Why French banks are leaving Morocco [FULL]

Rédaction Africa Links 24 with Soufiane CHAHID
Published on 2024-04-15 08:36:00

On April 12th, a statement from the Société Générale group announced the conclusion of an agreement with the Saham group for the sale of Société Générale Marocaine des Banques (SGMB) and La Marocaine Vie.

The group led by Moulay Hafid Elalamy will pay 745 million euros to acquire 57.67% of the bank’s capital held by the French group Société Générale, including its subsidiaries, as well as all the shares held by Sogécap in the insurance company La Marocaine Vie.

The operation is expected to be completed by the end of 2024, after approval from Bank Al-Maghrib, the Competition Council, the Insurance and Social Welfare Monitoring Authority (ACAPS), and the Moroccan Capital Market Authority (AMMC), and will be accompanied by a mandatory public tender offer for Eqdom shares listed on the Casablanca Stock Exchange.

This operation will be the second of its kind in two years. In December 2022, the Holmarcom group officially acquired the total stake of the French Crédit Agricole in Crédit du Maroc, which was 78.7%. As for the last Moroccan bank still owned by the French, BMCI (BNP Paribas), its future has been the subject of speculation for several years.

This trend of French banks withdrawing in favor of Moroccan investors is not only observed in Morocco but also in other African countries. For example, at the end of 2019, Banque Centrale Populaire acquired the shares of the French group Banque Populaire Caisse d’Epargne (BPCE) in Cameroon, the Republic of the Congo, and Madagascar.

While Moroccan investors seek to capitalize on this situation to expand their activities in Africa, how should this growing disinterest of French banks in the African market be interpreted?

“The Lack of Synergies”
Several factors explain this gradual withdrawal, with the main one being strategic integration. In recent years, major French banking groups have realized that integrating retail and commercial banking activities in African countries is quite complicated. According to Rafael Quina, Senior Director of Financial Institutions at Fitch Ratings, these markets do not necessarily have the same banking structure as in France or Europe, the competitive environments are different, product strategies vary, and lending practices are not always in line with those seen in Western Europe. This limits synergies with other banking activities, making it difficult for these groups to maximize return on equity and justifying the maintenance of subsidiaries in these countries. Additionally, risk factors, such as credit risk and governance, geopolitical, and regulatory risks, play a significant role in the decision of French banks to withdraw from these markets.

“Risk Aversion”
Unlike local competitors, French groups are disadvantaged by European regulations, especially in credit granting. The European Central Bank’s regulations sometimes restrict the ability of French and European shareholders to engage in certain business activities in African countries. To avoid penalties, these groups strive for greater harmonization of risk management processes to reassure supervisors about risk control in their balance sheets. This hinders French banks from increasing their presence in rapidly growing markets.

“Next Candidate”
While Société Générale’s withdrawal from the Moroccan market may have surprised some, the decision was not unexpected for those closely monitoring the French banking group’s recent strategic reviews. Société Générale recently disengaged from several African countries, including Mauritania, Congo, Chad, and Equatorial Guinea. It is expected that more African subsidiaries will be sold off in the coming months. The future of BMCI in the Moroccan banking sector remains uncertain, as BNP Paribas evaluates the performance of its subsidiaries regularly and considers staying in certain countries.

If BNP Paribas decides to divest from Morocco, finding a financially sound buyer will be a complex task. Alongside Holmarcom and Saham, who will have the financial strength to take on such an endeavor? Only time will tell.

Read the original article(French) on L’Opinion