Angolan Banks: Banking Sector Remains Resilient in 1H2022

Angolan Banks: Banking Sector Remains Resilient in 1H2022

Activity in the oil sector is recovering in 2022

Economic activity in Angola improved in the first semester of 2022 relatively to the previous year. According to the National Statistics Institute (INE), real GDP growth reached 3.2% YoY in the period, which compares with a modest growth rate of 1.1% in 2021. This more favorable evolution was thanks to a recovery in the oil industry (2.2%), particularly after a contraction in each of the last six years (2016-21), and continued growth in the non-oil sector (3.5%). It also reflected an improvement in liquidity conditions in the foreign exchange market, as well as the favorable effects of the lower restrictions related to the Covid-19 pandemic. That said, activity in the non-oil sector decelerated relatively to 2021 following a contraction in retail (-1.2%) and financial services (-27.9%). Overall, the oil sector represented 27% of total GDP in the first semester of 2022, which is roughly the same as in the homologous period.   

Inflation is on a downward trajectory

The latest figures from INE also showed that annual inflation is decelerating in 2022 and looks to be well on target to reach the central bank’s forecast of an inflation rate below 18% by the end of the year. Consumer prices rose a more modest 18.2% YoY in September from 27.0% YoY in December 2021. This evolution has been thanks to the slower increase in the cost of (1) food and non-alcoholic beverages, (2) hotels, cafes, and restaurants and (3) leisure and cultural events. The downward trajectory in the inflation rate allowed the BNA to lower its reference interest rate by 50bp to 19.5% in its latest meeting in September and could lead to further interest rate cuts in not-too-distant future.

The kwanza exchange rate appreciated in the first semester of 2022

Brent prices remained above US$ 100 for a significant part of the first semester of 2022, supporting Angola’s external sector and providing more foreign exchange liquidity to the domestic market. This allowed the kwanza exchange rate to continue to appreciate and reach 428.2 AKZ/US$ at end-June from roughly 560 AKZ/US$ in December 2021, which represents an appreciation of about 30% year-to-date. This more stable evolution of the kwanza has also helped to contain inflation, as Angola continues to import a significant part of the goods consumed in the country.

The combined net profit of the banking sector continued to improve

The available semester accounts reported by the Angolan banks showed that their combined net profit continued to improve in the first semester of 2022 relatively to the previous year. In particular, the total net profit of these 21 banks increased 36.6% YoY to AKZ 258,157 million in the period. Their balance sheet figures also showed that total assets reached AKZ 13,375 billion (-4.9% YoY), while net loans stood almost flat at AKZ 2,789 billion (0.9% YoY) and deposits fell by 5.7% YoY to AKZ 10,013 billion. This means that the combined loans-to-deposits ratio of these banks stood at 27.9% in June 2022, roughly the same level of 27.6% in December 2021. Meanwhile, figures disclosed by the BNA showed that the total solvency ratio of the sector stood at 20.49% in June 2022. This compares with 24.24% in December 2021 and 18.37% in the homologous period. Also, the NPL ratio stood relatively stable at 19.37% (from 19.46% in December 2021 and 18.22% in June 2021).