Banking in Review Angola 2008 by dxu18403

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                                                                                                                     BANKING IN REVIEW
                                                                                                                            Angola 2008




Contents                                                                Presentation
A reference
in the Angolan economy                                             2
                                                                        Banking in Review
Supervision
Risk control to generate value                                     4    Angola 2008
Mandatory reserves penalise
financial sector profitability                                     8

EMIS has New Card Issue and
Management Platform under preparation                              10   This is the third edition of the ‘Banking in Review’ publication,
                                                                        which presents some enhancements comparing with last year’s
Risk management                                                    14   publication following a philosophy of continuous improvement,
                                                                        particularly related to the development of some of the most critical
Bankarisation and new distribution models                          15   issues for the Angolan banking industry; the evolution of the
                                                                        distribution models, the more efficient risk management and the
Capital markets                                                         preparation for the stock exchange opening.
Opportunities in a crisis environment                              17
                                                                        This publication, the result of a partnership between ABANC
More and better banking in Angola                                  19   (Angolan Banks Association) and Deloitte Angola, has become a
                                                                        reference to the sector and the Angolan economy, as seen in the
Study ‘Banking in Review Angola 2008’                              31   improvement of the debate and transparency of the results, as
                                                                        well as in the diffusion of the industry success to other national
                                                                        and international forums.

                                                                        The main goal of the comparison with other markets and even
                                                                        within the sector is to lead and assist the development of several
                                                                        Banks competing in Angola and the sector as a whole, either
                                                                        through adoption of management and market best practices,
                                                                        either through innovation and creativity. This is our purpose to
                                                                        sponsor and participate in this study. On the other hand, we
                                                                        intend to support the narrowing between the financial sector and
                                                                        all the other economical sectors, which seek up to the banks,
                                                                        solutions to the development and implementation of their
                                                                        projects.

                                                                        Once again, we would express our thanks to Deloitte Angola team
                                                                        for the coordination and technical work, and to the associate
                                                                        members for their availability, which has enabled the presentation
  Property
                                                                        of a study that emphasizes the initiatives that each bank has been
  Deloitte                                                              developing towards the modernization and affirmation on the
  Rua Engº Costa Serrão, nº 13 • Luanda • Angola                        Angolan financial sector,
  Tel: (+244) 222 391 808 • Fax: (+244) 222 391 972
  angola-geral@deloitte.pt
                                                                                                                    Dr. José Massano
  Sponsorship                                                                                        Chairman of the Executive Board
  ABANC - Associação Angolana de Bancos                                                              ABANC – Angolan Banks Association
  Rua Dr. Alfredo Troni, nº 79 - 15º andar do BPC
  Caixa Postal nº 1847 • Luanda • Angola                                                                                      30 July 2008
  Telefax: (+244) 222 399 474
  abanc.angola@netangola.com

  Design, redaction, edition, graphical production and pre-print
  Editando - Edição e Comunicação Lda.
  Rua Joaquim Bonifácio, nº21 - 5º • 1150-195 Lisboa • Portugal
  Tel: (+351) 213 584 460 • Fax: (+351) 213 584 461
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                                                                                                                                          1
BANKING IN REVIEW
Angola 2008




                    A reference
                    in the Angolan economy
                    It is with great pleasure that Deloitte Angola returns to conduct the study ‘Banking in Review’,
                    a reference in the industry analysis in Angola, in close collaboration with the Angolan Banks
                    Association. Since the study first edition, we have tried to follow closely the dynamism of the
                    sector, improving the study. In its second edition the study become bilingual, thereby
                    increasing the potential audience of the study, something very important taking into account
                    the different and increasingly diversified trading partners of Angola. In this third edition, we
                    have decided to further analyze and develop some issues that we consider of great importance
                    for the financial sector at the present moment:

                      • Despite the industry growth, the Angolan rate of bankarisation is still low, thus at a time
                        when there are 16 banks in Angola, the question that raise is which distribution strategies
                        may increase the rate of bankarisation of the Angolan population
                      • At a time when the Stock Exchange has already started to operate, although using virtual
                        companies, and that had become clear that the official opening is imminent, it’s
                        acceptable to question the degree of preparation of the different banks to better take
                        advantage of this market mechanism in their benefit and therefore in the benefit of the
                        Angolan financial sector
                      • Finally, given the recent development of credit crisis in the United States and Europe,
                        which have led to the muscular intervention of central banks to ensure the solvency of
                        some banks, to develop some thoughts on the best strategies for risk management

                    In 2007 the financial sector, aligned with the rest of the Economy, continued to show high
                    levels of growth, although slightly lower than those observed in 2006. As happened last year,
                    the biggest growth took place on the side of credit, with an evolution of 82.8%. The deposits
                    still had an extremely relevant growth with an increase of 45.6% over the previous year. These
                    high levels of growth raises a number of challenges to the Banks leaders in that it is essential
                    to ensure the scalability of the various components that operationally support banks, may they
                    be information systems that with business growth increase their importance, or processes and
                    organization whose complexity tends to increase with business growth, or, finally, human
                    resources, whose lack in the labour market is a painful reality.

                    We hope this study and the whole debate and analysis around it contributes to the continuous
                    development of this sector, which is absolutely structural for the development of the Angolan
                    Economy and to its regional and global statement. For Deloitte Angola as a professional
                    services firm, it is without a doubt an opportunity to improve our know-how and thus also
                    improve our ability to continue providing a quality and excellence service to all our customers.


                                                                                                      Nuno Vaz
                                                                               Managing Director Deloitte Angola




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BANKING IN REVIEW
Angola 2008




Supervision
Risk control to generate value
The high rate of growth of the economy, with a substantial growth of       underscored “the efforts made with a view to aligning prudential
liquidity, increases the need to consolidate a monetary policy that will   regulations with international standards, in compliance with the 25
open up the way to stabilisation of inflation and creation of              Basel Principles directing banking supervision activities and actions”
prudential rules that will encourage healthy development of Angola’s       and how “harmonisation of the process of implementation by
financial system. Growth of the financial sector has been particularly     operators of the financial system within the SADC member countries
significant over the past three years, in step with the overall growth     and the increased co-operation in this matter, particularly with regard
of the Angolan economy and, from the standpoint of regulatory              to the training of our supervisors were relevant to our Central Banks”.
architecture, the three sub-sectors – banking, insurance and capital
market – have distinct supervisory entities, which articulate with each    Institutional framework
other in performing their duties. In this connection, a modern,            The Banking Supervision Division is charged with ensuring the stability
efficient financial system constitutes an essential instrument of          and solidity of the financial system, the security of deposits and
development, acting as a resource catalyser between the export             depositors, and the protection of consumers of financial services. To
sectors, which generate capital, and the rest of the economic fabric.      this end it has a number of instruments, mostly of a preventive
In recent years, the National Bank of Angola (BNA) has introduced          nature, designed to ensure the stability of the institutions, though
alterations to the prudential system with a view to progressively
bringing about the conditions required to adopt the international
accounting standards and, later, the Basel II Accord (see box). In 2007,     “Progressive adoption of the International
examples of the new regulatory framework for financial institutions
operating in Angola include setting mandatory reserves at 15% of
                                                                               Accounting Standards will allow greater
own funds and the adoption of a new Accounting Plan, effective as                    articulation between national and
from January 1st 2007. Another area fundamental to increasing the
credibility of the Angolan system within the international financial
                                                                                international institutions, an important
system was the creation of a ‘battery’ of solvency indicators, which                   step towards obtaining a rating
simplify comparisons with other countries, particularly at regional
                                                                                                        for our market”.
level. Just recently, on the occasion of the SADC Supervisors Meeting,
the person responsible for BNA’s supervision, Laura Monteiro,                                      Carlos da Silva/Banco Privado Atlântico


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                                                                                                                        BANKING IN REVIEW
                                                                                                                               Angola 2008




  “These profound structural changes must
 be faced if we are to promote our financial                               RISK-CONTROL
   market as a reference on the continent”.                                IS THE RIGHT WAY
                José Massano/Banco Africano de Investimento                The present context of the international economy “clearly
                                                                           indicates the relocation of the poles of growth. During
                                                                           many years we witnessed the hegemony of the West, the
                                                                           EU and the USA in particular. Today, we are witnessing the
                                                                           budding of a new pole, the engines of which are the
                                                                           emerging economies”, points out Carlos da Silva, Chairman
they replace neither competent management nor effective internal
                                                                           of BPA, for whom these “peculiar times, with the global
control by the credit institutions and financial companies.
                                                                           economy experiencing a delicate and complex recessive
Thus, from a distance, the Central Bank analyses economic and
                                                                           period, are the result of little concern for the quality of
financial performance within the scope of internationally accepted
                                                                           credit extended during a decade of exponential global
practices, monitoring compliance with the regulations.
                                                                           growth based on cheap raw materials and exceptionally low
The aim of the Prudential Rules is to ensure the security and solidity
                                                                           interest rates”. Now that “the framework has changed
of the institutions, while also protecting depositors and investors
                                                                           radically in less than a year, with raw-material prices rising
against possible risks of inadequate or fraudulent management by the
                                                                           sharply, mainly energy and food, and the consequent
financial institutions.
                                                                           increase of inflationary pressures and of interest rates”,
Recent examples in the international context, such as the bankruptcy
                                                                           international banks are facing a “new crisis – the reduction
of major institutions such as Bear Stearns and Northern Rock, merely
                                                                           of economic growth at the traditional poles and high
add to the need for control by the central authorities of each country.
                                                                           interest are causing very difficult financial conditions for the
Thus, the basis of supervision is to gauge the exposure to risk, taking
                                                                           life of companies on a very large scale, which could lead to
own funds into account. This leads to limits, based on the degree of
                                                                           a need for further write-offs of assets in their books”.
risk of the assets, for shareholdings or for provisions designed to
                                                                           For the BPA chairman, this new context, allied to the
cover loans and advances. In short, there are rules directed at
                                                                           considerable losses booked by the leading international
influencing access to the market and others at controlling credit,
                                                                           financial institutions, poses a twofold challenge: “A growing
market and exchange-rate risks. The first of these involves rules such
                                                                           need to control the levels of financial gearing and capital
as control of acquisition of qualified holdings, verification of the
                                                                           ratios, so as to prevent crises of lack of liquidity at moments
standing and experience of the members of the management and
                                                                           of greater market volatility”; and the need to adopt
supervisory bodies, and imposition of minimum equity capital, while
                                                                           “extremely rigorous structures and methodologies in
limits to concentration of risks for a single customer or limited set of
                                                                           extending credit, from the analysis of the dossier and cons-
customers, limits to financial holdings or the setting aside of
                                                                           tant monitoring of the processes to the time when they
provisions illustrate the rules of the second type.
                                                                           have been repaid in full”.
In Angola, own funds cannot be less than the minimum equity capital
                                                                           While it is true that the stage of growth and maturity of the
and at least 20% of the net profit returned each year has to be
                                                                           Angolan financial system has allowed it to come through
allocated to a legal reserve until such time as it equals the equity
                                                                           this crisis relatively unscathed, it should view as an example
capital. In a preventive framework, the solvency ratio (which
                                                                           those problems “that are striking the world’s leading finan-
compares own funds with assets) should not be less than 10% and
                                                                           cial institutions”, says Mr da Silva.
loan-loss provisions should account for 2 to 4% of credit extended.
                                                                           Emídio Pinheiro, Chairman of the Executive Comittee of
                                                                           BFA, agrees that “since it does not yet have very much
On the right path
                                                                           exposure to the international markets”, Angolan banking
The first step in safeguarding the proper working of the financial
                                                                           will not be particularly affected by the international financial
institutions was the enactment of the New Accounting Plan, which
                                                                           crisis, “other than the increase of spreads on loans”.
largely reflects an approach to the Basel II Accord and the regulations
                                                                           Couto Lopes, Chairman of the Executive Comittee of
on equity capital, and the need for capital for each type of risk.
                                                                           Finibanco Angola, is confident that despite “the fact that
Angola’s monetary policy guidelines have been praised by
                                                                           the situation of the international economy is complex and
international institutions such as the World Bank, which concluded
                                                                           worrying”, an oil producing country such as Angola, “with
that, as far as inflation control, international financial reserves and
                                                                           about 20% of the whole of Africa’s water resources, with
growth of the economy other than in the oil area, such as agriculture,
                                                                           diamonds and other minerals, besides its exceptional agri-
construction and financial services, are concerned, Angola “is on the
                                                                           cultural potential, has an economic and social future of
right path”.
                                                                           great hope”.
In turn, at the presentation of the study on Development in the
                                                                           But the “particularly serious international situation” imposes
Provision of Financial Services and Improvement of the Efficiency of
                                                                           learning. Mr Massano, Chairman of the Executive Comittee
the Banking Industry, Amadeu Maurício, the BNA governor, listed a
                                                                           of BAI, insists on the “principle of investing in sectors and
number of constraints involving Human Resources, Information and
                                                                           products in which the risks are known and manageable”,
Propriety, Offer of Financial Services and Other Factors relating to
                                                                           and the “present crisis shows that this is the way. Ongoing
Supply and Demand, which hampered faster growth in access to
                                                                           improvement of the quality of banking supervision, the
bank loans.
                                                                           banks’ ability to manage the risks, mainly those of a
Greater banking efficiency called for “an increase of the offer of
                                                                           financial and credit nature, and to keep their balance sheets
medium - and long-term loans, particularly to finance private inves-
                                                                           highly liquid” are fundamental to Angola and, therefore,
tments, in a climate in which the government was making efforts in
                                                                           “the new prudential rules and the new Accounting Plan are
the reconstruction of infrastructures to allow private activity, which
                                                                           welcome”, concludes the BFA chairman.
ought to be the engine of the economy, to become more dynamic”.


                                                                                                                                              5
BANKING IN REVIEW
Angola 2008




“The banks have provided the market with a
     powerful signal of great commitment to                                 Specifically, one of the biggest challenges “has to do with the
   financing households and the business of                                 adaptation of the software, which is totally different and will require
                                                                            a huge effort by the banks, not only to accommodate the new
                                companies”.                                 accounting structure, but also in terms of opening up the way to
                     Emídio Pinheiro/Banco de Fomento Angola                making better use of the IT platform in the production of mana-
                                                                            gement information”.
                                                                            Aware of the weight of the institution that he heads – 100 branches,
                                                                            over 470,000 customers and assets totalling US$ 4.7 billion - Emídio
                                                                            Pinheiro, chairman of the Executive Committee of Banco Fomento de
On the other hand, the Importance of the SMEs in driving the                Angola (BFA), corroborates the ideas of “quite complex, demanding
economy would suggest that specific measures be implemented for             work”, and that “in-house, the process has been launched so that we
this segment, especially with regard to access to credit.                   shall be prepared to adopt the New Accounting Plan at the start of
The third area of future development has to do with the problem of          2009, having passed all the test stages that have been planned”.
the cost of banking services, interest rates and the banking spread,
and the structure of banking commissions, as well as with the
evaluation of operating income and its interlink with competition, risk
and transparency.                                                               Limits to financial
                                                                                                         Liquidity control              Audit
                                                                                     holdings
                                                                                (under 15% of own
Banking industry adaptation                                                      funds and overall
                                                                                      qualified
As far as the financial institutions are concerned, the process of              holdings under 60%
                                                                                   of own funds)
adaptation is welcome and inevitable, especially taking into account
the developments that have taken place within the international
financial system.                                                                                            Capital                 Minimum limits
                                                                                   Limit of forex
The introduction of the new Accounting Plan “demonstrates the                   position (up to 20%
                                                                                                            Adequacy
                                                                                                          (10% of Assets)
                                                                                                                                       of provisions
                                                                                                                                    (2% to 4% of the
                                                                                  of own funds)
Regulator’s growth efforts to adapt the activity of the Angolan                                                                       loan portfolio)

financial system to best international practices”, in the words of
Carlos da Silva, chairman of the Board of Directors of Banco Privado
                                                                                   Dependence
Atlântico. Indeed, progressive adoption of the International Accou-              on few customers
                                                                                                                                  Mandatory Reserves
nting Standards “will allow greater articulation between national and               (under 30%
                                                                                  of own funds)
international institutions, an important step towards obtaining
a rating for our market”, a process that will tend to strengthen
“recognition and acceptance of the Angolan financial system by the
major international players, a step essential to the insertion of the
Angolan economy and financial system into the global financial chess-                   “Despite the complex and worrying
board”, concluded the BPA chairman,
Of course, “the alteration of the present Accounting Plan is not an                 situation of the international economy,
easy process”, points out João Pinheiro, financial manager at Totta                          Angola has great hopes for its
Angola. But “the adaptation has gone ahead as planned in con-
junction with the National Bank of Angola through regular moni-                                economic and social future”.
toring meetings and involving training courses for our technicians”.                                                         Couto Lopes/Finibanco


    ON THE WAY TO BASEL
    The Basel II Accord comes in the wake of Basel I, which fixed the       Banks can use two rating systems, one the standard used by the
    minimum solvency level for banks with a view to ensuring the            rating agencies, and another internal to the bank (IRB). SMEs are
    sufficiency of capital and competitive neutrality. The new Basel II     not normally covered by the rating agencies and banks must
    Accord now refines and expands the scope of the Basel II Accord,        therefore implement internal rating systems for these companies.
    and it is based on three pillars:                                       Impacts on financial market
    1 – Determination of the minimum capital adequacy requirements          The main advantage of Basel II is the inclusion of capital
    to cover credit, market and operational risks;                          allocation requirements to minimise operational risks. A large
    2 – Convergence of supervisory policies and practices (which can        part of the collapse of financial institutions occurs through
    give rise, in particular, to fixing different minimum requirements in   operational failures and there is often the risk of contagion, that
    the light of the risk profiles or the solidity of the institutions’     is, failure of other smaller banks. Therefore, under the new rules,
    internal management and control systems);                               the volume of allocation of capital will be greater, responsibilities
    3 – Provision of information to the market and to the public in         are defined and managers’ awareness of the importance of risk-
    general, so as to ensure greater transparency as to the financial       management to the institution’s competitiveness is higher. The
    situation and solvency of the institutions.                             level of exposure to major risks, in turn, will lie within
    What do these three pillars mean in practice?                           acceptable, manageable parameters, eliminating unnecessary
    In practical terms, banks will have to implement tighter risk-control   controls, leading to lower costs and lending the market greater
    systems, and risk rating/scoring systems will have to be used.          security and transparency.



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                                                                                                                                BANKING IN REVIEW
                                                                                                                                       Angola 2008




                                                                                 “Application of Basel II should be gradual
                                                                                         and progressive in the process of
These “profound structural changes have to be faced if we are to
promote our financial market as a reference on the African continent               development and modernisation of the
and, especially, in our region”, states José Massano pragmatically, the                entire banking industry in Angola”.
chairman of the Executive Committee of Banco Africano de Inves-
                                                                                                                    João Pinheiro/Totta Angola
timento (BAI), an institution that has a specific project under way to
adopt in the new rules in full in 2009, particularly in terms of human
resources training.
With the increase of the prudential rules, “the capital base will have
to be enlarged and we shall have to set aside provisions not only to         tighter now, with significant direct impacts on the institutions’
cover possible financial losses stemming from credit risks, but also the     operating statements”.
operational risks”, sums up Carlos Silva.                                    Mr da Silva, too, focuses the solidity of his institution, although the
With regard to the Basel II implementation process, the BPA chairman         goals for 2008 – twofold increase of the volume of assets under
agrees with the “principle, particularly since it is aligned with the most   management, growth of the physical distribution channels and
modern demands of the supervisors”, though he adds that “it should           threefold increase of net profits compared to 2007 – are being met.
be gradual”. This gradual nature is warranted because “these                 However, the strategy is “aimed at building up a solid fabric, based
changes require profound reorganisation of the business and control          on competent professionals and modern work methods, investing in
models”, and the fact is that “Even the leading international banks          their training and ensuring the continuation of high quality service
have not yet fully incorporated the highest levels of control of the         levels, rigour and security of operations”. These strategic priorities
operational disk defined in Pillar I of Basel II”, he added.                 lead to “high operating costs, probably higher than the rest of the
In Totta’s case, Mr Pinheiro explains that “with regard to credit risk we    market, but customer response in terms of turnover attracted and the
are still at a stage of adaptation of National Bank of Angola’s Notice       profits generated lead us to believe we are on the right path”.
on the matter of introducing alterations to the methodology to be
employed in loan classification and the provisions coefficients required
for each loan”. Specifically with regard to Pillar I, “We shall subse-
quently analyse the impacts of adopting the methods proposed by the
Basel II Accord, particularly in the theoretical approach to the methods
to be adopted”. In the matter of the operational risk, the head of
Totta mentions the “steps involved in job segregation”, saying that “It        TAKING ADVANTAGE
is perhaps the only bank in Angola that applies the Sarbanes-Oxley
Act”. In risks of a third kind, market risks, Mr Pinheiro is of the opi-       OF THE REDUCTION OF INFLATION
nion that “Since we are part of a financial system still undergoing
development, exposure to these risks has been identified and quan-
tified on the basis of certain scenarios”. He also supports “a step at a       One of the objectives of monetary policy involves the increase of
time”, with “gradual and progressive application of Basel II in the            credit extended to the economy and an alteration of its structure,
process of development and modernisation not only of Banco Totta               that is, a progressive penetration by private entities into the
but also of the entire banking indusry in Angola”.                             country’s real economy. Bank profits have grown mainly as a
Mr Massano points out another relevant aspect in matching capital to           result of investment of their financial surpluses in Treasury and
the Basel criteria as far as banks such as BAI are concerned, which,           BNA securities.
besides internal growth, are focusing on internationalisation. “The            Solid development of the financial system requires macroeco-
effort is greater but the calculation rules seem clear to us and, for this     nomic stability both at home and abroad, allied to an increase of
reason, at the General Meeting last April the bank’s shareholders              employment, of income and, naturally, of the wellbeing of the
approved a US$ 150 million increase of the equity capital, bringing            people.
the own funds’ structure up to about US$ 500 million”.                         The government has therefore invested politically in nominal
To sum up, in the words of Mr Pinheiro, “Adopting Basel II right now           stabilisation, that is, in the control of inflation, in the robustness
could possibly be a mistake, taking into account the industry’s state of       of external reserves and in the growth of ‘bankarisation’ of the
development”, but the approach strategy is interesting. In 2009, “the          economy. Carlos Silva understands “the context of the monetary
new prudential rules, which affect the solvency ratio and the new              policy and the growing need for the Central Bank to use its
methods of calculation of loan-loss provisions will be essential steps if      monetary policy instruments to control the monetary base more
we are to be able to face new stages in this process later on”.                efficiently, with a view to reducing pressure on the inflation
                                                                               rate”. After all, in the medium and long term, the benefits of
Commitment to the future                                                       lower inflation are reflected “in greater macroeconomic stability,
“The banks have sent a strong signal to the market of their great              providing better conditions for the growth of private invest-
commitment to financing households and the business of com-                    ment”.
panies”, Mr Pinheiro emphasises. This signal can be seen in the signi-         The scenario will help to attract private investors who favour a
ficant increase of the overall transformation rate of the Angolan              climate of economic stability, understood as low inflation and
banking system. As challenges of the future the BFA chairman lists:            interest rates and stable exchange rates.
sustained growth of the network; staff training from a “clear stan-            Till now, the main basis of the Angolan banking industry has lain
dpoint of training future leaders to act within the Angolan financial          in the cash flows of the State Budget, but the capacity to
system”; and efficient control of the processes of extending and               channel the income generated by oil to the non-oil sectors
recovering credit, “so as to reduce the risk and the need to set aside         constitutes a base for the leverafge of the business of the banks.
provisions, in that the new general loan-loss provision rules are far


                                                                                                                                                        7
BANKING IN REVIEW
Angola 2008




Mandatory reserves penalise
financial sector profitability
BNA Instruction nº 4/2007, of August 30th (which revoked
nº 2/2007 of April 18th) required banking institutions to increase
substantially their mandatory reserves deposited at the Central Bank,
with the consequent impact on liquidity management policies and
on financial intermediation margins.
                                                                           Securities were eligible (up to a maximum of 5%) in setting up the
                                                                           mandatory reserves, which meant that, in practice, one third of the
                                                                           amounts set aside by the banks were in fact remunerated by the
                                                                           BNA.
                                                                           Only the increase of the returns achieved thanks to the upward
                                                                           trend of interest rates as a result of the alteration of the rates policy
                                                                           governing Central Bank Securities offset, even though indirectly, the
                                                                           loss of remuneration of the mandatory reserves.
                                                                           The excess liquidity in the system, largely the result of the fast
                                                                           growth of deposits in domestic currency at banks as a whole (and
                                                                           the fact that extending credit in domestic currency remains at a very
                                                                           low level), has contributed to the fact that there has been no major
                                                                           difficulty in meeting the requirements of the Central Bank in the
                                                                           matter of mandatory reserves. The difficulties mentioned lie mainly
                                                                           in the operational and management fields. In the former, as
                                                                           explained by Álvaro Sobrinho, chairman of the Executive Committee
                                                                           of Banco Espírito Santo Angola (BESA), “because the mandatory
                                                                           reserves scheme that has been established includes a basis of
                                                                           calculation that is out of step with the times. From a management
                                                                           standpoint, because there is always the question of the opportunity
                                                                           cost that the banks have to assume and of the liquidity needed to
                                                                           finance the projects required by the country”.
                                                                           However, as Álvaro Sobrinho told ‘Banking in Review’, “The State
                                                                           must have a macroeconomic perspective. In this connection, my
                                                                           view is that the mandatory reserves legislation, together with the
                                                                           issue of treasury Bills with attractive rates and with the strong
                                                                           Kwanza policy, is intended to condition the level of physical
                                                                           currency in circulation and so to combat inflation. The model that
                                                                           has been instituted has been tested in other situations and tended
For the National Bank of Angola (BNA) the measure is one of the            to become less relevant as the means and electronic payment
mechanisms to control and monitor the financial system’s liquidity         systems become more developed, robust and effective. I am
and to safeguards the interests of depositors.                             therefore of the conviction that Angola will observe this trend as the
For the banks, regardless of the merit that they attribute to the          financial system becomes more developed, sophisticated and secure,
Central Bank’s goals in selecting its instruments to comply with the       particularly with regard to the interbank money market.”
government’s monetary policy, the measure is a costly one that             “But it is obvious”, adds the head of BESA whose bank was
‘upsets’ their profitability and, in some cases, is even classified as a   distinguished at the beginning of July by the specialised magazine
veritable tax on the banking industry.                                     Global Finance and by Wolrd Finance as the ‘Best Bank in Angola’
The coefficient of 15% for mandatory reserves established by the           and as the ‘Best Bank of Sub-Saharan Africa in 2007’, respectively,
BNA is considered high when compared with other markets, even              “that the present scheme impacts on the bank’s liquidity and,
taking into account the recent past of the Angolan economy                 consequently, on the readiness to extend credit to companies and
(hyperinflation) and the industry’s sophistication. On the other hand,     individuals. Additionally, the obligation of maintaining the re-
the requirement to comply with the daily balance and the backward          quirement solely in domestic currency creates a mismatch in the
step in remuneration of reserves implemented in August 2007 mean           bank’s balance sheets. This distortion has a major impact on an
that the scheme has become even more penalising for the banks.             economy such as ours that is still highly dollarized. Obviously, many
Till then, the Central Bank Securities (TBC) and the Public Debt           countries have already experienced levels of reserves such as those

8
                                                                                                                             BANKING IN REVIEW
                                                                                                                                    Angola 2008




now ruling in our country. The gradualism in the reduction of             on the mandatory reserves, this instrument may not be very effec-
mandatory reserves that the government intends to introduce and           tive in monetary control. Nevertheless, we praise the introduction by
the prudence that has been adopted are warranted in a climate of          the Central Bank and by the Finance Ministry of other financial
strong demand, as is currently the case in Angola.”                       instruments on the Securities market that have also helped mone-
                                                                          tary policy directed at the control of inflation”. From the viewpoint
The demand for a daily balance and the non-remuneration                   of the head of this institution, all instruments must be carefully
of the deposits are penalising                                            appraised to ensure that the banks’ role as lenders is not hampered.
Emídio Pinheiro, chairman of the Banco de Fomento Angola (BFA)            For the time being, he maintains that, “We no longer feel these
Executive Committee states, however, that “Although from an               effects, in that the system continues to have a relative surplus in
historic standpoint one can understand the high coefficient of            liquidity terms”.
reserves required – owing to a not too distant past of hyperinflation,    In turn, Carlos da Silva, Banco Privado Atlântico CEO, declares that
and bearing in mind the need to control liquidity in a market in          the bank he heads has adapted naturally “to the Regulator’s new
which the inflows of funds are very significant and considerably          guidelines, understanding the monetary policy framework and the
greater than the economy’s present capacity to absorb them, which         Central Bank’s growing need to use its monetary policy instruments
could reignite inflationary pressures – this is clearly not the best      to control the monetary base more efficiently, with a view to
monetary control mechanism, to the extent that it tends to                reducing pressure on the inflation rate. We believe that, in the me-
perpetuate the incipience of the money market.” On the other              dium to long term, Angola’s economic agents, including the
hand, he adds that “With a high coefficient, daily compliance and         financial institutions, will benefit from lower inflation, fostering
unremunerated mandatory reserves, a practice that is being faded          greater economic stability and providing better conditions, leading
out around the world, the mandatory reserves policy acts as a tax         to an increase of private investment. However”, he adds, “this
on banking activity, penalising the banking industry. In most Sub-        process of increasing the percentage of mandatory reserves in 2007
-Saharan countries the reserves coefficient is less than 15%. Indeed,     meant that the banks had to implement tighter liquidity mana-
as pointed out in a recent work by the BIS (June 2008), the               gement policies and to pay more attention to interest rates on loans
mandatory reserves coefficients, even in the emerging economies,          and deposits to keep net interest income and budget targets under
are generally equal to or less than 10% (with exceptions for specific     control, the whole in a scenario of great competition within the
categories).”                                                             industry, subject to great pressure to cut margins, posing a major
In the opinion of the chairman of the BFA Executive Committee, and        challenge for all the banking institutions. We also believe that this
since the interbank money market is still incipient and has a large       measure is temporary and will be alleviated in the near future”.
surplus of funds, “The mandatory reserves play just two roles:            João Pinheiro, financial manager of Banco Totta Angola, believes
monetary control and source of income for the BNA. Indeed, they           that mandatory reserves have always existed and will continue to do
are of no help in liquidity management because the BNA does not           so, not only in Angola but in almost every country of the world.
actively modify the reserves coefficient with a view to balancing         “They are an instrument that plays a role in money market
liquidity within the system. However, to the extent that the banking      management, in monetary control, that is used by central banks in
system has surplus liquidity in domestic currency and as the              implementing monetary policies they consider to be most correct in
interbank money market is not yet very developed, hindering the           the light of the country’s economic surroundings, and therefore
adoption of indirect monetary control mechanisms such as the              constitute a mechanism of stabilisation of short-term interest rates
definition of reference interest rates on liquidity injection and         and of control of monetary expansion.”
mopping up, mandatory reserves are still used as an instrument of         António Couto Lopes, chairman of the Executive Committee of
direct monetary control.”                                                 Finibanco Angola, has a position very similar to that of the previous
Fernando Teles, chairman of the Board of Directors of Banco BIC           interviewees. In his view, the 15% coefficient is too high to the
and one of its leading shareholders, also considers that failure to       extent that it “aggravates the interest rates on credit extended by
remunerate the 15% deposits affects the institution’s profitability.      the banking industry, by virtue of the fact that the index of
However, this top manager, who replied to the questionnaire sent          transformation of deposits into loans is higher, reducing the banking
by ‘Banking in Review’ just hours before flying to London to receive      industry’s profitability and the monetary mass in circulation,
‘The Best Bank in Angola 2008’ prize awarded to Banco BIC by the          therefore influencing the interest rate on loans as well”.
specialised British magazine Euromoney – expects that, “In the short
term, with macroeconomic stability, the Central Bank will reduce the
mandatory reserves coefficient or will come to remunerate them”.          Brief note
                                                                          This article was written on the basis of replies to a questionnaire sent
The banks’ role as lenders should not be hampered                         out by the ‘Banking in Review’ magazine to all banks operating in the
Banco de Negócios Internacional (BNI), wholly owned by Angolan            Angolan market. Unfortunately, not all replied in time, preventing the
capital, started up in 2007 when the current mandatory reserves           inclusion of their views on a matter as sensitive as mandatory reserves.
legislation was already in place. However, Ricardo Viegas d’Abreu,        Besides the institutions mentioned in the article, ‘Banking in Review’ also
deputy-chairman of the BNI Board of Directors sustains that “In the       received messages from the management of Banco Comercial Angolano
present state of development of the Angolan financial system, in          and of Banco Keve, both of which declined the invitation since they
which the variable used in extending credit to the banks is the           consider it to be a matter to be discussed only in the proper forum and
interbank market interest rate, which is little or not at all dependent   directly with the Central Bank.



                                                                                                                                                   9
 BANKING IN REVIEW
 Angola 2008




     EMIS has New Card Issue and
     Management Platform under preparation

     To consolidate the Payment Card          The “first acceptance of the VISA Card as an electronic means
                                              of payment within Angola’s automatic payments network”
     Business Empresa Interbancária de        took place in May 2007. How many Angolan banks are now
                                              working with the VISA network?
     Serviços de Angola (EMIS) has a          We have been involved in a long process since May 2007, which
     project under way involving the crea-    led to gradual accreditation of the Angolan banks by VISA, allo-
                                              wing these banks to be duly represented before the MULTICAIXA
     tion of a new multi-brand card issue     network. By mid 2008 eight banks were affiliated under the VISA
                                              network with these MULTICAIXA ATMs and were able to accept
     and management platform to replace       the VISA flag. Of the 8 VISA-affiliated banks, 5 are POS acquirers
     the present MULTICAIXA manage-           and have been adding VISA contracts to the MULTICAIXA POSs
                                              that they support.
     ment platform, calling for an inves-
     tment in the order of 2 million euros.   What is the volume of transactions to date (June 2008) invol-
                                              ving the use of credit cards in Angola?
     For José Matos, executive director of    The number of transactions with acceptance of cards via the
                                              MULTICAIXA network in 2007 totalled 17.7 million via the ATM
     EMIS, besides other advantages, the      and 651,000 via the POSs. From January to June this year, there
     new system “will allow ‘On-Us Ac-        were 13.7 million ATMs transactions and 486,000 POS transa-
                                              ctions. This movement, from January to June, includes 77,000 VISA
     ceptance’ of international brand cards   transactions via ATMs and 7,800 via POSs.

     issued by Angolan banks”.                How many subscribers are there? Does this come up to EMIS’s
                                              expectations?
                                              A total of 1.2 million MULTICAIXA Cards have been issued, of
                                              which 30% are non-personalised cards. Of the cards 734,000 are


10
                                                                                                                        BANKING IN REVIEW
                                                                                                                               Angola 2008




 “The number of transactions via the MULTICAIXA
 network grew 97% compared to the previous year.
 This increase represented a sum of USD 932 million
 handled by the ATM network and volume of pay-
 ments made via the POS network in the sum of USD
 65 million”.                                               José Matos
                                             Executive Director of EMIS




live, that is, having at least one transaction using the network since    understood that the international brand card is still a fairly
its creation, providing a 60% activity rate. These figures are in         expensive payment instrument that can hardly compete with a
keeping with the company’s Business Plan,                                 domestic card aiming at mass use of electronic payments.

Of the POSs that allow payments through the VISA network                  With regard to the MULTICAIXA network, what amounts
how many are now working in Angola?                                       were involved in transactions via the ATM and POS networks
At this time (June 2008) about 60% of the MULTICAIXA POS have             in 2007 and by the end of the first half of 2008?
a VISA acceptance contract. It should be pointed out that one of          The total amount dispensed via the ATM network in 2007 was USD
the main factors of success, at this stage, in the consolidation of       932 million, while the volume of payments made via the POS
the automatic payment service is communications and, in this,             network that year totalled USD 65 million. In 2007 transactions via
field, it must be said that that we still have some stability problems,   the network increased 97% over the previous year. Growth in 2008
although the use of the GPRS services provided by operator UNITEL         compared to 2007 is expected to stand around 80%.
has made a major contribution. Another factor of success has to do
with the support that the acquirers give to the tradespeople. The         How many ATMs and POSs are there in Angola at this time?
present multi-acquirer model may not be the one best suited to a          At present (June 2008) 560 ATM and 1,740 POS are registered with
stage of growth of the service. This is a matter that requires            the MULTICAIXA network. About 30% of these terminals are
reflection.                                                               located in the provinces.

VISA transaction movement has not yet compensa-                           Angolan bankarisation rate growing
ted the investment                                                        What percentage of bank account holders uses the MULTI-
As from the moment the VISA affiliation is operational does               CAIXA cards? How many were issued during 2007 and up to
the process of subscription to other networks, such as                    the end of the first half of this year, and how many are still
Master Card, AmEx, etc., become easier and faster? Is EMIS                active?
already preparing to join other networks?                                 According to our estimates there are currently about 1.1 million
The Angolan interbank company is the technological operator of            bank customers (not accounts), which provides a gross bank-
Angolan Payments System. It is neither an issuer nor an acceptor of
banking cards, merely a ‘processor’. EMIS does not therefore have
the profile to represent international brands in Angola. That role
belongs to the comercial banks. Certification of the MULTICAIXA
Network for acceptance of the VISA cards was only possible
because there were Angolan banks that became representatives of
the brand and appointed EMIS as their processor. This will also
                                                                            “One of the banks’ problems has to
have to occur with the other international Brands (MasterCard,
AmEx, etc.). As soon as an Angolan bank becomes their repre-
                                                                               do with the delivery of the cards.
sentative and appoints EMIS as its processor, a start is made to the
certification process. All the work previously done for certification        Hence the importance of the ‘non-
of the network for the VISA world helps because a large part of the
rules is common to the various international card brands. But is                personalised’ card, which can be
should be understood, in the first place, that the question is no
longer a technological but a business one. We are convinced that              activated almost instantly and can
only with a business case will there be more certifications. VISA
was a special case because there was great political and
institutional will, for the movement of VISA transactions has not
                                                                           therefore be handed over on opening
yet compensated the investment made. It’s true that compensation
will come about in the medium to long term, but it must be
                                                                                                    the account”.

                                                                                                                                          11
BANKING IN REVIEW
Angola 2008




arisation rate of 6.7% (or 12% of the active population). Of this
banking population about 70% have been issued a MULTICAIXA
                                                                                                 “The movement of VISA
card (which may not have been delivered) and 37% use it regularly
(June 2008 figures). One of the problems with which the banks are                  transactions has not yet compensated
faced has to do with delivery of the cards. Hence the importance of
the ‘non-personalised’ card, which can be activated almost ins-                                 the investment made. The
tantly and can therefore be handed over on opening the account.
                                                                                         international brand card is still a
A great deal has been said about the possibility of reducing
the risk in banking transactions in Angola through the
adoption of agreements similar to Basel II. What is the
                                                                                    fairly expensive payment instrument
current situation of the Angolan Payments System in respect
of standardisation?
                                                                                           that can hardly compete with a
At international level, a set of ten core principles of systemic
importance to be met by the payment systems is now in place.
                                                                                     domestic card aiming at mass use of
These principles are contained in a document issued by the BIS
(Bank of International Settlements) entitled ‘Core Principles for                                    electronic payments.”
Systemically Important Payment Systems’ that has provided the
guidelines for the whole of the sub-systems forming the Angolan
Payments System (SPA) of which MULTICAIXA is a part. The SPA
Act – Act nº 5/05 of July 29th – introduced in full the major inter-
nationally-accepted principles as the guidelines of the country’s                  Recovery was one of the company’s initial concerns from a more
payment systems. In this connection, Article 3 of the SPA Act                      short-term standpoint. The PCN, in turn, views the Company’s busi-
enshrined the Angolan Payments System’s four public-interest                       ness as a whole and seeks to implement a support infrastructure
objectives: Security, Reliability, Efficiency and Transparency. Article            highly tolerant of failures (internal and external). The PCN has
4 of the Act stipulates the mechanisms and measures that are to be                 several components of which the prime one, at this stage, is the
observed to ensure that the four goals listed above are met. The                   New Secure IT Centre (NCIS). The centre is being built from the
MULTICAIXA Network was therefore conceived to comply fully with                    roots up. It has been conceived in accordance with the strictest se-
this framework, one that is fully reflected in the respective                      curity and service continuity (failure tolerance) rules. This infra-
regulations approved by the BNA.                                                   structure will allow the MULTICAIXA infrastructure to operate over
                                                                                   two DPCs simultaneously. With a view to taking advantage of the
New Card Issue and Management Platform                                             scale effect of a project of this nature, a decision was taken to
What are the major projects that EMIS has in hand and what                         consider additional spaces to support another business area for the
are the main goals for 2008?                                                       Company related with server accommodation services for those of
The Company’s investment plans are directed at three principal                     its shareholders having an interest in this. The cost of this
areas: the Business Continuity Plan (PCN), Consolidation of the                    investment is in the order of 10 million euros, and it is scheduled
Payment Card Business and Development of new Business Areas.                       for conclusion towards the end of 2009.
The PCN is an evolution of the Disaster Recovery Plan. Disaster                    Within the scope of the consolidation of the Payment Card Busi-
                                                                                   ness, the Company has another project under way known as ‘New
                                                                                   Card Issue and Management Platform’. The aim is to create a new
                       RECENT EVOLUTION OF THE                                     multi-brand card issue and management platform to replace the
                     BANKING INDUSTRY IN ANGOLA                                    present MULTICAIXA card management platform. The three main
                                                                                   drivers of this projects are the technological driver (evolution from
                          1995      2000      2004    2005      2006        2007   the domestic scheme to EMV, in step with the business trend and
     Commercial banks       6        8         11      12        15          17    increasing the security of the domestic product), the regulatory
     Branches              N/D       42       160      237       279         318   driver (making possible “’Acceptance On-Us’ of international brand
     Bankarised                                                                    cards issued by Angolan banks, that is, domiciling in Angola the
     municipalities*       N/D       19         25      29        34         41    clearance of transactions involving use of these cards within
     ATM                    -         -         85     150       289        498    Angola) and the co-operative driver (to develop a card mana-
     Branches                                                                      gement platform that will ensure that all banks that participate in
     100,000 inhab.          -        -        1,1     1,4       1,7        2,0    EMIS will have equal access to credit-card management tools and
     ATM                                                                           will provide a shared fraud-management solution). The estimated
     100,000 inhab.          -        -        0,4     1,5       2,0        3,1    cost of this project is 2 million euros.
     Bankarisation
     rate (**)             N/D      2,4%      4,6% 5,1%         5,7%        6,7%   With regard to new business areas, what projects does EMIS
     (*) Includes head of province municipalities                                  have in the pipeline?
     (**) Bankarisation rate: bankarised population over total population          In new business areas the Company has a project under way
     Source: EMIS                                                                  known as the ‘Automatic Clearing House of Angola’. This ins-
                                                                                   trument will open up the way to two new, very important services




12
                                                                                                                        BANKING IN REVIEW
                                                                                                                               Angola 2008




for Angolan banking, the ‘credit transfers’ and the ‘direct debits’,    platform. Within the scope of certification of new terminals,
opening up not only new business areas for the Company but also         certification has been concluded of two Wincor brand ATM models
for its shareholders. The future Automatic Clearing House of            already installed in the network (while the NCR brand certification
Angola (CCAA) will undertake the clearing of various retail             is nearing finalisation), Both brands will join the DeLaRue brand.
payment services, such as cards, credit transfers, direct debits and    The Company also expects to certify the Diebold and Itautec
cheques. Priority has been given to credit transfers which, together    brands.
with the cards, will be the first two services to be supported by the   As far as security is concerned. a project has been concluded
CCAA. The cost of this project is estimated at 1.5 million euros.       involving evolution to Triple DES cryptography so as to make the
Within the scope of the consolidation of the present business we        network compatible with International Standards (PCI) Another
have another project under way, known as ‘Universal Card                project has also been finalised in respect of protection of the
Acceptance Platform – Evolution to MG v5’. Its aim is to ensure the     collector networks and of the interbank network (network
technological evolution of the present multi-brand acceptance           segregation and installation of firewalls).




    MULTICAIXA USERS CAN NOW TRANSFER UP TO ONE MILLION KWANZAS
    As from the beginning of July MULTICAIXA card users can transfer up to one million kwanzas from their account associated with their
    card every 24 hours. For EMIS this is a means of controlling risks, bearing in mind that “the MULTICAIXA network is a retail payments
    system and is therefore suited to payments of relatively small sums. Other systems and means are available for payments of large
    sums”. A payment terminal such as the Automatic Teller Machine “is a terminal that is not appropriate for large-value transactions”,
    in the words of an EMIS press release published by Jornal de Angola.
    The range of products offered by the MULTICAIXA network operated by EMIS includes ‘automatic bank transfers via automatic teller
    (ATM)’, a transaction whereby a user of a MULTICAIXA card can transfer sums from his account associated with the card in question
    to any account within the Angolan banking system, provided such an account is identified by its IBAN. The banks forming the
    MULTICAIXA system may impose a limit per transaction and may also limit any authorisations that are not given in real time.




                                                                                                                                            13
BANKING IN REVIEW
Angola 2008




Risk management
Nuno Alpendre – Partner Deloitte Portugal


Risk is part of any enterprise activity, but it has a crucial role within   one the country is experiencing. On the other hand, the imple-
financial institutions, especially Banks. In fact, when a bank grants a     mentation of risk management integrated processes will force
credit, it is buying risk for which it expects to receive sufficient        changes and require investments on different areas such as the
income for bearing it. Besides credit risk, banks are also exposed to       organizational structure, human resources, processes and techno-
other types of risks, such as foreign exchange risk, liquidity risk,        logy.
interest risk, market risk or operational risk, among others.               The risk strategy must be aligned with the bank’s global business
Therefore, risk management must be a key component of the over-             strategy and its implementation must be supported in a well defined
all bank management processes. Additionally, risk management                corporate governance model. Therefore, the set-up or expansion of
must be seen not only as a way to ensure a bank’s sustainability but        autonomous risk management departments is foreseeable. The
also as a means to optimize the bank’s results through an efficient         nature of functions of these departments will vary but can include
trade-off between business growth and incurred risks.                       risk analysis of new operations or clients, the risk analysis of new
In the last few years, there has been a great evolution within the          products, global monitoring of different risks or the design of risk
banking industry concerning the measuring, control and mana-                measurement internal models. Within this context, internal gover-
gement of risk. This evolution has been sponsored by international          nance processes that manage the ‘healthy conflicts’ between the
regulation and supervisory bodies which have encouraged the deve-           risk and business areas are most relevant.
lopment and application of integrated risk management systems.              In terms of human resources, banks will have to provide training to
On an international level, the Basel Committee, aiming to encou-            its resources or hire specialized resources, such as credit risk analysts
rage banks to improve their risks management practices, made                or technical experts to develop and maintain risk measurement
significant changes to the Capital Agreement. The new rules, com-           models. Furthermore, the implementation of a risk culture along
monly known as Basel II, are now being implemented on an                    with processes changes may force the need to implement a sensitive
increasing number of countries.                                             change management process.
Within Basel II new rules, banks can choose between alternative             Current business processes will also change in a way to include new
approaches to calculate minimum capital requirements. The diffe-            principles of risk identification and measurement. For example, with
rence between these approaches is the way to measure the risk,              the growing expansion of credit products for retail banking, the
either by using standard indicators or through the use of internal          application process for new proposals will tend to be decentralized
models. Adopting internal models will have an impact on the way             and supported by risk evaluation models such as scoring models.
banks run their business and manage their risks, since capital              The development of new credit and deposit products will also bring
requirements will depend on the real risk of the banks´ activities and      the need to a higher sophistication of the liquidity risk and interest
portfolios.                                                                 rate risk measurement methods.
Another major revolution within the banking industry has been the           The investment in information systems is essential to an effective
growing adoption of the International Financial Reporting Standards         implementation of risk management processes. Some of the needs
(IFRS). Among other things, the IFRS take into account new features         are at the legacy systems´ level such as, for example, scoring models
related with risk management such as the treatment of the in-               or operational risks alerts. Consequently, the need will arise for
creasingly complex financial instruments and the new rules to cal-          legacy systems to contain a more detailed set of information for risk
culate credit risk provisions, also know as impairment losses.              management purposes.
Angola is following along this international trend, being a clear           Besides these needs, the most relevant needs at the IT level will be
example of the set of Notices and Instructions issued by Banco              the implementation or upgrade of information management
Nacional de Angola in September 2007 and the introduction of the            systems. These systems can include data bases with sets of infor-
new accounting rules in 2009 which take into account the IFRS               mation of all bank’s portfolio, either credits, deposits or financial
principles.                                                                 markets deals. This information will allow the control of business
Within the new legislation it is important to point out BNA’s Notice        and risk evolution through key risk indicators such as provisions,
9/2007, which set new principles and rules regarding the classi-            profitability returns or capital requirements. The analysis of such
fication and provisioning of credit loans. This process will no longer      indicators at several axes (for example, by product, branch or client)
be just an accounting issue as it will have to be integrated with           will allow bank managers to take decisions aligned with the bank
banks risk management processes. In addition, it will allow a con-          global strategy.
vergence with IFRS as it establishes the use of criteria to individually    Therefore, in this era of great economic growth, risk management
assess client risk complemented with the use of statistical methods.        must be seen not only as regulatory requirement but as an oppor-
Implementing a risk culture and risk management processes within            tunity to implement management processes that guarantee the
a bank is a highly complex challenge. On one hand, it is easier to          sustained growth of the institutions with optimized results to their
disregard risks in a period of great economic growth such as the            shareholders.



14
                                                                                                                             BANKING IN REVIEW
                                                                                                                                    Angola 2008




Bankarisation and new distribution models
Pedro Leitão – Partner Deloitte Portugal


      The evolution that Angolan Financial System has
      witnessed, acted as a fundamental leverage for the
      country’s economic development. For banks, the
      challenge lays in accelerating the population’s
      bankarisation, with an economically feasible approach.


Financial sector’s good health has significantly contributed to             Aiming to improve bankarisation index, financial institutions have
economic growth and development, as a vehicle for capturing savings         been developing their distribution models, contributing to a closer
and directing them to activities with growth potential, as well as a        and more familiar contact between population and financial services
facilitator for economic transactions.                                      offered, via more available, efficient and easy-to-use channels.
However, in order to fully accomplish its role in the economy, financial    Although the branch is still the key element in customer/Bank
services need to be accessible, so population can actively take             relationship for most Banks, a set of other channels such as ATM,
advantage of the benefits banking services provide. This means that         Internet Banking, Mobile Banking that allow simultaneously better
population needs to be bankarised.                                          customer service, transaction speed and comfort while freeing branch
The concept of bankarisation, in its wider sense, is defined as the level   resources to value added activities, are being developed. There are
of access and of utilisation of financial services by people. Generally,    also Banks that are already developing their business based on
this concept is referred to as the percentage of adult individuals with     branch-free distribution models.
and open bank account, and is strongly correlated with a set of             Bank branches have suffered deep changes and are currently looked
factors such as socioeconomic situation, countries’ cultures and            upon by some financial institutions as a distinctive sales channel,
education, banking services offer and pricing, market regulation and        differentiated by segment or by range of service offered. Some
banking network coverage .                                                  branches already present customer niche directed communication,
Given the context, one shouldn’t be surprised that developed                functionalities, layout and service offering (e.g. affluent individuals,
countries with stable socioeconomic conditions, higher education            companies, students, etc.).
indexes and greater range and coverage of financial services have
superior bankarisation levels, when compared to developing                  Angola and Angolan banking:
economies.                                                                  accelerating bankarisation
                                                                            In recent years Angola has witnessed significant economic growth
Figure 1 – comparison between bankarisation                                 (average annual growth of 24% in the past 3 years), financial system
and development indexes                                                     is clearly expanding and bankarisation index as shown some progress
                                                                            (6,5% in 2006 versus 2,4% in 2004).
                                                                            Despite the evidence of economic growth, other figures should also
                                                                            be considered, more specifically a poverty index of 40,2% and an
                                                                            adult literacy rate of 67,4%(2), that reveal a developing country where
                                                                            alterative distribution models can be implemented (complementary to
                                                                            traditional models) in order to reach rural and lower education
                                                                            populations.
                                                                            Given this context, it’s useful to analyse successful alternative Banking
                                                                            distribution models in order to reach populations that are less
                                                                            familiarised with financial services, nominately microcredit, agent
                                                                            supported distribution or even the development of self help groups.




(1)
      WorldBank – “Who are the unbanked”, Junho de 2008
(2)
      Fonte: Relatório do Desenvolvimento Humano 2007/2008



                                                                                                                                                  15
BANKING IN REVIEW
Angola 2008



Figure 2 – Evolution of distribution channels

                                                                                                  Relative Importance to Customer
                    Channel Group:
                Branch              Direct      Alternative F2F     ATM or Mail

                                                                                                       Low             High


                                      1980s                                   Present                                      Future
          High
                     ATM
                                                                  ATM
                                                                                                             ATM
                                                Branch
                                                                                                                                    Internet
      Transaction
        Intensity




                                                                                         Branch                                                  Alt. F2F
                                                                              Internet

                                                                                                         Mobile

                                                                          Phone
                                                                                                                   Phone
                                                                                                                                               Branch
       Low                  Phone        Mail
                                                                   Mail                                 Mail

                      Low           Sales/Service        High
                                      Intensity




Microcredit                                                                                           Self Help Groups
Microcredit, considered one of the most efficient poverty fighting                                    Finally, the Self Help Groups model consists of associations of
mechanisms, consists of providing small loans to individuals living in                                individuals on the brink of poverty, typically organised with the help
the limit of poverty so that they can establish or expand sustainable                                 of NGO’s, with the objective of helping each other in order to
business, creating virtuous development cycles in their local                                         promote their development. Funds created by these groups are
economies.                                                                                            deposited at the Bank in name of the group.
Some institutions already operate in this area, such as Nobel Prize                                   These groups are especially popular in India, where their success is
winner Grameen Bank that boasts significant growth and operates in                                    considerable, and where the development of these groups has also
over 40 countries.                                                                                    been supported by microcredit, where 100 million people are
The success of microcredit expansion relies on the distribution model                                 estimated to be inserted in these groups in 2006(3).
adopted by the financial institution since, as previously mentioned,                                  Banking in Angola needs to lessen stages. The challenge remains in
those populations are barely bankarised and seldom culturally                                         accelerating the populations’ bankarisation and to do it in an
prepared for such bankarisation. There are, however, models based                                     economically feasible manner, three ingredients are fundamental:
on partnerships with local microcredit institutions (e.g. Deutsche                                       1. Develop a vision for distribution, concealing innovation and
Bank) or more final-customer oriented (e.g. ABN AMRO).                                                      experience;
                                                                                                         2. Implement stage-oriented capillarity, looking for lessons learned
Agents                                                                                                      to avoid pitfalls and maximising return on investment;
Another model that financial institutions have recurred to has been                                      3. Join efforts from several stakeholders, also bearing in mind social
Banking supported by an agent network, typically leveraged in non                                           and educational dimensions in this expansion.
financial partners (e.g. mail distributors, retail institutions), that allow
for a considerable increase in banking network capillarity, without
incurring in strong infrastructural overhead.                                                         Figure 3 – Channel specific transaction volume in a typical
Despite allowing greater capillarity, this model only permits early stage                             European Bank
financial service offering, since that Bank doesn’t entirely control
those channels.
                                                                                                                       Transactions volume by channel (Europe)
Although some countries register widespread utilisation of this model,
most operations performed are payments or funds transfer. Credit
and savings operations represent only a small percentage of the total
(e.g. in Brasil, around 78% of State-directed payments and other
invoices are performed by agents, while only 10% of all registered
operations is related to credit or savings operations).




(3)
      Source: Air India


16
                                                                                        BANKING IN REVIEW
                                                                                               Angola 2008




Capital markets
Opportunities in a crisis environment
Vitor Lopes – Senior Manager GMS*


Writing in the eve of the creation of Luanda’s Stock
Exchange Market about the technical, management,
human, organizational, and system requirements that
will allow financial agents to become active players of
the Market, can arrive just out of time.


                                          In other hand, since 2008, the details of these requirements have
                                          showed to be much more complex than usual. They are no longer
                                          the classic views of a book of finance but a re-creation of several
                                          ideas still non-universally accepted.
                                          Indeed, 2008’s first semester was struck by abrupt falls in both
                                          stock and bond markets throughout the strongest economies. To
                                          aggravate the scenario, some of the top institutions, like Inves-
                                          tment Banks or Hedge Funds, have reported great losses, revealed
                                          near-bankruptcy or are indicted in an investigation process, where
                                          their shareholders are negatively affected.
                                          When a institution like Bear Stearns becomes near-bankruptcy and
                                          is bought for a bargain, when thousands of Wall Street employees
                                          are fired, and when the English Government is obliged to
                                          nationalize a Bank in order to prevent it from bankruptcy, the
                                          entire Financial Market wonders: “What happened that urged
                                          this critical situation?”. Truly, this question had already been
                                          made when the financial market was shocked by the first sub-
                                          -prime consequences and its parallel liquidity and confidence crisis.
                                          The causes of this crisis were identified and they vary between the
                                          naivety of the financial agents that believed in the profit of highly
                                          sophisticated products without assessing its risk; the mass failure
                                          of some Regulatory Institutions and Rating Agencies; and mainly
                                          the naivety of the investors that believed they could’ve achieved
                                          great profits in the Capital Market that could totally outstand the
                                          real economy.
                                          Unfortunately for all, the stock exchange markets collapsed and
                                          the real economies marked by structural crisis won. Nowadays the
                                          bad news isn’t a surprise even with the commodities world crisis
                                          and the status of near recession that threats the main economies.
                                          In this scenario, the question that seems relevant is: “What to do
                                          to prevent this situation in the future?”.
                                          It seems that this answer can fit either an international investment
                                          bank that struggles out of this crisis, or a bank from Angola that
                                          is preparing himself to enter the Stock Exchange Market. Either
                                          way, the answer to this question is connected with: i) the reco-
                                          gnition of all it was made and worth to be kept as a good practice
                                          and ii) the several guidelines that are being discussed in order to
                                          avoid the appearance of uniquely financial crisis that aren’t an-
                                          ticipated.


                                                                                                           17
BANKING IN REVIEW
Angola 2008




 “Nowadays, the financial activity
 is structured in function of solid knowledge
 and in real time of the financial risks that a
 company is exposed and that can ultimately
 lead to capital destruction or even
 bankruptcy.”



Thus, the first answer to this question remotes to what can be                     teristics of the various types of investment that can be made,
named as the best practices to the correct implementation of the                   they will struggle to obtain investors in a sustained way. In
Capital Market, namely:                                                            the other hand, the recruitment of highly skilled personnel,
  • Market transparency: the first rule of a stock exchange                        with experience in asset management, with constant access
    market is that all of its transactions and the price arrangement               to technical lectures, totally aware of the researches about
    process are completely transparent. In this way, monitoring                    the markets they follow, are unique resources in an orga-
    acts of ‘Market Abuse’ are the primary concern of the                          nization and are essential in the success of any asset mana-
    Regulatory Institutions that have been investing in equipping                  gement firm.
    themselves with powerful software in order to detect throu-
    ghout the millions of transactions, a pattern of price mani-              The second part of this question can be answered with the help of
    pulation.                                                                 a set of discussions that are being focused in the most varied
  • Correct assessment of risk and profitability: the detailed                forums in the financial markets that sustain the following
    definition of an investment profile concerning its risk and               guidelines:
    profitability is essential in order to enlighten investors and to           • Creating an Organization focused on a Risk Culture:
    manage a portfolio. Speaking in the language of funds                         having a culture of maximization of value discarding its risk
    management, ‘beating a benchmark’ consists in obtaining                       was proved to be disastrous for the investors. Nowadays, the
    better profits that a specific index without breaking the risk                financial activity is structured in function of solid knowledge
    level. The implementation of this kind of management implies                  and in real time of the financial risks that a company is
    not only the use of software solutions of portfolio optimi-                   exposed and that can ultimately lead to capital destruction or
    zation according to different risk levels, but also the need for              even bankruptcy.
    an internal organization that supports the monitoring of the                • The reinforcement of the Regulatory Institutions: this
    board polices.                                                                point is no longer a discussion but instead a reality that has
  • Organization, Processes and Technology: the nature of                         gone mature. Crisis only prove that an efficient market needs
    portfolio management implies the execution of any task in                     more regulation. This way, the regulation that monitors ins-
    ‘light speed’ where its consequences are linked in the firm                   titutions actions and their solvency will be more confluent
    commitment of the Agents with the Market, since it can                        even. It also can be applied to the merge of Regulators of
    result in settlement or asset transfers. In this way, the                     Banking Institutions, of Insurance Institutions, of Hedge Funds
    architecture of the support process, the correct definition of                and of Brokers. Plus, Rating Agencies will be in tight obser-
    each area’s function, having the internal organization ruled                  vation.
    by the ‘best practices’, the investment in proven software
    that can assure the functioning of the business in a ‘Front to            Building a stock exchange market is clearly the ultimate step in the
    Back’ perspective are essential to the survival of an asset               process of perfecting the financial system. This step would mean
    management company.                                                       the beginning of a continuous improvement process of orga-
  • Diffusion of a Financial Culture: this theme has a double                 nizations and there internal control, the risk assessment methods
    meaning. In one hand, if the financial agents don’t share                 and the efficiency of the management. And because of all these,
    correct and detailed information about their investments as               it should be seen has a challenge and an opportunity to put the
    well as don’t teach their clients target about the charac-                Financial System of Angola in an International high level.




* The GMS is a Portuguese management consultancy company, specializing in the financial sector and in telecommunications.
Deloitte and GSM have a partnership for the development of some projects.




18
                                              BANKING IN REVIEW
                                                     Angola 2008




More and
better banking
in Angola
Even with the slight drop experienced
in 2007, the rate of profitability of banks
in Angola remains at envy levels compared
to developed markets.
With the imminent entry into operation
of the Stock Exchange and the emergence
of new players, including asset
management companies and investment
funds’, among others, banks in Angolan
market prepare strategies for growth
increasingly stringent and sophisticated.
Sustainable growth is the watchword
of a sector that is increasingly becoming
an active partner in economic and social
growth of the country.




                                                              19
BANKING IN REVIEW
Angola 2008




BESA
The future viewed with optimism
Confident in the opportunities that the Angolan Financial System holds, BESA introduced
BESAACTIF - Sociedade Gestora de Fundos de Investimento, S.A., at the end of June.

Do results achieved in 2007 confirm the bank’s expectations?                the Commission for the Capitals Market and the Angolan Stock
BESA’s results for 2007 were clearly well above plan and, in this           Market have shown themselves to be vigilant and to be weighing up
context, more than confirm expectations. The pursuit of a well              these conditioning factors. Realizing the Government’s ambition to
defined strategy, applied right from the start of the bank’s activity, is   encourage and open up a reference Stock Market in Sub-Saharan
responsible for BESA’s good performance, not only in terms of results       Africa will certainly be a determining factor in the expansion of
achieved but also in creating value for clients, shareholders and staff.    economic activities and, consequently, of the financial sector.
BESA encourages mutually positive relations, and is now a national
and international reference due to its dynamic growth, profit levels        Have the financial institutions trading on the Angolan market
and efficiency. I am happy to say that proof of this lies in the fact       faced increasing demands to play a more active role in sup-
that BESA earned the award ‘Best Bank operating in Angola” and              porting the national private sector. How does the bank meet
‘Best Bank in Sub-Saharan Africa”, attributed by Global Finance and         this demand?
by World Finance, respectively.                                             BESA backs value added projects by giving credit and technical
                                                                            support (in this case through investment banking), purchases and
How would you assess market development and, in particular,                 renovates premises for its head office, Companies Center, and for its
the Angolan Financial System, over recent months?                           agencies and provides employment for around 400 staff, most of
I think that today no one has any doubt that the Angolan Financial          whom are Angolan. In addition, the bank has a Social Solidarity
System is on the right approach towards stability and reliability. The      Fund, managed and audited independently and it supports the arts
traditional banking business is about to become full fledged with the       by sponsoring Angolan artists known internationally, helping them
opening of the Capitals Market and with the incorporation of                to transmit their message at home and abroad. In my opinion, BESA
Management Funds. There is still a lack of specific regulation, but I       clearly meets the goal of promoting the private sector (companies
would say that the structural work has been completed successfully.         and individuals) and the public sector in Angola and is proud to
Specialized credit will be a reality in a short space of time and           distinguish itself as a sponsor of the arts and provider of social
requires only specific regulations to be issued. All of these aspects       support.
are challenges but also, and above all, opportunities for the sector.
Viewing the number of financial institutions operating on the               Could the financial reality of Angola change after the le-
market, I think that fair competition is healthy when rules in force        gislative elections in September 2008?
are observed and applied in the same way by all concerned. Here,            I hope that the legislative elections in 2008 will be a decisive
the institutions with teams that are more experienced and skilled will      moment to tell the world that Angola, which has already proved
always be preferred by clients and others involved. I am optimistic         capable and self-sufficient in bringing peace and reconciliation to the
about BESA’s future.                                                        country, as well as in designing and beginning the implementation
                                                                            of an ambitious program of successful national reconstruction, is
What strategic areas will be targeted for expanding the                     today a prosperous country but one which works hard and long with
bank’s business?                                                            drive and dedication. I hope that the elections will leave the country
BESA began trading with market niches and with very well defined            strengthened in its ambitions to pursue the prosperity that will bring
target clients and it has retained this initial strategy. The bank pro-     it economic and social development. When this happens, all sectors
vides high quality banking services, and has the confidence and trust       of public or private economic activity will gain.
of its clients. With this in mind, BESA continues to trade in the same
strategic areas as always. In addition, on 27 June 2008, BESAACTIF,
an Investment Fund Management Company, was formally intro-
duced to the supervisory authorities, competitors, clients and the
media. Obviously this is an area targeted by BESA, and it will benefit
from the enormous experience and know how of its shareholder in
handling this business. Lastly, we have specialized credit areas, which
at this stage are relatively less important, as they still require the
standards required to regulate heir activity.

Will the introduction of the Capitals Market boost this ex-
pansion?
Having a Capitals Market with a regulator to supervise and justify
clear and transparent rules, accompanied by a good technology
platform in the system for negotiation, compensation and settle-
ment, is necessarily geared to success. Any Capitals Market that
                                                                                          Álvaro Sobrinho
observes these three key factors encourages opportunities and an
                                                                                      Chairman of the Board
alternative to credit and traditional banking applications. I think that
                                                                                        of Directors of BESA
20
                                                                                                                                 BANKING IN REVIEW
                                                                                                                                        Angola 2008




BFA
Strategy based
on sustained growth
An increase of more than 100,000 new clients, together with total
assets for the Bank of over 3.5 billion USD, a rise of 54%, brought
BFA to year end with a positive balance.


                                                                   Emídio Costa Pinheiro
                                                 Chairman of the Executive Comittee of BFA




Do results achieved in 2007 confirm the Bank’s expectations?                  Will the introduction of the Capitals Market boost this ex-
2007 was highly positive for BFA: total assets exceeded 3.5 billion           pansion?
USD, a rise of 54%; deposits totalled 2.9 billion USD and the client           BFA from the very start has been to the forefront in creating the
credit portfolio reached 1.5 billion USD, increases of 51% and 71%            Capitals Market in Angola. It is a founding shareholder in the Angolan
respectively. We have over 400,000 clients, an increase of 100,000            Stock and Derivatives Market (BVDA) and, in the last two years, gave
new clients. We also achieved a net result of 102 million USD,                assistance in assembling the operations and regulation of the Capitals
resulting in a Profit from Equity of 37.5%. These results are under-          Market Commission and the actual BVDA. We feel that Angola has
pinned by the growth strategy adopted by BFA right from the start, by         the conditions right for developing the Capitals Market, as an
macroeconomic stability and the tremendous boom in the Angolan                alternative means to attracting resources for investment in companies
economy.                                                                      and, as I said earlier, this is a business area to which we attach priority
                                                                              in our strategy and actions.
How would you assess market development and, in particular,
the Angolan Financial System, over recent months?                             Have the financial institutions trading on the Angolan market
As is well known, the Angolan Banking System in recent years has              faced increasing demands to play a more active role in sup-
seen a tremendous surge in growth while, at the same time, profit             porting the national private sector. How does the bank meet
levels have continued to be very attractive. In this context, it is natural   this demand?
for new operators to try to penetrate the market to draw benefit from         There would be no development of the private sector in Angola
these favourable conditions. The appearance of new banks leads to             without the solid presence of the credit banks ready to back industrial
more competition in the sector so it is natural for margins to drop and       initiatives. Our daily routine is to provide credit, bring in deposits and
this is likely to shape the future configuration of the sector.               conduct operations. To give a more effective, quality response to the
                                                                              requests made to us, we have created a specialised network of
What strategic areas will be targeted for expanding the bank’s                Company Centers and a Department for Corporate Risk. In addition,
business?                                                                     we have created specialised units to provide credit for construction
 BFA’s strategy is based mainly on the idea of sustained growth. For          and agriculture, two business areas that require specific responses.
this to materialise the essential component is the extension of our           Lastly, for investment operations that are large in volume or complex
commercial network and strengthening the process of client                    and for the corporate banking area, we have an investment banking
segmentation, adjusting supply and type of service to a range of              unit that has been growing in importance and size.
realities. At the same time, BFA is a bank that has brought financial
innovation to the Angolan market and this approach will continue. In          Could the financial reality of Angola change after the legis-
terms of business, priority areas are credit for construction and             lative elections in September 2008?
agriculture, including livestock farming, for which we have created           I do not think so. Three months from the legislative elections, the final
specialised units. We also want to play an active part in investment          preparations are being made. No surprises or social instability are
banking, an area that we reinforced recently.                                 expected once the results are announced. Quite the contrary, it is
                                                                              likely that current policies will continue and political risk will tend to
                                                                              be low.




                                                                                                                                                      21
BANKING IN REVIEW
Angola 2008




Banco BIC
The Banco BIC was elected 'The Best
Bank in Angola' by Euromoney
In 2008 the Bank BIC had the privilege of receiving the prize 'The Best Bank in Angola', by the excellence
of their performance in overall commercial areas, quality of service and consolidated results.
This prize is awarded annually by the British magazine Euromoney.

Do results achieved in 2007 confirm the bank’s expectations?               Have the financial institutions trading on the Angolan
The results of 2007 were the best in the three years in which              market faced increasing demands to play a more active role
Banco BIC has been operating, with a spectacular increase of               in supporting the national private sector. How does the bank
146% against 2006, and totalling 80 million USD. The solid                 meet this demand?
expansion of business with 80 agencies opened, giving the bank             Long term growth depends on investment and BIC excels in
full national coverage, as well as the rise in the balance sheet and       creating an environment favourable to investment and the growth
excellent risk management, have helped us achieve a profit on              of companies, conducting direct credit operations for private
assets of 4.7% and a profit on equity of 77%. The quality of the           clients. The volume of credit made available to this sector rose
loans portfolio is one of the best, with the ratio for credit due close    115%, with BIC granting 663 million USD to private clients and
to zero. An aggressive growth plan and solid commercial drive              small businesses and 643 million USD to large companies. BIC also
allied to the quality of our employees, which in 2007 rose to 860          promotes private national investment, particularly in the provinces,
employees, justify the excellent performance achieved once again           by subsidising interest on loans to the agriculture and fisheries
by Banco BIC.                                                              sectors and also to the construction sector. In these sectors real
                                                                           guarantees are very important and demand a careful analysis of
How would you assess market development and, in par-                       the client, as well as demanding personal guarantees from com-
ticular, the Angolan Financial System, over recent months?                 pany partners.
Prospects are good for the Angolan Financial System. This is
important as the system has been playing an increasingly aggre-            Could the financial reality of Angola change after the legis-
ssive role in the economy, supporting social and economic de-              lative elections in September 2008?
velopment, not only by encouraging public-private partnerships to          The elections in September 2008 will begin a new development
make major investments in infrastructure, but also by putting solid        cycle for the country and this will have the knock-on effect of
backing into the growing property market that has been emerging            economic consolidation. The elections will attract more foreign
recently. The rise in investment, seen in the growth of credit put         investors as the country will become more credible to international
into the economy, is a sign that the economy is going through a            institutions because of democratic stability and the reduction of
phase of prosperity with the main macroeconomic variables                  risk, as well as political stability. Like this the growth currently seen
stabilising. Stabilising the inflation rate will be a determining factor   in the Angolan Financial System as in Banco BIC will continue, and
as this will lead to a reduction in the interest rate on public            the best Financial Solutions will always be on offer.
securities, essential to make economic growth viable and to reduce
the public debt. This will all mean a fall in profits for banks, de-
manding that they improve their management capacity.

What strategic areas will be targeted for expanding the
bank’s business?
Without a doubt the individual network, particularly those in the
middle income bracket, adopting a mass market approach in pro-
viding access to ATM and TPA, without overlooking the national
industrial sector, promoting access to credit.

Will the introduction of the Capitals Market boost this ex-
pansion?
The Capitals Market will play a fundamental role as it will increase
the number of financing alternatives for companies, in this way
promoting direct competition with the banks. BIC provides several
types of corporate funding and can also participate as the unde-
rwriter of financial values.
                                                                                                            Fernando Mendes Teles
                                                                                       Chairman of the Board of Directors of Banco BIC




22
                                                                                                                     BANKING IN REVIEW
                                                                                                                            Angola 2008




Finibanco Angola
Taking off with a positive balance
Within its first month in operation, Finibanco Angola managed to
achieve results in line with the bank’s initial expectations, both in
terms of resources and credit.



Finibanco Angola was inaugurated recently (June) in Angola. How would you
describe the process of incorporating the bank? Have these early days of bank
operations met with expectations outlined initially?
The phases planned for the legal and physical incorporation of the bank went according to
plan. We signed the incorporation deeds in September 2007, we searched for and purchased
the premises and defined the respective layout by the close of 2007. Later, we started works
at the premises and at the same time we began hiring personnel, beginning their training in
Luanda (Instituto de Formação Bancária de Angola- IFBA) and in Portugal (Finibanco), up until
the inauguration of the bank. The start-up period for a company is always one of adjustment,       António Couto Lopes
however, both resources and credit levels achieved in the first month fall within expectations.    Chaiman of the Executive Comittee
                                                                                                   of Finibanco Angola
How would you assess market development and, in particular, the Angolan Financial
System, over recent months?
Development in the Financial System, and in particular in the Banking System, has been guided
by economic growth, and that has been at very fast pace. Bearing in mind the current number
of banks operating, there is still room for more banks in the Angolan Financial System.
However, banking opportunities have not always been the same since the attraction of
resources is not the same for all operators, and this means that the growth rate of banks varies
from bank to bank.

 What strategic areas will be targeted for expanding the bank’s business?
Attracting resources from the middle class and the SMEs, in such a way as to keep interest
rates from being too high, and support for Angola’s foreign trade, with special attention to
trade between Portugal and Angola, serving as a bridge between Portuguese and Angolan
industrialists.

 Will the introduction of the Capitals Market boost this expansion?
Gradually, the Capitals Market has all the conditions to promote the expansion of the Angolan
Financial System, and this will put the demand on companies to have precision and
transparency in their accounting, so that they can stand up to analysis.

Have the financial institutions trading on the Angolan market faced increasing
demands to play a more active role in supporting the national private sector. How
does the bank meet this demand?
Finibanco Angola intends to be an active partner in backing the Angolan productive sector,
analysing and supporting industrial initiatives and projects that are economically viable and
socially useful.

Could the financial reality of Angola change after the legislative elections in
September 2008?
Growth and economic development in recent years has been so obvious that no major
changes are expected in Angola’s financial situation in the short term, an encouragement to
ever greater banking support for the real economy.




                                                                                                                                       23
BANKING IN REVIEW
Angola 2008




Banco Regional do Keve
At the cutting edge
of corporate support
Banco Regional do Keve believes the Angolan Financial System must have diversification and targets the
SME as the strategic business objective.


Do results achieved in 2007 confirm the Bank’s expecta-                 What are the strategic areas for expanding the bank’s busi-
tions?                                                                  ness?
Profit indicators showed a positive trend and suggest results           Recently we made adjustments to our organisational structure and
above plan, particularly with respect to the business plan adopted      introduced investment banking and focused on the SMEs as a
for the year in question. The increase in the bank’s resources          strategic business objective with considerable development poten-
contributed significantly towards this and these resources meet         tial.
the needs of ever increasing client numbers, and a more
diversified clientele loyal to the bank, as well as serving to expand   Will the introduction of the Capitals Market boost this
the network of outlets and to improve the quality and experience        expansion?
of staff.                                                               We are preparing the bank to be able to respond successfully in
                                                                        the near future to market developments, including the capitals
How would you assess market development and, in par-                    market.
ticular, the Angolan Financial System, over recent months?
The Angola Financial System has accompanied market develop-             Have the financial institutions trading on the Angolan
ment, particular in terms of quality, already providing products        market faced increasing demands to play a more active role
and services with impact on end-users anxious to solve their            in supporting the national private sector. How does the
problems efficiently. However, we continue to believe that ope-         bank meet this demand?
ning new banks should involve quality services and innovation, so       Whoever looks at our Balance Sheet for 2007 can easily see that
that the competitive factor is always present. The growing eco-         Banco Regional do Keve, for its current size, is to the forefront in
nomy, which has risen to very high percentages, demands                 providing specific support measures for national industry, at all
diversification, leaving room, in the near future, for the emergen-     levels.
ce of the SMEs required to bring down unemployment and in-
flation, capitalised and well managed by individuals who unders-        Could the financial reality of Angola change after the
tand business, particularly in the productive sector, and giving rise   legislative elections in September 2008?
to an attractive business market with enormous potential.               Meeting the democratic goals of the country will inevitably and
                                                                        favourably strengthen all markets, improving the factors critical to
                                                                        success – credibility, confidence and performance – essential to
                                                                        the growth of the country and its subsequent development.




                                                  Amílcar Santos Azevedo da Silva
                         Chairman of the Board of Directors of Banco Regional do Keve




24
                                                                                                                           BANKING IN REVIEW
                                                                                                                                  Angola 2008




Millennium Angola
Increase in national coverage
                                                With an increase in client numbers of 65%, against December 2006,
                                                 totaling 150 million euros, Banco Millennium Angola is preparing
                                                   to extend its commercial network in both Luanda and the
                                                    provinces.




                                                   José Reino da Costa
                                                 Chief Executive Officer
                                                 of Banco Millennium Angola




Do results achieved in 2007 confirm the Bank’s expectations?               Will the introduction of the Capitals Market boost this ex-
Yes, we are growing throughout, and net results rose 87%, by around        pansion?
5 million euros.                                                           Yes, opening the Stock Market will bring a new form of funding for
The factors contributing most towards this result were the boom in         those companies that meet the requirements for listing. The Angolan
the Angolan economy, particularly development of construction and          economy has a lot of liquidity, which will stimulate and drive the
industry, both key sectors for national reconstruction. The country will   market, and will affect the Financial System, in a country that is
continue in the near future to be transformed into a ‘worksite’ for all    growing so rapidly.
types of infrastructure: basic drainage, housing, schools, roads, air-
ports, communications, energy, etc., all of which will benefit from the    Have the financial institutions trading on the Angolan market
support of the Angolan Financial System.                                   faced increasing demands to play a more active role in sup-
                                                                           porting the national private sector. How does the bank meet
How would you assess market development and, in particular,                this demand?
the Angolan Financial System, over recent months?                           Millennium Angola is a strategic partner, both for financial support,
The financial sector is increasingly more competitive with the             using a wide variety of financing types, and for advising clients and
emergence of new financial institutions and with existing ones com-        managing their funds. Proof of this is the result of bringing in client
peting with more investment and seeking to increase client numbers         resources, which saw a rise of 65% against December 2006, totaling
and to expand the market itself, that is, increasing the number of         150 million euros. The portfolio of loans already made by the bank
banks in Angola. There are, however, some constraints to expanding         rose 113.2%, totaling 115.9 million euros in December 2007. The
banking business, such as the process for registering land, companies      bank has grown 105% in client numbers, since December 2006, and
and mortgages and certificate validation at notaries, the lack of          117% in the number of accounts opened.
homes easily located in the mapping of the different provinces, the
lack of information in the Risk Center of the National Bank of Angola      Could the financial reality of Angola change after the legis-
and the incipient accounting organization of companies.                    lative elections in September 2008?
                                                                           The elections are viewed as one more sign of stability, which will
What strategic areas will be targeted for expanding the bank’s             contribute to reinforcing the confidence of economic agents and to
business?                                                                  increasing investment in Angola. For our part, we are confident in
We are determined to bring in new clients and we are seeking out the       Angola’s future, so that we will continue to invest in the expansion of
market of affluent individuals and companies, corporations and SMEs,       our commercial network, in both Luanda and the provinces.
in the main business sectors.




                                                                                                                                               25
BANKING IN REVIEW
Angola 2008




Novo Banco
Continuing to back micro-finance
The Novo Banco strategy involves the expansion of the network and the adequacy of the supply of products
and services to the needs of target customers in the segment of micro-finance.


Do results achieved in 2007 confirm the bank’s expectations?                 What strategic areas will be targeted for expanding the bank’s
The BAI assumed shareholder control and management of the                    business?
company on 1 December 2007, with a holding in share capital of               Certainly those that shareholders consider adequate for the objectives
85.7%, in partnership with a company controlled by Chevron, which            of social responsibility assumed, for planned investments and for the
holds the remaining 14.3%. To serve as the support for the entry of          goals of revenue expected. These areas include expanding the
BAI in a new segment, that of micro-finance, a strategic plan was            network, adapting the supply of products and services to the many
designed that outlines the objectives and guidelines for action, among       needs of target-clients in the micro-finance segment, continued de-
other aims of the bank for the transition period from 2008 to 2010.          velopment and human resources training.
Up to 2007, the bank inherited assets that were most important for
their command of a technology for financial intermediation to serve          Will the introduction of the Capitals Market boost this expan-
clients with no stable, formal salaried employment, and when                 sion?
employed, at a low salary. In terms of results, the Novo Banco closed        Having the Luanda Stock Market in operation, and the intermediation
2007 with a loss of around 900,000 USD. The factors responsible for          agents and institutions regulated by the Capitals Market Commission,
this are insufficient investment at a time when the main shareholders        will certainly help give another dimension and security to investment
and management were planning their exit from the market.                     in Angola. This could project business opportunities in the different
                                                                             sectors, bring in business with higher added value and more modern
How would you assess market development and, in particular,                  technology, all favorable to Angola’s economic growth. It is not yet
the Angolan Financial System, over recent months?                            clear in the microfinance segment what impact the Capitals Market
Market and Financial System development in 2007 was in harmony               could have directly, but it could be relevant.
with the good performance of macroeconomic stabilization policies
and structural measures for reconstructing the social and economic           Have the financial institutions trading on the Angolan market
basis of the country over the past four years. The economic grounds          faced increasing demands to play a more active role in sup-
favorable to maintaining this good performance could continue over           porting the national private sector. How does the bank meet
the next three to five years, unless the international situation affecting   this demand?
financial markets, raw materials, and basic goods takes a down turn.         A microfinance bank has a unique role to play in providing this
In the first scenario, development of the domestic market and of             support. Our informal sector of the economy is widespread throug-
exports should encourage the growth of the financial sector in terms         hout the country, employs vast numbers of people in the different
of its assets and take the supply of banking services to the                 regions, and in some of these regions it is the only economic activity
municipalities. Once regulations for financial services have been            that is private - a trade that is vibrant from dawn to dusk, providing
completed, the non-banking financial institutions envisaged in the           a supply of assets and goods to businesses upstream and affects the
framework law, namely specialized credit companies, long term                formal business of the country. In the center of this informal sector
leasing, etc., may emerge, besides interest in the market by the so-         our bank helps micro and small business people with talent to emerge
called first class financial institutions being confirmed.                   daily by providing credit, training and advice to help develop their
Should the world economy slow or run into depression, Angola may             businesses.
be a safe haven because of the strategic value of its diversified raw
materials and resources. Whatever the case, the biggest challenge and        Could the financial reality of Angola change after the
commitment for Government policies and the major, public and                   legislative elections in September 2008?
private economic interests, will be to protect the human                                Angolans cannot waste the excellent opportunity that the
dimension in developing Angola. Opening up the                                              elections offer to wed the democratic constitutional
financial market to micro-finance companies will                                               regime to development opportunities for their
lead to creating a more competitive environ-                                                      country, drawing advantage from an inter-
ment between the institutions operating in                                                          national environment that is in their favor.
this segment of the market and contribute                                                            These conditions appear once only in the life
to distributing and making accessible                                                                 cycle of a country, and only reappear after
business opportunities to wider sectors of                                                             fifty or more years have elapsed.
the population.




                                                                                                   Carlos Bessa Victor Chaves
                                                                                                 Executive Director of Novo Banco
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                                                                                                                      BANKING IN REVIEW
                                                                                                                             Angola 2008



BPA
Reinforcing the investment cycle
                                          A pioneer in providing investment banking services, BPA aims to
                                            consolidate its position in the area of project funding for Angolan
                                             industrialists and managers.




                                           Carlos José da Silva
                                         Chairman of the Board of Directors
                                       of Banco Privado Atlântico




Do results achieved in 2007 confirm the Bank’s expec-                  Will the introduction of the Capitals Market boost this ex-
tations?                                                               pansion?
Results for 2007 were highly positive and in line with plan. I think   We believe it will in that it will allow for the introduction of new
our result is the response to the discrete and technical work that     financial solutions for our clients, such as investment funds and
has been done with the market and our clients. All business areas      even the discretionary management of securities portfolios.
(relational banking, investment banking and asset management)
made a solid contribution towards the bank’s results.                  Have the financial institutions trading on the Angolan
                                                                       market faced increasing demands to play a more active role in
How would you assess market development and, in par-                   supporting the national private sector.
ticular, the Angolan Financial System, over recent months?
Market development is highly positive. The volume of assets being      How does the bank meet this demand?
managed has risen above 50% and, in the past three years, there        From the time of incorporation we have been getting ready to be
has been a significant increase in the conversion ratio of deposits    a specialized bank, focused on structuring and technically advising
to credit. Of course growth in Angola’s economy and in the             our clients and investors, both public and private, on the design,
financial sector in particular, attracts new financial investors and   structuring and shaping of their investment projects. We were the
banks. Looking to the future, we expect the sector to continue to      first bank in Angola to provide investment banking services so
grow, although probably at a slower rate than what we have seen        that we could be present throughout the whole investment cycle
in the past. However, there are many and varied challenges that        of our clients. We believe this is a clear demonstration that more
will have to be faced, mainly: the prospect of tough commercial        than just funding projects, we help industrialists and managers to
competition, which will have an impact on financial margins; a         ensure the success of their ambitions.
healthy demand from clients for new products and services and,
above all, the challenge of attracting, training and retaining         Could the financial reality of Angola change after the
human capital in the quantity and quality required to meet the         legislative elections in September 2008?
expansion of centers for client attendance, among others.              The elections are a natural political and civic act that we feel does
                                                                       not affect the performance of the Angolan Financial System. The
What strategic areas will be targeted for expanding the                future of the financial system is above all related to the com-
bank’s business?                                                       mitment and the investment made by the banks, and which they
Strategic business areas for us are those suited to our type of        will surely continue to make, and with the continued good
mixed operations involving investment banking and specialized          performance of Angola’s macroeconomic levels, which the poli-
asset management services, based on the principle of relational        tical and economic authorities have guaranteed in recent years.
banking.                                                               The September elections will help towards this consolidation.




                                                                                                                                         27
BANKING IN REVIEW
Angola 2008




Banco Totta Angola
Under the sign of growth
Growth in the volume of business and opening four company centers and one outlet, added to the
consequent increase in client numbers, are all factors proving that Banco Totta Angola is riding the wave of
growth.

Do results achieved in 2007 confirm the Bank’s expecta-                  Have the financial institutions trading on the Angolan
tions?                                                                   market faced increasing demands to play a more active role
We achieved planned objectives and, consequently, results met            in supporting the national private sector. How does the
with our expectations. Obviously financial plans are prepared on         bank meet this demand?
projection and do not reflect changes in monetary and exchange           Banco Totta Angola significantly increased credit over recent years.
policies that are implemented throughout the year and that have          In fact, the bank tripled credit granted in the past two years,
a direct impact on the bank’s results. Nevertheless, these variables     diversifying the portfolio in providing support for investment
were overcome successfully and we managed to maintain a level            projects, particularly consumer and housing loans. This bank has
of return on capital within planned levels. The factors most             an organic growth plan not only for Luanda but also for the
contributing to this result were, without a doubt, growth in the         provinces. Modernizing services and specializing in our client
volume of business, and the opening of four company centers and          attendance are factors that reinforce the role of the bank in giving
one outlet, which led to an increase in client numbers.                  support to all these sectors of the economy.

How would you assess market development and, in par-                     Could the financial reality of Angola change after the
ticular, the Angolan Financial System, over recent months?               legislative elections in September 2008?
Over recent months the Financial System has been evolving very           Yes, I think this will be an important step in bringing democratic
positively, both in terms of quality of services and in the complexity   stability to the country and, as a result, it will create an economic
of the products on offer to clients, despite the lack of regulation in   climate of confidence that will be even more favorable than what
certain areas that we believe to be key areas for the sector, such as    we are experiencing currently. The elections are seen by the vast
leasing and factoring, for example, among others. It is fair to say      majority of economic agents as an important landmark in the
that the Financial System is without doubt one of the most               country’s development. This means that whoever wants to invest
dynamic and modern sectors in the national economy. The rise in          in Angola will be more motivated to do so, regardless of their
the number of new banks brings challenges, increases competition         origin (national or foreign). The country’s development needs
and promotes banking modernization and specialization throu-             investment and growth in all sectors of productive activity and,
ghout, with a direct impact on improving services to clients.            obviously, this will reflect positively on the Financial System.

What strategic areas will be targeted for expanding the
bank’s business?
Continuing to focus on the major clients segment, which to date
has been our preferred target, and also on individual staff
members of major companies, by signing loan agreements. Due to
the plan to extend the commercial network by opening new
outlets and new companies centers in various parts of the country,
in the near future, we are obviously looking to diversify our
portfolio of clients, concentrating on Small and Medium sized
companies and on high income individuals.

Will the introduction of the Capitals Market boost this ex-
pansion?
A functioning Capitals Market is always an added value for a
Financial System that wants to be modern and efficient, a pro-
moter of business and one opening the way to developing other
aspects of banking business. Apart from being a source of funding
for companies that want to acquire and disperse capital, it leads to
developing investment funds as a good way of channeling in-
dividual savings into funding for companies, in this way boosting
and diversifying the financial market. On the other hand, and no
less important, the Capitals Market has a fundamental role to play                                     João Pinheiro
in the transparency of information made available by companies to            Financial Director of Banco Totta Angola
economic agents, bringing credibility to the market.


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BCA
Preparing to integrate
banking of the future
2007 saw a rise in the volume of deposits and credit for BCA, as well
as the start to a phase of radical restructuring, with a view to
preparing the bank for the future and making it ready to meet
international demands.

Do results achieved in 2007 confirm the bank’s expectations?
BCA is going through a phase of restructuring and in 2007 a detailed
analysis was done of the bank’s organization and its internal control
system, with a view to getting ready for the future. Measures were
defined in a variety of areas to make the bank’s standards in terms of
control, efficiency and governance compatible with international
demands. While this reorganization was taking place, attention was also
paid to developing the bank’s business, which led to growth in both deposit
and credit volumes, and to BCA developing financially from a loss in 2006 to
a gain in 2007.

How would you assess market development and, in particular, the Angolan
Financial System, over recent months?
Angola continues to be one of the world’s economies with the highest growth in GDP.          Filipe Coelho
Many investments are being made, both public and private, which also encourages              Executive Chairman
growth in the financial sector. I think we are going to see even more boom and               of Banco Comercial Angolano
competition in this sector and banks stepping up their respective processes for turning
deposits into credit. They will also offer an even greater variety of financial products.

What strategic areas will be targeted for expanding the bank’s business?
We consider that training and development for our human resources is highly important
for expanding BCA business. Besides local training for our staff, we also want them to be
aware of other international realities, to this end benefiting from the potential of the
Barclays/ABSA Group. We also want to cover parts of Angola that we have not yet
reached, proceed with client segmentation and invest significantly in technology.

Have the financial institutions trading on the Angolan market faced increasing
demands to play a more active role in supporting the national private sector.
How does the bank meet this demand?
Bearing in mind the economic growth boom in the country, Corporate and Medium sized
companies will be strategic for growth in our business. Consequently, the national private
sector is one of the segments we are targeting, and will continue to target, for business
in the future, particularly for making loans.

Could the financial reality of Angola change after the legislative elections in
September 2008?
We do not feel the current reality will change much. Growth is still expected and we are
convinced that the political players will act responsibly, reinforcing the way towards
stability and confidence for economic agents in our country.




                                                                                                                    29
                                      BANKING IN REVIEW



Versão Portuguesa
                                             Angola 2008




      Propriedade Deloitte Angola • Patrocínio ABANC
                                                      63
                      Study




Property Deloitte Angola • Sponsorship ABANC
BANKING IN REVIEW
Angola 2008




                                               Contents

                                               Macroeconomic review                33
                                               Preamble and bases of preparation   37
                                               Introduction                        38
                                               Assets structure                    39
                                               Customer deposits                   41
                                               Credit to customers                 44
Study Credits
                                               Profitability                       47
Participating Banks                            Conclusion                          49
Banco Africano de Investimentos S.A.
                                               The banks’ financial information    50
Banco Comercial Angolano S.A.R.L.
Banco de Comércio e Indústria S.A.R.L.
Banco Millennium Angola
Banco Espírito Santo Angola S.A.R.L.
Banco de Fomento Angola S.A.R.L.
Banco BIC S.A.
Banco de Poupança e Crédito S.A.R.L.
Banco Totta de Angola S.A.R.L.
Banco Regional do Keve S.A.R.L.
Novo Banco S.A.R.L.
Banco Sol S.A.R.L.
Banco Privado Atlântico S.A.
Banco de Negócios Internacional S.A.
Banco de Desenvolvimento de Angola E.P.
Banco Angolano de Negócios e Comércio S.A.
VTB Angola S.A.

Project Management
Roberto Fernandes • ABANC Secretary General
Nuno Vaz • Managing Director Deloitte Angola

Project Team
André Sousa • Manager Deloitte Angola
Luis Alves • Manager Deloitte Angola
Gilberto Diogo • Consultant Deloitte Angola
Pedro Leitão • Partner Deloitte Portugal
Nuno Alpendre • Partner Deloitte Portugal
Vitor Lopes • Senior Manager GMS Portugal




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                                                                                                                  BANKING IN REVIEW
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Macroeconomic review
A world in economic turmoil
2007 was a turning year for global economy. The subprime financial credit crisis, the oil price
surge (in 2007 it suffered a 84% increase, taking as reference the OPEC basket), the
commodities price increase, the real state bubbles bursting in the main markets (United States,
United Kingdom) and the continuous dollar depreciation, brought to the economic future an
high level of uncertainty and pessimism, unseen since 9/11. The first semester of 2008 has
confirmed and strengthen most of these trends, in particular the oil price surge, which as we
write this study has already surpassed the 140 dollar a barrel level, adding another trend: the
surge in food prices, which could have a devastating effect on the populations of
underdeveloped economies and of those more dependent on external aid.




  1. Oil Price Evolution (Opec Basket)                                                              2007 was a turning year
                                                                                                    for global economy




                                                                                    Source: Opec




The main impact of this set of trends, has been the lost of strength and consequentially the
influence capabilities of the economies traditionally considered the more powerful ones
(United States and European Union), in contrast with the evermore vigor and dynamism of
some of the emerging economies (China, India, Brazil, etc.), although some structural
fragilities. The emergence of sovereign wealth funds (funds backed up by national excess of
liquidity) and the massive acquisition of assets in the United States and Europe by them is one
of the symptoms of the creation of a new economic global order.



  2. Sovereign Funds Deals Evolution




                                                                                 Source: Dealogic




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BANKING IN REVIEW
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                                   Continuous economic growth
                                   In this economic and global turmoil, and with some of the trends beneficiating local economy,
                                   Angola maintained during 2007, the high level of economic growth, totalizing four
                                   consecutive years with two digit GDP growth. Impressive achievement in the global economic
                                   landscape (only other four countries have attained such an accomplishment, among them
                                   China). The political, social and macro economical stability environment have been the pillars
                                   of this continous economic growth.



                                     3. Angola GDP Growth Evolution (03-07)




                                                                                                                 Source: Finance Ministry




     The estimated GDP growth      The estimated GDP growth rate in 2007 is 20,9%, which represents a slight increase
                                   comparatively to 2006, and which position Angola, for the third year in a row in the Top 3
           rate in 2007 is 20,9%   countries with the biggest GDP growth rates, consolidating a stabilizing and influential
                                   geopolitical role in the African continent, in particular in the austral Africa community, where
                                   in comparison with the other countries Angola presents a growth rate, in the last three years,
                                   averaging three times the growth of his regional neighbors.




                                     4. GDP growth benchmarking - Africa (05-07)




                                                                                                            Source : IMF, Deloitte Analysis




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                                                                                                                                     Angola 2008


Although the oil price increase, in addition to the boost in oil production in Angola, who                    The Agriculture sector
ended 2007 with a daily production of 1,87 million barrels, have an huge positive influence in
the this year GDP growth rate, we are obliged to emphasize the contribution that the non-oil                  represents around 9,8%
sector had in the economic growth, in particular the Agriculture and Fishing sector, along with
the Construction sector. This fact is more relevant, in social terms, since these sectors are more
                                                                                                                           ,
                                                                                                              of the GDP while the
labor intensive (particularly the Agriculture) than the oil business. In 2007, the Agriculture                Construction sector has
sector represents around 9,8% of the GDP, while the Construction sector has almost
duplicated, in the last three years, its GDP weight, reaching in 2007 around 5,8% of the GDP.
                                                                                                              almost duplicated, in the
                                                                                                              last three years, its GDP
                                                                                                              weight

  5. Angola GDP Breakdown (05-07)




                                                                                   Source: Finance Ministry




Focused on the real economy
The huge increase in credit extended to the economy, with a global increase of 75% in
relation to 2006 and an increase of 81% in the corporate credit, granted by the commercial
                                                                                                              The credit extended
banks during 2007, is a proof of the sustained and continuous economical development of                       to individuals increased 62%
Angola, mainly the non-oil sector, with particular emphasis in the Construction, Services and
Retail & Wholesale, which represent a considerable share of the corporate credit. It is also
                                                                                                              during 2007
important to highlight the increase in credit extended to individuals, which increased 62%
during 2007. In spit of the huge increase, there is still a lot of market potential, as the
percentage of credit extended in relation to the GDP is still extremely low. Additionally, it is
also important to highlight that the Agriculture Sector has been neglected by the financial
sector as they present a very low share of credit extended, in comparison to its weight in the
national GDP.


 6a. Total credit granted                           6b. Corporate credit granted




                                                                                                 Fonte: BNA




                                                                                                                                              35
BANKING IN REVIEW
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                                       In result, partially, of the huge private and government investment, which the latter has almost
                                       duplicated in 2007, growing from 323 billion kwanzas to 529 billion, the imports amount has
                                       increased 33,3%, with a continuous diversification of the countries with which Angola has
                                       developed and strengthen commercial relations. Among the four top countries, in terms of
                                       value of imports, we find Portugal, China, Brazil and the United States, although the US has
                                       been showing a declining trend in the last years. On the exports side, the oil production
                                       capacity increase in addition to the surge in oil price during 2007, lead to a considerable
                                       increase in the value of exports, which reached almost 40 billion dollars, with the oil exports
                                       accounting 95,3% of total exports.



                                         7. Trade Account




                                                                                                               Source: BNA, Deloitte Analysis




     International reserves reached    The fiscal revenue resulting from oil exports, the contracting of external financings and the
                                       issuing of dollar treasury bonds, enabled the maintenance of the growing trend of
     a total of around 11,2 billions   international reserves, which reached in 2007 a total of around 11,2 billions dollars, the
                     dollars in 2007   equivalent to almost 12 months of imports.



                                       Inflation maintenance
                                       Despite the efforts of macroeconomic policies of the government and the National Bank of
                                       Angola, mainly by increasing the rediscount rate and the supply of Central Bank’ securities in
                                       the market, in 2007 inflation did not continue along with the decreasing trend seen in recent
                                       years, reaching around the same values of last year (12.2%), about 11.8%, slightly above the
                                       government target of 10%.



                                         8. Foreign currency appreciation towards AKZ




                                                                                                                   Source: OANDA, Deloitte




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                                                                                                                   BANKING IN REVIEW
                                                                                                                          Angola 2008


The devaluation of the Angolan currency against the currencies of some major trading                 The growth of the payment
partners (Europe and Brasil) and the rising price of commodities, so vital to the activities of
national reconstruction, are among the factors that the pressured for high prices.                   means in 2007 occurred
The growth of the payment means in 2007 occurred mainly in the component related to the
                                                                                                     mainly in the component
national currency, whose growth in the period was about 83%, compared with 25% growth                related to the national
in foreign currency, representing a clear increase in confidence of economic agents in the local
currency.
                                                                                                     currency
The BTC’s downward trend observed last year has been reversed and during the year 2007
was verified a gradual rise in interest rates, achieving values of around 15% (in the case of
182 days BTC) at the end of the year. This movement by the Central Bank had as its main
objective the maintenance of the rate of inflation, given the high liquidity in the market.
Alongside, there had been an increase in the return rates of fixed-term deposits and the
maintenance of credit’s interest rate.



  9. Interest rates evolution




                                                                                      Source: BNA




Preamble and bases
of preparation
This is the third edition of study that includes, besides the usual analysis on the market and
banks evolution, the vision of Deloitte specialists about relevant themes for the development
of the sector in the next year.
The analysis of the sector results from the compilation of financial information provided by the
different banks, the consolidation of a wide variety of data collected from other markets and
information provided by BNA.
The macroeconomic analysis of Angola and the sub-Saharan region is based on data released
by BNA, Ministry of Finance, IMF and OPEC as well as several expert reports.
In the individual analysis of each of the banks, the indicators presented resulted of the analysis
to the Financial Demonstrations using uniform criteria for all banks. This way we tried to
ensure maximum comparability between banks in the different indicators. In the analysis of
this year we have incorporated additional data relating to 2006 and recalculated the various
indicators. It resulted in minor corrections to the values of last year.
The aggregate values for the sector, unless expressly mentioned, result from the sum of the
values of all banks considered in the study. The study includes the 17 banks operating in
Angola. Bellow we present the list of banks operating in Angola on December 31, 2007 and
were included in our study:




                                                                                                                                   37
BANKING IN REVIEW
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                                                                                                           Table 1
                      BANKS IN ANGOLA IN 2007

                      INICIALS         NAME                                                          SINCE
                      BAI              Banco Africano de Investimentos S.A.                          1997
                      BCA              Banco Comercial Angolano S.A.R.L.                             1999
                      BCI              Banco de Comércio e Indústria S.A.R.L.                        1991
                      BMA              Banco Millennium Angola                                       1993
                      BESA             Banco Espírito Santo Angola S.A.R.L.                          2002
                      BFA              Banco de Fomento Angola S.A.R.L.                              1993
                      BIC              Banco BIC S.A.                                                2005
                      BPC              Banco de Poupança e Crédito S.A.R.L.                          1976
                      BTA              Banco Totta de Angola S.A.R.L.                                1993
                      KEVE             Banco Regional do Keve S.A.R.L.                               2003
                      NOVO BANCO       Novo Banco S.A.R.L.                                           2004
                      SOL              Banco Sol S.A.R.L.                                            2001
                      BPA              Banco Privado Atlântico S.A.                                  2006
                      BNI              Banco de Negócios Internacional S.A.                          2006
                      BDA              Banco de Desenvolvimento de Angola E.P.                       2006
                      BANC             Banco Angolano de Negócios e Comércio S.A.                    2007
                      VTB              VTB Angola S.A.                                               2007
                                                                                                       Source: BNA




                    Introduction
                    During the year 2007 the sector has increased its weight in the economy, the M2 indicator
                    grew 39.2% and the total assets 61.9%, well above GDP growth. The growth of the sector
                    was less steep than in the previous year, deposits grew 45.4%, compared with 70.1% in 2006
                    and credit to customers 82.8%, compared to 102.7% in 2006. Still a remarkable performance
                    of the sector that can be expected to remain in the coming years as GDP growth expected for
                    2008 (16%) and 2009 (13%) and the opportunities that the development of a capital and
                    stock market in Angola will bring to the sector.

                    During the year two new commercial banks started their operations in Angola:

                     • BANC - Banco Angolano de Negócios e Comercio, with 100% Angolan capital. Started his
                       business in June 2007.
                     • VTB with 66% of Russian capital and 34% of Angolan capital. Began operating in March
                       with the initial purpose of finance projects in the sectors of oil, diamonds, electricity and
                       telecommunications.

                    In the distribution network the efforts to expand increased with the 5 largest banks opening
                    138 new branches against 76 in the previous year. The increase of distribution network is the
                    result of more intense competition to the rapidly expand the customer base and offer better
                    service levels to existing customers.

                    The segmentation of the distribution network is also a reality with banks using alternative
                    models to universal branch. In some players you can find in its distribution network distinct
                    models such as service points, universal branch, SME branches, corporate centers and Private
                    banking branches.

                    The payment system has evolved and has achieved the interconnection to the Visa
                    International which allowed, from April 2007, the use of debit and credit cards from visa
                    network in ATMs and TPAs.




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Asset structure
There was an increase in the weight of credit in the assets representing in 2007 37%
compared to 33% in the previous year, yet still far from other more mature markets where the
credit represents about 60% of the total asset value.


   10. Consolidated asset structure


                                                         2%                 3%            5%              7%
      16%              18%
                                         27%
                                                         32%

                                                                                                                         Cash
                                                                            59%
      37%              33%                                                                57%
                                                                                                                         Loans and credit
                                         27%                                                             69%

                                                                                                                         Bonds and securities
                                                         38%

                       19%                                                                                               Other remunerated assets
                                         22%                                5%
      28%
                                                                                          18%
                                                                                                                         Other unremunerated assets

                                                         19%                25%
                       22%
                                         18%
                                                                                          11%            23%
      13%

                                                         10%                8%            9%
      6%               7%                 7%
                                                                                                          1%

   Angola 2007     Angola 2006         Angola 2005       Brazil            Portugal       USA          South Africa


                                                                                                      Source: Bank Financial Statements, BankScc




In bonds and securities the trend from previous years changed and there was an increase in
weight of this type of assets representing 28% of the assets in 2007 compared to 19% in
2006, this should not be separated from the increase in Central Bank Bonds (TBCs) interest
rates.
Additionally, this also results of high returns obtained with securities and the struggle to grow
even more the credit to customers.
This shift in the structure of assets shows an improvement in asset management, with a
reduction, compared with 2006 and 2005, of unremunerated assets (cash and other liquid
assets).
Still the sector presents high values at the level of unremunerated liquid assets in 2007. There
is still a potential for efficiency gains when compared with the more advanced markets where
this type of assets account for 2% to 7%. The development of a capital market will bring to
sector the financial instruments that will allow a more efficient management of these assets.




   11. Consolidated “funding” structure                                                                                                               The sector presents high
                                                                                                                                                      values at the level of
                                                                                                                                                      unremunerated liquid
                                                                                                                                                      assets in 2007
                                                               55%
                                                                                                             60%
            66%                                                                             66%
                             74%               71%                               71%                                        Deposits


                                                                                                                            Other liabilities


                                                                                                                            Equity and
                                                                                                                            generic provisions
                                                               34%
            23%                                                                             23%              33%
                             15%               18%                               21%

            11%              11%               11%             11%                8%        10%                7%

         Angola 2007     Angola 2006       Angola 2005            Brazil       Portugal         USA       South Africa



                                                                                                      Source: Bank Financial Statements, BankScc




                                                                                                                                                                                    39
BANKING IN REVIEW
Angola 2008


                                                                             In the assets funding structure there was a decrease in the share of deposits from 74% to
                                                                             66% compensated by the increase in weight of the other liabilities from 15% to 23%. These
                                                                             figures are relatively aligned with the assets funding structure in more mature markets.

                                                                             The equity financing maintained its relative weight, around 11%.




                                                                                12. Credit over deposits



                                                                                                   160%
                                                                                                                                                 Portugal 152%



                                                                                                   120%

                                                                                                                                                 South Africa 98%

                                                                                                     80%
                                                                                                                                             56%
                                                                                                                             45%
                                                                                                             37%
                                                                                                     40%


                                                                                                      0%
                                                                                                             2005            2006            2007

                                                                                                                                                      Source: Bank Financial Statements




                                                                             The net credit ratio over deposits continued its growth reaching 56% in 2007. This figure is
                                                                             still far from other more mature markets where this ratio is near or above 100%. The
                                                                             Angolan financial sector still has a large margin to grant credit, in this sense it is necessary to
                                                                             develop the internal capabilities to do so, ensuring the maintenance of good levels of risk
                                                                             management.




           The net credit ratio
      over deposits continued
     its growth reaching 56%
                      in 2007
                                  Editando (photo made in Ferpinta Angola)




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                                                                                                                                            BANKING IN REVIEW
                                                                                                                                                   Angola 2008




Customer deposits
Aggregated vision
The total value of costumer deposits in commercial banks in Angola reached 895 billion
kwanzas representing a growth of 45.4% over the previous year. There was also a significant
increase in share of deposits in national currency, result of the exchange rate stability
experienced particularly in the second half of the year. The deposits in national currency grew
from 35% in 2006 to 58% in 2007.


  13. Deposits structure by currency




                                            National
                                            Currency
                                                                               National
                                             35%                               Currency
                                                                                58%


                                            Foreign
                                            Currency
                                                                               Foreign
                                             65%                               Currency
                                                                                42%


                                             2006                              2007

                                                                                                               Source: BNA




In the composition of customer deposits, non-interest deposits continue to have a significant
predominance representing in 2007 around 81% of total deposits from customers. This,
although advantageous in the cost of funding, has an impact in liquidity management and
consequently the potential to increase in credit granting.




  14. Customer deposits structure                                                                                             Non-interest deposits
                                                                                                                              continue to have a
                                                                                                                              significant predominance
                    Million Akz




                                                                                                                              representing in 2007 around
                                                                          714.649                                             81% of total deposits from
                                               451.424
                                                                                                                              customers
                                                164.672                   181.385


                                                 2006                         2007


                                  Non-interest deposits   Interest deposits

                                                                                          Source: Bank Financial Statements




                                                                                                                                                            41
BANKING IN REVIEW
Angola 2008




                    Customer deposits
                    Relative position of banks
                    BAI due to a higher growth of customer deposits compared to its two largest competitors
                    became market share leader in customer deposits with 24%. BPC, despite a growth below
                    market average climbed to second position overcoming BFA. BFA showing a growth below
                    market average lost 6.5 pp of this market share.

                    BIC, with the highest growth among the five largest banks, 78%, gained 2.4 pp of market
                    share strengthening the fourth position and significantly reducing the distance to third place.




                                                                                                                                 Table 2
                      CUSTOMER DEPOSITS RANKING
                                            2007                                                        2006
                      RANKING     BANK           SHARE (%)                                       BANK        SHARE (%)
                      1           BAI                 23.7                                       BAI              23.5
                      2           BPC                 20.0                                       BPC              21.5
                      3           BFA                 17.0                                       BFA              20.2
                      4           BIC                 13.4                                       BIC              11.0
                      5           BESA                10.1                                       BESA               8.6
                      6           BCI                   3.8                                      BCI                4.5
                      7           BTA                   2.7                                      BTA                3.3
                      8           SOL                   2.5                                      SOL                2.2
                      9           BPA                   1.8                                      BPA                1.7
                      10          BMA                   1.5                                      BMA                1.5
                      11          BCA                   1.3                                      BCA                1.2
                      12          KEVE                  1.0                                      KEVE               0.5
                      13          BNI                   0.9                                      BNI                0.2
                      14          NOVO BANCO            0.1                                      NOVO BANCO         0.1
                      15          BANC                  0.0                                      -                    -
                      16          VTB                   0.0                                      -                    -
                      17          BDA                   0.0                                      -                    -
                                                                                                   Source: Bank Financial Statements




                    The five largest banks in Angola account for a deposits market share of 84%, somewhat
                    similar to the previous year with 85%. This level of concentration is similar to the one found
                    in other markets, like for instance, Portugal.




                       15. Growth on customer deposits (%)
                           Biggest 5 banks

                                                                                                       78%
                                                                                           72%

                                                                                60%
                                                                                                                      51%
                                             44%


                                                                         24%
                                      20%
                                                    17%                                                           16%
                                                                                                 13%
                                                                                      10%

                                                        5%

                                      BP C          BFA                  B AI         BE S A     BIC             Others

                                      Share 2007          Growth 06-07



                                                                                                         Source: Bank Financial Statements



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                                                                                                        BANKING IN REVIEW
                                                                                                               Angola 2008




For the remaining banks, we underline the growth of BPA, which grew its market share from
0.2% to 1.8% in 2007, unlike the majority of the other banks which have lost market share
in 2007 (with exception for Banco Sol, BNI and BMA). Consequently, BPA, which raised four
positions, ended up in ninth position immediately after BCI, BTA and Banco Sol that have
maintained their respective positions.




  16. Growth on customer deposits (%)                                                      1136%
      Other banks




     4%

                   3%       3%
                                                                                      2%
                                         1%           2%
                                               1%                        1%
     24%           21%                                46%    0%
                            0%           12%   21%                     168%
     BCI           BIA      SOL          BCA   KEVE   BCP   25%          B NI         BPA
                                                            NOVO
                                                            BANCO
      Share 2007          Growth 06-07
                                                                    Source: Bank Financial Statements




                                                                                                                        43
BANKING IN REVIEW
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                    The current methodology only considers customer deposits. Nevertheless there are other re-
                    sources, such as, bonds sold with repurchase agreement that, given their growth in 2007,
                    should be mentioned to contextualize the analysis.

                    So, we also present the deposits ranking, using BNA aggregation criteria. According to this
                    indicator we can observe an upholding of the relative position of the five major banks in 2007
                    when compared to 2006.




                                                                                                         Table 3
                      BNA DEPOSITS RANKING
                                                                    2007                                  2006
                      RANKING          BANK                    SHARE (%)                BANK         SHARE (%)
                      1                BAI                          22.4                BAI               23.5
                      2                BFA                          20.1                BFA               22.0
                      3                BPC                          17.0                BPC               19.2
                      4                BIC                          14.4                BIC               13.0
                      5                BESA                           8.3               BESA                7.4
                      6                BCI                            3.7               BCI                 4.2
                      7                SOL                            3.0               BTA                 3.0
                      8                BTA                            2.5               SOL                 2.3
                      9                BNI                            2.4               BCA                 2.0
                      10               BPA                            1.9               BCP (BMA)           1.4
                      11               BMA                            1.6               KEVE                1.2
                      12               BCA                            1.4               BNI                 0.4
                      13               KEVE                           1.0               BPA                 0.2
                      14               BDA                            0.2               NOVO BANCO          0.1
                      15               BANC                           0.1               -                     -
                      16               NOVO BANCO                     0.1               -                     -
                      17               VTB                            0.0               -                     -
                                                                                                      Source: BNA




                    Credit to customers
                    Aggregated vision
                    The credit continues to show strong growth and the credit extended to customers reached
                    502 billion kwanzas, a growth of 83% over the previous year. This growth trend, observed in
                    the last years, resulted from a strong focus from the banking sector in the financial
                    intermediation business. Consequently in 2007 the banks financial margin grew 84%.
                    The currency breakdown remained stable, the weight of credit in foreign currency, in 2007
                    was 52% compared to 50% of 2006.


                      17. Credit structure by currency




                                                         Foreign             Foreign
                                                         Currency            Currency
                                                          50%                 52%




                                                         National            National
                                                         Currency            Currency
                                                          50%                 48%




                                                          2006                2007



                                                                                                      Source: BNA



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                                                                                                                  BANKING IN REVIEW
                                                                                                                         Angola 2008




                                                                                                   The five largest banks
Credit to customers                                                                                continue to represent 85.1%
                                                                                                   of the market, a figure
Relative position to banks                                                                         slightly below previous year's
                                                                                                   86.9%
In the credit, we highlight BFA that, though losing some market share, took the lead with
21.9% deployed. BESA with an increase of 3.8 p.p. in its market share gained the fourth
position in the raking surpassing BAI. The five largest banks continue to represent 85.1% of
the market, a figure slightly below previous year's 86.9%.




                                                                                        Table 4
  CREDIT TO CLIENTS RANKING
                                     2007                                              2006
  RANKING      BANCK            SHARE (%)                     BANCO               SHARE (%)
  1            BFA                   21.9                     BPC                      25.1
  2            BPC                   19.8                     BFA                      25.0
  3            BIC                   18.3                     BIC                      15.6
  4            BESA                  12.6                     BAI                      12.3
  5            BAI                   12.5                     BESA                       8.8
  6            BNI                     2.6                    BCI                        3.3
  7            BMA                     2.5                    BTA                        2.8
  8            BTA                     2.3                    BMA                        2.1
  9            BCI                     2.3                    SOL                        1.6
  10           SOL                     1.8                    KEVE                       1.6
  11           KEVE                    1.6                    BCA                        1.4
  12           BCA                     1.1                    NOVO BANCO                 0.2
  13           BPA                     0.6                    BNI                        0.0
  14           NOVO BANCO              0.1                    BPA                        0.0
  15           BDA                     0.0                    -                            -
  16           BANC                    0.0                    -                            -
  17           VTB                     0.0                    -                            -

                                                               Source: Bank Financial Statements


                                                                                                                                  45
BANKING IN REVIEW
Angola 2008




                                    Editando/Pedro Magalhães


                                                               For the remaining banks, the highlight is the rise of BNI (which in one year captured 2.6% of
                                                               market share), the BMA and the Banco Sol and the lost of market share of the remaining
                                                               banks, with emphasis on the BCI which lost 1 pp and went from sixth to the ninth place
                                                               position.
                                                               BIC maintains a leadership among the five largest banks in terms of efficiency to transform
                                                               deposits in credit. BFA increased significantly the transformation ratio moving closer to the
                                                               levels of BIC. Among the five biggest banks only the BPC has not improved its ratio.




                                                                  18. Credit over deposits (%)




                                                                                                                                                                                               Portugal 152%

       The provisions registered
              an overall decrease                                                                                                                                                         South Africa 98%
                                                                            72%                                                                            76%
     in the provisions over gross                                                                                        55%      55%
                                                                                                                                         70%
                                                                                                                                                                   63%
                                                                                                                                                                             56%
                                                                                         48%                                                         46%                            45%
                     credit ratio                                                                    30%
                                                                                                                25%



                                                                                  BF A                   BA I              BP C             BE S A            BIC                Angola



                                                                           2007                   2006

                                                                                                                                                                  Source: Bank Financial Statements, BankScc




                                                               The provisions registered an overall decrease in the provisions over gross credit ratio. This
                                                               indicator does not reflect the potential increase in the risk level associated with the accelerated
                                                               growth of credit in the market.




                                                                  19. Credit provisions/Credit (%)


                                                                                                                                                                                      Brazil
                                                                                                                                                                                      6%




                                                                                                                  3.9%
                                                                                                                                                                             Portugal 2.6%
                                                                                                                                                           3.3%
                                                                                                                                                                          South Africa 2%


                                                                                                                  1.3%
                                                                                                                                                           0.5%

                                                                                                                  2006                                     2007

                                                                                               Specific provisions                Generic provisions


                                                                                                                                                                                                      Fonte: BNA



46
                                                                                                                                                         BANKING IN REVIEW
                                                                                                                                                                Angola 2008




                           Profitability
                           Aggregated vision
                           The operating income of commercial banking reached 91.7 billion kwanzas representing an
                           increase of 55% over the previous year. This increase resulted in largely from the increase in
                           the financial margin generated by the significant increase in the volume of credit granted,
                           while maintaining interest rates relatively stable throughout the year. The financial margin rose
                           84% over the previous year while the non interest margin rose 29% compared to 2006.

                           The return on average capital (ROAE) fell slightly in 2007 and is now of 31.9% compared to
                           33.9% in the previous year.

                           The profitability of the sector is still very high compared with other markets, which results
                           from:

                            • Higher intermediation rates. The deposits collected are not remunerated or remunerated
                              at low rates and the interest rates paid on credit are high.
                            • High non-interest margin resulting primarily from gains in financial operations, manly
                              currency related.
                            • A low cost-to-income ratio that results in part from lower operating costs and from high
                              concentration of business in high value customers.

                           With the expansion of retail distribution networks the operating costs will rise. With the
                           expansion of retail distribution networks the operating costs will rise. With the reduction of
                           intermediation margins that competition will bring the cost-to-income tend to approach the
                           values closer to more mature markets.


                                                                                                                                                                           Table 5
                             PROFITABILY INDICATORS
                                                                                                         ANGOLA                                            OTHER COUNTRIES
                                                                     2007         2006        2005        2004             BRAZIL     PORTUGAL      USA       SOUTH AFRICA
                             Financial Margin (% of assets)           4.8           4.2         5.6         6.4               5         1.9         3.1           2.7
                             Non-interest Margin (% of assets)        3.7           4.6         3.9         7.3             3.3         1.9         2.3           3.0
                             Opertaing income (% of assets)           8.4           8.8         9.4       13.7               9.1         3.8         5.4           5.7
                             Cost-to-income (%)                      44.4         47.9        40.1        40.2              0.0          0.0        0.0           0.0
                             Operating costs (% of assets)            -3.7         -4.2        -3.8        -5.5             -6.3        -2.6        -3.2          -3.6
                             Return on Average Assets
                             (ROAA) (%)                          2.9               3.1         4.1         3.8                 1,7      0.7          1.3            1.1
                              Average Leverage Rate             11.0              10.7        10.4         8.9                 9.4     15.6         10.4           14.1
                             Return on Average Equity (ROAE) (%)31.9              33.9        42.5         34.2                15.9    11.6         13.6           15.7


                                                                                                                                                 Source: Bank financial statements
Editando/Pedro Magalhães




                                                                                                                                                                                     47
BANKING IN REVIEW
Angola 2008




                    DR (Sonangol courtesy)




                                             Profitability
                                             Relative position of banks
                                             BIC and BESA maintain the two top positions in profitability, followed by BNI and BPA that in
                                             the second year of activities took over the third and fourth position among the most
                                             profitable banks.




                                                                                                                                       Table 6
                                               RANKING DE CREDIBILIDADE (ROAE %)
                                                                      2007                                          2006
                                               RANKING     BANCO                 ROAE                       BANCO                      ROAE
                                               1           BIC                     71                       BIC                         81.9
                                               2           BESA                   57.7                      BESA                        59.6
                                               3           BNI                    53.3                      BFA                         41.4
                                               4           BPA                    42.6                      BAI                         37.9
                                               5           BAI                    40.2                      Sol                         32.9
                                               6           Sol                    34.5                      BTA                         24.6
                                               7           BFA                    31.8                      Keve                        23.1
                                               8           BPC                    25.5                      BPC                         22.8
                                               9           BTA                    22.9                      BCI                           9.7
                                               10          BMA                    14.1                      BMA                           8.3
                                               11          Keve                   13.6                      BNI                           1.1
                                               12          BCI                    10.1                      Novo Banco                    0.7
                                               13          BCA                     1.5                      BCA                          -1.9
                                               14          Novo Banco            -17.9                      BPA                        -14.7
                                               15          BDA                   -20.0                      -                               -
                                               16          Banc                 138.1                       -                               -
                                                                                                              Source: Bank financial statements




48
                                                                                                                                                               BANKING IN REVIEW
                                                                                                                                                                      Angola 2008


In terms of return on assets the banks that bet on more aggressive credit strategies and are
more efficient to transform deposits into credit (BFA, BIC and BESA) are the ones that can
present greater returns.




  20. Profitabilitu biggest banks (% of average assets)




      3.3%                 5.1%                                                         4.1%
                                                                  3.7%                                         3.7%
                                                                                                                                         Non-interest margin
                                             2.8%
                                                                                                                                         Interest margin
                                   5.1%
                                                                          4.4%                                                           Operational costs
      5.8%    3.4%
                           3.9%                                                                                       2.9%
                                                     2.5%         5.0%                  5.0% 1.7%                                        ROAA (%)
                                                                                                               4.8%
                                             3.8%




      BF A             BE S A                 B AI                 BIC                  BPC             Angola 2007
                           -3.6%             -1.8%                -3.3%
      -2.8%
                                                                                                              -3.7%
                                                                                        -5.3%




                                                                                                          Source: Bank Financial Statements, BankScc




When looking at the leverage rate, in addition to the five largest banks, Banco Sol and BPA are
the banks with higher leverage rates and higher growth in this indicator representing a growth
of assets above the growth of capital. This could lead to future needs of equity increases to
equilibrate the balance sheet.



  21. Leverage rate

                                                                  24.3
                                                                          22.5


                                   15.8 15.3 15.7
                            12.8
                                                                                                        11.9
                     9.4                                                                 8.4
                                                     7.2
                                                                                  6.3                                        7.0
                                                            5.0
                                                                                                  3.7          3.8 2.9
                                                                                                                                   1.9
                                                                                       O


                                                                                      NC
                                      I




                                                                                      A)


                                                                                     VE

                                                                                VO BNI
                                   BIC



                                                     I
                                                    A
                    A




                                                                                      A



                                                                                                                                     B
                                                   A
                                   BA




                                                                                      A
                                                    L
                                     C




                                                                                    NC
                                                  BC
                  SA




                                                 SO




                                                                                                                                   VT
                                                 BT
                  BF




                                                                                   BD
                                                 BP



                                                                                   BC
                                  BP




                                                                                   BA
                                                                              M


                                                                                   KE
                BE




                                                                                  BA
                                                                            (B
                                                                          P
                                                                      BC




                                                                              NO




                             Leverage 2007                  Leverage 2006                       Angola 2007            Angola 2006


                                                                                                          Source: Bank Financial Statements, BankScc




                                                                                                                                                                               49
BANKING IN REVIEW
Angola 2008




                                    Conclusion
                                    In conclusion, we have seen in 2007 a further growth of the Financial Sector, in line with
                                    previous years. The distribution network of major banks has nearly doubled during 2007,
                                    demonstrating the strong bet in the growth and development of the bankarization of Angola.
      In 2007 the banks financial   The entry of new banks in 2007 did not significantly alter the picture of the sector; there are
                                    five major banks, which in total represent about 85% of the market. There were minor
               margin grew 91%      changes in the rankings of credits and deposits, which led to some exchanges of position
                                    between banks, BAI taken the lead in customer deposits, exchanging its position with the BFA,
                                    which in its turn took the lead in the credits, exchanging, in this case, the position with the
                                    BPC. In the smaller banks group, the highlight goes for the rise of BPA to 9 th place in the
                                    ranking of deposits and the BNI to 6 th place in the ranking of credit. Transformation ratio
                                    (deposit into credit) also improved, to 56%, still far from the one achieved in more mature
                                    markets. The profitability of the sector has remained at high levels, despite the slight decline
                                    compared with the previous year in ROAE. In 2007, the trend of declining financial margin
                                    observed since 2004 inverted, registering a rise of 0.8 pp compared to 2006.

                                    It is expected, given the growth prospects for the coming years in Angola and the opening of
                                    the capital market soon, that the financial sector continues to grow rapidly. In this sense, it is
                                    required to banks to monitor this growth to achieve sustainability, making their internal
                                    capacities grow, and ensuring ways to assure the current levels of profitability and high levels
                                    of risk management.




50
                                                           BANKING IN REVIEW
                                                                  Angola 2008




The banks’ financial
information
Consolidated Assets & Liabilities • 2007 / 2006 / 2005

Consolidated Income Statement • 2007 / 2006 / 2005

Banks Assets & Liabilities • 2007 / 2006

Banks Income Statements • 2007 / 2006

Consolidated Performance Indicators • 2007 / 2006 / 2005

Banks Performance Indicators • 2007 / 2006




                                                                           51
BANKING IN REVIEW
Angola 2008




          Consolidated assets & liabilities
                                                                                                        Million kwanzas
           CONSOLIDATED ASSETS & LIABILITIES
                                                                     31-12-2007   31-12-2006      31-12-2005
           ASSETS
           Cash and deposits
              Cash and due from Central Bank                           175.816      107.540           102.548
              Demand deposits with credit institutions                  44.915       43.724            33.615
           Loans to credit institutions                                170.081      185.895            91.505
           Customer loans                                              502.079      274.567           135.470
           Bonds and other securities                                  373.655      161.575           111.248
           Other unremunerated assets                                   81.234       58.328            33.353
           TOTAL DO ASSETS                                           1.347.780      831.629           507.738
                                                                                                            0
           LIABILITIES                                                                                      0
           Banks deposits                                               57.138        7.423             2.855
           Customer demand deposits                                    714.649      451.424           277.883
           Customer term deposits                                      181.385      164.672            84.391
           Other unremunerated assets                                  251.197      119.088            87.176
           Provisions                                                   20.874       11.387             9.397
                                                                             0            0                 0
           SHAREHOLDER FUNDS                                           122.533       77.635            46.037
           TOTAL LIABILITIES AND SHAREHOLDER FUNDS                   1.347.776      831.629           507.738

                                                                                      Source: Banks Financial Statements




          Consolidated income statement
                                                                                                        Million kwanzas
                                                                        2007          2006                 2005
           1. Interest and similar income on loan portfolio           73.144        39.523              38.012
           2. Interest expenses on loan portfolio                     20.962        11.140              13.351
           3. NET INTEREST INCOME [1-2]                               52.182        28.383              24.661
           4. Other net operating income                              39.780        30.734              17.201
           5. GROSS OPERATING INCOME/(LOSS) [3+4]                     91.761        59.117              41.862
           6. Provisions                                              11.443         5.817               4.131
           7. OPERATING INCOME/(LOSS) NET OF LOSS PROVISIONS [5-6]    80.319        53.299              37.731
           8. Operating costs                                         40.595        28.305              17.016
           9. NET OPERATING INCOME/(LOSS) [7-8]                       39.595        24.994              20.715
           10. Extraordinary Gains/(Losses)                              566         1.012                 457
           11. NET INCOME/(LOSS) BEFORE TAX [9-10]                    40.159        26.006              21.172
           12. Income tax                                              8.278         5.023               3.219
           13. NET INCOME/(LOSS) AFTER TAX [11-12]                    31.882        20.983              17.953

                                                                                      Source: Banks Financial Statements




52
                                                                                                                                    BANKING IN REVIEW
                                                                                                                                           Angola 2008




  Banks assets & liabilities 2007

                                                                                                                                                 Million kwanzas
                                                       BAI            BCA          BCI           BMA         BESA          BFA            BIC           BPC
ASSETS
Cash and deposits
  Cash and due from Central Bank                      37.856          2.820        9.658         4.101       14.086        30.969       23.561         33.281
  Demand deposits with credit institutions            16.887           353         1.303          117         2.914         1.804        1.881         13.083
Loans to credit institutions                          99.813          2.376        7.854         1.345        1.149        10.434        8.400         20.257
Customer loans                                        62.672          5.506       11.302        12.665       63.201       109.789       92.069         99.262
Bonds and other securities                            42.794          5.890       16.396         5.249       55.340       101.904       43.345         25.181
Other entities’ funds and other liabilities           14.156          1.223        7.116         2.023        8.246        11.590        5.324         22.905
TOTAL ASSETS                                         274.178         18.167       53.628        25.499      144.937       266.490      174.580        213.968

LIABILITIES
Banks deposits                                         945             -             -          3.592       40.537         5.494          0              138
Customer demand deposits                             202.011         7.629        31.541        8.655       51.932        130.439      90.779         135.017
Customer term deposits                                9.973          4.115         2.640        5.149       38.827         21.629      29.585          44.076
Other entities’ funds and other liabilities           40.651         4.145        11.583        3.725        1.596         74.348      40.524          15.299
Provisions                                            3.190           109           448          326          747           6.085       2.245           5.795

SHAREHOLDER FUNDS                                    17.407          2.169        7.416         4.052       11.298        28.495       11.447         13.642
TOTAL LIABILITIES AND SHAREHOLDER FUNDS              274.178         18.167       53.628        25.499      144.937       266.490      174.580        213.968

                                                                                                                              Source: Banks Financial Statements




                                                                                                                                                 Million kwanzas
                                               BTA           KEVE     NOVO BANCO         BSOL       BPA             BNI        BANC             BDA         VTB
ASSETS
Cash and deposits
  Cash and due from Central Bank               5.898      2.699           313         6.259         2.423        1.661         143            22             67
  Demand deposits with credit institutions      733        622             31          507          1.070        3.243         136           220             11
Loans to credit institutuions                  4.176      1.978            0          3.714         6.530         933          224           453            445
Customer loans                                11.580      7.806           694         9.034         3.013       13.154         105           137             90
Bonds and other securities                    12.849      2.460            56        14.066        11.742       13.182         749          22.284          168
Other entities´ funds and other liabilities    1.743      1.591           170         1.871         1.150        1.026         309           611            180
TOTAL ASSETS                                  36.979     17.156          1.264       35.451        25.928       33.199        1.666         23.727          961

LIABILITIES
Bank deposits                                   941           667           140         -           3.520       1.164             -             -            -
Customer demand deposits                      18.885         6.096          523      14.632         9.987       6.113           344             -           66
Customer term deposits                         5.360         3.142          215       8.104         6.122        2.234           15             -           199
Other entities´ funds and other liabilities    3.925         2.055           34      10.879         4.886       20.649         1.065         15.637         196
Provisions                                      442           553            20        378           262          248             3            20            3

SHAREHOLDER FUNDS                             7.426      4.643            332        1.458         1.151         2.791         239          8.070           497
TOTAL LIABILITIES AND SHAREHOLDERS FUNDS      36.979     17.156          1.264       35.451        25.928       33.199        1.666         23.727          961

                                                                                                                              Source: Banks Financial Statements




                                                                                                                                                          53
BANKING IN REVIEW
Angola 2008




Banks assets & liabilities 2006
                                                                                                                   Million kwanzas

                                                      BAI      BCA      BCI        BMA       BESA          BFA            BIC
      ASSETS
      Cash and deposits
        Cash and due from Central Bank               20.454    1.825    6.271      2.959      8.725      15.695         10.301
        Demand deposits with credit institutions     23.032     300     1.302       136       3.605       1.992          1.636
      Loans to credit institutions                   74.906    2.552    9.029      1.911      6.647      49.127         13.862
      Customer loans                                 33.821    3.970    9.042      5.808     24.290      68.773         42.749
      Bonds and other securities                     23.220    7.263    9.712      2.419     15.295      42.544         28.259
      Other entities’ funds and other liabilities    10.011    1.332    8.671       968       5.879       7.194          3.425
     TOTAL ASSETS                                   185.444   17.242   44.027     14.201     64.441     185.325        100.232

      LIABILITIES
      Banks deposits                                 1.200               197        0         2.836        1.333          528
      Customer demand deposits                      121.169   6.791    24.453     6.223      29.837       95.504        40.859
      Customer term deposits                         11.539   3.663     3.210     3.238      22.967       49.169        26.789
      Other entities’ funds and other liabilities    38.415   4.471    10.736     1.035       1.206       15.234        25.431
      Provisions                                     1.412     118       328       184         438         3.647         1.178

      SHAREHOLDER FUNDS                             11.709    2.200    5.103      3.520      7.158      20.438          5.447
      TOTAL LIABILITIES AND SHAREHOLDER FUNDS       185.444   17.242   44.027     14.201     64.441     185.325        100.232

                                                                                                Source: Banks Financial Statements




                                                                                                                   Million kwanzas
                                                     BPC       BTA     KEVE     NOVO BANCO   BSOL          BPA            BNI
      ASSETS
      Cash and deposits
        Cash and due from Central Bank               31.285    3.479    2.597      290        2.997        458            204
        Demand deposits with credit institutions      6.209     352      690        43        1.338        242           2.847
      Loans to credit institutions                   13.633    7.876    1.437       0         3.652       1.263            0
      Customer loans                                 68.839    7.809    4.364      592        4.434         1              75
      Bonds and other securities                     18.470    8.024     500        52        3.966        543           1.308
      Other entities’ funds and other liabilities    16.051    1.441    1.033      174        1.366        312            471
     TOTAL ASSETS                                   154.487   28.981   10.621     1.151      17.753       2.819          4.905

      LIABILITIES
      Banks deposits                                 850         0       0         80          0           399             0
      Customer demand deposits                      94.180    15.974   4.426       431       8.350        1.029          2.198
      Customer term deposits                        30.471     4.058   3.205       160       5.016         274            913
      Other entities’ funds and other liabilities   15.139     2.870    918         32       3.054         370            177
      Provisions                                    3.284       361     268         22        145           0              2

      SHAREHOLDER FUNDS                             10.562    5.718    1.804       426        1.188        747           1.615
      TOTAL LIABILITIES AND SHAREHOLDER FUNDS       154.487   28.981   10.621     1.151      17.753       2.819          4.905

                                                                                                Source: Banks Financial Statements




54
                                                                                                                    BANKING IN REVIEW
                                                                                                                           Angola 2008




  Banks income statements 2007
                                                                                                                                  Million kwanzas
                                                                BAI     BCA          BCI    BMA      BESA      BFA         BIC           BPC
1. Interest and similar income on loan portfolio             11.341    1.282       2.741    1.436    6.952   16.694       9.984        13.243
2. Interest expenses on loan portfolio                        2.625     464          597     311     2.900    3.573       3.202         4.064
3. NET INTEREST INCOME [1-2]                                  8.716     818        2.144    1.125    4.052   13.121      6.782         9.179
4. Other net operating income                                 6.433     498         518      819     5.367    7.485       5.100         7.538
5. GROSS OPERATING INCOME/(LOSS) [3+4]                       15.149    1.316       2.662    1.944    9.419   20.606      11.882        16.717
6. Provisions                                                 2.159      91         -126     173      283     3.367       1.348         2.982
7. OPERATING INCOME/(LOSS) NET OF LOSS PROVISIONS [5-6]      12.990    1.225       2.788    1.771    9.136   17.239      10.534        13.735
8. Operating costs                                            4.094    1.185       2.669    1.102    3.767    6.362       4.532         9.744
9. NET OPERATING INCOME/(LOSS) [7-8]                         8.896      40          119      669     5.369   10.877      6.002         3.991
10. Extraordinary Gains/(Losses)                               -114      -6          513      77      -36      120          -1           -20
11. NET INCOME/(LOSS) BEFORE TAX [9-10]                       8.782     33          632      746     5.333   10.997      6.001         3.971
12. Income tax                                                2.923                          214       12     3.228         0            891
13. NET INCOME/(LOSS) AFTER TAX [11-12]                       5.859     33         632       532     5.322    7.769      6.001         3.080

                                                                                                               Source: Banks Financial Statements




                                                                                                                                  Million kwanzas
                                                      BTA    KEVE     NOVO BANCO    BSOL     BPA     BNI     BANC          BDA           VTB
1. Interest and similar income on loan portfolio     2.379   1.105       275        1.818   1.256   1.304     56          1.237           41
2. Interest expenses on loan portfolio                383     248         30         626     636     618      19           662             4
3. NET INTEREST INCOME [1-2]                         1.996    857        245        1.192    620     686      37           575           37
4. Other net operating income                        1.216    987         34        1.071   1.232   1.361     21           100            0
5. GROSS OPERATING INCOME/(LOSS) [3+4]               3.212   1.844       279        2.263   1.852   2.047     58           475           36
6. Provisions                                         148     306         35         135     262     248       4            25            3
7. OPERATING INCOME/(LOSS) NET
   OF LOSS PROVISIONS [5-6]                          3.064   1.538       244        2.128   1.590   1.799     54           450            34
8. Operating costs                                    929     872        312        1.539   1.186    635      219         1.255           322
9. NET OPERATING INCOME/(LOSS) [7-8]                 2.135    666        -68         589     404    1.164    -165         -805           -288
10. Extraordinary Gains/(Losses)                       30      10         0          -18      0       11       0            0              0
11. NET INCOME/(LOSS) BEFORE TAX [9-10]              2.165    676        -68         571     404    1.175    -165         -805           -288
12. Income tax                                        659     237         0          114       0       0       0            0              0
13. NET INCOME/(LOSS) AFTER TAX [11-12]              1.506    439        -68         457     404    1.175    -165         -805           -288

                                                                                                               Source: Banks Financial Statements




                                                                                                                                          55
BANKING IN REVIEW
Angola 2008




Banks income statements 2006
                                                                                                                             Million kwanzas
                                                                 BAI     BCA      BCI        BMA        BESA           BFA         BIC
     1. Interest and similar income on loan portfolio          6.851    1.038    1.839       493        3.339        10.306       4.333
     2. Interest expenses on loan portfolio                    2.505     378      493         97        1.101         1.573       1.565
     3. NET INTEREST INCOME [1-2]                              4.346     660     1.346       396        2.238         8.733       2.768
     4. Other net operating income                             4.296     626     1.827       429        3.980         6.234       3.171
     5. GROSS OPERATING INCOME/(LOSS) [3+4]                    8.642    1.286    3.173       825        6.218        14.967       5.939
     6. Provisions                                              267      361      175         62         273          1.914        994
     7. OPERATING INCOME/(LOSS) NET OF LOSS PROVISIONS [5-6]   8.375     925     2.998       763        5.945        13.053       4.945
     8. Operating costs                                        3.497     976     2.829       423        2.635         4.696       2.335
     9. NET OPERATING INCOME/(LOSS) [7-8]                      4.878     -51      169        340        3.310         8.357       2.610
     10. Extraordinary Gains/(Losses)                           -158      7       211         47           2           803          4
     11. NET INCOME/(LOSS) BEFORE TAX [9-10]                   4.720     -44      380        387        3.312         9.160       2.614
     12. Income tax                                            1.177              133        112          16          2.212
     13. NET INCOME/(LOSS) AFTER TAX [11-12]                   3.543     -43      247        275        3.294         6.948       2.614

                                                                                                          Source: Banks Financial Statements




                                                                                                                             Million kwanzas
                                                                 BPC      BTA     KEVE    NOVO BANCO   BSOL          BPA           BNI
     1. Interest and similar income on loan portfolio           7.566    1.753     655       227       1.054          7             62
     2. Interest expenses on loan portfolio                     2.690     254      173        26        283            1             1
     3. NET INTEREST INCOME [1-2]                               4.876    1.499     482       201        771           6            61
     4. Other net operating income                              7.475    1.040     608        39        801           26           182
     5. GROSS OPERATING INCOME/(LOSS) [3+4]                    12.351    2.539    1.090      240       1.572         32            243
     6. Provisions                                              1.522      78       50        23         97            0             1
     7. OPERATING INCOME/(LOSS) NET OF LOSS PROVISIONS [5-6]   10.829    2.461    1.040      217       1.475         32            242
     8. Operating costs                                         8.051     752      530       214       1.054          86           227
     9. NET OPERATING INCOME/(LOSS) [7-8]                       2.778    1.709     510        3         421          -55           15
     10. Extraordinary Gains/(Losses)                            -11       71       49         0        -13            0             0
     11. NET INCOME/(LOSS) BEFORE TAX [9-10]                    2.767    1.780     559        3         408          -55            15
     12. Income tax                                              616      507      194         0         50            0             6
     13. NET INCOME/(LOSS) AFTER TAX [11-12]                   2.151     1.273     365        3         358          -55             9

                                                                                                         Source: Banks Financial Statements




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                                                                                                   BANKING IN REVIEW
                                                                                                          Angola 2008




Consolidated performance indicators
 CONSOLIDATED INDICATORS (%)                                   ANGOLA
                                               2007            2006                2005
 SIZE AND GROWTH
 Growth in customer deposits                   45.4            70.1                64.3
 Growth in customer loans                      82.9            102.7               44.0
 Growth in assets                              62.1            63.8                47.0
 LIQUIDITY
 Shareholders' funds/total assets              9.1              9.3                9.1
 Net advances/client deposits                  56.0             44.6               37.4
 Term deposits/total deposits                  20.2             26.7               23.3
 QUALITY OF ASSETS
 Generic provisions/total credit               3.3               3.9                3.9
 Specific provisions/total credit              0.5               1.3                2.5
 Bad debts/total credit                        3.8               5.2                6.4
 PERFORMANCE
 Return on average equity (ROAE)               31.9             33.9               42.5
 Return on average total assets (ROAA)         2.9              3.1                4.1
 Net interest income/average total assets       4.8              4.2                5.7
 Other operating income/average total assets    3.7              4.6                3.9
 Total income/average total assets             8.4              8.8                9.6
 EFFICIENCY
 Operating costs/gross operating income        44.4             47.9               40.1
 Operating costs/average assets                3.7              4.2                3.9

                                                      Source: Banks Financial Statements and BNA




                                                                                                                   57
 BANKING IN REVIEW
 Angola 2008




  Banks performance indicators 2007

                                                          BAI           BCA               BCI            BMA             BESA            BFA            BIC          BPC
SIZE AND GROWTH
Growth in deposits (%)                                59.74             12.34            23.56            45.9           71.88           5.11           77.93       43.68
Growth in credit to customers (%)                      85.3             38.69            24.99           118.06          160.19          59.64         115.37       44.19
MARKET SHARE
Customer deposits (%)                                 23.66             1.31             3.81             1.54           10.13           16.97         13.43        19.99
Customer loans (%)                                    12.48             1.10             2.25             2.52           12.59           21.87         18.34        19.77
LIQUIDITY
Shareholders’ funds/total assets (%)                  6.35              11.94            13.83           15.89            7.8            10.69          6.56         6.38
Net advances/client deposits (%)                      29.56             46.88            33.07           91.75           69.64            72.2         76.49        55.42
Term deposits/total deposits(%)                       4.70              35.04            7.72            37.30           42.78           14.22         24.58        24.61
PERFORMANCE
Return on average equity (ROAE) (%)                      40.2           1.52             10.09           14.05           57.67           31.75         71.04        25.45
Return on average total assets (ROAA) (%)                2.5            0.19             1.29            2.68            5.08            3.44          4.37         1.67
Net interest income/average total assets (%)             3.8            4.62             4.39            5.67            3.87            5.81          4.94         4.98
Other operating income/average total assets (%)          2.8            2.81             1.06            4.13            5.13            3.31          3.71         4.09
Total income/average total assets (%)                    6.6            7.43             5.45            9.79              9             9.12          8.65         9.07
PRODUCTIVITY AND EFFICIENCY
Operating costs/gross operating income (%)                27            90.05           100.26           56.69           39.99           30.90         38.14        58.29
Operating costs/average assets (%)                        1.8           6.69             5.47            5.55             3.6             2.8           3.3         5.29

                                                                                                                                  Source: Bank Financial Statements and BNA




                                                   BTA          KEVE      NOVO BANCO             BSOL             BPA             BNI          BANC           BDA     VTB
SIZE AND GROWTH
Growth in deposits (%)                            21.03         21.06           24.87           70.10        1136.30          168.31              -            -         -
Growth in credit to customers (%)                 48.29         78.87           17.23           103.74       301200.0        17438.67             -            -         -
MARKET SHARE
Customer deposits (%)                             2.71          1.03             0.08            2.54             1.8             0.93           0.0          0.0    0.03
Customer loans (%)                                2.31          1.55             0.14             1.8             0.60            2.62           0.0          0.0    0.02
LIQUIDITY
Shareholders’ funds/total assets (%)              20.08         27.06           26.27             4.11           4.44          8.41            14.3       34.01     51.79
Net advances/client deposits (%)                  47.76          84.5           94.04            39.73           18.70        157.59           29.2         -        34.0
Term deposits/total deposits (%)                  22.11         34.01           29.13            35.64           38.0         26.76            4.2          -          75
PERFORMANCE
Return on average equity (ROAE) (%)               22.92         13.62           -17.94           34.54           42.57           53.34       -138.1       -19.95 -115.96
Return on average total assets (ROAA) (%)          4.57          3.16            -5.63            1.72            2.81            6.17        -19.8        -6.79 -60.05
Net interest income/average total assets (%)      6.05           6.17           20.29            4.48             4.31            3.60         4.4         4.85     7.60
Other operating income/average total assets (%)   3.69          7.11             2.82            4.03            8.57            7.14          2.5         0.84     0.05
Total income/average total assets (%)             9.74          13.28           23.11            8.51            12.88           10.74         7.0         4.00     7.56
PRODUCTIVITY AND EFFICIENCY
Operating costs/gross operating income (%)        28.92         47.29           111.83           68.01           64.04           31.02       377.6       264.21 867.40
Operating costs/average assets (%)                2.82          6.28            25.84            5.79            8.25            3.33        26.3        10.58 67.05

                                                                                                                                   Source: Bank Financial Statements and BNA




 58
                                                                                                      BANKING IN REVIEW
                                                                                                             Angola 2008




Banks performance indicators 2006

                                                   BAI    BCA    BCI       BMA          BESA           BFA            BIC
 SIZE AND GROWTH
 Growth in deposits (%)                            64.9   71.2     -      129.8         77.9           50.4         264.8
 Growth in credit to customers (%)                 47.6   51.9     -      233.3         165.7          65.6         585.8
 MARKET SHARE
 Custumer deposits (%)                             21.5    1.7    4.5       1.5          8.6           23.5          11.0
 Customer loans (%)                                12.3    1.4    3.3       2.1          8.8           25.0          15.6
 LIQUIDITY
 Shareholders' funds/total assets (%)              6.3    12.8   11.6      24.8          11.1          11.0           5.4
 Net advances/client deposits (%)                  25.5   38.0   32.7      61.4          46.0          47.5          63.2
 Term deposits/total deposits (%)                  8.7    35.0   11.6      34.2          43.5          34.0          39.6
 PERFORMANCE
 Return on average equity (ROAE) (%)               37.9    -1     9.7       8.3          59.6          41.4          81.9
 Return on average total assets (ROAA (%)           2.5   -0.3    1.1       2.4           6.4           4.4           3.9
 Net interest income/average total assets (%)       3.0   4.0     6.1       3.5           4.3          5.6           4.1
 Other operating income/average total assets (%)   3.0    3.8    8.3        3.8          7.7           4.0           4.7
 Total income/average total assets (%)             6.0    7.7    14.4       7.3          12.1          9.6           8.8
 PRODUCTIVITY AND EFFICIENCY
 Operating costs/gross operating income (%)        40.5   75.9   89.2      51.3          42.4          31.4          39.3
 Operating costs/average assets (%)                2.4    5.9    12.9      3.7           5.1           3.0           3.5

                                                                                     Source: Bank Financial Statements and BNA




                                                   BPC    BTA    KEVE   NOVO BANCO       SOL           BPA           BNI
SIZE AND GROWTH
Growth in deposits (%)                             28.7   47.8   79.0     169.1          8.7            -              -
Growth in credit to customers (%)                  64.4   79.4   89.4     69.1          82.7            -              -
MARKET SHARE
Custumer deposits (%)                              20.2   3.3    1.2       0.1           2.2           0.2           0.5
Customer loans (%)                                 25.1   2.8    1.6       0.2           1.6           0.0           0.0
LIQUIDITY
Shareholders' funds/total assets (%)                6.8   19.7   17.0     37.0           6.7          26.5           32.9
Net advances/client deposits (%)                   55.2   39.0   57.2     100.2         33.2           0.1            2.4
Term deposits/total deposits (%)                   24.4   20.3   42.0     27.1          37.5          21.0           29.3
PERFORMANCE
Return on average equity (ROAE) (%)                22.8   24.6   23.1       0.7         32.9          -14.7          1.1
Return on average total assets (ROAA) (%)          1.5    5.0     3.9       0.3         2.2            -3.9          0.4
Net interest income/average total assets (%)       3.4    5.9     5.2      22.6         4.7            0.4            2
Other operating income/average total assets (%)    5.2    4.1    6.6       4.4          4.9            1.8           7.4
Total income/average total assets (%)              8.6    9.9    11.8      27.0         9.5            2.2           9.9
PRODUCTIVITY AND EFFICIENCY
Operating costs/gross operating income (%)         65.2   29.6   48.6      89.2         67.0          273.5          93.4
Operating costs/average assets (%)                 5.6    2.9    5.7       24.0         6.4            6.1           9.3

                                                                                     Source: Bank Financial Statements and BNA




                                                                                                                                 59
BANKING IN REVIEW
Angola 2008




                    About Deloitte
                    Our values
                    On a global level, Deloitte is an organization that provides integrated professional
                    services solutions in Audit, Tax, Consulting and Corporate Finance, including a wide
                    range of technical skills and competences.

                    Our global vision is to be “the standard of excellence”, reached for being unequivo-
                    cally respected from the community and for being:
                    • The first choice of the most pretended talents in the world, motivated by our
                      reputation, culture and diversity;
                    • The first choice of the most required clients, attracted by the range and
                      penetration of our services.
                    We offer a comprehensive vision that allows us to face challenges in depth and
                    range. The Deloitte offer is a unique combination of integrated services in Audit,
                    Tax, Consulting and Corporate Finance, addressing the complex issues of its clients.

                    We operate in more than 140 countries, supported by more than 150.000
                    professionals and we reported 20.000 million dollars in revenues in 2006. Deloitte
                    is, consequently, in a unique position to effectively support its clients.




                    Deloitte Angola
                    Deloitte Angola was incorporated in 1996 and began its activity in May of 1997
                    with an office in Luanda, providing professional services in Audit, Tax, Consulting
                    and business process application solutions in all industry sectors.

                    In 2007 the firm was providing professional services to a majority of the biggest
                    national and multinational companies in the country and relies on nearly 90
                    dedicated highly motivated professionals to exceed clients’ expectations.

                    Facing the potential growth and actual challenges, since 2003, Deloitte in Angola
                    was definitively integrated in the Portuguese offices, so that its employees could
                    develop their skills at the international required standards, as an outstanding leader
                    in the professional services segment.

                    Deloitte has became one of the main and most respected professional services firm
                    in Angola, contributing to the modernization and development of management
                    practices, and by doing so, giving a contribute to the economic development of
                    Angola.




60
                                                                                                          BANKING IN REVIEW
                                                                                                                 Angola 2008




About ABANC
The “Associação Angolana de Bancos” (ABANC), it’s a non-profit non-governmental
institution with a local scope, created under the Law n.º 14/91, of 11th of May, to defend the
interests of its associates, the banks with head offices or branches in Angola.
Its headquarters is in Luanda but may establish delegations and will last for an indefinite
period.

The ABANC aims to promote and practice all acts which could contribute to technological,
economic and social progress of their members activities and to pursue and defend the
interests of these before any public or private, domestic or foreign.

It was created on the 31st of December of 1998 when there were only two state owned
banks, one mutual association and two branches of Portuguese banks.

Nowadays, it has a significant number of associate members that are becoming members at
the same time they become banks. It has seventeen associate members.

The master guidelines of ABANC are built upon the rule of developing actions of cordiality
between banks with the intention of defending and strengthening the banking system:
  • Develop and disclosure research and opinions on economic, financial and technical
    matters of national, regional or trade banking interest;
  • Provide technical and legal assistance to its members;
  • Promote in collaboration with the Institute for Banking Training, professional training of
    banking staff;
  • Promote among the government measures designed to streamline the banking system;
  • Promoting coordinated actions in the scope of banking protection and security;
  • Providing services and any information to their associates related to the areas that are part
    of its goal.

The objectives that ABANC pursues are included in their statutes and aim to be able to offer
its associates all the institutional support that it’s reflected in its subject, being the strengths of
its activities the fact of developing opinions and draw up documents in line with its business,
sending them to the government organs that request them and beyond, including the Central
Bank and the Ministry of Finance.

Besides the credit activity of each one of the members, some Banks affiliated to the ABANC
have been organizing themselves in trade unions to finance state development projects,
especially for the acquisition of aircrafts, the construction of economic neighbourhoods,
among others.

In the area of training, ABANC in partnership with the Institute for Banking Training of Angola,
the “Universidade Lusófona de Humanidades e Tecnologias” in Lisbon and Ulege Angola -
School of Advanced Management Studies, has carried out some training activities, like
seminars and meetings about different matters, with highlight to the Annual Meeting of
Banking Jurists of Angola, now in its fourth consecutive year, the completion of the first Post-
Graduate Management in Banking course conducted in Angola, for senior management of
banks and other entities close to the system, apart from a seminar about credit and
guarantees given to Economic Journalists of the country and a Workshop on Basel II to the
managers of the banks involved.

ABANC does not interfere with the expansion policy of banks, to be a highly competitive
activity, so depending on the strategic vision of each member. However, with the advent of
peace achieved six years ago, is already clearly visible the strong growth of branch openings,
which spread through the country, which already holds 29.25% of the 508 existing branches
at the national level.

At the end of 2007 there were competing in the Angolan banking system, in addition to BNA,
17 banks, three public and 14 of private equity.
To the present date, one more commercial bank started its activity and it is already authorized
the opening of two more.




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BANKING IN REVIEW
Angola 2008


                    We believe that the opening of more banks, with projects and financing models and other
                    banking products more modern and diversified, as well as the consequent opening of
                    branches in the country, will be the basis for confidence that businesses have in the system
                    and the market, and the security they can enjoy: the facilities, technical means and employees,
                    across all the Angolan territory.

                    ABANC visited and has a friendship relationship with the Association of Banks of Macao
                    (China) and in Africa cooperates and is part of the Southern Africa Regional Banks Association,
                    being one of its founding members. It is also a member of the CPLP Business Council.

                    The major challenges facing ABANC in the near future are the reinforcement of its own
                    activity, for which it has established and regulated the operation of a specialized section called
                    "Group of National Users of the SWIFT Service" and are still creating the technical conditions
                    for the development of efforts to help in the design and assembly of a Risk Central for the
                    system and the improvement and implementation of the Code of Conduct for Banks and its
                    Rules.

                    Its governing bodies are the following:

                    Board of the Annual General Meeting
                    Banco Regional do Keve
                    Amílcar dos Santos Azevedo da Silva                      Chairman
                    Banco Totta de Angola
                    Eduardo Pompeu Tendinha da Silva                         Secretary
                    Banco de Fomento Angola
                    Emídio José Bebiano da Costa Pinheiro                    Secretary

                    Executive Management
                    Banco Africano de Investimentos
                    José de Lima Massano                                     Chairman
                    Banco Sol
                    Coutinho Nobre Miguel                                    Vice-President
                    Banco de Poupança e Crédito
                    Joaquim Pedro Fernandes                                  Member
                    Banco Millennium Angola
                    Adriano José de Sousa Mota                               Member

                    Board of Auditors
                    Banco Espírito Santo Angola
                    Denise Nair Brito Rocha Santos Henriques                 Chairman
                    Banco BIC
                    Vera Tangue Escórcio                                     Member
                    Novo Banco
                    Florindo Panzo                                           Member

                    General Secretariat
                    Roberto José Fernandes                                   General Secretary

                    Associates

                    BANC • BAI • BCA • BCI • BDA • BESA • BFA • BIC • BMA • BNI • BPA • BRK
                    BPC • BS • BTA • NBC • VTB




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