VZCZCXYZ0000
RR RUEHWEB

DE RUEHLU #0014/01 0051200
ZNR UUUUU ZZH
R 051200Z JAN 07
FM AMEMBASSY LUANDA
TO RUEHC/SECSTATE WASHDC 3580
RUEAWJA/DEPT OF JUSTICE WASHDC
RUEATRS/DEPT OF TREASURY WASHDC
RUEHSE/US SECRET SERVICE WASHINGTON DC

UNCLAS LUANDA 000014 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
STATE FOR EB/IFA/OMA AND AF/S 
 
E.O. 12958: N/A 
TAGS: EFIN ECON EAID AO
SUBJECT:  ANGOLA'S BANKING SECTOR - LIMITS TO GROWTH? 
 
REF: LUANDA 1261 
 
¶1.  (SBU)  Summary.  Angola's banking sector has grown rapidly since 
the civil war ended in 2002.  Commercial banking assets have doubled 
to more than USD 6 billion since 2003 and the number of banks has 
increased.  Private banks are profitable, and new banks are looking 
for market niches.  Banks are lending more each year, but the 
industry's overall lending rates remain low.  Regulatory and legal 
reforms will be necessary to broaden lending, and the National Bank 
is working to introduce these.  End Summary. 
 
Rapid Growth of Angola's Banking Sector 
--------------------------------------- 
 
¶2.  (U)  Since Angola's civil war ended in 2002, total assets of 
commercial banks have grown from USD 2.9 billion in 2003 to USD 6.3 
billion in 2006 (at 80.1 Kwanza per USD).  In November, Angola's 
fourteenth commercial bank, the Banco Privado Atlantico, opened for 
business with USD 10 million in capitalization.  The authorities 
have since approved another commercial bank. 
 
Role of Foreign Investment 
-------------------------- 
 
¶3.  (SBU)  Foreign investment, and foreign banks, have helped fuel 
banking's growth.  Portuguese banks, including Banco Espirito Santo 
and Millenium Bank, have either established operations in Angola, or 
invested in new Angolan banks.  Other foreign banks investing in 
Angola include Spain's Banco Santander and South Africa's Standard 
Bank.  Angolan parastatals, such as Sonangol, the national oil 
company, are also major investors.  (Note: A spreadsheet of Angola's 
commercial banks appears at the end of this cable and in a somewhat 
different form in the 2007 Investment Climate Statement for Angola. 
End note.) 
 
Access to Credit 
---------------- 
 
¶4.  (SBU)  Bank credit has expanded from USD 94 million in 2004 to 
USD 146 million in 2005, according to the 2006 KPMG study.  Lending, 
however, remains low at 35 percent of assets, according to a late 
November statement by BNA Vice-Governor Rui Miguens who argued that 
banks should be lending at least 50 percent of their assets.  The 
Banco Nacional de Angola (BNA) requires banks to deposit with the 
BNA the equivalent of 15 percent of their deposits.  (Note:  Banks 
must also retain a capital adequacy ratio of 10 percent.  End note.) 
 Miguens also noted that loans to business make up barely 11 percent 
of loans, while 67 percent of the amount loaned has gone to 
individuals.  Commercial banks earned USD 226 million in profits in 
2005, and Banco Espirito Santo Angola (BESA) earned 72 percent on 
equity in 2005, according to KPMG.  However, most banking profits 
come from cash management services, foreign exchange transactions, 
and service fees charged depositors, rather than loans. 
 
Constraints Limiting Lending 
---------------------------- 
 
¶5.  (SBU)  USAID Angola has studied which deficiencies in the legal 
and regulatory system inhibit lending.  Credit histories on 
potential borrowers are unavailable, and even personal identities 
are hard to verify.  Few Angolan land titles are clear, so potential 
borrowers cannot use land as collateral.  The lack of a market for 
rural land would make foreclosure an unpalatable option for banks in 
any case.  Ill-defined property rights keep real estate finance 
undeveloped on both the credit and investment sides.  Angola lacks 
notaries to formalize contracts, and reliable courts to enforce 
them.  All of these factors limit access to credit, especially for 
small and medium enterprises which lack experience with financing 
and thus have difficulty proposing projects for which banks will 
lend money. 
 
Making Profits, but Not Loans 
----------------------------- 
 
¶6.  (SBU)  Although the banks move large quantities of money, their 
high turnover rates limit their ability to use the funds to build 
assets.  Angolan banks do not offer financial investment vehicles to 
keep the money on deposit and use it to build assets.  The lack of 
financial instruments (such as certificates of deposits with a 
positive real rate of return) reflects the risks of lending to 
businesses in Angola.  Banks have learned to operate profitably by 
charging for services to businesses.  Corporate customers are 
themselves making good profits.  The new Banco Privado Atlantico 
will target only companies earning over USD 2 million per year. 
 
¶7.  Much bank credit goes to finance imports, leaving little for 
Angola's non-petroleum economy.  In some areas, although banks 
appear to be extending credit, the real source of credit may be 
 
elsewhere.  For example, five-year bank loans for automobile 
purchase is really financed by the dealership.  The dealership 
conveys title to the vehicle to the bank, which passes the 
purchaser's monthly payments to the dealership. 
 
Non-Performing Loans 
-------------------- 
 
¶8.  (SBU)  Angola's state-owned commercial banks are believed to be 
carrying large, undisclosed sums of non-performing loans (NPLs) on 
their books.  Some bank NPLs have been restructured as government 
debt.  In addition, the BNA recently introduced a modified reporting 
process permitting banks to write off NPLs, and thus free those 
assets for lending, but it is not yet in use by the entire sector. 
The declared rate of nonperforming loans by the end of 2004 was 8 
percent of total credit granted (KPMG). 
 
¶9.  (SBU)  Comment.  Inadequacies in Angola's business and legal 
environment keep banks from playing a larger role in helping 
Angola's economy grow out of its focus on resource extraction. 
Commercial banks have lending opportunities in construction, civil 
works, transportation and manufacture.  However, the Angolan 
government, the biggest spender in the country, will have to do more 
to provide the business and legal environment banks will need to 
extend credit more broadly throughout the Angolan economy. 
Government can encourage an improved business environment to help 
development.  The GRA can take steps to create an encouraging 
environment for commercial banking. 
 
¶10.  (SBU)  Angolan Commercial Banks 
 
Bank Name         Head of Bank    Shareholders   Clients 
                    Title                        Svcs 
---------         -----------     ------------   ------- 
 
Bco de Comercio    Adriano Pascoal  Govt          Public 
e Industria (BCI)  Pascoal CEO                 Enterprises 
 
Bco de Poupanca    Paixoa Junio     Govt      Public Admin, 
E Credito (BPC)                                  gives some 
                                                microcredit 
 
Bco Africano       Jose Carlos     Sonangol,      Oil Cos., 
De Investimentos   de Castro       DPM A Jaime,    Biz, 
(BAI)              Paiva           Min of Petrol    Priv. 
                   CEO            Desidero Costa   Individs 
 
Bco de Fomento     Isidro Pinheiro  Portuguese   Business, 
Angolano (BFA)     CEO              Investment   Individs 
                                    Bank (BPI) 
 
Bco Comercial      Benvindo Pitra    South African  Medium 
Angolano (BCA)     CEO               Bank (ABSA)    Cos., 
                                                   Individs 
 
 
Bco Sol           Sebastiano         S. Lavrador   Micro- 
                  Lavrador           Ana Paula     credit 
                  CEO                dos Santos    Small 
                                                   Cos. 
 
Bco Regional      Amilcar Silva      A. Silva      Agrobiz 
Do Keve           CEO                Carlos Gomes 
 
 
Bco Totta         Mario Nelson       Bco Totta &    Private 
De Angola         Maximo  CEO        Acores       Investors 
 
Bco Millnnium     Maria Nazare Dang  Millenium BPC  Priv. 
Angola            Genl Mgr           (Port. Bank)   Cos. 
 
Bco Espirito      Ricardo Espirito   Grupo Espirito 
Santo             Santo CEO          Santo (Port.) 
Angola (BESA) 
 
Bco de Credito     Fernando Teles    Grupo Amorim 
Internacional      CEO               (Port.) 
(BIC)                                Isabel dos Santos 
 
Novo Banco         Tom Mitro         Chevron        Micro- 
                   Genl Mgr.         World Bank     credit 
 
Bco de Negocios    Mario Palhares    Angolan        Cos. 
Internacional      President         Private    Comm. Banks 
                                     Cos. 
 
Bco Privado        Carlos da Silva   AAA Ins. Co.    Lg &. 
Atlantico          CEO              Global Pactium  Med Cos 
 
 
Bco de Desenvol-   Paixao Franco     State Funds    Coops 
Vimento de         Junior                           micro 
Angola (BDA)       President                   credit and 
                                    guidance for borrowers 
 
---------------------------------- 
Notes to the chart above: 
 
Bco = Banco = Bank 
 
Ana Paula dos Santos is the wife of Jose Eduardo dos Santos, 
President of Angola. 
 
Isabel dos Santos is the daughter of President dos Santos. 
 
AAA Insurance Company is a subsidiary of Sonangol, the national oil 
company of Angola. 
 
Global Pactium is a consortium of anonymous Angolan investors. 
 
FERNANDEZ