The National Ratings of BNP Paribas El Djazair are based on the presumed support from its 100%-shareholder, BNP Paribas (BNPP; rated ‘A+/Stable Outlook’), Fitch in a statement said.
“Given BNPP’s capacity for and history of support for group entities, full ownership and strong integration, Fitch Ratings believes that BNPP would have a high propensity to support BNPP El Djazair, if necessary,” it added.
BNPP El Djazair is of limited size relative to BNPP, which should make it easier for BNPP to provide financial support, whereas not doing so would materially damage parent’s reputation. This consideration is a further factor driving Fitch’s expectations of support from BNPP. As a result, Fitch believes that, if necessary, BNPP El Djazair could obtain support from BNPP.
BNPP El Djazair’s management and board are dominated by BNPP members, and its strategy is agreed at the BNPP level. The bank’s IT, control and risk reporting systems are strongly integrated with those of its parent, and risks are overseen by its parent. BNPP also counter guarantees some of BNP Paribas El Djazair’s exposures to allow the bank to comply with local regulations. In line with BNPP’s worldwide organisation, the local consumer finance branch of BNPP, CETELEM Algerie, should merge with BNPP El Djazair in 2013.
BNPP El Djazair, which has been operating in Algeria since 2002, is part of BNPP’s strategy to develop retail banking in the Mediterranean basin. BNPP El Djazair is the largest privately owned bank in Algeria, with loan and deposit market shares of respectively 2% and 2.3% at end-H112 (but a higher 18% of the private banking sector).
BNPP El Djazair’s comfortable profitability, with average ROE above the 26% mark since 2008, is consistently boosted by strong loan growth. Loan impairment charges (10.4% of pre-impairment operating profit) continued to be well controlled in 2011 amid the bank’s aggressive expansion. The impaired loan ratio, although declining, remained higher than its historical average at end-2011 (3.9%), but net impaired loans accounted for a low portion of equity (3.2%).
BNPP El Djazair is self-funded through customer deposits and its excess liquidity is almost entirely placed in the local central bank. However, the bank’s capital ratios (with Tier 1 and Fitch core capital at 20% and 19.8% respectively at end-2011) remain slightly thin given its volatile operating and regulatory environment.