Angolan Banks: Sector discloses another strong increase in net profit

Economic activity accelerated in 2024 while inflation remained elevated

Real GDP growth in Angola accelerated to 4.4% YoY in 2024 after a relatively weak performance in the previous year. This was the fastest growth recorded in the country since the start of the oil crisis in 2014. Economic activity benefited from a favorable contribution from both the oil (2.8%) and the non-oil (5.0%) sectors, with the diamond sector being responsible for nearly a quarter of the total real GDP growth recorded in the period. Meanwhile, inflation continued to increase at a rapid pace, with annual inflation standing at 27.5% at end-2024. More than half of the increase in inflation continued to reflect the higher cost of food and non-alcoholic beverages. This led the central bank to keep a tight monetary policy stance during the year aimed at containing inflationary pressures. The central bank lifted the BNA rate on two of its meetings (for a total of 150bps) to the current 19.5%, which is the highest rate since December 2022.   

Angolan banks kept a low-risk appetite

The combined assets of the 19 banks that reported their 2024 accounts reached AKZ 22,810 billion (US$ 25.0 billion), rising 4.1% YoY. This evolution mainly reflects the increases in customer loans, cash and deposits at central banks and other assets, which accounted for nearly half of the total assets of the sector. Balance sheet figures also showed that net loans saw another robust increase (18.1% YoY), as loans in kwanzas (representing 84.3% of the total loans) and in foreign currency rose 20.7% and 5.9% YoY, respectively. Deposits saw a more modest increase of 1.9% YoY (after surging 31.0% YoY in 2023) as the increase in local currency deposits more than offset the decline in deposits in foreign currency. Deposits remained by far the largest funding source of the sector, accounting for 89.1% of total liabilities. Angolan banks kept a low-risk appetite, despite their combined loans-to-deposits ratio surpassing the 30% level for the first time since 2018.    

NPLs increased once again by double-digits

Balance sheet figures also showed another double-digit increase in the total amount of NPLs of the 19 banks. However, the total NPLs of the six largest banks operating in Angola (corresponding to +/- 2/3 of the sector) showed a decline of -3.4% YoY thanks to the sharp falls witnessed at BPC and BMA. We highlight that BIC continued to be responsible for about 40% of the total NPLs of the banking sector and BMA for over 10% of the total. All that said, our calculations showed that the combined NPL ratio of the 19 banks declined to 18.0% from 18.8% in 2023.  

Robust operating income performance and lower provisions lift bottom-line

The combined net profit of the 19 banks showed another significant improvement in 2024 thanks to (1) a strong operating income performance, (2) markedly lower loan impairments and (3) a reversal in provisions for other assets at some of the larger banks. Revenues increased across the board at double-digit pace while costs rose at a rate below inflation. Overall, total net profit reached AKZ 872,194 million (US$ 956 million) in the period, representing a ROE of 29.7% and a ROA of 3.82%. These ratios compare with 20.5% and 2.19%, respectively, in 2023. The Angolan banking sector remained well capitalized, with the BNA stating that the total solvency ratio of the sector stood at 20.9% (vs. 26.3% in 2023).