Over the first quarter this year, the MAD6 billion consolidated net banking income achieved by Attijariwafa Bank was only 1.5% higher than that in Q1 2019, the weakest Q1 increase since 2018. The net income group share was MAD1.1 billion, down 23.8% from Q1 2019. This shows that the Moroccan bank was in a very weak position even before the coronavirus.

For FY2019, Attijariwafa Bank distributed a generous dividend of MAD2.72 billion to its shareholders, despite a 6% drop in its share value over the year. This dividend figure represents 59.2% of the net profit in FY2019, well above the average 47.5% distributed in 2017 and 2018.

The net dividend was MAD13.5 per share, the highest since 2007. Concerning the latest value of the Attijariwafa shares on the Casablanca stock exchange (MAD341.9), the net dividend represents a yield of 3.9%. However, all these strong indicators of immediate profitability are weakened by a less exciting outlook ; higher risk cost, lower profitability in a context marked by the covid-19 pandemic

The financial data published in the first quarter of this year show an 82.5% rise in the cost of the risk, which reached MAD1.1 billion. Although this only makes 1.3% of outstanding credit amount over the period, it is a worrying trend. At the same time, the sharp decline in net income led to a fall in the various profitability ratios.

The Price-to-earnings ratio was 12.9x against an average of 18x over the last three years. This means that from now on, an investor who invests in this stock would recover his stake after 12.9 years rather than 18 years on average at the end of 2019. This is a welcome prospect for new investors, but for old investors, it is proof that there has been a value deterioration to their disadvantage.

The historic evolution of the company’s share value confirms this potential and latent loss for existing investors. Attijariwafa's share has been declining by 0.6% since 2015. It is down 17.2% since the beginning of 2017, and since January 2020, the share has accumulated a loss of 31.47% as of May 8. Prospects for 2020 are timid and mainly depend on the evolution of the pandemic. The World Bank says it has granted debt moratorium of up to MAD22 billion to 80,000 individuals and companies that requested so. The analysis shows that these people have not been able to repay their due debts. It is difficult to confirm that at the end of the moratorium, they will be in a better position to do so.

It is not certain that the banking group will be able to continue with its strategy of generous dividend distribution. The future of this strategy will then depend on the speed of the economic recovery, and perhaps also on how the Moroccan Central Bank will authorize the prudential management of covid-19 debts. However, the group can count on equity capital of MAD55.4 billion and could put it to use in the event of a shock, but the profitability of this capital has deteriorated since 2016.

Idriss Linge