the core of international business: angola• 4rd largest bank in terms of net income • most...

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The core of international business: Angola

Álvaro Sobrinho // CEO of BES Angola

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Angola: The fastest growing African economy

Angolan Financial Sector

BES Angola Competitive Position

Table of Contents

Sustaining leadership in profitability

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Angola: the fastest growing African economy

• Angola is the 5th economy in Africa

and has the highest GDP growth rate

over the last 5 years (17.4%)

• The economic and political

stabilisation created the ground for the

2008 general elections in a peaceful

environment and will remain critical

issues for the outstanding

performance of Angola.

Source: IMF, BESA

Country GDP at current prices(2008, USD bn)

CAGR2003-2008

South Africa 295,595 4.8%

Nigeria 219,937 7.5%

Algeria 158,699 4.4%

Egypt 151,258 5.9%

Angola 88,464 17.4%

Morocco 84,402 4.8%

Libya 78,886 6.4%

Sudan 53,950 8.1%

Tunisia 39,244 5.5%

Kenya 30,343 5.2%

Major African Economies

3

100 111134

159

193

223

60 6885 96

130114

2003 2004 2005 2006 2007 2008 E

Real GDP Real GDP Oil

Source: IMF; BESA

Real GDP Growth (2003=100)

CAGR 17.4%

CAGR 16.7%

• The oil sector accounts for nearly 60% of

total GDP

• The Angolan GDP has been driven by the

increase in the oil production capacity,

and by the sharp rise of oil prices in the

international market.

• Since the end of the civil war, Angola non-oil

activity started booming.

• The political and economic stabilization

of Angola together with a strong program of

public investment in infrastructures are

critical issues for the growth of the non-oil

sector.

Still an oil based economy…

4

… but Angola presents good growth prospects for non oil sectors

16%

4%4%

6%

3%

9%

58%Oil & Gas

Agriculture, Forestry & Fisheries

Other

Wholesale &

Retail Trade

Construction

Manufacturing Diamond Mining

GDP breakdown by sector (2006) • Construction: rehabilitation of infrastructure (roads, ports, airports, railways, power plants, power gridline, hospitals, schools, CAN 2010) and a hot real state market, specially in Luanda• Mining: the political stabilisation is attracting large companies, specially in the diamond mining. The cutting and polishing industry is internalizing value added in the diamond industry.• Bank/Financial Services: one of the most competitive sectors in Angola, with a massive entry of new players.• Agriculture: better transport links to rural areas and public investment in the sector (irrigation). Biofuelprojects are also under development.• Industry: mainly focused in intermediate goods for the construction sector (cement and other materials)

Source: IMF; BESA

5

Whereas Angolan exports are clearly biased towards oil, imports show a more balanced range of goods in line with country’s needs

• Oil accounts for more than 95% of

total exports, diamonds representing 3.6%

• Imports almost tripled from 2002 to

2006, trend expected to continue.

Consumer goods still represent the main

imports of Angola, and capital goods

account for 30% of total imports.

• Angolan imports from Portugal have

been growing at a 23% CAGR 2002-2007

(USD million)

Source: AICEP

Angolan Imports

0

1 000

2 000

3 000

4 000

5 000

6 000

2002 2003 2004 2005

Consumer Goods Intermediate Goods Capital Goods

6

Angola’s growth dynamics are attracting an increasing slice of FDI directed towards the Southern African Development Community

906

8,669

1,2831,0371,6341,558

6,602

(USD million)

• Angola is the 2nd major recipient of FDI in the Southern African Development Community, with investment being channeled mainly to the Oil&Gasindustry.

• The economic and political stability of the country is attracting foreign private investment in non-oil sectors, which also benefits from a strong public reconstruction program, and from a friendly legal framework (fiscal benefits, repatriation of dividends)

• The National Agency for Private Investment is the public institution that supports and interacts with private investors (“one stop shop” concept).

• However, according with international standards, business environment is still low in Angola, specially concerning further regulatory developments and bureaucracy reduction.

• Portugal, Brazil and China are amongst the major investors in non-oil sector.

FDI in SADC (2002-2005)

Angola

Moz

ambi

que

DR

C

Bot

swan

a

Nam

ibia

Oth

er

South Africa

Source: AICEP

7

Angolan and Portuguese economies are becoming increasingly integrated with the latter already being the main source of imports of the first

Portugal is the first trade partner of Angola. Major imports from Portugal are beer, vehicles, furniture and construction equipment.

Portugal is also one of the key non-oil investors in Angola, focusing in construction, real estate, banking and retail.

France; 6%

China; 9%

South Africa;

8%

Brazil; 9%

Japan; 5%

USA; 10%

Portugal; 17%

Source: AICEP

Angolan Imports by Country, 2006 Investment projects approved by ANIP

66 83

191 176

267 293

463

600

2004 2005 2006 2007

Portugal Total

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Additionally the Angolan and Chinese economies are also becomingincreasingly important to one another

• China is, since 2006, the largest destination for

Angolan oil exports and Angola is the main trade

partner of China in the African Continent.

• In 2003, China approved a USD 2 billion credit line to

Angola (further extended to USD 7 bn), to fund public

investment projects. In exchange, China would

access to the oil produced in Angola. This is

consistent with the global strategy of China in Africa

for funding in exchange for commodities.

• China has, since 2003, diversified its interests in

Angola in sectors such as construction,

manufacturing, telecoms and oil &gas.

Source: AICEP

Gabon; 3%

Republic of Congo; 10%

Equatorial Guinea; 6%

Sudan; 11%

Other; 21%

South Africa; 19%

Angola; 30%

China’s African Trade Partners, 2006

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• In 2006, Brazil was the third major source of imports to Angola, after Portugal and China.

• The trading volume with Brazil has increased 133% in two years.

• Machinery & Equipment and Food products represent more than 50%of total imports from Brazil

• Last year BNDES (Brazil) approved a USD 1 Bncredit line for construction and rehabilitation of infrastructure

• The Brazilian companies are present in a vast range of sectors, such has construction, real estate, mining or consultancy

Trade flow increase between Brazil and Angola has been outstanding in the last 3 years. Currently more than 700 Brazilian companies export to Angola

0

459.4

944.8

521.3

837.8

1218.2

2005 2006 2007Imports Exports

Source: Ministério do Desenvolvimento, Indústria e Comércio Exterior

Angolan trade flow with Brazil

(USD mn)

Angolan imports from Brazil, 2007Others;

3.0%Consumer goods (non-

food); 10.0%

Oil derivatives;

6.0%

Furniture (Inc.

Medical Equip); 11.0%

Food products;

23.5%

Machinery &

Equipments; 39.0%

10

44.3

33.3

23.8

12.16.7 4.7

2003 2004 2005 2006 2007 2008

International Profile of Angola

• Angola is consistently improving its international profile since 2002.

• The agreement reached with the Paris Club earlier this year will normalise the financial relations with its members.

• Quite recently US Eximbank extended their credit facilities for medium/long term maturities (up to 7 years).

• International appetite for Angolan risk allowed the issuance of USD 1 billion Government Bonds, with future Issuances already scheduled.

• The high volume of international reserves of Angola, together with the short decline of the External Debtare indicators that have a positive effect on the external financial credibility of Angola

• In 2008, the Angolan Ministry of Finance was awarded the best Ministry of Finance of Africa.

0.792.03

4.17

8.44 8.9

10.71

2003 2004 2005 2006 2007 2008

(as a % of GDP)

(USD billion)

Sources: Ministry of Finance and IMF

External Debt to Official Creditors

International Reserves

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Table of Contents


12

6.7

18.2

10.4

2005 2006 2007

5% of population uses Banking Services (Portugal: ca.90%)

Angolan Banking Industry in brief

Source: KPMG; BNA

Banks operating in Angola

3687

5335

2005 2006

219

314

2005 2006

Branches EmployeesTotal Assets

(USD bn) 171%44%45%

1975: Nationalisation of the Financial system

1976: Launch of Banco Nacional de Angola

1991: BNA acts only as a regulator – launch of state owned BPC, BCI and CAP

1996: Launch of 2 privately-owned banks (BAI & BCA)

2001: Launch of BES Angola 2006: Launch of BDA – the Angolan Development Bank

2007: Sonangol starts playing a strategic role in financial markets, acting as relevant shareholder in 5 banks

2008: 19 Banks operate in Angola, of which 5 have Portuguese shareholders

810

1215

1719

1975 1996 2005 2006 2007 2008

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Total Deposits Total Credit

Deposits / GDP

1,8

7,0

3,4

2005 2006 2007

4,7

12,2

7,7

2005 2006 2007

Angolan Banking Industry: Deposits and Credit

Source: KPMG, BNA

(USD bn) (USD bn)

Credit / GDP

2000 2007

10.5%

23.2%

2000 2007

1.3%

10.7%

Euro Area countries: both ratios above 100%

CAGR 61%

• Credit is growing faster than deposits, leading to an increase in the transformation ratio of the economy, from 37% to 57%

• The 5 major banks in Angola have an aggregate market share of 82% of Deposits and 83% of Credit

• Potential growth steaming from the low bancarisation levels is enormous going forward

• BNA is the Central Bank and supervisory body

CAGR 99%

2005 2006 2007 2005 2006 2007

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Trends in the financial sector

• Increase of bancarisation levels, converging to the benchmarks in other African countries, (eg Nigeria with 25% bancarisation level)

• New players in the market• New regulatory package published by BNA • Launching of a Stock Exchange • Access to international capital markets

Macro trends

Sector specific

• Growth of GDP and GDP per capita • Development of non-oil sectors• Foreign Direct Investment• Infrastructure investments by the Government• Excess liquidity • International funding (private/public)

• Expansion of corporate banking

• Emerging of a new affluent segment

• Strengthening of the existing Private banking segment

• Trade finance development

• Innovation in financial products and services

• Harmonization with Basel II

• Development of the Angolan capital market

• Overall Investment banking opportunities: Project Finance, ECM, DCM

Political stability, decline of country risk premium

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Table of Contents


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BES Angola Milestones

The Birth

2001 - 2003

2004 - 2006

2007 - DateDiversification and increased range of

services

Organic Growth

• BES Angola was incorporated in August 2001 with a share capital of USD 10 mn equivalent

• Definition of BESA’sstrategy towards the Angolan market

• BESA opens the first trading room in Angola

• In 2003, local Group GENI acquired 20% of the capital

• Consolidation of the strategy:- Focus on service to the client- Focus on the image (high profile agencies)- Focus on private banking, local & Portuguese companies and Public sector- Focus on profitability• Market segmentation• Launch of the corporate division• Recognition as a bank of excellence (service to the client)• Opening of the new BESA’sheadquarters

• Implementation of the new IT system Flexcube

• Launch of the first Asset Management Company in Angola: BESACTIF

• Network expansion• Leadership positioning in Public Debt Issuance

• Internationalization• Launch of the internet banking service in 2008

• Recognition has one of the big banks in the market

• Best Bank in Award for Angolan Banks (2008)

• Development of investment banking business opportunities

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BES Angola Key Indicators

794

1920

2006 2007

76%

84%

2006 2007

664

1220

2006 2007

• Awarded Best Bank in Angola by Global Finance in 2008

• 5th largest Bank in terms of Assets

• 4rd largest Bank in terms of Net Income

• Most profitable Bank in Angola

Total Assets ROE

Deposits Credit

(USD bn)

302

841

2006 2007

(USD bn)(USD bn)

Increase of the transformation ratio from 46% in 2006 to 69% in 2007

(*) ROE base on national accounting system. The exchange rate considered for 2006 1 USD = 80.28 AKZ and for 2007 1USD = 75.00 AKZ

18

36

34

27

5

73

27

41

44

33

87

75

78

80

104

BPC

BESA

BAI

BIC

BFA

Competitive Position

483

421

1647

1597

1288

794

1246

1918

2304

2304

1920

2327

3553

3656

BESA

BIC

BPC

BFA

BAI

Total Assets(USD bn)

# 5

070605

070605

070605

070605

070605

Net Profit (*)

(USD mn, approx.)

070605

# 4

070605

070605

070605

070605

(*) Net profits according with the national accounting system. Exchange rate 2005 1 USD = 80.77 AKZ, 2006 1 USD = 80.28 AKZ and 2007 1 USD = 75.00 AKZSource: KPMG; Annual Reports

n.a.

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Deposits and Credit: Growing faster than competition, leading to a very strong market share, specially on the credit side, reflecting the focus on the public sector

Source: KPMG, BNA

Market Share of Deposits

6.9%

6.9%

24.7%

24.9%

19.1%

7.4%

13.0%

19.2%

22.0%

23.5%

8.3%

14.5%

17.1%

20.1%

22.4%

BESA

BIC

BPC

BFA

BAI

Market Share of Credit

# 5

070605

070605

070605

070605

070605

2005-2007

+3.3

-4.8

-7.6

+7.6

+1.4

16.0%

6.4%

4.4%

29.0%

29.3%

12.3%

8.9%

15.6%

25.1%

25.1%

11.9%

12.0%

17.5%

20.8%

BAI

BESA

BIC

BFA

BPC

# 4

070605

070605

070605

070605

070605

2005-2007

n.a.

-8.2

+13.1

+5,6

-4.1

20

(EUR million)2006 2007 YoY

(%)1Q07 1Q08 YoY

(%)

324.6

229.5Other Assets

Total Liabilities 547.9 1,220.1 122.7 586.4 1,315.9 124.4

48.8

Total Assets 602.8 1,304.8 116.4

106.3

639.9 1,405.7 119.7

54.9

27.3

504.2

16.4

Transformation Ratio 45.5% 69.0% 60.5 61.7%

744.5 184.5669.7

571.6

63.5

579.1

84.7

370.1

74.6

76.4

68.0

n.m.

71.2

71.8

828.6

149.1

30.2 82.0

54.1 89.8

n.m.

64.3

353.1

30.5

939.0

23.821.5

261.7

331.7

46.5

53.4

24.2

548.4

13.9

Monetary Assets

Credit Portfolio

Total EquityMonetary Liabilities

Client Deposits

Other Liabilities

BES Angola Financial Performance: Balance Sheet

Balance sheet

growing at

outstanding pace

driven by credit

expansion

Liquidity of Angolan

economy and low

bancarisation levels

justify low

transformation

ratios and imply

very interesting

potential going

forward

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BES Angola Financial Performance: P&L

(EUR million)2006 2007 YoY

(%)1Q07 1Q08 YoY

(%)

21.4

21.2

16.3

58.9

22.3

36.7

2.6

34.1

13.8

= Net Income 20.3 33.5 47%

72%

4.8 9.2 91%

14.2

38%

115%36.8

34.9

17.3

89.0

33.1

55.9

3.6

2.6

53.3

-34%

182%

76%

61%

87%

12%

93%

96%19.8

65%

6%

51%

49%

52%

9.0

-1%

26.8

56%

43%

10.5

16.3

0.7

15.6

37%

6.4

39%

6.6

5.4

3.2

15.2

6.5

8.7

0.6

8.1

3.3

43%

+ Net Interest Income

+

+

=

-

=

-

=

-

Fees and Commissions

Capital Markets Results & Other

Banking Income

Operating Costs

Net Operating Income

Net Provisions

Income Bef. Taxes & Min.

Taxes & Minority Interests

Cost to Income

Strong growth

driven by activity

booming

Highly efficient and

profitable operation

Significantly

positive operating

jaw, despite strong

investments and

business expansion

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Table of Contents


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Commercial Approach: Tapping high growth segments

Private & Affluent

Corporate Bkg

Investment Bkg

What we do Key Data

Focus on Institutional and medium-large companies –knowledge of local market and local playersLeveraging on the strong commercial ties between Portugal and Angola (exports and investment)

• Corporate desks• 3,400 clients• Leaders in trade finance with Portugal

In connection with Espirito Santo Investment, the investment banking division of BESA offers a full range of products and services adjusted to the local market

• BESA was mandated for 3 Government Bonds Issues, in a total nominal value of USD 1.45 bn

Focus on private banking customers and senior executives

• 26 branches• 14,000 clients• First AM company in Angola - BESACTIF

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Private and Affluent Banking

• Physical branch network of 26 branches

• BES Angola was the first bank with Private Banking services

in the Angolan market

• Private banking clients have access to a sophisticated

personalised service (e.g. including access to FX services),

with a dedicated private manager

• Strong focus of the excellence of the service and on the

institutional image of BESA

• Private and Affluent clients increased 86% yoy in March 2008

(from 7.6k to 14.1k)

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Private and Affluent Banking: Strongly focused campaign

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• Knowledge of the local market and local players

• Strong positioning on institutional and medium-large companies

• BESA is able to provide a solution or to provide a feed back to the client in a short period of time -BESA’s commitment toward the clients is recognized by the market

• For Portuguese companies doing business in Angola, BESA has created a fully dedicated corporate team

• 2,240 Portuguese companies export to Angola• 200 Portuguese companies operating in Angola 176

are BES Angola clients, and 5 out of 15 Spanish companies

BES Angola is able to give efficient and immediate answers to requests from its corporate clients (Angolan, and international), guaranteeing a wide, integrated offer of products and services.

Corporate Banking: Full service commitment

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Mechanism that mitigates credit and political risk of the country, when exporting to Angola

Anticipation of the revenues for the exporter

LC’s:-BESA opens

- BES confirms

LC’s Discount

Trad

e Fi

nanc

e Li

neR

isk

Insu

ranc

e Ve

hicl

es

Know how in financial structures providing risk mitigation.

Usage of vehicles like Export Credit Agencies or private insurers that take the commercial / political risk of the transaction.

Typically covering Sovereign risk, but also possible to structure Export Trade Finance Operations with private companies.

These products are applicable for exports or for foreign investment in Angola.

Corporate Banking: Full service and leadership in trade finance

BESA is one of the top leading banks in Angola in trade finance. The quality of its service and the time efficiency of BESA – a key issue for this type of operations - are well appreciated by the market

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Investment Banking: Offering full serviceBESA has created an investment banking division, in connection with Espirito Santo Investment, to provide a

global service adjusted to local market needs. For each product / service, is selected a joint-team that might include members from different Espírito Santo Investment offices, in accordance with the expertise needed (product line) and the geographical scope of each project (market line). This is an emerging area of business in Angola that will increase significantly in the future.

• BESA was mandated in last year, together with BAI, to lead the 3.5 USD bn Government Bond Issuance

• The construction & rehabilitation and the booming in the private investment are business opportunities for the development of structuring and project finance.

• The launch of the stock exchange expected in the short term anticipates new opportunities in Capital Markets, Privatizations, M&A and Brokerage

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Investment Banking: Leadership in Government Bond Issuance

Issuance Date Amount Leaders

Nova Vida - Fase I 2004 USD 100 mn

Airplane Acquisition (TAAG) Nov 2005 USD 200 mn

Co-leaders:BESA, BFA, BAI

Public Investments Apr 2007 USD 400 mnCo-leaders:

BFA, BPC, BAI

Investments - Cabinda Jul 2007 USD 250 mnLeader:BESA

National Reconstruction Nov 2007 USD 1,000 mnCo-leaders: BESA, BAI

Ministry of Finance

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Strategic steps towards sustained growth in Angola

Organisational

Commercial Innovation

Expansion of the branch network from 26 branches currently to 50 branches in 2010

• Implementation of a new information system (FlexCube), which allows the Bank to face

strong growth and a more competitive market:

• Development of a new global risk division

Dedicated corporate centres, to Iberian clients and to attend the geographical dispersion of

companies throughout Angola

Training: qualified human resources are scarce, and the demand for high skills in the market is

growing

Launch of the first Asset Management company in Angola: BESACTIF

Network improvement: new offices for corporate and private clients

New services, such as internet banking, will be available in the short term, as a consequence

of the adoption of FlexCube

Fully dedicated team to Private Banking segment

Further investment banking business opportunities, namely brokerage and Investment

Banking as a natural consequence of new regulation and the launch of the Stock Exchange

31

Wrap up

DepositsMarket Share Organic based activity growth, leveraging

on expansion of branch network and client acquisition Credit

Market Share

Profitability Maintain the leadership in profitability in the Angolan banking system

8.3%

12.0%

Leveraging on the expected evolution of the Angolan Economy and financial system, BES Angola should become a multi-specialist financial

Group

32

Disclaimer

This document may include certain statements relating to the Banco Espírito Santo Group that are neither reported financial results nor other historical information. These statements which include targets, forecasts, projections, descriptions of anticipated cost savings, statements regarding the possible development or possible assumed future results of operations and any statement preceded by, followed by or that includes the words “believes”, “expects”, “aims”, “intends”, “may” or similar expressions or negatives thereof are or may constitute forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995, regulations, and case law.

By their nature, forward-looking statements are inherently predictive, speculative and involve risk and uncertainty. There are a number of factors that could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements. These factors include, but are not limited to, changes in economic conditions in individual countries in which the BES Group conducts its business and internationally, fiscal or other policies adopted by various governments and regulatory authorities of Portugal and other jurisdictions, levels of competition from other banks and financial services companies as well as future exchange and interest rates. Certain of the factors that could affect actual results and developments are described in Banco Espírito Santo’s Annual Report.

In addition, even if the BES Group’s results of operations, financial condition and liquidity and the development of the industry in which it operates are consistent with the forward-looking statements contained in this presentation, those results or developments may not be indicative of results or developments in future periods. Banco Espírito Santo does not undertake any responsibility to release publicly any revision to the forward-looking information included in this news release to reflect events, circumstances or unanticipated events occurring after the date hereof.

the core of international business: angola• 4rd largest bank in terms of net income • most...

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