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OBG: 2011, a year of business as usual for Tunisia’s banks

Despite the uncertainty prevailing about the Government’s plans in the longer range, “2011 would be a year of business as usual for Tunisian banks,” The Oxford Business Group (OBG) said in a report released recently.

According to this document, the Tunisian banking sector looks set to profit from the improving global economic outlook and renewed efforts to tackle the issue of Non-Performing Loans (NPLs) in the current year, provided that Tunisia is able to move past the political uncertainty of early 2011.

Tunisian Banks: “Rather Good Performance in 2010”

While final figures are not yet available, 2010 seems to have been a good year for the sector, the report adds. Maxula Bourse, a leading local brokerage firm, estimated that net banking profits for the year rose by more than 20% on 2009 figures, to reach 504 million Tunisian dinars (MTD), 257.08 million Euros (ME), in 2010.

While not all banks have yet announced their end-2010 figures, the report points out, the early signs are positive, with the country’s second-largest bank, the publicly owned “Société Tunisienne de Banque” (STB), reporting that deposits grew by 8.46% to 5.1 billion TD (2.6 billion Euros) in 2010, while its loans portfolio increased by 12.46%, compared with 2009, reaching 5.4 billion TD (2.75 billion Euros). This translated into profit growth of 5% over the previous year, to 42 MTD (21.42 ME).

The authorities are working to further improve the sector’s prospects, and the central bank is also taking action to ensure the smooth functioning of the financial system and meet the concerns of creditors and foreign investors. Efforts to further reduce NPLs can build on the success of recent years, which have seen the NPLs ratio fall from 24.2% in 2003 to 15.5% in 2008 and 13.2% in 2009.

In 2009, this rate broke down to 14.1% for publicly owned banks and 12.5% for private banks. The provisions ratio for NPLs increased from 44.1% in 2003 to 58.3% in 2009 (57.1% for public banks and 59.2% for private banks). While 2010 figures for the sector are not yet available, STB, for instance, reported an NPL rate of 18.8% and a provisions ratio of 46.8% at the end of 2010.

“Attijari Bank” reported a higher-than-average NPL provisions ratio of 68.1%, up from 64.2% in 2009. Arab Tunisian Bank’s provisions ratio was higher still at 75.2% in 2010, compared with 73.2% in 2009, with an NPL rate of 7.1% in 2010, down from 8.7% in 2009.

The “Banque Internationale Arabe de Tunisie” (BIAT) reported that its NPLs fell to 8.2% with a provisions ratio of 71.3% at the end of 2010, down from 9.4% with 70.3% provisioning in 2009.

While NPLs have been falling and provision rates increasing, the value of retail lending in the banking system has also been expanding, OBG report also highlights. According to figures from the Central Bank, retail lending stood at 10.7 billion TD (5.46 billion Euros) in December 2010, up approximately to 21% compared with the same period the year before.

Housing loans/mortgages accounted for 78% of the total, and grew by 26% between December 2009 and December 2010, to reach 8.35 billion TD (4.26 billion Euros).

Since 2005, mortgage lending has grown more than threefold. Vehicle loans, though accounting for a small proportion of overall consumer finance, have also seen rapid growth in the last five years, rising from 150 MTD (76.51 million Euros) to 335 MTD (170.88 million Euros) at the end of last year, i.e. an increase of over 120%.

To ensure the continued smooth functioning of the banking system in the light of the recent political developments, in January, the Tunisian Central Bank, the report recalls, took the control of two institutions impacted by the upheaval, the “Banque de Tunisie” and Zitouna Bank, the country’s only Islamic bank.

While the recent political changes may cause a short-term blip in the downward trend of NPLs, the longer-term picture should see progress on this front accelerated.

Some questions remain unanswered, the OBG report specifies, as to the Government’s plans in the longer term, particularly in regard of efforts to make the country a regional centre for finance.


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