(Business in Cameroon) - In Cameroon, BICEC concentrates the highest volume of bad debts (the credits granted by commercial banks and microfinance institutions that are highly unlikely to be recovered) out of the 15 banks operating in the country.
According to figures published by the Central African Banking Commission (COBAC), which regulates the banking market in the CEMAC region, BICEC’s bad debts at end-June 2020 was XAF162.8 billion. That volume was about 30% of the overall bad debts in the country (XAF533.5 billion). At the time, the volume of BICEC’s bad debt was about twice that of Société Générale Cameroun (XAF77.4 billion), Société Commerciale de Banque (XAF71.9 billion), and Afriland First Bank (XAF71.9 billion).
The bad debts represent 33.5% of its overall outstanding loans, estimated at XAF486.5 billion, and was twice the national average, which is about 14.7%. Worse, less than 10% of those bad debts (XAF15.2 billion) were guaranteed by security interests.
Loan loss provision
This means that BICEC could record XAF147.6 billion (32% of its outstanding loans) of loan losses in addition to the over XAF50 billion it lost to embezzlement (many executives including the bank’s former general director, were jailed because of those funds’ misappropriation).
However, according to an expert of the African banking sector, Moroccan banking group Banque centrale Populaire (BCP), which took over BICEC (in October 2019 by purchasing Banque Populaire-Caisse d’épargne-BPCE’s 68.5% stake) has enough liquidity to cope with the situation. "BCP’s global assets are estimated at $49 billion (about XAF26,538 billion). So, XAF150 billion of bad debt is just a minor issue for the Moroccan banking group," our expert explains. Moreover, the Moroccan group is the sixth-largest banking group by equity in Africa.
As the regulation requires, at end-June 2020, BCP provisioned XAF145.2 billion to cover the possibility of losing those bad debts. “The provision will balance BICEC’s balance sheet without necessarily solving the problem. From there, BCP can start distributing dividends till the date it will sell the problem to another buyer as BPCE did…,” the expert added.
Though BCP’s CEO claims that "Bicec has a strong and sound financial foundation," he is aware of the problem. “By joining Banque centrale Populaire, Bicec is entitled to better banking practices, innovations, and expertise adapted to the African market," he said when signing the purchasing agreement with BPCE; since then, BCP has been working with the State of Cameroon (which is the second shareholder of BICEC) to reorganize the management of BICEC, according to our sources.
For Kamal Mokdad, the integration process implemented is aimed at "accelerating the exchange of good practices" within BICEC. "To prepare its future," the bank elaborated a 3-year strategic roadmap, and the reform of the loan granting process is one of the many strategic reforms it launched. As a result of that reform, the volume of credits granted by BICEC in 2020 dropped by 90%.