OREANDA-NEWS. Fitch Ratings has affirmed Morocco-based Attijariwafa Bank's (AWB) 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 'bb-' 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
AWB's IDRs, National Ratings, SR and Support Rating Floor (SRF) reflect a moderate probability of support from the Moroccan authorities. AWB is one of the leading Moroccan corporate and retail banks with respectively a 26.2% and 26.4% market share in deposits and lending. It is domestically-owned and operates internationally with subsidiaries in Tunisia and in sub-Saharan African countries. The Stable Outlook on the bank reflects the Outlook on the Moroccan sovereign rating.

Fitch considers that the Moroccan authorities would have a high propensity to support AWB if needed, given the bank's systemic importance in the country. However, Fitch views the probability of support as only moderate given Morocco's financial strength (BBB-/Stable).

KEY RATING DRIVERS: VIABILITY RATING
Fitch views the combination of AWB's modest capital ratios and significant risk appetite as having a higher influence on its VR than other factors. AWB's VR also reflects its leading domestic franchise, moderate asset quality, overall solid funding and liquidity profile and its capacity to generate sustained profitability.

AWB's capital ratios are modest given the bank's significant risk appetite as reflected in its high loan book concentration, substantial exposure to volatile markets - such as sub-Saharan African countries and Tunisia (together 20% of total assets at end-2014) and high related-party lending. AWB's Fitch core capital (FCC) ratio is only adequate (9.2% at end-2014) and we expect it to be stable in 2015.

Fitch views AWB's asset quality as moderate. AWB's impaired loans ratio was 6.8% in 2014, reflecting economic pressure encountered by Moroccan corporates and SMEs (60% of loan portfolio at end-2014), a still challenging operating environment in Tunisia (7.5% impaired loans ratio) and weak economies in sub-Saharan African countries (12% impaired loans ratio). Fitch expects impaired loans to keep rising in 2015, albeit only moderately, due to persistent economic uncertainties in those countries.

High obligor concentration in AWB's loan book still represents a material credit risk. At end-2014, nine credit exposures represented more than 10% of FCC, with the top 20 obligors representing a significant 2.8x FCC. This concentration reflects, to some extent, the concentration of the Moroccan economy in certain sectors and AWB's high domestic market shares. Those large exposures include related-party lending (which accounted for 35% of AWB's FCC at end-2014), which Fitch considers a rating weakness.

Fitch considers AWB's funding and liquidity profile as solid. Stable retail deposits form the bulk of funding and liquidity is improving as a result of slowing demand for loans and continuously growing client deposits. Fitch considers that AWB's buffer of domestic government bonds is comfortable as it covers 12 months of short-term market funding.

AWB's profitability was strong in 2014 despite slowing growth in domestic lending and higher loan impairment charges - benefiting from net gains on its large securities portfolio, which we do not expect to be repeated in 2015. Fitch believes that profitability will remain under pressure in 2015; still affected by a fairly slow-growing domestic economy in the absence of stronger economic recovery in Europe - Morocco's main economic partners. We also expect loan impairment charges to remain high 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
The VR would benefit from an improvement in AWB's capital ratios. Conversely, evidence of higher risk appetite or a significant deterioration of asset quality could put pressure on AWB's VR.

NATIONAL RATINGS
AWB's National Ratings would be downgraded if the sovereign is downgraded by multiple notches or if the Moroccan state's willingness to support AWB diminishes, most probably as a consequence of reduced systemic importance. 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 'bb-'.