Fitch Affirms Credit Immobilier Et Hotelier at 'BB+'; Outlook Stable.
The IDRs and National Ratings are support driven, based on potential support from CIH's majority shareholder, Caisse des Depots et Gestion (CDG). The VR measures the bank's standalone financial strength and indicates that the bank is vulnerable to adverse changes in business or economic conditions, but that it has a moderate degree of fundamental financial strength.
KEY RATING DRIVERS
IDRS, NATIONAL RATINGS AND SUPPORT RATING
The bank's IDRs, National Ratings and Support Rating reflect potential support from CDG, which controls 65.9% of the bank. CDG, a public sector establishment, is Morocco's leading institutional investor and a driver for development and change in the country's financial sector and capital markets. CDG is represented on CIH's board and key committees and is closely involved with strategic decisions and oversight.
Under Moroccan law public sector entities are not allowed to fail or be liquidated. In our view, the Moroccan state's propensity to support CDG in case of need is very high, as is CDG's propensity to support CIH if required. However, the overall probability of support for CIH from CDG is moderate, and this is reflected in the bank's Support Rating. The Stable Outlook reflects that on Morocco's sovereign ratings.
The bank's VR reflects its moderate franchise and concentrations in real estate development and retail mortgages. It also factors in some weaknesses in asset quality, and asset and liability maturity mismatches, which expose the bank to potentially high interest rate risk, and expansion plans that are likely to result in erosion of capital adequacy ratios. The bank's experienced management team, sound knowledge of Morocco's real estate markets and good execution skills, combined with the bank's acceptable risk controls, are positive for the VR.
CIH's share of banking sector assets is below 5%. However, its share of retail mortgages and real estate development loans is almost double that, reflecting its origins as a specialist financier of Morocco's key tourism and real estate sectors. CIH is expanding lending activities to the corporate and consumer sectors in line with plans to reduce dependence on the real estate sector, but in our view diversification will take time.
Impaired loans represent around 7% of CIH's gross loans, in line with the average for the sector's domestic, entirely Morocco based, loan portfolios. Stable deposits provide 50% of funding and the bank's access to domestic capital markets is good. Performance indicators are in line with the sector average.
The bank's IDRs, National Ratings and Support Rating are sensitive to a change in our assumptions around CDG's propensity and ability to support CIH. This could be triggered by a change in Morocco's sovereign rating, for example. This is unlikely in the near term, as indicated by the Stable Outlook on Morocco's rating.
Moroccan banks share certain weaknesses and these constrain their VRs at fairly low levels. We do not expect significant revenue diversification at CIH in the near term, nor do we expect a material reduction in its real estate niche, impaired loans, or structural interest rate risk. Upside potential for CIH's VR is therefore limited.
A modest upgrade of the VR may result over time as the bank further builds up its presence in the consumer finance segment, expands its corporate lending business and continues to grow, provided capital ratios are maintained.
The rating actions are as follows:
Long-Term Foreign and Local Currency IDR affirmed at 'BB+'; Outlook Stable
Short-Term Foreign and Local Currency IDR affirmed at 'B'
Viability Rating affirmed at 'bb-'
Support Rating affirmed at '3'
Long-term National Rating affirmed at 'AA-(mar)'; Outlook Stable
Short-term National Rating affirmed at 'F1+(mar)
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|Publication:||Daily the Pak Banker (Lahore, Pakistan)|
|Date:||May 28, 2018|
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