OREANDA-NEWS. Fitch Ratings has revised Banco Angolano de Investimentos S.A.'s (BAI) Outlook to Negative from Stable, while affirming its Long-term Issuer Default Rating at 'B+'. This follows a recent similar action on the Outlook of Angola's sovereign rating (see 'Fitch revises Angola to Negative: Affirms at B+' dated 25 March 2016 on www.fitchratings.com)

A full list of rating actions is detailed at the end of the commentary.

KEY RATING DRIVERS
IDRS, SUPPORT RATING AND SUPPORT RATING FLOOR
BAI's IDRs, Support Rating (SR) and Support Rating Floor (SRF) reflect a limited probability of support for BAI from the Angola authorities.

The probability of support from the authorities reflects a high propensity to support the bank and the sector, BAI's systemic importance and evidence of extraordinary support in the form of re-capitalisation of a large bank that failed in 2H14.

The probability of support is constrained by the authorities' ability to support, as reflected in Angola's sovereign rating and takes into account also a highly concentrated economy and banking sector and a high proportion of foreign currency liabilities that would be more onerous to support.

VIABILITY RATING
Fitch views BAI's Viability Rating (VR) as being under pressure from a weakening operating environment in Angola. Angola's economy is highly reliant on oil export revenues and falling oil prices have led to slower growth, a weakening local currency, higher inflation and tighter monetary policy.

A weaker operating environment eroded BAI's core earnings in 2015. However, net income rose 20% year-on-year, significantly enhanced by gains on securities indexed to the exchange rate between local currency (kwanza) and the US dollar. Following a significant weakening of foreign currency liquidity across the sector BAI has implemented a weekly limit on US dollar cash withdrawals. Fitch also believes that the operating environment is likely to have a detrimental effect on future asset quality, particularly in light of the bank's high asset concentrations by sector and single obligor. The VR also takes into account BAI's adequate capital ratios and strong local currency liquidity.

RATING SENSITIVITIES
IDRS, SR AND SRF
BAI's IDRs, SR and SRF are sensitive to a downgrade of Angola's sovereign rating, given its Negative Outlook.

VR
The bank's VR is sensitive to continued deterioration of the operating environment, which may be indicated by a downgrade of the sovereign rating of Angola. The VR is also sensitive to deteriorating asset quality, which may lead to losses and erosion of capital ratios.

The rating actions are as follows:

Banco Angolano de Investimentos S.A.
Long-term IDR affirmed at 'B+'; Outlook revised to Negative from Stable
Short-term IDR affirmed at 'B'
Support Rating affirmed at '4'
Support Rating Floor affirmed at 'B+'
Viability Rating affirmed at 'b'