Banco Angolano de Investimentos (BAI) – Money-centre bank with lending optionality

Banco Angolano de Investimentos (BAI) is the largest Angolan bank by assets. It is a money-centre, institutional-focused bank, with high investment and trading revenue, funded by a diversified deposit base. BAI’s distribution focus has supported healthy deposit-driven growth. Its strong capital base and solvency position it for growth in an Angolan economic upswing. BAI’s low loan-to-deposit ratio provides optionality in the long term to drive higher returns on assets and equity.

The Angolan economy remains oil dependent

While Angola ranks fifth by GDP of sub-Saharan economies, its oil dependence, sensitive current account and high foreign debt has limited recent GDP growth and exposed its currency to volatility. Effective current account management and successful new debt repayment terms with China, as well as its exit from the Organization of the Petroleum Exporting Countries, have improved the medium-term outlook (2.4% 2024 GDP growth forecast by the International Monetary Fund).

Small but growing banking sector

Angola’s banking sector ranks behind South Africa, Nigeria and Kenya by assets (in line with Ghana and Tanzania). Angola is growing its asset base, with 23 commercial banks, and has strong solvency levels (30% capital adequacy ratio). Angola has an underdeveloped credit market with low loan-to-deposit ratios (28% on average).

Money-centre bank with a diversified deposit base

BAI generates almost all of its revenue from its investments, trading and sales operations, funded by an increasingly diversified deposit pool. Its ambition is to enhance its position as the leading money-centre bank of Angola, fuelled by deposit growth, in a rising Angolan economy and a growing consumer sector.

BAI’s growth strategy is starting to bear fruit

BAI has invested aggressively in distribution over the past three years, growing distribution channels by 24% pa on average and active customers by 21% pa and doubling its active cards to 1.66 million. BAI experienced a sharp 40% increase in FY23 deposits as this strategy started to bear fruit.

Attractive valuation relative to peers

BAI’s asset base of US$6.4bn is modest relative to its sub-Saharan peers but, with peer-beating solvency, superior returns and loan-to-deposit ratio optionality, its prospects look healthy on a relative basis. BAI’s return on average equity (RoAE) of 28% (29% for the peer group) compares to its price/book trading level of only 1.4x (1.5x for the peer group).

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