Morocco - Financial Sector Development Project (Vol. 2 of 2) : Technical annex on the lines of credit

Document of The World Bank FOR OFFICIAL USE ON.Y .>-,rl,u rN-. - [O;j;J'2 r.lt_lR Repoit No. P-5553-MOR REPORT AND RECOMMENDATION OF THE PRESIDENT OF THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT TO THE EXECUTIVE DIRECTORS ONA PROPOSED PACKAGE OF LOANS TO THE KINGDOM OF MOROCCO AND EIGHT MOROCCAN BANKS IN AN AGGREGATE AMOUNT EQUIVALENT TO US$235 MIlLON FOR A FINANCIAL SECTOR DEVELOPMENT PROJECT PART II: TECHNICAL ANNEX ON THE UNES OF CREDIT June 3, 1991 This document has a restricted distribution and may be used by recipients only in the performance of their official duties. its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EOUIVALENTS Currency Unit - Dirham (DH) DH per USS 1984 1985 1986 1987 1988 1989 1990 Year Average 8.81 10.06 9.10 8.36 8.21 8.48 8.02 Year End 9.55 9.62 8.71 7.80 8.21 8.12 8.04 FISCAL YEAR January 1 - December 31 LIST OF ABBREVIATIONS BCM Banque Commerciale du Maroc BCP Banque Centrale Populaire BMCE Banque Marocaine du Commerce Exterieur BMCI Banque Marocaine pour le Commerce at l'Industrie BNDE Banque Nationale pour le D6veloppement Economique CCG Caisse Centrale de Garantie CDG Caisse de Dep6t et de Gestion CDM Cr6dit du Maroc CIH Credit Immobilier et H6telier CNCA Caisse Nationale de Credit Agricole CPM Credit Populaire du Maroc EC European Community EMI Electrical and Mechanical Industry ERR Economic Rate of Return FI Financial Intermediary GDP Gross Domestic Product GOM Government of Morocco IS Corporate Income Tax ITPA Industrial and Trade Policy Adjustment MCI Ministry of Commerce and Industry MTR Medium-Term Rediscountable ODI Office pour le Developpement Industriel PB Participating Bank PCB Participating Commercial Bank PE Public Enterprise PERL Public Enterprise Rationalization Loan SAL Structural Adjustment Loan SGMB Societe G6n4rale Marocaine de Banque SOE Statement of Expenditures SSI Small Scale Indust'y UNDP United Nations Development Program UN/ISO United Nations/International Standardization Program VAT Value Added Tax  FOR OFFICIAL USE ONLY PM TAble of Contents PART 11- TECHNICAL ANNEX ON THE UNES OF CREDIT I. THE PARTICIPATING BANKS . . . . . . . . . . 1 . . . . . . . . . I A. Banque Nationale pour le Developpement Economique (BNDE) 1 B. Banque Marocainn du Commerce Exterieur (BMCE) . . . . . . . 7 C. Banque Commerciale du Maroc (BCM) . . . . . . . . . . . . . 10 D. Wafabank (WAFA) . . . . . . . . . . . . . . . . . . . . . . 12 E. Banque Marocaine pour le Commerce et l'Industrie (BMCI) . . 15 F. Banque Centrale Populaire (Cr6dit Populaire du Maroc) . . . 17 G. Soci6t6 Generale Marocaine de Banque (SGMB) . . . . . . . . 20 H. Cr6dit du Maroc (CDM) . . . . . . . . . . . . . . . . . . . 21 II. THE LINES OF CREDIT . . . . . . . . . . . . . . . . . . . . . . . 23 ANNEXES Annex 1: BNDE Financial Statements . . . . . . . . . . . . . . . . . 29 Annex 2: BMCE Financial Statements . . . . . . . . . . . . . . . . . 33 Annex 3: BCM Financial Statements . . . . . . . . . . . . . . . . . 35 Annex 4: WAFA Financial Statements . . . . . . . . . . . . . . . . . 37 Annex 5: BMCI Financial Statements . . . . . . . . . . . . . . . . . 39 Annex 6: BCP Financial Statements . . . . . . . . . . . . . . . . . 41 Annex 7: SGMB Financial Statements . . . . . . . . . . . . . . . . . 43 Annex 8: CDM Financial Statements . . . . . . . . . . . . . . . . . 45 Annex 9: Estimated Disbursement Schedu]e . . . . . . . . . . . . . . 47 This document has a restricted distribution and may be used by e& Apients only in the performance I of their official duties. Its contents may not otherwise be disclosea without World Bank authorization.  PART 11 T WE LINES OF CREDIT 1. THE PARTICIPATING RANKS A. BANQUE NATIONALE POUR LE DEVELOPPEMENT ECONOMIQUE (BNDE) 1.01 BNDE is Morocco's industrial development bank. It plays a dominant role in medium- and long-term industrial lending, though a decreasing one due to the greater involvement of commercial banks in this type of financing, mainly through Bank lines of credit. The Moroccan Government directly controls 34% of BNDE's shares and an additional 15% through other publicly controlled finencial institutions. The Moroccan private sector owns 27%, IFC 3% (originally 25%) and other foreign instituticns 21%. BNDE received nine direct loans from the Bank between 1962 and 1981, and two loans from syndicates of foreign banks led by IFC in 1983 and 1985 respectively. BNDE has also been the apex institution for the two Bank-financed SSI projects in which commercial banks participated. In addition, under the 1987 Industrial Export Finance and the 1989 Industrial Finance Project, BNDE received two loans of US$28 million and US$50 million, both of which are fully committed. 1.02 Management and Organization. Like most development banks, in the mid-1980s, BNDE encountered difficulties in redefining its role as selective credit policies were being reduced and competition from commercial banks increased. BNDE's president and senior management reacted to this new situation, and proposed a redefinition of the role of the board and a new organization, which have now been fully implemented. BNDE's Board of Directors is composed of Government representatives, Moroccan private sector and foreign banks, including the IFC. It meets twice a year. Since 1987, BNDE's Board has been focusing exclusively on policy and institutional issues, and projects are approved by two committees chaired by the president. The executive committee, which includes BNDE's senior management and representatives from the Ministries of Finance and industry, reviews and approves all credits above DH 15 million. Loans under DH 15 million are approved by an internal committee composed of BNDE's senior managers. This system has given positive results, as reflected in BNDE's good image in the business community. At the same time, BNDE's internal organization has been streamlined. There are four main directorates in charge, respectively, of appraisal of operations, portfolio monitoring and loan recovery, finance, and equity participations and personnel. A technical department provides support to operational staff and prepares sector studies. The heads of these five units report to a general manager who reports directly to the president. An internal audit department is under the supervision of the general manager. 1.03 Operations. BNDE's operations over the 1986-1990 period are summarized in Table 1.1 below. Direct medium- and long-term loans constitute BNDE's main activity. Due to BNDE's promotional efforts, and vigorous investment demand, approvals of direct loans almost tripled between 1986 and 1990, increasing by 68% in 1988 alone. Most medium-term rediscountable (MTR) loans of the commercial banks are packaged with BNDE's direct loans, and MTR loans averaged 63% of BNDE's direct loans during the 1986-90 period. BNDE started to  extend guarantees to client enterprises and to provide short-term credits in 1988. Short-term credits amounted to DH426 million in 1990. In 1990, BNDE received the Central Bank's agreement for rediscounting export financing and prefinancing short-term credits, a profitable activity which BNDE anticipates to develop rapidly. Table 1.1: BNDE'S OPERATIONS IN 1986-90 (DH million) 198 198 1988 1989 19 Direct loans Approvals 595 722 1,210 1,351 1,705 Commitments 658 551 864 1,077 1,400 Disbursements 611 550 760 860 1,200 Eguity Investments Approvals 15 15 9 70 79 Other ADprovalsW 522 507 539 714 1,267 Guarantees - - 23 246 373 Short-term credits - - 263 256 426 a/ Mainly medium-term rediscountable (MTR) industrial loans and suppliers credit granted by commercial banks that BNDE reviews, approves and processes for rediscounting by the Central Bank. 1.04 Operating Policies and Procedures. BNDE's policy statement was amended in 1983 and sets at 75X the minimum share of loan approvals to private sector enterprises, an operating policy with which BNDE has since complied. Loans to public enterprises are selected on a pure commercial basis. The policy statement also sets a single project exposure limit to 25X of equity. Recently, with the agreement of its board, BNDE has approved individual loans which exceeded the limit. Under the proposed project, BNDE agreed to lower its single project exposure limit to 20% of equity. This appears necessary in view of BNDE's significant resource requirements in 1991-93 (para 1.10) and would constitute a first ;tep towards the planned harmonization of SFIs' prudential guidelines with tho.ie of commercial banks (para 1.11). About 701 of BNDE' s loans are to manufacturing firms; the rest are to mining, transportation, services and leasing companies. BNDE remains the main external source of term financing to leasing companies; loans to leasing companies represented about 151 of BNDE's portfolio at end-199'. The Casablanca region, the hub of the country's industrial activity, accounted for 56X of BNDE's total loan approvals in 1988- 89 against over 70% during 1983-85. BNDE's appraisal methodology is satisfactory and benefits from a 30-year experience in industrial project financing. 1.05 BNDE' s supervision activities have improved significantly since 1987, with the implementation of a plan to improve their focus and coverage. The  - 3 - supervision function has been reorganized to separate preventive supervision activities from recovery activities, and two distinct derartments have been created within the portfolio monitoring and loan recovery Directorate. -he Supervision Department' 8 staffing and procedures have been strengthened. Regular superv.sion activities are now carried out in accordance with specific guidelines; a reporting system has been developed and a Supervision Committee, which meets monthly, has been formed to follow up on portfolio implementation issues. The Collection Department has been staffed to ensure weekly contact with enterprises in arrears, and a division has been created within the Legal Department to handle default cases where mutually agreeable resolution has not been possible and recourse to legal action is deemed necessary. A classification system of client companies has been developed for follow up purposes by subsector, according to BNDE's exposure, and for those in arrears, according to the seriousness of their problems. In the supervision process, technical and financial reviews are conducted, and assistance to clients is offered to prevent implementation and/or repayment problems. Recovery efforts seek first to resolve problems on a case-by-case basis through technical assistance, the restructuring of enterprises, or refinancing of the client's debt to BNDE. Legal proceedings are brought against those clients where efforts to negotiate settlement have failed. The implementation of these new actions has contributed substantially to improvements in BNDE's loan portfolio since 1988 (para. 1.08). 1.06 Financial situation and Derformance. BNDE's financial statements in 1985-90 are shown in Annex 1, and a summary of financial indicators during this period is presented in Table 1.2. In 1982-83, BNDE faced a financial crisis, caused mainly by the losses incurred from Eurocurrency borrowings at floating rates. Net operating profits recovered in 1985 to DH62.3 million, and BNDE could resume paying dividends. BNDE's net profits have increased steadily since, and in 1988 amounted to DH28.1 million, or 11.7X of average equity. Dividends of DH21 million, representing 10% of BNDE's capital, were paid to shareholders in 1988. In 1989 and 1990, however, BNDE's profitability declined slightly. Net operating profits reached DH60.9 and 69.6 million, respectively, or 1.1 of average total assets, as compared with DH75.5 million (1.4X of average total assets) in 1988. Net profits declined to 9.0X of average equity in 1990, permitting BNDE to continue payment of 101 dividends on share capital. The downturn in profitability since 1989 stems from three main causes. First, BNDE's interest expenses increased from 7.51 to 9.2% of average borrowings between 1988 and 1990 as a result of increasing interest rates on the domestic bond market and more stringent conditions imposed by the Treasury for the coverage of the foreign exchange risk. At the same time, lending rates were, until October 1990, administratively set. As a result, BNDE's net intermediation spread declined to 4.9X in 1990 from 6.21 in 1988. Second, operating expenses increased from 0.8X of average total assets in 1987 to 1.11 in 1989 and 1990. Third, BNDE's profits have been adversely affected by delays in reimbursement by the Treasury of BNDE's losses on foreign exchange borrowings covered by agreements with the Government. While these arrears were settled at the end of 1989, as a condition of negotiations of the Industrial Finance Project, they have had a negative impact of BNDE's profitability. Furthermore, these arrears had resumed and amounted to DH187 million at the end of 1990. BNDE cannot charge interest on these arrears but it has to cover them with additional borrowings. Several factors may create the conditions for the improvement of BNDE's profitability. Interest rates on medium- and long-term loans have been liberalized since October 1990, thus providing BNDE with more flexibility in intermediation spread  - 4 - management. Government arrears on the account of foreign exchange losses, have now been settled, and assurances were obtained during negotiations on the timely payment of any future foreign exchange losses (para 2.08). However, the surge of disbursements (+40% in 1990) resulting from the increase of activity and the new financial sector envircnment present BNDE with a significant challenge. BNDE's plan to maintain a sound financial performance in the medium term is discussed in para. 1.13. 1.07 At end-1990, foreign borrowings represented 58X of BNDE's long-term resources, i.e. a somewhat higher ratio than for other Moroccan DFI's, such as CNCA and CIH. The foreign exchange risk is covered by the Government (Part I, para 4.15). BNDE maintains a high level of provisions which reached DH349 million or 10.7Z of average loans outstanding at end-1990. An annual allocation for provisions deductible from taxable income is allowed, up to a maximum of one seventh of interest income on direct loans. BNDE's auditors provide, each year, an estimate of probable losses for bad loans (DH127 million at end 1988). BNDE's provisions, after deduction of possible losses, can therefore be considered as reserves. This reserve may be available, wholly or in part, for distribution to shareholders after payment of income tax. It is also used for the purpose of the calculation of the long-term debt-equity ratio, which BNDE's policy statement sets at a maximum of 10:1. The ratio was 7.9:1 at the end of 1989. Since 1982, BNDE's allocation to provisions has represented one ninth of interest income. As a consequence of this special tax arrangement, BNDE's profitability tends to be slightly underestimated. This fiscal arrangement will be reviewed in the context of the planned harmonization of accounting procedures between SFIs and commercial banks, to be implemented in 1992. BNDE's liquidity remained satisfactory with a debt service coverage ratio averaging 1.4 in 1989-90. Liquidity is projected to become tighter, as the recent surge of activity translates into higher disbursements, and sizeable payments on domestic and foreign loans fall due in 1991 and 1993. Table 1.2: BNDE'S EINANCIAL INDICATORS IN 1985-90 (DH Million) (As of end of pericd) 198 1986 1987 1988 1989 12990 Loans Outstanding 2,766 2,871 2,878 3,044 3,270 3,655 Equity Investments 140 147 156 159 236 230 Provisions/Average Loans Outstanding (%) 8.2 9.2 10.4 11.3 11.0 10.7 Net Intermediation spread (X) 4.6 5.0 6.2 6.2 5.6 4.9 Net operating profit/Average total assets (X) 1.4 1.4 1.5 1.4 1.1 1.1 Net profit/Average Equity (X) 8.8 8.0 8.1 11.7 9.7 9.0 1.08 Portfolio. The quality of BNDE's portfolio has been improving regularly since 1986. Between 1986 and November 1990, arrears over three months decreased from 10.7% to 7.9% of loans outstanding, and loans affected by arrears  - 5 - from 18.8% to 12.9%. This improvement reflects BNDE's improved portfolio management and policy to limit the share of loans to public enterprises to 25% annually, as many of BNDE's problem loans in the early eighties stemmed from state-owned enterprises. Due to large allocations to provisions for loan losses, the ratio between provisions and loans affected by arrears has increased from 48% in 1986 to 74% in 1989. This level is fully satisfactory and above the ratio of 70% recommended by the Central Bank between provisions and doubtful and contentious loans. At end-1989, 22% of the arrears were covered by guarantees from the CCG. Significant delavs in obtaining reimbursement of arrears by the CCC have been encountered and BNDE has stopped requesting Government guarantees. Table 1.3: BNDE'S LOAN PORTFOLIO BETWEEN DECEMBER 1986-1990 (DH Million) (As of end of period) 1986 198 1988 199 12990 (November) Loans outstanding 2,871 2,878 3,044 3,270 3,647 Loans Affected by Arrears 539 859 485 473 470 Arrears over 3 months 307 350 287 273 289 Provisions for Losses 260 299 334 349 - Loans Affected/Loans (X) 18.8 29.8 15.9 14.5 12.9 Arrears/Loans (%) 10.7 12.2 9.4 8.3 7.9 Provisions/Loans Affected (%) 48 35 69 74 - Write Offs 10.3 5.3 8.8 31.5 1.09 BNDE's equity portfolio represents about 6% of the total portfolio. At end-1989, BNDE held participations in about 40 companies in the industrial, financial and tourism sectors. Dividends increased from 7.9% of average equity investments in 1986 to 9.4% in 1990. In 1989, the size of BNDE's equity portfolio increased by 48%, mainly as a result of investments in the banking sector (BMCE, BAII in Paris, the bank Al-Amal, specialized in the repatriation of savings from Moroccan workers abroad, and the Mali Development Bank). In 1990, BNDE's equity portfolio remained at its 1989 level. 1.10 Projected Ogerations and Performance. BNDE's loan disbursements in 1991-93 are expected to increase, at about 9% per year, while loan approvals are expected to rise at 8% per year. BNDE's equity investments are expected to remain at about 6% of total portfolio. BNDE's medium- and long-term resource requirements in 1991-93 would amount to DH3.7 billion (about US$460 million equivalent), of which 30% are expected to be raised from foreign loans. BNDE raises resources in the domestic market mainly via domestic bond issues and the placement of 5-year bonds with the commercial banks. As domestic financial markets further develop (Part I, para 4.11), BNDE intends to rely increasingly  on an expanded bond market to mobilize resources in order to eventually eliminate the need for government guaranteed borrowings. 1.11 BNDE's projected statements of income, balance sheets and debt service cover ratios are presented in Annex 1. A summary of BNDE's project financial indicators is shown in Table 1.4 below. BNDE's loan portfolio is expected to increase at an average annual rate of 15% in 1990-93. BNDE's financial performance is expected to remain acceptable during the 1991-93 period. BNDE's net operating profit is projected to increase by 6% per annum to DH88 million in 1993. BNDE's intermediation margin as defined in its policy statement-V would fluctuate between 2.5% and 3.0%, above the minimum required of 2.5%. Net profit would average DH26 million, reflecting BNDE's commitment to maintain sizeable provisions of about 10% of average loans outstanding. At the same time, BNDE intends to continue its 10% dividend policy (DH21 million), leaving relatively little cushion to strengthen the equity base through allocation to reserves, but still complying with its policy of maintaining a maximum long-term debt equity ratio of 10:1. The regulatory minimum capital ratio which will become mandatory for all commercial banks by end-1992 will not apply to the SFIs due to the specific nature of their activities. However, once accounting procedures and policies of SFIs and commercial banks are harmonized (Part I, para 4.18), the Central Bank is expected to define for SFIs a minimum capital adequacy ratio as well as other ratios, which will meet the prudential standards set for commercial banks and also reflect the specificity of SFIs operations. Liquidity would be tight during the 1991-93 period, in particular in 1991 and 1993 with a debt service coverage ratio projected to be at 0.89 and 0.98 respectively. BNDE's management is aware of this situation and is currently negotiating with local banks the consolidation of a large payment of domestic bonds which fall due in 1991. BNDE's liquidity and resource mobilization are part of the issues to be addressed in the medium-term plan to be discussed with the Bank by March 31, 1992 (para 1.13). Table 1.4: BNDE's PROJECTED FINANCIAL INDICATORS IN 1991-93 1990 1991 1992 1993 (Preliminary) Loans Outstanding 3,655.0 4,206.0 4,936.0 5,611.0 Net Operating Profit 69.G 85.0 87.0 88.0 Net Profit 22.3 28.0 26.0 23.0 Net Profit/Average Equity (%) 9.0 11.2 10.0 8.9 Long-Term Debt/Equity 7.7 8.3 9.1 9.1 1.12 BNDE's Prospects in a Market-Determined Financial Environment. Over recent years, BNDE has been facing increasing competitive pressures from commercial banks, as a result of the Government policy to gradually liberalize .1/ Interest and other income less interest expenses over average loans and equity portfolio.  - 7 - the financial system. BNDE reacted by (i) increasing rapidly its activity in order to maintain a large share of the investment lending market; and (ii) focusing on improving its competitiveness through a broadening of its resource base (opening commercial banking brpnches and taking deposits) and starting to diversify its activities. Whtle BNDE succeeded in increasing the amount of long- term lending, the development of new pvoeucts and idantification of high profit activities has remained limited. The -olume of deposits remains small in comparison with CIH and CNCA, the other two major SFIs. BNDE has explored new avenues and discussed its medium-term plan with the Bank in 1990, as agreed under the Industrial Finance Project, but seems to experience difficulties in translating strategy into a plan of action and its implementation. In 1990, BNDE's financial performance was not as good as during the two previous years. 1.13 Competitive pressures are likely to increase further in the early nineties, as the Government completes the second phase of financial sector reforms. In this context, it will become more difficult for BENDE to maintain an acceptable financial performance. BNDE is aware of this challenge and its board has recently asked a tri-partite commission (BNDE, Central Bank and Ministry of Finance) to prepare a report on BNDE's financial and operational prospects. BNDE's medium-term plan needs to be strengthened and, equally important, concrete steps must be decided to ensure its effective implementatton. The Bank discussed these points with BNDE's r-.gement and agreement was reached on carryins out a technical assistance program aimed at ensuring BNDE's long- term viability in a market-determined financial environment. This program would include (i) a study to be realized by high level banking consultants which would focus on strategic planning, structure of costs and revenue by banking product, staffing and training requirements; and (ii) a one-to-two year assistance program, possibly by the same consultants, to monitor the effective implementation of the agreed operational strategy. Financing of this program will be provided under BNDE's loan, for US$200,000. BNDE's medium-term program, based on the results of the study, will be furnished to the Bank by December 31, 1991, and discussed by March 31, 1992. B. BANQUE MAROCAINE DU COMMERCE EXTERIEUR (8MCEI 1.14 Structure and Ownershin. BMCE is the second largest commercial bank in Morocco, with total assets of DH19.2 billion at end-1990. It is a state bank, whose ownership is shared between several large public financial and industrial agencies for a total share of 50.4X and private Moroccan or foreign interests for the balance. Office Cherifien des Phosphates owns 20.8X, Caisse de Dep6t et de Gestion 13.5%, Banque Nationale pour le DUveloppement Economique (BNDE) 8.3X, and foreign banks 12.6% (Banque Frangaise pour le Commerce Ext6rieur, Banco Exterior de Espana, BancaCommerciale Italiana, Commerzbank). BMCE owns shares in several Moroccan financial institutions (Cr6dit Immobilier et H6te'Lier, Cr6dit du Maroc) and in several other enterprises. At the end of 1990, BMCE had 137 branches, including a branch in the Tangiers Export Zone, and ona in Paris. 1.15 Staff and Management. BMCE's staff numbers about 2500, including 540 professionals. BMCE's management is generally skilled and competent. Professional staff are frequently sent abroad for training, often through B.YCE's  - 8 - network of foreign shareholders and correspondent banks. BMCE's president, a former Minister of Finance and senior Central Bank official, is widely recognized for his competence and dynamism. He is also the president of the professional association of Moroccan banks (GPBM). Because of his current and previous functions, BMCE's president has been a key interlocutor with the Government and the Bank in the formulation of the reform program in the financial sector. 1.16 Onerations. BMCE's operations are geared towards foreign trade and the public sector. This reflects both BMCE's original role as the bank for external trade and its traditional links with the public sector. The PE sector accounted for 28% of outstanding loans at the end of 1989. OCP, Morocco's largest exporter, is both a major depositor and borrower. BMCE has also been playing an important role in financing the acquisition of defense equipment. In 1988 and 1989, BMCE acquired a large amount of Treasury bonds financed by loans from the Central Bank, with a small margin of 1/32 of 1% accruing to BMCE. As a result, the stock of Government securities rose to 49% of total absets in 1989 from 22% in 1987, while during the same period BMCE's debt to the Central Bank rose to 40% from 7% of total liabilities. Under a recent agreement with the IMF, the Government is reducing the outstanding amount of indirect borrowing from the Central Bank through BMCE, and at end-1990, advances from the Central Bank had decreased to 11% of total assets. BMCE's commercial lending is mainly short-term, more than the other banks. At end-1990, medium- and long-term investment loans represented or.ly 18% of total loans outstanding. However, as a response to restrictive credit ceilings, the growth of medium- and long-term loans (not subject to ceilings for the most part) has far outpaced the growth of the entire loan portfolio (43% p.a. vs 14% p.a. over 1987-90). This is slowly changing the structure of BMCE's assets. BMCE's medium-term strategy is to continue to grow at a moderate pace, increase the share of investment financing in total lending and develop fee-income generating activities, in rarticular in foreign trade. 1.17 Financial Profile. BMCE's financial statements for the 1987-1990 period are shown in Annex 2 and key financial indicators for that period are presented in Table 1.5 below. These indicators are calculated on the basis of BMGE's financial statements, net of indirect Treasury borrowings through the Central Bank (para. 1.16), in order to limit the analysis to BMCE's direct commercial activities. Accordingly, total assets grew by 8% p.a. between 1987 and 1990, as compared with 15% p.a. in BMCE's published statements.  9 Table 1t.5: FINANCIAL PROFIL