OREANDA-NEWS. Fitch Ratings has affirmed Morocco-based BMCE Bank's (BMCE) Long-term foreign currency Issuer Default Rating (IDR) at 'BB+', Long-term local currency IDR at 'BBB-', National Long-Term Rating at 'AA-(mar)', Viability Rating (VR) at 'b+' and Support Rating (SR) at '3'. The Outlook on the Long-term ratings is Stable.

A full list of rating actions is available at the end of this commentary.

KEY RATING DRIVERS: IDRs, NATIONAL RATINGS, SUPPORT RATING AND SUPPORT RATING FLOOR
BMCE's IDRs, National Ratings, SR and Support Rating Floor (SRF) reflect Fitch's view of the moderate probability of support from the Moroccan authorities, if needed. BMCE is among the leading corporate and retail banks in Morocco.

Fitch considers that the Moroccan authorities would have a high propensity to support BMCE if needed, given the bank's systemic importance in the country. BMCE is the third-largest banking group in terms of assets in Morocco. It has 13.2% and 14.8% domestic market shares in credits and deposits, respectively. However, Fitch views the probability of support as only moderate given Morocco's financial strength (BBB-/Stable). BMCE's Long-term IDRs have a Stable Outlook, reflecting that on the Moroccan sovereign rating.

BMCE is largely owned by FinanceCom, a local private company (39% stake at end-2014), and France's Banque Federative du Credit Mutuel (BFCM; A+/Stable), which holds a 26.2% stake. FinanceCom's ability or willingness to support BMCE cannot be assessed and Fitch considers that BFCM is unlikely to provide support to BMCE, if required, although its ability to do so is high.

RATING DRIVERS: VIABILITY RATING
Fitch views the combination of BMCE's modest capital ratios and high risk appetite - as evidenced by its significant exposures towards sub-Saharan Africa - as having a higher influence on its VR than other factors. BMCE's VR also factors in BMCE's solid franchise in Morocco, modest asset quality, overall solid funding and liquidity profile and sound profitability.

Fitch considers that BMCE's risk appetite is higher than Moroccan peers as reflected by its substantial and growing activities in sub-Saharan Africa (24% of BMCE's loans book at end-2014) and higher lending growth than Moroccan peers in and outside Morocco. BMCE is present in west and east sub-Saharan Africa through the holding company Bank of Africa (BoA).

BMCE's capital ratios are modest for its exposure to volatile markets in sub-Saharan African countries, which introduces an additional source of credit and operational risks. Net impaired loans represented a substantial 16.8% of equity at end-2014.

Fitch views BMCE's asset quality as modest given the bank's significant exposures to domestic SMEs (27% of total loan portfolio at end-2014) and the weak credit quality of the loan portfolios in the sub-Saharan African subsidiaries. Fitch expects the impaired loans ratio (6.8% at end-2014) to increase moderately in 2015, in the absence of solid economic growth in Morocco and persistent economic uncertainties in sub-Saharan Africa.

Fitch considers BMCE's funding and liquidity profile as solid. Stable retail deposits are BMCE's main funding source (73% of total funding at end-2014). Liquidity is adequate with a loan-to-deposit ratio of 96% at end-2014 and a satisfactory liquidity buffer that covers short term market funding maturing over one year.

BMCE's profitability is sound and largely supported by profitable lending activity in sub-Saharan Africa (42% of operating profit in 2014). Fitch expects BMCE's operating profit to remain affected by high loan impairment charges in 2015 (116bp of gross loans in 2014), driven by aggressive loan growth in the higher-risk sub-Saharan African countries and a still subdued economic environment in Morocco, which affects domestic SMEs. Fitch considers that limited cost efficiencies - notably in the sub-Saharan subsidiaries - will continue to weigh on operating profitability in 2015.

RATING SENSITIVITIES
IDRs, SUPPORT RATING AND SUPPORT RATING FLOOR
The IDRs, SR and SRF would be sensitive to a change in Fitch's view of the Moroccan state's willingness or ability to support the bank.

VR
Higher risk appetite with a significant deterioration of asset quality and capital ratios could put pressure on BMCE's VR. Conversely, the VR would benefit from an improvement in risk management and capital ratios.

NATIONAL RATINGS
BMCE's National Ratings would be downgraded if the sovereign is severely downgraded or if the Moroccan state's willingness to support BMCE diminishes, most probably as a consequence of reduced systemic importance of the bank. Both scenarios are unlikely in the near future.

The rating actions are as follows:

Long-term foreign currency IDR: affirmed at 'BB+'; Outlook Stable
Short-term foreign currency IDR: affirmed at 'B'
Long-term local currency IDR: affirmed at 'BBB-'; Outlook Stable
Short-term local currency IDR: affirmed at 'F3'
National Long-term Rating: affirmed at 'AA-(mar)'; Outlook Stable
National Short-term Rating: affirmed at 'F1+ (mar)'
Support Rating: affirmed at '3'
Support Rating Floor: affirmed at 'BB+'
Viability Rating: affirmed at 'b+'