Deloitte ‘rejects’ Banco Económico’s accounts in technical bankruptcy and with losses of 300 billion Kz.

A new assessment is underway for the purposes of resolving the former BESA by an independent entity appointed by the BNA, which will help the supervisor decide the future. Shareholders do not want to invest capital, the State is out of money and seems averse to this solution. Bad bank and good bank in sight?

Banco Económico closed 2023 with losses of 298.9 billion Kz, an increase of 686% compared to the net profits of 38.0 billion Kz recorded in 2022, according to calculations made based on the institution's report and accounts published last week. For the 5th consecutive year, the former Banco Espírito Santo Angola (BESA) closes a financial year in technical bankruptcy, as the -627.9 billion Kz in equity represents a worsening of 72% compared to the -364.0 billion recorded in 2022.

To make the situation even worse, the external auditor, Deloitte, refused to issue an opinion on the accounts, considering that they do not adequately represent the situation.

Although the bank stepped up its restructuring and recapitalization plan initiated in 2021 last year, closing 28 branches to a total of 42, and reducing the number of employees by 215 to 630, this reduction in operating expenses had virtually no impact on the accounts, as the banking institution (which received 60% of the USD 100 million from the sale of its headquarters to ANPG in 2023) saw its losses and equity worsen in 2023. This was partly due to the exchange rate devaluation seen last year, in which the national currency depreciated by 39% against the dollar and the euro.

As 74% of the little over 1 billion KZ recorded in customer deposits in 2023 (+30% than in 2022) are in foreign currencies, whenever the national currency depreciates, it means that the bank's liabilities increase.

And while liabilities increased, assets fell. In 2023, the bank reversed the transaction with the current INVESTPAR (former ENSA Group), in which in 2016 the former BESA sold a set of assets, including a credit portfolio (most of which were toxic) and a set of properties, and reincorporated these assets into the bank, derecognising the amounts receivable, which had a “negative impact on total assets”, the bank admits. And it has not been selling some of these properties received in April last year.

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