Tunisian Bank Profitability Faces Pressure from New Lending Rules –Fitch
Tunisian bank profitability faces pressure from new lending regulations, which allow borrowers interest rate reductions on certain fixed-rate loans and require banks to issue prescribed amounts of interest-free loans, Fitch Ratings says.
According to Fitch, the 40% corporate tax rate on bank profits earned from 1 January 2024, up from 35% and caps on certain fees and commissions will also weigh on profitability, but we do not expect bank ratings to be affected.
One new regulation, introduced last year, allows borrowers whose fixed-rate interest payments from January 2022 to September 2024 exceeded 8% of the outstanding principal at end-September 2024 to ask banks to halve the interest rate for the remaining life of the loan, Fitch said, added that Banks must accept all such requests.
Fitch expects this to weaken net profit at the ten largest banks by about TND170 million in 2025 , which is 11% of their annualised 1H24 net profit, but the accounting cost can be spread over several years, which will soften the impact.
Another regulation, set to be introduced soon, will require banks to grant interest-free loans totaling 8% of their 2024 net income to micro, small and medium-sized enterprises.
“We estimate the associated revenue loss for 2025 at about TND50 million for the ten largest banks”
The two new regulations aim to soften the impact of a new law, introduced in February 2025, prohibiting staggered payments using backdated cheques.
The use of backdated cheques is a common practice in Tunisia that has enabled consumers and small businesses to pay for purchases in instalments, and the new law will disrupt cash flow management for these borrowers.
“We expect the two regulations to reduce the ten largest banks’ 2025 net profit by about 14%. This would not be enough to affect ratings, but it would pressure profitability that is already modest by emerging-market standards”.
Fitch said the sector return on equity averaged 10% during 2022–9M24, which is modest given Tunisia’s high inflation and the significant risks that Tunisian banks face. Fitch’s operating environment score for Tunisian banks is ‘ccc+’.
Sector profitability has been constrained by muted loan growth since 2022, a long-standing interest rate cap on all loans, rising operating expenses and the Central Bank of Tunisia’s (CBT) toughened provisioning policies.
The CBT further tightened the methodology for calculating general provisions in January 2025, which will require banks to provision an additional TND100 million.
Fitch said this will hurt profitability in the short term but will leave banks better-positioned for IFRS 9 implementation, which may start in 2026. Analysts noted that credit growth was only 2% in 9M24, but banks’ credit profiles have been resilient to the challenging operating environment.
Liquidity conditions have remained adequate despite the volatile operating conditions, with banks having sufficient liquidity to help meet the sovereign’s growing financing needs. Capital ratios – including the sector Tier 1 and capital adequacy ratios – have been stable.
In January 2025, the CBT issued a circular limiting bank dividend payouts to 35% of 2024 net income and authorising dividends only if banks had buffers at least 2.5pp above minimum regulatory requirements for both the Tier 1 ratio and the capital adequacy ratio at end-2024.
Efforts to encourage banks to preserve capital are credit-positive and will help to cushion the capital impact of the new lending rules. #Tunisian Bank Profitability Faces Pressure from New Lending Rules –Fitch Naira Extends Rally on Declining Foreign Reserves
