Angolan Banks - Consolidation about to kickoff ?

We believe the Angolan banking sector landscape is likely to change in the not so distant future. In our view, having 29 banks operating in the country should prove to be unsustainable and, as a result, lead to several consolidation moves.

The planned merger between BPA and Banco VTB Africa and the press reports suggesting changes in the shareholder structure of Banco BIC that could eventually lead to its merger with BFA have brought the topic of consolidation to the limelight once again. The latest events around BESA could also trigger further moves in the banking sector, namely involving the bigger players. 

The five largest banks operating in Angola reported a combined net profit of AOA 66.2 billion (US$ 681 million) in 2013, down nearly 2% from the previous year. The lower bottom-line mainly reflected a weaker operating performance, as revenues remained flat from the previous year while the increase in costs continued to evidence the sector's branch expansion strategy. Results benefitted from lower provisions and taxes in the period, but were negatively impacted by capital losses in the sale of a real estate asset by BESA.

BESA has been the target of an intervention by the BNA following the recent events involving Portugal's BES, which controls 55.7% of the Angolan bank. This includes the appointment of two interim board members that will carry out an overhaul of BESA. As a result of this intervention, the sovereign guarantee of US$ 5.7 billion provided to BESA in December 2013 by the Angolan State to cover about 70% of its loan portfolio (which is reportedly in risk of default) would be revoked. The BNA stated that the future relationship between BES and BESA would be clarified in the coming weeks.