Annual Ballance Report 2018
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annual balLAnce report 2018 Ruacana Falls on the Cunene River CUNENE, ANGOLA Millennial giant stones Iona natural park 2 CUNENE, angola BCI banco de comércio e IndÚstria annual BALANCE report 2018 IndEX 1. Message of the Chairman of the Board of Directors 5 2. Key Indicators 9 3. BCI 10 Corporate Governance and Internal System Control 10 Composition of the Governing Bodies 12 Organisational Structure 13 Vision 16 Mission 16 Values 16 4. Main events of the year 2018 17 5. Distribution Network 18 6. Economic and Financial Framework 18 International Context 18 National Context 21 7. Business Areas 24 Private and Micro-finance 24 Corporate and Institutional 25 8. Business Support Area 26 E-Banking 26 Human Resources 27 Accounting and Payments 30 Operations 30 Global Risk 31 Internal Control 31 Compliance 32 Credit Recovery 32 Information Technologies 32 International Relations 33 Marketing and Communication 33 Organisation and Quality 34 9. Social Responsability 34 10. Risk Management 35 11. Financial Analysis 37 12. Proposal for the Appropriation of Profits 47 13. Financial Statements 49 14. Notes to the Financial Statements 55 15. Opinion of Audit Board 107 16. External Audit Report 110 3 BCI banco de comércio e IndÚstria ANNUAL BALANCE REPORT 2018 Filomeno da Costa Alegre Alves de Ceita CHAIRMAN OF THE BOARD OF DIRECTORS 4 BCI banco de comércio e IndÚstria annual BALANCE report 2018 1. MESSAGE FROM THE CHAIRMAN OF THE BOARD OF DIRECTORS As usual, we are called upon drawing some reflections of the financial performance of the Bank during the year of 2018. Nevertheless, a third commentary can be added, given the pressure on the net international reserves and given that Certainly this evaluation cannot be detached from the the North-American dollar price was relatively cheap in economical context, at a national and even international comparison with the parallel market (in the proportion of 1 level, for the interconnections that make the Bank a piece to 5) and this stimulated speculation in favour of substantial of the Angolan finance system, which is affected by the gains with foreign exchange transactions. Due to the foreign international events related to finances. exchange depreciation in the official market, both markets have re-balanced and therefore the speculative tendency Firstly, it is worth mentioning that due to the fast depreciation was substantially reduced. of the national currency in the foreign exchange of the economic year of 2018, with the foreign exchange rate Another important event for the financial sector was the “freeze” at the official market for around two years publication, on the 21 February, of Notice nº. 02/2018, of (2016 and 2017), the permanent foreign exchange parity Banco Nacional de Angola, which set the 31 December remained, for that period, at 165,90 Kwanzas per North- 2018 as the deadline to the increase of the share capital American dollar. Therefore, in the first days of 2018, the of the financial banking institutions to 7,5 billion Kwanzas, national currency was depreciated in 10%, followed by in fact, an increase of 5 billion in comparison with the limit other in a similar decreasing way, until reaching 308,60 of 2013, in force until that moment. The compliance with Kwanzas per North-American dollar, in December 2018, this norm, by BCI, was not a constraint, given that the Bank which meant an increase of the foreign exchange rate of helds share capital above that limit, and own funds above around 86%. the regulations. These circumstances have a significant impact in the From a macro-economic point of view, despite the economy may be perceived in two interpretations. The reduction, considering the acceptable standards for this first and most obvious is that the depreciation affected, important indicator of economic stability, the inflation rate inevitably, the assets expressed in national currency, in is still high, at 18,2% by the end of the year, a value bellow around 45%, i.e., decreased to nearly half of its value in the the 26,2% registered in 2017 and also much below the beginning of the year. 41,9% of 2016. The second, and opposed to the first, naturally anchored As a result, from the evolution of the average price of Oil in the foreign exchange profit of the owners of property at the international market and from the foreign exchange expressed or indexed to the foreign currency, with particular resources management, the Net International Reserves to the foreign exchange rates resulting from investments in (NIR) changed from 13,3 billion North- American dollars Treasury Bonds, namely Treasury Bonds indexed to the reached in December 2017 to 10,6 billion North-American North- American dollar. dollars attained by December 2018. 5 BCI banco de comércio e IndÚstria ANNUAL BALANCE REPORT 2018 The NIR situation is still critic, as these have been falling It is likely that, once these circumstances are enhanced, since 2014, when the downward trend of the oil barrel they may ease the constraints to the recovering of default price at the international marked started, and still remains credit, which, during the year under analysis, forced the at price levels below half the one reached in mid-2014. Bank to incorporate, in its accounts, considerable amounts in the quality of impairment losses. Moreover, the abrupt Against this background, the country initiated negotiation interruption of the negational process with Recredit to with the International Monetary Funda (IMF) in order cease a part of the overdue credit portfolio, after all the to obtain balance of payments financing agreements, in premises fulfilled, forced the Bank to support a larger particular the Extended Fund Facility (EEF) at two years, financial effort, and yet, it was possible to close the financial extendable for one more year, if necessary. This facility year with a positive result and an opinion without reserves is an agreement of commitment in which the Angolan from the external auditors. Government commits towards adopting policies to solve the economical and structural problems of the country. In its internal aspect, BCI has continued to privilege the Amongst those policies to be adopted, many of them will human assets development, particularly in terms of training extend to the financing sector, in particular to the banking and specialised technical workshops on the processes sectored, that will be called upon clearing from their balance considered to be critic. In general terms, all collaborators, sheets the assets that might express impairment losses. including the management team, took an intensive training in English language. On what concerns the banking activity of 2018, with the exception of the facts mentioned above, the prevalent By the end of this financial year, with a prediction of scenario was not different from the previous years. positive perspectives open to 2019, we close by thanking The practice was once more a larger allocation of to all those who have contributed to the growth and resources on investments in Treasury Bonds, instead strengthening of the Bank. of investments in credit operations due to its high risk, related to already known factors that result from a cloudy business environment and from precarious physical and institutional infra-structures, despite the already achieved improvements, since the entrance of the Government after the elections of September 2017, with particular mention to the approval of the Competitiveness Law (Law nº.05/18 of 10 May). The Chairman Filomeno da Costa Alegre Alves de Ceita 6 BCI banco de comércio e IndÚstria annual BALANCE report 2018 From left to right: Carlos Alberto Teixeira de Alva Sequeira Bragança, João de Jesus Batalha Freire dos Santos, Jorge Leão Peres, Maria do Carmo Bastos Corte Real Bernardo and Filomeno da Costa Alegre Alves de Ceita. 7 BCI banco de comércio e IndÚstria ANNUAL BALANCE REPORT 2018 Namibe Arch oasis in the namibe desert Namibe, Angola 8 BCI banco de comércio e IndÚstria annual BALANCE report 2018 2. KEY INDICATORS Amounts expressed in Million AKZ 2016 2017 2018 Var. (%) 18/17 1. STRUCTURE Total Assets 180 827,8 176 138,9 175 059,9 -0,6% Customer credit (Net impairment) 45 149,7 47 104,7 48 388,7 3% Customer deposits 101 210,5 101 470,3 123 187,0 21% Own funds 13 493,9 26 555,5 27 257,9 3% Commercial network number 1 148 158 155 -2% Number of employees 1 095 1 130 1 131 0,1% ATM´s² 155 162 159 -2% APT´s³ 1 486 2 083 1 990 -4% Number of customers 452 159 490 438 547 667 12% 2. PROFITABILITY Net interest margin 7 895,7 8 257,7 11 182,9 35% Complementary margin 9 349,3 13 151,3 9 085,5 -31% Net operating income 17 245,0 21 409,0 20 268,4 -5% Structural costs 4 12 007,3 15 218,8 18 663,7 23% Net Income 302,0 663,0 702,4 6% Return On Equity (ROE) 2,2% 2,5% 2,6% 0,1 p.p. Return On Assets (ROA) 0,2% 0,4% 0,4% 0,0 p.p. 3. SOLIDITY Loans overdue/ Total loans 17,3% 20,3% 28,7% 8,4 p.p. Impairment/ Loans overdue 93,0% 93,2% 67,1% -26,1 p.p. Impairment/ Total loans 16,0% 18,9% 19,2% 0,3 p.p. 4. SOLVENCY Balance sheet solvency ratio 7,5% 15,1% 15,6% 0,5 p.p. Balance sheet regulatory solvency ratio 19,7% 37,4% 19,8% -17,6 p.p. 5. LIQUIDITY Loans/ Total deposits 44,6% 46,4% 39,3% -7,1 p.p. Term deposits/ Total deposits 36,0% 34,9% 31,7% - 3,3 p.p.