Executive summary
The banking environment of Morocco is stable and is closely supervised to avoid any excess by banks. Indeed, the strong regulation of the banking sector, its policy of risk management and its limited integration in the global financial system allowed it to be spared by the financial crisis. Restructured in the late 1990s, the process of modernizing the financial system had improved the banks assets quality. In the same vein, the refinancing facilities and the increasing contribution of deposits to customers in the global resources also participated in reinforcing the financial strength of banks. Finally, the sector's activity, being mainly focused on the traditional business of banking, that is, bank intermediation and credit to the domestic market, protected the system from the drifts of the international economy. On the economic front, the dynamics facing the country over the past five years has enabled the banking sector to strengthen its role as the engine of the Moroccan economy. Bank financing has grown considerably through a window of opportunity marked by the rise in consumption and investment of all economic agents. Thus, the performance recorded in recent years both in terms of GDP growth, control of inflation and rising foreign investment, allowed the Moroccan economy to be one of the strongest and most competitive countries in the MENA region (Middle East and North Africa). However, like all emerging markets, the economic crisis in the West has also partially infected the countrys financial system due to the correlation of the economic cycle with that of its European partners. The underperformance recorded in key sectors and the recovery since the beginning of 2010 demonstrate the resilience of the economy to the crisis. Nevertheless, the high concentration of Moroccan banks leads them to seek growth opportunities. The downward trend of the margin intermediation encourages banks to seek new sources of revenue in the local market but also internationally. If financing and investment banks as well as the activity of bank assurance are being increasingly developed, the international activities of the major banking groups are real growth opportunities because of the economic and financial potential target markets. This study will try to provide an outline of the Moroccan banking industry by analyzing its structure and evolution.
Table of Contents 1 History ................................................................................................................................................................4 1.1 1.2 1.3 2 Before the Protectorate .............................................................................................................................4 The colonial period .....................................................................................................................................4 After the independence .............................................................................................................................4
Structure .............................................................................................................................................................5 2.1 2.2 The Central Bank and its role in the economy ...........................................................................................6 Typologie ....................................................................................................................................................6 Public or semi-public banks ................................................................................................................7 Private banks ......................................................................................................................................8 Offshore banks ...................................................................................................................................8
Banking models ..................................................................................................................................................8 3.1 3.2 3.3 3.4 3.5 Attijariwafa bank and BMCE, universal banks ............................................................................................8 The Popular Banks group, an atypical universal banking model ................................................................9 The former OFS...........................................................................................................................................9 The subsidiaries of French banks (BMCI, CDM, SGMB) ..............................................................................9 Microfinance institutions ...........................................................................................................................9
Banks network ................................................................................................................................................. 10 4.1 4.2 4.3 Banked population .................................................................................................................................. 10 Branches .................................................................................................................................................. 10 ATMs ........................................................................................................................................................ 11
International growth ....................................................................................................................................... 12 6.1 6.2 6.3 The need for internationalization............................................................................................................ 12 Expansion in Africa .................................................................................................................................. 13 The expatriates remittances ................................................................................................................... 14
The Moroccan banking sector and the global crisis ........................................................................................ 15 7.1 7.2 The threats of the financial crisis ............................................................................................................ 15 Potential developments of the crisis ....................................................................................................... 16
Conclusion ....................................................................................................................................................... 16 3
1 History
To understand the structure of the Moroccan banking sector, it is convenient to explain its development during the course of the history of the country.
The political and legal unification of the country. The economic and social development. Numerous reforms underwent for the Moroccan banking system: Replacement of the State Bank by the Bank of Morocco in 1959, followed by Bank Al Maghrib (BAM) since 1987. The creation between 1959 and 1967 of public financial institutions involved in banking activities. In 1967, the amendment, by royal decree, of the banking regulations in force since 1943 In February 2006, the approval of a new law reform which focuses on the following main areas: o Improvement of the institutional framework. o Strengthening of good governance rules. o Strengthening the protection of the interests of clients of credit institutions.
Certainly, the evolution experienced by the Moroccan banking sector from the first until the last reform illuminates the importance of banks in the national economy, which leads us to define the bank structure and its various types.
2 Structure
The Moroccan banking system is similar to that of France, but not quite as sophisticated. It is composed of a Central Bank and about 20 other commercial banks that provide a comprehensive range of services. Financing is available from semi-public and from private institutions. Moroccan banks are divided into 13 private banks and 7 public or semi-public banks. 6 Offshore banks control less than 2% of the banking system assets, while the government still controls around 23% of the banking sector, the share has been declining over the years, through selling its shares to the public. With the government attempting to establish Morocco as a strong financial hub, the government has been attempting to liberalize the market. Recently it offered 22% of Credit Agricole for public subscription. The number of commercial banks in Morocco has decreased from 2003, where the number of private banks amounted to 18. The reason for the decline in the number of banks, finance companies, and consumer credit companies is the process of reconstructing the financial sector. This resulted in mergers and acquisitions to emerge as strong banks and position Morocco as a hub of commercial banks with a potential for strong leadership. Attijariwafa is considered the leading financial institution in Morocco with around 324.9bn dirhams of assets in 2010. BMCE is the second largest with assets worth 136bn in 2010. Other large banks include BMCI, and Banque Centrale Populaire, which together own assets amounting to over 30bn dirhams. The Moroccan financial sector has experienced over the past two decades, a profound change marked by the restructuring and consolidation of former Specialized Financing Organizations (Organismes de Financement Spcialiss: BNDE, CIH, CAM), privatization of public banks (BMCE, BCP) and a major merger (BCM-Wafabank). In addition to the overhaul of the regulatory and institutional framework, the cutting edge modernization of the 5
banking sector has enabled the Moroccan financial sector today to be one of the most organized and most powerful of the southern Mediterranean . This structural reform of the financial system has earned the country to be recognized by the IMF as having a "stable banking sector, adequately capitalized, profitable and impact proof" (IMF Country Report 2009). The various financial reforms initiated in the mid-90s, whether those to modernize the capital market, liberalize exchange or restructure the banking sector, had the expected results by allowing the banking sector to consolidate its role as the main component of the financial system, with total assets of 112.4% of GDP in 2009. Also, capital markets have also contributed greatly to strengthening the financial structure of the country with a market capitalization representing 68.6% of GDP in that year.
2.2 Typologie
The Moroccan banking sector experienced in the early 1990s a movement of restructuring and consolidation that has enhanced the concentration of banking institutions to set up state-owned banks that were on the verge of bankruptcy and give birth to national champions', able to develop an international dimension. The past three years have been characterized by the strengthening of the international presence through the acquisition by two Spanish banks, namely Banco Sabadell and La Caixa, of licenses to exercise within the territory and the acquisition by Al Barid bank for a banking license. The 20 banks can be divided into three banking groups given the shareholding structure.
Public shareholding
Crdit Agricole du Maroc CIH Fonds d'quipement Communal CDG Capital Mdia Finance Al Barid Bank
Local private shareholding Attijariwafa bank Crdit Populaire du Maroc BMCE bank Bank Al Amal Union Marocaine de Banques CFM CFG
Foreign private shareholding Socit Gnrale Maroc BMCI Crdit Du Maroc Arab bank Maroc La Caixa Banco Sabadell Citi bank Maroc
The three groups within the Moroccan banking sector differ clearly by the size of their branch network2 but also by the outstanding deposits and loans to customers: Private Shareholding: this group consists of a banking network of 1,248 branches, and manages outstanding deposits and customer loans of 401, 6, and 310.7bn dirhams respectively. Market shares of these two activities stood at 68.1% and 60.4% respectively; Public Shareholding: consisting mainly of restructured former state-owned banks, this group is composed of a network of 431 bank branches and manages outstanding deposits and loans of 66.4bn dirhams and 82.0bn dirhams. Market shares of these two activities stood at 11.3% and 15.9% respectively; Foreign shareholding: these banks have a network of 760 branches and manage outstanding deposits and customer loans 121.4 and 122.1bn dirhams respectively. Market shares of these two activities stood at 20.6% and 23.7% respectively.
The Moroccan banks can also be classified based on the criteria listed in Article 11 of the Banking Act of 2006: 2.2.1 Public or semi-public banks Created by the State to perform specific tasks in terms of funding: Bank Al Amal Banque centrale populaire (BCP), group of 11 regional banks. It has the largest branch network and the widest customer base in Morocco CDG capital (Investment bank) Crdit Agricole du Maroc (CAM), formerly Caisse National de Crdit Agricole (CNCA) Crdit Immobilier et Htelier (CIH) subsidiary of CDG Group since 2005 Fond dEquipement Communal (FEC) Al Barid Bank, a subsidiary of the Moroccan public post company (Maroc Poste).
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2.2.2 Private banks It is worth noting that the capital of most private banks is essentially foreign: Arab Bank Maroc, a subsidiary of the Jordanian Arab Bank Attijari wafa Bank, the largest North African banking group and the third in Africa Banque Marocaine du commerce extrieur (BMCE), the second largest banking group by assets, present in Africa and Europe Banque Marocaine pour le commerce et lindustrie (BMCI), subsidiary of BNP Paribas Casablanca Finance Markets (CFM) Citibank Maroc, investment bank subsidiary of Citibank Crdit du Maroc (CDM), subsidiary of Credit Agricole SA. Mdia Finance (MDF) Socit Gnrale (SG) Union Marocaine de Banque (UMB) CFG Group, a Moroccan investment bank Banco Sabadell La Caixa
2.2.3 Offshore banks These banks a generally dedicated to collect resources in convertible foreign currencies, financial investment transactions, etc. Offshore banks must obtain approval from the BAM (Bank Al Maghrib). They are all installed in Tangiers offshore banking zone: Attijari international Bank (Attijari I.B-BOS) Banque International de Tanger (BIT-BOS) BMCI-Groupe BNP (BMCI-BOS) Chabi International Bank Socit Gnrale Tanger Offshore (SGT-OS) Succursale Offshore de la BMCE (SUCC.OS.BMCE)
3 Banking models
In Morocco, the last two decades have witnessed the reorganization of the banking operations through consolidation and reconciliation, giving rise to multi-business banks. In this context, the following are the different models existing in the Moroccan banking sector:
income originates mainly from retail banking both local and international, predominantly Attijari Tunisie and CBAO for Attijariwafa bank and the Groupe Bank of Africa for BMCE.
allowed to lend for productive activities. However, MFIs have broad permission to innovate both in mobilizing capital and in lending methodology. Microfinance is represented by a dozen of micro-credit associations (Associations de MicroCrdit, AMC), however, the essential of the micro-credit activity is dominated by the largest three: Al Amana, Zakoura and FBPMC. These institutions target the 8mn people unbanked population among which 1.2mn are already covered by the AMC, accounting for a total of 5.7bn dirhams in micro-credits. Moreover, since 2007 the sector benefits from a financing fund: Jaida , held by Dpts et Gestion, la Poste, Caisse des Dpts et Consignations (France), KFW (Germany) and the French Development Agency. Some actions in order to downscale the services of some major banks, directly or in partnership with the AMC, are being undertaken. Some examples include the partnerships of Attijariwafa bank and FONDEP22 with the project of to make accessible bank services to the unbanked population, or the partnership of BMCE and Al Amana for the sale of home loans.
4 Banks network
4.1 Banked population
The banking rate (number of accounts / total population) has risen sharply in recent years and it is forecasted to reach 50% before 2013. Indeed, in late 2009, the banking rate of the Moroccan population was 47%. This rate is similar to that experienced by emerging markets but remains well below that of developed countries such as Spain or France, which is respectively 92% and 99%. Taking into account the entire network of the public postal service and its bank Al Barid Bank, the banking sectors accounts for a bank branch for each 6000 inhabitants. Given this fact, it appears that the improvement of the banking penetration is a major challenge for the Moroccan financial system. Indeed, the sector has the leverage of improving the banking rate, to increase the growth of consumption and investment of economic agents. It is worth noting that the Moroccan economy is becoming more and more a debt economy where bank financing is central, portending a favorable development of banking in the country.
4.2 Branches
For the coming years, the most important banks are planning to open an average of 400 branches per year.
Table 1 Number of branches
2009 Attijariwafa bank BCP BMCE Socit Gnrale Maroc CDM BMCI CIH Total 791 850 555 317 266 254 152 3185
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In 2012, the banking network of the main institutions of the place would amount to 4.400 branches, plus the network of public postal service (1.880 branches at end-2012), bringing the banking rate above 55%.
4.3 ATMs
The ATM network is constantly increasing its density with more than 4.700 terminals all over the country. Given that the banked population rate is estimated at 47%, this means there is 1 ATM for every 3.000 Moroccans holding a bank account. 7,3mn cards have been issued so far by local banks including more than 5,7mn debit/credit cards (Visa, MasterCard, etc.) and about 1,6mn cards used only for withdrawals in the issuing bank ATMs. The number of transactions is steadily increasing since 2007 when the number of ATM transactions was 85mn, amounting to 72bn dirhams. In 2010, more than 120mn transactions from ATM were performed, accounting for more than 90bn dirhams. In regards of credit cards purchases, nearly 39mn transactions were performed in the first quarter of 2011, with Moroccan bank cards in shops equipped with electronic payment terminals (TPE), for a total of 33bn dirhams, an increase of 23% over the same period in 2010. Cash withdrawals continue to represent the bulk of transactions through credit/debit cards. Two are the main technological suppliers of ATM operating systems: HPS (PCO SGMB, CIH, Arab Bank and the Post Office) M2M (BMCE and Attijariwafa bank)
These suppliers do not skimp on technology innovations to optimize the better use of the equipment, thus, offering new services to meet the Moroccans needs, such as mobile phone and prepaid cards top-ups, bill payments or cash deposits. Since mid-2011, a new law allows Moroccan banks to issue international credit cards to perform e-commerce transactions.
5 Regulation
The banking industry is highly regulated. Central Bank regulations deal with minimum capital requirements, liquidity, solvency and legal lending limit ratios. The Banking Act of February 14, 2006 is the basic document governing the activities of credit institutions. The financial lawmaker is fundamentally independent, and plays a decisive and proactive role. If the Moroccan banking system is living through the crisis in a very satisfying manner, it is thanks to the lawmaker's strict regulations issued every month since 1993, in line with international standards in terms of risk management (Basel II standardized norms, IFRS). The lawmaker urged all Moroccan banks to implement these norms. 11
6 International growth
In globalized market, technological change and deregulation, the banking industry has experienced over the last decade profound changes. Increased domestic competition has led all banks in the world to reflect on their value chain in domestic markets but also in terms of external growth. The expansion of the space of consolidation of the Moroccan banks in recent years, mainly in the international business, has profoundly changed their consolidated balance sheet structure. Specifically, the strategy of growth of the two largest banking groups in Morocco, namely Attijariwafa bank and BMCE, materialized by taking majority stakes of banks with high growth potential in the Maghreb and Africa.
The Moroccan banking market is highly concentrated with a combined market share in retail banking of more than 60% owned by the three largest banking groups in Morocco. Also, the downward trend of the intermediation margin pushes them to seek sources of revenue beyond the borders. It is noteworthy however that the banking market in Morocco is far from being a mature market given the low rate of banked population and the evolution of growing domestic demand; The important weight of export sectors in the Moroccan economy, as well as the positioning of large companies abroad such OCP (the world's biggest exporter of phosphates) or IAM (Public Telecom Company) push banks to expand internationally to attract the new business flows. Also, the recent privatization of the banking sector in some African countries encourages Moroccan banks to position themselves abroad; Finally, the low rate of banked population and the growth potential of the economy of neighboring countries are all factors that encourage Moroccan banking groups to position themselves in these markets.
Looking at the potential of the markets targeted by Moroccan banks and taking into account the economic aspects of these regions, and their degree of maturity, we can draw the following conclusions: North America and Europe: they are very mature markets, especially competitive, with the highest rates of banking in the world. Countries in these regions have very high rates of bank density with an average of more than 2000 bank accounts per 1000 adults compared with an average of 661 accounts per 1000 adults in developing countries. For example, France, Germany and the United States have banking rates exceeding 95% and a number of credit institutions from 349 banks in France to over 16,878 institutions in the United States. The internationalization of Moroccan banks to these areas is impossible, if not through the establishment of subsidiaries in countries with large North African community in order to attract financial flows of the latter to Morocco; The Asian market and South America: the two markets represent potential development for European and American countries which have historical economic and political relations with these target markets. Also, economic and language barriers do not allow Moroccan banks to expand in these regions; The African market: it is a poorly banked market with an underdeveloped the financial system. The countries of this continent have a very important potential for economic growth. Moroccan banks may introduce new sources of growth in these countries.
demand, fierce competition at the local level, represented by a price war, naturally pushes banks to expand beyond the borders. However, it is clear that the historical contribution from subsidiaries of these groups, mainly finance companies and insurance companies that display results in strong growth, ensures a recurring growth of the group results at the local level. The need for increased funding of economic agents, improving the banking and business development of bankassurance, will most probably make these subsidiaries to be important contributors to earnings growth of the sector in the coming years
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Although not affected by the financial crisis, Morocco could not escape the initial effects of the global economic crisis, felt through the activities most sensitive to the international situation. Thanks to the reforms undertaken in recent years, particularly on the economic front, and to the strong internal dynamic, Morocco faces the financial crisis in a relatively favorable position.
8 Conclusion
In the last five years, the Moroccan banking sector has experienced a significant development because of the changing regulatory framework, the economic environment and the clear desire of development. However, the volume recorded in the credit business, the intense competition and its negative impact on the rate margins and commitment of banks to finance certain sectors, established as a national priority by the government, are increasing the risk exposure of banks. The Moroccan banking sector is able to withstand the various international shocks due to its low exposure to global regulations and its financial market. The consolidation of domestic demand in recent years and the 16
international deployment reflects the industry's ability to grow organically. Finally, the sector, as a whole, possesses quality bank assets and a sound financial stability, reinforced by the weight of unpaid resources, the quality of capital and constant improvement of indicators of risk/remuneration. It is also worth mentioning the active role played by Bank Al Maghrib to regulate the liquidity needs of the banking system, thus diminishing the tensions in the interbank market. Through the analysis of the different banking models, we have shown that the model of universal banking is the dominant one in Morocco. However, the development of the main activities of the banking model, namely the commercial bank and the bank markets and investment remains very disparate. Indeed, the models of Attijariwafa bank, BMCE and the Popular Banks group, have an income over commercial banking and investment banking and markets much higher than that of French subsidiaries groups or the former OFS. The three universal banks Attijariwafa bank, Credit Populaire du Maroc and the BMCE, because of their market share, the size of their networks and their financial base, form the core of the banking sector. These three banking groups monopolize more than 60% of the activity of credit and deposits and more than 60% of bank assets and branch network. These three banks have, in total, increased their netted income, driven by the volume effect, by improving the risk / return, and by expanding the scope of consolidation; Faced with the low development of local retail banking, the Moroccan banking sector is more and more focusing in market activities, Investment and bankassurance. Indeed, the development of financial markets, the opening of Morocco to international markets and the relaxation of currency exchange control regulations portend a growing trend of this activity in the coming years. On the external part, the maturity of the local market, the phenomenon of globalization and the search for new growth are pushing banks to internationalize. The potential target market for Moroccan operators is the African continent. The geographical and cultural proximity, the level of development and potential economic growth of African countries are strong assets, justifying the export of Moroccan banks in this area. The banking sector is sufficiently capitalized, as a whole, to ensure sustained growth of its business indicators in the years to come.
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