Angolan Banks

Resilient 2014 results despite increasing headwinds

Number of players continues to increase

The Angolan banking sector consisted of 23 banks at the end of 2014. Two more institutions started operating in the country this year with an additional four banks in the process of reaching this stage in the near term. This is significantly more than the 11 banks that existed just over a decade ago. Four of the largest players hold 60-65% of the total assets, loans and deposits of the system. In our view, there is no major surprise here. However, the Angolan banking sector has a rather unique shareholder structure, as several individual shareholders hold stakes in more than one bank. As we have stated before, we believe this is something to monitor closely as it could prove to be unsustainable in the medium-term and lead to M&A movements in the not too distant future. On this front, it is worth highlighting the recent announcement of the merger plans between Banco Privado Atlântico (BPA) and Banco Millennium Angola (BMA). We provide details of this operation in the annex to this report.   

2014 saw higher LC loans and deposits and a deterioration in NPLs

Figures disclosed by the BNA for the Angolan banking sector showed that in 2014 (1) loans continued to expand, although at a much slower pace than in recent years, (2) loans in local currency (LC) represented more than 70% of total loans, (3) lending to households accounted for a fifth of the loan portfolio, (4) NPLs increased markedly, (5) deposits were still growing at double-digit figures (boosted by deposits in LC) and (6) deposits remained the main source of funding for banks, namely sight deposits. All in all, the sector recorded a 50% annual drop (in LC terms) in net profit last year as a result of the impact of former BESA, now Banco Económico. 

Net profit actually improved c13% in 2014 (excluding ex-BESA)

The picture changes somewhat if we strip out from our analysis the figures from the former BESA. Loans were up quite nicely last year and allowed the transformation ratio for the rest of the banking system to surpass the 50% level, the first time it has done so. Recall that BESA was by far the largest loan provider in Angola, with its loans-to-deposits ratio reaching well over 200% in 2013. In terms of the profit and loss account, the rest of the sector recorded a healthy operating performance, which more than offset higher provisions for loan losses. Revenues were boosted by strong contributions from net interest income and fees while costs continued to reflect the expansion strategy of most banks in recent years, which has led to the opening of new branches and the hiring of additional employees. Results were also aided by lower taxes in the period. In sum, this allowed for an improvement of nearly 13% in the bottom-line from 2013, which considering the slowdown in economic activity and tougher environment witnessed in the second half of the year is not all that bad.