(The following statement was released by the rating agency)
Nov 21 -
-- We now expect Morocco-based Attijariwafa Bank's (AWB) capitalization
to remain fairly stable following the recent moderate capital increase, while
we previously assumed a more significant rise.
-- As the Moroccan economy is slowing down, we have revised down our
capital build-up projections for AWB and we now expect that improvement might
only occur in the long term. We are therefore revising our outlook on AWB to
stable from positive and affirming our 'BB/B' ratings.
-- The stable outlook balances AWB's solid business position and adequate
funding and liquidity profile with its weak capitalization and ambitious
geographic expansion strategy.
On Nov. 21, 2012, Standard & Poor's Ratings Services revised its outlook on
Morocco-based Attijariwafa Bank (AWB) to stable from positive. At the same
time, we affirmed our 'BB/B' long- and short-term counterparty ratings on the
The outlook revision reflects our revised projection of AWB's capitalization.
We now anticipate that the bank will not achieve a significant increase of
capital over the next 12-18 months. Growth prospects in the Kingdom of Morocco
(foreign currency; BBB-/Negative/A-3, local currency; BBB/Negative/A-2) are
slowing down, mirroring the economic difficulties in Europe, and this may
constrain the bank's capacity to increase earnings and build up capital
internally. We also believe that past expansion in sub-Saharan countries
entails risks that require more capital than the less risky domestic
operations, which should continue to represent a steady 80% of AWB's total
assets in the medium term.
We now expect the bank's weak capitalization to only slightly improve in the
near term, and do not assume a large capital increase under our base-case
scenario. This translates into our projected risk-adjusted capital (RAC) ratio
before adjustments for AWB of about 4.5% over the next 12-18 months. This
projection takes into account that the bank's staff subscribed to a Moroccan
dirham (MAD)2.1 billion capital increase in mid-2012.
Quality of regulatory capital is burdened by subordinated debt of MAD10
billion, which we do not take into account in our capital ratios, unlike the
Moroccan regulator. Morocco's central bank increased the minimum capital
adequacy ratio from 10% to 12% and Tier 1 ratio to 9% from June 2013. Like
some other Moroccan banks, AWB has resorted to subordinated debt to bolster
its regulatory capital over the last few years.
The ratings on AWB remain supported by the bank's leading business position
and adequate liquidity profile.
The bank's stand-alone credit profile (SACP) is 'bb-' and the long-term rating
is one notch higher than the SACP, reflecting our view of AWB's "high"
systemic importance based on its dominant market share, and our assessment of
the Moroccan government as "supportive" toward its banking sector.
The stable outlook balances AWB's solid business position and adequate funding
and liquidity profile with its weak capitalization and ambitious geographic
We might upgrade the ratings on AWB if the bank's expansion strategy became
less risky than we currently anticipate and reduced the risk of asset quality
deterioration. An increase in capitalization beyond our expectations would
also lead us to raise the bank's SACP and ratings. More specifically, a
strengthening of the bank's capital, leading to a projected RAC ratio before
adjustment of more than 5% on a sustainable basis, would have positive rating
implications, all other things being equal. Abating pressure on the
sovereign's creditworthiness, if economic conditions were to improve in
Morocco, would be a prerequisite for a positive rating action on AWB.
A significant deterioration in asset quality, or a serious decline in the
bank's core capitalization might cause us to reassess its risk position or
capital and earnings and trigger a revision of the SACP. Given the difference
between the local currency rating on Morocco and the bank's SACP, a lowering
of the sovereign ratings would not trigger a rating action on AWB, all other
factors remaining equal.
Ratings Score Snapshot
Issuer Credit Rating BB/Stable/B
Business Position Strong (+1)
Capital and Earnings Weak (-1)
Risk Position Moderate (-1)
Funding and Liquidity Average and adequate (0)
GRE Support 0
Group Support 0
Sovereign Support 1
Additional Factors 0
Related Criteria And Research
-- Use Of CreditWatch And Outlooks, Sept. 14, 2009
-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
-- Banking Industry Country Risk Assessment Methodology And Assumptions,
Nov. 9, 2011
-- Bank Capital Methodology And Assumptions, Dec. 6, 2010
-- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011
Certificate Of Deposit BB/B
Ratings Affirmed; CreditWatch/Outlook Action
Counterparty Credit Rating BB/Stable/B BB/Positive/B