EU Commission warns Portugal’s banks of Angola exposure risk

The European Commission issued a warning today (20 May) that Portugal’s banks could be exposed to the Angolan slump whose oil-reliant economy is suffering as a result in the international collapse in oil prices.

In its specific half-yearly recommendations for Portugal based on an analysis of the Portuguese Stability Programme, the European Commission states that mitigation measures against the impact of Covid-19 on Portugal’s economy “should take the resilience of the Portuguese banking sector into consideration.”
The exposure of the Portuguese banks to some geographies which are highly dependent on the price of raw materials, namely oil, is one of the alerts identified by the Commission.
Without ever specifically mentioning Angola, the EC led by Ursula von Der Leyden said that “exposure to these geographies is sensitive to market risk, exchange rate fluctuations and credit risks which could have an impact on “the quality of loans made to these regions).
Angola is an oil producing country and exports oil through the State-owned company Sonangol. According to the local newspaper ‘Mercado’ and using statistics from the Angolan Ministry of Finance, the Angola exported 44.5 million barrels of oil in April at the average price of US$26.75, well below the average price per barrel of oil seen in March which was US$54.97.
From among the main Portuguese banks, many have a strong exposure to the Angolan market through banking operations they hold in Angola.
BPI owned 100% by the Spanish bank CaixaBank has a 48.1% in BFA. Caixa Geral de Depósitos through Partang which it owns and 100%, controls 51% of Caixa Geral Angola. Millennium bcp, through BCP Africa SGPS has a 22.52% in Millennium BCP Atlântico. Banco Montepio controls 51% of Finibanco Angola and Novo Banco hold 9.27% of Banco Económico.
The European Commission says that although the Portuguese banking sector has made huge improvements and is more solid and robust in terms of credit ratios and profits because the banks are more efficient and have reduced their losses and offloaded toxic and NPLs which has enabled them to reinforce their capital ratios their own capital ratios are still below the European average while the ratio of NPLs is double the EU ratio.