Bank Bailout Reports Highlight Systemic Problems
BMI View: The Angolan government's reported move to guarantee billions of dollars' worth of bad loans held by distressed Portuguese bank Banco Espirito Santo Angola (BESA) has sent jitters through the financial sector. While a full blown banking crisis is unlikely, the bank's problems highlight systemic weaknesses in governance - one of a number of issues holding back progress within the sector.
We remain broadly positive on the prospects for the Angolan banking industry over the medium-to-long term, believing that a strong economic trajectory, a large unbanked population, an improving regulatory environment and rising foreign interest will spur growth and competition within the sector. That said, recent developments lend support to our view that, following a decade or so of rapid growth, Angolan banks will face increasingly testing times over the next couple of years as they grapple with rising bad debts, adjust to tougher government regulations and re-orientate loan portfolios.
Widely publicised but unconfirmed reports that the Angolan government has provided a guarantee to Banco Espirito Santo Angola (BESA), Angola's second largest bank, in order to back-up billions of dollars' worth of non-performing loans is the starkest illustration yet of the difficulties facing the sector. The bank is a subsidiary of distressed Portuguese lender Banco Espirito Santo (which holds a 55% stake in BESA) which has been a major source of funding for its Angolan unit in recent years. However, BESA has since run into severe financial difficulty with a reported USD5.7bn worth of loans - over three quarters of its credit portfolio - now considered bad.
|Falling Asset Quality|
|Angola - Outstanding Commercial Bank Loans|