2013 BSP | Annual Report
Bank of South Pacific Limited
The Vision
To be the Leading Bank
in the South Pacific
Key FeaTures oF BsP’s sTraTegy
• A Focus on Sales & Service
• High Performing Teams
• Operational Excellence
• Profitable Growth
BsP’s Core Values
•
Integrity
• Leadership
• People
• Professionalism
• Quality
• Team Work
ConTenT
Chairman’s Report
4
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A Brief History of Bank South Pacific
6
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Board of Directors
8
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Chief Executive Officer’s Report
10
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2013 Strategic Business Unit Review
13
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Corporate Governance Principles
23
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Historical Summary 2013
34
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Contributions by BSP to PNG
35
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Overseas Branches and Subsidiaries
36
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42
Directors’ Report and Financial Statements
• Directors’ Report
•
•
•
•
•
• Notes to the Financial Statements
Statement by the Directors
Statement of Comprehensive Income
Statement of Financial Position
Statement of Changes in Shareholders’ Equity
Statement of Cash Flow
42
44
45
46
47
48
49
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Independent Audit Report
90
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Shareholder Information
92
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Branch Network
98
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Corporate Social Responsibility
104
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1
BSP Annual Report 2013
BsP loCaTions
Key
Branches l
Sub Branches l
Agents l
PaPua new guinea
• 42 Branches
• 38 Sub Branches
• 226 Agents
• 300 ATMs
• 10,800+ EFTPoS
• XX Premium Service Centres
Fiji
• 18 Branches
lae
• 6 Priority Centres
Branches
Lae Top Town
• 3 FX Bureau’s
Lae Market
Lae Commerical
• 107 aTMs
Premium service Centre
• 1, 589 eFTPos
Lae Top Town
PorT MoresBy
soloMon islands
Branches
Boroko, Port Moresby,
Harbour City, Waigani BC, Waigani Dr
BsP First
Gordons, Harbour City,
Port Moresby, Vision City
Premium service Centres
Gordons, Waigani BC,
Harbour City, Water Front, Vision City
• 7 Branches
• 7 agencies
• 8 Branchless Banking agents
• 18 aTMs
• 120 eFTPos
BsP Fiji
BsP soloMon islands
2
BSP Annual Report 2013
PaPua new guinea
• 42 Branches
• 12 Premium Service Centres
• 39 Sub Branches
• 226 Agents
• 297 ATMs
• 11,702 EFTPoS
Fiji
• 18 Branches
• 6 Priority Centres
• 3 FX Bureau’s
• 106 ATMs
• 1,759 EFTPoS
soloMon islands
• 7 Branches
• 7 Agencies
• 8 Branchless Banking Agents
• 18 ATMs
• 120 EFTPoS
3
BSP Annual Report 2013 CHAIRMAn’S
REPORT
KOSTAS COnSTAnTInOu, OBE
Chairman
The Bank South Pacific Group has again achieved sound results
in 2013, despite a slowdown in the Papua New Guinea economy.
Profitable operations translated to solid balance sheet growth
once again. In 2013 BSP moved from transformation to
implementation, balanced by a sharper focus on strategically
critical areas and cost control measures. These measures have
supported short term results in 2013 and are also expected to
have positive impacts in succeeding periods.
In terms of expenses,
increases have been experienced
mainly in the areas of depreciation and amortisation related
to transformation capital expenditure over recent years and
in premises and equipment expenses. Management reviewed
asset start dates and estimated useful lives of capitalized
projects which resulted in additional depreciation, amortization
and impairment losses being taken in 2013. These increased
charges have been the main contributors to a cost to income
ratio for the Group of 55%, up from 53% in 2012.
The Group achieved a consolidated operating profit before tax
of K607.0 million for the 2013 financial year, an 11.3% increase
on the consolidated 2012 operating profit of K545.3 million.
The Group result after tax is K436.8 million. Total assets of the
Group increased, by approximately K2.476 billion to K15.809
billion. The bank’s achievements are similarly strong with pre-
tax profits growing 10.7% to K592.9 million, from K535.4 million
in 2012. Total assets of the bank at the end of 2013 are just over
K15.324 billion.
The customer loan and receivables portfolio has seen net growth
of K502 million to K5.3 billion. Customer deposits continue to
grow strongly, especially in the corporate segment in Fiji, and
in the retail and government segments in PNG, achieving a PNG
market share of 56%.
The bank and group capital base remains sound. Total capital
adequacy at the end of 2013 is 18% notwithstanding the impact
of continued growth in balance sheet assets as well as total
dividend payments of K271.686 million and just over K3.3 million
of shares bought back in the year. The capital adequacy ratio
exceeds the minimum Bank of Papua New Guinea prudential
requirement of 12.00%.
Group revenues have increased by 18% during the year, largely
on the strength of foreign exchange spot and forward business
transacted for the most part, in the corporate segment of the
market. With generally low interest rates and competitive
pricing in the corporate lending markets in PNG and Fiji during
2013, most of the revenue growth has come from non-interest
income streams, in particular foreign exchange earnings in PNG.
Some growth has also been achieved with customer transaction
volumes, although this has slowed relative to the last few years
due to the slowdown of the PNG economy.
Continued growth of electronic banking facilities mainly through
the network of EFTPoS agents and devices and increased mobile
phone banking transactions, are compelling features of BSP’s
customer engagement activities in 2013.
4
In PNG, BSP Group has been a leading performer. Most of
the Group Profit growth of 7.1% and asset growth in 2013 is
attributable to the bank in PNG. The bank dominates market
share in PNG, with its share of loans at 46%, and deposits at
56%. These results have been achieved despite a slow-down in
PNG’s economic growth from 9.2% in 2012 to around 5 % in
2013. The decrease in economic growth has been attributed to
the winding down of the construction phase of the LNG Project
and also lower commodity prices at the global level which
impacted on exports.
A significant decline in the value of the kina against major
currencies and higher inflation rates were also factors that
affected the business environment in PNG. The Government’s
2013 National Budget decided on some key priorities which
included investment in infrastructure, social services, law and
order and funding for agriculture, which also provided some
growth impetus during the year. The political environment
remained stable during the year, promoting positive GDP trends.
In Fiji the Bank has improved its performance in 2013, in an
extremely highly competitive market. BSP Life in Fiji has also
performed strongly, and remains the largest life insurance
business in that market. In terms of business conditions,
economic growth has improved and there are encouraging
signs of increased investment, and it has been pleasing to note
that tourism and sugar, the stalwarts of the Fijian economy, are
the areas where recovery has continued in 2013.
The Bank has again yielded good results in the Solomon Islands,
where a strong market position is being developed in electronic
banking channels. Foreign aid continues to give impetus to
economic performance, with planned growth in activity around
public capital projects. Forestry and fisheries exports have
performed well during 2013. The RAMSI presence is winding
down, with new arrangements helping to preserve investment
confidence.
BSP Annual Report 2013 Whilst BSP’s performance continues to trace the positive trends
in the economies of PNG and its Pacific neighbours, it is also
a strong proponent of the financial inclusion program in the
Pacific. Investments continue to be made in technology, risk
management and other resources, to extend banking services
at minimal cost to customers in parts of the market that have
poor access to banking services.
A concerted effort is being made to introduce low cost, simple
accessible savings products for children and students. The Bank
has been collaborating actively with the central banks in PNG,
Solomon Islands, and Fiji, to support and participate in financial
literacy exercises, and publicity campaigns.
BSP has continued to engage with, and be a part of, the
communities where it operates. In 2013 Community support
projects have continued in PNG, Solomon Islands and Fiji, worth
over half a million Kina.
BSP Group also supports local sports and charity organisations
as part of this community engagement, and as a responsible
corporate citizen of the Pacific, BSP continues to work in
partnership with community and government organizations to
deliver programs that sustain and improve the lives of people in
PNG and the Pacific.
PNG’s growth prospects remain positive and Fiji and the
Solomon Islands have shown promising signs of recovery and
return to normalcy. As large projects in PNG change PNG’s
economic capacity, and anticipated public
infrastructure
investments progress, the country moves closer to realising its
development potential.
Pacific regional economic relationships and interactions are also
anticipated to grow, and BSP plans to be part of that growth,
delivering valued, effective financial products and services to its
markets, in an efficient and responsible manner.
BSP Group is also reaching a stage in its life cycle in PNG where
it can realistically consider further diversification of its Pacific
business, and at the same time develop a focus on growth
opportunities in growth regions adjacent to the Pacific.
The 2013 results demonstrate again, how a committed,
motivated, enterprising group of people, working as a team,
can deliver outstanding results across diverse markets and
cultural settings.
BSP will continue to meet its challenges, return more profitable
results for shareholders and ultimately serve our customers
better in 2014.
Being the Offical Sponsor of the 2015 Pacific Games is one
such initiative and we are proud to work closely with the PNG
Government and our Pacific neighbours, to ensure that it is
successfully hosted in Port Moresby.
The coming years will present their own challenges and BSP
Group with its local strength and presence in the region, is in a
great position to anticipate market conditions, adapt to changes
and continue to remain competitive.
In 2014, an improving but fragile global economy will continue
to pose challenges. Growth rates are expected to slow slightly
in the emerging market economies of Asia, Africa, Eurasia and
South-Latin America. In the traditional developed economies
of Europe and North America the outlook is improving, but
fundamentals are not robust, and they are forecast to remain
subdued.
Kostas Constantinou, oBE
Chairman
ToTal asseTs
NeT ProfiT afTer Tax
n
o
15.81
i
l
l
i
B
a
n
K
i
13.33
11.68
n
o
i
l
l
i
m
a
n
K
i
436.828
407.744
355.947
9.40
10.03
283.147
257.118
2009
2010
2011
2012
2013
2009
2010
2011
2012
2013
5
BSP Annual Report 2013
a BrieF hisTory oF BanK souTh P aCiFiC
Bank South Pacific Limited opened its doors in 1957 in Port Moresby as a branch of the
National Bank of Australasia Limited. In 1995 a consortium of Papua New Guinea businesses
acquired the bank creating the first and only PNG private sector owned bank.
Bank South Pacific purchased the State Owned - Papua New Guinea Banking Corporation
(PNGBC - formerly CBA PNG) in 2002 creating the largest Bank in PNG. Other acquisitions
followed: National Bank of Solomon Islands 2005, Habib Bank in Fiji in 2006, Colonial Group
of Companies (Banking & Life Businesses) in Fiji in 2010.
Bank South Pacific rebranded to become “BSP” in 2008. Our shareholders include major
PNG Institutions – IPBC, Nasfund, Nambawan Super, Petroleum Resources Kutubu, Credit
Corporation, MVIL, PNG Teachers Savings & Loan, Comrade Trustees, and the International
Finance Corporate (IFC).
In 2012, BSP’s account opening process employing a tablet computer and instant card
issuance, won the award for the world’s Best Bank Led Mobile Money Program at the 2012
Connected World Global Awards.
Bank South Pacific continues to be a dominant force in the market leading the way with
innovation and technology.
Today BSP has the largest fleet of EFTPoS and ATMs in the country, including an increasing
customer base in electronic and mobile banking channels. Over 80 million transactions
were processed through all electronic and mobile phone channels in 2013.
GoiNG WHere THe oTHer BaNKs DoN’T
a BsP rural team travelling up the Purari river,
Gulf Province to set up an agent in Baimuru.
6
BSP Annual Report 2013 BaNKiNG oN THe Go
in 2013, new features were introduced
to BsP’s Mobile Banking channel
including a domestic remittance
product, known as Wantok Moni.
Wantok Moni facilitates the
remittance of money from BsP
customers to non-banked relatives
and friends and the receiver of the
remittance is able to transact using
these funds at any BsP efTPos terminal
or withdraw from a BsP aTM without
the need for a debit card.
7
BSP Annual Report 2013
BoarD of DireCTors
Kostas Constantinou, oBE | Chairman |Director since April 2009. Appointed Chairman
February 2011.
Kostas Constantinou is a prominent business figure in Papua New Guinea, holding a number of high level
public and private sector appointments. He is a Chairman of various companies, including Airways Hotel
Limited & Airways Residences Limited, Lamana Hotel Limited, Lamana Development Limited, Hebou
Constructions, Alotau International Hotel and Gazelle International Hotel. He is a Director of Heritage
Park Hotel, Honiara, and Grand Pacific Hotel, Fiji. Kostas is a Director of two other listed companies: Oil
Search Limited and Airlines PNG Limited. He is Chairman of 2015 Pacific Games Authority since 2011,
Deputy President of Employers Federation of Papua New Guinea, Honorary Consul for Greece in Papua
New Guinea and Trade Commissioner of Solomon Islands to Papua New Guinea.
roBin FlEming | Group CEO | Director since June 2013.
Robin Fleming was appointed Group CEO of Bank of South Pacific Limited in June 2013. Before his
appointment as Group CEO, he had been Deputy CEO and Chief Risk Officer since 2009. Prior to that,
Mr Fleming held senior executive roles as Chief Risk Officer, General Manager Corporate & International,
and Head of Risk Management with BSP. Prior to the merger of Bank of South Pacific Limited and PNGBC
Limited, Robin held senior management roles with PNGBC. He has worked in PNG for over 30 years and
holds a MBA and a Master of Management from Charles Sturt University.
tom Fox, oBE, BEc | Deputy Chairman, Non - Executive Director | Director since June 1993.
Thomas Fox holds a Bachelor of Economics degree from the University of Papua New Guinea. He
commenced his career with the Reserve Bank of Australia, and gained experience in senior management
roles within semi-government institutions, and private sector companies, including serving as the
Managing Director of the Investment Corporation of Papua New Guinea for eight years. His other current
directorships include, BSP Capital Limited, Teyo No. 1 Limited and Akura Limited. Mr Fox is also a trustee
for the Institute of National Affairs, and a foundation member and Fellow of the PNG Institute of Directors.
gErE a aoPi, CBE, mB a |Non - Executive Director | Director since April 2002.
Gerea Aopi has achieved several tertiary degrees in Papua New Guinea, and a Masters of Business
Administration from the University of Queensland. Mr Aopi has substantial public service and business
experience in Papua New Guinea, including Secretary of Finance & Planning and Managing Director
of Telikom PNG Limited. He presently holds the position of Executive General Manager, External &
Government Affairs and Sustainability at Oil Search Limited. He was previously the Chairman of Telikom
PNG Limited and Independent Public Business Corporation (IPBC). Mr Aopi is a Director of Oil Search
Limited, Steamships Trading Company Limited and is involved in a number of other private sector and
charitable organisations in Papua New Guinea.
Dr ila tEmu , PhD, mEc | Non - Executive Director | Director since 2003.
Dr Ila Temu was appointed to his current role as Country Manager Barrick PNG in June 2011. Prior to this,
he held senior executive roles in Placer Dome Niugini both overseas and in PNG. He has also held senior
positions in a number of other public organisations including Senior Lecturer in Economics at UPNG,
Director of the National Research Institute and Managing Director of Mineral Resources Development
Company (MRDC). Dr Temu held director and membership roles in Dome Resources, Kina Finance Ltd,
PNG Chamber of Mines and Petroleum, IPBC, PNG Employers Federation and was Chairman of PNG
Ports Corporation Ltd for 5 years. He is currently a Director of National Petroleum Company of PNG Ltd,
Kina Petroleum Ltd and a member of the Governing body of the Divine Word University. Dr Temu holds
a Bachelor of Economics (Hons) from the University of Papua New Guinea, a Masters in Agricultural
Development Economics from the Australian National University, Canberra, Australia and a Ph.D in
Agrcicultural Economics from the University of California, Davis, USA.
8
BSP Annual Report 2013 sir nagora Bogan, KBE, llB | Non - Executive Director | Director since 2003.
Sir Nagora Bogan graduated with a Bachelor of Law from the University of Papua New Guinea in 1978.
In 1992, Sir Nagora was appointed Commissioner General of the PNG Internal Revenue Commission. In
1996, he was appointed as PNG’s Ambassador to the United States with accreditation as Ambassador to
Mexico and High Commissioner to Canada. In 2002, Sir Nagora became a private business entrepreneur.
He is Chairman and CEO of In Touch Media Limited, a multimedia/record label company, Chairman of
Nambawan Super Limited and Director on several private company boards. Sir Nagora received his
knighthood during 1997 in recognition of his distinguished public service.
lylE ProCtEr, mEc, FFin| Non - Executive Director | Director since July 2004.
Lyle Procter has been a career central banker, having spent 36 years with the Reserve Bank of Australia.
He also spent several years with the Australian Department of Foreign Affairs. Since retiring from the
Reserve Bank, Mr Procter has worked as a consultant to the International Monetary Fund, Washington
and the Asian Development Bank, Manila. He has also worked privately as a consultant to the Australian
banking industry, and in several South-East Asian countries. Other current directorships include Sun
Hung Kai and Co. Ltd, Allied Overseas Ltd, Tanami Gold NL and Eurogold Ltd.
FrEDa talao| Non - Executive Director | Director since April 2012.
Freda Talao being a lawyer by profession holds a Law Degree from University of Papua New Guinea, a
Masters Degree from Bond University, Queensland and is currently undertaking Doctoral Studies at TC
Beirne School of Law, University of Queensland. Freda has extensive work experience in the government,
private, NGO and development sectors in PNG. Ms Talao has previously been on several Boards, including
the Mama Graun Conservation Trust Fund, Liklik Dinau Trust Fund, Individual and Community Advocacy
Forum (ICRAF), Civil Aviation Authority (CAA), National Airports Corporation Board (NAC) and Airport
City Development Limited (ACDL). She is also currently a member of the External Stakeholders Advisory
Panel (ESAP) to the Morobe Mining Joint Venture (MMJV) which owns the Hidden Valley Gold Mine in
Morobe Province and Australian Institute of Company Directors.
gEoFFrEy J. r oBB, mBa| Non - Executive Director | Director since April 2012.
Geoffrey Robb is a highly qualified and experienced banker having occupied several senior Executive
positions including Head of Resource Finance at Bank of America, and Global Head of Acquisition Finance
and Head of Complex and Strategic Transactions with ANZ Banking Group. As Head of Bank of America
in Melbourne, he led resource financings with BHP, CRA, Elders Resources, Bougainville Copper, Ok Tedi
and Porgera. He holds MBAs from the International Management Institute Geneva and Macquarie
University. Mr. Robb has travelled extensively in emerging markets and has received the Medal of the
Order of Australia for his services to mountaineering and charity. He is Chairman of the Board Audit, Risk
and Compliance Committee and is also on the Board of BSP Capital Ltd.
ErnEst Brian gangloFF | Non - Executive Director | Director since November 2013.
Ernest Gangloff Ernie is an Accountant and registered with CPA PNG and the Accountants’ Registration
Board. Ernie has extensive experience in the areas of risk management, internal audit and corporate
governance. Ernie has over 30 years professional experience with over 15 years in Senior Management
positions. Ernie retired as Partner with Deloitte in May 2013 and established Gangloff Consulting in June
2013. He is also a director of Gangloff Consulting Ltd, Laurabada Investments Ltd and New Britain Palm
Oil Ltd. Ernie is a Council Member of the of the Institute of National Affairs and the Vice President of the
Business Council of PNG.
9
BSP Annual Report 2013 GROUP CEO’S
REPORT
ROBIn FLEMInG
Group Chief exeCutive offiCer
I take great pleasure and pride in reporting to shareholders
another record financial result for BSP in 2013. The net profit
after tax of K436.828 million represented an increase of 7.1%
on our 2012 results.
Our Chairman, Kostas Constantinou, provided details of our
strong financial performance and the underlying economic
fundamentals which the BSP team optimised to the benefit of
our shareholders.
Papua New Guinea continues to be the predominant driver of
BSP’s performance. Economic growth was maintained in our
home market for the 14th consecutive year. GDP growth for
2013 was estimated at 5.1% with strong contributions from
sectors benefitting from PNG LNG construction related activity.
The US$20 billion PNG LNG project has proved to be a watershed
for the PNG economy. Its completion in 2014 with first gas in
the second half of 2014 represents a significant achievement for
the project sponsors and the PNG Government. The multiplier
effect of the project across numerous business sectors has been
substantial and in many ways transformational.
Whilst the construction phase of the PNG LNG project may be
nearing completion the revenues associated with export of
the LNG will provide support for Government infrastructure
developments and spending in areas such as health and
education.
Business confidence remains buoyant on the back of a PGK15
billion budget for 2014 and announcements in late 2013 by
Interoil and Total which could result in another LNG construction
project for PNG in the next 2 to 3 years.
income growth
in our
BSP’s 2013 results reflect strong
international services product
lines which our Corporate
and Treasury sales teams actively promoted. There was also
continued growth in our net interest income where increased
loan assets have partially offset some margin compression in
response to a more competitive lending market.
Equally pleasing was the income contribution emerging from
BSP’s Mobile Banking suite of products. Enhancements to
telephone banking functionality permitted more Retail clients
to access banking facilities by way of our electronic channels
efficiently in a lower cost and more convenient manner.
Strategically BSP has over the past 5 years positioned itself to
optimise its capacity to meet the growing demands of a broad
client base across a diverse geography. This transformation
has involved significant capital expenditure in our properties,
information technology systems and infrastructure, as well as
our products and channels.
The majority of the large projects involving our properties are
completed or drawing to a close. BSP’s new Harbour City Port
Moresby branch was opened in the 2nd half of 2013. This branch
is located in BSP Haus at Harbour City Port Moresby, a joint
venture with major clients, and replaces the former Douglas St
Port Moresby branch which was closed in the 1st half of 2013.
A new branch was opened in Tari and the new BSP Rural at
Maprik is expected to open in the 1st quarter of 2014. The
new Pacific Operations Centre and Gordons Operations and
Data Processing Centre, both in Port Moresby, and the new
Commercial Centre in Lae, will all be complete and operational
in the 2nd half of 2014.
Branches such as Mt Hagen and Buka had upgrades completed
with Waigani Banking Centre nearing completion in early 2014.
During 2014 there are upgrades planned for Tabubil and Lihir
branches.
Improvements in, and refinements to, the physical branch
infrastructure have been complemented by the introduction of
queuing systems in branches in Port Moresby. This has resulted
in reduced waiting times for our customers and is a tangible
illustration that BSP is acting to improve the service experience
for our customers. These learning’s are shared with branches
outside of Port Moresby and waiting and service times have
improved in those branches as well. What has been recognised
during this process is the largely untapped sales potential of the
BSP branch network and this will be a key component of BSP’s
strategy in 2014.
The substantive investments in critical information technology
infrastructure is all but complete with the major project in 2014
being the relocation of core systems from the current location at
Waigani in Port Moresby to Gordons in Port Moresby once the
Gordons Operations and Data Processing Centre is complete.
This project will be accorded the importance and resource
allocation deserving of one which involves core systems.
1 0
BSP Annual Report 2013 New systems brought in to production in 2013 included phase
1 of the trade finance platform under licence with Wells Fargo,
an automated loan origination system for unsecured personal
loans and the first phases of the automated cheque processing
project which involves Real Time Gross Settlement, the Central
Bank’s new Kina Automated Transfer System, and by mid-2014
cheque imaging and truncation.
There were further refinements to our internet banking online
offerings and our mobile banking suite. Human Resource’s new
Human Capital Management system was implemented with the
payroll function to be put into production in the 1st payroll of
2014 after an exhausting dual payroll processing programme
that was undertaken over an extended period.
Our overseas operations have also commenced major IT
upgrade projects with BSP Fiji and BSP Life Fiji initiating
core system replacements for their respective operations.
These system upgrades will not only provide our banking
and Life businesses with up to date operating systems, but
also improved productivity and increased customer sales and
service capabilities.
In the Solomon Islands a “lift and shift” project was successfully
implemented whereby BSP PNG’s suite of mobile banking
products and channels were migrated and rolled out in Solomon
Islands.
As indicated earlier the costs of investments of this magnitude
are not
insubstantial and the multi-year nature of the
transformation has been such that the full deprecation costs
associated with the capital expenditure programme are now
being captured in our expense base. Understanding that
much of the transformational costs have been related to
more aggressively amortised IT infrastructure, IT software and
systems, product development and enhancement, the higher
depreciation expense is expected to normalise by the end of
2016.
program integrated with our vision, our values, our culture. The
linkage of our vision and values of integrity, professionalism,
leadership, quality, people, teamwork is intrinsic to embedding
a true service and sales culture within BSP.
BSP’s optimum sales and service culture is to place customer
satisfaction at the forefront of our planning process and our
operational activities. Customer satisfaction should then
translate to improved returns for our shareholders.
Equally important will be renewed emphasis on training and
career development of our staff. This will involve product
knowledge to provide staff with the confidence to sell our
products to our customers, specialist skills training, leadership
development, and tailored multi year programmes for our
future leaders.
During 2013 three of our middle management staff participated
in a 3 month secondment to Barclays Africa Bank Limited
in South Africa. This was an outstanding success thanks to
Management at Barclays Africa Bank Limited and our team
in Port Moresby. The intent is to continue the secondment
programme in 2014 and build up a cadre of staff who will have
had real work exposure in international banks.
Financial inclusion remains a key objective of our Retail banks’
strategy. Our BSP Rural sub branch network and our agency
network which complements our main branch network, provide
BSP with the capability to add new customers using our world
class tablet technology. The emerging SME market is also an
area where Retail has developed Smart Business Products to
meet the needs of this customer group and which will be rolled
out more aggressively in 2014.
I thank all staff for their contributions and efforts in 2013 and
look forward to their ongoing support in 2014. I am confident
that with the support of the board, the management team and
the committed and dedicated staff throughout the bank, BSP
will achieve the goals that have been set.
invested heavily
in physical assets,
Having
information
technology infrastructure, systems, products, in addition to
new and improved channels, strategically the focus for BSP
is realigned from project work to benefit realisation. These
investments are seen as enablers that provide our staff with the
tools to improve productivity and increase our sales capability.
A key component of the strategic related effort in 2014
therefore will be an organisation wide sales and service
ROBIN FLEMING
grouP ChiEF ExECutivE oFFiCEr
1 1
BSP Annual Report 2013
flaGsHiP BraNCH
BsP’s flagship Harbour City Branch
at BsP Haus. BsP’s new Harbour City
Port Moresby branch was opened
in the 2nd half of 2013. This branch
is a joint venture with major clients,
and replaces the former Douglas st
branch which was closed in the 1st
half of 2013.
1 2
BSP Annual Report 2013 2013 STRATEGIC
BuSInESS unIT REVIEW
The daily execution of the bank’s business operations is the
responsibility of the strategic business units (SBUs), Retail
Banking, Corporate, Treasury, Paramount Banking, Group Risk
Management, Human Resources, Operations and Finance &
Planning.
Highlights of each SBU performance in 2013 include:
reTail BanKing
2013 marked another year where BSP extended the outreach
of banking services across Papua New Guinea. The Branch
network saw the opening of a new branch at Tari in Hela
Province and the relocation of the former Douglas Street
branch to new premises at BSP Haus, Harbour City. Our sub-
branch (BSP Rural) network was increased to 39 locations. A
concerted push was also made to increase the number of bank
agencies operating across PNG and by the end of 2013, over
226 agents were in place. This included 7 agents operating
under the SVS retail chain’s Supa Village Stoas. The expansion
of branches, sub-branches and agencies into rural areas of
PNG was supplemented by the continued roll-out of EFTPoS
merchant facilities and this greatly increased people’s access
to banking.
Work continued to provide customers with a choice of products
to meet their needs and life cycle; this included the new Kids
Saving Account which was designed to help parents teach their
children to develop a savings habit for the future. A new Kundu
transaction account was also introduced with a packaged
service charge structure to provide customers with further
choice to meet their specific banking needs and habits. A new
lending product, the Savings Secured Loan, was introduced to
provide customers with an alternative to the standard personal
loan product offered by financial institutions in PNG.
BSP continued in its efforts to support and develop the nascent
SME (Small & Medium Business) sector. Emphasis was placed
on providing SME customers with a pathway for growth
through the adoption of electronic payment systems such as
EFTPoS to help them develop a financial footprint to support
requests for credit finance. These activities were supported by
BSP’s Banking Education Unit which offered tailored training to
different market segments serviced by BSP.
average and customer wait-times in branches were dramatically
reduced as learning gleaned from an automated ticketing/
queuing system were applied in branches across the network.
BSP continued to pilot new technology during 2013 including
deposit taking ATMs. At present 4 ATMs are used to accept
cash deposits and the functionality to accept cheque deposits
is scheduled to be rolled out in 2014.
New features were also introduced to BSP’s Mobile Banking
channel in 2013 including a domestic remittance product. The
service known as Wantok Moni facilitates the remittance of
money from BSP customers to non-banked relatives and friends
and the receiver of the remittance is able to transact using these
funds at any BSP EFTPoS terminal or withdraw from a BSP ATM
without the need for a debit card. This is an attractive product
in Papua New Guinea which has a large unbanked population
but significant numbers have a mobile phone.
Overall growth in Mobile Banking transactions was exceptionally
strong in 2013 and the use of this channel is reducing the
pressure on branches in the provision of over-the-counter
transactions.
On the Sales and Service front, perhaps the most significant
change in the Retail space has been the merger of the Retail
and Network Strategic Business Units. This has introduced
much efficiency in the provision and sale of retail financial
services and this is set to continue during 2014 through the
restructuring of Sales and Service structures in branches to take
advantage of the many technological and process changes that
have been introduced in BSP over the past few years.
CorPoraTe
Corporate Banking contributed significantly to BSP’s improved
performance in 2013. The major driver was improved cross sell
of non-lending solutions. The result was further strengthened
by disciplined expense management with direct costs reducing
by 7%.
Net interest Income increased by 10% compared to the prior
year, driven by slower growth due to a slowing economy and
intense competition for loans.
The introduction of a loan origination and processing system
helped BSP reduce the average personal loan approval and
funding timeframe from 48 hours to less than 2 hours on
Other income increased by 60%. Strong growth in the sale of
foreign exchange products and hedging solutions contributed
to this result.
1 3
BSP Annual Report 2013 owners of supa V stoas are also BsP agents.
In 2013, the Corporate lending book increased by 5.3% and
deposits increased by 7.8% . This includes BSP’s diversification
into USD lending for our local and international customers.
Other factors impacting loan growth included prudent credit
risk management and exit from identified “watch list” facilities.
The key product initiative completed in 2013 was our new trade
finance solution, developed in conjunction with Wells Fargo,
one of the world’s largest financial institutions. Through this
collaboration we will be able to provide world class solutions
covering letters of credit, document collections, etc.
Service and sales programs continue to be the key focus and
continued focus to uplift non-lending fees and cross-sell of our
“whole of Bank” solutions.
The Corporate vision remains unchanged “to be the leading
financial services team excelling in customer service; through
customer first, best people, innovation & communication”.
The corporate team remains focused on our Customer First
program, which involves putting customers at the top of our
priorities – establishing a “customer first – I care” culture.
To better understand customer expectations, during 2013 we
appointed an independent market research firm to conduct our
Benchmark Corporate Customers satisfaction survey across 400
of our customers.
The survey highlighted a number of key strengths, including
BSP relationship managers, extensive product range; and the
convenience and safety of our branch network. However
there are areas for improvement; including adding value,
responsiveness, branch waiting times, clear and timely
communication; and lifting our capacity in Asset and Trade
Finance.
At Corporate we intend to act on this feedback.The next
Corporate Customers Satisfaction survey will be undertaken
mid-2014.
1 4
We continue to focus on credit and operational risk based on our
proven strategic and responsible approach. In partnership with
the Risk Management team we vigilantly monitor and control
the quality of the loan book especially during the current period
of slower economic activity.
The focus for Corporate after the Transformation initiatives is
“benefits realisation” for all BSP stakeholders. During 2013 we
focused on continued enhancements of our products, such as
online business banking, business MasterCard Corporate Debit
Card, Asset Finance and Trade. We continue to leverage the
capabilities of BSP Capital Limited for our customers with an
extensive joint calling program.
As outlined throughout this annual report, what truly makes
Corporate an outstanding business partner is our dedicated
relationship management team, extensive product suite and
most importantly BSP’s “whole of bank” solution incorporating
electronic channels and access to the largest retail branch
network in the country.
We continue to strive for excellence in customer service
and across all aspects of our business including reputation,
asset quality, profitability, customer satisfaction, innovation,
governance and community engagement.
BSP Annual Report 2013 2013 STRATEGIC BUSINESS UNIT REVIEW
Treasury
The BSP Group operates across PNG, Fiji and Solomon Islands.
jurisdictions each have particular
These three different
characteristics but share being small in the international
context with each having their own discrete foreign exchange
regulations, few market participants and incomplete, illiquid
financial markets.
The role of BSP Treasury remains to:
•
•
foster relationships with clients to provide Financial
Markets services; and
act as “Banker” to the bank managing market risks,
funding, liquidity, capital and capital planning. This includes
managing the Bank’s exposures and liquidity levels in
line with prudential requirements, ALCO directives and
delegated authorities.
In PNG foreign currency capital inflows relating to the PNG
Liquefied Natural Gas project construction phase reduced during
2013, relative to ongoing imports. This, combined with lower
commodity prices, produced a lagged move in PNG’s Balance of
Payments from surplus into deficit with the demand for scarcer
foreign currency also inducing a lagged Kina depreciation.
As part of its mandated policy function of maintaining price
stability the Bank of Papua New Guinea sought to stabilise the
Kina’s decline by selling about PGK2.5 billion worth of USD into
the market (compared to sales of about PGK1.8 billion worth
of USD in 2012). Over 2013 the BPNG rate to sell USD for Kina
fell by about 13% from 0.4755 to 0.4130.
PNG system foreign exchange turnover fell by about 1.5% in
2013. With a greater sales and service focus compared to 2012,
volume intermediated by BSP Treasury rose about PGK1.4
billion equating to a market share of about 30% (compared
to 26% in 2012). Excluding the BPNG sales of USD, customer
turnover fell by about 2.5% vs 2012 even after factoring in the
Kina’s depreciation. Across the Group we managed to achieve
higher volumes and spreads. This also related partly to the need
to manage larger and more frequent mismatches of currency
inflows due to higher relative foreign currency demand.
BSP’s credit rating is constrained by PNG’s country credit rating.
Notwithstanding this S&P raised BSP’s long term issuer credit
rating to B+. We continued to grow and diversify our funding
base over 2013 with depositors and fund providers recognising
our strong business position, entrenched importance to the
financial systems of the countries in which we operate as well
as our fundamental financial strength and security. This helped
fulfil part of our strategy to increase USD funding to customers
who use our whole-of-bank solutions, compared with those
solely transactional relationships.
Once again high levels of domestic financial system liquidity
contributed to a low domestic nominal and negative real
interest rate regime. Low monetary policy rates risk implicitly
taxing savers, disrupting the signalling function of interest rates
for efficient capital allocation and increases the value of any
unfunded pension liabilities. In PNG the yield curve flattened
and fell by more than planned, from 1.98% for 28 days and
2.32% for 182 days towards the end of 2012 to 1.65% and
2.00% respectively over the first half of 2013. Treasury Bill and
Inscribed stock yields also fell around July 2013.
Aiming to enhance monetary policy effectiveness, the BPNG
Cash Reserve Requirement was increased in 2013, reducing
bank funds available for investment, with a consequent
impact on earnings potential. By the end of 2013 28 day and
182 day Kina yields had climbed back to about 1.84% & 2.51%
respectively. Short term offshore yields also fell over most
of the year which, along with the depreciating Kina, reduced
earning rates on offshore deposits. This has led to earnings
on PNG Bank kina liquids and investments to be reduced by
9.1% in 2013 compared to 2012 at an average yield of 4.52%
on an average balance of about K4.7 billion for 2013. Across
the Group earnings from liquids and other similar investments
reduced by a similar amount.
ParaMounT
Paramount Banking is the Strategic Business Unit entrusted
with management of the Bank’s liability portfolio which stood
at K5 billion in 2013. This is a result of the continued high
liquidity experienced within the Banking system. Paramount
Banking continued to perform well above budget forecast in
spite of operational challenges in 2013.
BSP is not only seen as the Nation’s Bank but a Strategic Partner
with the National and Provincial Governments in providing
Banking and Financial services to the people of this Nation.
The extensive Branch and Rural banking network together with
Electronic Banking services throughout the Country are the
Bank’s strength.
Paramount Banking’s Vision is to be the Bank of Choice for
all High Value net worth clients. The business unit focuses on
professional and personal relationship with its high valued
clients including the National Government’s and its agencies.
The Community Affairs Officer continued to establish contacts
with various Resources Developers and co-ordinate training on
Banking and Financial services with Landowner groups including
opening new accounts in anticipation of future compensation
payments and royalty flows.
The slow growth in non-mining sectors including low commodity
prices have contributed to the restraining of economic growth
in 2013 and that is expected to continue into 2014, also subject
to unexpected disruptions due to regional and global economic
conditions.
grouP risK ManageMenT
Risk management at BSP is independently overseen by various
1 5
BSP Annual Report 2013 2013 STRATEGIC BUSINESS UNIT REVIEW
business units within the Group Risk Management strategic
business unit. The specific business units are: (a) Credit – has
underwriting and portfolio management responsibilities; (b)
Operational Risk – has broad operational risk involvement
across the network; (c) Asset Management – manages the
distressed asset portfolio; and (d) Credit Inspection – provides
an independent assessment of credit policy compliance.
In the second half of the year, the operational reporting lines
for Audit and Legal Services were transferred to Group Risk
Management while Audit retains an independent and direct
reporting line to Board Audit Risk & Compliance Committee
(BARCC). This change was implemented to allow a clear
oversight of all the three risk lines of defence including Audit as
the third and last defence in the risk management framework.
Credit
Credit risk is defined as the potential failure of a Borrower
or Counterparty to meet its contractual obligations. Within
BSP, credit risk is managed by developing and undertaking an
ongoing review of a credit risk strategy that identifies our target
market acceptance providing a platform to grow the business
within defined parameters to build a quality loan portfolio
across a broad range of sectors.
Senior BSP Management has the responsibility to implement
credit risk strategy including developing policies and procedures
for identifying, measuring, mitigating, monitoring, controlling
and on a continuous basis reviewing the effectiveness of the
credit risk strategy and inherent credit culture.
Completion of the construction and development phase of the
PNG LNG project resulted in a return to more normal business
activities with a lower demand for borrowing with a period of
consolidation being experienced with this expected to continue
in 2014. Consequently lending growth across all sectors of the
PNG economy was relatively stable. Diversification of the loan
portfolio across key economic sectors continues to be closely
monitored, providing a mitigant to the overall loan portfolio
exposures, to ensure that no significant concentration risk
develops that may impact the stability of the asset portfolio
performance.
GDP growth of 6.2% is forecast for PNG over 2014 with a focus
on the agriculture, forestry and the fisheries sector and a sharp
increase in the oil and gas sector with the commencement of
the gas production in 2014. Total non-mining GDP is forecasting
moderate growth of 1.6 per cent in 2014 which is lower than
2013 growth of 4.7 per cent. The slowdown in the non-mining
sectors reflects the contraction in the construction sector
coming mainly from the completion of the PNG LNG project.
The property market continues to be a sector undergoing
reform with supply outweighing demand leading to lower
rental yields and capital growth. BSP continues to monitor the
exposure to the property sector undertaking appropriate stress
testing of the property loan portfolio.
sectors in a subdued market. However despite the overall
increase in asset balances the Bank’s market share has declined
in a competitive market. During the course of 2013, overall
delinquency rates remained relatively stable with some marginal
improvement in both the Corporate and Retail portfolios. The
Retail portfolio experienced some delinquency volatility during
2013 due in part to a change in the collection process which
has been addressed with an immediate improvement noted.
The loan portfolio weighted average risk rating has remained
stable with the loan portfolio overall risk profile considered to
be sound.
Significant changes to the Retail loan application processing
was achieved with the implementation of the automated loan
origination system for unsecured personal loans resulting in a
more consistent origination process and improved turnaround
times for approval and funding. In 2014 it is proposed to expand
the loan origination process to all retail loan products including
secured personal loans, housing loans, small to medium
business sector loans incorporating a credit scorecard that will
provide a consistent loan decision and automated origination
process providing improved turnaround times for our retail and
small business customers.
Lending policies and procedures continue to be reviewed on an
ongoing basis with further policy changes made in 2013. These
changes are due to continuing changing market and product
trends focussing on improving controls and reporting in order
to move the Bank towards compliance with industry best
practice for credit risk management standards. We continued
to implement our social and environmental policies and
processes which strive to be consistent with market adopted
practices.
Training remained a key focus in 2013 and will continue into
2014. The Moody’s online training introduced in 2012 has been
completed with the majority of staff, predominantly in Credit
and Corporate, successfully completing the program. The
online training was complimented with Moody’s conducting
classroom training sessions specifically focussed on identifying
potential early warning signals and implementing appropriate
strategies.
operational risk
The Bank has independent Operational Risk functions in PNG,
Fiji (both the Bank and Life Insurance operations) and Solomon
Islands. The Head of Group Operational Risk functionally reports
to the Board Audit Risk & Compliance Committee (BARCC) in
PNG and administratively to the Group Chief Risk Officer.
The key focus for the operational risk unit continues to be the
embedding and refinement of the Operational Risk Management
Framework across the BSP Group and the strengthening
and enhancement of Operational Risk Management tools to
support this Framework.
Some of the risk initiatives undertaken during 2013 have
included:
Overall performance of the loan portfolio remains sound with
moderate growth achieved in both the corporate and retail
•
Continuation of the process mapping, risk & control analysis
1 6
BSP Annual Report 2013
2013 STRATEGIC BUSINESS UNIT REVIEW
•
and where required risk mitigation plans for key BSP processes;
Improved monitoring and analysis of non-lending related
losses across the Bank;
• Assist Executives and Senior Management with analysis and
•
•
•
regular reporting of operational risk issues;
Identification of the Top 20 enterprise wide risks across
the Bank;
Enhanced the process in investigating fraudulent transactions;
Conducted regular operational risk, anti-money laundering
and fraud awareness workshops across the Bank.
It is expected that a number of these activities will continue in
2014 with a renewed focus on further staff development and
empowerment to continue proactively driving Operational Risk
objectives.
internal audit
recruitment & selection
•
•
Facilitated the identification of a number of senior national
staff to replace outgoing expatriate contract workers;
Strengthened our partnership with university and tertiary
level institutions through career choice workshops and
recruitment fairs;
• Utilised the psychometric testing tools and interviewing
guides available in the Assessment Centre methodology for
Graduate and High Potential recruitment;
•
Facilitated the integration of BSP Rural staff into the parent
Retail SBU and together with the Remuneration team aligned
all salaries and benefits.
learning & development
BSP has independent internal audit functions in PNG, Fiji (both
the Bank and Life Insurance operations) and Solomon Islands
with these various teams reporting, through the Head of Group
Internal Audit, functionally to the Board Audit Risk & Compliance
Committee (BARCC) in Port Moresby and administratively to
the Group Chief Risk Officer.
Major highlights during 2013 were the combined Central
Banks’ (Bank of PNG, Reserve Bank of Fiji and Central Bank
of the Solomon islands) supervisory examination of the BSP
Group during May - July and the internal audit of the Bank’s
Treasury & International Operations in PNG, with assistance
from accountants, PricewaterhouseCoopers during November
- December.
As part of the Bank’s career development and succession planning
program we initiated and facilitated the first three BSP staff for an
ongoing three-month secondment in partnership with Barclays
Africa Group Limited in Johannesburg, South Africa.
As part of the Bank’s Senior Managers leadership development
initiative facilitated the attendance of a number of senior managers
in externally provided Leadership programs.
Training focused on the development and bank-wide roll out
of two key Bank initiatives – LendFast for loan origination and
Cheque Processing which provides significant changes to the way
the Bank process cheques.
One of the key focus areas during 2013 was also the continued
strengthening of the Bank’s IT Audit capabilities.
Ongoing training initiatives for 2013 included:
legal services & Company secretary
Legal Services provides an in-house legal counsel and advisory
function for BSP. It is involved in legal advice on a range of matters
to staff, many of which are time critical, with prompt and accurate
advice being vital. The Head of Legal is also responsible for legal
advice to the Executive. All contracts, leases and agreements are
reviewed by Legal prior to execution. Legal Services also manage
litigation matters involving the Bank.
Company Secretary has responsibility for compliance with
PomSoX reporting requirements, BPNG regulatory requirements,
corporate compliance requirements, investor relations and also
Board secretarial functions within the Bank.
huMan resourCes
•
•
•
•
Conducted a number of leadership development courses for
junior and middle management employees;
Conducted a number of team leadership for change manage-
ment courses for junior and middle management employees;
In response to a training needs analysis (TNA) survey, delivered
a variety of soft skills and technical skills courses;
Facilitated Moody’s training in credit skills and business
finance for Credit and Risk, Corporate Banking and Finance
employees.
remuneration Management/succession Planning
• Aligned critical roles, key persons and assigned benefits and
identified potential successors for critical roles to mitigate
operational risks;
The Human Resources SBU is a key strategic partner in the
Bank supporting the operations of the Bank through its core HR
Management functions.
•
in conjunction with SBU restructuring initiatives within the
Bank, undertook Hay job evaluations, revised job grades
and aligned salary levels to attract and / or retain specialist
employees;
In 2013, the HR SBU implemented the following key initiatives:
1 7
BSP Annual Report 2013
sandra fore, stanerd Wai and Joyce Narakobi were attached with Barclays africa Group limited
in Johannesburg, south africa on a three month secondment.
• Conducted a market survey on total salary and benefits,
aligned salaries in a number of key business units to maintain
market competitiveness;
HR Operations relaunched an updated Human Resource manual
in an interactive, user friendly web based format.
•
•
Implemented automated Human Capital Management (HCM)
payroll leave capture modules which eliminated manual
processes and improved operational efficiencies;
Continued to identify eligible national employees for partici-
pation in the Bank’s First Home Owners Home Ownership
Scheme and expanded the Bank’s assistance to staff building
on traditional land through the Informal Housing Scheme.
hr operations
Development and implementation of the HCM system continued
with the following milestones being realised:
•
The Employee Self Service (ESS) and Manager Self Service
(MSS) modules of HCM were implemented as the functional
tools for all payroll leave captures;
• Operational efficiencies were realised through ESS and MSS
automating of a number of staff payroll processes;
•
Testing and validating of the HCM payroll system was completed
through parallel runs with our CHRIS payroll system;
• HCM payroll was commissioned as the primary payroll system
following the last pay period processing in December 2013;
• HCM became the source of truth of all management infor-
mation and decision making reports.
1 8
Total head count was 2,947 (BSP PNG) and 3,951 (BSP Group).
Staff turnover in 2013 was 10.0 percent compared to 17.0
percent in 2012.
Total training mandays for 2013 was 10,189 equating to almost
3.0 mandays per employee.
oPeraTions & inForMaTion TeChnology
The role of the Operations & Information Technology SBU is to
provide support to both external customers of the Bank across
the multiple channels which BSP has made available as well as
internal clients (i.e. other SBUs within BSP) in developing the
infrastructure to enable reliable and efficiently executed external
customer transactions.
A key driver is the need to ensure that our technology is always
on, always available. Whilst planned outages for implementa-
tion of upgrades and certain other incidents related mostly to
external service providers prevent the 100% threshold from being
achieved, we achieved an availability level of 99.6% or more
for our key systems which compares favourably to the banking
industry regionally and, closer to home, has demonstrated
greater reliability than that offered by peer banking institutions
and other major service providers within Papua New Guinea.
The critical front end processing system used to authorise card
based transactions achieved 99.98% availability in 2013.
In addition to ensuring that all our critical systems had redun-
dancy in terms of a secondary data centre location as well as
contingency for potential individual equipment faults, significant
BSP Annual Report 2013 effort was expended to identifying root causes for system outages
and improving the IT infrastructure such that the number of
these incidents be reduced. We can report that in overall terms
such incidents reduced by more than 60% from 2012 making the
exercise a highly successful one.
The SBU continues to contribute significantly to the expansion
of the Bank’s new channel and automated processing capabili-
ties. This past year saw the culmination of numerous technology
projects resulting in the introduction of:
• Wantok Moni;
• Mobile Banking for Solomon Islands;
Internet Banking for Solomon Islands;
•
Internet Payment Gateway;
•
KATS Phase 1: RTGS;
•
• Automated Receipt Printing at Teller;
• Retail Lending Origination System;
•
•
•
• Management Information System (MARS);
•
•
•
Customer Queuing;
EFTPoS Integration;
Infinium (HCM) Payroll Processing;
Sun GL System Upgrade;
Internet Banking Phase 2;
Trade Finance Front Office portal;
In terms of the Bank’s Facilities Management, much work was
undertaken towards the delivery of:
Fit-out and activation of BSP Haus, NCD;
•
• New BSP Tari Branch;
•
•
•
Six BSP Premium Centres;
18 BSP Rural branches;
34 new ATM locations;
a customer using using the optiQ system to get a ticket.
• Major branch refurbishments in Mt.Hagen, Buka and Kavieng;
• Ongoing activity towards development of new facilities
including the Pacific Operations Centre, Gordons Security
Base, new Data Centre and the Lae Corporate Banking Centre.
Within the processing teams, there has been
increased
automation and reduced headcount within Channel Operations,
International Operations and Lending Support/Collections. The
introduction of the new Loan Origination System is enabling
automatic funding of loan approvals as opposed to previous
practice where manual postings were necessary resulting
in headcount requirements for reconciliations and day 2
verifications. In the International Operations BU, a business
as usual project was undertaken to increase the utilisation of
the automated Reconciliation tool such that the number of
accounts automatically reconciled is now greater than 800 as
compared to the previous 300. This has resulted in the flexibility
to both reduce headcount as well as redeploy staff to areas
providing a greater added value to the organisation.
Channel Operations historically encompassed Cash Distribution
Centre, ATM & EFTPoS Support, Kundupei Processing and
Card Management including all corresponding transactional
and settlement activities. In order to better streamline the
organisation and focus operational activities within Operations
and IT, this BU now also has responsibility for the National
and Lae Operational Centres which handle the centralised
processing activities for NCD and Lae branches. As part of the
KATS Project, these areas will be transformed into processing,
checking and control functions to take advantage of economies
of scale thereby reducing headcount requirements both within
the BU as well as in the Network. Within Channel Operations
the number of changes implemented on an annual basis to
improve controls and efficiency are too numerous to mention.
1 9
BSP Annual Report 2013 2013 STRATEGIC BUSINESS UNIT REVIEW
The largest headcount component within the SBU continues
to be the Security BU which had 440 people. Given the
country’s geographical spread and limited transport & security
infrastructure, BSP’s assets require 24/7 protection which
can only be provided by having an ample in-house security
capability complemented by outsourcing in certain locations
where security capacity is best provided by local firms. Efforts
during the year focussed on placing decreased reliance on
human elements and increasing the capacity of systems. This
included risk rating of improved vehicle tracking, upgraded
utilisation of security access systems, improved monitoring
using CCTV systems and improved investigatory techniques for
internal and external incidents.
Lastly, the BSP Customer Call Centre has now also been
integrated within the Operations and IT SBU given the need to
more closely integrate their largely in bound calling capabilities
with the technology required to provide customer support in
an integrated and standardised level.
Plans for 2014
In terms of premises, the completion of the Pacific Operations
Centre, new Security Base, new Data Centre and the new Lae
Corporate Banking Centre are all expected to be completed
between Q3 and Q4 2014, with relocations taking place in
Q4 and Q1 2015. The POC will result in almost 900 staff from
different buildings within NCD consolidating within the new
site in Waigani. In Lae, all Corporate Banking activity, BSP First
as well as regional functions will be headquartered within the
new building on the old airport road.
Branch improvement work will also be prominent in 2014.
Expected refurbishments include Waigani Banking Centre
(commenced in December 2013) and Tabubil being the most
prominent and new branch fit-outs for Mendi and Lihir.
Other strategic objectives of the SBU include the continued
improvement of
infrastructure
the robustness of
(technology, people, processes) given the need for continuous
development in line with increasing business needs and
changing technology.
the
FinanCe & Planning
a year of consolidation
In 2013, the Finance and Planning team has built on
developmental work that had been outsourced in previous
years, and has taken on the ongoing production and
development of these initiatives, in Business Planning and
Analysis, and in Middle Office.
In 2013 the Business Planning and Analysis (BPA) team facilitated
Strategic Planning exercises at SBU level, and this fed directly
into the budgeting process in the latter half of the year. The
team also took over and delivered the ongoing production and
development of BSP’s detailed Branch Profitability Analyses
2 0
and 3-year Models.
Improvements have also been made by Middle Office (for
Treasury services) in 2013. The team resources have settled,
and are continuing to develop a more detailed understanding
of the underlying workings of the new system, leading to better
improvement over reporting, control and monitoring activities
between the system’s front desk customer interface and the
back office control functions. Middle Office ends 2013 well
positioned and looking forward to working with Treasury to
facilitate the introduction of more sophisticated products into
the market in 2014.
A reduced reliance on consulting accompanied the Group’s
2013 focus on cost reduction. Finance played a significant
part in facilitating and driving cost reduction initiatives for
the group, a major strategic focus in 2013. We envisage this
focus will continue in 2014 and the Finance team will play an
important role in ongoing exercises to achieve operating cost
reduction and benefits realisation of capital investments.
Finance made progress towards its stated objectives for 2013.
The team continued to develop and standardise reporting
formats for the Group, Bank, and Strategic Business Units.
Significant efforts were directed towards, and improvements
were achieved, on the quality, accuracy, and timeliness of
management information to stakeholders.
In 2013, the first phase of a project of key strategic importance
was completed – Management Automated Reporting System
(MARS) Phase 1. A Data Warehouse (DW) was built which
draws data from the bank’s core banking systems. The DW
included powerful interface capabilities allowing MARS to link
with the bank’s other systems, with a Business Intelligence (BI)
front end for queries and analytics. MARS will serve as a central
repository of information and will be a core application of the
bank’s Analytics function.
By the end of 2013, the bank had migrated some of its
existing reporting and analysis functions into the DW, and
this will continue through to 2014. During 2014, MARS Phase
2 will further streamline the MIS function and will allow bank
users and stakeholders to generate broader insights into
its customers, its products, its distribution channels, and its
processes and operations.
Team
Finance was able to successfully recruit at a higher level
in 2013 and retain its high performing staff. The Analytics
team formerly sited within the Retail SBU was merged with
the financial analytics team within Finance and Planning, a
timely and more cohesive structure given the implementation
of MARS. Skills and knowledge were improved as a result of
meeting greater and more sophisticated reporting challenges,
both internally and externally.
BSP Annual Report 2013 2013 STRATEGIC BUSINESS UNIT REVIEW
lae CoMMerCial CeNTre
an artist’s impression of the new
Commercial Centre in lae.
The centre will be complete and
operational in the 2nd half of 2014.
2 1
BSP Annual Report 2013 KoMo BraNCH
Traditional dancers celebrate the
opening of BsP’s Komo sub-Branch
in June 2013. The branch serves both
the local landowners and workers of
the PNG lNG Project.
2 2
BSP Annual Report 2013 CORPORATE
GOVERnAnCE
BSP has adopted an approach to Corporate Governance that is
underpinned by its core values of Integrity, Leadership, People,
Professionalism, Quality and Teamwork. This approach is supported
by a comprehensive framework of Corporate Governance principles
and policies. The BSP Board has demonstrated its commitment to
developing and maintaining a standard of corporate governance
that seeks to match global practice.
The Board ensures that it complies with the requirements of BSP’s
home exchange, Port Moresby Stock Exchange (“POMSOX”). It
also closely monitors developments in corporate governance
principles and practice within Australia and has benchmarked
itself against:
1. ASX Corporate Governance Council ‘Corporate Governance
and Best Practice Recommendations’;
2. Australian Prudential Regulatory Authority Prudential
Standard APS 510;
3. Standard Australia AS 8000-2003 Good Governance Principles
BSP is mindful of the advantages of demonstrating to investors
that its corporate governance standards meet the requirements
expected of companies listed in countries such as Australia. This
Corporate Governance Statement therefore compares BSP’s
corporate governance practices to the ASX Corporate Govern-
ance Council and Best Practice Recommendations. BSP manages
in excess of half the banking market in Papua New Guinea, and
is predominantly owned by institutions and individuals in Papua
New Guinea. The Board, management and staff of BSP are very
much aware of their responsibilities to the people of Papua New
Guinea. The set of Corporate Governance principles developed by
BSP is intended to provide a framework that will help to ensure
that BSP deals fairly and openly with all its stakeholders – share-
holders, customers and staff alike.
BSP publishes its corporate governance practices on its website.
This is available at www.bsp.com.pg in the shareholders section.
1. The Board oF direCTors
a) role and responsibility of the Board
The roles and responsibilities of the Board are defined in the
Board Charter. This document also details the matters reserved
for the Board and matters that have been delegated to manage-
ment. The Board, with the support of its committees, is respon-
sible to the shareholders for the overall performance of the
company including its strategic direction; establishing goals for
management; and monitoring the achievement of those goals
with a view to optimising company performance and increasing
shareholder value.
Key functions of the Board include:
•
•
•
•
•
•
•
•
•
•
•
•
overall strategy of the company, including operating, financing,
dividends, and risk management;
appointing the Group Chief Executive Officer and setting an
appropriate remuneration package;
appointing General Managers and setting appropriate
remuneration packages;
appointing the Company Secretary and setting an appropriate
remuneration package;
endorsing appropriate policy settings for management;
reviewing Board composition and performance;
reviewing the performance of management;
approving an annual strategic plan and an annual budget
for the company and monitoring results on a regular basis;
ensuring that appropriate risk management systems are in
place, and are operating to protect the company’s financial
position and assets;
ensuring that the company complies with the law and relevant
regulations, and conforms with the highest standards of
financial and ethical behaviour;
acquisitions and disposals material to the business;
establishing authority levels;
• Directors’ remuneration via the Remuneration & Nomina-
tion Committee;
•
selecting, with the assistance of the Audit, Risk and Compli-
ance Committee, and recommending to shareholders, the
appointment of external auditors;
•
approving financial statements.
2 3
BSP Annual Report 2013 The BsP Board of Directors
A number of these responsibilities have been delegated by the
Board to various committees. The committees and their respon-
sibilities are detailed in Section 2, Board Committees.
The Board has delegated to management responsibility for:
•
•
•
developing the annual operating and capital expenditure
budgets for Board approval, and monitoring performance
against these budgets;
developing and implementing strategies within the frame-
work approved by the Board, and providing the Board with
recommendations on key strategic issues;
appointing management below the level of General Manager
and preparing and maintaining succession plans for these
senior roles;
• developing and maintaining effective risk management
policies and procedures;
•
keeping the Board and the market fully informed of material
developments.
b) Membership, expertise, size and composition of the
Board
The Corporate Governance Principles affirm that the majority of
the Board should be independent. As is typical of small financial
markets generally in Papua New Guinea, there are very consider-
able demands on the relatively small numbers of people with the
2 4
skills and experience to fill the demanding role of Non-executive
Director on the Boards of the Nation’s larger corporate institutions.
In these circumstances it is inevitable that a number of the
Non-Executive Directors of BSP will also have roles on the Boards,
or in Senior Management, of institutions that may be significant
shareholders in, or substantial customers of, the Bank. Directors
of BSP are meticulous in handling situations where there could
potentially be conflicts of interest, by declaring their interests
in advance, and absenting themselves from any consideration
of matters where a conflict might arise. The Bank’s Corporate
Governance Principles require Directors to disclose any new
Directorships and equity interests at each Board meeting.
The maximum number of Directors, as prescribed by the Constitu-
tion approved by shareholders, is ten. At the date of this report
there are ten Directors, with nine Non-executives designated
as independent, plus the Group Chief Executive Officer. Under
the Constitution, at each annual general meeting one-third of
the company’s Directors, in addition to any Director appointed
during the year, excluding the Group Chief Executive Officer, must
offer themselves for re-election by the shareholders. Normally,
Non-executive Directors are expected to serve a maximum of
four three-year terms, dating from the AGM at which the newly
elected Director is first confirmed by shareholders. This provision
has effect from the date the Bank took its present form, following
the merger of BSP with the Papua New Guinea Banking Corpora-
tion in April 2002. In certain instances it may be considered that
a director may bring valuable expertise, independent judgement
and an ability to act which may determine that it is in the best
interests of the Company for a director to serve beyond a fixed term.
The Board has a broad range of skills, experience and expertise
that enables it to meet its objectives. Details of the Directors’
BSP Annual Report 2013 business backgrounds and experience are provided on pages 8
and 9.
In assessing the independence of Directors, the Board will consider
a number of criteria including:
CORPORATE GOVERNANCE
The Board accepts that it has a responsibility to shareholders to
ensure that it maintains an appropriate mix of skills and experience
(without gender bias) within its membership, and consequently
gives careful consideration to setting criteria for new appoint-
ments it may recommend to shareholders in accordance with the
BSP Constitution. It has delegated the initial screening process
involved to its Remuneration and Nomination Committee which,
in accordance with its Charter, may seek independent advice on
possible new candidates for Directorships. All Directors must be
satisfied that the best candidate has been selected.
Nominees of the Board and/or shareholders must meet the ‘fit
and proper person’ criteria established by the Bank of Papua
New Guinea before they can take their place on the Board. The
Board does not accept that any office bearer and/or employee
of an institutional shareholder, by virtue only of his/her position
within that organisation, have an automatic right to be appointed
to the Board.
On joining the Board, new Directors will be provided with a
comprehensive orientation programme.
•
•
•
•
•
•
c) role and selection of the Chairman
The Chairman is elected by the Directors every two years and holds
the position for a maximum of three terms. His role includes:
ensuring all new Board members are fully aware of their
duties and responsibilities;
providing effective leadership on the company’s strategy;
presenting the views of the Board to the public;
ensuring the Board meets regularly throughout the year, and
that minutes are taken and recorded accurately;
•
•
•
•
•
the Director is not an executive of the bank;
the Director is not a substantial shareholder of the bank or
otherwise associated directly with a substantial shareholder
of the bank;
the Director has not within the last three years been a material
consultant or a principal of a material professional adviser
to the Bank or a group member, or an employee materially
associated with a service provided;
the Director is not a material supplier to, or customer of the
Bank or other group member, or a material consultant to the
Bank or other group member, or an employee materially
associated with a material supplier or customer;
the Director has no material contractual relationship with
the Bank or other group member other than as a Director
of the bank;
the Director is free from any interest and any business or other
relationship which could, or could reasonably be perceived
to, materially interfere with the Director’s ability to act in
the best interests of the Bank.
This information is assessed by the Board to determine whether on
balance the relationship could, or could reasonably be perceived
to, materially interfere with the exercise of the Director’s respon-
sibilities. Materiality is assessed on a case-by-case basis.
As noted earlier, the Board is cognisant of the need to avoid
conflicts of interest and it has in place policies and procedures
for the reporting of any matter, which may give rise to a conflict
between the interests of a Director and those of the Group. These
arrangements are designed to ensure that the independence and
integrity of the Board are maintained.
setting the agenda of meetings and maintaining proper
conduct during meetings;
The Bank of Papua New Guinea sets prudential limits on loans
to ‘associated persons’: Bank South Pacific fully complies with
these requirements.
•
reviewing the performance of Non-executive Directors;
The Chairman is not permitted to occupy the role of Chief Execu-
tive Officer.
Kostas Constantinou, OBE, who sits on the Board as an independent
Non-executive Director, is the current Chairman.
d) director independence and Conflict of interest
Directors are determined to be independent if they are judged
to be free from any material or other business relationship with
the Bank that would compromise their independence. Prior to
appointment Directors designated are required to provide infor-
mation to the Board for it to assess their independence.
Financial Note 30, Related party transactions, on pages 76- 78,
provides details of Directors’ interests.
e) Meetings of the Board and attendance
Scheduled meetings of the Board are held six times a year, and
the Board meets on other occasions as necessary to deal with
matters requiring attention. Meetings of Board Committees are
scheduled regularly during the year. The Board has a policy of
rotating its meetings between locations where the Group has
a significant presence. On these occasions the Board also visits
company operations and meets with local management and key
customers.
The Chairman, in consultation with the Chief Executive Officer,
2 5
BSP Annual Report 2013 The Board, management and staff of BsP
are very much aware of their responsibili-
ties to the people of Papua New Guinea.
The set of Corporate Governance
principles developed by BsP is intended
to provide a framework that will help to
ensure that BsP deals fairly and openly
with all its stakeholders – shareholders,
customers and staff alike.
determines meeting agendas. Meetings provide regular oppor-
tunities for the Board to assess BSP’s management of financial,
strategic and major risk areas. To help ensure that all Directors
are able to contribute meaningfully, papers are provided to Board
members one week in advance of the meeting. Broad ranging
discussion on all agenda items is encouraged, with healthy debate
seen as vital to the decision making process.
reports to enable them to carry out their duties. The General
Managers make regular presentations to the Board on their areas
of responsibility. The Chairman and the other Non-executive
Directors have the opportunity to meet with the Chief Executive
Officer and the General Managers for further consultation, and
to discuss issues associated with the fulfilment of their roles as
Directors.
Financial Note 27, Directors’ and Executive remuneration, on
pages 72 - 74, provides attendance details of Directors at Board
meetings during 2013.
f) review of Board Performance
The Remuneration and Nomination Committee reviews the
processes by which the Board regularly assesses its own perfor-
mance in meeting its responsibilities. It is intended to extend the
assessment of the Board as a whole to include an assessment of
the contribution of each individual Director. The Board is cognisant
of the need to continually identify areas for improvement; to
ensure that it meets the highest standards of corporate govern-
ance; and for the Board and each Director to make an appropriate
contribution to the Group’s objective of providing value to all its
stakeholders. The performance review is conducted annually, and
may involve assistance from external consultants.
g) Board access to information and advice
All Directors have unrestricted access to company records and
information and receive regular detailed financial and operational
The Board recognises that in certain circumstances individual
Directors may need to seek independent professional advice, at
the expense of the company, on matters arising in the course of
their duties. Any advice so received is made available to other
Directors. Any Director seeking such advice is required to give
prior notice to the Chairman of his or her intention to seek
independent professional advice.
2. Board CoMMiTTees
a) Board Committees and Membership
The Board has established two committees whose functions
and powers are governed by their respective charters. These
committees are the Audit Risk and Compliance Committee, and
the Remuneration and Nomination Committee.
Membership of the committees and a record of attendance at
committee meetings during the year is detailed in table below.
Remuneration details are provided in Financial Note 27 on page 72.
2 6
BSP Annual Report 2013 CORPORATE GOVERNANCE
Membership of Board Committees as at 31/12/2013:
-------------------------------------------------------------------------------------
d) Board audit risk & Compliance Committee
Board Audit Risk &
Compliance Committee Nomination
Remuneration &
The Audit Risk and Compliance Committee is delegated by the
Board with responsibility for reviewing and monitoring the:
Committee
-------------------------------------------------------------------------------------
6/6 Chair
Geoff Robb
4/6
Sir Nagora Bogan
4/6
Gerea Aopi
Arthur Sam1
6/6
Freda Talao2
5/6
2/2*
Kostas Constantinou
2/2*
Tom Fox
2/2*
Ila Temu
Lyle Procter
2/2*
-------------------------------------------------------------------------------------
1 Arthur Sam is a non-executive, non-director, appointed by the board
for board development purposes. 2Freda Talao attends as an observer
director. *Board members who attend the BARCC meeting to discuss
the year end and half year accounts.
Chair 3/3
3/3
3/3
b) Committee Charters
The Committee Charters are available in the shareholders infor-
mation section of the BSP website www.bsp.com.pg.
c) Committee structure
Committee members are chosen for the skills, experience and
other qualities they bring to the committee. At the next Board
meeting following each committee meeting, the Board is given a
report by the Chairman of the respective committee and minutes
of the meeting are tabled.
The Audit Risk and Compliance Committee is comprised of
three Non-executive Directors, a majority of whom should be
independent, and who are duly appointed by the Board. The
Chairman of the Audit Risk and Compliance Committee must be
one of the independent Directors, other than the Chairman of
the Board. Each member should be capable of making a valuable
contribution to the committee and membership is reviewed
annually by the BSP Board.
The Remuneration and Nomination Committee comprises
three Non-executive Directors, the majority of whom should
be independent, and who are duly appointed by the Board. The
Chairman of the Remuneration and Nomination Committee must
be one of the independent Directors, other than the Chairman
of the Board.
Each member should be capable of making a valuable contribu-
tion to the committee, and membership is reviewed annually
by the BSP Board.
A review of the performance of committee members will form
part of the Board’s performance review.
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•
•
•
•
•
•
•
•
integrity of the financial statements and the financial
reporting and audit process;
external auditor’s qualifications, performance and independ-
ence;
performance of the internal audit function of the bank;
performance of the operational risk function of the bank;
systems of internal control and management of all risks;
systems for ensuring operational efficiency and cost control;
systems for approval and monitoring of expenditure including
capital expenditure;
processes for monitoring compliance with laws and regula-
tions (both in Papua New Guinea and overseas);
implementation of Board decisions by management and
making recommendations to the Board for the appointment
of the external auditor;
•
annual internal audit plan and its ongoing review.
In the course of fulfilling its mandate, the committee meets with
both the internal and external auditors without management
present.
i. annual Financial statements
The Audit Risk and Compliance Committee reviews the annual
financial statements to determine whether they are complete and
consistent with the information known to committee members
and to assess whether the financial statements reflect appropriate
accounting principles. In particular it:
•
•
pays attention to complex and/or unusual transactions;
focuses on judgmental areas, for example those involving
valuation of assets and liabilities; provisions; litigation reserves;
and other commitments and contingencies;
• meets with management and the external auditors to review
the financial statements and the results of the audit;
•
reviews the other sections of the Annual Report before its
release and considers whether the information is under-
standable and consistent with members’ knowledge about
the bank and its operations;
•
satisfies itself as to the accuracy of the financial accounts,
2 7
BSP Annual Report 2013
CORPORATE GOVERNANCE
reconciles them with management accounts presented to
the committee, and signs off on the financial accounts of the
bank before they are submitted to the Board.
ii. external audit
The Audit Risk and Compliance Committee is responsible
for making recommendations to the Board on appointment
and terms of engagement of BSP external auditors. The
selection is made from appropriately qualified companies in
accordance with Board policy. The Board submits the name of
the recommended appointee to shareholders for ratification.
In line with the policy of the Bank of Papua New Guinea, the
signing partner in the external audit firm must be rotated at
least every three years.
The committee reviews annually the performance of the external
auditors and makes recommendations to the Board regarding
the continuation or otherwise of their appointment, consistent
with the Bank of Papua New Guinea’s Prudential Standard No.
7/2005 - External Auditors, while ensuring their independence
is in line with Board policy.
There is a review of the external auditor’s proposed audit scope
and approach, to ensure there are no unjustified restrictions.
Meetings are held separately with the external auditors to discuss
any matters that the committee or the external auditors believe
should be discussed privately. The external auditor attends
meetings of the Audit Risk and Compliance Committee at which
the external audit and half yearly review are agenda items.
The committee ensures that significant findings and recommenda-
tions made by the external auditors are received and discussed
promptly, and that management responds to recommendations
by the external auditors in a timely manner.
The duly appointed external audit firm may not be engaged by
the Group to provide specialist consultancy services relating to
financial, strategic and/or taxation matters.
The external auditor is invited to the Annual General Meeting
of shareholders and is available to answer relevant questions
from shareholders.
The Bank of Papua New Guinea Prudential Standards provide
for a tri-partite meeting between BPNG, the external auditors,
and the Bank, if required.
iii. internal audit
The Audit Risk and Compliance Committee approves, on the
recommendation of management, the appointment of Head
of Internal Audit. The committee meets regularly with Head of
Internal Audit.
Reviews are undertaken of the scope of the work of the internal
audit function to ensure no unjustified restrictions or limitations
have been placed upon Audit and Risk Departments. The Audit
Risk and Compliance Committee also reviews the qualifications
2 8
of internal audit personnel and endorses the appointment,
replacement, reassignment or dismissal of the internal auditors.
An independent review by an expert consultant is made regularly
as to the effectiveness of the internal audit and risk function.
These reports are presented to the Audit Risk and Compliance
Committee, and the Board.
The Audit Risk and Compliance Committee meets separately with
the internal auditors to discuss any matters that the committee,
or the internal auditors, believe should be discussed privately.
The Internal Auditor has direct access to the Audit Risk and
Compliance Committee and to the full Board. The committee
ensures that significant findings and recommendations made by
the internal auditors are received and discussed promptly, and
that management responds to recommendations by the internal
auditors on a timely basis.
Internal Audit meets with the external auditors half yearly, to
review the scope and findings of internal audit’s annual audit
plan, and the extent of the external audit plan, having regard to
internal audit’s findings.
iv. Compliance
The Audit Risk and Compliance Committee reviews the effective-
ness of the systems for monitoring compliance with all legal and
regulatory obligations and the Constitution of BSP. It also reviews
the results of management’s investigation and follow-up (including
disciplinary action) of any fraudulent acts, or non-compliance.
The committee obtains regular updates from management and the
bank’s legal officers regarding compliance matters, and satisfies
itself that all regulatory compliance matters have been considered
in the preparation of the financial statements.
Reviews of the findings of any examinations by regulatory
agencies are undertaken and the Chairman of the Audit Risk and
Compliance Committee has the right to approach a regulator
directly in the event of a prudential issue arising.
v. risk Management
The committee’s role in the bank’s risk management processes
are detailed in 3(b).
e) Board remuneration and nomination Committee
The Remuneration and Nomination Committee has been estab-
lished to assist the Board in fulfilling its oversight responsibilities
in respect of Board and Senior Executive Management selection,
appointment, review and remuneration.
The responsibilities of the Remuneration and Nomination
Committee are:
•
oversee the selection and appointment of a Chief Executive
Officer and recommend an appropriate remuneration and
benefits package to the full Board;
BSP Annual Report 2013 BsP has adopted an approach to Corporate Governance that is underpinned by
its core values of integrity, leadership, People, Professionalism, Quality and Teamwork.
•
•
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•
•
•
•
•
•
determine and review appropriate remuneration and benefits
of Directors for recommendation to the full Board, and
subsequently to the shareholders;
•
engage external consultants as and when deemed appropriate
to benchmark remuneration packages for Executives and
Senior Management;
identify and maintain a clear succession plan for the Execu-
tive Management Team, ensuring an appropriate mix of
skills and experience as well as appropriate remuneration
and benefits packages are in place and reviewed regularly;
ensure that the Board itself maintains an appropriate mix
of skills and experience necessary to fulfil its responsibilities
to shareholders while maintaining a world class Corporate
Governance regime;
receive and endorse positions/titles recommended by the
Chief Executive Officer from time to time as applying to
designated Senior Executive Management positions;
review the procedures in place to ensure that all new Senior
Executive appointees are adequately qualified and experi-
enced, and that proper recruitment procedures are followed;
review and make recommendations to the Board on the
appointment and terms and conditions of employment to
all Senior Executive Management positions;
review and approve all termination arrangements for such
Senior Executives;
review transactions between the Group and any of the Direc-
tors or relevant Senior Executives;
review and make recommendations to the Board on employee
remuneration and benefits policies and practices generally;
•
review Board performance, tenure, and succession planning.
The Board has in place a review process, led by the Chairman,
that involves a peer review of performance based on a broad
range of criteria. A performance review has been performed
every year since 2010.
3. risK ManageMenT
a) approach to risk Management
The Group’s Risk Management activities are aligned to the
achievement of the Group’s Objectives, Goals and Strategy. The
Board, in consultation with the Executive Committee, determines
the Group’s risk appetite and risk tolerance. These benchmarks
are used in the risk identification, analysis and risk evaluation
processes.
BSP distinguishes the following major risks:
Credit risk: The potential for financial loss where a customer or
counter party fails to meet their financial obligation to the Group.
market risk: The potential financial loss arising from the Group’s
activities in financial, including foreign exchange, markets. More
detailed commentary on financial risk management is provided
in the Notes to the Financial Accounts.
2 9
BSP Annual Report 2013 CORPORATE GOVERNANCE
liquidity risk: The risk of failure to adequately meet cash demand
in the short term.
vested with the Board. However every employee from Execu-
tive Management to the newest recruit has a responsibility and
a part to play in the process.
interest risk: Risk to earnings from movement in interest rates.
Operational Risk: The risk of loss resulting from inadequate
or failed internal processes, people, or from external events,
including legal and compliance risk.
The Group’s Asset & Liability Committee monitors market risk,
interest risk, and liquidity risk, and the Credit Committee monitors
credit risk. Operational risk is monitored by the Operational Risk
Committee, including the maintenance of a risk register system
that has been implemented across the Group. The Executive
Committee and the Board overview the highest tier of risks
within these risk registers.
The Group’s risk management policy ensures that the Group has
in place acceptable limits for the risks identified by the Group’s
employees. The risk management approach encompasses the
following:
•
•
•
•
•
•
•
defining the types of risks that will be addressed by each
functional or policy area (i.e. credit risk, interest rate risk,
liquidity risk, operational risk, etc.);
ensuring that mechanisms for managing (identifying, measuring,
and controlling) risk are implemented and maintained to
provide for organisation-wide risk management;
developing information systems to provide early warning,
or immediate alert, of events or situations that may occur,
or already exist, that could create one or more types of risk
for the Group;
creating and maintaining risk management tools, including
those requested by the Board, such as policies, procedures,
risk registers, controls and independent testing, personnel
management and training, and planning;
instituting and reviewing risk measurement techniques that
Directors and management may use to establish the Group’s
risk tolerance, risk identification approaches, risk supervision
or controls, and risk monitoring processes;
developing processes for those areas that represent poten-
tial risks;
establishing appropriate management reporting systems
regarding these risks so individual managers are provided
with a sufficient level of detail to adequately manage and
control the Group’s risk exposures.
b) risk Management roles & responsibilities
The Board accepts responsibility for ensuring it has a clear under-
standing of the types of risks inherent in the Group’s activities.
Therefore responsibility for overall risk management in BSP is
There is a formal system of financial and operational delegations
from the Board to the Chief Executive Officer, and from the Chief
Executive Officer to the General Managers. These delegations reflect
the Group’s risk appetite, and are cascaded down to managers
who have skills and experience to exercise them judiciously.
The Board defines the accountabilities (including delegated
approval/control authorities/limits) and reporting/monitoring
requirements for the risk management process. The severity of
risks identified in the risk identification, analysis and evaluation
processes, and noted in the Strategic Business Unit Risk Registers,
is used to determine the approval/control authorities/limits. The
Board reviews these risk limits annually along with an annual
review of the Group’s significant risks.
The Board has adopted guidelines, with the help of manage-
ment analysis, covering the maximum loss exposure the Group
is able and willing to assume. These guidelines are detailed in
the Group’s Risk Policy and Procedures Manual which has been
externally reviewed and approved by the Board.
The Board has also delegated to the Audit Risk and Compliance
Committee responsibility for overview of loss control and for
overseeing the risk management function.
The Audit Risk and Compliance Committee is responsible for
providing regular reports and recommendations to the Board on
the risk management activities of the Group, especially relating
to risk issues that are outside of the authority of the Group’s
Executive Committee to approve.
The Group’s Executive Committee is responsible for deliberating
on risk management issues which are outside of the delegated
authorities/ limits of the Credit Committee, Asset and Liability
Committee (ALCO) and General Managers, with escalation of
these issues to the Audit Risk and Compliance Committee, and
the Board itself, in case of need.
c) Management assurance
The Board is provided with regular reports about BSP’s financial
condition and its operating performance. Annually, the Chief
Executive Officer and the Chief Financial Officer certify to the
Board that:
•
•
•
the financial records of the Group have been properly
maintained and that they accurately record the true financial
position of the Group;
the financial statements and notes meet all appropriate
accounting standards;
there are sound systems of risk management and control
that are operating effectively;
3 0
BSP Annual Report 2013 Additionally all General Managers provide bi-annual statements
attesting that;
•
•
•
•
they have assessed and documented the risks and internal
control procedures in their Strategic Business Unit;
they have identified any changes in business, operations
and computer systems and the risks that may arise from
those changes;
the risk management and internal compliance and control
systems are appropriate and operating efficiently and effectively;
any weaknesses in the risk management and internal compli-
ance and control systems have been identified and remedial
action taken.
4. eThiCal BehaViour
BSP acknowledges the need for Directors and employees at all
levels to observe the highest standards of ethical behaviour when
undertaking BSP business. To this end, the Board has adopted:
•
•
a Code of Conduct for both Directors and members of the
Executive Management team of the Group and stipulated
that each Director, and relevant employees, acknowledge
in writing having read, understood and agreed to abide by
the Code; and
a Corporate Mission, Objectives, and Core Values Statement
which establishes principles to guide all employees in the
day to day performance of their individual functions within
the Group.
To ensure the maintenance of high standards of corporate behav-
iour on an ongoing basis, the Board further stipulates that senior
management periodically undertake an appropriate communi-
cation programme to reinforce both the Code and Core Values
Statements. All Directors are encouraged to maintain member-
ship of an appropriate Directors’ Association to keep abreast of
current trends in Directors’ duties, responsibilities and corporate
governance issues.
BSP is committed to a culture in which it is safe and acceptable
for employees, customers and suppliers to raise concerns about
poor or unacceptable practices, irregularities, corruption, fraud
and misconduct.
The Group has adopted a whistle-blowing policy that is designed
to support and encourage staff to report in good faith matters
such as:
•
•
•
•
unacceptable practices;
irregularities or conduct which is an offence or a breach of
laws of the countries in which BSP operates in (actions and
decisions against the laws of relevant countries including
non-compliance);
corruption;
fraud;
CORPORATE GOVERNANCE
• misrepresentation of facts;
•
decisions made and actions taken outside established BSP
policies & procedures;
sexual harassment;
abuse of Delegated Authorities;
•
•
• misuse of Group assets;
•
•
disclosures related to miscarriages of justice;
health and safety risks, including risks to the public as well
as other employees;
damage to the environment;
other unethical conduct;
failure to comply with appropriate professional standards;
abuse of power, or use of the Group’s powers and authority
for any unauthorised purpose or personal gain;
breach of statutory codes of practice.
•
•
•
•
•
Directors and management of the Group are subject to Securities
Act 1997 restrictions for buying, selling or subscribing for securi-
ties in the Group if they are in possession of inside information,
i.e. information which is not generally available and, if it were
generally available, a reasonable person would expect to have a
material effect on the price or value of the securities of the Group.
Further, Directors and management may only trade in the securi-
ties of the Group, subject to the foregoing insider trading restric-
tions, during each of the eight weeks following the announce-
ments of half yearly profit and yearly profit or the date of issue
of a prospectus. Management should discuss proposed share
trades with the Chief Executive Officer in advance, who in turn
will keep the Chairman of the Board appraised of management
activities. Directors should discuss proposed share trades with
the Chairman in advance.
In addition Directors and management must not trade in any other
entity if inside information on such entity comes to the attention
of the Director or management by virtue of holding office as an
Officer of the Group.
5. MarKeT disClosure
The Group’s continuous disclosure regime is fundamental to the
rights of shareholders to receive information concerning their
securities. The most important aspect of the Group’s shareholder
communication policy is to comply with the continuous disclosure
regime and to implement best practice disclosure policy.
Market announcements are posted to BSP’s website immediately
after release to the market. All market announcements made by
the bank since its listing in August 2003 are currently available
on the website.
Where BSP provides financial results’ briefings to analysts or
media, these briefings are published on the website as soon as
possible after the event. In any event, no material information
which has not been previously released to the market is covered
in such briefings. The material upon which the briefing is based
(such as slides or presentations) is released to the market prior
to the briefing.
3 1
BSP Annual Report 2013 CORPORATE GOVERNANCE
The Group’s insider trading rules are important adjuncts to the
continuous disclosure regime in ensuring that shareholders are
given fair access to material information regarding securities.
BSP seeks to limit the opportunity for insider trading in its own
securities through its continuous disclosure policies and the
dealing rules applying to its employees and Directors.
6. shareholder CoMMuniCaTions
BSP’s Code of Conduct requires its employees to act with high
standards of honesty, integrity, fairness and equity in all aspects
of their employment with BSP.
7. reMuneraTion
BSP remuneration policy for senior management is comprised of a
fixed component and an at risk component that is a combination
of short term rewards and long term incentives. The remuneration
packages of General Managers and the Chief Executive Officer are
approved by the Remuneration and Nomination Committee, and
details are provided by the committee to the Board.
Fixed remuneration of senior management is reviewed at the
time of contract renewal taking into account the nature of the
role, the pay position relative to comparable market pay levels,
and individual and business performance.
With this in mind, BSP commits to dealing fairly, transparently
and openly with both current and prospective shareholders using
available channels and technologies to communicate widely and
promptly. BSP commits to facilitating participation in shareholder
meetings, and dealing promptly with shareholder enquiries.
Non-executive Directors are remunerated on a fixed basis within
an aggregate Directors’ fee pool approved periodically by share-
holders. The shareholders in 2012 approved an increase in the
pool to K2.00 million. During 2013 K1.43 million of the pool was
utilised (2012: K1.42 million).
Our shareholder communication policy is built around compliance
with disclosure obligations and aspiring to be at the forefront of
best practice in disclosure. Our framework for communicating
with shareholders is to concisely and accurately communicate:
A table of fees paid to Directors during 2013 is produced on
page 72. Non-executive Directors are not paid any retirement
or superannuation benefits, nor do they participate in any share
option programmes.
•
•
•
our strategy;
how we implement that strategy; and
the financial results consequent upon our strategy and its
implementation.
The Group uses shareholder forums such as the Annual General
Meeting, and group meetings with larger shareholders, within
disclosure policies, to communicate financial performance and
strategies.
3 2
BSP Annual Report 2013
CusToMer serViCe
BsP will place emphasis on training
and career development of our staff.
This will involve product knowledge
to provide staff with the confidence
to sell our products to our customers,
specialist skills training, leadership
development, and tailored multi-year
programmes for our future leaders.
3 3
BSP Annual Report 2013 HISTORICAL
SuMMARY 2013
2008
377,100
243,828
Profit and Loss (K’000)
Net interest income
Non interest income
Bad and doubtful debt
(expense)/recovery
Other operating expenses
Operating profit
Impairment of
non-current asset
Share of profit from associates -
328,798
Profit before tax
(100,464)
Income tax (expense)
228,334
Profit/(loss) after tax
(11,353)
(229,599)
379,976
2009
473,969
251,743
2010
2011
597,479
544,002
410,973 496,383
2012
681,554
603,781
2013
740,857
781,217
(15,020) (20,581) (25,234) (70,952) (78,573)
(335,146) (522,827) (688,621) (748,346) (833,849)
534,126 594,685
468,490
375,546
411,566
(50,000) 2,372
-
378,143
(121,025)
257,118 283,147 355,947 407,744 436,828
(14,967)
12,270
410,804 474,986 545,296 606,955
(127,657) (119,039) (137,552) (170,127)
-
6,496
-
11,170
-
-
Dividends (toea)
Dividends paid per share1
Balance Sheet (K’000)
Net loans and advances
Total assets
Deposits
Capital
2.20
2.20 5.37 47.3 55.0 58.0
2,343,844
6,807,868
5,782,020
744,254
3,638,562
9,397,821
7,493,779
934,097
4,091,297
10,027,290
7,984,657
1,134,397
4,300,913
11,681,293
9,366,281
1,344,188
4,804,626
13,333,102
10,860,522
1,465,893
5,306,362
15,808,790
12,200,999
1,619,060
Performance Ratios
Return on assets 3.6% 3.2% 2.9% 3.3% 3.3% 3.0%
Return on equity 34.7% 30.6% 27.4% 28.7% 29.0% 28.3%
Expense/Income 45.0% 46.0% 54.7% 58.2% 55.3% 57.3%
Key Prudential Ratios
Capital adequacy 22.8% 22.1% 23.6% 24.2% 22.3% 18.0%
47.5% 50.1% 43.0% 43.6% 38.9% 41.78%
Liquid asset ratio
10.4% 9.1% 10.5% 10.0% 9.0% 7.6%
Leverage ratio
Exchange rates (One (1) PNG Kina buys):
US dollar
AU dollar
0.3735 0.3700 0.3785 0.4665 0.4755 0.3905
0.5396 0.4127 0.3724 0.4591 0.4580 0.4369
(Source – Bank of Papua New Guinea Quarterly Economic Bulletin)
_______________________
1Dividends per share has been adjusted for 1/10 share split 2008. In 2010, BSP paid a full and final dividend for the 2009 year in July, and an
interim dividend for 2010 year, in November. Dividends per share has been adjusted for 10/1 share consolidation 2011. In 2011, BSP paid a
full and final dividend for the 2010 year in June, and an interim dividend for 2011 year, in October. In 2012, BSP paid a final dividend for the
2011 year in June, and an interim dividend for 2012 year in October. In 2013, BSP paid a final dividend for the 2012 year in June, and an interim
dividend for the 2013 year in October.
3 4
BSP Annual Report 2013
COnTRIBuTIOnS
BY BSP TO PnG
All amounts are expressed in K’000
Company income taxes
paid to PNG Government
Other taxes paid to
PNG Government (IWT, FCWT,BWT)
Dividends paid
Payments to PNG based
suppliers/creditors
Payments to PNG training institutions
Superannuation payments
Salaries paid in PNG
Commercial rental payments
Residential rental payments
Water
Power
Telecommunication
total
2009
2010
2011
2012
2013
101,372
213,771
119,590
212,080
155,391
11,169
182,373
9,780
247,959
10,091
6,204
223,526 258,994
4,989
271,686
171,761
1,858
3,599
42,982
6,532
2,612
178
5,319
8,006
537,761
153,200
2,908
4,336
53,751
15,038
2,745
169
5,067
8,986
717,710
240,402 489,754 440,331
6,468
8,471
2,133
9,420
8,187
5,176
95,570
88,527
65,518
20,459
19,565
21,094
36,408
33,609
10,396
1,069
90
144
13,930
11,489
5,544
8,507
18,417
14,809
712,121 1,151,779 1,074,138
3 5
BSP Annual Report 2013
OVERSEAS BRAnCHES
AnD SuBSIDIARIES
summary FinanCial inFormation
All amounts expressed in K’000
Net Profit
Total
Total
After Tax
Liabilities Turnover
Asset
8,610
459,963
428,364 30,430
Solomon Islands
11,709
1,945,046 1,859,574 111,490
Fiji Branches
13,564
531,670 179,313
663,141
BSP Life
- 565
-
14
Niue *
12,052 3,789 (2,355)
21,011
BSP Capital
BSP Convertible Note 21,318
14 1,253 847
*Kiwibank has taken over as the provider of banking services in Niue
effective from end of April 2013.
oVerseas BranChes
2013 highlights
Fiji
economic Conditions
Economic indicators have been strong in 2013 with forecast
GDP growth expected to be in the order of 3.6%. This has been
achieved by strong performances from the Sugar Industry and
an overall upturn in investment. New lending for investment
rose 88% in the year to November and imports of investment
goods rose annually by 25%. Tourism has performed reasonably
with a marginal increase in visitor arrivals forecast after a slow
start to the year.
Indicator for domestic consumption are high with electricity
production (+5.6%), VAT Collections (+12.7%) and new vehicle
sales (+40.4%). Inflation continues to hover around 3%. Foreign
reserves remain strong at F$1.8bn and 4.9 months import cover.
Monetary conditions remained challenging with system liquidity
consistently over F$600m with little opportunity for investment
of these surplus funds. Credit growth improved to 15%. This was
led by an increase in consumption lending and also an increase
in lending for investment purposes. Lending rates declined due
to strong competition in the marketplace.
It is expected that as the Government continues on the road to
democratic elections in 2014, there will be a continued improve-
ment in investment activities and economic growth.
2013 achievements
Financial results for 2013 showed an increase in net profit after
tax of just on 182%.
3 6
The Corporate area performed strongly with portfolio growth of
34% in a difficult marketplace. Revenues from this growth were
offset by tighter margins and also a challenging time in the foreign
exchange market due to new competition. The introduction of
Business Internet Banking will provide higher service levels for
our Corporate clients.
The Retail bank continued to perform quite strongly with substantial
growth in the personal loans portfolio and the re-introduction
of a revamped car loan product. Revenues from our electronic
channels – ATM’s, EFTPoS, SMS Banking & Internet Banking
continue to grow and provide our clients with convenience and
world class options as to how they do their banking.
Non accrual and problem loans and delinquencies have reduced
across the board.
We embarked on our major project to upgrade our core banking
system to the latest version. This will provide more efficient
services for our clients and more flexible products. This upgrade
is expected to be fully completed in February 2016. Recognising
the increasing reliance on our electronic channel services, we
also undertook upgrades in our data centres to provide high
reliability and backup on our systems.
We have continued to invest in our branch network. We opened a
BSP First & BSP Premium Service Centre in Nadi. We opened our
new Lautoka Business Centre and also a Lautoka BSP First. We
opened our Sales & Business Centre in Valelevu and Pacific House
in Suva City. These centres provide account opening, enquiries
and loan facilities to our retail customers and full teller service for
our business customers. This new concept recognises that many
of our retails customers can use our electronic channels or call
centre to complete their day to day banking. We were also proud
to open our new full service branch in the Damodar City complex.
2014 initiatives and Challenges
2014 will be a critical year as we head into democratic elections
by September. A smooth path to these elections will continue to
engender business confidence and increased investment, both
locally and from overseas.
Our challenge will be to continue to generate above market
growth in an increasingly competitive environment. This includes
the newly licensed 6th commercial bank, HFC Bank.
Much of the bank’s focus will be ensuring that our core banking
upgrade is successful as this will transform the bank’s operations
and improve customer service. We will continue to focus on
great products and customer service as we build to being the
BSP Annual Report 2013
BsP assisted the National airline with finance to assist with the purchase of the airlines first Dash 8
airplane. The Dash 8 is seen as the perfect airplane for services around the solomon islands.
best bank in Fiji.
soloMon islands
2013 was a year of much change for BSP Solomon Islands. We
farewelled the former Country Manager, Mark Corcoran, who
spent 10 years with BSP (and prior to that NBSI) and welcomed
new Country Manager, David Anderson, who has 37 years Banking
experience in Australia and the South Pacific.
Branchless Banking Agencies started to be rolled out in September
2013 and Mobile Banking was launched in October 2013. These
initiatives are the result of transferring successful products and
services in the PNG market to other BSP territories. As at year
end we have established 6 new agents and registered 4,785
customers to Mobile Banking and processed 63,024 Mobile
Banking transactions.
BSP continues to have the largest ATM network and 2014 saw
1 new ATM established in the provincial town of Noro and our
EFTPoS merchants increased from 43 to 101.
The continued growth of all electronic channels is a major focus in
2014. At the moment we are restricted to areas where Solomon
Telekom provides 2G data signals, however, as they expand their
network coverage it will enable us to provide Banking Services
to more provincial areas of the Solomon Islands.
2013 also saw the refurbishment and relocation of our Point
Cruz branch from the lower ground floor to the ground floor.
Customers and staff welcomed the move and they are enjoying
the new premises.
The Central Bank of Solomon Islands in October 2013 issued an
Interim Banking Licence to Pan Oceanic Bank. This will allow Pan
Oceanic Bank to take further steps to meet the requirements to
gain a Full Banking Licence sometime in 2014. The establishment
of this new Bank will offer new challenges to BSP; it is essential
that we retain a close relationship with our customers and develop
our Agency and Mobile Banking networks.
The Solomon Island economy continues to remain very liquid;
this has increased competition in the lending market and has
pushed Interest Rate margins down. Lending increased by 5%
and deposits rose by 3%. Foreign Exchange earnings rose 9% over
2013 results. Country GDP growth stands at 4.8% and inflation at
5.5%. Foreign reserves are SBD3,809 million which is equivalent
to 11 months Import Cover.
BSP’s financial performance for 2013 was a Net Profit Before Tax
that exceeded budget and 3% higher than 2012. As mentioned,
increased competition in the lending area saw a tightening of
margins and resulted in Interest Income being lower than budget.
However, a review of fees & charges and proactive investment
of surplus liquidity compensated for this and resulted in results
that were better than budget.
2014 promises to be an exciting year for BSP Solomon Islands
as we continue the rollout of Electronic Banking initiatives and
transform our workforce into a more sales oriented culture.
BsP CaPiTal liMiTed
2013 was a year of change for BSP Capital. It was a year where
there were changes to the Management of the business as well
as a greater client service and revenue focus in each of the 3
operating arms of BSP Capital (Share Broking, Funds Manage-
ment and Corporate Advisory). In March of 2013 a new General
Manager, Richard Borysiewicz was appointed, bringing with him
25 years of experience in Financial Services and a more aggres-
sive focus on business origination at BSP Capital.
share Broking
•
BSP Capital continues to dominate the local market in terms of
transactions. Clients of BSP Capital have been able to transact
on both the local POMSoX as well as overseas markets;
• Activity and revenue were in line with the previous year.
Turnover was much improved in the middle of the year
3 7
BSP Annual Report 2013 OVERSEAS BRANCHES AND SUBSIDIARIES
however global market conditions during November and
December saw a decline in market activity;
2013 saw the implementation and on-going execution of major
initiatives planned for the year or which began in 2012:
• We completed a Compliance Listing on POMSoX during the
year and there is the potential for additional new listings
during the year ahead;
•
Returned the Health business to profitability through business
growth, better underwriting and claims management practices;
•
The strategy for Share Broking is to seek out a broader mix
of clients with PNG High Net Worth clients as the most likely
local investor segment with which we can work more. In
addition, BSP Capital is seeking greater exposure to overseas
investors into the local market.
Funds Management
•
Total Funds under Management during the year grew by
53%. This substantial increase in Funds was a mix of new
mandates and cash flow from existing clients. Total Funds
Under Management (FUM) at the end of December 2013
was K644 million;
• A substantial increase in FUM is expected due to an agree-
ment reached with one of our largest clients for further
inflows during 2014;
• We are in the early stages of negotiation with several new
prospects and expect that further additions to our client list
will be made in 2014.
• Development and launch of the new suite of Medical Products
– Value, Premier and Premier Plus and the new endowment
product - Bula Elite for the Life business;
•
•
•
Substantial work was performed on the project being under-
taken to change our core insurance systems. The new system
was selected and implementation is underway;
Completed feasibility assessment and received Board approval
for the development of Denison/Duncan F$11.2m gated
accommodation project;
Continued focus on investments subsidiaries’ performances
resulting in marked improvement in their values.
We had a strong 26% growth in Life new business which together
with increased focus on conservation saw the Life inforce portfolio
increasing by F$4.0m. The 13th month persistency rate was at
an all-time high of 75%. Health business inforce grew by F$1.0m.
Actual new business was below the significant growth experienced
in 2012 due to a strong fight back by our competitors but the
overall inforce book growth was pleasing.
Corporate advisory
Financial Performance
•
BSP Capital was mandated during the year to work on several
large transactions;
• BSP Capital is the premier Investment Bank in PNG and was
appointed during 2013 by large corporates as well as govern-
ment to act on their behalf in industries covering energy,
telecommunications and real estate;
•
The outlook for the year ahead is positive with numerous
opportunities presenting themselves to work with clients
in raising money, divesting or acquiring assets or providing
strategic advice. BSP Capital is very well placed to work
together with other parts of BSP (particularly Corporate
Banking and Treasury) to offer complete and integrated
solutions to clients.
BsP liFe liMiTed
overview
The 2013 year results in both financial and strategic actions that
were undertaken were very pleasing. Our strong financial perfor-
mances recorded in 2012 in both our Life and Health businesses
continued into 2013 with profit results exceeding targets. Significant
developments were also noted in our key strategic initiatives.
The Insurance Group NPAT for 2013 was F$9.9m, F$2.5m above
budget. After adjustment for non-operating items NPAT is F$9.2m,
F$1.8m above budget. The Life business NPAT was F$9.8m against
a budget of F$7.4m while the Health business showed a profit
of F$16k against a budget profit of F$15k.
insurance Market
The Life insurance market continues to be dominated by endow-
ment products. There are two major players. BSP Life market share
on inforce annual premium basis (excluding single premiums)
was at 57% at the end of 2012. Competition remains strong
from our Life competitor which has been successful in the sale
of a guaranteed return single premium product. 2013 saw the
development and launch of a new endowment product, Bula Elite,
which has been well accepted in the market. The focus on our
system change in 2014 means that we have to properly prioritise
our product initiatives as we push to lead in product innovation.
The health insurance market remains very competitive with
four active competitors. BSP Health Term Life market share on
premium income was 49% while the Medical market share was
29% in 2012; both products experiencing growth over 2011. With
the review of underwriting guidelines the focus during 2013
was getting quality business on our books. With new customer
education campaigns, additional licensed Health agents and a
refined Group quote process, further improvements in market
share are expected in 2014.
3 8
BSP Annual Report 2013 Branchless Banking in seghe, Western Province, solomon islands.
strategic initiatives
In 2014, BSP Life will build on the strong results achieved in 2013.
Strategic Initiatives underway include:
•
•
•
•
•
•
Implementation of our new core insurance systems for both
our Life and Health businesses.
The Core Systems Change exercise will result in significant
changes to our core insurance business processes impacting
on organisation structure and human resources. An effec-
tive change management approach which will be a crucial
component to the success of the project is being rolled out.
Continuing to maintain the current aggressive growth stance
on both Life and Health new business through product
innovation and on-going channel development with focus
on business quality and business retention.
Continue to closely manage our Health business to ensure
that profitability is sustained and improved.
Low interest rate environment continues to negatively impact
the investment return on a large portion of our investment
portfolio that is in fixed interest securities. We will continue
to pursue growth assets opportunities while maximising
returns from our current private equity investments.
Continued improvement in risk management practices and
the development of skills and expertise within the Insurance
business ensuring that appropriately skilled staff provide
service in critical areas.
•
Focus on Customer Service enhancements through process
transformation, people up-skilling and service culture devel-
opment to complement the service delivery capability of
our new systems.
3 9
BSP Annual Report 2013 OVERSEAS BRANCHES AND SUBSIDIARIES
4 0
BsP liFe
ManageMenT TeaM
seated: Malakai Naiyaga, Managing
Director.
Standing (L-R): Michael Nacola, General
Manager Distribution & Marketing,
Munendra Naidu, Chief Financial Officer,
Glenis Yee, GM Legal & Compliance,
Pramesh Sharma, GM Investments.
BsP Fiji
ManageMenT TeaM
Seated (L - R): Ravindra Singh, GM
Retail Bank, Kevin McCarthy, Country
Manager, Cecil Browne, GM Corporate
& International and Alvina Ali, GM Legal.
Standing (L - R): Ronesh Dayal, Chief
Financial Officer, Howard Politini, GM
Human Resources, William Wakeham,
Chief Operating Officer, Ashleigh
Matheson, Chief Risk Officer and
Omid Saberi, Chief Information Officer.
BsP soloMon island
ManageMenT TeaM
Seated (L - R): Genevieve Apusae,
Financial Controller, David Anderson,
Country Manager, Pricilla Maehau,
Relieving Manager, Commercial Banking.
Standing (L-R): Robert Bochman,
Relationship Manager, Joan Ramo,
Manager International Operations,
Alphonse Toati, Manager Agencies
& Electronic Banking, Janet Marau,
Manager Retail Banking Operations,
Peter Lemon, Manager Corporate
Services, Lyn Toati, Manager Credit
Administration, Winterford Maehau,
Manager Information Services.
BSP Annual Report 2013 BaNKiNG
eDuCaTioN iN fiJi
Customer Care Manager Mosese
Taga promotes electronic Banking to
Military Personnel.
4 1
BSP Annual Report 2013
DIRECTORS‘
REPORT
for the Year Ended 31 December 2013
KOSTAS COnSTAnTInOu, OBE
Chairman
ROBIn FLEMInG
Group Ceo
The Directors take pleasure in presenting the Financial Statements of Bank of South Pacific Limited and its subsidiaries (Bank and
the Group) for the year ended 31 December 2013. In order to comply with the provisions of the Companies Act 1997, the Directors
Report as follows:
Principal activities
The principal activity of the Bank of South Pacific Limited (BSP) is the provision of commercial banking and finance services. The
Group’s activities include the provision of commercial banking and finance services, stock broking and fund management and life
business services throughout Papua New Guinea and the Pacific region. BSP is a Bank listed on the Port Moresby Stock Exchange
(POMSoX), incorporated under the Companies Act of Papua New Guinea, and is an authorised Bank under the Banks and Financial
Institutions Act of Papua New Guinea. The Bank and the Group are licensed to operate in the Solomon Islands, Fiji Islands and Niue.
The registered office is at Douglas Street, Port Moresby.
review of operations
For the year ended 31 December 2013, the Bank’s profit after tax was K424.762 million (2012: K399.588 million profit). The Group’s
profit after tax was K436.828 million (2012: K407.744 million).
dividends
Dividend payments totalling K271.686 million were paid in 2013 (2012: K258.994 million). A detailed breakup of this is provided
in Note 23.
directors and officers
The following were Directors of the Bank of South Pacific Limited at the year ended 31 December 2013:
Mr K Constantinou, OBE
Mr T E Fox, OBE
Dr I Temu
Mr R Fleming
Ms F Talao
Mr E B Gangloff
Mr G Robb, OAM
Sir N Bogan
Mr G Aopi, CBE
Mr C C Procter
Details of directors’ tenure and directors and executives’ remuneration during the year are provided in Note 27 of the Notes to
the Consolidated Financial Statements. Mr Ernest B Gangloff was appointed to the board on 28 November 2013. The CEO Robin
Fleming remains the only executive director in the composition of the board.
The company secretary is Mary Johns.
independent audit report
The financial statements have been audited and should be read in conjunction with the independent audit report on page 90.
Details of amounts paid to the auditors for audit and other services are shown in Note 41 of the Notes to the Financial Statements.
4 2
BSP Annual Report 2013
for the Year Ended 31 December 2013
donations & sponsorships
Donations and sponsorships by the Group during the year amounted to K9,267,141 (2012: K4,192,404).
interests register
Transactions recorded in the Interests Register are disclosed in Note 30 of the Notes to the Financial Statements.
Change in accounting Policies
No change in accounting policies occurred during this year.
For, and on behalf of, the Directors.
Dated and Signed in accordance with a resolution of the Directors in Port Moresby this 26th day of March 2014.
Kostas Constantinou, oBE
Chairman
roBin FlEming
Group Chief Executive Officer/Director
4 3
BSP Annual Report 2013
STATEMENT BY THE DIRECTORS
for the Year Ended 31 December 2013
The Directors declare that:
a)
b)
in the Directors’ opinion, there are reasonable grounds to believe that the Bank and the Group will be able to pay
their debts as and when they become due and payable; and
in the Directors’ opinion, the attached financial statements and notes thereto are in accordance with the PNG
Companies Act 1997, including compliance with accounting standards and give a true and fair view of the financial
position and performance of the Bank and the Group.
additional statutory information
The results of the Bank and the Group’s operations during the financial year have, in the opinion of the Directors, not been
materially affected by items of an abnormal nature, other than those disclosed in the financial statements.
In the opinion of the Directors, no circumstances have arisen that make adherence to the existing method of valuation of assets or
liabilities of the Bank and the Group misleading or inappropriate.
At the date of this report the Directors are not aware of any circumstances that would render the values attributed to current
assets in the financial statements misleading.
No contingent liability other than that disclosed in the notes to the attached financial statements has become enforceable, or is
likely to become enforceable, within a period of twelve months from the date of this report, that will materially affect the Bank and
the Group in its ability to meet obligations as and when they fall due.
Dated and signed in accordance with a resolution of the Directors at Port Moresby this 26th day of March 2014.
Kostas Constantinou, oBE
Chairman
roBin FlEming
Group Chief Executive Officer/Director
4 4
BSP Annual Report 2013
sTaTeMenT oF CoMPrehensiVe inCoMe
for the Year Ended 31 December 2013
grouP
BanK
3
4
note
2
2
2013
794,807
(53,950)
740,857
285,594
400,176
1,426,627
179,313
(22,025)
(61,841)
95,447
all amounts are expressed in K'000
Interest income
Interest expense
net interest income
Banking fee and commission income
Other banking income
Net banking operating income
Net insurance premium income
Increase/(decrease) in policy liabilities
Claims, surrender and maturities
Net insurance operating income
Total net operating income before
impairment & operating expenses
Impairment expenses
Impairment on subsidiary
Operating expenses
Profit before income tax
Income tax expense
Net profit after income tax
Non-controlling interests
Net profit for the year
Other comprehensive income
Exchange difference on translation of
foreign operations
Net value gain on revaluation of
(4,526)
share options
Net movement in asset revaluation
-
Other comprehensive income for the year, net of tax (8,659)
428,169
total comprehensive income for the year
93.1
Earnings per share - basic & diluted (toea)
1,522,074
(78,573)
(14,967)
(833,849)
594,685
(170,127)
424,558
12,270
436,828
13
8
5
24
24
(4,133)
23
24
9
6
The attached notes form an integral part of these financial statements.
2012
2013
2012
743,086 793,877 743,145
(61,532) (53,474) (61,619)
740,403
681,554
681,526
281,028 251,462
253,869
400,311
273,178
273,849
1,421,742 1,206,837
1,208,601
-
144,823
-
(20,347)
-
(47,742)
-
76,734
-
-
-
-
1,285,335
(70,952)
-
(680,257)
534,126
(137,552)
396,574
11,170
407,744
1,421,742 1,206,837
(70,952)
(78,573)
(14,967)
-
(600,448)
(735,326)
535,437
592,876
(135,849)
(168,114)
399,588
424,762
-
-
399,588
424,762
3,487
(6,741)
(1,053)
(4,526)
1,288
9,810
(11,267)
14,585
422,329 413,495
90.5
86.9
-
1,289
9,810
10,046
409,634
85.2
4 5
BSP Annual Report 2013
sTaTeMenT oF FinanCial PosiTion
for the Year Ended 31 December 2013
All amounts are expressed in K’000
Note
2013
2012
grouP
BanK
2013
2012
1,806,597
3,237,517
327,563
4,804,626
744,292
69,226
1,557,950
96,441
-
1,992,970
3,283,432
1,445,199
5,244,188
589,623
61,505
1,924,536
43,690
96,929
133,198
1,764,275
3,237,517
327,563
4,750,793
718,279
69,226
1,354,659
43,275
107,377
3,126
-
-
110,401
434,107
15,324,158 12,920,598
-
-
5,369
56,755
3,706
111,141
127,151
511,919 381,737
13,333,102
72,775
10,860,522
75,525
714,735
13,112
34,560
95,980
11,867,209
90,828
786,035
12,296,226 10,920,691
75,525
75,525
285,157
435,124
13,022
33,222
28,358
38,698
105,016
91,198
13,769,846 11,504,779
384,814
870,148
210,931
1,465,893
13,333,102
381,498
991,368
181,446
1,554,312
15,324,158
384,814
838,292
192,713
1,415,819
12,920,598
assEt
Cash and balances with Central Bank
Treasury & Central Bank bills
Amounts due from other banks
Loans and advances to customers
Property, plant and equipment
Assets subject to operating lease
Other financial assets
Investment in associates & joint ventures
Investment in subsidiaries
Intangibles
Investment properties
Asset held for sale
Deferred tax asset
Other assets
total assets
liaBilitiEs
Amounts due to other banks
Amounts due to customers
Subordinated debt securities
Other liabilities
Provision for income tax
Deferred tax liabilities
Other provisions
Total liabilities
SHAREHOLDERS’ EQUITY
Ordinary shares
Retained earnings
Other reserves
total shareholders' equity
Total equity and liabilities
10
11
12
13
14
14
16
9
8
7
15
15
6
17
18
19
20
21
6
6
22
23
24
24
2,030,800
3,283,432
1,445,199
5,306,362
623,360
61,505
2,170,798
116,821
-
133,399
65,429
-
134,372
437,313
15,808,790
786,035
12,200,999
75,525
936,369
33,395
47,370
110,037
14,189,730
381,498
1,035,290
202,272
1,619,060
15,808,790
The attached notes form an integral part of these financial statements.
4 6
BSP Annual Report 2013
sTaTeMenT oF Changes in shareholders’ eQuiTy
for the Year Ended 31 December 2013
BanK
note
share
Capital
assigned
Capital
reserves
retained
Earnings/
(Accumalated
losses
total
All amounts are expressed in K’000
Balance at 1 January 2012
Net profit
Dividend paid
Elimination of Fiji Bank Investment
Share buyback
Other comprehensive income
Balance at 31 December 2012
Net profit
Final Dividend paid for 2012
Interim Dividend for 2013
Share buyback
Other comprehensive income
Balance at 31 December 2013
23&24 426,444 24,883
-
-
-
-
- (24,883)
-
-
-
-
-
-
-
-
23 & 24 381,498 -
24
23
23
23 (41,630)
-
23 & 24 384,814
-
-
-
(3,316)
-
24
23
23
23
250,579
697,698 1,399,604
399,588
399,588
-
- (258,994) (258,994)
(67,912) - (92,795)
-
-
(41,630)
10,046
-
10,046
838,292 1,415,819
192,713
-
424,762
424,762
- (178,001) (178,001)
(93,685)
- (93,685)
(3,316)
-
-
(11,267)
(11,267)
-
181,446 991,368 1,554,312
grouP
All amounts are expressed in K’000
Balance at 1 January 2012
Net profit
Dividend paid
Share buyback
Other comprehensive income
Balance at 31 December 2012
Net profit
Dividend paid
Interim Dividend for 2013
Share buyback
Other comprehensive income
Balance at 31 December 2013
-
-
-
-
23&24 426,444
-
24
23
-
23 (41,630)
-
196,346 721,398 1,344,188
407,744
- 407,744
- (258,994) (258,994)
(41,630)
-
-
-
- - 14,585
14,585
210,931
870,148 1,465,893
23&24 384,814
- 436,828 436,828
-
- (178,001) (178,001)
-
(93,685)
(93,685)
-
-
(3,316)
(3,316)
-
-
(8,659)
- - (8,659) -
202,272 1,035,290 1,619,060
-
-
-
-
-
24
23
23
23
-
23&24 381,498
-
The attached notes form an integral part of these financial statements.
4 7
BSP Annual Report 2013
sTaTeMenT oF Cash Flow
for the Year Ended 31 December 2013
All amounts are expressed in K’000
Note
2013
2012
grouP
BanK
2013
2012
Cash FloW From oPErating aCtivitiEs
Interest received
Fees and other income
Interest paid
Amounts paid to suppliers & employees
Operating cash flow before changes
in operating assets
Increase in loans
Decrease/(increase) in bills receivable & other assets
Increase in deposits
Increase in bills payable & other liabilities
Net cash flow from operations before income tax
Income taxes paid
Net cash flow from operating activities
28
824,729 638,579
793,338
740,819 792,272 739,443
680,650 524,618
(64,232) (71,974) (63,615) (70,626)
(653,712) (565,607) (489,745) (452,221)
900,123 741,817 919,562 741,214
(571,582)
(585,771)
(571,969)
(558,746)
13,532 (239,171)
(257,224)
8,361
1,280,731
1,474,302
1,465,780 1,375,536
189,562 57,261 147,016 57,377
1,447,951
1,820,031 1,436,052 1,883,677
(233,720)
(156,953) (238,675)
(156,634)
1,214,231
1,197,377 1,727,043
1,663,078
Cash FloW From invEsting aCtivitiEs
Decrease/(increase) in government securities
Expenditure on property, plant & equipment
Proceeds from disposal of property, plant & equipment
Proceeds from other investments
Movement in share trading activities
Net cash flow from investing activities
(599,553)
(212,647)
7,760
34,653
3,446
(766,341)
(70,246)
(218,027)
3,822
25,215
8,252
(250,984)
(6,965)
(615,794)
(203,484)
(213,096)
7,615 3,818
-
-
(216,243)
-
-
(811,663)
Cash FloW From FinanCing aCtivitiEs
Share buyback
Client management trust
Dividends paid
Net cash flow from financing activities
23
23
(3,316)
(3,902)
(271,686)
(278,904)
(41,630)
(7,243)
(258,994)
(307,867)
(3,316) (41,630)
-
-
(258,994)
(271,686)
(300,624)
(275,002)
Net increase/(decrease) in cash and cash equivalents
617,833
Effect of exchange rate movements on cash & cash equivalents 10,746
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
640,378
638,526
10,746
(710)
2,061,385 1,423,569 2,001,010
2,689,964 2,061,385 2,652,134
28
697,364
(710)
1,304,356
2,001,010
The attached notes form an integral part of these financial statements.
4 8
BSP Annual Report 2013
noTes To The FinanCial sT aTeMenTs
for the Year Ended 31 December 2013
1. aCCounTing PoliCies
The principal accounting policies adopted in the preparation of
these consolidated financial statements are set out below:
Basis of Presentation & general
a
accounting Policies
interpretations of these standards
The consolidated financial statements of the Bank of South
Pacific Limited (the Bank) and the Group are prepared in
accordance with International Financial Reporting Standards
and
issued by the
International Financial Reporting Interpretations Committee.
They are prepared on the basis of the historical cost convention,
as modified by the revaluation of certain non-current assets and
financial instruments.
Estimates and assumptions have been used to achieve
conformity with generally accepted accounting principles in the
preparation of these financial statements. These assumptions
and estimates affect balances of assets and liabilities, contingent
liabilities and commitments at the end of the reporting period,
and amounts of revenues and expenses during the reporting
period. Whilst the estimates are based on management's best
knowledge of current events and conditions, actual results may
ultimately differ from those estimates.
There are no new standards and interpretations being adopted
in these financial statements.
The financial statements are presented in Papua New Guinea
Kina, expressed in thousands of Kina, as permitted by Papua
New Guinea Accounting Standards.
B
Consolidation
The consolidated financial statements incorporate the assets
and liabilities of all controlled entities of the Bank and the
Group as at 31 December 2013, and their results for the year
then ended.
Controlled entities are those over which the Group has the
power to govern financial and operating policies, generally
accompanied by a shareholding that commands the majority of
voting rights, and are commonly referred to as subsidiaries.
of identifiable net assets acquired is treated as goodwill,
and any deficiency is recognised directly in the statement
of comprehensive income;
• All intercompany transactions and balances are eliminated.
C
investment in associates &
joint Ventures
investments in associates
Associates are entities over which the Group has significant,
but not controlling influence, generally accompanied by a
shareholding conferring between 20 percent - 50 percent of
voting rights.
In the consolidated financial statements, these investments are
accounted for under the equity method, where:
•
•
The investment is initially recognised at cost;
The Group’s share of profits or losses are recognised in the
statement of comprehensive income.
interests in joint Ventures
A joint venture is a contractual arrangement whereby the Bank
together with other parties undertake an economic activity that
is subject to joint control that is when the strategic financial and
operating policy decisions relating to the activities require the
unanimous consent of the parties sharing control. Joint venture
arrangements that involve the establishment of a separate
entity in which each venturer has an interest are referred to as
jointly controlled entities.
When the Group undertakes its activities under joint venture
arrangements directly, the Group’s share of jointly controlled
assets and any liabilities incurred jointly with other venturers are
recognised in the financial statements of the jointly controlled
entity. The Group reports its interests in jointly controlled
entities at cost, except when the investment is classified as held
for sale, in which case it is accounted for under IFRS 5 Non-
current Assets Held for Sale and Discontinued Operations.
d
revenue
Subsidiaries are accounted for at acquisition under the
acquisition method of accounting, where:
interest income and expense
•
•
acquisition cost is measured at fair value of assets
transferred, equity issued, liabilities assumed and any
directly attributable costs of the transaction;
identifiable net assets are recorded initially at acquisition,
at their fair values;
•
any excess of the acquisition cost over the relevant share
Interest income and expense are recognised in the Statement of
Comprehensive Income on an accrual basis using the effective
yield method. The income arising from the various forms of
instalment credit has been determined using the effective
interest method.
Interest income includes coupons earned on inscribed stock,
accrued discount and premium on Treasury and Central Bank
bills.
4 9
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
short term insurance contracts
These contracts are the Term Life, Medical and Travel policies
sold and underwritten by BSP Health Care (Fiji) Limited.
These contracts protect the Group’s customers from the
consequences of events such as death, medical emergency or
loss on travel. Guaranteed benefits paid on occurrence of the
specified insurance event are either fixed or linked to the extent
of the economic loss suffered by the policy holder. There are no
maturity or surrender benefits.
For all these contracts, premiums are recognised as revenue
(earned premiums) proportionally over the period of coverage.
The portion of premium received on in-force contracts that
relates to unexpired risks at the balance sheet date is reported
as the unearned premium liability. Premiums are shown before
deduction of commission.
Claims and loss adjustment expenses are charged to income
as incurred based on the estimated liability for compensation
owed to contract holders or beneficiaries. They include direct
and indirect claims settlement costs and arise from events
that have occurred up to the balance sheet date even if they
have not yet been reported to the Group. The Group does not
discount its liabilities for unpaid claims.
Liabilities for unpaid claims are estimated using the input of
assessments for individual cases reported to the Group and
statistical analyses for the claims incurred but not reported,
and to estimate the expected ultimate cost of more complex
claims that may be affected by external factors (such as court
decisions).
long term insurance contracts
These contracts insure human life events (for example death
or survival) over a long duration. They protect the Group’s
customers from the consequences of events such as death,
disability or critical illness. Guaranteed benefits paid on
occurrence of the specified insurance event are fixed or linked
to the level of bonus declared to the contract holder. Most of
the policies have maturity and surrender benefits.
For all these contracts, premiums are recognised as revenue
when they become payable by the contract holder. Premiums
are shown before deduction of commission.
Approximately 90 percent of the above contracts in the Group’s
portfolio contain a Discretionary Participation Feature (DPF).
This feature entitles the holder to receive, as a supplement to
generated benefits, additional benefits or bonuses.
The liability for long term insurance contracts (principally Life
Insurance) has been determined in accordance with LPS 1.04
Valuation of Policy Liabilities, issued by the Australian Prudential
Regulation Authority.
5 0
The policy liability is calculated in a way that allows for the
systematic release of planned profit margins as services are
provided to policy owners and the revenues relating to those
services are received (Margin on Service methodology).
Services used to determine profit recognition include the cost of
expected insurance claims and the allocation of future bonuses.
The liability is generally determined as the present value of all
future expected payments, expenses, taxes and profit margins
reduced by the present value of all future expected premiums
and take into consideration projected future bonuses. The
liabilities are recalculated at each balance date using best
estimate assumptions. These assumptions are revisited
regularly and adjusted for actual experience on claims, expense,
mortality and investment returns.
e
Fee & Commission income
Fees and commissions are generally recognised on an accrual
basis when the service has been provided. All other risk related
fees that constitute cost recovery are taken to income when
levied. Non-refundable front-end loan fees are capitalised and
deferred over the expected term of the financial instrument.
F
Borrowing expenses
Expenses associated with the borrowing of funds are charged to
the Statement of Comprehensive Income in the period in which
they are incurred.
g
loans and Provisions for loan
impairment
Loans are originated by providing funds directly to the borrower
and are recognised when cash is advanced to borrowers.
All loans and advances receivable are subject to continuous
management review. A specific provision for loan impairment
is established if there is objective evidence that the Bank and
the Group will not be able to collect all amounts due under the
terms of loans. The amount of the provision approximates the
difference between the carrying amount and the recoverable
amount, which is the current best estimate of the present
value of expected future cash flows arising from the asset.
All bad debts are written off against the specific provision for
loan impairment in the period in which they are classified
as irrecoverable. Subsequent recoveries are credited to the
provision for loan losses in the Statement of Comprehensive
Income.
General provisions for impairment are maintained to cover
incurred losses unidentified at balance date in the overall
portfolio of loans and advances. The provisions are determined
having regard to the level of risk weighted assets, economic
conditions, the general risk profile of the credit portfolio, past
loss experience and a range of other criteria. The amount
necessary to bring the provisions to their assessed levels, after
BSP Annual Report 2013
for the Year Ended 31 December 2013
write-offs, is charged to the Statement of Comprehensive
Income.
h
goodwill
Goodwill represents the excess of the cost of any acquisition
over the acquirer’s interest in the fair value of the identifiable
assets and liabilities acquired as at the exchange transaction.
Goodwill is reported in the statement of financial position as an
intangible asset.
In determining the estimated useful
life of goodwill,
management considers various factors including net selling
price of the acquired business, existing market share, potential
growth opportunities, and other factors inherent in the
acquired business. This assessment is reviewed at each balance
date, so that any indication of impairment with implications for
the recoverability of goodwill can be tested, and adjustments to
the carrying value of goodwill made if necessary.
i
Computer systems development
Costs
Costs incurred to develop and enhance the Bank and the
Group’s computer systems are capitalised to the extent that
benefits do not relate solely to revenue that has already been
brought to account and will contribute to the future earning
capacity of the economic entity. These costs are amortised over
the estimated economic life of four years using the straight-line
method. Costs associated with maintaining computer software
programmes are recognised as an expense when incurred.
j
Property, Plant and equipment
Land and buildings are measured at fair value. Fair value is
determined on the basis of regular independent valuation
prepared by external valuation experts, based on discounted
cash flows or capitalisation of net income (as appropriate).
The fair values are recognised in the financial statements of
the consolidated entity, and are reviewed at the end of each
reporting period to ensure that the carrying value of land and
buildings is not materially different from their fair values.
Any revaluation increase arising on the revaluation of land and
buildings is credited to the asset revaluation reserve, except
to the extent that it reverses a revaluation decrease for the
same asset previously recognised as an expense in profit or
loss, in which case the increase is credited to the Statement
of Comprehensive Income to the extent of the decrease
previously charged. A decrease in carrying amount arising on
the revaluation of land and buildings is charged as an expense
in statement of comprehensive income to the extent that it
exceeds the balance, if any, held in the asset revaluation reserve
relating to a previous revaluation of that asset.
NOTES TO THE FINANCIAL STATEMENTS
Depreciation on revalued buildings is charged to profit or loss.
On the subsequent sale or retirement of a revalued property,
the attributable revaluation surplus remaining in the asset
revaluation reserve, net of any related deferred taxes, is
transferred directly to retained earnings.
Depreciation is provided on property, plant and equipment,
including freehold buildings but excluding land. Depreciation is
calculated on a straight line basis so as to write off the net cost
or other revalued amount of each asset over its expected useful
life to its estimated residual value. Leasehold improvements are
depreciated over the period of the lease or estimated useful
life, whichever is the shorter, using the straight- line method.
The estimated useful life, residual values and depreciation
method is reviewed at the end of each annual reporting period.
The following basis and method of depreciation is used:
rate
Straight-line basis
Class of asset method
-----------------------------------------------------------------------------------
Property
(excluding land)
-----------------------------------------------------------------------------------
Plant
& equipment
-----------------------------------------------------------------------------------
Equipment under
operating lease
-----------------------------------------------------------------------------------
Straight-line basis
Straight-line basis
10 -25% pa
6 - 20% pa
2 - 3% pa
Gains or losses on disposals (being the difference between the
carrying value at the time of sale or disposal and the proceeds
received) are taken into account in determining operating
profit for the year. Where the carrying value of an asset is
greater than its estimated recoverable amount, it is written
down immediately to its recoverable amount. Repairs and
maintenance are taken into account in determining operating
profit when the expenditure is incurred.
K
leases
Bank is lessee
All leases entered into by the Bank and the Group are operating
leases. Total payments made are charged to the Statement
of Comprehensive Income reflecting the pattern of benefits
derived from the leased assets.
Bank is lessor
Finance leases are included in Loans and Advances to Customers
(Note 13) and are accounted for under the finance method
whereby income is taken to account over the life of the lease in
proportion to the outstanding investment balance.
5 1
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
Assets subject to operating leases are separately disclosed in
the statement of financial position, according to the nature
of the asset. These assets are stated at cost less accumulated
depreciation. The assets are depreciated on a straight-line basis
over the life of the operating lease. Lease income is recognised
on a straight-line basis over the term of the lease.
l
Cash & Cash equivalents
For the purpose of the Cash Flow Statement, cash and cash
equivalents comprise notes and coins, and balances due to and
from other banks.
M
Provisions
Provisions are recognised when the Company has a present
obligation (legal or constructive) as a result of a past event,
it is probable that the Company will be required to settle the
obligation, and a reliable estimate can be made of the amount
of the obligation. The amount recognised as a provision is the
best estimate of the consideration required to settle the present
obligation at reporting date, taking into account the risks and
uncertainties surrounding the obligation. Where a provision is
measured using the cash flows estimated to settle the present
obligation, its carrying amount is the present value of those
cash flows.
When some or all of the economic benefits required to settle
a provision are expected to be recovered from a third party,
the receivable is recognised as an asset if it is virtually certain
that reimbursement will be received and the amount of the
receivable can be measured reliably.
n
employee Benefits
A liability is required for benefits accruing to employees in
respect of wages and salaries, annual leave, long service leave
when it is probable that settlement will be required and they
are capable of being measured reliably.
Liabilities recognised in respect of employee benefits expected
to be settled within 12 months, are measured at their nominal
values using the remuneration rate expected to apply at the
time of settlement.
Liabilities recognised in respect of employee benefits which are
not expected to be settled within 12 months are measured as
the present value of the estimated future cash outflows to be
made by the consolidated entity in respect of services provided
by employees up to reporting date.
employment Benefits - defined contribution plans
A defined contribution plan is a pension plan under which the
Bank and the Group pays fixed contributions into a separate
fund, and there is no recourse to the Bank and the Group for
employees if the fund has insufficient assets to pay employee
5 2
benefits relating to service up to the balance sheet date.
The Bank and the Group pays contributions to publicly or
privately administered superannuation plans on a mandatory,
contractual or voluntary basis in respect of services rendered up
to balance sheet date by all Papua New Guinean staff members.
The contributions are at the current rate of employees' gross
salary. Once the contributions have been paid, the Bank and
the Group have no further payment obligations for post-
employment benefits from the date an employee ceases
employment with the Bank and the Group.
o
income Tax
Current tax
Current tax is calculated by reference to the amount of income
taxes payable or recoverable in respect of the taxable profit or
tax loss for the period. It is calculated using tax rates and tax laws
that have been enacted or substantively enacted by reporting
date. Current tax for current and prior periods is recognised as a
liability (or asset) to the extent that it is unpaid (or refundable).
deferred tax
Deferred tax is accounted for using the balance sheet liability
method. Temporary differences are differences between the
tax base of an asset or liability and its carrying amount in the
statement of financial position. The tax base of an asset or
liability is the amount attributed to that asset or liability for tax
purposes.
In principle, deferred tax liabilities are recognised for all taxable
temporary differences. Deferred tax assets are recognised to
the extent that it is probable that sufficient taxable amounts will
be available against which deductible temporary differences
or unused tax losses and tax offsets can be utilised. However,
deferred tax assets and liabilities are not recognised if the
temporary differences giving rise to them arise from the initial
recognition of assets and liabilities which affects neither taxable
income nor accounting profit.
Deferred tax assets and liabilities are measured at the tax rates
that are expected to apply to the period(s) when the asset and
liability giving rise to them are realised or settled, based on tax
rates (and tax laws) that have been enacted or substantively
enacted by reporting date. The measurement of deferred tax
liabilities and assets reflects the tax consequences that would
follow from the manner in which the Bank expects, at the
reporting date, to recover or settle the carrying amount of its
assets and liabilities.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and the
Bank intends to settle its current tax assets and liabilities on a
net basis.
BSP Annual Report 2013 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
Current & deferred Tax for the period
Current and deferred tax is recognised as an expense or income
in the statement of comprehensive income, except when it
relates to items credited or debited directly to equity, in which
case the deferred tax is also recognised directly in equity.
P
investments
Investments are classified into the following categories: held
for trading, held-to-maturity and available-for-sale. Trading
reflects active and frequent buying and selling, and financial
instruments held for trading generally are used with the
objective of generating a profit from short-term fluctuations in
price or dealers margin. Investments with fixed maturity that the
management has the intent and ability to hold to maturity are
classified as held-to-maturity. Investments intended to be held
for an indefinite period of time, which may be sold in response
to needs for liquidity or changes in interest rates, are classified
as available-for-sale; Management determines the appropriate
classification of its investments at the time of the purchase.
All purchases and sales of investments are recognised on the
trade date, which is the date that the Bank and the Group
commits to purchase or sell the asset. Cost of purchase includes
transaction costs. Trading and available-for-sale investments
are subsequently carried at fair value, whilst held-to-maturity
investments are carried at amortised cost using the effective
yield method. Realised and unrealised gains and losses arising
from changes in the fair value of trading investments are
included in the income statement in the period in which they
arise.
Q
Foreign currency
entity’s overseas operations are translated at exchange rates
prevailing at the reporting date. Income and expense items are
translated at the average exchange rates for the period unless
exchange rates fluctuate significantly. Exchange differences
arising, if any, are recognised in the foreign currency translation
reserve, and recognised in profit or loss on disposal of the
foreign operation.
r
share capital
share issue costs
External costs directly attributable to the issue of new shares
are deducted from equity net of any related income taxes.
dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the
period in which they are declared. Dividends for the year,
declared after the balance sheet date, are dealt with in the
subsequent events note.
share options
The fair value of the employee services received in exchange
for the grant of options is recognised as an expense. The
total amount to be expected rateably over the vesting period
is determined by reference to the fair value of the options
determined at the grant date, excluding the impact of any
non-market vesting conditions (for example profitability).
Non-market conditions are included in assumptions about
the number of options expected to become exercisable or the
number of shares that the employee will ultimately receive.
The financial statements of the Bank are presented in the
currency of the primary economic environment in which the
entity operates (its functional currency). For the purpose of
these financial statements, the results and financial position of
the Bank are expressed in Papua New Guinea kina, which is the
bank’s functional and presentation currency.
This estimate is revised at each balance sheet date and
the difference is charged or credited to the statement of
comprehensive income, with a corresponding adjustment to
equity. The proceeds received on exercise of the options net
of any directly attributable transactions costs are credited to
equity.
In preparing the financial statements, transactions in currencies
other than the entity’s functional currency (foreign currencies)
are recorded at the rate of exchange prevailing on the dates of
the transactions. At each balance sheet date, monetary items
denominated in foreign currencies are retranslated at the rates
prevailing at the balance sheet date. Non-monetary items
carried at fair value that are denominated in foreign currencies
are retranslated at the rates prevailing on the date when the
fair value was determined. Non-monetary items that are
measured in terms of historical cost in a foreign currency are
not retranslated.
Foreign operations
On consolidation, the asset and liabilities of the consolidated
s
asset impairment
At each reporting date, the Bank and the Group reviews the
carrying amounts of its tangible and intangible assets to
determine whether there is any indication that those assets
have suffered an impairment loss. If any such indication exists,
the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the
asset does not generate cash flows that are independent from
other assets, the Bank and the Group estimates the recoverable
amount of the cash-generating unit to which the asset belongs.
Goodwill, intangible assets with indefinite useful lives and
intangible assets not yet available for use are tested for
impairment annually and whenever there is an indication that
5 3
BSP Annual Report 2013 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
the asset may be impaired. An impairment of goodwill is not
subsequently reversed.
Recoverable amount is the higher of fair value less costs to sell
and value in use. In assessing value in use, the estimated future
cash flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the
time value of money and the risks specific to the asset for which
the estimates of future cash flows have not been adjusted.
If the recoverable amount of an asset (or cash-generating unit)
is estimated to be less than its carrying amount, the carrying
amount of the asset (cash-generating unit) is reduced to its
recoverable amount. An impairment loss is recognised in
profit or loss immediately, unless the relevant asset is carried
at fair value, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying
amount of the asset (cash-generating unit) is increased to the
revised estimate of its recoverable amount, but only to the
extent that the increased carrying amount does not exceed
the carrying amount that would have been determined had no
impairment loss been recognised for the asset (cash-generating
unit) in prior years. A reversal of an impairment loss is recognised
in profit or loss immediately, unless the relevant asset is carried
at fair value, in which case the reversal of the impairment loss is
treated as a revaluation increase.
T
non-current assets held for sale
Non-current assets (and disposal groups) classified as held for
sale are measured, with certain exceptions, at the lower of
carrying amount and fair value less costs to sell.
Non-current assets and disposal groups are classified as held
for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing
use. This condition is regarded as met only when the asset (or
disposal group) is available for immediate sale in its present
condition subject only to terms that are usual and customary
for such a sale and the sale is highly probable.
The sale of the asset (or disposal group) must be expected to
be completed within one year from the date of classification,
except in the circumstances where sale is delayed by events or
circumstances outside the company’s control and the company
remains committed to a sale.
u
Convertible notes
Convertible notes issued by the company are regarded as
compound instruments, consisting of a liability component
equivalent to the three year fixed coupon amount and an equity
component equivalent to the balance. At the date of issue,
the fair value of the liability component is estimated using the
prevailing market interest rate for similar non-convertible debt.
5 4
The difference between the proceeds of issue of the convertible
loan notes and the fair value assigned to the liability component,
representing the embedded option to convert the liability into
equity of the company, is included in equity.
The interest expense on the liability component is calculated by
applying the coupon rate of 7 percent to the liability component
of the instrument. The difference between this amount and the
interest paid is added to the carrying amount of the convertible
notes.
V
derivative financial
instruments & acceptances
Forward foreign exchange contracts entered into for trading
purposes are initially recognised at cost and subsequently re-
measured at fair value based upon the forward rate. Gains
and losses on such contracts are taken to the statement of
comprehensive income.
Acceptances comprise undertakings by the Bank and the Group
to pay bills of exchange drawn on customers. The Bank and the
Group expects most acceptances to be settled simultaneously
with the reimbursement from the customers. Customer
acceptances are accounted for as off-balance sheet transactions
and are disclosed as contingent liabilities and commitments.
The Bank and the Group does not actively enter into or trade
in complex forms of derivative financial instruments such as
currency and interest rate swaps and options.
w
Comparatives
Comparative figures have been adjusted to conform to changes
in presentation in the current year, including:
•
•
Computer development costs have been moved to
Intangibles category from Other Assets category. Refer to
note 7 (b).
Elimination of the Fiji bank investment and the related
assigned capital and capital adequacy reserve.
.....................................................................................................
Investment in Subsidiary 2012
215,517
.....................................................................................................
Eliminattion of Fiji Bank Branch investment entries
- Assigned capital
- Capital adequacy reserve
- Colonial Bank assigned capital
(24,883)
(67,912)
(21,456)
101,266
Transfer projects costs
6,111
from other assets to investment
.....................................................................................................
Adjusted balance for investment
in subsidiary in 2012
107,377
.....................................................................................................
BSP Annual Report 2013
for the Year Ended 31 December 2013
2. neT inTeresT inCoMe
all amounts are expressed in K'000
interest income
Cash and short term funds
Treasury bills
Central Bank Bills
Inscribed Stock
Loans and advances
Other
Less:
interest Expense
Customer deposits
Other banks
Subordinated debt securities
Other borrowings
NOTES TO THE FINANCIAL STATEMENTS
grouP
BanK
2013
2012
2013
2012
8,184
47,176
27,850
140,195
569,262
2,140
794,807
32,054
13,589
8,307
-
53,950
740,857
6,417
53,759
56,095
127,412
496,988
2,415
743,086
44,606
8,547
8,330
49
61,532
681,554
8,184
47,176
27,850
140,195
568,332
2,140
793,877
31,578
13,589
8,307
-
53,474
740,403
6,417
53,759
56,095
127,412
497,047
2,415
743,145
44,693
8,547
8,330
49
61,619
681,526
3. BanKing Fee & CoMMission inCoMe
all amounts are expressed in K'000
Fee and commission income
Credit related
Trade and international related
Electronic banking related
Brokerage and fee income
Other
Less:
Fee and commission expenses
Agencies
grouP
2013 2012
BanK
2013
2012
73,263
13,467
46,770
3,789
148,995
286,284
690
690
285,594
67,808
11,894
34,505
2,407
138,175
254,789
920
920
253,869
73,263
13,467
46,770
-
148,218
281,718
690
690
281,028
67,808
11,894
34,505
-
138,175
252,382
920
920
251,462
4. oTher BanKing inCoMe
grouP
BanK
all amounts are expressed in K'000
Foreign Exchange related
Other
2012
2013
353,463 223,708
49,470
46,713
400,176 273,178
2013
353,463
46,848
400,311
included in other income:
Profit/(loss) on sale of fixed assets
Change in fair value of assets held through profit and loss
(906)
-
498
5,922
(906)
-
2012
223,708
50,141
273,849
498
-
Foreign Exchange related income includes gains and losses from spot and forward contracts and translated foreign currency
assets.
5 5
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
5. oTher oPeraTing eXPenses
all amounts are expressed in K'000
Administration
Auditors’ remuneration (note 41)
Computing
Depreciation
Amortisation of computer development
Non-Executive Directors’ costs
Non-lending losses
Premises & equipment
Staff costs
Defined contribution plans
Statutory benefit contributions
Wages and salaries
Other
6. inCoMe TaX
All amounts are expressed in K’000
income tax expense
Current tax
Deferred tax
Current year
Income tax under/(over) provided in previous years
Tax calculated at 30% of profit before tax (2012:30%)
Tax calculated at 20% of profit before tax – subsidiary
Expenses not deductible for tax
Net insurance income not subject to tax
Impact of change in tax rate – Fiji subsidiary
Income tax under/(over) provided in previous years
grouP
2013
2012
194,455 186,099
2,496
2,707
34,983
39,521
57,968
90,817
25,785
85,018
1,424
1,434
15,386
16,942
55,742
79,150
379,883
510,044
10,643
10,908
227,150
75,104
323,805
833,849
9,348
9,334
211,490
70,202
300,374
680,257
BanK
2013
129,474
2,110
39,521
86,723
85,018
1,224
16,942
70,730
431,742
9,512
10,908
210,461
72,703
303,584
735,326
2012
128,217
1,423
34,983
54,806
25,785
1,244
15,386
55,742
317,586
8,346
9,334
197,227
67,955
282,862
600,448
grouP
BanK
2013
2012
2013
2012
181,261
(12,599)
168,662
180,190
(8,970)
171,220
1,465 (33,668)
137,552
170,127
160,631
178,406
2,757
3,246
(13,520)
3,734
- 4,098
530
1,465
170,127
180,959
(12,341)
168,618
(504)
168,114
177,863
-
(9,245)
-
178,622
(14,936)
163,686
(27,837)
135,849
160,631
-
3,056
-
-
(27,838)
135,849
- -
(504)
(33,668)
168,114
137,552
Provision for income tax
At 1 January
Income tax provision
Previous years over/(under) provided
Foreign tax paid
Tax payments made
At 31 December
(13,112) (77,961)
(73,684)
(181,261) (180,190) (180,959) (178,622)
5,564
-
233,720
(13,022)
6,364
4,955
233,720
(33,395) (13,112)
4,125
216
156,637
4,125
-
156,634
(33,222)
(13,022)
Deferred taxes
Specific allowance for losses on loans and advances
General allowance for losses on loans and advances
Employee related provisions
Prepaid expenses
Other provisions
Depreciation and amortisation
Unrealised foreign exchange gains
Deferred expenditure
At 31 December
11,704
44,912
71,033
19,504
18,708
21,573
(1,285)
(1,112)
18,164
17,085
(29,234) (29,952)
(4,658)
(10,444)
8,150
9,435
76,581
87,002
11,704
71,033
18,453
(1,285)
16,527
(27,033)
(10,381)
9,435
88,453
44,912
19,504
15,783
(1,112)
22,052
(22,588)
(4,658)
8,150
82,043
5 6
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
6. inCoMe TaX (continued)
all amounts are expressed in K'000
Represented by:
Deferred tax asset
Deferred tax liability
At 31 December
grouP
BanK
2013
2012
2013
2012
134,372
(47,370)
87,002
111,141
(34,560)
76,581
127,151
(38,698)
88,453
110,401
(28,358)
82,043
Movement in deferred tax is reconciled as follows:
opening
balance
All amounts are expressed in K’000 GROUP – 2013
adjustment
Current
brought
period P&L
forward
Movements
(11,412) (1,398)
(780)
24,011
(2,178)
12,599
(34,560)
Gross deferred tax liabilities
Gross deferred tax assets
111,141
76,581
Closing
Revaluation
Balance
& net addition
-
(47,370)
- 134,372
87,002
-
All amounts are expressed in K’000 GROUP – 2012
Gross deferred tax liabilities
Gross deferred tax assets
(19,028) (13,046) - (2,486) (34,560)
-
87,625 22,016
111,141
(2,486) 76,581
8,970
1,500
1,500
68,597
All amounts are expressed in K’000 BANK – 2013
(28,358) (11,467) 1,127
Gross deferred tax liabilities
(7,058)
Gross deferred tax assets
110,401 23,808
(5,931)
82,043 12,341
- (38,698)
127,151
-
88,453
-
All amounts are expressed in K’000 BANK – 2012
Gross deferred tax liabilities
Gross deferred tax assets
(18,627)
(7,245)
87,336 22,181
68,709 14,936
-
884
884
(2,486) (28,358)
- 110,401
82,043
(2,486)
BsP has a Banking education team that meet customers in their communities
or workplaces to educate them on how to use our producst/services.
Here Banking education officer Vani Vani talks to staff at anglicare .
5 7
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
7. a) inTangiBle asseT
All amounts are expressed in K’000
Gross carrying amount
grouP
2013
201
201
2012
2,243
2,243
BanK
2013
-
-
2012
-
-
The Directors have determined that the carrying value of the goodwill arising on consolidation as a result of elimination of
BSP investment in its subsidiaries is considered not materially impaired. These subsidiaries trade on a going concern basis
and their normal business operations are not exceptionally impaired.
7. B) CoMPuTer deVeloPMenT CosTs
All amounts are expressed in K’000
At 1 January 2013
Additions
Adjustments
Amortisation expense
At 31 December 2013
grouP
2012
2013
3,126 29,145
-
208,147
6,943
(234)
(85,018) (25,785)
3,126
133,198
BanK
2012
2013
3,126 29,145
-
208,147
6,943
(234)
(85,018) (25,785)
3,126
133,198
Total Intangible assets
133,399
5,369
133,198
3,126
8. inVesTMenT in suBsidiaries
All amounts are expressed in K’000
Principal
activity
Name of Subsidiary
BSP Capital Limited
Share brokerage/
Fund Management/
Capital Raising
BSP Life Limited
Life Insurance
BSP Convertible Note Limited Capital Raising
Place of
incorporation &
operation
ownership % 2013 2012
Balance of Investment
PNG 100% 8,959 19,407
FIJI 100% 87,653 87,653
FIJI 100% 317 317
96,929 107,377
Provision for impairment of the investment in BsP Capital limited
The directors have determined that the investment in BSP Capital Limited has been materially impaired as the carrying amount
of the investment is greater than its net book value. As of the reporting date, the investment amount is written down to its
net book value. The provision for impairment impacts the bank’s results but not the consolidation as a result of elimination
upon consolidation.
All amounts are expressed in K’000
Opening Balance
Net Movement
Provision for Impairment
Closing Balance
2013 2012
19,407 19,407
4,519 -
-
(14,967)
8,959 19,407
5 8
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
9. inVesTMenTs in assoCiaTes & joinT VenTures
Name of Associates
Principal
activity
Suva Central Limited
Richmond Limited
Williams and Gosling
Carpark Limited
Malagan Limited
Property Rental
Hotel operation
Freight forwarding
Property
Property
Proportion of ownership & voting
Place of
power held
incorporation &
operation
2013
Fiji 50%*
Fiji 61.3%**, 50%***
Fiji 27.7%*
PNG 33.33%
PNG 33.33%
61.3%**, 50%***
27.7%*
33.33%
33.33%
2012
50%*
*both ownership and voting power held, **ownership, ***voting power held.
All amounts are expressed in K’000
associates
Investment in associate - equity
Movement
Share of profit/(loss) for year ending December 2012
Net investment in associate
Summarised financial information of associates:
Total assets
Total liabilities
net assets
Net profit/(loss)
Share of associate’s profit/(loss)
Joint ventures
Share held in jointly owned entity – at costs
total investments in associates and joint ventures
group
Bank
2013
2012
2013
2012
53,166
7,464
12,270
72,900
139,900
(38,418)
101,482
22,316
12,270
42,394
(398)
11,170
53,166
119,846
(37,244)
82,602
18,932
11,170
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
43,921
116,821
43,275
96,441
43,690
43,690
43,275
43,275
5 9
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
10. Cash & BalanCes wiTh CenTral BanK
All amounts are expressed in K’000
Notes, coins and cash at bank
Balances with Central Bank other than statutory deposit
Included in cash and cash equivalents
Statutory deposits with Central Bank
2012
2013
423,238
391,639
510,161
572,581
933,399
964,220
1,066,580
873,198
2,030,800 1,806,597
2013
353,809
572,581
926,390
1,066,580
1,992,970
2012
380,916
510,161
891,077
873,198
1,764,275
grouP
BanK
11. Treasury & CenTral BanK Bills
All amounts are expressed in K’000
Treasury & Central Bank bills – face value
Premium/(discount) for interest receivable
grouP
2013 2012
3,309,115 3,225,565
11,952
3,283,432 3,237,517
(25,683)
BanK
2013 2012
3,225,565
3,309,115
11,952
(25,683)
3,237,517
3,283,432
12. aMounTs due FroM oTher BanKs
All amounts are expressed in K’000
Items in the course of collection
Placements with other banks
grouP
BanK
2013
128,524
1,316,675
1,445,199
2012
35,604
291,959
327,563
2013
128,524
1,316,675
1,445,199
2012
35,604
291,959
327,563
Customers at Gilbert Camp, east Honiara
finding out more information from a BsP staff.
6 0
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
13. loans & adVanCes To CusToMers
All amounts are expressed in K’000
Loans originated by the BSP Group:
Overdrafts
Lease financing
Term loans
Mortgages
Policy loans
Gross loans and advances net of reserved interest
Less allowance for losses on loans and advances
grouP
2013 2012
BanK
2013 2012
1,203,238
261,271
2,951,144
1,124,777
43,013
5,583,443
(277,081)
5,306,362
1,095,419
224,464
2,638,291
1,028,791
38,194
5,025,159
(220,533)
4,804,626
1,203,237 1,095,419
261,271 224,464
2,931,168 2,617,631
1,124,300 1,028,000
-
5,519,976 4,965,514
(275,788) (214,721)
5,244,188 4,750,793
-
The spread of the loans are detailed in the maturity analysis table in note 34. The loans are well-concentrated across various
sectors and region and are further analysed in note 33.
Lease financing
The Group and the Bank provided finance leases to a broad range of clients to support financing needs in acquiring movable
assets such as motor vehicles and plant and equipment. Finance lease receivables are included within loans and advances to
customers. Loans and advances to customers includes finance lease receivables, analysed as follows:
Gross investment in finance leases receivable
Not later than 1 year
Later than 1 year and not later than 5 years
Unearned future finance income
Not later than 1 year
Later than 1 year and not later than 5 years
Present value of minimum lease payment receivable
28,268
266,429
294,697
27,498 28,268 27,498
244,080
244,080
266,429
271,578
271,578 294,697
(11,895) (719) (11,895) (719)
(46,395)
(21,531)
(47,114)
(33,426)
224,464
261,271
(46,395)
(47,114)
224,464
(21,531)
(33,426)
261,271
Present value of minimum lease payment receivable is analysed as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
16,373
244,898
261,271
26,779 16,373
244,898
197,685
261,271
224,464
26,779
197,685
224,464
Provision for impairment
Movement in allowance for losses on loan and advances;
Balance at 1 January
Net new and increase provisioning
Loans written off against provisions /
(write back of provisions no longer required)
Balance at 31 December
220,553
69,320
168,072
73,752 69,320
214,721 162,174
73,752
(12,792)
277,081
(21,291)
(21,205)
220,533 275,788 214,721
(8,253)
In determining the potential loss in specific loans, groups of loans, or in the aggregate loan portfolio, all relevant factors have
been considered including, but not limited to: current economic conditions, historical loss experience, delinquency trends,
the effectiveness of the bank’s lending policies and collection procedures, and the timeliness and accuracy of its loan review
function in line with the Group Provisioning Policy.
Bank of South Pacific has met the minimum provisioning amounts are to be maintained under Prudential Standard 2/2003
- Asset Classification, provisioning and suspension of interest. At the end of each calendar quarter, or more frequently if
warranted, the board of directors has caused management to evaluate the collectability of all loans, including any accrued and
unpaid interest in line with Bank of South Pacific’s loan policy.
6 1
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
13. loans & adVanCes To CusToMers (continued)
All amounts are expressed in K’000
Provision for impairment is represented by:
Collective provision
Individually assessed or specific provision
Balance at 31 December
grouP
BanK
2013
2012
2013
2012
237,400
39,681
277,081
174,220
46,313
220,533
236,776 173,635
39,012 41,086
275,788 214,721
loan impairment expense
(57,449) (65,013) (57,449) (65,013)
Net collective provision funding
Net new and increase individually assessed provisioning (11,871) (8,739) (11,871) (8,739)
Total new and increase provisioning
(69,320) (73,752) (69,320) (73,752)
Recoveries during the year
26,239 21,133 26,239 21,133
Net write back/(write off) (35,492) (18,333) (35,492) (18,333)
(78,573) (70,952) (78,573) (70,952)
Balance at 31 December
BsP staff at the Telefomin sub-branch during the opening
in february 2013. Telefomin, West sepik Province, is only
accessible by air and is one of the most remote places
in PNG. Previously locals either travelled by air into
provincial capital Vanimo or into Kiunga and Tabubil in
Western Province to do banking.
6 2
BSP Annual Report 2013
for the Year Ended 31 December 2013
14. ProPerTy, PlanT & eQuiPMenT
All amounts are expressed in K’000
Carrying value
Capital works in progress
Premises
Accumulated depreciation
Net Book Value
Equipment
Accumulated depreciation
Net Book Value
total net Book value
NOTES TO THE FINANCIAL STATEMENTS
grouP
BanK
2013
2012
2013
2012
117,253
490,704
(105,509)
385,195
471,108
(350,196)
120,912
623,360
325,821
407,608
(76,888)
330,720
361,790
(274,039)
87,751
744,292
113,744
465,966
(97,875)
368,091
436,168
(328,380)
107,788
589,623
Reconciliation of carry value of property, plant and equipment is set out below:
Capital WiP
At 1 January
Additions
Transfers
Balance at 31 December
Premises
At 1 January
Additions
Disposals
Depreciation expense
Balance at 31 December
Equipment
At 1 January
Additions
Disposals
Depreciation expense
Balance at 31 December
325,821
171,170
(379,738)
117,253
244,401
230,398
(148,978)
325,821
330,720
90,489
(7,877)
(28,137)
385,195
87,751
88,909
(789)
(54,959)
120,912
296,539
51,841
(422)
(17,238)
330,720
81,963
44,140
(5,617)
(32,735)
87,751
324,982
167,006
(378,244)
113,744
316,703
86,745
(7,877)
(27,480)
368,091
76,594
83,360
(644)
(51,522)
107,788
324,982
386,707
(70,004)
316,703
334,239
(257,645)
76,594
718,279
243,498
221,783
(140,299)
324,982
281,258
52,634
(422)
(16,767)
316,703
72,766
39,177
(5,305)
(30,044)
76,594
6 3
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
14. ProPerTy, PlanT & eQuiPMenT (continued)
All amounts are expressed in K’000
Assets subject to operating lease
Carrying value
Aircraft
Accumulated depreciation
Balance at 31 December
Reconciliation of carry value of aircraft is set out before:
Aircraft
At 1 January
Revaluation net increase
Depreciation
Balance at 31 December
Future minimum lease payments
Not later than 1 year
Later than 1 year and not later than 5 years
Balance at 31 December
grouP
2013
2012
BanK
2013
2012
123,326
(61,821)
61,505
123,326
(54,100)
69,226
123,326
(61,821)
61,505
123,326
(54,100)
69,226
68,936
69,226
68,936
- 8,285 - 8,285
(7,995)
(7,721)
69,226
61,505
(7,721)
61,505
(7,995)
69,226
69,226
10,104
25,427
35,531
8,373
28,609
36,982
10,104
25,427
35,531
8,373
28,609
36,982
The carrying amount of land, buildings and aircraft had they been recognised under the cost model are as follows:
All amounts are expressed in K’000
Freehold land
Building
Aircraft
Balance at 31 December
grouP
2013
14,932
100,864
61,508
177,304
2012
14,531
102,444
60,392
177,367
BanK
2013
11,832
86,240
61,508
159,580
2012
11,434
86,192
60,392
158,018
Freehold land and buildings carried at fair value
An independent valuation of the Bank’s land and buildings was performed by GDA Pacific Valuers to determine the fair value
of the land and buildings. The valuation, which conforms to International Valuation Standards, was determined by reference to
capitalisation of the notional income stream approach on the Market Value basis. The last valuation was dated 31 December 2011.
asset subject to operating lease – aircraft
An independent valuation of the Bank’s aircrafts was performed by Charles Taylor Aviation to determine the current realistic fair
value for each of the aircraft. The valuation, which conforms to International Valuation Standards, takes into consideration the
current global market variations for the specific types of aircrafts. The effective date of the most recent valuation was on 31 May
2012.
6 4
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
grouP
2013
56,755
8,251
-
423
65,429
2012
60,308
1,112
(3,706)
(959)
56,755
BanK
2013 2012
-
-
-
-
-
-
-
-
-
-
for the Year Ended 31 December 2013
15. inVesTMenT ProPerTies
All amounts are expressed in K’000
Opening net book value
Net movement
Transfer to asset held for sale
Gain/Loss on revaluation
Balance at 31 December
16. oTher FinanCial asseTs
All amounts are expressed in K’000
Securities - held to maturity
Inscribed stock - issued by Central Bank
Financial assets carried at fair value through profit and loss:
Equity securities
Balance at 31 December
grouP
BanK
2013
2012
2013
2012
2,121,654
1,505,589
1,924,536
1,354,659
49,144
2,170,798
52,361
1,557,950
-
1,924,536
-
1,354,659
The fair value hierarchy of the financial assets carried at fair value through profit and loss:
2013
Equity securities
Balance at 31 December
2012
Equity securities
Balance at 31 December
level 1
level 2
level 3 level 4
- 47,811 1,333 49,144
1,333 49,144
-
47,811
- 51,278 1,083 52,361
- 51,278 1,083 52,361
The fair value hierarchy disclosure is in accordance with International Financial Reporting Standards requirements.
17. oTher asseTs
All amounts are expressed in K’000
Items in transit and other assets
Accrued income
Intercompany account
Outstanding premiums
Inventory
Prepayments
Accounts receivable
Balance at 31 December
grouP
BanK
2012
398,018 290,995 357,349
76,079 75,882 76,079
- 494 (11,454)
20,865
2013 2012 2013
305,184
75,882
-
26,050
7,861 5,575 -
13,943
13,943
423
8,393
381,737
437,313
- -
-
14,824
(2,691)
434,107
14,824
(3,442)
511,919
6 5
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
18. aMounTs due To oTher BanKs
All amounts are expressed in K’000
2013
2012
2013
2012
grouP
BanK
Items in the course of collection
786,035 72,775 786,035 90,828
19. aMounTs due To CusToMers
All amounts are expressed in K’000
On demand and short term deposits
Term deposits
Balance at 31 December
grouP
2013
10,232,667
1,968,332
12,200,999
2012
9,012,413
1,848,109
10,860,522
BanK
2013
10,326,962
1,969,264
12,296,226
2012
9,016,405
1,904,286
10,920,691
The majority of the amounts are due to be settled within twelve months of the balance sheet date as shown in the maturity
analysis table in note 34. The deposits are well-diversed across industries and regions.
20. suBordinaTed noTes
At 31 December, there are K75.525 million of debt securities outstanding, expected to be settled more than 12 months after the
balance sheet date. The notes were issued during 2009, with a maturity date in 2019, and interest is payable semi-annually at
11 % per annum. They are valued at amortised cost. There have been no defaults of interest or any other breaches of terms and
conditions with respect to these debt securities in 2013.
21. oTher liaBiliTies
All amounts are expressed in K’000
Creditors and accruals
Items in transit and all other liabilities
Policy liabilities
Premiums received in advance
Outstanding claims
Claims incurred but not reported ( IBNR)
Balance at 31 December
Policy liability is reconciled as follows:
Opening balance
Increase in policy liability
Balance at 31 December
22. oTher ProVisions
grouP
BanK
2013
76,584
362,875
481,087
3,985
10,398
1,440
936,369
2012 2013 2012
63,812 66,330
79,054
218,827
371,312
223,079
-
-
399,627
-
-
5,387
-
6,420
-
-
-
1,168
285,157
435,124
714,735
399,627
81,460
481,087
376,743
22,884
399,627
-
-
-
-
-
-
All amounts are expressed in K’000
Staff related
Provision for non lending loss
Provision for others
Balance at 31 December
Staff related provisions
At 1 January
Provisions charge
Payouts
Balance at 31 December
grouP
BanK
2013
62,191
30,947
16,899
110,037
57,069
23,705
(18,583)
62,191
2012
57,069
25,394
13,517
95,980
46,478
19,799
(9,208)
57,069
2012
2013
57,170
52,287
30,947 25,394
13,517
16,899
91,198
105,016
52,287
21,655
(16,772)
57,170
42,609
24,208
(14,530)
52,287
6 6
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
23. ordinary shares - BanK
Number of shares in ‘000s, book value in K’000
At 31 December 2011/1 January 2012
Share buyback
Balance at 31 December 2012/1 January 2013
Share buyback
Balance at 31 December
Book Value
Number of Shares
473,882 426,444
(41,630)
(4,681)
384,814
469,201
(3,316)
(777)
381,498
468,424
At the Bank’s Annual General Meeting held on the 20 May 2011 in Port Moresby, the shareholders approved a reorganisation of
the Bank’s capital through a share consolidation by which ten existing BSP ordinary shares were consolidated into one BSP share.
In May 2011, the Directors agreed to introduce a share buyback scheme of up to K40 million in conjunction with the 1 for
10 share consideration. The share buyback commenced in July 2011. At the expiry of the first buyback scheme the Directors
approved a further buyback program of K40 million which commenced on Friday 9 March 2012 for a period of 12 months which
ceased on 27 March 2013.
The issued capital of Bank of South Pacific Limited comprises ordinary shares. Following is a summary of principal shareholders
as at 31 December 2013 and their respective percentage holdings.
Major shareholders: % shareholding
Independent Public Business Corporation
National Superannuation Fund Limited
Nambawan Super Limited
Petroleum Resources Kutubu Limited
Credit Corporation (PNG) Limited
Motor Vehicle Insurance Limited
PNG Sustainable Development Program Limited
IFC Capitalization (Equity) Fund LP
International Finance Corporation
Teachers Savings and Loans Society Limited
Comrade Trustee Services
Tropicana Limited
All Others
2013
18.00
11.10
10.03
9.85
7.75
6.67
6.23
4.87
4.87
3.70
3.09
1.06
87.22
12.78
100.00
2012
17.97
11.06
10.04
9.84
7.85
6.66
6.25
4.86
4.86
3.69
3.13
1.06
87.27
12.73
100.00
6 7
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
23. ordinary shares - BanK (continued)
All amounts are expressed in K’000
Earnings per ordinary share
436,828
Net Profit attributable to shareholders (K’000)
Weighted average number of ordinary shares on issue (‘000) 469,136
Basic and diluted earning /(loss) per share (expressed in toea) 93.1
grouP
2013
2012
BanK
2013
2012
407,744
469,201
86.9
424,762
469,136
90.5
399,588
469,201
85.2
Basic earnings per ordinary share is calculated by dividing the net profit attributable to shareholders by the weighted average
number of ordinary shares in issue during the year. Bank of South Pacific Limited has no dilutive potential ordinary shares.
Consequently, basic earnings per share equals diluted earnings per share.
All amounts are expressed in K’000
Dividend paid on ordinary shares
Interim ordinary dividend (2013: 20 toea; 2012: 20 toea)
Final ordinary dividend (2012: 38 toea; 2011: 35 toea)
Balance at 31 December
grouP
2013
2012
BanK
2013
2012
93,685
178,001
271,686
93,970
165,024
258,994
93,685
178,001
271,686
93,970
165,024
258,994
Applicable dividend withholding tax of 17% has been deducted for payment to the relevant authority.
6 8
BsP Group DCeo/Cfo Johnson Kalo and Gulf
Governor Havilla Kavo sign agreements in June
2013 for BsP to return to Kerema.
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
24. reserVes & reTained earnings
All amounts are expressed in K’000
2013
2012
2013
2012
grouP
BanK
retained earnings
At 1 January
Net profit for the year
Dividend paid
Balance at 31 December
reserves comprise:
Revaluation reserve
Capital reserve
Equity component of convertible notes
Options reserve
General reserve
Exchange reserve
Balance at 31 December
movement in reserves for the year:
Revaluation reserve
At 1 January
Asset revaluation increment
Deferred tax on asset revaluation
Balance at 31 December
Capital reserve
At 1 January
Balance at 31 December
Options reserve
At 1 January
Movement during the year
Balance at 31 December
general reserve
At 1 January
Balance at 31 December
Exchange reserve
At 1 January
Movement during the year
Balance at 31 December
exchange reserve
870,148
436,828
(271,686)
1,035,290
721,398
407,744
(258,994)
870,148
838,292
424,762
(271,686)
991,368
697,698
399,588
(258,994)
838,292
170,103
635
18,218
-
2,875
10,441
202,272
170,103
635
170,103
635
18,218 -
4,526
2,875
14,574
210,931
170,103
635
-
- 4,526
2,875
2,875
14,574
7,833
192,713
181,446
170,103 160,293
12,296
-
(2,486)
-
170,103
170,103
170,103 160,293
-
12,296
- (2,486)
170,103
170,103
635 635
635
635
635
635 635 635
4,526
(4,526)
-
3,238
1,288 (4,526)
-
4,526
4,526 3,238
1,288
4,526
2,875 2,875
2,875
2,875
2,875
2,875
2,875
2,875
14,574
(4,133)
10,441
11,087
3,487
14,574
15,627
14,574
(6,741)
(1,053)
7,833 14,574
The movement in exchange reserve is a result of taking on alignment entries and month end entries of BSP’s foreign branches in
Solomon Islands and Fiji. These treatments are in accordance with applicable accounting standards.
6 9
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
24. reserVes & reTained earnings (continued)
equity component of convertible notes
On 20 April 2010, the Group issued 3,064,967 Fiji Dollars (FJD) denominated mandatory convertible notes through its wholly
owned subsidiary BSP Convertible Notes Limited (BSP CN) at an issue price of FJD5.25 (K7.30) per note. Each note entitles the
holder to convert to ten (10) Fiji Class shares. On conversion all notes are redeemed for their face value and the proceeds of that
redemption are applied as the subscription price for Fiji Class shares. Notes can only be redeemed in cash at the election of BSP CN
Fiji with regulatory approval. The amount payable at redemption will be the greater of the market value or face value of the note
plus accrued interest. The notes have mandatorily converted to Fiji Class Shares on 20 April 2013.
The net proceeds received from the issue of the convertible notes have been split between the financial liability element and the
equity component, representing the residual attributable to the option to convert the financial liability into equity of BSP CN.
The equity component of K18.218 million has been credited to equity (option premium on convertible notes).
Note holders have no right to vote at meetings of BSP Convertible Notes Limited.
statutory capital requirements in Fiji
As a requirement of the Reserve Bank of Fiji, BSP Fiji operations are required to maintain assigned capital of K24.833m (2012:
K24.833m) and capital adequacy reserve of K68.547m (2012: K68.547m).
Branchless Banking in Malu’u,
North Malaita,solomon islands
7 0
BSP Annual Report 2013 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
25. ConTingenT liaBiliTies and CoMMiTMenTs
All amounts are expressed in K’000
Off balance sheet financial instruments
Standby letters of credit
Guarantees and indemnities issued
Forward Exchange Contracts
Trade letters of credit
Commitments to extend credit
legal Proceedings
grouP
2013
2012
BanK
2013 2012
47,692
181,232
374, 934
47,691
860,453
1,512,002
18,051
47,692 18,051
121,782
64,490 170,124
57,291 374, 934 57,291
86,963 25,619 86,963
1,178,340
695,233
1,290,923
1,462,427
1,313,602
1,517,718
A number of legal proceedings against the Bank and the Group were outstanding as at 31 December 2013. Suitable provisions
have been made based on existing management information and professional advice, on likelihood of any success of claim
against the bank. Based on information available at 31 December 2013, the Bank and the Group estimates a contingent liability
of K77.90 million (2012: K74.780 million) in respect of these proceedings.
All amounts are expressed in K’000
Statutory deposits with the Central Bank
Cash reserve requirement - 9% of all amounts
due to customers (2012: 8 %)
Commitments for capital expenditure
Amounts with firm commitments, and not reflected
in the accounts
Operating lease commitments
Not later than 1 year
Later than 1 year and not later than 5 years
26. FiduCiary aCTiViTies
grouP
2013
2012
BanK
2013 2012
1,066,580
873,198
1,066,580
742,495
154,344 24,646 154,344 24,646
40,079 23,048 40,079 23,048
37,556 80,914
37,556
103,962
77,635
77,635
80,914
103,962
The Group especially through BSP Capital Limited conducts investment fund management, stock broking and other fiduciary
activities as responsible entity, trustee, custodian or manager for investment funds and trusts, including superannuation. These
funds are not consolidated as the Group does not have direct or indirect control. When the funds incur liabilities in respect of
these activities, and the primary obligation is incurred in an agency capacity, for the fund or clients rather than its own account, a
right of indemnity exists against the assets of the applicable fund or trust. As these assets are sufficient to cover the liabilities and
it is therefore not probable that the Group will be required to settle the liabilities, the investments in the assets and liabilities of
these activities are not included in the consolidated financial statements.
7 1
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
27. direCTors’ and eXeCuTiVe reMuneraTion
executive remuneration
Directors of the Group received remuneration including benefits during 2013 as detailed below:
All amounts are in K’000
Director
K. Constantinou, OBE
T. E. Fox, OBE
Dr. I. Temu
C. C. Procter
Sir N. Bogan
R. Fleming*
I. B. Clyne*
J. G. Jeffery, CBE
G. Aopi, CBE
G. Robb, OAM
F. Talao
E. B Gangloff
Meetings
attended/
total held
7/7
7/7
7/7
6/7
6/7
4/4
3/3
2/2
7/7
7/7
6/7
0/1
Appointed/
(Resigned)
01/06/13
(31/05/13)
(23/05/13)
28/11/13
Base
emolument
222,539
213,542
112,014
217,388
104,967
-
-
62,385
115,456
280,613
104,875
-
Total remuneration
2013
2012
195,090
222,539
210,037
213,542
113,910
112,014
211,969
217,388
101,224
104,967
-
-
- -
62,385
160,244
116,043
115,456
280,613 207,104
108,869
104,875
-
-
Directors Thomas Fox and Ila Temu retired by rotation in accordance with Clause 15.3 of BSP’s Constitution and being eligible,
offered themselves for re-election by the shareholders at 24th May 2013 Annual General Meeting. John Jeffery resigned as a
Director of the BSP Board on 23rd May 2013. Ernest Gangloff joined the Board as a Director on 28 November 2013 and will offer
himself for election by the Shareholders at the Annual Meeting in May 2014.
Non - executive Directors - Constantinou, Fox and Procter received an allowance of K60,000 as Board Members of BSP Capital Ltd
which forms part of the Group. Geoff Robb was appointed as a Director to the Board of BSP Capital Ltd and receives Directors fees
of K60,000 per annum for this.
Ian B. Clyne ceased to be Group CEO and Managing Director on the 31st May 2013. Robin Fleming was appointed Group CEO and
Managing Director as of 1st June 2013.
*Managing Director/Chief Executive Officer receives no fees for his services as Director during the year. Other members of BSP
executive management who serve as directors of subsidiaries of BSP Group receive no fees for their services as Director.
7 2
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
27. direCTors’ and eXeCuTiVe reMuneraTion (continued)
executive remuneration
The number of employees or former employees whose income from the Bank was equal to or greater than K100,000 during the
year, are classified in income bands of K10,000 as follows:
Remuneration 2013 2012 Remuneration 2013 2012 Remuneration 2013 2012
K’000 No. No.
28
100 – 110
29
110 – 120
21
120 – 130
25
130 – 140
14
140 – 150
9
150 – 160
8
160 – 170
8
170 – 180
6
180 – 190
6
190 – 200
5
200 – 210
3
210 – 220
4
220 – 230
3
230 – 240
5
240 – 250
5
250 – 260
5
260 – 270
2
270 – 280
5
280 – 290
2
290 – 300
7
300 – 310
3
310 – 320
1
320 – 330
1
330 – 340
2
340 – 350
3
350 – 360
2
360 – 370
3
370 – 380
1
380 – 390
2
390 – 400
1
400 – 410
total
34
16
21
21
24
11
10
13
8
9
1
7
4
4
9
7
6
4
3
-
3
4
1
2
2
2
3
2
2
3
4
K’000
420 – 430
430 – 440
440 – 450
450 – 460
460 – 470
480 – 490
490 – 500
500 – 510
510 – 520
520 – 530
530 – 540
540 – 550
550 – 560
560 – 570
570 – 580
580 – 590
590 – 600
600 – 610
610 – 620
620 – 630
630 – 640
640 – 650
650 – 660
670 – 680
680 – 690
690 – 700
700 – 710
710 – 720
720 – 730
730 – 740
740 – 750
No. No. K’000 No. No.
2
2
1
2
-
-
-
2
1
-
3
-
1
1
-
1
-
3
-
2
-
2
-
3
1
-
-
2
-
4
1
-
1
3
-
5
-
2
-
1
3
2
1
-
-
3
-
-
-
1
-
3
1
1
1
-
-
1
1
750 – 760
760 – 770
770 – 780
780 – 790
800 – 810
810 – 820
820 – 830
830 – 840
850 – 860
880 – 890
890 – 900
910 – 920
950 – 960
960 – 970
980 – 990
1050 – 1060
1060 – 1070
1090 – 1100
1100 – 1110
1260 – 1270
1350 – 1360
1440 – 1450
1660 – 1670
1730 – 1740
1790 – 1800
2430 – 2440
4500 – 4510
6800 – 6810
1
1
2
-
1
2
3
3
5
-
3
2
2
-
5
2
2
-
4
-
1
3
3
2
2
1
4
1
1
-
-
2
2
1
1
1
-
1
1
1
1
1
1
-
1
2
-
-
1
1
1
-
-
1
1
1
1
-
1
Executives’ remuneration stated includes phantom share options.
312
291
7 3
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
27. direCTors’ and eXeCuTiVe reMuneraTion (continued)
executive remuneration
The specified executives during the year were:
Ian B Clyne
Johnson Kalo
Giau Duruba
Robin Fleming
Peter Beswick
Mark Railston
Robert Loggia
Paul Thornton
Edward Ruha
Richard Borysiewicz
Frans Kootte
Haroon Ali
Aho Baliki
Specified executives remuneration in aggregate (K’000)
Primary Non-
Salary Bonus monetary
201
13,143 4,251
220
8,213 1,954
Pre-scribed
benefits
-
-
Equity Other
Other options benefits
1,339 755
-
1,200 378
-
Super
191
200
2013
2012
Total
19,880
12,165
Post-employment
28. reConCiliaTion oF oPeraTing Cash Flow
grouP
BanK
All amounts are expressed in K’000
Reconciliation of operating profit/(loss) after tax to operating cash flow
before changes in operating assets
Operating profit/(loss) after tax
Add: Tax expense
Operating profit before income tax
436,828
170,127
606,955
2013
2012
2013
2012
407,744
137,552
545,296
424,762
168,114
592,876
399,588
135,849
535,437
major non cash amounts
Depreciation
Amortisation of computer development costs
Net (profit)/loss on sale of fixed assets
Movement in forex income accrual
Movement in provision for doubtful debts
Movement in payroll provisions
Net effect of other accruals
Operating cash flow before changes in operating assets
54,806
86,723
57,968
90,817
25,785
85,018
25,785
85,018
(498)
906 (498) 906
(710) 10,746
10,746
(710)
92,085 104,812 92,085
104,812
5,778
5,778
9,587
9,587
32,703 24,722
(4,909) 12,304
741,214
919,562
741,817
900,123
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less than 90 days
maturity.
Cash and balances with Central Bank (note 10)
Due from other banks (note 12)
Due to other banks (note 18)
2,030,800 1,806,597 1,992,970 1,764,275
1,445,199 327,563 1,445,199 327,563
(786,035) (72,775) (786,035)
(90,828)
2,689,964 2,061,385 2,652,134 2,001,010
7 4
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
29. segMenT inForMaTion
Bank of South Pacific Limited and the Group comprises two segments, these being the provision of banking services and products
and stock broking services. For management purposes, segment information determination is based on the risks involved with the
provision of core banking services and products and the Bank and Group’s management reporting system. The main business lines
for management purposes are the core banking segments of Retail Bank, Wholesale Bank which includes Corporate & Paramount
SBUs, insurance operations in Fiji and BSP Capital’s stock broking and fund management activities. The Bank of South Pacific
Limited and Group’s business segments operate in Papua New Guinea, Niue, Fiji and Solomon Islands. Inter segment adjustments
reflects elimination entries in respect of inter segment income and expense allocations including funds transfer pricing.
Analysis by business segments:
Year ended 31 December 2013
All amounts are expressed in K’000
retail Wholesale
Fiji
Bank insurance
510,606 669,906 111,716 188,370
(363,856) (255,319) (96,827) (172,475)
14,889 15,895
Revenue
Costs
Operating results 146,750 414,587
Income tax expense
Profit after tax
BsP
others
Capital
3,687
32,356
(6,921) (31,901)
(3,234) 455
Year ended 31 December 2012
All amounts are expressed in K’000
retail Wholesale
395,269 636,433
(258,909) (326,565) (78,522) (142,209)
4,583 13,785
Revenue
Costs
Operating results 136,360 309,868
Income tax expense
Profit after tax
BsP
Fiji
Bank insurance
Capital
83,105 155,994 2,407
others
56,158
(6,315) (33,878)
(3,908) 22,280
adjust
inter
segment
total
99,101 1,615,742
(81,488) (1,008,787)
606,955
17,613
(170,127)
436,828
adjust
inter
segment
total
268,301 1,597,667
(205,973) (1,052,371)
545,296
62,328
(137,552)
407,744
7 5
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
30. relaTed ParTy TransaCTions
Related parties are considered to be enterprises or individuals with whom the Bank and the Group is especially related because
either they or the Bank are in a position to significantly influence the outcome of transactions entered into with the Bank and the
Group, by virtue of being able to control, dominate or participate in a fiduciary capacity, in decision-making functions or processes.
The Bank and the Group conducted transactions with the following classes of related parties during the year:
• Directors and/or parties in which the Director has significant influence;
•
Key management personnel and other staff and/or parties in which the individual officer has significant influence.
A number of banking transactions are entered into with these related parties in the normal course of business, and include loans,
deposits, property rentals, share transfers and foreign currency transactions. These transactions are carried out on commercial
terms and market rates. For the year ended 31 December 2013, balances and transactions of accounts for Directors were as
follows:
All amounts are expressed in K’000
Deposits
Opening balances
Net movement
Closing balance
interest paid
loans and advances
Opening balances
Loans issued
Interest
Charges
Loan repayments
Closing balance
2013
2012
139,557
52,889
192,446
4,022
208,359
(68,802)
139,557
7,261
172,725
339,602
40,128
11,590
(179,725)
384,320
157,039
219,795
58,296
6,113
(268,518)
172,725
Employment-based transactions are provided for staff. Such transactions include marginal discounts on rates, and specific fee
concessions. These incentives are mainly percentage-based on market rates and fees, and as such, staff accounts are always
subject to underlying market trends in interest rates and fees. As at 31 December 2013, staff account balances were as follows:
All amounts are expressed in K’000
Housing loans
Other loans
Cheque accounts
Foreign currency accounts
Savings accounts
2013
18,111
16,442
34,553
8,083
237
10
8,330
2012
17,296
16,674
33,970
23,736
320
11
24,067
7 6
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
30. relaTed ParTy TransaCTions (continued)
interests register
The following are transactions recorded in the interests register:
name
nature of interest
K. Constantinou, OBE
Chairman
Director
Bank of South Pacific Ltd1, BSP Capital Ltd1, Airways Hotel & Apartment Ltd,
Lamana Hotel Ltd, Lamana Development Ltd, Hebou Constructions Ltd, Heritage
Park Hotel Ltd, Gazelle International Hotel Ltd, Airlines PNG Ltd, Oil Search Ltd,
Alotau International Hotel Ltd, Kimbe Bay Hotel Ltd, Grand Pacific Hotel Ltd, City
Centre Development Ltd, Coastwatchers Court Ltd, Waigani Assets Ltd, Southern
Seas Investments Ltd, Texas Chicken South Pacific Ltd.
shareholder
Airways Hotel & Apartment Ltd, Lamana Hotel Ltd, Lamana Development Ltd,
Texas Chicken South Pacific Ltd.
Member
Director
Australian Institute of Company Directors, PNG Institute of Directors, Pacific
Games Authority1,6, Anglicare Foundation.
Bank of South Pacific Ltd2, BSP Capital Ltd , Teyo No. 1 Ltd5, BSP Life Ltd, Akura
Ltd.
T. E. Fox, OBE, BEc
Deputy Chairman
shareholder
Bank of South Pacific Ltd, Teyo No. 1 Ltd, Akura Ltd.
Trustee/ Member
Institute of National Affairs8 , PNG Institute of Directors.
R. Fleming
Director
Bank of South Pacific Ltd9, BSP Capital Ltd, BSP Convertible Notes Ltd, BSP Rural
Ltd, BSP Life Ltd, BSP Capital Securities Ltd, BSP Services Ltd, Capital Nominees
Ltd, BSP Nominees Ltd, Malagan Ltd, Carpark Ltd, NGIP Agmark Ltd, BSP Services
(Fiji) Ltd, BSP Health Care (Fiji) Ltd, BSP Investments (Fiji) Ltd.
shareholder
Bank of South Pacific Ltd.
Member
Australian Institute of Company Directors, PNG Institute of Directors, Anglicare
Foundation.
G. Aopi, CBE, MBA
Director
Bank of South Pacific Ltd, Oil Search Ltd7, Steamships Trading Co Ltd, POMSoX
Ltd, Marsh Ltd, Wahinemo Ltd, CDI Foundation.
shareholder
Bank of South Pacific Ltd, Oil Search Ltd7, Hirad Ltd, Wahinemo Ltd, Newcrest Ltd,
Highlands Pacific Ltd, Melanesian Trustees (ICPNG), Kumul Asset Management.
Trustee/ Member
Institute of National Affairs, Business Council of PNG, PNG Chamber of Mines &
Petroleum, Oil Search Health Foundation.
Dr I. Temu, PhD, MEc
Director
Bank of South Pacific Ltd, Tipi Enterprise Ltd, Telemu Ltd1, Kina Petroleum
Ltd, National Petroleum Company Ltd, Savi- Tec Ltd.
shareholder
Telstra Ltd, Nautilus Minerals Niugini Ltd.
Employee
Barrick Gold Ltd.
Member
Divine Word University.
7 7
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
30. relaTed ParTy TransaCTions (continued)
interests register
The following are transactions recorded in the interests register:
name
nature of interest
C. C. Procter, mEc, FFin Director
Bank of South Pacific Ltd, BSP Capital Ltd, Sun Hung Kai & Co. Ltd, Allied
Overseas Ltd, Eurogold Ltd., Tanami Gold NL.
Member
Australian Institute of Company Directors.
E. B. Gangloff
Director
Bank of South Pacific Ltd, Gangloff Consulting Ltd, Laurabada Investments
Ltd, New Britain Palm Oil Ltd.
shareholder
Member
sir n. Bogan, KBE, llB
Director
Gangloff Consulting Ltd, Laurabada Investments Ltd.
CPA PNG, PNG Institute of Directors, Vice-President of PNG Business
Council, Institute of National Affairs, Business & Officials Committee PNG/
Australia Bilateral Ministerial Committee, CIMC Trade Services Commission
Chairman.
Bank of South Pacific Ltd, Nambawan Super Ltd1,5,In Touch Media Ltd1,
Coprez Communications Ltd1, Coprez Holdings Ltd, Mapai Transport Ltd, Ahi
Holdings Ltd.
shareholder
In Touch Media Ltd, Coprez Holdings Ltd.
Member
Chancellor Unitech, Chairman PNG Taxation Review.
G. Robb, OAM
Director
Bank of South Pacific Ltd, BSP Capital Ltd.
F talao, llB
Member
Director
Member
Australian Institute of Company Directors.
Bank of South Pacific Ltd.
External Stakeholders Advisory Panel (ESAP) to Morobe Mining Joint
Venture, Australian Institute of Company Directors.
1Chairman, 2Deputy Chairman, 3Managing Director, 4Executive Director, 7General Manager, 8Councillor, 5Company is shareholder
of Bank of South Pacific Limited, or shareholder of company that is shareholder, 6Company has commercial banking facilities with
Bank of South Pacific Limited, 9Chief Executive Officer
7 8
BSP Annual Report 2013
30. relaTed ParTy TransaCTions (continued)
31. BanK oPeraTions, risKs & sTraTegies in using FinanCial insTruMenTs
for the Year Ended 31 December 2013
NOTES TO THE FINANCIAL STATEMENTS
All business operations must deal with a variety of operational and financial risks. The business activities of a bank expose it to
very critical and specific risks, which are principally related to the Bank and the Group’s primary financial intermediary role in the
financial markets, including the use of financial instruments such as derivatives. These market risks (risk of an adverse event in the
financial markets that may result in loss of earnings) include liquidity risk, foreign exchange risk, interest rate risk and credit risk.
The Bank and the Group accepts deposits from customers at both fixed and floating rates and for various periods and seeks to
earn above average interest margins by investing these funds in high quality assets. These margins are achieved and increased
by consolidating short-term funds and lending for longer periods at higher rates whilst maintaining sufficient liquidity to meet all
claims that might fall due.
The Bank and the Group also seeks to optimise its interest margins by obtaining above average returns, net of provisions, through
lending to commercial and retail borrowers with a range of credit standings. In addition to directly advancing funds to borrowers,
the Bank and the Group also enters into guarantees and other commitments such as letters of credit, performance bonds, and
other bonds.
The Bank and the Group also enters into transactions denominated in foreign currencies. This activity generally requires the Bank
and the Group to take foreign currency positions in order to exploit short term movements in the foreign currency market. The
Board places limits on the size of these positions. The Bank and the Group also has a policy of using offsetting commitments for
foreign exchange contracts, effectively minimising the risk of loss due to adverse movements in foreign currencies.
Risk in the Bank and the Group is managed through a system of delegated limits. These limits set the maximum level of risk that
can be assumed by each operational unit and the Bank and the Group as a whole. The limits are delegated from the Board of
Directors to executive management and hence to the respective operational managers.
The risk management framework establishes roles, responsibilities and accountabilities of the Asset and Liability Committee, the
Credit Committee, the Operational Risk Committee and the Executive Committee, the specific management committees charged
with the responsibility for ensuring the Bank and the Group has appropriate systems, policies and procedures to measure, monitor
and report on risk management. The framework also includes policies and procedures which detail formal feedback processes
to these management committees, to the Audit, Risk and Compliance Committee of the Board, and ultimately to the Board of
Directors.
32. CaPiTal adeQuaCy
The Bank and the Group is required to comply with various prudential standards issued by the Bank of Papua New Guinea (BPNG),
the official authority for the prudential supervision of banks and similar financial institutions in Papua New Guinea. One of the
most critical prudential standards is the capital adequacy requirement. All banks are required to maintain at least the minimum
acceptable measure of capital to risk-weighted assets to absorb potential losses. The BPNG follows the prudential guidelines set
by the Bank of International Settlements under the terms of the Basel Accord. The BPNG revised prudential standard 1/2003,
Capital Adequacy, prescribes ranges of overall capital ratios to measure whether a bank is under, adequately, or well capitalised,
and also applies the leverage capital ratio. The Bank and the Group complies with the prevailing prudential requirements for total
capital and leverage capital. As at 31 December 2013, the Bank and the Group’s total capital adequacy ratio and leverage capital
ratio satisfied the capital adequacy criteria for well-capitalised. The minimum capital adequacy requirements as set out under the
standard are: Tier 1 8 percent, total risk based capital ratio 12 percent and the leverage ratio 6 percent.
The measure of capital used for the purposes of prudential supervision is referred to as base capital. Total base capital varies
from the balance of capital shown on the statement of financial position and is made up of tier 1 capital (core) and tier 2 capital
(supplementary). Tier 1 capital is obtained by deducting from equity capital and audited retained earnings (or losses), intangible
assets including deferred tax assets.
7 9
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
32. CaPiTal adeQuaCy (continued)
Tier 2 capital cannot exceed the amount of tier 1 capital, and can include subordinated loan capital, specified asset revaluation
reserves, un-audited profits (or losses) and a small percentage of general loan loss provisions. The leverage capital ratio is calculated
as Tier 1 capital divided by total assets on the balance sheet.
Risk weighted assets are derived from on-balance sheet and off-balance sheet assets. On balance sheet assets are weighted for
credit risk by applying weightings (0, 20, 50 and 100 per cent) according to risk classification criteria set by the BPNG. Off-balance
sheet exposures are risk weighted in the same way after converting them to on-balance sheet credit equivalents using BPNG
specified credit conversion factors.
The Bank and the Group’s capital adequacy level is as follows:
All amounts are expressed in K’000
Balance sheet assets (net of provisions)
Currency
Loans and advances
Investments and short term securities
All other assets
Off-balance sheet items
Total
Balance sheet/
notional amount
2013
2012
Risk-weighted
amount
2013 2012
2,030,800
5,306,362
5,454,230
3,017,398
1,512,002
17,320,792
1,806,597
4,804,626
4,795,467
1,926,412
1,517,718
14,850,820
-
5,009,265
-
2,778,531
714,414
8,502,210
-
4,594,014
-
1,847,900
316,934
6,758,848
Audited Capital Ratios
Capital (K’000)
2013 2012 2013 2012
Capital Adequacy Ratio (%)
a) Tier 1 capital
1,181,187
Tier 1 + Tier 2 capital 1,533,093
1,185,382 13.9% 17.4%
1,516,086 18.0% 22.3%
b) Leverage Capital Ratio
7.6%
9.0%
The capital adequacy ratio has been affected by the capitalisation of the software development costs, categorised under intangibles
per note 7, which is deducted from tier 1 capital.
8 0
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
33. CrediT risK and asseT QualiTy
The Bank incurs risk with regards to loans and advances made to customers and other monies or investments held with financial
institutions. Credit risk is the likelihood of future financial loss resulting from the failure of clients or counter-parties to meet
contractual obligations to the Bank and the Group as they fall due.
Credit risk is managed by analysing the risk spread across various sectors of the economy and by ensuring risk is diversely spread
by personal and commercial customer. Individual exposures are measured using repayment performance, reviews and statistical
techniques. Comprehensive credit standards and approval limits have been formulated and approved by the Credit Committee.
The Credit Committee (which reports to the Board through the Executive and Chief Executive Officer) is responsible for the
development and implementation of credit policy and loan portfolio review methodology. The Credit Committee is the final arbiter
of risk management and loan risk concentration.
As indicated in Accounting Policy G – Loans and provision for loan impairment, the Bank and the Group has in place processes that
identify, assess and control credit risk in relation to the loan portfolio, to assist in determining the appropriateness of provisions
for loan impairment. These processes also enable assessments to be made of other classes of assets that may carry an element of
credit risk. The Bank and the Group assigns quality indicators to its credit exposures to determine the asset quality profile.
Large credit exposures are also monitored as part of credit risk management. These are classified as the largest 25 individual
accounts or groups of related counter-parties. As at 31 December 2013, the 25 largest exposures totalled K3.2 billion, accounting
for over 60 percent of the Bank and 60 percent of the Group’s total loan portfolio (2012: K2.815 billion, accounting for over 56
percent and 56 percent respectively).
The Bank of Papua New Guinea has maintained a revised prudential standard for asset quality since October 2003. The revised
standard specifies more detailed criteria for the classification of loans into various grades of default risk and corresponding
loss provision levels as a consequence of those gradings. Since its introduction, the Bank and the Group has complied with the
requirement at all times.
Credit related commitments
These instruments are used to ensure that funds are available to a customer as required. The Bank and the Group deals principally
in the credit related commitments set out below.
Guarantees and standby letters of credit, which represent irrevocable assurances that the Bank and the Group will make payments
in the event that a customer cannot meet its obligations to third parties, carry the same risk as loans.
Documentary and trade letters of credit are written undertakings by the Bank and the Group on behalf of a customer, authorising
a third party to draw drafts on the Bank and the Group for specified amounts under specified terms and conditions. They are
collateralised by the underlying shipments of goods to which they relate and therefore carry less risk than a conventional loan.
Commitments to extend credit represent undrawn portions of authorisations to extend credit in the form of loans, guarantees or
letters of credit. Whilst the potential exposure to loss equates to the total undrawn commitments, the likely amount of loss is less
than the total commitment since the commitments to extend credit are contingent upon customers maintaining specific credit
standards. The Bank and the Group monitors the term to maturity of these commitments because longer term commitments
generally carry a greater degree of credit risk than shorter term commitments.
8 1
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
33. CrediT risK & asseT QualiTy (continued)
economic sector risk concentrations
Economic sector risk concentrations within the customer loan portfolio are as follows:
All amounts are expressed in K’000
As at 31 December
Commerce, finance and other business
Private households
Government and Public Authorities
Agriculture
Transport and communication
Manufacturing
Construction
Net loan portfolio balance
34. liQuidiTy risK
2013 %
2012
%
2,391,072
695,782
444,670
267,367
583,853
394,268
529,350
5,306,362
45
13
9
5
11
7
10
100
40
1,937,732
946,132
20
101,621 2
2
116,451
15
723,624
11
520,588
10
458,478
100
4,804,626
Liquidity risk is the risk of being unable to meet financial obligations as they fall due. The Board, through the Asset and Liability
Committee, sets liquidity policy to ensure that the Bank and the Group has sufficient funds available to meet all its known and
potential obligations.
The matching and controlled mismatching of the maturities and interest rates of assets and liabilities is fundamental to the
management of banking activities. An unmatched position potentially enhances profitability, but can also increase the risk of
losses.
short-term mismatch of asset and liability maturity at 31 december 2013.
The maturity profile of material Assets and Liabilities as at 31 December 2013 is shown in the schedule below. The mismatching
of maturity of assets and liabilities indicates an apparent negative net ‘current’ asset position. However, as stated in the preceding
paragraph, mismatched positions are established and managed to achieve profit opportunities that arise from them, particularly in
a normal yield curve environment. Accordingly, this mismatched maturity position is considered manageable by the Bank and the
Group, and does not impair the ability of the Bank and the Group to meet its financial obligations as they fall due. The Directors
are also of the view that the Bank and the Group is able to meet its financial obligations as they fall due for the following additional
reasons:
•
•
The Bank and the Group complies with the Minimum Liquid Asset Ratio (‘MLAR’) and Cash Reserve Requirement (‘CRR’) set
by the regulatory authority, the Bank of Papua New Guinea (‘BPNG’). The MLAR is the minimum ratio of liquid assets to total
customer deposits considered by the regulator as sufficient to support exceptional liquidation by depositors, of their funds.
The requirement to hold a minimum of 25 percent of the value of total customer deposits in the form of prescribed liquid
assets was reduced to zero percent by the BPNG in September 2010. As at 31 December 2013, the Bank and the Group’s Liquid
Asset Ratio was approximately 41.78 percent (2012: 38.92%);
The CRR specifies that a bank must hold an amount equal to 9 percent of its total customer deposits in the form of cash in
an account maintained at the BPNG. The Bank and the Group complies with this daily requirement on an ongoing basis. The
balance of the CRR account is shown in Note 10, Cash and Balances with Central Bank, and Note 28, Cash and cash equivalents.
8 2
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
34. liQuidiTy risK (continued)
Maturity of assets and liabilities
All amounts are expressed in K’000
As at 31 December 2013
Up to 1 1-3 3-12 1-5 Over
month months months years 5 years total
-
-
-
2,030,800
assets
Cash & Central
Bank assets
Treasury &
Central Bank bills
Due from other banks
Loans and advances
Investments
total assets
Liabilities
- 786,035
Due to other banks
786,035
364,169 81,441 838,239 12,200,999
Due to customers 10,516,602
- 75,525 1,011,894
936,369
Other liabilities
-
Other provisions
- 190,802
-
133,632 57,170 -
Total liabilities 12,372,638 457,718 364,169 81,441 913,764 14,189,730
46,861
Net liquidity gap (7,254,836) 1,050,777
1,284,959
1,442,069
86,764 248,344
106,587 662,365 1,408,141 1,853,800
30,185 83,642
2,436,420
1,508,495
-
3,283,432
- 1,445,199
5,306,362
937,033 967,265 2,170,798
2,352,809 2,821,065 14,236,591
548,769
1,110,091
1,275,469
152,673
5,117,802
-
400,548
-
7,635
-
2,030,800
2,072,251
1,907,301
2,271,368
-
-
-
As at 31 December 2012
Total assets
Total liabilities
Net liquidity gap
Up to 1 1-3 3-12 1-5 Over
month months months years 5 years total
1,306,911
4,749,543
11,734,253
1,325,159
506,315 315,394 48,723 81,767 11,867,209
10,915,010
(132,956)
800,596 1,608,455 1,276,436 2,347,024
(6,165,467)
2,428,791
1,923,849
35. oPeraTional risK
Operational risk is the potential exposure to unexpected financial or non-financial losses arising from the way in which the Bank
and the Group conducts its business. Examples of operational risk include employee errors, systems failures, fire, floods, or similar
losses to physical assets, fraud, or criminal activity. Operational risk is managed through formal policies, documented procedures,
business practices and compliance monitoring.
An operational risk management function is responsible for the maintenance of these policies, procedures, practices and
monitoring the organisation’s compliance with them. The Operational Risk Committee coordinates the management process
across the organisation.
An independent internal audit function also conducts regular reviews to monitor compliance with policy and the regulatory
environment and examines the general standard of control.
The Operational Risk Committee and the internal audit function mandatorily report to the Board Audit, Risk and Compliance
Committee.
8 3
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
36. Foreign eXChange risK
Foreign exchange risk is the risk to earnings caused by a change in foreign exchange rates on open currency positions. The objective
of foreign exchange risk management within the Bank and the Group is to minimise the impact on earnings of any such movement.
The Bank and the Group accepts foreign currency denominated transactions and therefore has exposure to movements in foreign
currency. The Bank and the Group has a policy to offset these transactions by minimising daily exposure. This is done through
hedging material exposures as they arise. As foreign exchange contracts generally consist of offsetting commitments, they involve
only limited foreign exchange risk to the Bank and the Group and material loss is not envisaged.
Currency concentration of assets, liabilities, and off-balance sheet items.
All amounts are expressed in K’000
As at 31 December 2013 USD
assets
Cash &Central Bank assets 2,856
Treasury &
Central Bank bills
Due from other banks
Loans and advances
Investments
Other assets
total assets
AUD
EURO
PGK
Others
Total
2,340
47
1,395,220
630,337
2,030,800
-
- - 3,153,436 129,996 3,283,432
684,184 345,435 20,417 23,745 371,418 1,445,199
152
3,699,064 1,374,996 5,306,362
228,719
2,170,798
1,904,598 266,200
-
-
210,259
1,361,940
-
1,572,199
-
2,983,206 15,808,790
11,538,003
915,759 351,206 20,616
3,431
-
-
Liabilities
Due to other banks
Due to customers
Other liabilities
Total liabilities
Net on-balance
sheet position
Off-balance sheet
net notional position
Credit commitments
(9,805,477)
(601,844)
(736,230) (289,279) (13) (10,421,023)
(36,883) - (13,702) (396,054) (786,035)
(1,746,279) (12,200,999)
(600,852) (1,202,696)
(2,743,185) (14,189,730)
(339,396)
(396,834) (252,396) (13)
- -
-
179,529
61,927 20,603
1,116,980
240,021
1,619,060
(283,238) (59,576) (20,535)
-
762,385
- - 1,512,002 - -
187,067
938,667
As at 31 December 2012
Total Assets
Total Liabilities
Net on-balance
sheet position
Off-balance sheet
net notional position
Credit commitments
414,670 193,415 22,696
(343,027) (364,966) (3)
10,626,406
(9,149,052)
2,075,915 13,333,102
(2,010,161) (11,867,209)
71,643 (171,551) 22,693
1,477,354
65,754 1,465,893
26,463 2,355 27,018
- -
-
-
1,517,718 -
1,034,611 1,090,447
-
8 4
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
37. inTeresT raTe risK
Interest rate risk in the balance sheet arises from the potential for a change in interest rate to have an adverse effect on the
revenue earnings in the current reporting period and future years. As interest rates and yield curves change over time the Bank
and the Group may be exposed to a loss in earnings due to the effects of interest rates on the structure of the balance sheet.
Sensitivity to interest rates arises from mismatches in the re-pricing dates, cash flows and other characteristics of the assets and
their corresponding liability funding. These mismatches are actively managed as part of the overall interest rate risk management
process governed by the Assets and Liabilities Committee (ALCO), which meets regularly to review the effects of fluctuations in
the prevailing levels of market interest rates on the financial position and cash flows of the Bank and the Group. The objective of
interest rate risk control is to minimise these fluctuations in value and net interest income over time, providing secure and stable
sustainable net interest earnings in the long term. The table below illustrates the interest sensitivity of assets and liabilities at the
balance date.
Given the profile of assets and liabilities as at 31 December 2013 and prevailing rates of interest, a 1% increase in rates will result
in a K15.3 million increase in net interest income, whilst a 1% decrease in rates will result in a K45.2 million decrease in net interest
income.
BsP Group Ceo robin fleming (third from left), the BsP team
and sVs during the signing of the agreement for the supa V stoa.
8 5
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
37. inTeresT raTe risK (continued)
Interest sensitivity of assets, liabilities and off-balance sheet items – re-pricing analysis
All amounts are expressed in K’000
As at 31 December 2013
Up to 1
month
1-3
months months
3-12 1-5
years
Over
5 years
Non
interest
Bearing
assets
Cash & Central Bank assets -
Treasury & Central
Bank bills
Due from other banks
Loans and advances
Investments
Other assets
total assets
2,453,175
1,350,589
4,595,301
41,713
5,894
8,446,672
Liabilities
Due to other banks
Due to customers
Other liabilities
Other provisions
Total liabilities
Interest sensitivity gap
786,035
6,674,541
-
-
7,460,576
986,096
-
-
-
-
2,030,800
822,622
94,609
248,375
61,648
5,052
1,232,306
-
294,855
-
-
294,855
937,451
7,635
-
376,046
450,145
20,207
854,033
-
158,042
-
-
158,042
695,991
-
-
81,548
518,833
5,363
605,744
-
-
301
1,184,568
-
1,184,869
-
-
4,792
-
1,458,333
3,493,925
-
-
-
5,057,140
26
16,396
983,739
75,525
-
143,432
-
-
16,396 75,551 6,184,311
(2,690,386)
1,109,318
589,348
As at 31 December 2012
assets
Cash & Central Bank assets -
Treasury & Central
Bank bills
Due from other banks
Loans and advances
Investments
Other assets
total assets
-
-
- - 1,806,597
-
1,154,447
-
-
59,811 219,660 216,675 -
-
962,220
-
327,563
-
4,308,480
- 34,250
296,750 523,060 703,890 -
- - - - - 1,598,849
3,405,446
5,598,263
1,120,850
-
-
-
1,248,508
1,637,260
703,890
739,735
-
-
-
72,775
5,823,901
410,159 292,971 48,723 5 4,284,763
- - - - 75,525 714,735
- - - - - 143,652
5,143,150
292,971 48,723
5,896,676
410,159
838,349 1,344,289 691,012 628,360 (1,737,704)
(298,413)
75,530
-
-
Liabilities
Due to other banks
Due to customers
Other liabilities
Other provisions
Total liabilities
Interest sensitivity gap
8 6
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
38. Fair Values oF FinanCial asseTs and liaBiliTies
There is no material difference between the fair value and carrying value of the financial assets and liabilities of Bank of South
Pacific Limited and the Group.
In the normal course of trading, the Bank and the Group enters into forward exchange contracts. The Bank and the Group does
not actively enter into or trade in, complex forms of derivative financial instruments such as currency and interest rate swaps and
options.
Exposures in foreign currencies arise where the Bank and the Group transacts in foreign currencies. This price risk is minimised by
entering into counterbalancing positions for material exposures as they arise. Forward and spot foreign exchange contracts are
used.
Forward exchange contracts outstanding at 31 December 2013 stated at the face value of the respective contracts are:
All amounts are expressed in respective FCY’000 and K’000
As at 31 December 2013
usD
(121,041)
Selling FCY
318,482
Kina
Buying FCY
10,100
Kina (23,246)
As at 31 December 2012
gBP
auD Euro
(30,538) (44) (1,550)
2,636
71,112
160
-
- -
-
-
-
other
(262,287)
9,853
926
(4,063)
total
402,243
(27,309)
Selling FCY
Kina
Buying FCY
Kina
usD auD Euro
(35,634) (4,709) (3,966)
10,551
10,443
75,347
16,068
-
-
(33,285) - -
other
gBP
- (7,489)
-
4,116
(14,085)
1,413 97,754
-
-
(47,370)
total
39. PoliCy liaBiliTies For BsP liFe liMiTed
Key assumptions used in determining this liability are as follows:
discount rates
For contracts which have a Discretionary Participating Feature, the discount rate used is linked to the assets which back those
contracts. For 31 December 2013 this was 4.69% per annum (31 December 2012: 4.69% per annum), based on 5 year government
bond rate and expected earnings from the investment portfolio. For contacts without DPF, a rate of 3.2% per annum was used at 31
December 2013 (31 December 2012: 3.2% per annum). For Accident business a rate of 3.2% per annum was used at 31 December
2013 (31 December 2012: 3.2% per annum). These rates were based on the 5 year government bond.
investment and Maintenance expenses
Future maintenance and investment expenses are based on budgeted expenses. Future inflation has been assumed to be 3.5% per
annum (31 December 2012: 3.5% per annum) for determining future expenses.
Taxation
The rates of taxation enacted or substantially enacted at the date of the valuation (i.e. 20%) are assumed to continue into the
future.
8 7
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
39. PoliCy liaBiliTies For BsP liFe liMiTed (continued)
Mortality and Morbidity
Projected future rates of mortality for insured lives are based on the Fiji Mortality Statistics table FJ90-94 Male. These are then
adjusted by comparing with the Group’s own experience. The mortality rates used were 70% of the FJ90-94 Male table.
rates of discontinuance
Best estimate assumptions for the incidence of withdrawal and discontinuance are based on the Group’s experience and are
reviewed regularly. Rates used for the long term insurance contracts are as follows:
Whole of Life and Endowment Insurance
Term Insurance
Accident Insurance
Basis of Calculation of surrender Values
2013
15%
18%
14%
2012
15%
18%
14%
Surrender values are based on the provisions specified in the policy contracts. There have been no changes to surrender basis during
the period (or the prior periods) which have materially affected the valuation result.
discretionary Participating Business
For most participating business, bonus rates are set such that, over long periods, the returns to contract holders are commensurate
with the investment returns achieved on the pool of assets which provide security for the contract, together with other sources
of profit arising from this business. Distributions are split between contract holders and shareholders with the valuation allowing
for shareholders to share in distributions at a maximum allowable rate of 20% (31 December 2012: 20%). For business written
between 1995 and 1998 the shareholder receives 11% of distributions.
In applying the contract holders’ share of profits to provide bonuses, consideration is given to equity between generations of
policyholders and equity between the various classes and sizes of contracts in force. Assumed future bonus rates included in
the liability for the long term insurance contracts were set such that the present value of the liabilities equates to the present
value of assets supporting the business together with assumed future investment returns, allowing for the shareholder’s right to
participate in distributions.
reinsurance
Contracts entered into by the Company with Reinsurers under which the Company is compensated for losses on one or more
contracts issued by the Company, are classified as reinsurance contracts.
As the reinsurance agreements provide for indemnification by the Reinsurers against loss or liability, reinsurance income and
expenses are recognised separately in the statements of comprehensive income when they become due and payable in accordance
with the reinsurance agreements.
Reinsurance recoveries are recognised as claims recoveries under the statements of comprehensive income. This is netted off
against the claim expenses. Reinsurance premiums are recognised as reinsurance expenses.
8 8
BSP Annual Report 2013
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2013
40. eVenTs oCCurring aFTer BalanCe sheeT daTe
No matters or circumstances have arisen since the end of the financial year which significantly affected or may significantly affect
the operations of the Bank and the Group, the results of these operations, or the state of affairs of the Bank and the Group in future
financial years.
41. reMuneraTion oF audiTors
All amounts are expressed in K’000
Financial Statements audits
Other Services
Balance at 31 December
grouP
2013
2,707
4,413
7,120
2012
2,496
8,731
11,227
2013
2,110
4,413
6,523
BanK
2012
1,423
8,731
10,154
The external auditor Deloitte Touche Tohmatsu is also engaged in providing other services to the Bank and Group as required.
The provision of other services included secondment of staff to BSP Capital Limited, due diligence and board strategy planning.
official opening of the BsP sub Branch in Komo.
8 9
BSP Annual Report 2013
independent audit opinion to the members of
Bank of south Pacific limited and subsidiaries
Deloitte Touche Tohmatsu
Deloitte Tower, Level 12
Douglas Street, Port Moresby
PO Box 1275 Port Moresby
National Capital District
Papua New Guinea
Tel: +675 308 7000
Fax: +675 308 7001
www.deloitte.com/pg
We have audited the accompanying consolidated financial report of Bank of South Pacific Limited and subsidiaries which comprise
the consolidated statement of financial position as at 31 December 2013, the consolidated statement of comprehensive income,
consolidated statement of changes in equity and the consolidated statement of cash flow for the year then ended, and a summary
of significant accounting policies, other explanatory information and the directors’ declaration.
director’s responsibility for the Consolidated Financial statements
Directors are responsible for the preparation of the consolidated financial statements that give a true and fair view in accordance
with the Companies Act 1997 and International Financial Reporting Standards, and for such internal control as management
determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement,
whether due to fraud or error.
auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit
in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and
plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from
material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial
statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material
misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the
auditor considers internal control relevant to the entity’s preparation of consolidated financial statements that give a true and
fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting
policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation
of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
audit opinion
opinion
In our opinion, the financial statements give a true and fair view of the financial position of Bank of South Pacific Limited and
subsidiaries as at 31 December 2013, and of its financial performance and its cash flows for the year then ended in accordance
with International Financial Reporting Standards.
report on other legal and regulatory requirements
The financial report of the Bank of South Pacific Limited and subsidiaries is in accordance with the Companies Act 1997 and proper
accounting records have been kept. Bank of South Pacific Limited and subsidiaries are in compliance with the Banking and Financial
Institutions Act 2000 and other applicable acts and regulations.
During the year ended 31 December 2013 we also provided Bank of South Pacific Limited with tax and consulting services.
DEloittE touChE tohmatsu
Suzaan Theron
Registered under the Accountants Act 1996
Partner, Chartered Accountants
9 0
Port Moresby, 21st day of March 2014.
BSP Annual Report 2013
reaCHiNG THe
uNreaCHeD
strategically BsP has over the past 5 years
positioned itself to optimise
its capacity to meet the growing
demands of a broad client base across a
diverse geography.
This transformation has involved
significant capital expenditure in our
properties, information technology
systems and infrastructure, as well as our
products and channels.
9 1
BSP Annual Report 2013
SHAREHOLDERS
InFORMATIOn
The following is a summary of pertinent issues relating to a
shareholding in the Group. The Constitution of BSP may be
inspected during normal business at the Registered Office.
righTs aTTaChing To ordinary shares
The rights attaching to shares are set out in Bank of South
Pacific Limited’s Constitution and in certain circumstances, are
regulated by the Companies Act 1997, the POMSoX Listing Rules
and general law. There is only one class of share. All shares have
equal rights. Other rights attached to ordinary shares include:
(a)
general meeting and notices
Each member is entitled to receive notice of, and to attend
and vote at, general meetings of BSP and to receive all notices,
accounts and other documents required to be sent to members
under BSP’s constitution, the Companies Act or the Listing
Rules.
(b)
Voting rights
At a general meeting of shareholders, every holder of fully
paid ordinary shares present in person or by an attorney,
representative or proxy has one vote on a show of hands
(unless a member has appointed two proxies) and one vote per
share on a poll.
A person who holds a share which is not fully paid is entitled, on
a poll, to a fraction of a vote equal to the proportion which the
amount paid bears to the total issue price of the share.
Where there are two or more joint holders of a share and more
than one of them is present at a meeting and tenders a vote in
respect of the share, the Company will count only the vote cast
by the member whose name appears first in BSP’s register of
members.
(c)
issues of further shares
The Directors may, on behalf of BSP, issue, grant options over,
or otherwise dispose of unissued shares to any person on
the terms, with the rights, and at the times that the Directors
decide. However, the Directors must act in accordance with the
restrictions imposed by BSP’s constitution, the POMSoX Listing
Rules, the Companies Act and any rights for the time being
attached to the shares in any special class of those shares.
(d)
Variation of rights
Unless otherwise provided by BSP’s constitution or by the terms
of issue of a class of shares, the rights attached to the shares in
any class of shares may be varied or cancelled only with the
written consent of the holders of at least three-quarters of the
issued shares of that class, or by special resolution passed at
a separate meeting of the holders of the issued shares of the
affected class.
(e)
Transfer of shares
Subject to BSP’s constitution, the Companies Act and the
POMSoX Listing Rules, ordinary shares are freely transferable.
The shares may be transferred by a proper transfer effected
in accordance with the POMSoX Business Rules, by any other
method of transferring or dealing with shares introduced by
POMSoX and as otherwise permitted by the Companies Act or
by a written instrument of transfer in any usual form or in any
other form approved by either the Directors or POMSoX that is
permitted by the Companies Act.
The Directors may decline to register a transfer of shares (other
than a proper transfer in accordance with the POMSoX Business
Rules) where permitted to do so under the POMSoX Listing
Rules or the transfer would be in contravention of the law. If
the Directors decline to register a transfer, BSP must give notice
in accordance with the Companies Act and the POMSoX Listing
rules, give the party lodging the transfer written notice of the
refusal and the reason for refusal. The Directors must decline
to register a transfer of shares when required by law, by the
POMSoX Listing Rules or by the POMSoX Business Rules.
(f)
Partly paid shares
The Directors may, subject to compliance with BSP’s
constitution, the Companies Act and the POMSoX Listing Rules,
issue partly paid shares upon which there are outstanding
amounts payable. These shares will have limited rights to vote
and to receive dividends.
(g)
dividends
The Directors may from time to time determine dividends to be
distributed to members according to their rights and interests.
The Directors may fix the time for distribution and the methods
of distribution. Subject to the terms of issue of shares, each
share in a class of shares in respect of which a dividend has
been declared will share in the dividend equally.
9 2
BSP Annual Report 2013
aTM lobby at the new BsP Harbour City Branch, BsP Haus.
Each share carries the right to participate in the dividend in the
same proportion that the amount for the time being paid on the
share (excluding any amount paid in advance of calls) bears to
the total issue price of the share.
Dividend payouts over the last six years are disclosed in the
schedule of Historical Financial Performance elsewhere in this
Annual Report.
(k)
Powers of the Board
Except as otherwise required by the Companies Act, any
other law, the POMSoX Listing Rules or BSP’s constitution, the
Directors have power to manage the business of BSP and may
exercise every right, power or capacity of BSP to the exclusion
of the members.
(l)
share buy backs
(h)
liquidation
Subject to the terms of issue of shares, upon liquidation
assets will be distributed such that the amount distributed to
a shareholder in respect of each share is equal. If there are
insufficient assets to repay the paid-up capital, the amount
distributed is to be proportional to the amount paid-up.
Subject to the provisions of the Companies Act and the POMSoX
Listing Rules, BSP may buy back shares in itself on terms and at
times determined by the Directors.
(m)
officers’ indemnities
(i)
directors
BSP’s constitution states that the minimum number of directors
is three and the maximum is ten.
(j)
appointment of directors
Directors are elected by the shareholders in general meeting
for a term of three years. At each general meeting, one third
of the number of directors (or if that number is not a whole
number, the next lowest whole number) retire by rotation. The
Board has the power to fill casual vacancies on the Board, but
a director so appointed must retire at the next annual meeting.
BSP, to the extent permitted by law, indemnifies every officer of
BSP (and may indemnify any auditor of BSP) against any liability
incurred by the person, in the relevant capacity, to another
person unless the liability arises out of conduct involving lack
of good faith.
BSP may also make a payment in relation to legal costs incurred
by these persons in defending an action for a liability, or resisting
or responding to actions taken by a government agency or a
liquidator.
9 3
BSP Annual Report 2013
SHAREHOLDERS INFORMATION
Twenty largest registered fully paid ordinary shareholders
At the 31 December 2013, the twenty largest registered fully paid shareholders of the Group were:
Independent Public Business Corporation
PNG Sustainable Development Program Limited
IFC Capitalization (Equity) Fund LP
International Finance Corporation
1
2 National Superannuation Fund Limited
3 Nambawan Super Limited
Petroleum Resources Kutubu Limited
4
5
Credit Corporation (PNG) Limited
6 Motor Vehicles Insurance Limited
7
8
9
10 Teachers Savings and Loans Society Limited
11 Comrade Trustee Services Limited
12 Tropicana Limited
13 Lamin Trust Fund
14 Credit Corporation (PNG) Ltd (CC Finance Ltd)
15 Mineral Resources OK Tedi No. 2 Limited
16 Solomon Islands National Provident Fund Board
17 Nominees Niugini Limited
18 Catholic Diocese of Kundiawa
19 Southern Highlands Provincial Government
20 Mineral Resources Star Mountains Ltd
Other shareholders
distribution of shareholding
Share Held
84,311,597
52,006,767
46,962,180
46,153,840
36,288,331
31,243,736
29,202,767
22,796,644
22,796,644
17,317,366
14,456,052
4,983,653
3,518,132
3,000,000
2,890,000
2,500,001
2,369,495
2,165,688
2,000,000
1,975,799
39,485,944
468,424,636
%
18.00
11.10
10.03
9.85
7.75
6.67
6.23
4.87
4.87
3.70
3.09
1.06
0.75
0.64
0.62
0.53
0.51
0.46
0.43
0.42
8.42
100.00
At the 31 December 2013, BSP had 6,831 shareholders. The distribution of shareholdings is as follows:
Range (number)
1-1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and above
Number of Shareholders Number of Shares
5,799 1,490,314
685
1,402,928
99 704,485
166 5,835,077
82 458,991,832
6,831 468,424,636
9 4
BSP Annual Report 2013
SHAREHOLDERS INFORMATION
employee share scheme
BSP resolved on 27 May 2004 that a maximum of 1% of the total number of shares held in BSP may be allocated to employees each
year at the discretion of the Board.
interest in shares in the Bank
Directors hold the following shares in the Bank:
director
T. E. Fox
G Aopi
R Fleming
shares held
%
160,013
10,000
93,000
0.00
0.00
0.00
registered office
share registry
website
Bank of South Pacific Limited
PO Box 78,
PORT MORESBY
National Capital District
PAPUA NEW GUINEA
Telephone: +675 305 7700
PNG Registries Limited
PO Box 1265,
PORT MORESBY
National Capital District
PAPUA NEW GUINEA
Telephone: +675 321 6377
www.bsp.com.pg
home exchange for BsP shares
home exchange for BsP Convertible notes
Port Moresby Stock Exchange Ltd (POMSOX)
PO Box 1531
PORT MORESBY
National Capital District
PAPUA NEW GUINEA
Telephone: +675 320 1980
South Pacific Stock Exchange
GPO Box 11689
SUVA
FIJI
Telephone: +679 330 4130
9 5
BSP Annual Report 2013
TaKiNG BaNKiNG To
reMoTe areas
The local Parliamentarian solan
Mirisim makes the first transaction via
an efTPos, at the Telefomin sub-Branch
during the launch as BsP staff look on.
9 6
BSP Annual Report 2013 senior ManageMenT
standing (L-R): Paul Thornton, GM Retail Banking, Giau Duruba, GM Human Resources, Peter Beswick, GM Corporate Banking,
Haroon Ali, Group Chief Risk Officer, Richard Borysiewicz, GM BSP Capital , Edward Ruha, Chief Financial Officer - PNG.
Seated (L - R): Aho Baliki, OBE, GM Paramount, Robert Loggia, Group Chief Operating Officer, Robin Fleming, Group CEO, Johnson
Kalo, Group DCEO/Group Chief Financial Officer, Mark Railston, GM Treasury.
9 7
BSP Annual Report 2013 Png BranCh direCTory
aitaPE
457 2042
Branch Manager
Alex Wafimbi
--------------------------------------------------------------------------------------------
alotau
641 1284
Ben Umba
Branch Manager
--------------------------------------------------------------------------------------------
araWa
276 9244
Branch Manager
Patrick Buibui
--------------------------------------------------------------------------------------------
Bialla
983 1095
Branch Manager
Mary Koi
--------------------------------------------------------------------------------------------
BoroKo
323 2288
Anne Baniyamai
Branch Manager
Premium Centre
303 4354
Sheila John
--------------------------------------------------------------------------------------------
BSP Harbour City
305 6151
Alex Kuna
Branch Manager
Premium Centre
305 6189
Bau Kiso
--------------------------------------------------------------------------------------------
BSP FIRST, Harbour City
305 6503
Branch Manager
Lama Orea
--------------------------------------------------------------------------------------------
BuKa
973 9042
Julie Warren
Branch Manager
Premium Centre
973 9087
--------------------------------------------------------------------------------------------
Bulolo
474 5366
Branch Manager
Joe Makinta
--------------------------------------------------------------------------------------------
gorDons PrEmium CEntrE
325 5999
Maureen Wanu
Branch Manager
BsP First, gordons
302 5245
Branch Manager
Barry Namongo
--------------------------------------------------------------------------------------------
Daru
645 9062
Branch Manager
Ivy David
--------------------------------------------------------------------------------------------
goroKa
532 1633
Livikonimo Koki
Branch Manager
--------------------------------------------------------------------------------------------
Kainantu
537 1065
Branch Manager
Marco Hamen
--------------------------------------------------------------------------------------------
KaviEng
984 2066
Madeleine Leka
Branch Manager
Premium Centre
984 2100
--------------------------------------------------------------------------------------------
KimBE
983 5166
Branch Manager
Misbil Alfred
--------------------------------------------------------------------------------------------
Kiunga
649 1073
Suya Yopahafo
Branch Manager
--------------------------------------------------------------------------------------------
KoKoPo
982 9088
Robinson Panako
Branch Manager
Premium Centre
982 9068
Jennifer Tiolam
--------------------------------------------------------------------------------------------
9 8
KunDiaWa
535 1025
Branch Manager
Rita Singut
--------------------------------------------------------------------------------------------
laE toP toWn
473 9801
Joseph Was
Branch Manager
Premium Centre
473 4814
Mona Teloti
--------------------------------------------------------------------------------------------
laE CommErCial
473 9800
Branch Manager
Agnes Mark
--------------------------------------------------------------------------------------------
laE marKEt
473 9606
Josephine Komoru
Branch Manager
--------------------------------------------------------------------------------------------
lihir
986 4052
Branch Manager
Kalat Tiriman
--------------------------------------------------------------------------------------------
lorEngau
970 9050
Branch Manager
Quillan Nongi
--------------------------------------------------------------------------------------------
maDang
422 2477
Cecilia Pasum
Branch Manager
Premium Centre
422 2621
Christine Mes
--------------------------------------------------------------------------------------------
mEnDi
549 1070
Branch Manager
Billy Veveloga
--------------------------------------------------------------------------------------------
moro
276 1566
Meck Kaum
Branch Manager
--------------------------------------------------------------------------------------------
motuKEa
321 7701
Branch Manager
Jenny Joel
--------------------------------------------------------------------------------------------
mount hagEn
542 1877
Mary Kundi
Branch Manager
Premium Centre
Ruth Kagl
--------------------------------------------------------------------------------------------
PoPonDEtta
629 7171
Branch Manager
Anthonia Dru
--------------------------------------------------------------------------------------------
PorgEra
547 6900
John Basanu
Branch Manager
--------------------------------------------------------------------------------------------
Port morEsBy
322 9790
Rarua Kema
Branch Manager
Premium Centre
305 7943
Lina Popal
BsP First Port morEsBy
305 7731
Branch Manager
Emily Basil
--------------------------------------------------------------------------------------------
raBaul
982 1744
Branch Manager
Bevilon Homuo
--------------------------------------------------------------------------------------------
taBuBil
649 9179
Tony Waningu
Branch Manager
--------------------------------------------------------------------------------------------
tari
276 1650
Branch Manager
Gabriel Ak
--------------------------------------------------------------------------------------------
BSP Annual Report 2013
PNG BRANCH DIRECTORY
Waigani DrivE
302 5301
Branch Manager
Mathias Manowo
--------------------------------------------------------------------------------------------
WatErFront PlaCE
305 6408
Eric Tasman
Team Leader
--------------------------------------------------------------------------------------------
WEWaK
456 2344
Branch Manager
Albert Seri
--------------------------------------------------------------------------------------------
BsP First
vanimo
457 1209
Branch Manager
Karen George
--------------------------------------------------------------------------------------------
vision City
310 0008
Sibona Kema
Branch Manager
Premium Centre
300 9103
Damaris Toran
310 0008
Dianne Sawala
--------------------------------------------------------------------------------------------
WaBag
547 1176
Branch Manager
Jerry Marie
--------------------------------------------------------------------------------------------
Waigani BanKing CEntrE
300 9600
Jeffery Singer
Branch Manager
Premium Centre
300 9645
Lorraine Siaoa
--------------------------------------------------------------------------------------------
PNG BRANCH MANAGEMENT
aGNes MarK
lae Commercial
alBerT Burua
NGi area Manager
alBerT seri
Wewak
alex KuNa
Harbour City
alex WafiMBi
aitape
aNNe BaNiyaMa
Boroko
aNToNia Dru
Popondetta
Barry NaMoNGo
BsP first, Gordons
BeN uMBa
alotau
BeViloN HoMuo
rabaul
Billy VeVeloGa
Mendi
CeCilia PasuM
Madang
DaMaris ToraN
Vision City Premium
DiaNNe saWala
BsP first, Vision City
DeNNis laMus
area Manager
Momase
eriC TasMaN
Waterfront Premium
eMily Basil
BsP first, Port Moresby
GaBriel aK GreG
Tari
9 9
BSP Annual Report 2013
BRANCH MANAGEMENT
iVy DaViD
Daru
Jeffrey siNGer
Waigani BC
JeNNy Joel
Motukea service
Centre
Jerry Marie
Wabag
Joe MaKiNTa
Bulolo
JoHN BasaNu
Porgera
JosePH Was
lae Top Town
JosePHiNe KoMoru
lae Market
Julie WarreN
Buka
KalaT TiriMaN
lihir
KareN GeorGe
Vanimo
laMa orea
BsP firsT
Harbour City
liViKoNiMo KoKi
Goroka
MaDeleiNe leKa
Kavieng
MarCo HarMeN
Kainantu
Mary Dale KuNDi
Mt Hagen
Mary Koi
Bialla
MaTHias MaNoWo
Waigani Drive
MaureeN WaNu
Gordons Premium
MeCK KauM
Moro
MisBil alfreD
Kimbe
NuNi Kulu
area Manager
southern
PaTriCK BuiBui
arawa
QuilaN NoNGi
lorengau
rarua KeMa
Port Moresby
ruBeN elizaH
area Manager
Highlands
riTa siNGuT
Kundiawa
roBiNsoN PaNaKo
Kokopo
siBoNa KeMa
Vision City
sTaNerD Wai
area Manager NCD
suya yoPaHafo
Kiunga
ToNy WaNiNGu
Tabubil
1 0 0
BSP Annual Report 2013 aiyura
7230 8313
Cribia Albert
-----------------------------------------------------------------------------------
BanZ
7100 9078
Kessy Elly Sammy
-----------------------------------------------------------------------------------
Buin
7100 7855
Melchior Tania
-----------------------------------------------------------------------------------
ChuavE
7197 6001
Maxie Joe
-----------------------------------------------------------------------------------
Daulo
7100 6763
Delilah Gahale
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gEmBogl
7313 4177
William Koima
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guminE
7100 7860
John Sii
-----------------------------------------------------------------------------------
hEnganoFi
7100 7859
Amos James
-----------------------------------------------------------------------------------
hosKins
7031 2627
Ruddy Samson
-----------------------------------------------------------------------------------
ialiBu
7197 6004
Mathew Garu
-----------------------------------------------------------------------------------
KaBWum
7346 1426
Rachael Watu
-----------------------------------------------------------------------------------
Kamtai
7243 4695
Robert Kom
-----------------------------------------------------------------------------------
KErEvat
7190 8231
Kilala Kindau
-----------------------------------------------------------------------------------
KEroWagi
7100 9077
Leah Taia
-----------------------------------------------------------------------------------
Kinim
7100 7861
Malapun Bannick
-----------------------------------------------------------------------------------
Komo
7362 0760
Lobe Arawi
-----------------------------------------------------------------------------------
Konos
7197 6006
Maureen Nick
-----------------------------------------------------------------------------------
KuPiano
7288 4140
Andrew Baine Jnr
-----------------------------------------------------------------------------------
laBa
7197 6008
Auda Morea
-----------------------------------------------------------------------------------
laiagam
7196 6002
Roselyn Joel
-----------------------------------------------------------------------------------
SUB BRANCH NETWORK - PNG
laKurumau
7197 6005
Christine Gawi Frank
-----------------------------------------------------------------------------------
lousia
7031 2617
Lorna Solomon
-----------------------------------------------------------------------------------
luFa
7100 6761
Vida Kemati
-----------------------------------------------------------------------------------
maPriK
7168 7815
Christian Tatu
-----------------------------------------------------------------------------------
minJ
7100 9076
Pauline Kapal
-----------------------------------------------------------------------------------
mutZing
7100 2488
Frank Godfrey
-----------------------------------------------------------------------------------
namatanai
7197 6007
Mathew Tabakas
-----------------------------------------------------------------------------------
ningErum
7031 8497
Mathew Tware
-----------------------------------------------------------------------------------
oKaPa
7374 5623
Mele Aron
-----------------------------------------------------------------------------------
Palmalmal
7323 9181
Freda Nablup
-----------------------------------------------------------------------------------
Pangia
7197 6003
Philemon Kambu
-----------------------------------------------------------------------------------
tamBul
7100 7863
Joseph Wanjil
-----------------------------------------------------------------------------------
tElEFomin
7255 8421
Donna Yarkin
-----------------------------------------------------------------------------------
WaKunai
7100 7856
Melvin Kusa
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Walium
7106 8357
Brenda Igusam
-----------------------------------------------------------------------------------
WaPEnamanDa
7100 7862
Grace Reto
-----------------------------------------------------------------------------------
yangoru
7127 0000
Michael Paul Java
-----------------------------------------------------------------------------------
yonKi
7185 5768
Usick Asino
-----------------------------------------------------------------------------------
ZEnag
7318 5855
Nicko Morris
-----------------------------------------------------------------------------------
1 0 1
BSP Annual Report 2013
(679) 323 4232
BsP First suva
Premium Centre suva
Manager
Mereani Peters
----------------------------------------------------------------------------------
BsP First naDi
(679) 6705101
Premium Centre naDi
Lice Toga
Manager
Albertina Lilo
----------------------------------------------------------------------------------
BsP First lautoKa
(679) 6660180
Premium Centre lautoKa
Meri Quminakelo
Manager
Albertina Lilo
-----------------------------------------------------------------------------------
soloMon islands
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solomon islanDs
(677) 21874
David Anderson
Country Head
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auKi
(677) 40484
Branch Manager
Samuel Misi
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CommErCial BanKing
(677) 23620
Branch Manager
Rose Murray
----------------------------------------------------------------------------------
giZo
(677) 60539
Relieving Branch Manager
Clotilda Londeka
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honiara
(677) 21814
Michael Kahamana
Branch Manager
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munDa
(677) 62177
Branch Manager
Rebecca Hickie
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noro
(677) 61222
Branch Manager
Tewia Laore
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Point CruZ
(677) 21874
Branch Manager
Rose Funa
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ranaDi
(677) 39403
Branch Manager
Joy Vave
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Fiji & soloMon island direCTory
FiJi
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(679) 330 4011
FiJi
Kevin McCarthy
Country Head
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Ba
(679) 662 7335
Branch Manager
Anupa Kumar
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DamoDar
(679) 321 4311
Branch Manager
Manjila Goundar
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laBasa
(679) 881 1360
Branch Manager
Eka Seduadua
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lautoKa
(679) 666 2466
Branch Manager
Josefa Tuitubou
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naDi
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Branch Manager
Davendran Pillay
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Branch Manager
Madhur Lata Kumar
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nausori
(679) 347 8499
Shailendra Roy
Branch Manager
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PaCiFiC harBour
(679) 345 2030
Officer in Charge
Naomi Waqa
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PaCiFiC housE
(679) 321 4580
Officer in Charge
Shalit Kumar
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raKiraKi
(679) 662 7341
Officer in Charge
Ronika Prakash
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samaBula
(679) 338 7999
Anand Nair
Branch Manager
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savusavu
(679) 885 0221
Officer in Charge
Vineeta Prasad
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sigatoKa
(679) 662 7332
Branch Manager
Reginald Kumar
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suva – CEntral
(679) 321 4455
Arif Mohammed
Branch Manager
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tavEuni
(679) 888 0433
Branch Manager
Marica Mara
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tavua
(679) 662 7338
Officer in Charge
Sanjeev Sumer
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thomson st
(679) 321 4671
Branch Manager
Rajesh Chand
-----------------------------------------------------------------------------------
valElEvu
(679) 334 2333
Sera Petueli
Officer in Charge
-----------------------------------------------------------------------------------
1 0 2
BSP Annual Report 2013
BeyoND BaNKiNG
our people, devoted their own time during
weekends to paint, plant, plumb
and perform other manual work to deliver
these wonderful projects.
our people also take time to visit the sick
at the hospital.
1 0 3
BSP Annual Report 2013 CORPORATE SOCIAL
RESPOnSIBILITY
BsP ambassador ryan Pini leads children during the Go Green Clean up in september 2013.
BSP is a brand that has become a household name. When
you think BSP, you think Mobile Banking, EFTPoS, ATMs, Bank
branches, you think lime green. And as a bank, we take pride in
our innovative and determined approach to banking.
BSP has also supported many worthy causes, that we believe
will ensure the people in the communities in which we
operate, particularly children and youth have health, hope and
opportunity for a brighter future.
In 2013, BSP delivered new branches, took banking to new
heights with the introduction of Wantok Moni, a mobile banking
service that enables BSP customers to transfer funds to anyone,
anytime and anywhere. In 2013, we delivered a Kids Savings
Account and a Sumatin Account.
Our teams have braved unforgiving weather, rugged terrain and
many odds to educate people in rural communities, schools and
villages on basic financial literacy. The feedback and appreciation
from many of these far flung areas is simply amazing. Some of
these areas, don’t have roads. Take Telefomin for instance. No
roads. But they have a rural branch. When we talk banking in
your world, we mean what we say and we walk the talk.
And beyond banking, our people, devoted their own time during
weekends to paint, plant, plumb and perform other manual
work to deliver many wonderful projects. They do this, because
they are not just bankers, they are a part of the community.
Here is a brief look at what we did in 2013. In 2013, we delivered
33 Community Projects in Communities in which we operate.
16 in Education, 10 in Health and 6 in Environment/Community.
We installed water tanks in schools, constructed new town
markets, and provided rubbish bins and bus shelters. We rebuilt
Hospital Wards and provided much needed medical equipment
and supplies. The list is endless. Our commitment is on-going.
BSP’s “Go Green” year round environmental program now
attracts hundreds of children and adults from all levels of society
to help “Clean up our World”. We sponsor able and disabled
athletes, men and women from grassroots local events to high
performance athletes.
By supporting local communities and people we encourage
active participation and social responsibility in our community.
1 0 4
BSP Annual Report 2013 supporting Buk Bilong Pikinini.
Go Green fiji.
Kid’s Tennis.
CoMMuniTy ProjeCTs
At BSP we understand every customer belongs to a community,
and that the relationships we build with each and everyone
brings us opportunities to help their communities.
Thousands of conversations happen each year with our
customers, their communities and BSP men and women, to
determine the area of greatest need for a community.
Once the need has been identified, BSP formulates an action
plan - a plan to implement positive change and make a real
difference to the lives of men, women and children throughout
the South Pacific region.
We are proud that every Branch Manager and their teams make
a personal commitment to this programme, devoting their
own time, backed by all the resources of BSP. Our community
projects typically include:
•
•
•
•
•
refurbishing health facilities
renovating schools
bringing healthcare to communities
installing water supply to schools and
constructing new market buildings.
enVironMenT & susTainaBiliTy
BSP Go Green Clean up 2013 Day had approximately 19,400
participants across the 39 branches where the clean up took
place in PNG. There were around 970 groups registered. This
is almost double the number of groups who took part at the
2012 Community Clean up Day. The majority of participants
were community groups made up of friends, families,
neighbourhoods and villages.
2013 Go Green Clean up Day was the most successful so far; we
doubled the participation from last year. The theme for BSP’s
Go Green in 2013 was ‘Recycle, Reuse, Respect’:
• recycle: Collect and deposit discarded items at an
operation, where these materials can be recycled into
new products, e.g. scrap metal/plastic buyers.
• reuse: Remove wastes or ‘patch up’ damaged areas
on an item or its components, to use again for the
same purpose.
• respect: Dispose your unwanted items properly-
tied up in bags & put in a rubbish bin. Respect the
environment.
These are the simple messages we as an organisation want to
impart through events such as our Annual Clean Up Day, and
we encourage everyone to do the same, every day.
Growing our responsibility and sustainability. We are the
‘Greenest bank in the South Pacific’. As one of the South
Pacific’s largest organisations, BSP recognises the effect it has
on environment and is committed to finding ways to reduce any
negative impact and enhance the environment we live in.
As part of our environment strategy, we support organisations
and initiatives that foster an understanding of environmental
issues and provide practical support to building sustainable
communities. We’re continually seeking innovative new ways
to decrease our environmental impact in the operation of
our branches by reduction of resources and materials used
wherever possible.
sPorTs For liFe
Promoting Sport and Choices for Life. “Never stop playing”. It’s
the healthy lifestyle message at the heart of a huge and diverse
set of lifestyle initiatives and programmes BSP has committed
to do.
With a focus on children and youth programmes, BSP has
invested significantly in children’s sporting partnerships. We
are proud that the number of children we have encouraged to
lead active lifestyles since the programmes were commenced in
2009 have swelled to in excess of 800,000 children throughout
the South Pacific region.
1 0 5
BSP Annual Report 2013 CORPORATE RESPONSIBILITY
supporting operation open Heart.
supporting PNG swimming inc for more that 10 years.
BSP’s association with a huge range of sports includes cricket,
tennis, the Paralympics, football, game fishing, AFL, Sailing, PGA
and youth golf.
BsP regional Tennis
The BSP Regional Tennis program was the first school program
supported by BSP in 2009 to identify and develop children in
the sport of Tennis in the country. To date a total of over 50,000
participants took on this program around the country. In 2013,
with the support of K50,000, 1266 participants took part from
33 schools around the country.
The 2013 program was more defined and targeted to identify
prospective players for the 2015 Pacific Games. Apart from
financial assistance, our branch network around the country
played a pivotal role in coordinating with the PNG Tennis
Association to ensure the program was delivered as planned.
PNG Paralympics
BSP is the major sponsor of the PNG Paralympic Team,
committing not only funds (K100,000pa), but merchandise
and people. BSP aims to give athletes living with disabilities
the opportunity to achieve their dreams. Rosemary Mawe,
Manager Corporate Sponsorships has been an integral team
member of the PNG Paralympic support team and in 2012 was
appointed the Team Manager for the 2012 London Paralympic
Games.
swimming
BSP has supported PNG Swimming Inc (PNGSI) for over 10 years
and was an integral part of supporting the development of
Ryan Pini and Judith Meauri who competed in the 2012 London
Olympics. BSP sponsors directly the two target squads known
as BSP Kundu Gold and Kundu Silver Target Aquatic Excellence
Squads.
The PNGSI/BSP National Aquatic Excellence Program is a
program to recognise swimming excellence
in our PNG
Swimmers. The program covers swimmers from age 9 through
to Open. Swimmers who achieve a qualifying standard are
awarded a Silver or Gold standard level in the Junior (9-11
years), Intermediate (12-14 years) or Open levels (Kundu Target
Squads).
With our support of K80,000, PNGSI works closely with
Swimming NZ (SNZ), Swimming Australia Limited (SAL) and
Australian Swim Coaches and Teachers Association (ASCTA) and
regularly brings representatives to PNG for coaching clinics and
courses and Technical official courses. In conjunction with these
experienced partners the BSP Learn to Swim Program will be
prioritised in other centres outside the National Capital District
with Alotau and Lae community schools being targeted in the
first instance.
BsP school Kriket
The global award winning children’s cricket programme, BSP
School Kriket, achieved the ambitious target of reaching more
than 130,000 school children in 2013. The most successful
initiative in the Asia Pacific region, the BSP School Kriket
programme is expanding further nationwide. The programme
has been awarded the Best Junior Development Programme
with the International Cricket Council’s (ICC) East Asia Pacific
Award for three years running. From the regional award, the
programme has also been awarded the ICC Global Award of
Best Junior Participation initiative for 2010, 2011, and was a
finalist in 2012. In 2013, the program saw record participation
with 171,578 students and children participating in 10 regions,
297 schools and 136 clinics across the country.
junior golf development Program
The Papua New Guinea Golf Association (PNGGA) has an
ambitious objective to deliver gold medals in the 2015 Pacific
Games and BSP will help drive these aspirations forward with
a sponsorship package worth K600,000. BSP’s sponsorship
will support PNGGA’s Junior Golf Development Program over
1 0 6
BSP Annual Report 2013 award winning BsP school Kriket Programme.
Toea Wisil, BsP Brand ambdassador with a customer.
Federation and Sports Foundation.
“I thank BSP not only for the sponsorship of the games, but also
for their part in nation building and what these games will make
for us,” he added.
“BSP’s choice to back the Games is a wise choice, for the
exposure it will get and the contribution it will make. I encourage
other Corporate Entities and big industries to support Pacific
Games 2015. It is a huge task that I cannot do myself, and we
have to work together,” he stressed.
“It is with great pleasure that I now welcome on board BSP as
the official sponsor for the PNG 2015 Pacific Games, I say with
much confidence that we now have the capacity to dream big
about the range of possibilities for engagement, participation
and for delivering the best ever Pacific Games,” said Games
Chairperson Emmah Waiwai.
the next three years at K200,000 per annum. As part of this
program, talented young golfers nationwide will be identified
and given the opportunity to progress from the amateur to
professional level, to ensure a high competitive environment is
maintained.
Brand ambassadors
BSP has two brand ambassadors who support our ‘Sports for
Life’ initiatives. Ryan Pini has been a BSP Brand Ambassador
for 3 years. As PNG’s most celebrated athlete, Ryan represents
dedication and commitment to his sport and his country and is
a valued strategic partner in promoting healthy, active lifestyles
- Sports for Life. Ryan promoted BSP and PNG throughout his
challenge at the 2012 London Olympics. Ryan is now preparing
to represent PNG at his last competition, the 2015 XV Pacific
Games. Known as the Sprint Queen of the Pacific, Toea Wisil
has certainly made her mark in the Papua New Guinean
sports scene, inspiring young athletes all across Oceania.
She was signed as the second BSP Ambassador in 2013. The
arrangement will see the 25-year-old associate with BSP’s team
and use her experience and success to promote and encourage
healthy, active lifestyles through various sports, environment
and community initiatives supported by the bank.
official sponsor Pacific games
Sports and Pacific Games Minister Justin Tkachenko made the
official announcement in Port Moresby 7 February 2013, in
front of Pacific Games CEO Peter Stewart, board members from
the Pacific Games Committee, the Pacific Games Authority and
the Venue, Infrastructure and Equipment Committee and Sports
1 0 7
BSP Annual Report 2013 Theophilus Foundation
ChariTies/organisaTions
• Buk Bilong Pikinini (Lae, Goroka, Manus & NCD)
• Operation Open Heart Program
•
• Anglicare
• Susu Mamas Ball
•
• City Mission
• Salvation Army
• Filipino Association
Indian Association
•
• Port Moresby Cancer Society
Indigenous Business Council
BsP Mascot
CORPORATE SOCIAL RESPONSIBILITY
some of the Major sponsorships by BsP in 2013
ConFerenCes
• PNG Business Advantage
• Certified Practicing Accountants
• Madang SME Summit
• BPNG Financial Inclusion Expo
•
Institute of Internal Auditors
• PNG Australia Business Council
• Fiji Trade & Investment Mission to PNG
• Australia & PNG Mining Resource Expo
• PNG Human Resource Institute
• PNG Safety Expo
CulTural FesTiVals
• Kenu & Kundu Festival
• Goroka Show
• Morobe Agricultural Show
• 6th Sepik Crocodile Festival
• Wawagira & Mask Festival
• Bulolo Show
• Rabaul Frangipani Show
sPorT
• PNG Cricket
• PNG Junior Golf Development Program
• Ryan Pini, Brand Ambassador
• PNG Paralympic Committee
• PNG Swimming Inc
• PNG Tennis Association
•
• AFL Premiership
• BSP Pennants
• Port Moresby Golf Open
• Game Fishing Club
• Kone Kanu Klub
Toea Wisil, Brand Ambassador
some of the organisations supported by BsP in 2013
The Institute of
Internal Auditors
PNG Chapter
COPYRIGHT MEDIA PLAYGROUND LTD © 2014
1 0 8
Morobe Province
agricultural society inc
BSP Annual Report 2013 some of the Major sponsorships by BsP in 2013
suPPorTiNG WorTHy
Causes
a BsP staff member at the Head office
giving blood during the 2013 Corporate
Blood Drive. BsP’s Port Moresby branches
participated in this worthy event to help
save lives.
some of the organisations supported by BsP in 2013
1 0 9
BSP Annual Report 2013 a new children’s playground at local hospital
built by the Kavieng branch team
COMMunITY PROJECTS In 2013
New water tanks to St Anna Primary School.
New medical equipment & renovation of Golanai Urban Health Clinic.
New beds, mattresses, pillows & clean up at local hospital.
Refurbishment St Johns for the Blind Centre and new office equipment
Renovation of ablution at Bialla Health Centre.
Set up rubbish drums around township.
New 9000 ltr water tank and maintenance of ablution at Hompiri Primary School
Renovation of local Police Station, including new office furniture.
Building of library at Hohola Demonstration Elementary School.
aiTaPe
aloTau
arawa
BoroKo
Bialla
BuKa
Bulolo
daru
douglas sT
gordons PreMiuM Renovation of Ororo Primary School library.
goroKa
KainanTu
KaVieng
KiMBe
Kiunga
KoKoPo & raBaul
Kundiawa
lae 3 BranChes
lihir
lorengau
Madang
Mendi
Moro
MT hagen
PorT MoresBy
PoPondeTTa
Porgera
TaBuBil
VaniMo
waBag
waigani
waigani dr
wewaK
Refurbishment of Goroka Base Hospital outpatient ward.
Renovation of classroom, new Tuffa tank at Rapinka Primary School.
Built a children’s playground at local Hospital.
New mattresses to the surgical/children’s ward at local hospital.
Renovation of town basketball court & presentation of sport equipment.
New mattresses, pillow cases and medical equipment to Tapipi Rural Health Centre.
Reconstruction of Chemotherapy preparation room at the local hospital.
Renovation of Buimo Correctional Services Clinic.
Built a new bus stop at Lihir Destiny School.
New wheelie bins around township.
Renovation of mental ward at local hospital.
New toilets Magani Elementary School.
Renovation of classroom and library books to Kutubu High School.
New rubbish drums around township.
Renovation of Classroom at Bavaroko Primary School.
New water tank and painting of classroom at Resurrection Primary School.
New water tanks at Sirunki Lutheran High School.
Clean up & presentation of sporting equipment to Tabubil Primary & other schools in township.
New rubbish drums around township.
Renovation of carpentry workshop at Holy Cross TVET Centre.
New water taps, pipes, hand basins and a mini shelter at Waigani Elementary School.
Renovation of classroom at Ted Diro Primary School.
Repainting workshop and new water tank at Callan Services Disabled Centre.
1 1 0
BSP Annual Report 2013
aiTaPe
aloTau
araWa
BoroKo
CORPORATE SOCIAL RESPONSIBILITY
Bialla
BuKa
Bulolo
Daru
DouGlas sT
GorDoNs
GoroKa
KaiNaNTu
KaVieNG
KiMBe
KiuNGa
KoKoPo & raBaul
KuNDiaWa
lae 3 BraNCHes
liHir
loreNGau
1 1 1
BSP Annual Report 2013 CORPORATE SOCIAL RESPONSIBILITY
MaDaNG
MeNDi
Moro
MT HaGeN
PorT MoresBy
PoPoNDeTTa
PorGera
TaBuBil
VaNiMo
WaBaG
WaiGaNi
WaiGaNi Dr
WeWaK
QuiCK FaCTs aBouT BsP CoMMuniTy ProjeCTs
• 33: The number of projects delivered in PNG in 2013
• 32 Community Projects in 2009, 34 in 2010, 35 in 2011 and 31 in 2012.
• 165: The number of individual projects in PNG from 2009 – 2013
•
since 2009: 78 Projects focused in Education, 54 in Health and 27 centred
around Environment/Community activities and 6 in Sports.
• K3.6 million: Amount BSP has invested in communities in PNG from 2009 – 2013
reNoVaTeD liBrary
Gordons Premium Centre helped renovare the
ororo Primary school library
1 1 2
BSP Annual Report 2013 www.bsp.com.pg