The earning power continues its catch-up effect
Since the release of our Research Report on February 22nd, 2024, under the theme « BMCI : A significant room for cost saving » (Research Report-BMCI 2024), BMCI stock price increased by +16% to reach our initial target price of MAD 665 on January 13th, 2025.
In a very favorable banking environment, BMCI still has significant room for improvement in its profitability indicators, namely Cost-to-Income ratio (C/I ratio) and Net Income Group Share (NIGS). Thus, we maintain our BUY Recommendation on the Stock.
Following our analysis of the FY 2024 results, four key messages should be noted :
- NBI increases by +10.2% to MAD Mn 3,789 against a forecast of MAD Mn 3,795. The Interest income explains almost 2/3 of this increase. This rose by +9.1% supported by an optimization effect of the intermediation margin. The volume effect is modest through an evolution of +0.6% of loans(1). The Income from market activities(2) jumped by +12.1% to MAD 611 Mn driven by the good performance of the Foreign Exchange Activity ;
- The C/I ratio continues its normalization falling from 63.7% in 2023 to 59.1%, i.e. a decrease of -4.6 pts. On the MT, this indicator should move closer to the sector's average of 43.0%, i.e. a significant improvement of 16.0 pts ;
- The Cost of Risk (CoR) increased by +27.9% to MAD 810 Mn against a forecast of MAD 709 Mn. According to the Management, this increase is attributed to a significant provisioning effort to improve the loan loss reserve ratio ;
- The NIGS stands at MAD 325 Mn against a forecast of MAD 408 Mn. Beyond the CoR effect, which came out above our expectations, the corporate tax rate remains at high levels (54.5% compared to 39.0% over 2017-2019). This concerns allowances for cases still open as part of the tax audit covering the period 2019-2022. Finally, the DPS is stable at MAD 18.0 and should return, in our opinion, to its normative levels of MAD 30 over the MT.
