The outlooks for banking sectors in South Africa and Morocco have changed to stable from negative, and remain stable for those in Nigeria, Egypt, Kenya and The West African Economic and Monetary Union (WAEMU), as banks' deposit-based funding structure, capital and profitability are set to hold steady despite a challenging operating environment, Moody's Investors Service said in reports today.

"Profitability will be supported by improving net interest margins from rising interest rates that will compensate for higher costs and loan loss provisions," said Constantinos Kypreos, Senior Vice President at Moody's Investors Service. "Reported capital ratios will also be stable, with banks potentially reducing dividend payouts if required."

Most banking sectors in Africa face a fragile operating environment this year, characterised by high inflation and interest rates, and – in the case of Egypt and Nigeria – by foreign currency liquidity pressures. Local currency depreciation has been an additional headwind in many of these countries.

Moody's expects asset quality for most banks will deteriorate, reflecting households' reduced disposable incomes and businesses' declining earnings. African banking systems will remain deposit funded and liquid, supporting financial stability, though foreign currency liquidity will still be a challenge in the case of Nigerian and Egyptian banks.

Prospects for economic growth are mixed, with continued low growth forecast for South Africa, and more robust growth for WAEMU, Kenya and Egypt.

To see the complete banking sector reports, click the link for each country:

South Africa: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1350781

Nigeria: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1355268

Egypt: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1350416

Morocco: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1351572

Kenya: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1355749

WAEMU: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1355274