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UNCLAS SECTION 01 OF 04 ABIDJAN 000135 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE PASS TO USTR 
 
E.O. 12958: N/A 
TAGS: ECON EFIN ETRD IV
SUBJECT: COTE D'IVOIRE'S BANKING SECTOR 
 
REF: A. 06 ABIDJAN 1405 B. ABIDJAN 12 
 
¶1.  (SBU) Summary:  The performance of Cote d'Ivoire's 
banking system in the government-controlled south has 
stabilized since the beginning of the political crisis in 
¶2002.  Profitability is relatively strong and the total asset 
base has recently grown modestly.  However, these results 
mask a troubled client base, as non-performing loans and 
outright defaults have increased markedly due in large 
measure to the continued political and economic crisis. 
Banking remains concentrated largely in the hands of 
subsidiaries of French banking concerns.  Banking executives 
acknowledge the need to expand access to banking services 
through microfinance and other mechanisms, but many Ivorians 
remain outside of the banking system.  Ebanking and eservices 
remain underutilized.  Public borrowing is on the rise, 
according to industry sources, and could jump higher still 
when the long-delayed elections campaign begins.  The 
Northern, Forces Nouvelles (FN)-held areas of the country 
remain isolated from banking services, exacerbating the 
economic difficulties of northerners, retarding the 
administrative reintegration of the country and encouraging 
the proliferation of informal money-transfer operations (the 
"havala" system).  Without a resolution of the crisis, the 
banking sector will continue to sag.   However, the revival 
of the banking sector, especially in the North, would itself 
be a key step towards resolving the crisis.  End Summary. 
 
Background and Statistics 
================= 
¶2.  (U) As of December 2005 (the last point for which 
accurate statistics are available), financial institutions' 
balance sheets totaled CFA 2 trillion (USD four billion), up 
1.7 percent from the previous year, accounting for 29.5 
percent of the West African Economic and Monetary Union 
(WAEMU) market.  From 2004-05, net profitability was up 47 
percent to CFA 28 billion (USD 56 million), generated 
primarily by customer service operations, currency trading, 
and securities and leasing.  According to sources, while 
lending operations produced meager results, overall return on 
investment stood at a very respectable 20 percent on a total 
capitalization base of USD 250 million.  Overall loans 
outstanding to the private sector are estimated at CFA 1.2 
trillion (USD 2.3 billion), an increase of 1.4 percent from 
¶2004.  As measured against GDP, the value of total lending to 
the private sector stands at 13 percent, which the WAEMU 
considers low.  This phenomenon partly reflects the banks' 
cautious lending policy and the lack of long-term lending, 
derived from the difficult business environment caused by the 
ongoing political crisis.  In contrast, since 2002, lending 
to the government has increased 17 percent.  Overall, asset 
quality of bank portfolios has deteriorated: non-performing 
loans rose by 31.8 percent from 2004 to 2005 to a current 
total of USD 450 million, with a significant share (44.2 
percent) of loans in actual default.  Inflation dropped from 
3.9 percent in 2005 to 2.5 percent in 2006. 
 
¶3.  (U) The banking system includes 19 credit institutions 
(against 22 in 2003), of which 17 are banks (ten in 2003), 
two are specialized lending institutions, one a coffee and 
cocoa financing group and the other an automobile financing 
company (down from five financing companies in 2003).  The 
Ivorian banking sector is concentrated among the seven 
largest banks, with subsidiaries of French banks accounting 
for nearly 60 percent of the customer base, but approximately 
40 percent of total assets and 30 percent of total 
capitalization.  Two of these seven leading banks are 
Ivorian.  The following list includes all banks and financial 
institutions, with figures up to date through 2005 as 
reported to the BCEAO, ranked by total assets: 
 
      a.  Banque Nationale de l'Investissement (BNI, Cote 
d'Ivoire), 100 percent state-owned, traditionally 
specializing in state debt instruments but beginning to 
diversify its portfolio among a range of capital-intensive 
industries, such as petroleum production.  It is capitalized 
with USD 41 million (CFA 20.5 billion). 
      b.  Banque Internationale pour le Commerce et 
l'Industrie (BICICI), a retail bank owned by the French bank 
Banque Nationale de Paris  (BNP) with capital of USD 33 
million (CFA 16.67 billion). 
      c.  Societe Generale des Banques en Cote d'Ivoire 
(SGBCI), the bank with the largest number of retail clients 
and in which the French group Societe Generale owns a 
majority, with capital of USD 31 million (CFA 15.6 billion). 
      d.  Banque Internationale Pour l'Afrique Occidentale 
(BIAO), a retail bank with capital of USD 20 million (CFA 10 
billion).  Effective December 11, 2006, the Belgian group 
 
ABIDJAN 00000135  002 OF 004 
 
 
Belgolaise sold its 80 percent stake in the BIAO.  The 
Ivorian Insurance Group (the Nouvelle Societe Internationale 
d'Assurance) now owns 60 percent of the shares while the 
Ivorian private pension fund "Caisse Nationale de Prevoyance 
Sociale," (CNPS), owns 20 percent and the Ivorian government 
owns the remaining 20 percent. 
      e.  Societe Ivoirienne de Banque (SIB), a retail bank 
owned by the French Bank Credit Lyonnais, with capital of USD 
8 million (CFA 4 billion). 
      f.  Ecobank, a diversified retail bank based in Togo 
which has operations in 15 West and Central African countries 
and capital in Cote d'Ivoire of USD 6 million (CFA 3.2 
billion). 
      g.  Bank of Africa, a commercial lending bank (it has 
no deposit accounts) owned by a group based in Benin (but 
with a fast-growing network of local banks throughout West 
and East Africa) and possessing 5 million in capital. 
      h.  Citibank. Citi is the only U.S. bank present in 
Cote d'Ivoire, and has capital of USD 15 million invested 
(CFA 7.5 billion).  It has only 465 clients which are 
primarily corporate accounts and very few individual accounts. 
      i.  Banque Atlantique de Cote d'Ivoire.  Owned by a 
consortium of mainly Ivorian investors and companies, this 
bank focuses on lending to large commercial enterprises and 
is capitalized with USD 14 million in assets (CFA 7 billion). 
      j.  Standard Chartered Bank.  100 percent owned by its 
British parent, this diversified bank has USD 30 million in 
capital (CFA 15.3 billion). 
      k. Versus Bank.  Formed in March 2004 by Ivorian 
management but largely financed by foreign investors, this 
bank has a wide-ranging portfolio and USD 6 million in 
capital (CFA 3 billion). 
      l.  Compagnie Bancaire de l'Atlantique en Cote 
d'Ivoire.  Owned by Banque Atlantique (see i) and 
specializing in the financing of imports/exports and 
capitalized with USD 6 million (CFA 3 billion). 
      m.  Banque de l'Habitat de Cote d'Ivoire.  Sixty five 
percent owned by individual investors and 17.5 percent owned 
by the Ivorian government, it specializes in real estate 
lending and has $3.4 million in capital (CFA 1.8 billion). 
      n.  Omnifinance.  Private Ivorian investors own 65 
percent and the same financial group invested in Bank of 
Africa owns 20 percent.  This bank specializes in lending to 
small and medium sized enterprises (SMEs) and has USD 6 
million in capital (CFA 3 billion). 
      o.  Bank pour le Financement de l'Agriculture.  The 
Coffee and Cocoa Regulation Fund owns 48 percent and private 
Ivorian investors own the remaining 52 percent.  It has USD 4 
million in capital (CFA 2 billion). 
      p.  Cofipa Investment Bank de Cote d'Ivoire.  This 
Congo-Brazzaville-based bank concentrates on commercial 
banking and has USD 6 million in capital (CFA 3 billion). 
      q.  Societe Africaine de Credit Automobile.  A group 
owned by a diverse set of holding companies (the largest of 
which owns a Moroccan auto distributor), this financial 
institution concentrates on auto loans and has USD 2.4 
million in capital (CFA 1.3 billion). 
      r.  Fonds de Garantie des Cooperatives Cafe-Cacao. 
This non-bank financial institution (it has no depositor 
accounts) is 42 percent owned by cocoa and coffee 
cooperatives, 24 percent owned by exporters, 24 percent by 
various banks and 10 percent by the Ivorian government.  It 
specializes in lending to cooperatives who would otherwise 
have difficulty in meeting borrowing requirements set by 
banks.  It has a small capitalization base of USD 600,000 
(CFA 300 million). 
 
¶4.  (U)  The banking sector in Cote d'Ivoire is part of the 
financial sector of the WAEMU economic region, whose Central 
Bank is the "Banque Centrale des Etats de l'Afrique de 
l'Ouest" (BCEAO). The BCEAO is the sole issuer of currency in 
the WAEMU region and organizes and supervises banking and 
financial activity.  Banking regulation is carried out by the 
WAEMU's regional banking commission "Commission Bancaire" 
(located in Abidjan).  Market entry requirements for the 
Ivorian banking sector are relatively low; the minimum 
capital requirements are CFA 1 billion (USD 2 million) for 
banks and CFA 300 million (USD 600,000) for non-banking 
institutions. 
 
¶5.  (SBU)  According to executives from top banks BNI, 
Citibank and Ecobank, microfinance will be a key focal point 
in business planning and expansion.  Prior to the outbreak of 
the 2002 crisis, the development prospects of this sector 
were significant; in 2000, the country counted 16 
microfinance institutions, offering a total of 287 points of 
service (for about 331,000 customers), compared with 154 bank 
branches.  The large banks and new players (such as the Bank 
 
ABIDJAN 00000135  003 OF 004 
 
 
of Africa) are attempting to expand access to banking 
services to underserved markets.  Executives from Ecobank 
tell us that they value the prospects of small business 
lending highly for its potential to generate new revenues and 
employment in the region.  Citibank has a high-profile public 
relations campaign to stress to its clients the convenience 
and efficiency of its e-banking, a tremendous advantage to a 
small-but growing concern.  However, in general the low rate 
of access to the banking sector for the general population 
remains a major problem affecting both small enterprises and 
potential individual retail clients: Ivorian society is 
somewhat "under-banked" compared to other West African 
countries, as Ivorian financial institutions account for 31.3 
percent of all WAEMU assets, whereas the Ivorian GDP is 37 
percent of the regional economy.  Industry sources point to 
this as another indication that there is considerable 
potential for expanded banking services.  However, bankers 
privately acknowledge that banking fees are high and 
e-services are scarce in comparison to other relatively 
high-income African countries, particularly Anglophone 
countries. 
 
¶6.  (U) Even though the banks tell us they are interested in 
expanding their lending to small and medium enterprises 
(SMEs), few of them have actually done so.  Currently, while 
two financial institutions offer services for SMEs, the 
primary sources of such lending is the Ivorian National 
Business Development Fund (FIDEN), created in 1999 by the 
Ministry for Industry and which gives priority to export and 
import-substitution businesses. 
 
Monetary Policy, Macroeconomic trends, Impact of Political 
Situation on Banking 
======================================== 
¶7.  (U) Inflation in Cote d'Ivoire has been contained by the 
tight monetary policy of the BCEAO, whose primary objectives 
are to maintain stability between the CFA franc and the euro 
and to control inflation in the CFA zone.  The BCEAO's 
monetary policies closely track those of the European Central 
Bank (ECB) by design.  Since its inception in 1945, the BCEAO 
deposits 65 percent of all foreign exchange receipts in 
France,s national treasury to ensure the French Central Bank 
would have access to sufficient hard currency if ever needed 
to address monetary difficulties and thus ensure the CFA's 
stability.  An example of this close association can be found 
in the stability of their respective interbank rates: all 
through 2005 the BCEAO interbank rate stayed close to 4.88 
percent while the ECB's stayed similarly close to 2.1 
percent.  In 2006, the BCEAO's interest rates increased 
modestly in step with the ECB's.  The CFA franc is pegged to 
the Euro at a rate of 655.96 CFA to 1 Euro and it is likely 
that the CFA peg will remain.  Sources in the industry cite 
continued strong commodity prices and consistently strong 
political opposition to a CFA devaluation as central 
underpinnings of the continued peg.  The CFA was last 
devalued in 1994 as part of an effort to aid African exports. 
 As a result of the rise in the value of the Euro vs. the 
dollar in recent years, a 2005 IMF working paper suggests a 
moderate worsening of the terms of trade and actual trade 
performance in exporting to the U.S. while exports continue 
to rise moderately to the EU. 
 
¶8.  (SBU) Banking executives worry that continued delays in 
holding Cote d'Ivoire's elections will only prolong the 
economic uncertainty and further delay the resumption of 
international support.  The Director General of BNI predicted 
that campaign spending in the run-up to planned elections 
(either in 2007 or later) will push the fiscal deficit up by 
an additional 1.8 percent of GDP, further reducing the supply 
of capital available for borrowing by the private sector. 
Although a successful election would likely result in the 
resumption of international funding and budget support, BNI 
expects government expenditure to remain high and the fiscal 
deficit to increase further, to 2.5 percent of GDP, in 2007. 
 
¶9.  (SBU) The ongoing political crisis has disrupted banking 
operations, causing a reduction of the volume of pre-crisis 
bank transactions of approximately 10 percent. Of 165 bank 
branches, 32 have closed.  The banking sector has been 
affected by business closures, lost sales and job losses in 
the economy.  Client insolvency and an increase in unpaid 
debts owed by both businesses and individuals has been the 
inevitable result.  Because of the increasing risks, banks 
have preferred to concentrate resources on short-term lending 
to established businesses and on lending to the government. 
Banking executives predict that challenges for the banking 
sector include trying to expand long-term lending and taking 
more aggressive action against non-performing loans. 
 
ABIDJAN 00000135  004 OF 004 
 
 
Executives predict revenue will remain flat due to the 
sluggish domestic economy (economic performance would be even 
worse without recent increases in oil and gas revenues) and 
the impact of the continued departure of expatriates on many 
small and medium-sized businesses. 
 
Banking in the North 
============== 
¶10.  (SBU) The crisis in 2002 left the country divided both 
geographically and financially.  Since 2002, all accredited 
financial institutions previously doing business in the 
FN-held north have closed, due to the lack of security and 
repeated bank robberies since the crisis (reftel A).  As a 
result, residents of the North wishing to do banking business 
must travel to Yamoussoukro or Abidjan, an expensive journey 
taking several hours.  Travelers must pay bribes to pass 
through the many road checkpoints, both government and FN, 
along the way.  The absence of any accredited financial 
institution is a key underlying obstacle to the 
administrative reintegration of the country (reftel A), 
because government employees, including teachers, are paid 
through their bank accounts.  The leader of the FN, Guillame 
Soro, has promised to guarantee security for any bank that is 
willing to return to the FN-held north but so far, banks 
remain hesitant.  (Note: Soro held talks on this issue with 
Finance Minister Delegate Charles Diby on January 15, and 
Diby announced on January 31 that the Finance Ministry would 
reopen its presence in the North at the end of February to 
begin rebuilding the financial infrastructure needed by banks 
to restore their operations.  End Note.)  During a recent 
trip around the North by EconOffs, businesses, such as 
textile mills, cashew processing facilities and cotton and 
nut producer cooperatives, all appealed to the U.S. to 
encourage a return of the banks to the North. 
 
¶11.  (U) There is one savings and loans institution that 
covers all of the FN-held territory: the Popular Savings, 
Loan and Credit Bank of Cote d'Ivoire.  However, it is not 
accredited by the Central Bank, and its capitalization and 
deposit base remain small (total capitalization stands at CFA 
65,000,000, or USD 130,000).  It offers retail banking 
services to a total of 8,440 clients, of which 2108 are in 
Bouake.  It opened in February 2005 and since then has opened 
eleven full-service branches and mini-branches.  Women 
account for 45 percent of clientele, but the large cotton and 
cashew cooperatives represent the majority of its biggest 
clients.  It offers a range of services to account-holders, 
but the fee to open an account is prohibitively high, 
especially for small farmers or merchants for whom the 
average loan is around CFA 25,000 (USD 50).  Lending interest 
rates are between 10 and 15 percent. 
 
The Havala System 
============= 
¶12.  (SBU) According to a local official in the northern city 
of Korhogo, the havala system (the traditional form of 
long-distance money transfer found throughout West Africa and 
the Middle East), is very active in the north, to the extent 
that it has become a primary method for transferring sums of 
money from the government-controlled south to the FN-held 
north.  According to a consensus of the local council of 
Korhogo, the transfer fee is usually 10 percent of the 
transferred amount or, for small amounts, a flat rate of CFA 
5,000 (USD 10).  A client in one zone of the country makes 
contact with a middleman who in turn contacts an associated 
moneylender in the other zone.  The client pays the amount 
plus the 10 percent fee or flat rate, and the moneylender in 
the other zone delivers the cash to the indicated person. 
This process can take up the three days, as the actual 
physical transfer of money goes via drivers transporting 
goods who routinely drive the north-south route through the 
center of Cote d'Ivoire. 
 
Comment 
====== 
¶13.  (SBU) Cote d'Ivoire's troubled banking sector is a 
symptom of the country's protracted political crisis, which 
has produced an ongoing economic malaise that has dragged 
down banking sector performance.  The banking sector will 
continue to sag without progress in the now-stagnant peace 
process.  However, the revival of the banking sector, 
particularly in the North, would itself be a key step in 
resolving the country's political problems, and thus 
reinvigorating the broader economy. 
Hooks