Denver – Moroccan banks have shown signs of returning to normalcy after the devastating impacts of the pandemic on the global economy. But the road to full recovery will take at least until next year, according to financial analysts.
In a recent report, US credit rating Fitch Ratings said that Morocco’s banks have done well so far in 2021. According to the report, “aggregate net income for the seven largest Moroccan banks was up 86%,” during the first three months of this year. Banks in Morocco also reflected a “stronger profitability” during the same time period, due to the $380 million in COVID-19 relief contributions made in 2020.
However, there are still obstacles in the path to full economic recovery. Loan growth is predicted to remain “modest” for the rest of the year. Significant growth in private loans was stimulated in 2020 through two state-backed loan programs: Damane Oxygene and Damane Relance.
Both of these programs led to over $6 Billion in extended loans, although the programs will not be extended into 2021. This will stagnate revenue for the large banks this year, Fitch Ratings said. Meanwhile, analysts predict the biggest indicator of banks’ recovery in the domestic market during this year will be “cost control” capabilities.
While Moroccan banks will have trouble recovering in the domestic market, banks with a “wider geographical footprint and product diversification” will have a much easier time returning to “pre-pandemic profitability quickly, owing to cross-selling capabilities and faster business growth in some of their African markets.” Indeed, the plethora of investment opportunities in the rest of Africa may be the key to the recovery of Morocco’s financial institutions.
Even as banks struggle to generate loan revenues within Morocco, the “banks with international operations could see consolidated loan growth,” as they expand into faster growing markets with higher need for investment capital from these banks.
Currently, foreign accounts are “20%-30% of the banks’ consolidated assets,” but this number will likely increase as Morocco’s banks look to the foreign market in an attempt to consolidate and grow revenue during the current fiscal year.
