An­golan banks seek help from state to pro­tect client ac­counts

The Star Early Edition - - NEWS - Can­dido Men­des and Colin McClel­land

AN­GOLAN banks are ap­peal­ing to the gov­ern­ment to help put to­gether a bailout pack­age to pro­tect ac­count hold­ers as lenders reel from low oil prices that make up al­most all of the na­tion’s for­eign-ex­change earn­ings.

Fi­nan­cial as­sis­tance could come from the ad­min­is­tra­tion of Pres­i­dent José Eduardo dos San­tos or be shared by all of the African coun­try’s 28 op­er­a­tional lenders, said Amil­car Silva, the chair­man of the As­so­ci­a­tion of An­golan Banks. He did not spec­ify whether lenders were call­ing for a liq­uid­ity boost that would im­prove the in­dus­try’s abil­ity to con­vert short-term as­sets into cash, or cap­i­tal in­jec­tions aimed at strug­gling banks.

“Banks must be helped be­cause they have liq­uid­ity prob­lems that can cause neg­a­tive sit­u­a­tions in the whole sys­tem, putting its cred­i­bil­ity at stake,” Silva said. “What we need to do is look at the mat­ter in-depth and then de­cide the best way,” he said, adding that any agree­ments be­tween the in­dus­try and the au­thor­i­ties would have to cover the fu­ture vi­a­bil­ity of banks, and “if they have to re­turn the money and when”.

The An­golan econ­omy, sub-Sa­ha­ran Africa’s third largest, has been crip­pled by oil prices that have halved since mid-2014, with the In­ter­na­tional Mon­e­tary Fund es­ti­mat­ing zero growth for last year.

Lend­ing dif­fi­cul­ties

Those woes have knocked the bank­ing in­dus­try, caus­ing bad debts to soar and busi­ness to slow as the gov­ern­ment cuts spend­ing. Dol­lar sup­plies have also dried up as for­eign banks pulled out of sup­ply­ing green­backs to the coun­try that Trans­parency In­ter­na­tional ranks among the world’s 20 most cor­rupt be­cause of poor com­pli­ance with anti-money laun­der­ing and cor­rup­tion rules.

Trou­bled loans more than tripled to 15 per­cent of to­tal credit in Septem­ber when com­pared with lev­els in 2010, and were at their high­est as a pro­por­tion of reg­u­la­tory cap­i­tal re­quire­ments since 2014, ac­cord­ing to data com­piled by the coun­try’s cen­tral bank and con­sul­tancy Ea­gle­stone Ad­vi­sory, which has of­fices in Jo­han­nes­burg, Lis­bon and Luanda. For­eign ex­change fell to about a third of bank de­posits from more than half in 2012, the data shows.

Some smaller banks had been hit par­tic­u­larly hard, said Silva, whose group rep­re­sents 24 banks. Most of the in­dus­try’s profit last year was split be­tween for­eign-ex­change trans­ac­tions and loans, he said. The as­so­ci­a­tion had set up a group of ex­perts to im­prove mem­ber com­pli­ance with in­ter­na­tional rules and best prac­tices, he said.

A spokesper­son at An­gola’s cen­tral bank didn’t an­swer calls or re­spond to re­quests for com­ment. An­gola’s kwanza weak­ened 20 per­cent against the dol­lar last year.

Rev­enue at An­gola’s banks might be “slightly” higher in 2016, Silva said, af­ter the cen­tral bank raised the bench­mark in­ter­est rate three times last year to a record 16 per­cent. While the in­dus­try’s re­turn on eq­uity is grow­ing, it is still less than half of the 32 per­cent earned in 2010, ac­cord­ing to the cen­tral bank and Ea­gle­stone.

The cen­tral bank’s 2015 fi­nan­cial sta­bil­ity re­port showed al­most half of the coun­try’s banks would fail a stress test of hold­ing 10 per­cent cap­i­tal re­serves if their loan book was low­ered by two notches, ac­cord­ing to a Jan­uary 13 re­port in Luanda-based Ex­pansao news­pa­per. The risk ad­just­ment would also cut the in­dus­try’s 141.3 bil­lion kwan­zas (R11.5 bil­lion) net profit that year to a loss of 413.7 bil­lion kwan­zas and re­duce the sol­vency ra­tio to 11.7 per­cent from 19.8 per­cent, the news­pa­per said.

Three of the banks would not meet liq­uid­ity re­quire­ments if clients with­drew half of their de­posits, ac­cord­ing to Ex­pansao. – Bloomberg

Banks have liq­uid­ity prob­lems that can cause neg­a­tive sit­u­a­tions in the whole sys­tem.

PHOTO: BLOOMBERG

An­gola re­lies on oil for the bulk of its for­eign-ex­change earn­ings, and the low price of crude oil and its re­sul­tant knock to the oil-re­liant econ­omy leaves the coun­try’s lenders strug­gling to main­tain suf­fi­cient liq­uid­ity.

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