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Cablegate: Moroccan Banks On Regional Growth, Reform

VZCZCXYZ0004
PP RUEHWEB

DE RUEHCL #1325/01 3540854
ZNR UUUUU ZZH
P 200854Z DEC 06
FM AMCONSUL CASABLANCA
TO RUEHC/SECSTATE WASHDC PRIORITY 7531
RUEHAS/AMEMBASSY ALGIERS 2842
RUEHBP/AMEMBASSY BAMAKO 0210
RUEHBJ/AMEMBASSY BEIJING 0042
RUEHEG/AMEMBASSY CAIRO 0718
RUEHRY/AMEMBASSY CONAKRY 0005
RUEHDK/AMEMBASSY DAKAR 0227
RUEHLC/AMEMBASSY LIBREVILLE 0023
RUEHLO/AMEMBASSY LONDON 0228
RUEHMD/AMEMBASSY MADRID 3676
RUEHNK/AMEMBASSY NOUAKCHOTT 2205
RUEHRB/AMEMBASSY RABAT 7793
RUEHTU/AMEMBASSY TUNIS 1965
RUEHFR/AMEMBASSY PARIS 0506
RUEHYD/AMEMBASSY YAOUNDE 0063

UNCLAS CASABLANCA 001325

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958
TAGS: ECON EFIN KDEM MO
SUBJECT: MOROCCAN BANKS ON REGIONAL GROWTH, REFORM

REF: A) CASABLANCA 523; B) 05 CASABLANCA 1220; C) TUNIS 2899

1. (SBU) SUMMARY: A recent series of meetings with Morocco's three
national banks showed that while they have distinct personalities,
they share a strong interest in expanding to francophone Africa and
other countries in the Maghreb. They also agree that the economic
climate in Morocco has improved significantly since King Mohamed VI
came to power, but acknowledge the need for further reform to create
a transparent environment that fosters business and job creation.
END SUMMARY.

------------------------------------
DIFFERENT PERSONALITIES, APPROACHES
------------------------------------

2. (U) Each of Morocco's three national banks has a distinct
personality. Attijariwafa was created by the merger of Wafa Bank and
Banque Commerciale du Maroc in 2003. It is held in part by North
African Omnium Group (ONA), the King's investment vehicle, and is
therefore known as "the King's bank." It has about 25% of the market
share, as does its prime competitor, BCP. BCP, however, has a very
different history and persona. Founded after Moroccan independence,
BCP has been the State's bank since its inception and continues to be
partially state-owned. Its original mandate included providing
financing for artisans and small and medium-sized enterprises (SMEs),
and it retains this focus. For its part, BMCE has only 10-15% of the
market share and considers itself an internationally-oriented
corporate bank. Privatized in 1995, it prides itself on the freedom
that comes with being private.

3. (SBU) Along with different personalities come different
approaches. Attijariwafa considers its strength to be the Moroccan
market and has plans to expand nationally, though it is also pursuing
a strategy of regional development. According to its General
Manager, Mohammed El Kettani, the integration of the Maghreb is
crucial for middle term growth. He believes that economics should
come before politics, and expressed regret that the bank had to put
aside efforts to open in Algeria.

4. (U) Like Attijariwafa, BCP has a strong presence in Morocco with
600 branches throughout the country. In keeping with its commitment
to local clients, it is the only bank to operate in certain rural
areas, and was until recently the only one with no minimum for
deposit. It also distinguishes itself for its decentralized
approach. Each of its eleven regional banks in Morocco operates
independently and has its own president, making the process of
evaluating loan applications more efficient.

5. (SBU) BMCE is less focused on the domestic market, and more
interested in expanding internationally. It is the only Moroccan
bank with a branch in China (Beijing), and is ready to start
operations in London, where it plans to position itself as an
international player in corporate and investment banking. According
to the bank's Administrative Director General, Jaloul Ayed, BMCE
strives to create a strong common identity among the bank's various
interests, including banking, insurance, media, industry,
transportation, and telecommunications.

--------------------------------------------- -------
SHARED VIEWS ON REGIONAL EXPANSION, ECONOMIC CLIMATE
--------------------------------------------- -------

6. (SBU) While the three banks take different approaches, they all
express strong interest in establishing a presence in the Maghreb and
sub-Saharan Africa. Attijariwafa opened four branches in Dakar,
Senegal in July 2006 and recently purchased a majority stake in
Tunisia's Banque du Sud (REF C). It also has a majority share in
Senegal's fifth largest bank, and is considering other purchases.
BCP has subsidiaries in Guinea and the Central African Republic, and
is looking at opportunities in Mauritania, Gabon, the Democratic
Republic of Congo, and possibly Libya. True to its international
focus, BMCE also has numerous interests in the Maghreb and Africa,
including Tunisia, Mali, Congo Brazzaville, and Senegal, where it
created a regional investment bank. BMCE plans to open offices in
Cameroon, Gabon, Mauritania, and perhaps Algeria, Ivory Coast and
Angola, as it believes francophone Africa is highly receptive to
Moroccan interests due to a history of trade, common religion, and
cultural affinity.

7. (SBU) Morocco's national banks also share the view that the
country's economic situation is strong. Ayed of BMCE went so far as
to say that conditions are the best in a generation, allowing the
bank group to promote synergies between diverse interests in a way
that would not have been possible a few years ago. Attijariwafa's El
Kettani echoed this point, saying that the dynamic and reform-minded
Mohamed VI has alleviated the concerns of five years ago by fostering
an open environment. He cited as examples the fact that a private
company, Jorf Lasfar, now provides over 60% of Morocco's energy,
while the French company Lydec supplies water and electricity to
Casablanca.

--------------------------------------------- --
SHARED CHALLENGES - BANKING, SMEs, TRANSPARENCY
--------------------------------------------- --

8. (U) Attijariwafa, BCP and BMCE face several of the same problems
as well. Since only ten to twenty percent of the Moroccan population
banks, large sums of money bypass the banking system entirely. Both
Attijariwafa and BCP agree on the need to develop initiatives that
encourage people to bank, and that bring individuals from the
informal to the formal sector.

9. (SBU) The banks also agree that they must find ways to develop
SMEs. El Kettani argued that the state's investment in large
projects such as Tanger Med is key to developing infrastructure and
creating diverse opportunities for SMEs in the future. He admitted
that it is difficult for entrepreneurs to get funds, and that Morocco
needs to create a structure for capital risk. As Mr. El Morjani of
BCP pointed out, Moroccan banks do not currently have an adequate
mechanism for recouping credit, making lending risky.

10. (SBU) Bank representatives from loan officers to CEO's cited
transparency as a vital issue that needs to be addressed, though they
conceded that at root it is Moroccan tax policy that encourages
non-transparency. They agreed that the government would be better
served by significantly lowering taxes and having a higher percentage
of people pay. Rates surpassing 40 percent induce people not to
declare their true earnings, and not to keep accurate accounts.
This, in turn, forces banks to require personal guarantees on loans,
since they cannot rely on a company's books as an accurate indication
of risk.

11. (SBU) Not only is tax reform deemed necessary, but judicial
reform as well. One senior executive noted that while the judiciary
tribunals have improved, young judges earning eight or nine hundred
USD per month are all too willing to take bribes. He emphasized the
need to punish corruption, accelerate reform and institute a system
of arbitrage so that disputes can be resolved more fairly and
efficiently. According to Mr. Tadili of BCP, disputes currently take
anywhere from four to twenty years to resolve. Bank representatives
agreed that tax and judiciary reform, as well as increased
transparency in general, are key to improving the lending environment
for SMEs.

13. (U) COMMENT: Banking professionals are reacting with relish to
the new opportunities Morocco's recent economic boom has offered
them, even moving to address such tough issues as finance for small
enterprises. That said, they acknowledge that further reform is
needed to foster a more transparent environment which, in turn, will
promote opportunities for business creation and employment. END
COMMENT.

GREENE

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