Morocco’s banks needed little convincing to see the value of expanding outside their home market. The country’s banking sector is among the most highly developed in Africa, meaning returns are relatively low and opportunities to grow faster than the wider economy are limited. The kingdom’s project to expand its business links throughout the African continent, therefore, tallied well with lenders’ commercial interests.
“Banks realised quite early on that if they wanted to grow they’d have to go outside,” says Janine Dow, head of francophone African banks at Fitch Ratings.
Though their experiences have not always been free of trouble, revenues from international ventures are soaring, and industry figures say the investments are more than worth the risk, with further expansion planned.
“Almost all African markets still offer massive growth opportunities in all segments, provided you address them with the right value proposition, the right cost structure and the right risk management system,” says Kamal Mokdad, general manager in charge of international banking at Banque Centrale Populaire, one of Morocco’s biggest banks.
International revenues at BCP grew 800 per cent between 2009 and 2017, from less than 3.6 per cent of group sales to almost 20 per cent. It aims to raise that figure to 30 per cent by 2020. Rival Attijariwafa Bank, meanwhile, lifted its proportion of international sales from 15 per cent to 33 per cent over the same period.
Both groups are eyeing new markets: BCP recently bought a Mauritian bank and is in the process of buying another four businesses in Cameroon, Madagascar, Tunisia and Congo. In 2017, Attijariwafa made its largest acquisition with the $500m takeover of Barclays’ Egyptian unit, and it is considering purchases in Rwanda, Kenya and Ethiopia, among other countries.
Morocco chart
Analysts have warned, however, that the bumper growth could come at a cost. Repeated acquisitions have put pressure on banks’ reserves at a time when they are already “not very well capitalised”, says Ms Dow. In a recent note on banks across francophone west Africa, Fitch noted that the region generally has higher rates of bad loans than Morocco, concentration risk because of a relatively small number of large corporate borrowers, and political uncertainty in some markets. The collapse last year of SAF-Cacao, Ivory Coast’s largest cocoa exporter, for example, left BCP and Attijariwafa exposed to a reported CFA Fr25bn ($44m) in unpaid loans.
Ismail Douiri, Attijariwafa general manager, acknowledges that “risk is definitely higher, but returns are [also] higher, and when you have bigger margins you can invest some of it in taking risk.” He adds that “individual markets [outside Morocco] are small enough not to present a shock if any had a problem”.
Mr Mokdad says BCP has consciously expanded in countries with different economic profiles — such as oil-dependent economies and non-oil-dependent economies — to diversify its exposure.
Laureen Kouassi-Olsson, regional head for western and central Africa at Amethis Finance, a Paris-based private equity firm, says while much of the Ivorian banking sector was “badly hit” by SAF-Cacao’s collapse, the Moroccan lenders were less exposed than many of their peers. “They have enough on their plates to do without getting into the risky stuff that’s not in their area of expertise. That’s why I think it’s quite secure: they only finance the things they’re comfortable with”, she says.
The wider Moroccan push into sub-Saharan Africa provides its banks with what Ms Kouassi-Olsson calls a “captive audience of clients” in need of financing for major projects, providing a useful advantage to help compete with French and pan-African rivals such as Société Générale, BNP Paribas and Ecobank.
Ms Kouassi-Olsson’s firm has taken a stake in CFG Bank, another Moroccan lender that is set to follow its more established peers into west Africa. Having started life as an investment bank, CFG eventually became a full-service retail bank. It is looking at opportunities in Ivory Coast in particular, and is likely to focus on its historical strengths of asset management and corporate finance before considering broader expansion, Ms Kouassi-Olsson says.
The impact on capital levels and need to integrate new businesses may slow down the pace of acquisitions after the latest round of purchases is complete. But with further initiatives including building a new microfinance business and keeping up with developments in financial technology, banks’ broader investment in sub-Saharan Africa will continue, says BCP’s Mr Mokdad.
“While most are developing economies, we see it as a chance to be near each one of them, opening our bank to the financially excluded populations and at the same time fostering financial development and economic integration, all with the goal of eventually unlocking the continent’s undeniable potential . . . we are deeply convinced that we need to continue to grow.”
