Ver Angola

Banking and Insurance

Fitch Solutions: credit growth is expected to slow down gradually

The consultancy Fitch Solutions predicted that the growth of bank loans in Angola will slow down from 28.4 percent in 2019 to 9.8 percent this year and 8.4 percent in 2021 due to the depreciation of the kwanza.


"After the depreciation of the Angolan currency increased the value of loans in foreign currency throughout 2019, we believe that a more moderate depreciation in the coming quarters will cause credit growth to slow down gradually this and next year", reads in the forecast of analysts of this consultant held by the same owners of the financial rating agency Fitch Ratings.

In the comment, sent to investors and to which Lusa had access, Fitch Solutions also says it hopes that "a combination of poor asset quality with high government borrowing will act as an obstacle to short-term loans to the private sector".

In the note, analysts recall that the growth of loans to the private sector stood at 21.2 percent in December 2019 compared to the same month of the previous year, above the average of 12.5 percent recorded in the total for 2019, but point out that "much of this growth was due to the depreciation of the kwanza by more than 33.5 percent as part of the transition carried out by the National Bank of Angola to an exchange rate determined by the market, which should slow down this and next year".

Foreign currency loans are worth almost 25 percent of total loans taken between 2014 and 2019, points out Fitch Solutions, which points out that the poor quality of assets will also limit banks' willingness to facilitate loans in the short term.

"Low oil prices and decreasing domestic production kept Angola in recession between 2016 and 2019, with the economic contraction and rising unemployment reducing the ability of customers to meet their financial obligations", which caused bad loans had stood at 34.6 percent in September last year, well above the 19.2 por cent average recorded since 2014, "which reflects a more risky banking environment".

In the comment on the sector, Fitch Solutions also warns that "given the forecast of recession of 0.3 percent this year and a short expansion of 1.8 percent in 2021, the quality of short-term assets should remain low when compared to previous years", so, they conclude "banks should remain cautious in offering loans, which further contributes to a moderation in credit growth "to individuals and companies.

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