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09 July 2024

Angolan Banks: Net profit of the sector more than doubled in 2023

Slower economic growth and higher inflation

Real GDP growth in Angola decelerated to 0.9% in 2023 from 3.0% in the previous year. This slowdown was due to the persistent decline in activity in the country’s oil sector (-2.4%), as oil production continued to be affected by maintenance shutdowns on some oil platforms. More positively, activity in the non-oil sector continued to grow (4.0%) thanks to the favorable contribution of key sectors such as retail, real estate and agriculture and fishing. Meanwhile, annual inflation increased in the second half of the year, reaching 20.0% in December 2023 (well above the rate of 13.9% recorded in 2022). Inflation was once again under some pressure because of the impact that the depreciation of the kwanza in May-June 2023 had on the prices of certain goods and services, namely food items. The increase in inflation led the central bank to tighten monetary policy at the end of 2023, raising the BNA rate by 100 bps (to 18.0%) and the minimum reserve coefficient in domestic currency by the same amount.

Balance sheet figures impacted by the sharp depreciation of the kwanza

The combined assets of the 21 banks that reported their 2023 accounts reached AKZ 21,984 billion (US$ 26.5 billion), rising 29.9% from the previous year. This evolution mainly reflects the increases in the amount of securities and net loans in the balance sheet, which represented about 30% and 20% of the total assets of the banking sector, respectively. Balance sheet figures also showed that net loans rose at a much faster pace of 40.5% YoY after another strong increase in domestic and foreign currency denominated loans, with the latter being particularly affected by the depreciation of the kwanza. Loans in domestic currency represented 79.8% of total loans (vs. 83.5% in 2022). Deposits also saw a strong increase of 30.9% YoY mostly due to the sharp recovery in deposits in foreign currency (after the declines in the previous two years) and another robust increase in local currency deposits (represented 60.2% of the total deposit base). Angolan banks kept a low-risk appetite, with their combined loans-to-deposits ratio standing at 29.5% in the period (vs. 27.5% in 2022).    

Credit quality deteriorated

Balance sheet figures also showed an increase of 39.2% YoY in the combined NPLs of the 21 banks after recording some improvement in the previous years. In particular, the total NPLs of the five largest banks in Angola corresponded to 75.1% of the total NPLs of the sector, below 80.1% of the total in 2022.  We highlight the sharp increases from BIC, BMA and BAI, with this impact more than offsetting the declines recorded by BPC and BFA. BIC accounted for 40.0% of the total NPLs while BFA was only responsible for 1.0% of the total. Overall, our calculations showed that the combined NPL ratio of the 21 banks rose to 19.2% last year from 18.5% in 2022 (the NPL ratio of the five largest banks increased to 24.5% from 23.0% in the previous year).  

Bottom-line growth is boosted by strong contribution from revenues

The combined net profit of the 21 banks more than doubled to AKZ 818,165 million (US$ 987 million) in 2023. This evolution is mostly explained by the sharp increase in revenues, namely in other banking income related to gains from (1) FX operations, (2) trading in treasury instruments and (3) the sale of real estate assets. According to our calculations, the total net profit of these banks represented a ROE of 25.2% and a ROA of 3.72%. These ratios compare with 13.4% and 2.11%, respectively, in 2022. The Angolan banking sector also remained well capitalized, with the BNA stating that the total solvency ratio of the sector improved from 28.4% in 2022 to 30.3% last year.