Fitch Ratings expects Moroccan banks' strong profitability to continue in 2025–2026, driven by favorable operating conditions, economic growth, and structural reforms. Despite challenges like high non-performing loans and structural constraints, Fitch highlights opportunities for improved financial strength and credit growth from infrastructure projects and investment loans. The strong profitability of Moroccan banks is expected to continue in 2025 and 2026, according to recent forecasts by Fitch Ratings. This strong profitability is primarily backed by the sector's operating environment, which has become increasingly «favourable for business generation», the American credit rating agency noted on January 15. Morocco's sound economic growth is expected to surpass the median growth rate of the Middle East and North Africa (MENA) region, driven by its large investment projects. Fitch Ratings forecasts Morocco's annual GDP growth to average 3.8% over 2025–2026. Meanwhile, the agency predicts that structural reforms in Morocco «could also be credit-positive for banks – particularly the creation of a secondary market for non-performing loans, due to be adopted into law this year». Credit growth boosted by large infrastructure As for sector loan growth, Fitch Ratings expects it to reach 6% in 2025, compared to a mere 4.5% average over 2019–9M24 and 5% in 9M24. In the banking sector, the agency reports an aggregated net income increase of 19% year-on-year in 9M24 for Morocco's seven largest banks. Fitch anticipates further increases in 2025 and 2026, «underpinned by higher business volumes and lower impairment charges as operating conditions continue to improve». For large infrastructure and industrial projects in Morocco, Fitch estimates that they will require more than USD 100 billion in financing over 2025–2030 (69% of 2023 GDP), including USD 34 billion in 2025 alone. These projects are expected to drive credit growth, which Fitch predicts will average 6%–7% annually over the next few years. Compared to most peers in Africa, Morocco's operating conditions—referring to the overall environment and factors that affect businesses' ability to function and thrive within a country—are highly favourable. This is reflected in Fitch's operating environment score of 'bb' for Morocco's domestically focused banks. This score is the second-highest among Africa's banking sectors, according to Fitch, below that of Mauritian banks but above that of South African banks. Despite this relatively good score, Morocco's operating environment could face structural constraints. «These include Morocco's low GDP per capita (2024: USD 4,021), high reliance on agriculture (12% of GDP and 30% of employment), which exposes the economy to adverse weather conditions, high unemployment (2025F: 12.5%), and weaker human development and governance indicators than for higher-rated peers». Less NPLs to better support growing businesses Fitch also expects credit demand in Morocco to be supported by solid non-agricultural growth in 2025 and 2026, particularly in the tourism and construction sectors. These two sectors are anticipated to perform well due to future projects, such as hosting major sporting events. For investment loans (which increased by 14% year-on-year in 10M24), Fitch expects them to be the main driver of medium-term credit growth. However, Non-Performing Loans (NPLs)—loans that borrowers have trouble repaying—in Moroccan banks have more than doubled over the past 10 years. By the end of the third quarter of 2024, these bad loans totaled MAD 98 billion, equivalent to 8.6% of all bank loans and about 7% of Morocco's economy. These loans remain on banks' records for extended periods because Moroccan tax laws require banks to retain them for at least five years, even after exhausting recovery efforts, Fitch explained. The rating agency estimates that if the six largest Moroccan banks could reduce their NPLs by 20%, their financial strength would improve significantly. This improvement could enable these banks to invest more in growing their businesses. Fitch recommends that some Moroccan banks, especially those with weak financial strength (capitalization), focus on improving their financial foundations, reducing the burden of bad loans, and generating more internal profits. Such steps could lead to higher scores for their financial health.
