1.2bn). It is worth noting that the net fees margin increased stronger than expected, by 3.9% to Dh3.9bn (€424m), while other activities decreased by 33.5%.

The bank’s gross operating income stood at Dh10.9bn (€1.18bn), driven by a 0.7-point decrease in its cost-to-income ratio to 43.7%. Following a rise in non-performing loans that affected the entire Moroccan banking sector in 2014 – with an increase of 19.3% for the industry – the cost of risk increased 62.6% to Dh3bn (€326.4m), some 1.2% of gross customer loans, leading to a 1.9% drop in operating income to Dh7.9bn (€859.5m). Finally, the net income group share rose after a favourable basis effect, since the group suffered in 2013 from a tax reassessment on Wafa Assurance, up 5.2% to Dh4.4bn (€487.7m), a return on assets (ROA) of 1.3% and return on equity (ROE) of 12.7%.

Strategic Development 

For 2015, we estimate growth in outstanding loans of 7.1%, mainly driven by the bank’s good performance in Morocco, following a better than expected macroeconomic recovery over the final months of 2014. We also forecast 7.5% growth for deposits, following the positive effect of the fiscal amnesty on Moroccan assets overseas. Net banking income is expected to register a growth rate of 2.5% in 2015, due to the combined effects of a stronger net interest margin, up 8.5%, and a 21.9% decline in income from market activities. The gross operational income should grow by 12.8% to Dh11.2bn (€1.22bn) in 2015, driven by a decreasing cost to income ratio to 42.7%. In a context marked by a progressive improvement in the Moroccan economy, we believe that the consolidated cost of risk should stand at approximately 0.85% of gross outstanding loans. Finally, the net income should grow by 7.2% in 2015, representing an ROE of 13.4% and an ROA of 1.4%. While we have an overall neutral stance on the sector, we have a clear preference for Attijariwafa Bank for which we have a “buy” recommendation, with a target price of Dh407 (€44.28) per share for the following reasons:

• Attijariwafa Bank’s net banking income is one of the most diversified in the sector in terms of sources of revenues as well as in terms of geographic breakdown;

• Attijariwafa Bank is the most profitable in the industry, with a 2015 ROE and ROA of 13.4% and 1.4%, respectively, versus 9% and 1.1% for its peers;

• Attijariwafa Bank is currently trading at a discount to its peers, with a 2015 price-to-equity of 15.3x versus 18.5x for the other listed banks.