Profitability of Angolan banking sector guarantees return on investment in 2.5 years

13 October 2006

Luanda, Angola, 13 Oct – The Angolan banking sector has one of the highest rates of return in the world, guaranteeing average return on investment of 2.5 years, with Portugal’s BES bank and businessman Américo Amorim having recovered their investment in just a year, a report said.

The “high profitability is a window of opportunity” the Deloitte report concluded referring to profits, which increased from US$113.1 million in 2004 to US$219 million in 2005, and to the corresponding return on equity (ROE) of the Angolan banking sector.

ROE rose to 42.5 percent in 2005 from 34.2 percent in 2004, which was much higher than the average of 11.6 percent in Portugal, for example, or the 13.6 percent in the United States.

The profitability ranking of the 12 retail banks in Angola was led by Banco Espírito Santo Angola (BESA), of Portuguese group BES, with 88.7 percent, and by Banco Internacional de Crédito (BIC), in which businessman Américo Amorim has a 25 percent stake, with 88.6 percent, with both having managed a return on investment within a year.

Banco Fomento de Angola (BFA), which is owned by Portuguese banking group BPI, was ranked third, which as well as having a 25 percent share of the Angolan market, has an ROE of 52.8 percent, while Banco Totta de Angola (BTA) had 42.5 percent.

The Deloitte report projected that the Angolan financial system would continue to grow this at “an accelerated rate” but with “lower profitability than in 2006.”

From January to June, according to figures from the Bank of Angola, deposits increased by 25 percent, with this growth rate projected to continue until the end of the year, after reaching a peak of 38.7 percent in 2005, while the credit portfolio rose 38 percent..

Increased competition and operating cost are expected to contribute to reduced profitability, as the retail networks of the largest banks continue to grow.

As well as this, at least three new banks are expected to open in the Angolan capital, which have already been licensed by the Angolan central bank, two of which are private and one has been set up by the Government using oil revenues.

These new banks are proof of the gradual growth trend in the country’s financial sector of Angolan capital, which at the end of 2005 owned 56 percent of deposits, against 53 percent the previous year.

Portuguese-owned banks – five of the 12 that make up the sector – have 38.5 percent, “maintaining a string presence in the sector,” Deloitte’s report noted. (macauhub)