Angola’s commercial banking sector sees wave of mergers

NOVEMBER 16TH, 2015    FEATURES

The merger between Banco Privado Atlântico (BPA) and Millennium Angola is expected to start a wave of mergers in the commercial banking sector in Angola, with the aim of overcoming adversity such as lower profitability of the business, according to international analysts.

The BPA/Millennium Angola merger, which will create the fifth largest Angolan bank by assets, was announced in October in order to ensure growth in an adverse climate and respond to changes in European supervision, which penalised Portuguese banks exposed to Angola, and this is expected to be the first of many mergers.

The Economist Intelligence Unit points out in its latest report on Angola that this was the first time that two Angolan banks merged and recalled that Banco Privado Atlântico had been negotiating a similar transaction with the subsidiary of Russian bank VTB.

“With profitability retreating and other challenges that Angolan banks face, the sector’s consolidation is likely through mergers,” said the EIU.

The 2015 Banking under Analysis report published in October by Deloitte, revealed an increase in assets of Angolan banks, but a decline in profits of 50 percent, penalised by the adverse economic climate facing the country since oil prices began to decline.

Despite the adversities in banking, including an increase in bad debt, Angolan banks continued to expand internally and regionally, two new banks have started operating in the country and there were significant increases in the use of electronic payments and the issuance of debit and credit cards.

The BIC bank, controlled by Angolan billionaire Isabel dos Santos, recently started operating in Namibia and also opened an office in South Africa.

Analysts have long warned of the imminent consolidation of operations in Angola’s banking sector, and the next is expected to star the BFA, controlled by Portugal’s BPI, in which Isabel dos Santos has almost 20 percent.

The businesswoman’s initial plans, according to the Africa Monitor Intelligence newsletter, included taking control of BFA, in which she has owned 49 percent since late 2008, and merge it with BIC, creating the stand out largest commercial bank in Angola and with a regional dimension.

The implementation of European rules to the exposure it has to Banco de Fomento Angola led BPI to announce in December a decrease in its capital ratio, which has an impact on all its financial activity.

The penalty stems from the European Commission’s decision to exclude Angola from the list of countries with regulation and supervision equivalent to the European Union.

AA recent report by the Eaglestone consultancy said having 29 banks in the Angolan market was “unsustainable” and predicted “several short to medium term consolidation movements.”

The drivers of consolidation, it said, would be foreign players, as well as the need for banks to increase in size or to meet new and more stringent capital requirements and change the current shareholding structure of Angolan banks.

In banks such as BIC, Banco de Negócios Internacional, Banco Comercial do Huambo and Banco Valor, managers are still major shareholders, and their is room to find an international partner or even to sell a stake directly. (macauhub/AO)