New expertise for Angola’s changing market

Angola

Bruno Grilo, CEO of Banco Keve, talks to The Energy Year about the challenges preventing Angolan banks from getting more involved in oil and gas operations and Banco Keve’s strategy for financing companies and projects in the sector. Banco Keve provides banking and financial services to individual and corporate clients in Angola.

What are the key takeaways from Banco Keve’s recent restructuring?
We capitalised the bank twice and we cleaned our balance sheets. In 2022, by shrinking, shoring up liquidity and slashing debt, we have obtained a new balance besides setting up a new management and a compact shareholder structure. We used to have more than 50 shareholders, which made it very difficult to make united decisions. Now, due to compliance issues, we reduced the number of shareholders to four, who retain around 70% of the total capital. In the past, the board of directors had 12 members. Now we have three executives and four non-executive directors, with some independent members.
We are transforming the bank from a general commercial bank into a specialised institution with a focus on agribusiness and mining, including diamonds and other commodities. We specialise in oil and gas, but we are still young in this market.

What are the main challenges preventing Angolan banks from getting more involved in oil and gas operations?
The main issue is the correspondent banking situation. When an Angolan bank seeks financial support from a correspondent bank or a hedge fund, they need to prove these loans will have a return and that it will be possible to repay them. As you may know, there are high risks in investing in offshore exploration, since the project can be successful and find oil, but might not have enough commercial oil reserves to pay back the loan. On top of that, oil and gas transactions are in US dollars, which immobilises a lot of the bank’s foreign currency.
Participating in the oil and gas business as a standalone bank is difficult because the dimensions of investments are too big for one individual bank to afford and deal with risks. For instance, a local bank has the capacity to put together USD 100 million to finance upstream developments, which would cover only one project. This means that if the project fails, the bank will experience a challenging situation.
On average, for offshore projects the investment is around USD 150 million-300 million to start doing investments, and as of now the Angolan banks cannot provide backing as big as this without a syndicated bank facility. This brings not only a challenge but an opportunity as well – for fostering our links with international correspondent banks and hedge funds, and of course any other finance and funding facilities to be developed.

What is Banco Keve’s strategy to finance oil and gas companies and projects in Angola?
Part of our strategy is to increase our oil and gas services, starting in 2022. In order to achieve this goal, we have set up an oil and gas department, with experts with more than two decades in the oil and gas sector, and management tools and systems to give us the ability to service energy companies and meet their needs and standards. Under our own standards, customer service and predictability are key.
One of our main approaches, given the amounts involved, is the finance via syndicated bank loans where we gather expertise from financing the real estate sector and replicate it in line with oil and gas investment needs with a syndicated bank facility led by Banco Keve.
On top of that, we are bettering our partnerships with foreign banks – and looking forward to finding new partners – to be able to make transactions with international standards.

How challenging is it to find international finance for renewable energy projects in Angola?
The key aspect to getting the EU European Community funds (sovereign and private funds) for green projects is to find feasible public or private renewable energy projects to finance. Right now, the challenge in greenest power generation projects lies in the transformation, transmission and monetisation of this electricity. Taking electricity to the surrounding communities and then getting paid for it requires electrification and other infrastructure and a strong legal framework with purchase agreements with the public sector.
One of our next goals is to participate in renewable energy projects. Therefore, we have been studying how to manage them and meeting with European banks since they have the majority of funds to invest in green projects. Being a pioneer in financing this sector, we know it will be very hard to move forward and that we might fail once or twice, but the learning process is key.
We are already part of the electricity sector, and we are collaborating with the Ministry of Energy and Water, currently financing an Angolan company called Omatapalo in their project for the electrification of the 44,000-inhabitant town of Calulo in Kwanza Sul province.

How can local banks gain the needed know-how to participate in energy-related projects?
Besides oil and gas, we are following the developments of public and private initiatives – including bilateral and multilateral organisations’ initiatives such as those of the British and French embassies, as well as funding from the European Union Representation in Angola – in the renewable energy sector projects.
We have ambitions to participate more in this sector, but we are also very cautious. Right now it is hard to get into the gas production segment since the monetisation and profitability of this business is not 100% clear to us. Banco Keve is going through an oil and gas specialisation process, but this is a learning process, and to seriously finance projects, a bank needs to have the required expertise in that particular business, and for that it needs to be a partner of its clients.
In a similar trend, we are increasing our participation in the maritime sector, which is indirectly linked to offshore oil production. For example, we have clients that require finance for cabotage services. We see this as a stepping stone to increase our knowledge in the sector and to understand what other opportunities lie within. For instance, if the client shares a proper business plan with us, the bank could eventually finance the purchase of a ship.

How does the bank’s recent 50% increase to its capital share set it apart from other Angolan banks?
In 2021, Banco Nacional de Angola did an asset quality review placing us as the 13th-largest bank out of 26 existing banks in the country. Banco Keve was the only one which had achieved an increase of capital with fresh money.
Our bank is capitalised with a total of AOA 24 billion (around USD 45 million) of shareholders’ investment, in contrast to other banks, which use the resources placed in their own reserves to improve their P&L, balance sheet and non-performing loans.
We are focused on making sure we have new businesses, new models, new expertise – because markets are changing very fast. Banco Keve is a very flexible and dynamic bank seeking to meet either in a comprehensive or a specific way, the needs of our clients and prospective business partners.

How can mid-sized banks compete with the leading banks in the race to increase customer bases?
Our size is the better size, in terms of organisational chart and business model to address the needs of our clients and increase customer bases in an effective and efficient way.
As a small to medium-sized bank in Angola, we know our clients very well; we understand their risks and opportunities. These are the advantages that will enable us to increase our customer base. Big banks just do transactions, while we want to be our client’s business partner, to give them tailor-made solutions.
If you compare Keve’s transactional operations with those of the three leading Angolan banks, I believe one thing: Keve will achieve the best result, and in a more efficient and faster way. But this is not enough. A bank needs to know how the clients’ businesses work and how they manage them, something which is more difficult for a big bank, since it has such a great number of very different types of clients.
In terms of market size, we believe we can grab more market share from leading banks because of the high-level standards of our services for the client. I would dare to say we have the best client services in-country. The biggest banks have a big problem with bureaucracy, which makes them very slow in decision-making and customer service, even in making simple transactions. We take the same steps as them, but we move at a faster pace. Our centre of decisions is faster, and we can give efficient answers in a short time, which is key to the business.

How is Banco Keve following the global trend of digital banking?
Digital innovations are necessary, whether you want them or not. The truth is that digitalisation demands huge investments and when it is not developed properly, it puts operations at risk. Instead of rushing into being a fully digitalised bank, failing every now and then, as most banks have experienced, we prefer to learn from other banks’ mistakes while we keep implementing our digitalisation plan.
We watch other banks’ experience with digital banking very closely and we are following international trends and standards. We will not be the first bank that is fully digitalised, but when we “go live” with our digital banking solutions, they will be fully operative and efficient.

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