Moody's Investors Service has changed to negative from stable the banking system outlooks on South Africa, Nigeria and Morocco in light of the coronavirus pandemic and oil price slump.

In all three countries the outbreak will cause banks' asset quality to deteriorate and will put pressure on profitability, while slowing economic growth.

In South Africa the outbreak will exacerbate the already challenging operating environment and will weaken the creditworthiness of banks over the next 12 to 18 months by hurting loan performance and profitability, and severely hampering business growth. The fiscal package announced last week and regulatory measures to ensure adequate liquidity in money and government bond markets and loosening of capital requirements to free capital for on-lending by banks will provide some support. However, despite these measures and the banks' solid risk management, we still expect a material deterioration in the credit risk exposure of South African banks.

In Nigeria, banks will face weakening loan quality and foreign-currency liquidity as low oil prices and the pandemic weigh on the economy. These new challenges add to existing headwinds from slow economic growth and rising regulatory costs. Banks' exposure to the oil and gas industry is substantial, at around 27% of total loans at the end of 2019, making the system susceptible to the oil price slump. The banking system is also highly dollarized, putting pressure on both assets and liabilities in the event of a naira devaluation. Nigeria's largest banks, however, will continue to benefit from high government support.

In Morocco, the outbreak will weigh on growth and adds to the problem of low rainfalls that is hurting the agriculture sector. The impact will be partly offset by lower energy import prices, given that Morocco is an oil importer. We expect problem loans to rise due to borrower concentrations, with significant exposure to SMEs in Morocco and Sub-Saharan Africa countries. Although Moroccan banks' capitalisation is relatively modest, they benefit from good access to funding and liquidity, which will help buffer the impact.