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Strong
economic
growth
in
the
West
Africa
Economic
and
Monetary
Union
(WAEMU)
region
supports
banks’
profitability,
but
only
partially
offsets
asset
quality
and
capital
risks,
says
Fitch
Ratings
in
a
new
report.
The
regional
central
bank
expects
the
WAEMU
economy
will
grow
by
6.5%
in
2024
(2025:
6.6%),
while
Fitch
expects
banks’
balance
sheets
to
expand
by
at
least
15%,
on
average,
in
2024
on
the
back
of
the
large
infrastructure
projects
many
countries
have
engaged
in.
Banks’
credit
profiles
remain
weak
across
the
region,
despite
recent
improvements
in
banking
supervision
and
the
prudential
regime.
There
are
high
sector
and
single-obligor
concentrations
in
banks’
loan
books,
and
increased
sovereign
debt
sustainability
risks
due
to
growing
exposure
to
weak
sovereigns
through
banks’
securities
portfolios.
Already-thin
buffers
mean
any
substantial
losses
from
a
sovereign
default
could
lead
to
minimum
capital
requirements
being
breached.
Banks’
funding
sources
remain
undiversified
but
we
view
liquidity
as
sufficient.
The
sector
relies
largely
on
short-term
customer
deposits
to
fund
longer-term
assets,
which
gives
rise
to
significant
liquidity
mismatches.
However,
these
deposits
have
remained
historically
stable
in
most
countries,
mitigating
liquidity
risks.
Banks’
liquid
assets
consist
mainly
of
sovereign
securities,
which
can
be
used
as
collateral
for
repurchase
agreements
with
the
BCEAO
to
raise
cash.
Full
report
here