Angola’s Biggest Bank to Sell Bad Loans to Restore Profit

LUANDA (Capital Markets in Africa) – Angola’s biggest bank plans to sell non-performing loans as part of a reorganization to return to profit.

Banco de Poupanca e Credito SARL, known as BPC, aims to dispose of 231 billion kwanzas ($1.38 billion) of its unpaid loans to a state-owned company created earlier this year to recover bad debt and free the nation’s banks to lend again, according to Chairman Ricardo Viegas D’Abreu.

The lender has also been in talks with investors interested in buying some of the debt, which spans sectors from “real estate to initiatives in the industrial sector and agribusiness,” D’Abreu said in an interview in Lisbon on June 17.

BPC, based in the capital, Luanda, also plans to issue debt by the end of the third quarter, said D’Abreu, a former vice-governor of Angola’s central bank. BPC will also sell equity to bolster capital levels, he said.

The Angolan economy, sub-Saharan Africa’s third-biggest, has been crippled by oil prices that have halved since mid-2014, causing unpaid loans to surge as the government curbed spending and business slowed. The International Monetary Fund estimates the economy will expand 1.3 percent in 2017 after zero growth last year. The country vies with Nigeria as the continent’s biggest oil producer.

After hiving off the soured loans, which is set to happen in the “near future,” state-owned BPC will then focus on financing government projects and small- and medium-sized companies, the chairman said. 

Takeover Deals
The lender on May 31 reported a loss of 29.5 billion kwanzas for 2016 from a year-earlier profit of 8.3 billion kwanzas and said it plans to issue 72 billion kwanzas of convertible, subordinated debt to investment funds and sell 90 billion kwanzas of its stock to existing shareholders.

The company set aside 72.7 billion kwanzas for impairments and provisions in 2016, while its net asset value amounted to 1.69 trillion kwanzas, the lender said. Loans that haven’t been paid for more than 90 days made up 6.77 percent of total loans, and its capital adequacy ratio at 10.9 percent against a regulatory minimum of 10 percent, the company said in an emailed response to questions on Wednesday.

Challenges in the banking industry, which serves about half of the country’s 25 million people, will probably result in takeovers or combinations, he said.

“For many years the top five or six banks have had a very big weight in the sector, but the smaller banks have continued to exist,” he said. “Some of these could merge or be acquired.”

BPC also expects foreign lenders to resume dollar-clearing operations as the industry steps up efforts to comply with anti-money laundering rules, said D’Abreu.

Euro Supply
Deutsche Bank AG was the last international lender to pull out of supplying greenbacks to Angola in 2016. The Financial Action Task Force, an anti-money laundering watchdog, removed Angola from its blacklist in February last year. Angola, which Transparency International ranks among the world’s 20 most corrupt, had been on that list since 2010.

While there is still a shortage of dollars, European lenders have continued to supply Angolan banks with euro notes, which have enabled the country to continue to do business with its main trading partners in Europe, said D’Abreu, who met with bank officials last week in Germany, France, Spain and Portugal with lenders in the region. Angola imports most of its products and services from Europe, especially Portugal.

Angola’s central bank has been allocating a limited supply of dollars to banks at its regular auctions, prioritizing strategic areas such as the food and the health industries.