For years, Societe Generale viewed Morocco as its “golden chicken.” Despite difficulties in other African markets, which resulted in six exits last year, SocGen has repeatedly reaffirmed its commitment to the country.
The French giant caused trepidation with its announcement on April 12 that it would close its Moroccan branch. In business for over a century, SocGen boasts $12 billion in assets in the mountain kingdom, more than a million customers and 300 affiliates. It controls 8% of the loan market and 7% of deposits, ranking as Morocco’s fifth largest bank.
Despite this strong presence, SocGen is selling its 57.67% stake in Société Générale Marocaine de Banques, along with its subsidiaries, to Moroccan conglomerate Saham Group in a deal worth €745 million ($792 million).
However, the announcement was not shocking, says Rafael Quina, senior director for financial institutions at Fitch Ratings; Overall, this is in line with group CEO Slawomir Krupa’s plans to refocus SocGen on areas of competitive strength and where its presence matches its risk appetite. Although SocGen’s business in Morocco was of a reasonable size and performed adequately, its return on equity did not match the cost of capital required to maintain the bank’s presence.
“Strategic alignment and synergies with other business areas of the group were not important enough to offset an adequate return on capital,” Quina says.
The banking sector’s return on equity in Morocco averages 10%, lower than most emerging economies, he notes, so even domestic banks are expanding into more volatile African markets in pursuit of higher returns. Saturation is also making it difficult for banks, especially foreign-owned banks, to grow in Morocco’s credit market. Notably, other French banks such as Credit Agricole and BNP Paribas are also reviewing their strategies in the kingdom. With the departure of SocGen, the share of banks with foreign participation in the domestic lending niche of the sector will decrease to 5% from 19% as of 2021. It is also noteworthy that it marks the return of Saham founder Moulay Hafid Elalami, who has been dubbed the “Moroccan Financial Wolf” for the kingdom’s financial sector. In 2018, Saham sold its insurance business to South African company Sanlam for $1 billion.