Moody's Investors Service has changed the outlook to negative from stable on the Ba3 deposit ratings of Banco Angolano de Investimentos, S.A. following Angola’s sovereign rating’s bump down to negative.
At the same time, Moody's affirmed the Bank's Ba3 deposit ratings and E+ standalone bank financial strength rating (BFSR), which is equivalent to a b1 baseline credit assessment. The E+ BFSR maintains a stable outlook.
Oil price decline has driven Angola’s sovereign rating to negative outlook, impacting the country’s economic growth and the Government’s finances.
Moody’s feels that the challenging domestic environment will weigh on the Bank’s financial fundamentals, primarily its asset quality and profitability metrics. The Bank is also tied to the Government’s welfare through significant holdings of Government-related assets—over 50 per cent, or more than five times shareholders’ equity, Moody’s estimates.
However the ratings remain unchanged for now, largely due to the Bank’s ‘resilient credit profile, with a strong deposit-funded corporate banking franchise, liquid balance sheet, and significant capital buffers to absorb loan-related losses,’ Moody’s stated.
“In response to declining oil revenues, the Angolan government will likely aggressively cut-back on capital expenditures. We expect that such a policy would have negative repercussions on the non-oil economy, with the risk of leading to a build-up in government arrears to the corporate sector,” Moody’s said.
“These factors—in addition to a potentially weaker currency and higher inflation -- would weigh on borrowers' loan repayment capacity, leading to higher levels of non-performing loans, and higher credit costs, which would, in turn, weigh on Banco Angolano de Investimentos' profitability.”