Ver Angola

Banking and Insurance

Luanda Leaks: Fitch foresees growing withdrawal of Portuguese banks from Angola

The reduction in the exposure of Portuguese banks to Angola, following suspicions involving senior Angolan personalities, will have a positive effect on their credit rating, but it will be negative for the Angolan banking system, considers Fitch.

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“The various investigations related to money laundering involving senior Angolan personalities with accounts in Portuguese banks are reducing the appetite of some Portuguese banks for connections with Angola. An additional reduction in exposure to Angolan banks - which at the end of 2018 had already dropped to a weighted risk level of 0.7 percent, compared to 2 percent at the end of 2014 - would have a positive impact on banks' credit ratings Portuguese, given the weak operating environment and governance weaknesses in Angola”, the rating agency maintains in a note released this Wednesday.

However, he adds, “a weaker link [to Portuguese banking] is negative for the Angolan banking system, which in the past has benefited from the capital and‘ know how ’of Portuguese banks”.

The bank accounts of several prominent figures in Angola, including businesswoman Isabel dos Santos, were recently arrested, with the Attorney General's Office.

According to Fitch, "the cultural and economic links between Portugal and its former colony Angola are strong and were positive for banks in both countries at the beginning of the millennium, after the long civil war in Angola".

“Portuguese banks contributed capital and 'know-how' to the Angolan banking system and played an instrumental role in its development,” he says, arguing that “Portuguese bank subsidiaries played a prominent role in Angola and contributed substantially to the profit of houses- mother, particularly while the Angolan economy benefited from high oil prices, until 2014 ”.

According to the estimates of the financial rating agency, Angolan operations will have contributed 230 million euros to the net result of the six largest Portuguese banks in 2013-2014, mitigating the losses of the respective domestic operations.

However, he recalls, “the risks posed to asset quality in the wake of the volatile operating environment in Angola, hitherto masked by high oil prices, started to be noticeable when the price of a barrel started to fall in late 2014” and "Several Portuguese banks have since left Angola or reduced their positions in Angolan banks, under pressure from the regulator".

“The new regulatory standards, which forced Portuguese banks to provide more guarantees against Angolan assets, and the shareholder disputes over shares held by Isabel dos Santos and her associates in Portuguese banks have further reduced the appetite of Portuguese banks for connections to Angola”, says Fitch.

According to the rating agency, currently Angolan operations will contribute less than 100 million euros to the net result of the six largest Portuguese banks.

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