Efficiency of the ALM Approach for Improving Bank Profitability in Morocco during the COVID-19 Crisis

Abstract

This study examines the effectiveness of the Asset-Liability Management (ALM) approach in improving the profitability of Moroccan banks during the COVID-19 crisis. Faced with unprecedented challenges posed by the pandemic, the Moroccan banking sector had to adapt quickly to maintain its financial stability and profitability. Our research focuses on the period 2019-2022, encompassing the pre-crisis, acute crisis, and immediate post-crisis phases. Using the Structural Equation Modeling method, we analyzed a comprehensive set of financial and operational data collected from the eight main Moroccan banks, representing over 80% of the national banking market. Our findings suggest that ALM played a crucial role in stabilizing bank profitability during this turbulent period, with a significant positive correlation between ALM implementation effectiveness and several performance indicators, including net interest margin, return on assets (ROA), and return on equity (ROE). Banks that adopted more sophisticated ALM approaches demonstrated a better ability to manage liquidity and interest rate risks, with larger banks benefiting more from their ALM systems.

This research contributes to filling both theoretical and empirical gaps in the literature, providing a framework for understanding ALM effectiveness in the context of a global crisis.

JEL Classification: G21, G32, G01, C38

Paper Type: Empirical research article