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Bank skeletons in state’s closets posing danger for 2021

A few weeks ago, MP Faisal Derbel launched an alert on the state of two local banks in front of the governor of the BCT.

They were at that time, and for years, the BTK and the BFT. These are two banks, which are in a more than difficult financial situation. This is not, of course, the case of all Tunisian banks, especially those listed on the stock exchange.

In the first half of the year 2020, in fact, the results of all the companies making up the financial sector, the main category capitalization of the listing, fell by 34.5% compared to the same period of the year 2019, therefore totaling 451 million dinars against 689 MD.

The 12 listed banks realized a global half-yearly result of 396 MDT, down 34.1% compared to the same period of the year 2019.

Nine banks made profits and three closed the semester on losses.

– A bank with 51% equity capital

The BTK has suffered chronic deficit results bringing its shareholders’ equity at December 31, 2019 to an amount of 102.436 MTD, or 51.2% of its share capital, thus very close to the threshold set by Article 388 of the Code of Commercial Companies.

Deposits concern a limited number of customers, which constitutes a high exposure to liquidity risk, the difficulty to raise funds (bond issues, external resources … etc.), a decline in market share and profitability indicators, a significant deterioration of the operating ratio that rose to 80.96% at the end of December 2018 to 108.34% at the end of December 2019.

This is mainly due to the decline in Net Banking Income against a rise in costs and a high rate of doubtful and disputed loans (CDL), which exceeds the threshold required by lenders.

The short-term liquidity ratio is not respected for the months of July, September, and December 2019, contrary to the provisions of the BCT Circular No. 2014-14.

As at December 31, 2019, the minimum regulatory capital requirement with respect to weighted risks as provided for by the BCT reference texts (circular No. 2018-06) is not complied with by the Bank either.

This worrying situation would be aggravated by the possible impacts of the COVID-19 pandemic.

and that the State could no longer buy back…

In 2018, it had been announced that the Tunisian State would buy back the shares of the French bank BPCE, at the symbolic euro.

One year later, “the project of sale by BPCE-I of its stake in the BTK to the Tunisian State, in the context of the current health crisis, has seen a slowdown in procedures that should allow meeting the previous conditions (regulatory authorizations) to which the operation is subject.

In this context, the Closing date, initially scheduled for the first quarter of 2020, has been postponed”.

It would appear, in the meantime, that the decision to buy out the bank was taken by former Finance Minister Ridha Chalghoum “somewhat hastily. Indeed, he did not have the immediate and effective political support behind him to react quickly to the decision, as the bank was already losing money”, according to a financial source close to the case.

The latter source added there seems that a “good valuation of the assets has been made”.

And since then, a lot of water has flowed under the bridge.

From now on, we are told by a generally well-informed financial source, the bank would no longer interest the People’s Bank of Morocco, for French shares only, because the Kuwaitis would not intend to sell, but there would be demand and the owners would work on new avenues.

The danger for the Tunisian state-shareholder, is first to see its shares depreciate, or to have to follow a possible increase in capital in case of repurchase by another entity.

– The very high risk of the BFT in March 2021

And while the Tunisian government and its Minister of Finance get tangled up in debt trying to pass a budget on credit, neither seems to realize the danger of the BFT affair that has been dragging on for several years.

The case was in arbitration at the ICSID, until a former CPR minister managed to obtain a judicial amnesty for the former owner of the bank, leading the ICSID to confirm the direct responsibility of the Tunisian state in this affair and to decide on compensation to the ABCI Company.

The amount of this compensation, which is said to be in billions DT, should be determined in March 2021, and unless the Tunisian state manage to unblock the case otherwise or unless it has a new decisive card in its game, there is no beginning of provisioning in the 2021 budget that could help cope with it.

This is not to mention the risk to BFT itself, its employees and its customers.

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