Fitch Ratings has assigned Cote d'Ivoire-based Banque Internationale pour le Commerce et l'Industrie de la Cote d'Ivoire (BICICI) Long- and Short-Term Issuer Default Ratings (IDRs) of 'B+' and 'B', respectively.

The Outlook on the Long-Term IDR is Stable. Fitch has also assigned BICICI a Viability Rating (VR) of 'b+', and a Government Support Rating (GSR) of 'b'.

Key Rating Drivers

BICICI's IDRs are driven by the bank's intrinsic creditworthiness as expressed in its VR of 'b+'. The VR reflects the bank's moderate franchise in a challenging operating environment, vulnerable asset quality and modest capitalisation. It also considers its healthy profitability, stable funding and healthy liquidity.

Sustained High Growth in Cote d'Ivoire: We expect Cote d'Ivoire's real GDP growth to remain high at 6.6% in 2024, underpinned by easing inflation, a ramp-up in oil production, and progress in local processing of cocoa and cashew nuts.

Moderate Market Shares: BICICI's local market shares are around 5% by loans and deposits. However, its market position has benefitted from its past ownership by BNP Paribas S.A. (BNP) that has facilitated the bank's access to multinational companies and some larger domestic corporates. The bank's business plan envisages strong growth in the next five years, in line with Cote d'Ivoire's fast-growing economy.

Risk Concentrations: BICICI is exclusively focused on the domestic market and maintains a prudent risk culture inherited from BNP. BICICI targets multinational companies and prime commodity traders for its corporate loans, while focusing on affluent customers in the retail book. Nonetheless, our assessment of the risk profile is undermined by high sector and single-obligor concentrations exposing the bank to high event risk.

Vulnerable Asset Quality: BICICI's Stage 3 loans ratio of 8.2% at end-1H23 improved significantly from end-2020's 14.4% thanks to large write-offs but remains high by international standards. Total coverage by loan loss reserves was acceptable at 91% at end-1H23. BICICI follows conservative loan classification, which explains its high Stage 2 loans ratio of 30% at end-1H23.

Healthy Profitability: Profitability has improved since 2020 due to wider net interest margins and solid fee generation. Annualised operating profit increased to 3.3% of risk-weighted assets (RWAs) in 1H23 (2022: 2.8%; 2020: 1%), boosted by lower loan impairment charges (LICs). We expect core profitability to remain around current levels in the next two years as stronger net interest income will be balanced by higher operating expenses and higher LICs.

Tightly Managed Capitalisation: BICICI's regulatory capital ratio of 13.1% at end-1H23 was only 160bp above its minimum regulatory requirement. Its equity/asset ratio was modest at 7.9%. We view the bank's capitalisation as low given its high concentration risk and large exposure to a sub-investment-grade sovereign.

Stable Funding; Healthy Liquidity: Customer deposits were a high 96% of total non-equity funding at end-1H23, the bulk of which are sourced from large corporates or institutional clients. The funding base is moderately concentrated and the bank benefits from stable retail deposits (36% of total customer deposits). Liquidity is healthy, with a gross loans/deposits ratio of 65% and net liquid assets accounting for close to 45% of total assets at end-1H23.

Rating Sensitivities

Factors that Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade

BICICI's IDRs are sensitive to a change in its VR. A downgrade of the VR could come from a material and sustained deterioration in asset quality leading to weaker profitability and capitalisation, without clear prospects for recovery.

Factors that Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade

An upgrade of BICICI's Long-Term IDR is contingent on an upgrade of its VR. This is unlikely without a material improvement in the operating environment alongside the strengthening of the bank's franchise and a record of stable business model, as well as improved asset quality and capitalisation.

OTHER DEBT AND ISSUER RATINGS: KEY RATING DRIVERS

BICICI's GSR reflects a limited probability of extraordinary support being forthcoming from the Ivorian authorities, due to significant uncertainty about the timeliness and extent of such support. This view considers the bank's low systemic importance given its 5% market share as well as its recent and fragmented ownership by state-related entities.

OTHER DEBT AND ISSUER RATINGS: RATING SENSITIVITIES

The bank's GSR would be downgraded if the state's ability or propensity to support the bank weakens.

An upgrade of the GSR could come from an upgrade of the sovereign IDRs or a positive change in Fitch 's assessment of the probability of support for BICICI by the Ivorian authorities.

VR ADJUSTMENTS

The funding and liquidity score of 'bb-' is above the 'b' implied score, due to the following adjustment reason: liquidity coverage (positive).

Date of Relevant Committee

13 December 2023

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.

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