Moroccan Banks. Capital, NPLs, Revolut, SREP and Earnings… Fitch Ratings Takes Stock

Key points:

- Moroccan banks ended 2025 on a solid footing. Fitch notes a 26% increase in the aggregate net income of the seven largest banks, driven by revenue growth, loan expansion and a decline in the cost of risk.

- The agency expects aggregate net income to continue rising in 2026, but at a more moderate pace, between 10% and 15%. The expected slowdown mainly reflects lower market-related revenues.

- Behind this improvement, Fitch is keeping two areas under close watch: asset quality, with a still-high non-performing loan ratio, and solvency, with CET1 ratios below the average for emerging-market banks. The SREP and the potential arrival of new digital players such as Revolut also add new challenges for the sector.

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Here are the details:

Moroccan banks entered 2026 with stronger fundamentals. In 2025, listed banks posted nearly MAD 22 billion in group share net income, up 12.6% year-on-year. On their own, they account for around 44% of the aggregate earnings of listed companies. Including unlisted banks, notably Saham Bank and Crédit Agricole du Maroc, the banking sector posted group share net income of nearly MAD 24 billion.

This momentum reflects both stronger business activity and better control of the cost of risk. It confirms the central role of banks in value creation on the Casablanca Stock Exchange, but it also points to something else: the sector is entering a new phase, with more growth, stricter prudential requirements and finer trade-offs to be made between profitability, capital and risk.

This is also the view of Fitch Ratings, which believes that the credit profiles of Moroccan banks should continue to improve in 2026 and 2027, supported by business growth, profitability and changes in the regulatory framework. Yet this improvement does not close the debate. On the contrary, it shifts attention to the sector’s next tests: the rollout of the SREP, the capital consumption linked to African exposures, asset quality, and the potential arrival of new digital players capable of putting pressure on certain segments of the banking model.

To discuss these issues, Médias24 spoke with Ramy Habibi Alaoui, Director, Middle East and Africa Banks at Fitch Ratings, and Jamal El Mellali, Director, Middle East and Africa Banks, responsible for bank ratings in Francophone Africa.

Revolut, SREP: two new tests for Moroccan banks

The potential arrival of Revolut in Morocco certainly raises questions about the balance of the local banking sector. “The entry of new players into the market could, in general, increase competitive pressure and potentially weigh on banks’ revenues,” the two Fitch analysts explain, particularly on “fees and commissions, which account for around 15% of the sector’s net banking income”. It could also “intensify competition for deposits”.

However, Ramy Habibi Alaoui and Jamal El Mellali point out that, “based on previous cases, changes in the ownership structure and/or adjustments to the strategy of certain banks, particularly in the digital space, have not fundamentally changed” the structure of the market. The sector remains, in their view, “oligopolistic”, with the three largest banks accounting for “more than 60% of the country’s banking assets”.

On liquidity, the two analysts stress that “current conditions are particularly favorable”. Banks have “sufficient liquidity buffers”, as well as “alternative sources of funding if needed”.

The other issue is the SREP, which is being integrated by 2027. This framework will require banks to “conduct in-depth self-assessments and correct any weaknesses in their business model, internal controls, and capital and liquidity management”. This self-assessment approach, Ramy Habibi Alaoui and Jamal El Mellali add, “strengthens the risk culture within institutions”.

But the impact of the SREP will go beyond the prudential exercise. With higher capital requirements, banks “will have to make finer trade-offs between volume and profitability, probably favoring customer segments and products offering the best risk-adjusted margins”.

The two analysts also believe that these measures will strengthen banks’ internal governance and risk management frameworks, while encouraging greater discipline in capital management. The SREP should also encourage banks to maintain higher solvency ratios and prioritize profit retention, which, according to the two Fitch analysts, is “positive for their credit profile”.

Profitability, cost of risk and Africa: the drivers of improvement

Médias24: The increase in net income (+26%) comes in a context of growth in risk-weighted assets (RWA), with a stable core profitability ratio of 2.3%. What are the real drivers of value creation in this phase, and to what extent does this profitability remain sensitive to changes in the cost of risk?

Ramy Habibi Alaoui and Jamal El Mellali: The 26% year-on-year increase in aggregate net income in 2025 was mainly driven by 17% revenue growth, supported by 6% loan growth on a consolidated basis, as well as a 5% decline in the aggregate cost of risk. At the same time, our main profitability indicator, the operating profit-to-risk-weighted assets ratio, remained stable at 2.3%, reflecting contrasting trends across banks as well as sustained growth in risk-weighted assets, which rose by 9% year-on-year at the aggregate level of the seven largest banks.

In 2026, we expect aggregate net income to grow by 10% to 15%, supported by higher business volumes, a decline in the cost of risk in a favorable economic environment and controlled operating costs. This represents a slowdown compared with 2025, mainly due to lower market-related revenues, which account for around 20% of operating profit. We believe that higher inflation, expected to average 4% in 2026, will put pressure on domestic bond yields.

The average cost of risk stood at around 90 basis points in 2025, compared with 120 basis points in 2024, but remains above the pre-pandemic level of around 60 basis points. This level remains high despite the improvement in banks’ asset quality indicators.

An increase in the consolidated cost of risk, in the event of a deterioration in the economic environment in Morocco and/or Africa, would weigh on the sector’s earnings growth in 2026. This is not our base-case scenario, however, given the expected strength of Morocco’s economic growth, with real GDP growth forecast at 4.1% in 2026, as well as the high level of provisions built up by Moroccan banks since 2020.

- Exposure to Sub-Saharan Africa is evolving in an environment marked by downgrades of certain sovereigns. How is this trend currently reflected in the risk profiles of Moroccan banks, particularly in terms of capital consumption and the trajectory of the cost of risk?

- The downgrade of the sovereign ratings of certain Sub-Saharan African countries in 2025 did indeed lead to higher capital consumption, particularly among the three pan-African banks: Attijariwafa bank, Groupe Banque Centrale Populaire and Bank of Africa. The aggregate risk-weighted assets of the seven largest banks therefore rose by 9% year-on-year in 2025, partly reflecting the downgrade of several countries in the region as well as solid loan growth (+6% on a consolidated basis).

However, the impact on the cost of risk remained limited in 2025, as reflected in the aggregate decline in the cost of risk observed among pan-African banks. It should be noted that, at Fitch, the trend in African sovereign ratings was positive in 2025, with more upgrades than downgrades. This reflects an overall improvement in the credit quality of African sovereigns and supports the decline in the cost of risk for Moroccan pan-African banks.

Ultimately, the effects of sovereign downgrades were felt more in capital requirements than in asset quality. Under Basel III standards, exposures to sovereigns rated below “B-” are assigned a 150% risk weight, compared with 100% for sovereigns rated between “B-” and “BB+”.

Capital, margins and credit: balances to watch

- Capital ratios stand above regulatory requirements and support growth. How much flexibility do these buffers provide in a stress scenario, and what trade-offs become priorities in such a case?

- We believe that the current solvency ratios, particularly Common Equity Tier 1 ratios, provide Moroccan banks with sufficient safety margins in the event of a moderate deterioration in asset quality. The average CET1 ratio of the seven largest Moroccan banks stood at 10.6% at end-2025, well above the regulatory minimum of 8%. Moroccan banks also have solid earnings capacity to absorb a deterioration in asset quality, with operating profit before provisions representing around 4.5% of gross loans in 2025.

We also consider that Moroccan banks have a strong capacity to raise capital, notably through capital increases, dividend cuts, or issuances of Tier 2 subordinated debt or Additional Tier 1 perpetual instruments. It is also worth recalling that they have demonstrated in the past their ability to absorb significant losses and raise capital if necessary, as was the case during the pandemic.

We continue, however, to view the solvency profile of Moroccan banks as a weakness in their intrinsic rating, because their CET1 ratios remain below those observed in many emerging markets, even though they operate in a relatively high-risk environment.

- Net interest margins remain around 3.3%-3.4% in your scenario. What mechanisms currently support this stability, and what factors could alter its trajectory?

- Moroccan banks’ net interest margin has historically remained stable, at around 3.3% to 3.4%, based on the average of the seven largest banks in the market. This stability mainly reflects the stability of domestic interest rates across cycles, as well as the structurally low funding cost of Moroccan banks, which averaged 1.4% in 2025 for the seven largest banks in the market. The cost of customer deposits stood at only 80 basis points in 2025.

Overall, Moroccan banks benefit from lower interest rates insofar as their liabilities adjust more quickly to rate changes than their assets, given the longer maturity of their loan portfolios, with medium- and long-term loans accounting for more than 60% of outstanding loans. In this context, stronger-than-expected loan growth in 2026, combined with lower rates, could support a short-term increase in banks’ net interest margin.

Liquidity and vulnerabilities: the remaining areas of vigilance

- Credit dynamics continue to be driven by major investment projects. How does this growth phase influence the risk structure of bank balance sheets, particularly in terms of concentration and maturity of exposures?

- Credit growth has been driven since 2024 by the strong increase in equipment loans, up 14% year-on-year in 2025, supported by the Kingdom’s major investment projects. In terms of concentration, these projects, generally led by large public enterprises, often result in higher exposure to a limited number of counterparties. Credit concentration risk is already high in Morocco by international standards, as it is in most emerging markets.

By contrast, the risk of maturity mismatch (maturity mismatch) does not appear to us to be a concern. While these exposures have relatively long maturities, this should be assessed in the context of a loan portfolio already dominated by medium- and long-term financing, which accounts for more than 60% of the total, as well as Moroccan banks’ strong ability to raise resources of similar maturity on the domestic debt market and a stable funding base dominated by low-cost retail deposits. This translates into a maximum loss in the economic value of equity representing an average of 7.9% of the sector’s Tier 1 capital at end-2024, well below the maximum threshold of 15%.

- Funding relies mainly on low-cost deposits. How is this model evolving in a context of accelerating outstanding loans, and what signs would point to a change in the sector’s funding structure?

- The Moroccan banking sector is funded primarily by customer deposits, which account for around 80% of total funding. Demand deposits and savings accounts make up nearly 80% of total deposits, reflecting both Morocco’s historically low-rate environment and the preference of households, which hold 72% of the sector’s deposits, for liquidity.

This funding base, which is both stable and resilient, and almost entirely denominated in local currency, combined with the low cost of resources and the depth of the domestic bond market, is a strength of the funding and liquidity profile of Moroccan banks.

Despite strong growth in outstanding loans since 2022, we have not observed any significant tightening of banking liquidity, thanks to faster growth in deposits. Between 2023 and 2025, average credit growth in the sector stood at around 5%, compared with nearly 8% for deposits, which brought the loans-to-deposits ratio down to 89% at end-February 2026. It is also notable that the increase in retail investor participation in the stock market since 2024 has not resulted in a marked tightening of banking liquidity.

What could change banks’ funding structure would be credit growth that remains durably above deposit growth, leading to greater reliance on term deposits and, potentially, refinancing from the central bank. However, this is not our base-case scenario.

- What are the main vulnerabilities today in the credit profiles of Moroccan banks that could call the improvement trajectory into question?

- We identify two main relative weaknesses in the ratings of Moroccan banks: asset quality and the solvency profile.

With regard to asset quality, this assessment reflects the still-high level of the non-performing loan ratio, or loans in “bucket 3”, which stood at an average of 9.5% on a consolidated basis at end-2025, compared with 10.1% at end-2024 for the seven largest banks in the market. Despite this improvement, the level remains high compared with the average for emerging-market banks, which stood at around 3.3% at end-June 2025. We are nevertheless aware that these ratios must be interpreted in light of the low level of loan write-offs by banks, reflecting the tax framework.

In this context, the development of a secondary market for non-performing loans could help improve asset quality indicators and, to a lesser extent, the solvency indicators of Moroccan banks, as was observed in some Southern European countries following the sovereign debt crisis.

In terms of capital, we continue to consider that the solvency profile of Moroccan banks is a weakness in their intrinsic rating, despite some improvements in recent years. Their Common Equity Tier 1 ratios remain below those observed in many emerging markets, with a CET1 ratio of 10.6% at end-2025, compared with an average of 14.6% for emerging-market banks at end-June 2025. This is all the more notable given that Moroccan banks operate in a relatively high-risk environment, particularly in Africa, where their exposure exceeded MAD 430 billion at end-2025, representing around 24% of the total assets of Moroccan pan-African banks.

Banques marocaines : Fitch anticipe une amélioration des profils de crédit sur 2026-2027