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Societe Generale Marocaine de Banques - ratings affirmed by Capital Intelligence

August 31, 2014

Capital Intelligence (CI) has affirmed the ratings of SociÉtÉ GÉnÉrale Marocaine de Banques (SGMA), based in Casablanca, Morocco. SGMA's Financial Strength Rating (FSR) is affirmed at 'BBB-', on a 'Stable' Outlook. The FSR is supported by good profitability at the operating level, strengthened capital adequacy, maintained sound loan loss reserve (LLR) coverage and the Bank's solid position in the market.

The rating is constrained by very tight liquidity despite improvement in 2013 in respect of the loans to customer deposits ratio, a low liquid assets ratio and higher non-performing loans (NPLs). SGMA's Foreign Currency Ratings (FCR) are affirmed at 'BBB-' Long-Term and 'A3' Short-Term. The FCRs are constrained by CI's internal assessment of sovereign credit risk. The Outlook for the FCR is maintained at 'Stable'. The Support Rating remains at '2', reflecting majority SG ownership.

SGMA, majority owned by France's SociÉtÉ GÉnÉrale (SG), has a solid banking position in the Moroccan market, with a market share of around ten per cent. SGMA has been able to generate high margins, despite increased competition and falling domestic interest rates. The Bank's margins reflect high earnings on interest earning assets driven by a growing retail book, and a low cost of funds. This has resulted in the sector's widest estimated margins. In turn, SGMA has the highest operating profit on average assets amongst peer banks. However, operating profit did fall in 2013 mainly due to weak gross income on the back of very limited growth in the loan book during the same year. The fall in net profit was much more pronounced due to the high rise in the provision charge.

NPLs increased by a higher level in 2013 on the back of continued challenges in the Moroccan economy. SGMA's higher than sector average NPL ratio is partly due to a more conservative policy compared to other domestic Moroccan banks. That said, the ratio is on the high side, although mitigated by an adequate provisioning coverage.

The Bank's liquidity profile improved slightly in 2013 as customer deposit loan growth outpaced loan growth for the first time in some years. Despite the fall, the ratio of loans to customer deposits is considered very high. Liquid assets also rose in 2013, but the base of liquid assets remains small. The overall liquidity profile is supported by a reasonable base of medium and long-term funds, as well as subordinated debt. Moreover, capital adequacy continued to improve in 2013 and the capital adequacy ratio (CAR) is at a sound level.

SociÉtÉ GÉnÉrale Marocaine de Banques SociÉtÉ GÉnÉrale Maroc is now the brand name used is the product of the 1962 incorporation of the local operations of France's SG, whose interest in SGMA is now 57.01 per cent. Local investors Groupe Deveco Souss hold 27.54 per cent. Institutional staff and other individual owners hold the remaining share. Its shares are not listed. SG holds 6 of 12 seats on the Conseil de Surveillance (Board) and is heavily involved in management with French expatriates including Directeur GÉnÉral and other senior finance, risk, audit positions. The French parent contributes significantly to the Bank's strategy and operations. The Bank has a distribution network of 393 branches (as at end 2013) in the Kingdom, and several 'co-branded' branches in France within the network of SocGen, and is represented abroad in Spain and Italy. As at end 2013, total assets amounted to MAD 81,839 million ($10,042 million).

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Source: CPI Financial

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