Angola’s banking system is stable despite weak economic activity

LUANDA (Capital Markets in Africa) – The International Monetary Fund indicated that Angola’s banking system is stable despite weak economic activity that has weighed on the banks’ capital metrics and asset quality in the previous three years. The sector’s risk-weighted capital adequacy ratio reached 18.9% at the end of 2017 relative to 19.2% at end-2016, but was well above the regulatory minimum of 10%.

The IMF noted that Banco Nacional de Angola (BNA) introduced a new liquidity requirement that limits the banks’ daily net foreign ex- change liquid position. Also, it said that the BNA has increased by threefold the minimum regulatory capital requirement that banks have to meet by the end of 2018, which could lead to consolidation in the sector. In parallel, the banks’ aggregate liquid as sets represented 33.8% of total assets at the end of 2017 relative to 46.3% a year earlier, while they were equivalent to 43.2% of short-term debt at end-2017 compared to 59.2% at end-2016.

Further, the IMF said that subdued lending growth and high provisioning are weighing on the banks’ balance sheets and estimated the aggregate non-performing loans (NPLs) ratio at 28.8% at the end of 2017 relative to 13.1% at end of 2016, with 80% of NPLs concentrated in the state-owned Banco de Poupança e Crédito.

In addition, the sector’s loans-to-deposits ratio stood at 49.3% at end-2017 relative to 51.6% at-end 2016. The Fund noted that foreign currency loans represented 25.1% of total loans, while foreign currency deposits stood at 33.5% of total deposits. In addition, the banks’ return on assets reached 2.1% in 2017 nearly unchanged from 2.2% in 2016, while their return on equity decreased from 15.6% in 2016 to 14.5% in 2017.