Chairman’s Report
A Brief History of BSP
Board of Directors
Group CEO’s Report
Strategic Business Unit Reports
Corporate Governance
Historical Summary
Contributions by BSP to PNG
Overseas Branches & Subsidiaries
Financial Statements
• Directors’ Report
• Statements of Comprehensive Income
• Statements of Financial Position
4
6
8
10
12
21
29
29
31
39
40
42
43
• Statements of Changes in Shareholders Equity 44
• Statements of Cash Flow
• Notes to the Financial Statements
Independent Auditor’s Report
Shareholder Information
Directors’ Information
Management Teams & Directories
Corporate Social Responsibility
45
46
81
85
88
91
101
Our Vision
To be the leading financial services provider in our chosen markets
helping customers, staff, shareholders and communities prosper.
Our Mission
To create value for our stakeholders by delivering innovative and
cost effective financial services.
Key Features of BSP Strategy
A Focus on Sales & Service
High Performing Teams
Operational Excellence
Profitable Growth
INTEGRITY
We are honest, committed, trustworthy and reliable in our dealings with
our customers and each other.
PROFESSIONALISM
We commit ourselves to continual self-development to achieve standards
of excellence in our performance.
LEADERSHIP
QUALITY
PEOPLE
TEAMWORK
COMMUNITY
We inspire, we change, and we live our values, and lead by example.
We are committed to excellence whilst striving for continuous improvement
in products and services.
We respect and value our people and our customers.
We work with, and for, each other; we progress together.
We respect, value and support the communities in which we operate.
2
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 78 Branches
BRANCH
56 Sub-Branches
SUB-BRANCH
499 ATMs
11,343 EFTPoS
351 Agents
4,194 Staff
APRA Disclaimer:
BSP is not authorised under the Banking Act 1959 (Commonwealth of Australia) and is not supervised by the Australian Prudential Regulation
Authority (APRA). BSP’s products are not covered by the depositor protection provisions in section 13A of the Banking Act 1959 and will not be
covered by the financial claims scheme under Division 2AA of the Banking Act 1959.
3
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CHAIRMAN’S REPORT
BSP Group has completed another successful year of operational and financial performance in 2016. The majority of
businesses have performed well during another challenging year. Strategically also, activities related to the business
acquisitions from Westpac were completed when Vanuatu was settled in July 2016, and the Solomon Islands system
integration was implemented in November 2016.
BSP Group audited profit for 2016 was PGK643.5 million, an increase of
21% from 2015. Total assets have grown 14% to PGK20.8 billion.
Economic conditions were benign overall in the countries in which BSP
operates, reflecting the slow recovery in the global economy that has
continued over the period. Low growth has again featured in emerging
markets in Asia, led by China. Some commodity prices, such as oil have
shown some recent improvement and the demand for minerals like iron
ore, coal and copper have strengthened in recent months, following some
resurgence in economic activity in the Asian markets. PNG’s commodity
based economy influenced by natural gas, minerals and agriculture has
tracked a low growth path in 2016, with continued low export revenues.
In the non-PNG economies, there has also been low to moderate
growth, exacerbated especially in Fiji by Cyclone Winston early in 2016.
Notwithstanding this, tourism activity has been resilient, and agriculture
has also remained stable.
The latest Standard and Poors’ assessment of BSP continues to be at the
maximum rating possible for a Papua New Guinea based entity (B, negative
outlook for the short term).
BSP successfully completed the purchase of the Vanuatu branch of
Westpac in mid- 2016. In November, a system integration exercise was
successfully undertaken and completed in the Solomon Islands, to fully
merge the co-existing business operations. In both instances, the activities
were carried out predominantly by BSP teams, with limited assistance
from external parties.
BSP’s 2016 results reflect the growing prominence of the non-PNG
businesses. 20% of profit and 26% of balance sheet assets are now sourced
from outside of PNG. The recently acquired businesses have shown very
good progress, and I am pleased to repeat my earlier statement that BSP
is truly a South Pacific Bank in every sense, committed to partnering with
people, businesses and governments in supporting economic opportunity
and development across the region’s communities.
Diversification of financial service lines has continued. The Life insurance
business in Fiji has once again produced good results in 2016, with
continued profitability improvements and balance sheet management.
The Asset Finance operations which commenced in Fiji late in 2014, and
in PNG at the start of 2015 have yielded results above target during 2016,
supported by good market share growth.
The sustained growth of BSP in PNG as well as across the South Pacific
region, and the ongoing development of the portfolio of non-banking
financial services assets continues to demand more and more in the way
of improvements in BSP Group’s systems, procedures and staff capability.
An initiative to identify a new core banking system for the Group across
the region commenced in 2016 and activities will intensify over the coming
years. BSP’s leadership development program has expanded with the
addition of the 2016 cohort group including participants from regional and
non-banking businesses.
Changes in legislation in the banking industry and related regulatory
requirements have continued in 2016. Regulators in PNG and across the
region have introduced new prudential standards covering areas such
as corporate governance, anti-money laundering and anti-terrorism
funding. Compliance reporting requirements have been enhanced in
certain areas. BSP has responded appropriately to ensure it meets the
specified requirements. One of the requirements is that the Board Audit
Risk Compliance Committee (BARCC) has been split into 2 committees, one
for Risk and Compliance, and the other for Audit.
In 2016, two long serving highly respected directors retired from the BSP
Group Board. Thomas Fox departed from the Group Board after 23 years
of uninterrupted contribution, 22 of them as deputy chairman. Sir Nagora
Bogan stepped down in October after giving 13 consecutive years of service
on the Board. Both also served on Board committees throughout their
tenure. Their professional contributions and support for BSP over many
years deserve special mention and we wish both of them every success
for the future. The Board has welcomed new members in their place.
Prominent Samoan economic policy advisor, Dr Faamausili Lua’iufi and Mr.
Arthur Sam CPA PNG, an experienced Papua New Guinean professional
accountant, are two very worthy replacements.
BSP Group has managed to produce yet another year of record results
in 2016 at a time when economic conditions generally across its markets
have remained challenging. The BSP Group has once again outperformed
its major competitors. Our key metrics of ROE, ROA and cost to income
have again showed positive movements. Staff and management are
commended for their efforts in producing these results and maintaining
BSP Group’s leading position in the South Pacific region.
The coming year will continue to present challenges, with the weakness
in global economic performance likely to persist. Notwithstanding more
difficult economic conditions, I remain confident that BSP will perform
resolutely. The support of its stakeholders, its competitive operations,
and the continual review of its strategy, will enable BSP Group to produce
another successful year in 2017.
Sir Kostas Constantinou, OBE
Chairman
4
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
Sir Kostas Constantinou, OBE
Chairman
5
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 A BRIEF HISTORY OF BSP
BSP is the leading bank in PNG and has a long and proud track record of serving the needs of customers in PNG and other countries across the South Pa-
cific. BSP’s operations date back to 1957, when it was founded in Port Moresby as a branch of National Bank of Australasia Limited. In 1993, a consortium
of PNG businesses acquired the bank and created the first and only PNG private sector owned bank at that time.
BSP merged with the state-owned Papua New Guinea Banking Corporation in 2002, creating the largest bank in PNG. Other acquisitions followed, includ-
ing Habib Bank in Fiji in 2006, National Bank of Solomon Islands in 2007 and Colonial Bank and Colonial Fiji Life Insurance Limited in 2009. In 2015 and
2016, BSP completed the acquisition of Westpac’s operations in Cook Islands, Samoa, Solomon Islands, Tonga and Vanuatu, significantly expanding and
strengthening BSP’s geographic reach. Today, BSP continues to be a leading force in the PNG and South Pacific markets with the largest branch network,
and is a pioneer in bringing financial innovation and technology to the region.
KEY MILESTONES IN BSP’S DEVELOPMENT
1957
Commenced operations in Port Moresby on 1 May, 1957 as a branch of National Bank of Australasia Limited.
1974
1993
2002
2003
2005
2006
2007
2009
2010
BSP incorporated as Bank of South Pacific Limited, a wholly owned subsidiary of the Australian parent.
National Investment Holdings Limited, a nationally owned company, acquired BSP from National Australia Bank.
Merged with the state owned Papua New Guinea Banking Corporation.
BSP is listed on the Port Moresby Stock Exchange.
Standard & Poors issued an inaugural credit rating for BSP of B+.
Established a presence in Fiji through the acquisition of Habib Bank Ltd’s Fiji operations, which were rebranded to BSP.
Acquired the National Bank of Solomon Islands Ltd and rebranded to BSP.
Acquired Colonial Bank and Colonial Fiji Life Insurance Limited from Commonwealth Bank of Australia and rebranded to BSP and BSP Life,
respectively.
IFC acquired a 10% shareholding in BSP.
2015 - 2016
Acquired Westpac’s operations in Solomon Islands, Cook Islands, Samoa, Tonga and Vanuatu for A$125 million.
Net Profit After Tax (K million)
643.5
507.3
531.9
407.7
436.8
355.9
2011
2012
2013
2014
2015
2016
6
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 BSP Vanuatu Staff
Philan Kalmanu - Credit Analyst
and Tanya Longwah - Relationship Manager
Livikonimo Koki,
Branch Manager, Goroka, Papua New Guinea.
Pictured with his nephew Enoch Tonny.
7
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 BOARD OF DIRECTORS
SIR KOSTAS CONSTANTINOU, OBE | Chairman. Director since April 2009. Appointed Chairman February 2011.
Sir Kostas Constantinou, OBE, is a prominent business figure in Papua New Guinea, holding a number of high level
public sector and private sector appointments. Sir Kostas is Chairman of various companies, including Airways Hotel
and Apartments Limited, Lamana Hotel Limited, Lamana Development Limited, Alotau International Hotel and Anglicare
Foundation in Papua New Guinea. He is a Director of Oil Search Limited, Heritage Park Hotel in the Solomon Islands, Grand
Pacific Hotel in Fiji, Taumeasina Island Resort in Samoa, Good Taste Company in New Zealand, Gazelle International Hotel
and Loloata Island Resort Limited in Papua New Guinea. Sir Kostas is also Vice President of the 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, CSM, MBA, MMGT | Chief Executive Officer. Director since April 2013.
Robin Fleming was appointed CEO of Bank of South Pacific Limited in April 2013. Before his appointment as 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. Before the merger of
Bank of South Pacific Limited and Papua New Guinea Banking Corporation Limited, Robin held senior management roles
with Papua New Guinea Banking Corporation. He has worked in PNG for over 30 years and holds a MBA and a Master of
Management from Charles Sturt University.
DR. MATAGIALOFI LUA’IUFI, PhD, MSc | Non-Executive Director. Director since December 2016.
Dr Faamausili Matagialofi Lua’iufi is currently a Governance/Human Resource consultant based in Samoa and has worked
in Tonga, Cook Islands, Niue, Fiji, PNG, Vanuatu, Solomon Islands, and Niue in the last 10 years sharing her expertise.
Formerly she was in the Public service for 25 years and 12 years as the Chief Executive Officer for the Samoa Public
Service Commission. She has extensive governance experience in Public Sector Boards and policy committees in Samoa.
She holds a Doctorate in Philosophy in Management, a Master of Science (Management Sciences), Bachelor of Arts, in
Sociology and Political Science and graduate Diplomas in Training and Management.
GEREA AOPI, CBE, MBA | Non - Executive Director. Director since April 2002.
Gerea Aopi has obtained 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 PNG, including Secretary
of Finance and Planning and Managing Director of Telikom PNG Limited. He presently holds the position of Executive
General Manager, Stakeholder Engagement 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, BEcon | Non - Executive Director. Director since June 2003.
Dr Ila Temu achieved a distinguished academic career with the University of Papua New Guinea, The National Research
Institute of PNG, the Australian National University and the University of California, Davis, where he was awarded a PhD
in Agricultural Economics. Dr Temu entered the private sector in 1996 when he was appointed Managing Director of
Mineral Resources Development Company. From 2000 to 2006, he held senior positions in Placer Dome, including Country
Manager, Tanzania. With the successful take-over of Placer Dome by Barrick in 2006, Dr Temu has held various senior
management roles in PNG and Australia for Barrick. He is currently their Country Executive Director.
8
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 ARTHUR SAM, BComm, CPA, MAICD| Non- Executive Director. Director since 2016.
Arthur Sam is a qualified and experienced accountant and a member of CPA PNG, and a member of the Australian Institute
of Company Directors. He is the Audit and Managing Partner of JAJ & Associates and holds a Bachelor of Commerce from
the University of Papua New Guinea. Mr Sam previously worked with three global accounting firms - Pricewaterhouse
Coopers, Deloitte and Ernst & Young, and has extensive skills and experience in internal audit and risk management. Mr
Sam is also a member of the Board Audit Committee and the Board Risk and Compliance Committee.
AUGUSTINE MANO, BEcon, MSc | Non - Executive Director. Director since August 2014.
Augustine Mano is an economist and has been the Managing Director of the Mineral Resource Development Corporation
(MRDC) for the last 7 years. MRDC is the entity responsible for managing landowner investments and Mr Mano has lead
the organisation in undertaking some major investments such as the PNG LNG project and property development and
hospitality within PNG, Fiji and Samoa. He has extensive skills and experience in the mining and petroleum sector. He
is also involved with construction, transportation and the Insurance industry. He holds a Master of Science Petroleum
Economics from the Dundee University, Scotland and Bachelor degrees in Economics and Environmental Science from the
University of PNG. Mr Mano currently holds Chairman and Directorship in a number of entities, including MRDC and its
subsidiaries companies, Hevilift Group, Insurance Pacific, Pearl Resort, PNG Air, GFS and Handy Group.
FREDA TALAO, LLM, MPHIL, MAICD | Non - Executive Director. Director since April 2012.
Freda Talao is a lawyer and development specialist and is currently a consultant to Australian Law Firm Holding Redlich
in Brisbane. Until recently, Ms. Talao was a member of the External Stakeholders Advisory Panel (ESAP) to the Hidden
Valley Joint Venture (HVJV) Mine owned by Newcrest Limited and Harmony Gold in Wau, Papua New Guinea. She has also
served on numerous boards in PNG including the former Civil Aviation Authority (CAA), Mama Graun Conservation Trust
Fund, the National Airports Corporation (NAC), the Airport City Development Limited (ACDL) Board and the Individual and
Community Rights Advocacy Forum (ICRAF). Her executive roles have included Deputy Registrar National Court, Executive
Director, PEACE Foundation Melanesia and Senior Development Specialist with the Australian Aid Program (AUSAID). Ms
Talao was one of 6 PNG women nominated for the Nobel Peace Prize in 2005 as part of the 1000 Peace Women for the
Nobel Prize Project and was given an Independence Award for her work with women, children, youth and communities.
Ms. Talao holds a Law Degree from University of Papua New Guinea, a Masters in Law from Bond University, Qld (LLM), a
Master of Philosophy in Law from University of Queensland (MPHIL) and a Diploma in Business from the Southern Cross
University. She is also a member of the Australian Institute of Company Directors (AICD).
GEOFFREY J. ROBB, BA, MBA, OAM | 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 also on the Board of BSP Capital
Limited and Bank of South Pacific Tonga Limited.
ERNEST BRIAN GANGLOFF, CPA, MAICD | Non - Executive Director. Director since November 2013.
Ernest Gangloff is an Accountant and registered with CPA PNG and the Accountants’ Registration Board. Mr Gangloff has
extensive experience in the areas of risk management, internal audit and corporate governance. He has over 30 years
professional experience with over 15 years in Senior Management positions. Mr Gangloff retired as Partner with Deloitte
in May 2013 and established Gangloff Consulting in June 2013. He is also a director of Gangloff Consulting Limited, and
New Britain Palm Oil Limited. Mr Gangloff is a Council Member of the Institute of National Affairs and the Vice President
of the Business Council of PNG and member of Australian Institute of Company Directors. He is also Adjunct Professor of
the School of Business, UPNG.
9
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 GROUP CEO’S REPORT
I am pleased to report 2016 was another successful year for BSP. As indicated by our Chairman, Sir Kostas Constantinou OBE
in his report to shareholders, BSP recorded a profit of K643.5m for 2016 which was an increase of 21% on our result for 2015.
BSP now has operations in 7 countries across 4 different business lines, and
every country contributed to the 2016 profit outcome.
In Papua New Guinea despite economic conditions being somewhat less
buoyant than in recent years BSP recorded a profit increase of 21% with
each of our strategic business units working collaboratively to achieve our
collective financial targets. Our corporate team maintained its momentum
in the key corporate business market segment as reflected by lending market
share growth, strong growth in deposit market share, increased penetration
in the foreign currency market and positive customer engagement survey
outcomes.
An important component of this success has been our capacity to improve
whole of bank collaboration leveraging our Retail network, operational
capability with strong customer relationship management, supported by a
credit team based in Port Moresby that has good in country knowledge
and understanding of credit risk at a macro level and at a relationship level.
Paramount banking maintained its deposit market share, assisted with
growth in foreign exchange turnover and received outstanding responses
to the customer engagement survey.
Retail performed well during the year. Sales targets proved more challenging
to achieve than in recent years with fewer people in full time employment
but there was renewed focus on Retail’s account acquisition strategy that
has seen approximately 140,000 additional accounts opened in 2016. Our
fee free savings accounts have been popular with our customers and we
now have over 100,000 fee free Plus Saver accounts, more than 120,000
fee free Sumatin (Youth) accounts and approximately 45,000 fee free Kids
accounts. This is an important component of BSP’s financial inclusion
activities and in the longer term will assist develop a savings culture in these
key market segments. In addition to growing the Retail business, the Retail
team supplemented Corporates’ and Paramounts’ activities with its service
delivery across our extensive network of branches and sub branches.
Investment in our systems and electronic delivery capability continued.
The new data centre in Port Moresby was commissioned in the first half
of 2016 and BSP’s information technology and communications processing
was migrated to the new data centre around that time. We also rolled out
over 4,000 new merchant terminals across the country with our full fleet
of merchant devices in PNG to be replaced before the end of 2017. New
merchant terminals were introduced in Cook Islands, Samoa, Solomon
Islands, Tonga and Vanuatu, with Fiji having also embarked on a replacement
program for its merchant terminals with a target for introduction in quarter
2 of 2017.
Each of our offshore branches improved their profitability during 2016.
Fiji which is our largest business outside of Papua New Guinea reported
a profit of K59.8million, Solomon Islands performed well with a profit of
K27.1million, Cook Islands our smallest business had a profit of K2.9million,
Samoa achieved a creditable outcome at K7.3million, Tonga grew its
business significantly with a profit of K10.7million and Vanuatu in its first 6
months of operations laid the groundwork for future profit growth with a
profit of K1.5million.
With the settlement for the purchase of the Vanuatu business from
Westpac in July 2016 BSP has successfully completed the acquisition of its
current phase of expansion across the South Pacific. Integration of Cook
Islands, Samoa, Tonga and Vanuatu into BSP systems, processes and culture
has substantially been completed and the merger of the two businesses in
Solomon Islands has also been successful. In the final quarter of 2016 the
conversion and migration of our Solomon Islands business to one banking
system was concluded successfully.
Our Operations and Information Technology teams in Papua New Guinea
are to be congratulated for their efforts over an extended period in
effectively completing a program of integration activities that involved work
in 6 different countries whilst also participating in the delivery of other
important projects in PNG.
BSP Finance in PNG and Fiji performed most creditably exceeding plan
in both countries. The expansion of BSP Finance into Cambodia has also
progressed well during 2016 with commencement of operations expected
in the first quarter of 2017.
Investment in our future leaders continues and we now have over 50 staff
in our leadership management development program with participants
from every country. The program of activities includes study overseas,
secondments internally and externally, attendance at Executive Committee
meetings and board meetings on a rotational basis, and participation in
projects associated with our various strategic initiatives.
Vendor selection for a new core banking system was finalised and an
agreement signed with Oracle Corporation Australia Pty Limited in February
2017. This is a significant multi-year program that has the objective of
having a common platform in every country in which BSP operates, a
consistent and modern product and channel offering in all countries, a far
more integrated approach to our Information Technology partners and a
lower operating cost over time. This will position BSP to meet the future
needs and demands of our customers.
Our Board led by our Chairman Sir Kostas Constantinou, OBE, continues
to provide management with support to achieve the Board’s strategic
objectives for BSP which are directed to continuous improvement of
customer service outcomes, achieving organic growth targets and
maximising non organic growth opportunities aligned to our vision.
All of our staff, in all of our businesses and each of the countries in which we
operate, are to be congratulated for their efforts and support in delivering
these record results for our shareholders, and I look forward to their
ongoing commitment in 2017.
Robin Fleming, CSM
Group Chief Executive Officer
10
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Robin Fleming, CSM
Group Chief Executive Officer
11
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Strategic Business
Unit Reports
12
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 STRATEGIC BUSINESS UNIT REPORTS
The daily execution of BSP’s business operations is the responsibility of the Strategic Business Units (SBUs). The SBUs are Retail
Banking, Corporate, Treasury, Paramount Banking, Group Risk Management, Human Resources, Operations and Information
Technology, and Finance & Planning. Here are reports and highlights of each SBU performance in 2016.
CORPORATE
In 2016 the Corporate Strategic Business Unit (SBU) contributed strongly
resulting in an uplift in loans and deposits, foreign exchange volumes,
customer satisfaction and profitability.
Corporate SBU maintains a strong commitment to its people. The team
across Papua New Guinea and the Pacific provides a sound basis for BSP’s
competitive advantage, delivered through our “whole of bank” solutions.
The Corporate SBU contributed to some major drivers of the Bank’s 2016
performance, which were stable Kina lending, with overall market share
in PNG now at 55%. Overall focus on total business performance was
maintained, with the SBU’s direct cost increases held below our target for
the year. Deposits grew 10%, exceeding K3.5 billion during the year and
well above prior periods.
Corporate-PNG Loans Evolution (K billion)
There is a strong credit culture within Corporate focused on prudent
credit risks and maintaining a strong partnership with the Group Risk
Management team. Wherever possible, joint visits to customers are
undertaken, to proactively monitor and control the quality of the loan
portfolio and promptly respond to any sector or customer demonstrating
stress.
BSP’s “whole of bank” solution incorporating dedicated relationship
management, extensive product suite, electronic solutions and access
to the largest retail branch networks means BSP is the leading business
partner in PNG and across the South Pacific. The Strategic Customer
Support team continues to work with our key customers and international
targets in the oil & gas and mining sectors delivering a strong and unique
engagement opportunity across business units within countries and across
the South Pacific region.
Corporate SBU is well positioned with a strong pipeline of transactions,
competitive foreign exchange positon, and dedicated professional people
who remain ready to meet the challenges of the 2017 financial year
with the right solutions, the right Pacific footprint and a “whole of bank”
engagement that supports our customers and communities in our chosen
markets.
FY12
FY13
FY14
FY15
FY16
Corporate-PNG Deposits Evolution (K billion)
Joint visits arranged by Corporate, Treasury and Retail team to Coffee, Cocoa, Oil
palm and balsa exporters.
FINANCE & PLANNING
The focus of Finance & Planning activities in 2016 was a continuous
improvement of the key deliverables of Reporting for the Group.
The Finance and Planning team upgraded the general ledger system which
incorporates the latest technology features, including updated Microsoft
compatibility, to provide a strong financial accounting and reporting
platform to support the growing business activities of BSP.
A key benefit of this upgrade was leveraging the latest functionalities and
add-on solutions to provide enhanced reporting capabilities to BSP. The
upgrade was completed on time and within budget. Upgrades of the
general ledger systems in all countries will be completed during 2017.
A direct benefit of the upgrade in 2016 is streamlined and efficient
processes regarding consolidated management reporting. Training has
also been undertaken by PNG Finance and Planning so that all group
consolidation tasks are now completed with minimum assistance from the
external service provider.
BSP Vanuatu is now part of the group reporting database following its
acquisition in June 2016. The Database has proven to be a very beneficial
and effective reporting tool that can meet the Group’s growing financial
reporting needs. The team continues to work towards enhancing and
improving information delivery to management and various stakeholders,
with a focus on accuracy and timeliness. A number of key processes were
selected and assigned to cohort groups within the business to review,
13
FY12
FY13
FY14
FY15
FY16
Customer satisfaction is a key objective of Corporate SBU’s efforts and
we have delivered improved customer satisfaction scores over the past 4
years. This is evidence of the developing customer service culture behind
Corporate SBU’s success. During the year the Bank’s fourth independent
market research customer satisfaction survey was carried out, involving
feedback from over 430 of our customers. The survey results highlighted
a solid increase in customer satisfaction across the key drivers of Service,
Relationship Management, Product, Fees, Charges and Rates and Treasury
and Foreign Exchange. Each relationship team has developed action
plans to address their individual customers service issues as well as in
collaboration with other Bank and Group businesses.
8.0
6.0
4.0
2.0
0.0
4.0
3.5
3.0
2.5
2.0
1.5
1.0
0.5
0.0
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
STRATEGIC BUSINESS UNIT REPORTS
identify weaknesses and suggest ways to streamline these processes.
The exercise resulted in marked improvements in turnaround times and
improved quality of reporting. This initiative will be carried forward in 2017
with a new set of processes targeted for improvement.
The Strategy and Planning team has continued to undertake more
responsibilities in terms of the annual budgeting and strategic planning and
reporting cycles across the Group. Processes for planning, implementing
and reporting of strategic initiatives continue to undergo improvement.
Analytics capabilities continue to be improved in areas dealing with the
monitoring of the integrity of the Bank’s financial data, and the extraction
and analysis of operational and financial data for Retail and Corporate
segments.
Regular training on financial systems and applications used in the Finance
& Planning SBU was delivered during the year. With an experienced team
on board, the Finance & Planning SBU will continue to invest in staff skill
and knowledge through training and mentorship, to enhance professional
expertise and reduce reliance on external consulting resources as much as
possible. Quality courses were run during the year including “advanced
financial modelling” with participation from team members from across
all BSP entities in PNG and offshore. Marked improvements were noted
in the quality of output from staff members who attended this course.
More courses such as this will be sourced and run for Finance and Planning
members in 2017. Finance and Planning looks forward to the challenges of
the coming year, to deliver a higher quality service, keep up professional
development and set goals that extend its people and benefit the business.
GROUP RISK MANAGEMENT
Effective risk management is essential for the achievement of BSP’s vision.
BSP has a Board approved Group Risk Appetite Statement that reflects
the level of aggregated risk that BSP is willing to assume and manage in
the pursuit of its business objectives. The Group Risk Appetite Statement
reflects BSP’s business and risk strategies which are measured by internal
risk-return benchmarks.
The CEO and the Executive Team are responsible for implementing BSP’s
risk management strategy and frameworks, and for developing policies,
controls, procedures and processes for identifying and managing risk in all
activities. Various Business Units within Group Risk Management oversee
risk measurement, monitoring and management against the Group’s risk
appetite benchmarks.
Credit
Credit Business Unit undertakes key activities to manage credit risk. It
is responsible for the overall credit quality of the Bank’s loan portfolio,
implementing and reviewing credit policies and industry underwriting
limits and portfolio
standards, monitoring sector concentration
management responsibilities.
Credit Business Unit, in collaboration with Corporate and Retail Banking,
manages credit risk by developing and undertaking an ongoing review of
the credit risk strategy that identifies the Bank’s target market providing a
platform to grow the business within defined parameters to build a quality
loan portfolio across a diversified range of sectors and countries in which
BSP operates. Senior Management has the responsibility to implement
credit risk strategy including developing policies and procedures for
identifying, measuring, mitigating, monitoring, controlling and on a regular
basis reviewing the effectiveness of the credit risk strategy and inherent
credit culture.
Sound lending growth across all sectors of the PNG economy was achieved
in 2016. Diversification of the loan portfolio across key economic sectors
continues to be 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.
The Bank’s market share in PNG has increased to 55%. Loan growth was
achieved in all other countries as well. The total loan portfolio for the
Group was recorded at K10.5billion as at 31st December 2016.
14
LendFast, BSP’s automated retail loan origination system for unsecured
personal loans has been expanded to include housing loans and SME
lending providing a more consistent origination process and improved
turnaround times for approval and funding. The Bank with the assistance
of Standard & Poor’s (S&P) Capital IQ has recalibrated and revalidated the
internal Risk Grade system aligning the resulting Probability of Defaults to
S&P Global rating with reference to loss experience in PNG.
First batch of Edai Town Home Loan Customers and BSP Staff.
Training has been a key focus in 2016 and will continue into 2017. Moody’s
online credit training was completed for 90% of Credit and Corporate staff
during the year. Standard & Poor’s delivered formal classroom training
sessions in PNG to complement the online training modules. Weekly in
house training sessions consisting of 30 specific Credit related learnings,
were delivered by management during 2016 for Credit and Corporate staff.
Operational Risk
The Operational Risk & Compliance Business Unit has broad operational
risk management responsibilities across the Group. Operational risk is
defined as the risk of direct or indirect impacts resulting from human
factors, inadequate or failed internal processes and systems or external
events. Operational risks are inherent in the Group’s business activities.
The Bank has independent Operational Risk & Compliance functions in PNG
and in the Bank and Life Insurance operations in Fiji. It also has operational
risk teams in Solomon Islands, Tonga, Samoa, Cook Islands and Vanuatu.
The Bank placed significant focus on the Compliance and AML functions
during the year to comply with the new legislations on Anti-Money
Laundering and Counter Terrorist Financing (AML & CTF) in PNG and the
Prudential Standards released by the Bank of Papua New Guinea (BPNG)
plus other regulators in the countries in which BSP operates.
A comprehensive review of the AML/CTF Policy was undertaken that now
captures the requirements of BPNG Prudential Standards on Customer Due
Diligence (CDD) and the five (5) new legislations introduced in PNG in 2016
to combat financial crimes.
During 2016 an independent Compliance Unit, was created and embedded
within Operational Risk Business Unit. Risk management activities were
focused on regular risk and control assessments and related risk mitigation
plans for key BSP processes. Risk and control assessments and mitigation
planning at business unit level, involving risk register reviews, as well as
at enterprise level, were conducted. Risk awareness workshops across
the Bank targeted general operational risks, anti-money laundering and
fraud detection. This was combined with the implementation of the latest
release of the Bank’s online operational incident management database.
The Operational Risk Business Unit continued to provide support for the
management Operational Risk Committee, facilitating analysis and regular
reporting of operational risk issues.
Asset Management
Asset Management manages the non-performing asset portfolio. Non-
accrual loans volume saw a decrease in 2016 from circa 1.4% to 1.1% of
the Bank’s overall lending volumes in PNG. We have also seen a decrease
in defaulting unsecured consumer loans in PNG for 2016. This is a result of
tightening the approval process and more experience gained with the new
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 automated collection system. An improvement in Retail debt recoveries in
the latter part of 2016 was as a result of new additional staff completing
their induction and training after being appointed in late 2015.
Credit Inspection
Credit Inspection provides an independent assessment of the Bank’s
compliance with credit policy and also of portfolio quality. The primary
role of the Credit Inspection Business Unit is to provide a professional,
independent risk management function of the best practice standard
and portfolio quality assurance which assists senior management and the
Board via the Board Risk & Compliance Committee (BRCC) in the effective
discharge of their responsibilities. The Unit performs independent analysis
and objectively concludes on the quality of credit risk assessment, credit
approval, credit risk management, compliance, risk control and credit
portfolio reporting. It also makes recommendations to address weaknesses
and improve compliance. Its independent assessment activities are
executed through “on-site” inspections, and where applicable, “off-site”
inspections of the credit risk portfolio within the Bank in all countries.
In 2016, Credit Inspection completed 12 monthly reports for Retail Banking
(Personal Lending) in PNG and 12 reports for Corporate and Commercial
Banking Relationship Portfolios including Tonga and Samoa. For Corporate
Banking including Commercial, approximately 74% of the Corporate
Relationship Loan Portfolios were reviewed by Credit Inspection. In
addition both Tonga and Samoa loan portfolios were reviewed covering
approximately 74% and 82% of their respective loan portfolios.
Audit
Audit undertakes regular risk based internal audits of processes and
procedures to maintain compliance with regulations and BSP standards
and retains an independent and direct reporting line to the Board Audit
Committee (BAC). It provides the third element of defence in the business
unit structure of Group Risk Management, and acts as the last line of
defence in BSP Group’s risk management framework.
BSP has independent internal audit functions for the Group reporting,
through the Head of Group Internal Audit, functionally to BAC and Group
CEO and administratively to the Group Chief Risk Officer.
Key audits during 2016 included General Ledger Reconciliations, Anti-
Money Laundering, Business Continuity Management, Treasury and all
Retail branches. The Internal Audit team also conducted audits in Samoa,
Tonga and Cook Islands for the first time since acquisition.
Legal
Legal Services provides the legal services and advice required for the
operation of the business.
The Legal Unit provides or sources the legal services and advice required
by the Bank in conducting its business, principally in the area of
banking, commercial and securities law, litigation (both for and against the
Bank) and regulatory compliance. To the extent possible, these services are
provided by the five in house lawyers with external lawyers being engaged
where deemed necessary or prudent.
STRATEGIC BUSINESS UNIT REPORTS
HUMAN RESOURCES
Human Resources SBU continued its support role for the Bank’s operations
through its core Human Resource Management functions in 2016. BSP
received its third consecutive award for “Best Private Sector Employer”
from the Papua New Guinea Human Resources Institute Inc., recognising
BSP as a model organisation with best human resource practices in PNG.
Talent Management
In the Talent Management area, Human Resource was involved in the
design and implementation of Human Resources Best Practices which
were identified in our core Human Resources functions such as talent
administration and job profile completion amongst others. Staff turnover
rates reduce year on year and is now at 6%. Our Talent Management team
also initiated a structured coaching & mentoring program involving the
Leadership Management and Development Program (LMDP) participants
as mentees and the Executive Management team as mentors. This proved
to be an effective & professional coaching tool in nurturing and mentoring
our future leaders.
Human Resource Operations – Strategy & Change
Strategy and Change supported the Group’s icare program, BSP’s in-house
customer service culture program. We successfully rolled out the icare
Champions refresher training program to 97 icare Champions in BSP. This
program will continue over the coming year as it is a very important part
of developing BSP’s sales and service culture and is aimed at exceeding
our customers’ expectations and maintaining their loyalty. The Strategy
and Change team also administered BSP’s Staff Engagement Survey in
PNG. Over the last three years, we have conducted employee engagement
surveys in PNG to assess the engagement levels of our employees and
the results help to inform strategies on improving engagement moving
forward.
Training and Development
Training and Development
introduced five new supervisory course
programs as part of our ongoing staff development from foundation
level to supervisory level. This proved to be a great success, with strong
participation across all PNG businesses.
A similar rate of participation was also achieved for the Advance Leadership
course introduced for management level staff. Additionally, some of
our staff had the opportunity to participate in a certification course on
Emotional Intelligence. This training incorporates some recent innovative
approaches to leadership skills and development covering concepts of self-
awareness, resilience and adaptive behaviours. All programs have been
initially implemented in PNG and will be extended to BSP’s operations
outside of PNG from 2017.
In 2016, BSP’s elite Leadership and Management Development Programme
(LMDP) added 19 staff from PNG and Non-PNG countries to the three year
accelerated development program bringing the total to 34 employees
in the LMDP across the Group. The goal of the LMDP is to prepare the
next pool of senior managers for BSP and so far the LMDP is proving to
Michael Henao, Geoffrey Emang, Josephine Talpa and Asher Waffi in Court Room 1,
Supreme Court Building, Waigani.
BSP icare Champions attending training at Port Moresby.
15
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 STRATEGIC BUSINESS UNIT REPORTS
be a success with implementation of training programmes for the 2015
and 2016 cohorts and the excellent performance of the LMDP participants
within their Business Units and designated projects. As part of the program
in 2016 six senior category employees completed the General Management
and Strategic Banking programmes at Insead Business School at the France
and Singapore campuses and the other categories attended management
programs in Melbourne Business School. In 2016 six of the LMDP cohort
participated in the three month secondment program with the Bank of
Philippines Islands in Manila.
Employee Relations
A new Grievance Policy was instituted in BSP during the year. This policy
has been developed as a guideline to assist in the process of managing
employee grievances fairly, effectively and amicably.
Some key Human Resources Awareness Programs were initiated and
implemented across the PNG Retail Branch Network. Officers attended at
branches to explain the key policies in detail, ensuring that vital information
cascaded to all levels of BSP.
47 BSP Staff Graduated from various course from the PNG Institute of Banking
Business Management.
Remuneration and Benefits
Human Resources has continued to reliably provide this key employee
service in 2016. Participation in the National Staff Home Ownership Scheme
improved throughout the year. BSP increased its suspensory loan assistance
to staff in relation to equity contribution and construction of houses by
approved local contractors gathered momentum. This has boosted staff
morale and motivation. BSP also revised the National Staff Medical Insurance
policy to cover full premium payment for all employees in the Group.
Human Resources Projects and BSP Overseas Operations
The Human Resources team identified a more efficient and user friendly
comprehensive Human Resources System tool to support the core functions
of its financial Human Resources management system operations. As a
result, the Human Resources SBU set up a dedicated support team for
Human Resources needs and services from offshore branches to assist
them to integrate with the new system which will improve efficiency
and effectiveness in the financial element of our core mandated Human
Resources functions and responsibilities.
OPERATIONS AND INFORMATION TECHNOLOGY
The Operations & Information Technology SBU has continued to provide
the tactical solutions and strategic roadmaps required to move the delivery
capacities of the business forward.
In order to maximize BSP’s return on capital and focus on core business
activities, the Property Strategy continued to be implemented in 2016. The
sale of the Bank’s Head Office in Port Moresby as well as its Boroko Banking
Centre were completed, combined with the long term leaseback of branch
space in those locations. Additionally, several smaller commercial and
residential properties throughout PNG and the Solomon Islands were also
sold.
16
Significant investment was undertaken to improve our branch network with
a new SME Lending Centre at Brian Bell Complex Lae as well as Lending
Service Centres in Waigani Drive, Lae Market, Bulolo and Wewak branches.
Following its completion at the end of 2015, BSP’s new modern Data
Centre was commissioned during the first quarter of 2016. This required
24/7 work from our Technology team over seven consecutive weekends to
ensure all computing assets were securely moved from the previous data
centre and tested with no outage or inconvenience to our customers across
the Pacific. This involved numerous role swaps from the Production Data
Centre to the Backup facility.
The multi-year building project for the Waigani Head Office, which also
includes a new back up data centre, continued to the end of 2016. Final
testing of services and building occupancy certification are currently in
process with advanced planning in place for the relocation to the new
premises, of 900 staff from various buildings within Port Moresby in the
first half of 2017. During the year the integration of businesses acquired
from Westpac was completed and the Transitional Services Agreement
for the Solomon Islands purchase was cancelled. The acquisition of the
Westpac Vanuatu operation was finalized in July 2016. Using the experience
from the previous transactions we were able to migrate all technology to
BSP the same weekend as the effective sale date, with the sole exception
being scheme cards processing which required post sale actions on the
part of the Schemes themselves. During October and November 2016 we
successfully integrated the core banking and mobile banking systems of
BSP Solomon Islands with the Solomon Islands operations acquired from
Westpac, an effort that involved almost 12 months of activity.
The focus of the Project Management Office in 2016 has been to work on
projects which improve BSP’s e-Banking capabilities. Some of the projects
delivered in 2016 included Air Niugini Ticketing Payments using mobile
banking, EFTPoS system replacement in all locations outside Fiji (Fiji’s
exercise is being undertaken in country), replacement USSD and Branchless
Banking in Solomon Islands with rollout to Tonga, Samoa, Vanuatu and
Cook Islands scheduled for 2017. There was also an upgrade of Corporate
Internet Banking allowing batch uploads to ultimately replace the current
Kundupei used for salary and creditor file uploads and the upgrade of the
General Ledger system in PNG with rollouts planned in 2017 to the other
locations. Over the next 12 months BSP will invest significant time and
effort in EMV (Chip) Scheme cards with contactless functionality, increased
functionality in EFTPoS, a new HR Administration System, an improved
Internet Payment Gateway as well as an intranet to be used as the main
medium for all communications and procedural documentation within the
Group. BSP is also committed to PCI DSS compliance across all locations.
A major activity in 2016 was the initiation of the process leading to the
selection of a new core banking system provider. As the year commenced
the team in collaboration with the business developed an inventory of
more than 4000 functional requirements which was included in invitations
to the major core system providers globally. An evaluation process was
undertaken with each of the top four providers being invited to Port
Moresby for a four day demonstration to showcase their offerings to our
business representatives. Their scoring and our subsequent reference site
visits resulted in the further refinement of the listing to two contenders,
one of whom was identified for exclusive negotiations. A contract has been
signed with Oracle Corporation Australia Pty Limited in February, 2017.
Implementation of the new system will take two years in PNG with an
additional 12 to 18 months to accomplish same in all other locations. Once
completed, all BSP locations will have the same IT infrastructure and core
banking system with a reduced total cost of ownership and more uniform
product offerings across the Pacific.
PARAMOUNT BANKING
Paramount Banking performed well in 2016, achieving its planned targets.
By the end of the year, Paramount Banking was able to maintain its deposit
portfolio at K5.8 billion, which represents 48% of BSP’s deposit portfolio
and 27% of the PNG financial system liquidity.
A major factor contributing to these achievements has been the continued
strategic alliance supporting government service delivery through the
provision of premium professional banking services to entities and staff at
national, provincial and district levels of Government.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 STRATEGIC BUSINESS UNIT REPORTS
Against this backdrop, Retail achieved an increase of approximately 175,000
new customers in 2016 and this helped Retail register modest growth in
our electronic banking channel income, particularly mobile banking and
ATMs. The acceptance of electronic banking by our customers continued
to strengthen and during 2016, 90% or approximately 100 million customer
transactions were processed through electronic channels. The remaining
10% were transacted over-the-counter at our branches, sub branches and
agencies.
Retail - PNG Deposits Evolution (K billion)
3.0
2.0
1.0
0.0
FY12
FY13
FY14
FY15
FY16
We continued to innovate and develop new functions such as the payment
of airline tickets using BSP’s Mobile Banking product were introduced in
2016. The process of replacing our EFTPoS terminals continued throughout
the year.
Retail achieved strong growth in lending activities during 2016 with
consumer finance increasing by K130million to K634million and housing
finance increasing K73million to K303million. Lending and Payment
services to the Small to Medium Enterprises (SME) sector continued to be
a focus and a second SME branch dedicated solely to the promotion of this
sector was opened at Lae. Our Retail depositors’ balances also increased
K161million to K2.9billion during the year. Retail continued its efforts to
promote financial literacy and this contributed to the growth in customer
numbers and depositors’ balances. Retail also recommenced the delivery
of school banking in a number of centres enabling students to make regular
deposits into their accounts to develop a habit of saving.
Staff capabilities continue to be enhanced, with a number of our management
team now participating in the BSP Leadership and Management Development
Programme. Training in other areas has also been maintained. Retail has
also collaborated with SBUs across the Group, providing network and branch
support for Corporate and Paramount, and teaming with Treasury to ensure
ongoing support for Retail foreign exchange business. Implementing with
BSP Group Risk, changing operational risk requirements in areas such as
fraud, anti-money laundering, counter terrorism funding is also an ongoing
activity. Additional responsibilities have also been assumed for management
and coordination of South Pacific banking operations outside Fiji.
The performance of Paramount continues to be based on maintaining
a strong service culture in dealing with our entire segment base with
emphasis on regular and quality contact with our clients, supported by
appropriate internal and external training for our staff. We have two staff
on the Bank’s Leadership Development Program.
As part of BSP’s whole of bank approach to business during the year,
Paramount Banking partnered with the Corporate, Treasury and Retail
Strategic Business Units, playing a vital role in securing foreign currency
inflows from its customer base to support BSP’s efforts in meeting customer
needs for foreign currency. The Paramount Banking Community Affairs Officer
continued to maintain contact with various Resource Developers during
the course of the year particularly in the Highlands and Islands Region, and
arranging training on banking and financial services with Landowner groups.
Maintaining contact with Landowner groups is an important part of our
strategy for this segment due to their growing significance in the economic
and social systems of rural and regional populations in resource-rich areas.
Paramount-PNG Deposits Evolution (K billion)
6.0
4.0
2.0
0.0
FY12
FY13
FY14
FY15
FY16
Demand
Term
Paramount Banking continues to be the Banker of Choice for all of its clients
and this will continue in 2017. We expect to be fully engaged in providing
our superior customer service to our government and landowner clients,
as well as our other important institutional customers including overseas
missions, aid agencies, churches, regulatory bodies, and major non-bank
financial institutions.
RETAIL BANKING
We commenced 2016 with much of the country still suffering the impact
of an El Nino event which had resulted in drought and frosts during the
prior year. As these conditions eased, agricultural production in rural
areas improved, along with income flows back into the hands of farmers.
Employment in the formal sector was flat and indeed in some industries,
formal employment declined.
Retail - PNG Loans Evolution (K million)
1,200.0
800.0
400.0
-
FY12
FY13
FY14
FY15
FY16
Personal MSME
SME
Home Mortgage
Investment
Palmalmal Ecosystem Training.
17
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 TREASURY
The role of BSP Treasury remains to support client relationships, act as BSP
Group’s banker, and be a key part of the risk management process in terms
of market, liquidity and capital risk.
In its client relationship role, Treasury fosters and enhances relationships
with clients, providing Financial Markets services, solutions and ensuring
clients remain aware of the regulatory environment and its implications.
As “banker to the bank”, Treasury is involved in managing foreign exchange
flows, managing local and foreign currency liquidity flows, investing surplus
funds prudently in the interbank, Treasury Bill and Inscribed Stock markets,
funding foreign currency balance sheet operations across 7 countries,
and complying with all regulatory and internal guidelines and limits. Each
country has their own discrete foreign exchange regulations and operates
in financial markets where foreign exchange liquidity is derived from a
narrow base of export industries and sources, and the dependence on
imports are relatively high.
The risk management role is discharged through management of market
risk, liquidity risk, capital and capital planning, in line with prudential
requirements, ALCO directives and delegated Board authorities.
PNG Treasury foreign exchange earnings were above prior year levels
notwithstanding market imbalances where import demand far exceeded
export supply of foreign currency. These dynamics improved as the year
progressed, with OK Tedi Mine re-opening in April, and proceeds from
resumption of exports assisting with the supply of foreign currency to the
market.
Movements in the official Bank of Papua New Guinea (BPNG) rate of
exchange reflected this, falling 5.2% in the first half of 2016 (to USD 0.3160),
but only 0.3% in the second half of 2016 to close the year at USD 0.3150.
BSP’s foreign exchange market share in PNG increased from 33.3% in 2015
to 42.0% in 2016. The Bank’s foreign exchange turnover rose by 40%, while
PNG’s foreign exchange market turnover rose by 11%. Market share gained
came predominantly from the Mining and Agricultural sectors.
Government debt yield curves steepened over the course of the year,
reflecting evolving fiscal conditions. 28 day Central Bank Bills fell from
1.32% to 1.18%, 91 day Treasury Bills rose from 2.44% to 2.61%, 182 day
Treasury Bills rose from 4.65% to 4.72%, whilst 1 year Treasury rose 0.17%
to 7.77%. Yields on longer dated Government issued Inscribed Stock were
stable.
Operationally, PNG Treasury is actively focused on providing technical
training, empowering staff to continue their development journey.
Treasury dealing staff all sat the Australian Financial Markets Association
Foreign Exchange Markets Accreditation examinations during the year, and
will continue further technical training in Foreign Exchange and Money
Markets in 2017.
STRATEGIC BUSINESS UNIT REPORTS
In 2017, Retail will continue to improve network reach through sub-branches,
agencies, and EFTPoS. Work to enhance the Bank’s mobile banking offering
will also be undertaken in PNG and across the Pacific. Market growth
areas in consumer savings and lending will continue to receive focus.
Retail - PNG Customer Accounts (K million)
FY13
FY14
FY15
FY16
Deposits
Loans
Retail - PNG Transaction Volumes (millions)
FY13
FY14
FY15
FY16
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
120.0
100.0
80.0
60.0
40.0
20.0
0.0
18
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 STRATEGIC BUSINESS UNIT REPORTS
Account Opening for Students of Kadawa Primary, Daru.
Mt. Hagen Branch Staff welcoming Group CEO, Robin Fleming and Chairman, Kostas
Constantinou during one of the Board Meetings.
BSP Mt. Hagen Branch Staff opening accounts in rural Simbai.
Livikonimo Koki, Branch Manager, Goroka giving a speech at the We are BSP Brand
Launch.
Near a Building or under a Tree, BSP will be there Opening Accounts for you.
Opening of the SME Business Centre in the new Brian Bell Plaza, Lae, Morobe
Province.
Smiles of Success. Launching of the Mobile Banking Air Niugini Ticket Payment.
Account Opening for Students of Karakara Primary School.
19
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 We are you. We are Solomon Islands.
20
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Corporate
Governance
21
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CORPORATE GOVERNANCE
BSP has adopted an approach to corporate governance that is underpinned by our Core Values of Integrity,
Leadership, People, Professionalism, Quality, Teamwork and Community.
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 the Port Moresby Stock Exchange
(POMSoX) and the Australian Securities Exchange (ASX).
The Board, management and staff of BSP are very much aware of their
responsibilities to the people of Papua New Guinea and the various
countries that BSP operates in. The Board has adopted a statement of
Corporate Governance Principles which outlines the approach BSP has
adopted to corporate governance principles. These Corporate Governance
Principles are 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.
BSP’s Corporate Governance Principles are available in the Investor
Relations section of BSP’s website at www.bsp.com.pg.
BSP also complies with the Prudential Standards/ Statements dealing
with corporate governance issued by the regulators/ central banks in
the various countries that it operates in. These Prudential Standards/
Statements currently include: -
• The Bank of Papua New Guinea (BPNG) introduced its new Banking
Prudential Standard BPS300: Corporate Governance (issued under
Section 27 of the Banks and Financial Institutions Act 2000) in August
2016. The Effective Date of this Prudential Standard is 1 January
2017, with full compliance by 31 December 2018.
• The Reserve Bank of Fiji Banking Supervision Policy Statement No. 11:
Governance (Oct 2007)
• The National Reserve Bank of Tonga Prudential Statement No. 9
(revised 2014): Governance
The sections below explain how BSP complies with the ASX Corporate
Governance
and
Recommendations. These sections were adopted by the Board as BSP’s
Corporate Governance Statement on 3 March 2017.
Corporate Governance
Principles
Council’s
THE BOARD OF DIRECTORS
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 management with oversight by the Board.
The Board, with the support of its Committees, is responsible to the
Shareholders for the overall performance of BSP including its strategic
direction; establishing goals for management; and monitoring the
achievement of those goals with a view to optimising BSP performance
and increasing shareholder value. The key functions of the Board are: -
• setting overall strategy of BSP, including operating, financing, dividends,
and risk management;
• appointing the 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 BSP and
monitoring results on a regular basis;
• ensuring that appropriate risk management systems are in place, and
are operating to protect BSP’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;
22
• approving acquisitions and disposals material to the business;
• establishing authority levels;
• setting Directors’ remuneration via the Remuneration and Nomination
Committee;
• selecting, with the assistance of the Board Audit, Risk and Compliance
Committee, and recommending to Shareholders, the appointment of
external auditors; and
• approving financial statements.
A number of these responsibilities have been delegated by the Board
to various Committees. The Committees and their responsibilities 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 framework
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; and
• keeping the Board and the market fully
informed of material
developments.
Membership, Expertise, Size and Composition of
the Board
The Corporate Governance Principles affirm that the majority of the Board
should be independent.
Directors of BSP are meticulous in handling situations where there could
potentially be conflicts of interest, by declaring their interest in advance,
and absenting themselves from any consideration of matters where a
conflict might arise. The BSP’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 Constitution
approved by Shareholders, is ten. At the date of this report there are ten
Directors, with nine non - executives all of whom (including the Chairman)
are considered by the Board to be independent; and the Chief Executive
Officer who is not considered to be independent by reason of being
an executive of BSP. BSP in the ordinary course of business conducts
transactions with Directors, their spouses, parents and children and/
or parties which any of them control. These transactions include loans,
deposits, and foreign currency transactions. Such transactions are carried
out on commercial terms at market rates and do not require shareholder
approval under Papua New Guinea company law. Where they involve loans,
procedures follow BSP’s standard credit approval and review processes
which do not have any involvement of Directors, and BSP holds security
in accordance with its standard procedures. As a result, BSP considers that
Directors are able to maintain their independence even where a Director
is a party to a transaction of this kind because they will not have been
involved in the approval process for that transaction.
Under the Constitution, at each Annual General Meeting one-third of the
BSP’s Directors, in addition to any Director appointed during the year,
excluding the Chief Executive Officer, must offer themselves for re-election
by the Shareholders.
A Director is normally appointed for an initial term of three years. At
the end of the term of three years, the Director will become eligible for
reappointment by the Shareholders for a further term of three years and,
if not reappointed, retires automatically. A Director is not permitted to
hold office for a period exceeding three terms of three years or nine years,
whichever is the lesser.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
CORPORATE GOVERNANCE
Details regarding the length of service of each Director are set out in the
“Board of Directors” section.
Director Independence and Conflict of Interest
The Board has undertaken a renewal and succession planning process
in recent years with the aim of maintaining a proactive and effective
Board in line with the directions of the BSP Group. The Board already has
implemented an independent Board evaluation process to underpin the
assessment of its performance.
Consistent with Recommendation 2.2, BSP has a Board skills matrix
process. These skills include Risk Management, Regulatory/Government
Policy, business and financial acumen, experience as a Non-Executive
Director, remuneration and corporate governance.
The Board therefore has a broad range of skills, experience and expertise
that enables it to meet its objectives. Details of the Directors’ business
backgrounds and experience are provided on pages 8 - 9. 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.
Consequently the Board gives careful consideration to setting criteria for
new appointments it may recommend to Shareholders in accordance with
the 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.
Consistent with Recommendation 1.2, BSP undertakes appropriate checks
before appointing a person as a Director or offering them to Shareholders
as a candidate for election, and has appropriate procedures in place to
ensure material information relevant to a decision to elect or re-elect a
Director is disclosed in notices of meeting provided to Shareholders.
Nominees of the Board and/or Shareholders must meet the ‘fit and proper
person’ criteria outlined in BPNG Banking Prudential Standard BPS310: Fit
and Proper Requirements before they can take their place on the Board.
Directors are determined to be independent if they are judged to be free
from any material or other business relationship with BSP that would
compromise their independence.
Prior to appointment Directors are required to provide information to the
Board for it to assess their independence.
In assessing the independence of Directors, the Board will consider a
number of criteria including:
• the Director is not an executive of the Group;
• the Director is not a substantial shareholder of BSP or otherwise
associated directly with a substantial shareholder of BSP;
• the Director has not within the last three years been a material
consultant or a principal of a material professional adviser to BSP, or an
employee materially associated with a service provider;
• the Director is not a material supplier to BSP, or a material consultant
to BSP, or an employee materially associated with a material supplier or
customer;
• the Director has no material contractual relationship with BSP other
than as a Director of BSP;
• 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 BSP.
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 responsibilities. 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 BSP. These arrangements are designed to ensure that
the independence and integrity of the Board are maintained.
Consistent with Recommendation 2.6, BSP has a program for inducting
new Directors and providing appropriate professional development
opportunities for Directors.
BSP fully complies with the requirements of the BPNG Prudential Standard
4/2003 – Limits on Loans to Related Parties.
On joining the Board, new Directors are provided with an Appointment
Letter setting out the terms of the appointment, a Board induction pack
and undertake a comprehensive induction program. In particular, the
Appointment Letter specifies the term of appointment, BSP’s expectations
in relation to time commitment and Committee work, the Director’s
remuneration arrangements, the Director’s disclosure and confidentiality
obligations, the Director’s insurance and indemnity entitlements, and BSP’s
key corporate governance policies.
BSP’s senior management also enter into employment contracts which set
out their terms of employment, including their position, duties, reporting
lines, remuneration and termination arrangements.
Role and Selection of the Chairman
The Chairman is elected by the Directors and holds the position for a
maximum of 6 consecutive years unless in a certain exceptional instance.
The role includes:
• ensuring all new Board members are fully aware of their duties and
responsibilities;
• providing effective leadership on the BSP’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;
• setting the agenda of meetings and maintaining proper conduct during
meetings; and
• reviewing the performance of Non-Executive Directors.
Related Party Transactions are summarised in Financial Note 30. The
Directors’ information on page 70 provides details of the Director’s Interests.
Meetings of the Board and Attendance
Scheduled meetings of the Board are held at least 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, determines
meeting agendas. Meetings provide regular opportunities 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.
Financial Note 27, Directors’ and Executive remuneration, provides
attendance details of Directors at Board meetings during 2016.
Review of Board Performance
Consistent with Recommendation 1.6, BSP has a process for periodically
evaluating the performance of the Board, its Committees and individual
Directors. The key findings of the 2016 Performance Review are available in
Investor Relations section of BSP’s website at www.bsp.com.pg .
23
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
CORPORATE GOVERNANCE
The Remuneration and Nomination Committee reviews at least annually
the processes by which the Board regularly assesses its own performance
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 governance; 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 facilitated annually
by an external consultant.
The Board with the assistance of the Remuneration and Nomination
Committee sets the targets for the Chief Executive Officer and senior
management members under BSP’s employee incentive arrangements
described below. These incentive arrangements are administered by
the Remuneration and Nomination Committee. Performance against the
relevant targets is assessed periodically throughout the year and a formal
evaluation is undertaken annually.
Board Access to Information and Advice
Remuneration and Nomination Committee
Gerea Aopi
Freda Talao
Ila Temu
Tom Fox 3
2/2
2/2
2/2
1/2
1 - 2/6 as Committee Member, 4/6 as Director
2 - Sir Nagora Bogan retired as a Director on 13/11/2016
3 - Tom Fox retired as a Director on 10/6/2016
Sir Kostas Constantinou OBE, and Augustine Mano are not members of any
Board committees.
Arthur Sam and Dr Faamausili Lua’iufi were appointed as Directors by the
Board to fill casual vacancies in 2016 and are eligible for election at the
Annual General Meeting in May 2017.
The names and relevant qualifications and experience of Committee
members, and the number of times the Committees met and the number
of meetings each member attended, are set out in the “Board of Directors”
section.
All Directors have unrestricted access to company records and information
and receive regular detailed financial and operational reports to enable
them to carry out their duties.
Board and Committee Charters
The General Managers of each PNG Strategic Business Unit, Country
Managers and General Managers of subsidiaries make regular presentations
to the Board on their areas of responsibility.
BSP’s Board and Committee Charters are available in the Investor Relations
section of BSP’s website at www.bsp.com.pg.
Committee Structure
The Chairman and the other Non-executive Directors have the opportunity
to meet with the Chief Executive Officer, General Managers, Heads of
Subsidiaries and Country Managers for further consultation, and to discuss
issues associated with the fulfilment of their roles as Directors.
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 Board recognises that in certain circumstances individual Directors
may need to seek independent professional advice, at the expense of BSP,
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.
The BARCC is comprised of a minimum of three non - executive Directors,
a majority of whom should be independent, and who are duly appointed
by the Board. The Chairman of the BARCC 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 Board.
Company Secretary
The Company Secretary is through the Chairman, directly accountable to
the Board for proper functioning of the Board. Each Director may seek the
advice of the Company Secretary. Under the Constitution, the Company
Secretary may only be appointed or removed by the Board.
BOARD COMMITTEES
Board Committees and Membership
During 2016, two Committees of the Board were in operation whose
functions and powers were governed by their respective charters. These
Committees were the Board Audit Risk and Compliance Committee
(BARCC), and the Remuneration and Nomination Committee (RNC).
Membership of the Committees and a record of attendance at Committee
meetings during the year are detailed in table below.
Remuneration details are provided in Financial Note 27.
Membership of Board Committees as at 31/12/2016:
Board Audit Risk & Compliance Committee
Geoff Robb
Ernest Gangloff
Arthur Sam 1
Sir Nagora Bogan 2
6/6
5/6
6/6
4/6
The Remuneration and Nomination Committee comprises a minimum
of three Non-executive Directors, all of whom must be Non-executive
Directors, and wherever possible also independent Directors, 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 contribution to the
Committee, and membership is reviewed annually by the Board.
A review of the performance of Committee members will form part of the
Board’s performance review.
The names and relevant qualifications and experience of Committee
members and the number of times the Committees met and the number
of meetings each member attended are set out above.
Board Audit Risk & Compliance Committee
In compliance with the BPNG new Banking Prudential Standard BPS300:
Corporate Governance – Part III Principles and Prudential Requirements;
Section 7 Responsibility of the Board; Paragraph (d); the Board approved,
at its meeting on 14 October 2016, the ‘split’ of the Board Audit Risk &
Compliance Committee (BARCC) into two separate Committees, effective
from 1 January 2017 – (1) Board Audit Committee and (2) Board Risk &
Compliance Committee.
The roles and responsibilities of the two new Committees are outlined in
their Charters located on the BSP website, and these will come into effect
from 2017.
24
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
Notwithstanding in 2016, the BARCC was delegated by the Board with
responsibility for reviewing and monitoring the:
• integrity of the financial statements and the financial reporting and
audit process;
• external auditor’s qualifications, performance and independence;
• performance of the internal audit function of BSP;
• performance of the operational risk function of BSP;
• 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 regulations (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; and
• 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.
Annual Financial Statements
The BARCC 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
litigation reserves; and other
liabilities; provisions;
assets and
commitments and contingencies;
CORPORATE GOVERNANCE
BSP’s external audit firm is currently PricewaterhouseCoopers (PwC).
Representatives of PwC will attend the next Annual General Meeting in
May 2017 and be available to answer shareholder questions regarding the
audit.
Internal Audit
BSP has an internal audit function. The BARCC approves, on the
recommendation of management, the appointment of the Head of Internal
Audit. The Committee meets regularly with the 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 the Internal Audit Business Unit. The BARCC also reviews the
qualifications of internal audit personnel and endorses the appointment,
replacement, reassignment or dismissal of the internal auditors.
The BARCC 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 BARCC
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.
Compliance
The BARCC reviews the effectiveness of the systems for monitoring
compliance with all legal and regulatory obligations and the Constitution.
It also reviews the results of management’s investigation and follow-up
(including disciplinary action) of any fraudulent acts, or non-compliance.
• meets with management and the external auditors to review the
financial statements and the results of the audit; and
• satisfies itself as to the accuracy of the financial accounts, and signs off
on the financial accounts of BSP before they are submitted to the Board.
The Committee obtains regular updates from management and BSP’s
legal officers regarding compliance matters, and satisfies itself that all
regulatory compliance matters have been considered in the preparation of
the financial statements.
External Audit
The BARCC is responsible for making recommendations to the Board on
appointment and terms of engagement of BSP’s external auditors. The selection
is made from appropriately qualified auditors in accordance with Board policy.
Reviews of the findings of any examinations by regulatory agencies are
undertaken and the Chairman of the BARCC has the right to approach a
regulator directly in the event of a prudential issue arising.
Risk Management
The Board submits the name of the external auditors to Shareholders for
ratification on an annual basis. In line with the Prudential Standard of the BPNG,
the signing partner in the external audit firm must be rotated every five years.
The Committee’s role in BSP’s risk management processes are detailed in
the next section on Risk Management.
The Committee reviews annually the performance of the external auditors
and, where appropriate, makes recommendations to the Board regarding the
continuation or otherwise of their appointment, consistent with the BPNG’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 BARCC at which the external audit and half yearly review are
agenda items.
The Committee ensures that significant findings and recommendations 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 BSP to provide
specialist advisory or consultancy services to a bank while that same auditor/
audit firm is engaged for services to conduct BSPs annual audit and related
services. Services related to the preparation of a bank’s corporate tax return are
not prohibited. The external auditor is invited to the Annual General Meeting of
Shareholders and is available to answer relevant questions from Shareholders.
The BPNG Prudential Standards provide for a tri-partite meeting between
BPNG, the external auditors, and BSP, if required.
Board Remuneration and Nomination Committee
The Remuneration and Nomination Committee has been established 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 the Chief Executive Officer and
recommend an appropriate remuneration and benefits package to the
full Board;
• determine and review appropriate remuneration and benefits of
Directors for recommendation to the full Board, and subsequently to the
Shareholders;
• identify and maintain a clear succession plan for the Executive
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;
25
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
CORPORATE GOVERNANCE
• review the procedures in place to ensure that all new senior executive
appointees are adequately qualified and experienced, 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 and make recommendations to the Board on employee
remuneration and benefits policies and practices generally;
• engage external consultants as and when deemed appropriate to
for executives and senior
benchmark
management; and
• review Board performance, tenure, and succession planning.
remuneration packages
RISK MANAGEMENT
Approach to Risk Management
• developing processes for those areas that represent potential risks; and
• 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.
Risk Management Roles and Responsibilities
The Board accepts responsibility for ensuring it has a clear understanding of
the types of risks inherent in the Group’s activities. Therefore responsibility
for overall risk management in BSP is vested with the Board. However
every employee from Executive Management to the newest recruit has a
responsibility and a part to play in the process.
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 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 and this is expressed in the Group Risk Appetite Statement.
These benchmarks are used in the risk identification, analysis and risk
evaluation processes.
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 SBU Risk
Registers, is used to determine the approval/control authorities/limits. The
Board undertakes an annual review of the Group’s “Top 20” enterprise risks.
Consistent with Recommendation 7.2, the Board or a Committee reviews
the risk management framework at least annually.
BSP recognises 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.
Liquidity Risk: The risk of failure to adequately meet cash demand in the
short term.
The Board has adopted guidelines, with the help of management analysis,
covering the maximum loss exposure the Group is able and willing to
assume. These guidelines are detailed in the Group’s Risk Appetite
Statement and Risk Policy and Procedures Manual which have been
approved by the Board. The Board has also delegated to the BARCC
responsibility for overview of loss control and for overseeing the risk
management function.
The BARCC is responsible for receiving reports and providing regular
updates 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 and other delegated
Committees to approve.
Interest Risk: Risk to earnings from movement in interest rates.
Management Assurance
Operational Risk: The risk of loss resulting from inadequate or failed
internal processes, people, or from external events, including legal and
compliance risk.
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 Credit Committee monitors credit risk. The Group Asset & Liability
Committee monitors market risk, interest risk, and liquidity risk, and
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 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, 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;
• in their opinion, the financial records of the Group have been properly
maintained;
• in their opinion, the financial statements comply with the appropriate
accounting standards and give a true and fair view of the financial
position and performance of BSP; and
• their opinions above have been formed on the basis of a sound system
of risk management and internal control applying to BSP, which is
operating effectively;
Additionally all General Managers and Country 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; and
• any weaknesses in the risk management and internal compliance and
control systems have been identified and remedial action taken.
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:
26
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
CORPORATE GOVERNANCE
• a Code of Conduct for both Directors and members of the Executive
Management Team of the Group and stipulated that each Director, and
MARKET DISCLOSURE
relevant employees comply with 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.
While BSP’s Corporate Governance Principles provides that the Board must
ensure it maintains an appropriate mix of skills and experience without
gender bias, BSP has not adopted a standalone Board diversity policy,
which complies with Recommendation 1.5. BSP will do so as soon as
possible in 2017.
To ensure the maintenance of high standards of corporate behaviour on an
ongoing basis, the Board encourages senior management to periodically
issue staff Toksaves to reinforce both the Code and Core Values Statements.
All Directors are encouraged to maintain membership 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;
• 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; and
• breach of statutory codes of practice.
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. BSP has adopted a Continuous Disclosure Policy.
This is available at www.bsp.com.pg in the Investor Relations section.
Market announcements are posted to BSP’s website immediately after
release to the market. All market announcements made by BSP since 2012
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.
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. BSP
has adopted a Securities Dealing Policy. This is available at www.bsp.com.
pg in the Investor Relations section.
SHAREHOLDER COMMUNICATIONS
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.
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:
• the BSP 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 quarterly investor briefings, within disclosure policies, to communicate
financial performance and strategies.
BSP’s Code of Conduct for Employees and BSP’s Code of Conduct for
Directors are available at www.bsp.com.pg in the Investor Relations section.
BSP’s Shareholder Communication Policy is available at www.bsp.com.pg
in the Investor Relations section.
Directors and management of the Group are subject to Securities Act 1997
restrictions for buying, selling or subscribing for securities 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 securities of
the Group, subject to the foregoing insider trading restrictions, during
each of the eight weeks following the announcements 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.
Consistent with Recommendation 6.4, BSP gives Shareholders the option
to send and receive communications from BSP and its share registry
electronically. From 2017, BSP and its share registry will also use technology
to facilitate the participation of Shareholders in meetings consistent with
Recommendation 6.3.
To facilitate effective communication between BSP and its Shareholders,
potential investors, analysts and other financial markets participants, BSP
conducts periodic market briefings, including half and full year results
announcements and attendance at conferences. Shareholders, potential
investors, analysts and other financial markets participants are given
access to BSP directors and senior management at these events, and the
presentation material provided at these events announcement to the
market prior to commencement and subsequently uploaded to BSP’s
website.
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.
REMUNERATION
Executive Remuneration
BSP’s Code of Conduct for Employees also requires its employees to act
with high standards of honesty, integrity, fairness and equity in all aspects
of their employment with BSP.
BSP remuneration policy for senior management (including the Chief
Executive Officer and the Chief Financial Officer) is comprised of a fixed
27
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
The LTIP is administered by the Remuneration and Nomination Committee,
who reviews and endorses the proposed EPS performance target,
employee participation, employee awards and any plan changes to the
Board for approval.
If the EPS target for a cycle is achieved, the matrix set out below is used to
determine the award at the end of that cycle.
Exercising the 50% performance rights is subject to the condition that BSP’s
net profit after tax (NPAT) for the vesting year is above BSP’s NPAT in the
issuing year.
Participants are personally responsible for any income tax liability in
respect of payments made under the LTIP.
EPS target
1
2
3
As recommended by the
Remuneration and Nomination
Committee and approved by the
Board each LTIP cycle]
EPS target
achieved
90–100%
80–89%
79% and
below
Performance
Rights
100%
50%
0%
If a participant resigns their employment for health reasons or retires prior
to vesting, awards may be made in full or pro rata at the time of exit, at
the discretion of the Board. If a participant resigns or their employment
is terminated on disciplinary grounds prior to the vesting, awards are not
granted.
WEBSITE
Shareholders can access BSP’s financial reports, market announcements,
corporate governance policies and various other shareholder resources
from the “Investor Relations” tab of its website at www.bsp.com.pg.
Shareholders can also access details of BSP’s history, business and structure
from the “About Us” tab of the website.
SUSTAINABILITY RISKS
identifies and manages
its material exposures to economic,
BSP
environmental and social sustainability risks within the risk management
framework described above. In particular, BSP has a separate Social and
Environmental Management Systems Policy which identifies and manages
these risks. This policy applies to all Directors and employees of BSP.
Under the Social and Environmental Management Systems Policy, BSP
has adopted performance standards, completes due diligence and risk
assessments, and undertakes incident and grievance reporting. BSP will
not support or assist any project that causes or is likely to breach social or
environmental regulation in the countries in which it operates.
BSP does not presently disclose whether it has any material exposure to
economic, environmental and social sustainability risks but intends to do
so as soon as possible in 2017.
CORPORATE GOVERNANCE
component and an at risk component that is a combination of short term
rewards and long term incentives.
Remuneration packages are approved by the Remuneration and
Nomination Committee, and details are provided by the Committee to the
Board.
Fixed remuneration is reviewed at the time of contract renewal taking
into account the nature of the role, comparable market pay levels, and
individual and business performance.
Members of senior management who serve as directors of subsidiaries of
BSP receive no fees for their service as a director.
Non-executive Director remuneration
Non-executive Directors are remunerated on a fixed basis within an
aggregate Directors’ fee pool approved periodically by Shareholders.
Under the Constitution, the Board determines the total amount paid to
each non-executive Director as remuneration, subject to the aggregate
amount not exceeding the amount fixed by the Shareholders in general
meeting. Shareholders are required to approve any change to this annual
aggregate amount. In 2015, the Shareholders approved an increase in the
pool to PGK 2.5 million.
Directors may also be reimbursed their reasonable travel and other
expenses incurred in attending to BSP business. Directors may also receive
additional remuneration if they, perform any additional services at the
request of the Board.
Non-executive Directors are not paid any retirement or superannuation
benefits, nor do they participate in any share or share option programmes
or the employee incentive schemes described below.
A table of fees paid to Directors during 2016 is produced on page 66.
Employee incentive schemes
BSP has established the following incentive arrangements to assist in
the recruitment, retention and motivation of senior management and
employees, and to directly link performance and behaviour to long term
financial results and shareholder value.
BSP does not currently have any equity-based remuneration schemes.
Under BSP’s employee incentive arrangements below, participants are not
currently entitled to receive grants of shares or share options.
Employee share option plan
In 2014, the Board approved an employee share option plan. The options
are paid out as cash and are fully taxed. Participants are not entitled to
receive grants of shares or share options. This plan is available for use but
is not currently in use.
Long term incentive plan
BSP also has a long term incentive plan (LTIP) for certain senior employees.
The LTIP is currently in use.
While performance rights are calculated by reference to earnings per share
(EPS), participants are not entitled to receive grants of shares or share
options. Rather, participants are entitled to receive an amount up to 10%,
15% or 30% percentage of their fixed annual remuneration depending on
their level of seniority.
The LTIP runs on a two year performance cycle, commencing on 1 January
in the first year and ending on 31 December the following year.
28
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 HISTORICAL SUMMARY
Profit and Loss (K’000)
Net interest income
Non interest income
Bad and doubtful debt (expense)/recovery
2011
597,479
502,880
(25,234)
2012
681,554
614,951
(70,952)
2013
740,857
793,487
2014
2015
2016
884,761
1,006,251
1,107,686
613,970
540,888
684,371
(78,573)
(76,796)
(89,905)
(98,622)
Other operating expenses
(600,138)
(680,257)
(833,849)
(703,085)
(691,084)
(769,641)
Operating Profit
474,986
545,296
621,922
718,850
766,150
923,794
Impairment of non-current asset
-
-
(14,967)
-
-
-
Profit before tax
Income tax (expense)
Profit/(loss) after tax
Dividends (toea)
474,986
545,296
606,955
718,850
766,150
923,794
(119,039)
(137,552)
(170,127)
(211,511)
(234,271)
(280,343)
355,947
407,744
436,828
507,339
531,879
643,451
Dividends paid per share[1]
47.3
55.0
58.0
66.0
79.0
88.0
Balance Sheet (K’000)
Net loans and advances
Total assets
Deposits
Capital
Performance Ratios
Return on Assets
Return on Equity
Expense/Income
Key Prudential Ratios
Capital adequacy
Liquid Asset Ratio
Leverage ratio
Exchange rates (One (1) PNG Kina buys):
US Dollar
AUS Dollar
4,300,913
4,804,626
5,306,362
6,756,997
8,621,514
10,102,909
11,681,293
13,333,102
15,761,420
15,816,507
18,196,303
20,831,803
9,366,281
10,860,522
12,200,999
12,708,383
14,595,374
16,912,349
1,344,188
1,465,893
1,619,060
1,800,193
2,029,176
2,314,337
3.3%
28.7%
54.5%
24.2%
43.6%
10.0%
0.4665
0.4591
3.3%
29.0%
52.5%
22.3%
38.9%
9.0%
0.4755
0.458
3.0%
28.3%
54.3%
18.0%
41.8%
7.6%
0.3905
0.4369
3.2%
29.7%
46.9%
24.0%
34.3%
9.0%
0.3855
0.4708
3.1%
27.8%
44.7%
23.1%
31.5%
8.9%
0.3325
0.4552
3.3%
29.6%
42.9%
23.1%
35.8%
9.3%
0.3150
0.4354
BSP has adopted the practice of paying an interim dividend based on half year results, in October of each year, and paying a final dividend based on
audited full year results, after the end of the financial year, and no later than the end of the second quarter of the succeeding year.
CONTRIBUTIONS BY BSP TO PNG
All Amounts are expressed in K'000
2011
2012
2013
2014
2015
2016
Company income taxes paid to PNG
Government
GST paid and not able to be recouped
Other taxes paid to PNG Government
(IWT,FCWT,BWT)
119,590
212,081
155,391
188,627
249,210
292,443
10,703
10,091
12,836
6,204
14,082
4,989
11,024
2,568
16,793
3,701
21,268
10,226
Donations and Sponsorships
3,879
4,192
9,267
9,358
8,219
4,345
Total
144,263
235,313
183,729
211,577
277,923
328,282
29
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 We are you. We are Cook Islands.
30
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Overseas Branches
& Subsidiaries
31
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 OVERSEAS BRANCHES & SUBSIDIARIES
COOK ISLANDS
There was an overall contraction in economic growth of 0.3% in 2016 mainly
due to delays in capital projects combined with reduced consumption
domestically but this was offset by increased tourism activity. Cook Islands,
as a tourism based economy, has a large reliance on tourist activity and
arrivals have been on a positive trend in the past 12 months.
2016 represents the first complete financial year Cook Islands has been
under BSP ownership with a strong financial result delivered. NPAT
result of NZD1.37 million has been achieved. The performance has been
achieved through a solid loan balance sheet position of NZD83.2 million
driven by strong activity in the retail sector. Total deposits have grown
22% to NZD122.5 million. There has also been an ongoing focus on non-
performing loans with the efforts being rewarded with a reduction in total
non-performing loans to total loans ratio in 2016.
Financial results for 2016 reported a net profit after tax of FJD40.2m
compared to the 2015 result of FJD31.0m an improvement of 30% which is
a commendable effort.
Our Corporate Business performed strongly driving overall portfolio
growth of 12% in a highly competitive marketplace. This result was due to
strong relationship management by a team of experienced and long term
personnel with highly developed relationships gained over decades of
experience in the Fiji market. This stability is valued by our clients.
Foreign exchange income grew by 9% continuing from the large increase
achieved in 2015. This result once again came from an experienced team in
the foreign exchange dealing area using established and new relationships,
and providing value added advice to our clients.
The Retail bank showed substantial growth in car loans and housing loans
in an increasingly competitive market. Our team of Personal Bankers
continue to provide quality service and meet competitive timeframes
to provide the best service to our clients. The unsecured personal loan
product has been an area of fierce competition between the banks with
some portfolio stress emerging.
Revenues from our electronic channels – ATMs, EFTPoS, SMS Banking
and Internet Banking - continue to grow and provide our clients with
convenience and world class options for their banking. This area was
boosted in the earlier months of the year when the Fiji National Provident
Fund paid out approximately FJD275m in Cyclone Winston relief funds to
their members which resulted in higher volumes of electronic transactions.
During the year the Smart Business product range was launched for the
Micro SME and SME sectors. This new product range offers competitive
transaction and savings products together with a pathway to finance for
business expansion.
Fiji Banking Deposits Evolution (FJD billion)
2.0
1.8
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
1.6
1.4
1.2
1.0
0.8
0.6
0.4
0.2
0.0
BSP Cook Islands “In your Shoe” program.
Overall 2016 has been a pleasing year and staff should be congratulated
for their efforts. Other successes include the strong partnership that has
been forged with the Ministry of Education culminating in the delivery
of financial literacy programs, Money Basics and Financial First Steps, to
all Rarotongan school students in years 7 – 9. These programs are set to
extend to the outer islands in 2017. BSP brand positioning and community
engagement is strong and resonating well with the general public. BSP
points of representation have increased during the year with 6 new agents
opened throughout Rarotonga and our first outer island agent opened in
Aitutaki.
We are confident the platform has been set for continual improvement
and a very rewarding 2017 where our strategic focus includes extending
the scope of our banking services and financial literacy throughout the
outer islands and continue to strengthen our market leading position
through the launch of exciting new products.
FIJI
The estimated GDP growth rate for the Fiji economy in 2016 was 2%.
Whilst lower than 3.6% achieved for 2015 the outcome is still credible
given the impact of Cyclone Winston in February 2016. The statistics now
indicate 8 consecutive years of positive economic growth.
Inflation has been above 5% since the cyclone and together with recent
flooding is expected to continue at 4 to 5%. Foreign reserves remain
comfortable at FJD1.9bn and 5.3 months import cover.
Monetary conditions have tightened with system liquidity hovering around
FJD400m. Private sector credit growth was just under 11%, led by an
increase in consumption lending.
32
FY12
FY13
FY14
FY15
FY16
Demand
Term
Fiji Banking Loans Evolution (FJD billion)
FY12
FY13
FY14
FY15
FY16
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 OVERSEAS BRANCHES & SUBSIDIARIES
Despite a highly competitive marketplace with low interest rates, the
total loan book increased by 24% to WST243million, with business loans
performing strongly to achieve growth of 23% year-on-year, whilst the
Bank maintained its focus on credit quality and customer retention.
BSP Fiji’s Howard Politini, Malakai Naiyaga, RBF’s Lorraine Seeto and Sharyne Fong
at the 2016 AFI Global Policy Forum in Suva.
In 2017, Fiji expects to deliver a number of new product and service delivery
improvements. These initiatives will enhance customer experience and
access.
SAMOA
BSP Samoa Staff Charity Asora and Aysha Rimoni recieving the 2016
Environmental Award from MNRE.
During the year, there has been a 14% growth in customer numbers and
42% growth in consumer lending. Our commitment in making banking
easier was reflected in quicker credit decisions, efficient drawdown
processes and an expansion of access points that resulted in more ATMs,
agencies and over 330 EFTPoS terminals across the country.
BSP Samoa reported a solid financial performance
in 2016. This
performance has been achieved in a stable local economic environment
that experienced a 6.4% increase in economic activities for 12 months
reported up to June 2016. In the final quarter of 2016, this position
remained with headline inflation rising to 0.9%, the balance of payment
improving by 5.5% and tourism receipts showing significant increase of
9.1% albeit remittances slowing down.
Pleasingly the Bank has achieved above system growth and also continued
to strengthen its balance sheet through a growth strategy while at the
same time managing stressed assets. We executed our strategy along the
lines of four key themes: financial performance, operational excellence,
customer service and people. Our efforts in each of these areas have been
guided by the basic principle of putting the customer at the center of our
activities.
We supported our vision by participating in over 50 different community
events throughout the year, placing priority on health, youth development,
sports, education and the environment. Our Go Green cleanup campaign
and the installation of water tanks in villages with no access to clean
water as well as Mapuifagalele, the home for the elderly, led to the
Ministry of Natural Resources & Environment presenting BSP with an
award in recognition and appreciation of service and contribution to the
Environment.
The commitment of our staff and the strength of our culture have
been reflected in the way we foster excellent customer relationships.
Our values of integrity, professionalism, leadership, quality, people,
teamwork and community are integral to our culture and this year we
have been committed to embedding a values-driven approach to work by
demonstrating how we live these values every day.
BSP Samoa reported a profit of WST6.1million being an increase of 43%
over 2015. This was largely driven by a disciplined approach that increased
operating income by 9% and significantly reduced total expenditure by
12% year-on-year.
BSP Samoa Leadership Team Visits the Big Island of Savaii.
Staff are to be acknowledged for their ongoing dedication and commitment
to our customers and business, making possible a good result in 2016.
We remain positive that the Samoan economy will maintain its moderate
growth momentum. We will continue to build a high performing culture by
on-going investment in our people and embedding the BSP values in all our
actions. We will also continue to concentrate on productivity, efficiency
and credit quality.
SOLOMON ISLANDS
Economic Growth in the Solomon Islands has remained consistent over
recent years with 2016 bringing growth of 3.2%. BSP Solomon Islands has
exceeded this level with growth of 12% for 2016.
After the purchase of the operations of Westpac Solomon Islands in
October of the prior year, 2016 has seen the first full year of trading for the
new BSP Solomon Islands business The Solomon Islands team accepted the
challenge of integration of the two businesses and displayed the BSP Value
of Teamwork to ensure all customers expectations were met. All customers
now enjoy access to a much larger network of Branches, Agencies, ATM
and EFTPoS merchants and a greater variety of products.
As the largest Bank in the Solomon Islands this presents a number of
opportunities for staff to work at different branches and different Provincial
locations. During 2016 a number of staff took the opportunity to broaden
their experience and work in provincial Branches.
33
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 OVERSEAS BRANCHES & SUBSIDIARIES
In 2016 there has been significant expansion of our network, with 5 new
agencies and 2 sub-branches commencing operations. The opening of
new sub-branches particularly on the outer islands of Ha’apai and ‘Eua is
considered a major development in the provision of banking services for
the people of Tonga. 4 new ATMs were added to bring the total to 12 and
the number of EFTPoS also increased from 204 to 303. Major renovations
involving a new Business Centre for Nuku’alofa Branch and a major facelift
for Vava’u Branch were also completed during the year.
BSP Solomon Islands opens two Branchless Banking Agent in Dunde and Noro,
Western Province.
Financial Results for 2016 has seen a profit of SBD67m which is above 2015.
This is an extremely satisfying result as expenses included costs associated
with the integration of operating systems and procedures.
The Balance Sheet has continued to grow with Lending increasing by 11%
and Deposits also up by 10%. Pleasing growth in both Consumer and
Commercial loans has been achieved.
Throughout the year there have been several notable achievements for
the business. The customer base increased to 110,000, and 75 financial
literacy training programs were delivered to more than 21,000 participants,
including our eight branches delivering the training to two schools each. A
new Priority Banking Centre was opened at Ranadi Branch.
Staff staged another successful Go Green campaign with over 4,000
children participating all around the country and a number of staff attended
overseas training courses.
During 2016 the business upgraded a majority of our ATM and EFTPoS
Machines and it is expected that we will see increased usage of all our
Electronic Banking Channels in 2017.
Much has been achieved in 2016. This successful performance would not
have been possible without the exceptional dedication and commitment
shown by BSP’s people in the Solomon Islands and they are to be
congratulated on their great effort in 2016.
2017 will be another exciting year for BSP Solomon Islands. There are
some new exciting products to be launched this year and that along with
the focus to see increased usage of all Electronic Banking channels, will see
an improved customer experience for all in 2017.
TONGA
BSP Tonga operated in an economy where growth of 3.1% exceeded the
forecast driven by recovery in agriculture, the implementation of major
projects such as the renovation of the International Dateline Hotel and
the construction of the government office complex at St. George’s Palace.
Remittance receipts were up by 24.8%, private sector lending increased by
14.5% and tourism was strong as international arrivals increased by almost
15.0%. The growth projection for 2017 is revised down slightly to account
for a base effect from good growth in 2016, but the economy is expected
to experience continued growth supported by construction and tourism,
as well as increased commerce related to preparations for the 2019 Pacific
Games.
BSP Tonga performed exceptionally in 2016. We are the leading bank
both from a market share and customer number point of view. Lending
share has grown from 35% as at January 2016 to 38.7% in December 2016.
Deposit market share has increased slightly from 36.8% to 37.0%. It is also
pleasing to note that despite strong loan book growth focus on loan quality
has been maintained, with delinquencies managed and controlled well at
low levels. Customer numbers increased from 21,000 to 29,000 over the
year. BSP launched the Smart Business Product (for SMEs) in April 2016.
Since then we have opened 114 accounts under this product, 51 accounts
of these have value added product and 11 accounts with lending facilities.
34
Launch of BSP Tonga Business Centre.
BSP has been very active in the community during the year. Some
major highlights included our Financial Literacy workshops with 11,000
participants. In partnership with Tonga Waste Authority, we provided
a total of 32 branded rubbish bins for the community along Vuna Road.
Additionally, BSP built a full size netball court in our parking area with
floodlights to allow for night games. This community project was undertaken
in conjunction with Tonga Netball, Department of Foreign Affairs and Trade
of Australia and Tonga Power, and is the first of its kind in Tonga. At its
opening , the Australian Minster for International Development and the
Pacific, Senator Concetta Fierravanti-Wells personally commented on this
great initiative and vision BSP Tonga had to make such a project possible
and it represents a blueprint for future public/private development across
the Pacific.
Overall the above initiatives and key highlights have underpinned our
overall financial performance for the year. In brief, profit TOP7.6million
was ahead of prior year, supported by strong net interest income sourced
from a 28% increase in the loan book and investments in government
securities.
Going into 2017, BSP Tonga plans to drive the Small and Medium
Enterprises (SME) sector further by penetrating into the Agriculture and
Fisheries market.
BSP Tonga helping our small businesses.
Another focus will be for a more efficient, cost effective way for remittances
to support high remittance activity into Tonga. These projects along with
more community based projects promise to make 2017 another successful
year.
BSP Tonga is proud to be taking part in BSP Group’s Pacific journey, proud
of what the business has achieved and the positive impact on the Tongan
people and its economy in the first full year under BSP’s ownership.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
BSP Tonga has achieved its vision “To be the leading financial services
provider in our chosen market helping customers, staff, shareholders and
communities prosper”.
All the staff are to be commended for their hard work over the past 12
months and their loyalty and commitment as we look forward to create
value for our stakeholders by delivering innovative and cost effective
financial services in the coming year.
VANUATU
1,500.0
1,000.0
500.0
0.0
OVERSEAS BRANCHES & SUBSIDIARIES
Cook Islands, Samoa, Solomon Islands, Tonga &
Vanuatu Balance Sheet (K million)
Although economic conditions in 2016 remained relatively soft, a number
of flagship infrastructure projects were commenced, and some positive
trends emerged in the tourism sector. GDP is forecasted to be positive for
2017 and although the country will continue to face challenges it is well
positioned to deal with them.
BSP Vanuatu officially commenced operations on the 4th July 2016,
following the acquisition from Westpac. A significant amount of work was
undertaken prior to handover by both in-country and BSP Group personnel
to ensure a seamless transition, and minimal service disruptions. Market
and stakeholders feedback has been overwhelmingly positive.
Vanuatu Minister for Lands, Geology and Mines, Energy and Water Resources
and Reserve Bank of Vanuatu Governor cutting the ribbon to officially launch BSP
Branch as the Chairman looks on.
Following the change to BSP there has been an increase in customer
numbers with the business experiencing genuine demand for the products
and services offered.
Solomon
Islands
Samoa
Tonga
Cook
Islands
Vanuatu
Deposits
Loans
Assets
Cook Islands, Samoa, Solomon Islands, Tonga &
Vanuatu Customer Accounts
150,000.0
100,000.0
50,000.0
0.0
Solomon
Islands
Samoa
Tonga
Cook
Islands
Vanuatu
Customer Accounts
BSP CAPITAL LIMITED
Business conditions have been challenging in 2016, with PNG economic
growth more benign than in previous years.
The results for 2016 were consistent with 2015, with total revenue and
total expenses steady compared to the prior year.
However within various lines of business there were significant trends
when comparing 2016 to 2015. Overall revenues from Stockbroking were
down by 48% from the prior year whilst Corporate Advisory revenue was
up by 167.4% year on year and Funds Management revenue improved by
26.3% from 2015.
Staff engagement under BSP has been exceptional and all staff are to be
commended for the professionalism displayed during the acquisition.
Stockbroking
Community involvement and a renewed focus on brand awareness has
increased resulting in a solid performance for BSP Vanuatu. Profit was
VTU51.4 million for the 6 months under BSP led predominantly by non-
interest income.
The Balance Sheet grew 12% on an annualized basis which has been a
commendable effort and is significantly above system especially when
considered in the context of an economy still recovering from the March
2015 effects of Cyclone Pam.
There have of course also been some challenges; expense management
has and will remain a focus for the leadership team. In addition, the
Bank on transition was also required to convert from a branch to a wholly
owned subsidiary entity of BSP, with new capital adequacy requirements.
BSP Vanuatu has been able to meet the additional capital requirements
accompanying this change in status. As at 31 December 2016 Capital
adequacy sits at 18% against a regulatory requirement of 15%.
The continued commitment to BSP’s mission and vision statements will
be a key feature in the business drive for growth in the coming years.
2017 will be an exciting and challenging year. One of the key priorities is
expanding BSP’s footprint via the opening of 2 new branches (Tanna and
Port Vila). The business has moved quickly to ensure alignment with BSP
Group processes, procedures and cultural identity, and is well positioned
to execute on these challenges to deliver successful outcomes including
positive financial results.
Volumes traded across the whole market are down compared to 2015. This
is due to a combination of weaker economic conditions, poor liquidity and
no new listings or corporate actions.
BSP Capital remains the largest broker by value with 59.9% market share for
2016. We were successful in 2016 by sourcing a greater share of corporate
business generating higher brokerage. We remain the only broker that
provides research on locally listed companies with a distribution list of
3,500 across PNG and overseas.
Corporate Advisory
2016 was a much improved year across a number of assignments. BSP
Capital assisted clients with valuation work, strategic advice on capital
raising, asset disposal and potential listings during 2016.
2017 is expected to be strong, with some assignments continuing through
to next year.
35
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 OVERSEAS BRANCHES & SUBSIDIARIES
Funds Management
BSP Finance LIMITED
Funds under management grew by 15.8% to K1.458 billion. Revenue grew
more rapidly (+26.3%) with strong performance in our Retail and High Net
Worth client segment. We expect steady growth in our Funds Management
business with several new opportunities expected in 2017.
2016 was a challenging year for both BSP Finance Fiji and PNG. In Fiji
Cyclone Winston brought most economic activities to a temporary standstill
while in PNG economic growth was more constrained due to lower global
commodity prices.
In PNG the fall in global oil prices meant that government revenue was
significantly lower than forecast. Certain business sectors, including BSP
Finance’s target market were affected more than others as government
spending became more targeted to specific priority areas. BSP Finance PNG
realigned its loan portfolio in response which had the effect of improving
asset quality. This and other measures saw BSP Finance PNG moving to
profitability in the last quarter of 2016. In an increasingly difficult business
environment BSP Finance PNG has managed to grow its loan portfolio from
K54 million as at 31 December 2015 to K93 million as at 31 December
2016. As at 30 November 2016 the company had a market share of 15.3%
compared to 4% as at 31 December 2015.
In December 2016 BSP Finance PNG successfully completed its community
project which was the renovation of a classroom at St Marys Primary school
in Lae, Morobe province. The team is looking forward to the 2017 project
theme which is “Empowering Women and Children.”
BSP Finance PNG through an independent consulting firm conducted a
customer satisfaction survey and obtained a final score of 123 where a
score of 75 means that customer expectations are fully met. BSP Finance
Fiji in the same survey obtained a final score of 116. This indicates that
BSP Finance Limited has significantly exceeded the expectations of its
customers.
BSP Finance Fiji achieved month on month profitability in July 2016 and
recorded a profit of FJD431.1 thousand for 2016. This solid financial
performance has been on the back of consistent growth in loan volumes
which were driven by reconstruction activity after Cyclone Winston and
growth in the tourism sector. As a result BSP Finance Fiji’s market share has
grown from 6.25% as at 31 December 2015 to 12.11% as at 30 November
2016. BSP Finance Fiji launched a new Hire Purchase product on the
29th of October 2016. BSP Finance Limited continues to pursue potential
opportunities in South East Asia and other countries of the South Pacific
where BSP already operates.
The “Friends of BSP Finance” incentive program.
Additionally we were successful in winning a mandate from Oil Search for
their local Registry Services. This was done together with Computershare
who partnered with us to cover the non-PNG component. It is expected
further opportunities will emerge in 2017 in the provision of Registry
Services.
BSP LIFE FIJI
Achievements by BSP Life in both financial and strategic initiatives overall
were pleasing in an environment that experienced challenges in 2016. The
strong financial performance recorded in 2015 in our Life business and its
investments continued into 2016 with results exceeding expectation. The
Health business performance yielded a reasonable profit compared to the
significant loss experienced in 2015 through review of profitability drivers
including quality business growth, annual review of premiums and review
of cost structure.
In 2016, the accommodation project in Suva, which consists of a 10 unit
townhouse and 5 executive homes in a gated community, is now complete
and 100% occupied. We also established a new private hospital joint
venture and a new management agreement with Madras Institute of
Orthopaedics and Trauma International (MIOT) effective from 1st January
2017. Significant progress on investment plans were also made with other
subsidiaries and joint ventures to further improve their results.
The Life functionalities implementation of our core system change project
continues with the system currently in development phase. Good progress
is being made on data migration and business readiness for planned
implementation in July 2017.
The Insurance Group profit for 2016 was FJD14.3 million, 21% above profit
for 2015. After adjustment for non-operating items profit is FJD17 million,
ahead of expectations. Both the Life and Health businesses improved their
profits significantly compared to last year results. Life policyholder profits
achievement was also pleasing at FJD20.2 million.
Both Life and Health new business, however, were lower by 6% and
17% respectively compared to 2015 mainly due to a stronger focus on
improving business quality in our Agency distribution channel as well as
adverse impact from Cyclone Winston at the start of the year and flooding
in December 2016. Equally, the focus on business conservation saw the
Life In Force portfolio increasing by FJD4.7 million to FJD67.9 million, 7.5%
growth. The 13-month persistency rate on annual policy premium of 78.8%
is 1.1% higher than last year.
The Life insurance market continues to be dominated by endowment
products. BSP Life has significant market share on inforce annual premium
basis (excluding single premiums). The latest publicly available official
industry data indicates that BSP Life had 57% market share at the end of
2015. The same sources state that BSP Health Term Life market share on
premium income was 57% while the Medical market share was 34% in
2015.
In 2017, BSP Life will build on the strong results achieved in recent years.
The key strategic focus will be to successfully complete our core system
change with the implementation of our Life system. Our venture into new
markets will include exploring Life and Health insurance business potential
in Papua New Guinea with intent to commence business before the end
of 2017.
36
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
OVERSEAS BRANCHES & SUBSIDIARIES
BSP Cook Islands Brand Ambassador and Country Manager.
BSP FIji Nausori branch staff proudly display their trophy and certificates at meeting
their annual sales target.
BSP Samoa Celebrated its first anniversary with the Sisters of Mapuifagalele.
BSP Samoa launch of the cobranded Manu Samoa Visa Debit Card.
BSP Solomon Islands staff secondment to BSP PNG.
BSP Cook Islands staff JP Wilson and Setephano Noovao at their new agent Tex Mart
in Matavera.
School Kids in Tonga all dressed up for the BSP GO Green initiative.
BSP Solomon Islands Banking Services.
37
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 We are you. We are Samoa.
38
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Financial Statements
39
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 DIRECTORS’ REPORT
for the Year Ended 31 December 2016
The Directors take pleasure in presenting the Financial Statements of the Bank of South Pacific Limited and its subsidiaries (Bank
and the Group) for the year ended 31 December 2016. In order to comply with the provision 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 also
include stock broking, 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 also licensed to operate in the Solomon Islands, Fiji Islands, Cook Islands,
Samoa, Tonga & Vanuatu. The registered office is at Douglas Street, Port Moresby.
Review of operations
For the year ended 31 December 2016, Group profit after tax was K643.451 million (2015: K531.879 million). The Bank’s profit after tax was K606.674
million (2015: K505.749 million which included a dividend income of K19.221 million received from BSP Life (Fiji) Limited).
The Directors are of the view that 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 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.
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.
Dividends
Dividend payment totaling K413.973 million was paid in 2016 (2015: K369.810 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 31 December 2016:
Sir K Constantinou, OBE
Dr. F Lua’iufi
Mr. R Fleming, CSM
Mr. E B Gangloff
Mr. A Sam
Ms. F Talao
Mr. G Aopi, CBE
Mr. G Robb, OAM
Dr. I Temu
Mr. A Mano
Details of directors’ tenure and directors and executives’ remuneration during the year are provided in Note 27 of the Notes to the Financial Statements.
The Group CEO Robin Fleming is the only executive director.
The company secretary is Mary Johns.
Independent Auditor’s Report
The financial statements have been audited and should be read in conjunction with the independent auditor’s report on page 81. Details of amounts paid
to the auditors for audit and other services are shown in Note 42 of the Notes to the Financial Statements.
Donations and Sponsorships
Donations and sponsorship by the Group during the year amounted to K5,789,140 (2015: K9,091,256).
40
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
DIRECTORS’ REPORT
for the Year Ended 31 December 2016
Change in accounting policies
No changes in accounting policies significantly impacted the Group during the year.
For, and on behalf of, the Directors.
Dated and Signed in accordance with a resolution of the Directors in Port Moresby this 1st day of March 2017.
Sir Kostas Constantinou OBE
Chairman
Robin Fleming, CSM
Group Chief Executive Officer/Director
41
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
STATEMENTS OF COMPREHENSIVE INCOME
for the Year Ended 31 December 2016
A ll amo unts are expr essed in K’0 0 0
Note
2016
2015
2016
201 5
Consolidated
Bank
Interest income
Interest expense
Net interest income
Fee and commission income
Other income
Net banking operating income
Net insurance premium income
Investment revenue
Increase in policy liabilities
Policy maintenance and investment expenses
Claims, surrender and maturities
Share of profits from associates and jointly controlled entities
Net insurance operating income
2
2
3
4
39(b)
39(a)
1,267,911
1,100,866
1,214,671
1,083,281
(160,225)
(94,615)
(153,783)
(93,098)
1,107,686
1,006,251
1,060,888
362,337
298,078
310,468
209,175
340,764
277,045
990,183
301,232
200,425
1,768,101
1,525,894
1,678,697
1,491,840
118,418
85,616
(45,036)
(80,395)
(71,390)
16,743
23,956
94,322
93,405
(34,984)
(67,488)
(65,608)
1,598
21,245
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net operating income before impairment and operating expenses
1,792,057
1,547,139
1,678,697
1,491,840
Impairment on loans and advances
Impairment on subsidiary
Operating expenses
Profit before income tax
Income tax expense
Net profit for the year
Other comprehensive income
Items that may be subsequently reclassified to profit or loss
Translation of financial information of foreign operations
to presentation currency
Items that will not be reclassified to profit or loss:
Recognition of deferred tax on asset revaluation reserve
Net movement in asset revaluation
Other comprehensive income, net of tax
Total comprehensive income for the year
13
8
5
6
24
24
24
(98,622)
(89,905)
(90,460)
-
-
-
(86,657)
(11,068)
(769,641)
(691,084)
(709,139)
(665,979)
923,794
766,150
879,098
728,136
(280,343)
(234,271)
(272,424)
(222,387)
643,451
531,879
606,674
505,749
42,054
48,839
24,602
31,912
11,816
(1,265)
52,605
1,301
21,450
71,590
11,816
(1,832)
34,586
4,592
14,304
50,808
696,056
603,469
641,260
556,557
Earnings per share - basic and diluted (toea)
23
137.7
113.7
129.8
108.1
The attached notes form an integral part of these financial statements.
42
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
STATEMENTS OF FINANCIAL POSITION
As at 31 December 2016
All amounts are expressed in K’000
Note
2016
2015
2016
2015
Consolidated
Bank
ASSETS
Cash and balances with Central Bank
Treasury and Central Bank bills
Amounts due from other banks
Statutory deposits with Central Banks
Other financial assets
Loans, advances and other receivables from
customers
Assets held for sale
Property, plant and equipment
Assets subject to operating lease
Investment in associates and joint ventures
Investment in subsidiaries
Intangible assets
Investment properties
Tax receivable
Deferred tax assets
Other assets
Total assets
LIABILITIES
Amounts due to other banks
Customer deposits
Subordinated debt securities
Other liabilities
Provision for income tax
Other provisions
Total liabilities
SHAREHOLDERS EQUITY
Ordinary shares
Retained earnings
Other reserves
10
11
12
25
16
13
14
14
14
9
8
7
15
6
6
17
18
19
20
21
6
22
23
24
24
1,656,260
2,933,621
804,233
1,474,656
2,331,472
10,102,909
-
683,498
44,668
125,620
-
91,626
117,590
576
170,089
294,985
1,202,466
2,503,109
710,157
1,359,606
2,308,926
8,621,514
35,135
686,325
52,857
102,439
-
110,226
101,019
-
147,389
255,135
1,410,008
2,918,484
691,152
1,440,530
1,010,856
2,501,256
587,277
1,341,650
2,044,905
2,074,124
9,255,080
8,181,227
-
569,168
44,668
16,513
318,261
84,727
-
3,670
182,625
247,535
35,135
597,373
52,857
14,570
259,869
99,601
-
-
159,290
206,558
20,831,803
18,196,303
19,227,326
17,121,643
301,291
344,346
327,823
344,877
16,912,349
14,595,374
16,143,696
14,248,296
75,525
1,058,494
-
169,807
75,525
969,179
39,005
143,698
75,525
364,434
-
156,398
75,525
353,252
36,168
132,535
18,517,466
16,167,127
17,067,876
15,190,653
373,101
1,670,595
266,090
374,621
1,399,490
255,065
373,101
1,576,974
209,375
374,621
1,340,000
216,369
Equity attributable to the members of the company
2,309,786
2,029,176
2,159,450
1,930,990
Minority interests
Total shareholders’ equity
Total equity and liabilities
4,551
-
-
-
2,314,337
2,029,176
2,159,450
1,930,990
20,831,803
18,196,303
19,227,326
17,121,643
Sir Kostas Constantinou OBE
Chairman
Robin Fleming, CSM
Group Chief Executive Officer/Director
The attached notes form an integral part of these financial statements.
43
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
for the Year Ended 31 December 2016
Bank
Share capital
Reserves
Ret. earnings Min. Interests
Total
All amounts are expressed in K’000
Note
Balance as at 1 January 2015
379,297
183,546
1,183,505
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,746,348
505,749
50,808
556,557
(262,021)
(105,218)
(4,676)
(371,915)
-
-
1,930,990
606,674
34,586
641,260
(294,448)
(116,832)
(1,520)
(412,800)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,551
-
-
1,800,193
531,879
71,590
603,469
(263,872)
(105,938)
(4,676)
(374,486)
-
-
2,029,176
643,451
52,605
696,056
(297,141)
(116,832)
4,551
(1,520)
47
Net profit
Other comprehensive income
Total comprehensive income
2014 final dividend paid
2015 interim dividend paid
Share buyback
Total transactions with owners
Transfer from Asset Revaluation Reserve
BSP Life policy reserve
Balance at 31 December 2015
Net profit
Other comprehensive income
Total comprehensive income
2015 final dividend paid
2016 interim dividend paid
Share buyback
Total transactions with owners
Transfer from Asset Revaluation Reserve
BSP Life policy reserve
Balance at 31 December 2016
Group
Balance as at 1 January 2015
Net profit
Other comprehensive income
Total comprehensive income
2014 final dividend paid
2015 interim dividend paid
Share buyback
Total transactions with owners
Transfer from Asset Revaluation Reserve
BSP Life policy reserve
Balance at 31 December 2015
Net profit
Other comprehensive income
Total comprehensive income
2015 final dividend paid
2016 interim dividend paid
Minority interest capital
Share buyback
Loss attributable to minority interests
Total transactions with owners
Transfer from asset revaluation reserve
BSP Life policy reserve
Balance at 31 December 2016
23
23
23
24
24
23
23
23
24
24
23
23
23
24
24
23
23
23
24
24
24
-
-
-
-
(4,676)
(4,676)
-
-
-
505,749
50,808
50,808
-
-
-
-
(22,103)
4,118
505,749
(262,021)
(105,218)
-
(367,239)
22,103
(4,118)
374,621
216,369
1,340,000
-
-
-
-
-
(1,520)
(1,520)
-
-
-
606,674
34,586
34,586
-
-
-
-
(42,537)
957
-
606,674
(294,448)
(116,832)
-
(411,280)
42,537
(957)
379,297
201,460
1,219,436
-
-
-
-
-
(4,676)
(4,676)
-
-
-
531,879
71,590
71,590
-
-
-
-
(22,103)
4,118
-
531,879
(263,872)
(105,938)
-
(369,810)
22,103
(4,118)
374,621
255,065
1,399,490
-
643,451
52,605
52,605
-
-
-
-
-
-
-
643,451
(297,141)
(116,832)
-
-
47
-
-
-
-
-
-
(1,520)
-
(1,520)
-
-
The attached notes form an integral part of these financial statements.
44
(413,926)
4,551
(410,895)
(42,537)
957
42,537
(957)
-
-
-
-
373,101
266,090
1,670,595
4,551
2,314,337
373,101
209,375
1,576,974
-
2,159,450
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 STATEMENTS OF CASH FLOW
for the Year Ended 31 December 2016
All amounts are expressed in K’000
CASH FLOW FROM OPERATING ACTIVITIES
Interest received
Fees and other income
Interest paid
Amounts paid to suppliers and employees
Operating cash flow before changes in operating assets and
liabilities
Note
Consolidated
Bank
2016
2015
2016
2015
1,269,316
1,095,363
1,185,621
1,077,459
669,187
(161,093)
(629,235)
559,043
(73,977)
(536,708)
581,669
(155,774)
(569,818)
420,288
(76,268)
(433,083)
28
1,148,175
1,043,721
1,041,698
988,396
Increase in loans, advances and other receivables from customers
(1,392,582)
(1,410,690)
(1,130,592)
(1,327,316)
Increase in statutory deposits with the Central Banks
(Increase)/Decrease in bills receivable and other assets
Increase in customer deposits
Increase in bills payable and other liabilities
Net cash flow from operations before income tax
Income taxes paid
Net cash flow from operating activities
CASH FLOW FROM INVESTING ACTIVITIES
Increase in government securities
Expenditure on property, plant and equipment
Proceeds from disposal of property, plant and equipment
Purchase of controlled entities, net of cash acquired
40
Additional funding of subsidiaries
Net cash flow from investing activities
CASH FLOW FROM FINANCING ACTIVITIES
Share buyback
Non-controlling interests shares
Dividends paid
Net cash flow from financing activities
Net Increase/(decrease) in cash and cash equivalents
Effect of exchange rate movements on cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and Cash Equivalents at the end of the year
23
23
(115,050)
(108,024)
(78,874)
170,312
(98,880)
(48,610)
(90,068)
73,234
1,960,281
1,081,735
1,895,400
1,010,488
92,305
1,614,255
(338,647)
1,275,608
(453,058)
(91,758)
70,250
162,870
-
206,419
983,473
20,999
1,680,015
80,903
735,637
(282,784)
(330,331)
(282,837)
700,689
1,349,684
452,800
(384,565)
(135,160)
(388,010)
(61,468)
(357,087)
(105,684)
63,420
69,982
63,420
176,524
-
(38,020)
(20,372)
160,292
(16,251)
(311,696)
(279,781)
(437,888)
(255,310)
(1,520)
4,551
(413,973)
(410,942)
552,970
37,955
1,568,277
2,159,202
(4,676)
(1,520)
(4,676)
-
(369,810)
(374,486)
46,422
45,625
-
(411,280)
(412,800)
-
(367,239)
(371,915)
498,996
(174,425)
21,085
44,601
1,476,230
1,253,256
1,383,080
1,568,277
1,773,337
1,253,256
The attached notes form an integral part of these financial statements.
45
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
1. ACCOUNTING POLICIES
The principal accounting policies adopted in the preparation of these
Financial Statements are set out below. These policies have been
consistently applied to all the periods presented unless otherwise
stated. The assets and liabilities are presented in order of liquidity on the
Statements of Financial Position.
entities. The exception is available when the investment entity parent
measures its subsidiaries at fair value. The amendments to IAS 28
allow an entity which is not an investment entity, but has an interest in
an associate or joint venture which is an investment entity, a policy
choice when applying the equity method of accounting.
The adoption of these amendments did not have any impact on the
current period or any prior period and is not likely to affect future periods.
A. Basis of Presentation and General Accounting
Policies
Standards, amendments and interpretations issued but not yet effective
for the year ended 31 December 2016 or adopted early
The Financial Statements of the Bank of South Pacific Limited (the Bank)
and the Group are prepared in accordance with International Financial
Reporting Standards as issued by the International Accounting Standards
Board and interpretations of these standards 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, financial instruments and liabilities.
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.
The following standards, amendments and interpretations to existing
standards have been published and are mandatory for the entity’s
accounting periods beginning on or after 1 January 2017 or later periods,
but the entity has not early adopted them:
• Amendments to IAS 7 ‘Statement of Cash Flows’ on disclosure
initiative (effective 1 January 2017). These amendments to IAS 7
introduce an additional disclosure that will enable users of financial
statements to evaluate changes in liabilities arising from financing
activities.
• Amendments to IAS 12 ‘Income Taxes’ on recognition of deferred tax
assets for unrealised
losses (effective 1 January 2017). These
amendments on the recognition of deferred tax assets for unrealised
losses clarify how to account for deferred tax assets related to debt
instruments measured at fair value.
The financial statements are presented in Papua New Guinea Kina,
expressed in thousands of Kina, as permitted by Papua New Guinea
Accounting Standards.
Standards, amendment and interpretations effective for the year ended
31 December 2016
The following new standards and amendments were applicable for the first
time during the accounting period beginning 1 January 2016:
• Amendments to IAS 27 ‘Separate financial statements’ on the equity
method. These amendments allow entities to use the equity method
to account for investments in subsidiaries, joint ventures and associates
in their separate financial statements.
• Annual improvements 2014 makes minor changes to IFRS 5, IFRS 7, IAS
19 and IAS 34.
• Amendments to IAS 1 ‘Presentation of Financial Statements’ form a
part of the IASB’s Disclosure Initiative and clarify guidance in IAS 1 on a
number of issues including:
- Materiality – disclosures specified in IFRS only need to be included
in financial statements if they are material to the entity
- Disaggregation and subtotals – line items specified in IAS 1 may
need to be disaggregated where this is relevant to an understanding
of the entity’s financial position or performance. However, entities
should not aggregate or disaggregate information in a manner that
obscures useful information. There is also new guidance on the use
of subtotals.
- Notes – confirmation that the notes do not need to be presented in
a particular order
- Other comprehensive income (OCI) arising from investments
accounted for under the equity method: the share of OCI arising
from equity-accounted investments is grouped based on whether
the items will or will not subsequently be reclassified to profit
or loss. Each group should then be presented as a single line item in
the statement of OCI.
• Amendments to IFRS 10 and IAS 28 on investment entities applying
the consolidation exemption. The amendments to IFRS 10 clarify
that the exception from preparing Financial Statements is available to
intermediate parent entities which are subsidiaries of investment
• Amendments to IFRS 2 ‘Share based payments’ on clarifying how to
account for certain types of share-based payment transactions
(effective 1 January 2018). This amendment clarifies the measurement
basis for cash-settled, share-based payments and the accounting for
modifications that change an award from cash-settled to equity-
settled. It also introduces an exception to the principles in IFRS 2 that
will require an award to be treated as if it was wholly equity-settled,
where an employer is obliged to withhold an amount for the
employee’s tax obligation associated with a share-based payment and
pay that amount to the tax authority.
•
IFRS 9, ‘Financial Instruments’ (effective 1 January 2018) replaces the
guidance in IAS 39 with a standard that is less complex and principles
based. The new standard simplifies the model for classifying and
recognising financial instruments and aligns hedge accounting more
closely with common risk management practices. Changes in own
credit risk in respect of liabilities designated at fair value through profit
or loss shall now be presented within OCI; this change can be adopted
early without adopting IFRS 9. IFRS 9’s new impairment model is a
move away from IAS 39’s incurred credit loss approach to an expected
credit loss model. Earlier recognition of impairment losses is likely to
result and for entities with significant lending activities, an overhaul of
related systems and processes will be needed.
•
IFRS 15 ‘Revenue from contracts with customers’ (effective 1 January
2018) is a converged standard from the IASB and FASB on revenue
recognition and replaces IAS 11 and IAS 18. The new standard is
based on the principle that revenue is recognised when control of a
good or service transfers to a customer – so the notion of control
replaces the existing notion of risks and rewards.
The entity will have to adopt a new 5-step process for the recognition of
revenue:
identify contracts with customers
-
-
identify the separate performance obligations
- determine the transaction price of the contract
- allocate the transaction price to each of the separate performance
obligations, and
recognise the revenue as each performance obligation is satisfied.
-
• Amendments to IFRS 15 (effective 1 January 2018). These amendments
comprise clarifications of the guidance on identifying performance
46
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
obligations, accounting for licences of intellectual property and the
principal versus agent assessment (gross versus net revenue
presentation).
•
IFRS 16, ‘Leases’ (effective 1 January 2019) replaces the guidance in IAS
17 and will have a significant impact on accounting by lessees. The
previous distinction under IAS 17 between finance leases and operating
leases for lessees has been removed. IFRS 16 now requires a lessee to
recognise a lease liability representing future lease payments and
a ‘right-of-use asset’ for virtually all lease contracts. There is an
optional exemption for certain short-term leases and leases of low-
value assets. Under IFRS 16, a contract is, or contains, a lease if the
contract conveys the right to control the use of an identified asset for a
period of time in exchange for consideration.
• Amendments to IFRS 4, ‘Insurance contracts’ (effective 1 January 2018)
regarding implementation of IFRS 9. These amendments introduce two
approaches: an overlay approach and a deferral approach. The
amended standard will:
- give all companies that issue insurance contracts the option to
recognise in OCI, rather than profit or loss, the volatility that could
arise when IFRS 9 is applied before the new insurance contracts
standard is issued; and
- give companies whose activities are predominantly connected with
insurance an optional temporary exemption from applying IFRS 9
until 2021, in which case they will continue to apply IAS 39.
• Amendments to IAS 40, ‘Investment property’ (effective 1 January
2018) relating to transfers of investment property. These amendments
clarify that to transfer to, or from, investment properties there must be
a change in use. To conclude if a property has changed use there
should be an assessment of whether the property meets the definition.
This change must be supported by evidence.
• Annual improvements 2014 – 2016 makes minor changes to IFRS 1,
IFRS 12 and IAS 28.
•
IFRIC 22, ‘Foreign currency transactions and advance consideration’
(effective 1 January 2018) addresses foreign currency transactions or
parts of transactions where there is consideration that is denominated
or priced in a foreign currency. The interpretation provides guidance
for when a single payment/receipt is made as well as for situations
where multiple payments/receipts are made.
The Group and the Bank have conducted investigations and do not consider
that there is any measurement or recognition issues arising from the
release of these new pronouncements that will have a significant impact
on the reported financial position or financial performance of the Group
and the Bank for the year ended 31 December 2016.
IFRS 9 and IFRS 16 may have significant impact on the financial statements
of the Group and the Bank when these standards become effective. IFRS
9 will affect the classification, measurement and impairment of financial
instruments. IFRS 16 will require the recognition of all leases on the Group
and the Bank’s statement of financial position.
B. Consolidation
The Financial Statements incorporate the assets and liabilities of all
controlled entities of the Group as at 31 December 2016, 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.
Subsidiaries are accounted for at acquisition under the acquisition cost
method of accounting, where:
-
acquisition cost is measured at fair value of assets transferred, equity
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
-
-
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 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 and Joint Arrangements
Investments in Associates
Associates are entities over which the Group has significant, but not
controlling influence, generally accompanied by a shareholding conferring
between 20% - 50% of voting rights.
In the Financial Statements, these investments are accounted for under
the equity method.
Interests In Joint Arrangements
The Group applies IFRS 11 to all joint ventures. Under IFRS 11 investments
in joint arrangements are classified as either joint ventures or joint
operations depending on the contractual rights and obligations of each
investor.
Joint ventures are accounted for using the equity method in the Financial
Statements. Under the equity method of accounting, interests in joint
ventures are initially recognised at cost and adjusted thereafter to recognise
the Group’s share of the post-acquisition profits or losses and movements
in other comprehensive income. When the Group’s share of losses in a
joint venture equals or exceeds its interests in the entity (which includes
any long-term interests that, in substance, form part of the group’s net
investment in the joint ventures), the Group does not recognise further
losses, unless it has incurred obligations or made payments on behalf of
the joint ventures.
Interests in joint ventures classified as held for sale are accounted for under
IFRS 5 Non-current Assets Held for Sale and Discontinued Operations.
D. Revenue
Interest income and expense
Interest income and expense are recognised in the Statements of
Comprehensive Income on an accrual basis using the effective interest
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.
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 policyholder.
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 Statement of Financial Position date is reported as the unearned
premium liability. Premiums are shown before deduction of commission.
47
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
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 Statement of Financial
Position 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, survival,
disability or critical illness) over a long duration. Guaranteed benefits paid
on occurrence of the specified insurance event are fixed or linked to the
level of bonus declared on the policy. 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% 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 in
the form of reversionary 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.
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 Services
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 experiences on claims, expense, mortality
and investment returns. The policy liability also includes policy owner
retained earnings.
Insurance policy liabilities are further detailed in Note 39.
Foreign exchange income/(losses)
Realised and unrealised gains or losses from foreign currency trading,
or from changes in the fair value of the trading assets and liabilities are
recognised as income in the Statement of Comprehensive Income in the
period in which they arise.
E. Fee and 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. Loan origination
fees are deferred over the expected term of the financial instrument
according to the effective interest method. The effective interest method
uses the rate that exactly discounts estimated future payments and receipts
through the expected life of the instrument or when appropriate, a shorter
period to the net carrying amount of the financial asset.
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.
48
G. Provision for loan impairment
Loans are originated by providing funds directly to the borrower and are
recognised when cash is advanced to borrowers.
All loans, advances and other receivables from customers are subject to
continuous management review. A specific provision for loan impairment
is established if there is objective evidence that 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 Statements of
Comprehensive Income.
General provisions for impairment are maintained to cover incurred losses
unidentified at balance date in the overall portfolio of loans, advances
and other receivables from customers. 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 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 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 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 programs are recognised
as an expense when incurred.
J. Property, plant and equipment
Land and buildings are carried at revalued amounts, being its fair value
at the date of revaluation less subsequent accumulated depreciation
and impairment losses. 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 the statement
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
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. Buildings under constructions are referred to as work in progress
and are accounted for at cost and subsequently reclassified to buildings
(premises) upon completion.
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 value and depreciation method
is reviewed at the end of each annual reporting period.
also categorised as held for trading unless they are designated as
hedges. Assets in this category are classified as current assets if
expected to be settled within 12 months, otherwise they are classified
as non-current. The Group’s financial assets at fair value through profit
or loss comprise certain equity securities included under other financial
assets in the Statement of Financial Position.
b) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
are included in current assets, except for maturities greater than 12
months after the end of the reporting period. These are classified as
non-current assets. The Group’s loans and receivables comprise ‘trade
and other receivables’ and ‘cash and cash equivalents’ in the Statement
of Financial Position
The following basis and method of depreciation is used:
Class of asset
Method
Rate
Property
(excluding land)
Straight line basis
2 - 3% p.a
Plant and equipment
Straight line basis
10 - 25% pa
Equipment under
operating lease
Straight line basis
6 - 20% 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 Group are operating leases. Total payments
made are charged to the Statement of Comprehensive Income using the
straight line method.
Bank is lessor
Finance leases are included in Loans, Advances and Other Receivables
from Customers and are accounted for under the finance method whereby
income is recognised using the effective interest method. 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 or revalued amount 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 and 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 with
original maturities of less than three months.
M. Financial assets
The Group classifies its financial assets in the following categories: at fair
value through profit or loss, loans and receivables, and available for sale.
The classification depends on the purpose for which the financial assets
were acquired. Management determines the classification of its financial
assets at initial recognition.
a) Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss are financial assets
held for trading. A financial asset is classified in this category if acquired
principally for the purpose of selling in the short term. Derivatives are
c) Held to maturity investments
Held to maturity investments includes non-derivative financial assets
with fixed or determinable payments and fixed maturities that the
Group has both the intention and ability to hold to maturity.
Management determines the classification of investment securities held
to maturity at
the
appropriateness of that classification at the end of each reporting
period. Investment securities held to maturity are carried at amortised
cost. The Group’s held to maturity investments comprise securities
issued by Governments and Central Banks of respective countries
(Treasury and Central Bank Bills) and certain debt securities included
under other financial assets in the Statement of Financial Position.
initial recognition and reassesses
their
Recognition and Measurement
Regular purchases and sales of financial assets are recognised on the trade-
date – the date on which the Group commits to purchase or sell the asset.
Investments are initially recognised at fair value plus transaction costs for
all financial assets not carried at fair value through profit or loss. Financial
assets carried at fair value through profit or loss are initially recognised
at fair value, and transaction costs are expensed in the Statement of
Comprehensive Income. Financial assets are derecognised when the
rights to receive cash flows from the investments have expired or have
been transferred and the Group has transferred substantially all risks and
rewards of ownership. Available-for-sale financial assets and financial
assets at fair value through profit or loss are subsequently carried at fair
value. Loans and receivables are subsequently carried at amortised cost
using the effective interest method.
Gains or losses arising from changes in the fair value of the ‘financial assets
at fair value through profit or loss’ category are presented in the Statement
of Comprehensive Income within ‘Other banking income’ in the period
in which they arise. Dividend income from financial assets at fair value
through profit or loss is recognised in the Statement of Comprehensive
Income as part of other income when the Group’s right to receive payments
is established.
Offsetting financial instruments
Financial assets and liabilities are offset and the net amount reported in the
Statement of Financial Position when there is a legally enforceable right to
offset the recognised amounts and there is an intention to settle on a net
basis or realise the asset and settle the liability simultaneously. The legally
enforceable right must not be contingent on future events and must be
enforceable in the normal course of business and in the event of default,
insolvency or bankruptcy of the company or the counterparty.
N. Provisions
Provisions are recognised when the Group has a present obligation (legal or
constructive) as a result of a past event, it is probable that the Group 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 to settle
49
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
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.
O. Employee benefits
A liability is required for benefits accruing to employees in respect of
wages and salaries, annual leave, and 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 at 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.
Post-employment benefits - defined contribution plans
A defined contribution plan is a pension plan under which the Group pays
fixed contributions into a separate fund, and there is no recourse to the
Group for employees if the fund has insufficient assets to pay employee
benefits relating to service up to the balance sheet date.
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 Group intends to settle
its current tax assets and liabilities on a net basis.
Current and 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.
Q. Foreign currency
The Financial Statements of the Group 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.
In preparing the Financial Statements, transactions in currencies other
than the entity’s functional currency (foreign currencies) are recorded at
the rates 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.
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 staff members
other than non-citizen contract staff for whom there is no legal obligation
to do so. The contributions are at the current rate of employees’ gross
salary. Once the contributions have been paid, the Group has no further
payment obligations for post-employment benefits from the date an
employee ceases employment with the Group.
Foreign operations
On consolidation, the assets and liabilities of the consolidated 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
P. Income tax
R. Share capital
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 the 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 the reporting date. The measurement
of deferred tax liabilities and assets reflects the tax consequences that
would follow from the manner in which the Group expects, at the reporting
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.
S. Asset impairment
At each reporting date, 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 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 the asset may be impaired. An impairment of
goodwill is not subsequently reversed.
Recoverable amount is the higher of fair value less cost of disposal 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
50
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
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.
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.
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.
W. Segment reporting
Segments are reported in a manner consistent with the internal reporting
provided to the Group’s chief operating decision maker.
X. Earnings per share
Earnings per share is determined by dividing the profit or loss attributable
to owners of the Bank by the weighted average number of participating
shares outstanding during the reporting year.
Y. Comparatives
Comparative figures have been adjusted to conform to changes in
presentation in the current year.
T. Non-current assets held for sale
Z. Critical accounting estimates and judgments
The application of the Group’s accounting policies requires the use of
estimates and assumptions. If different assumptions or estimates were
applied, the resulting values would change, impacting the net assets and
income of the Group.
The areas involving significant estimates of judgments are:
• Estimated impairment of financial and non-financial assets – note 1(g)
and 1(s)
• Estimation of current tax payable and current tax expense – note 6
• Estimated goodwill impairment – note 7(a)
• Estimated useful life of computer systems development costs - note
7(b)
• Estimated insurance liability – note 21
• Estimation of fair value of financial assets and liabilities – note 38
• Estimation of fair value of non-financial assets - note 38
• Estimated fair values of assets acquired and liabilities assumed in a
business combination – note 40
Estimates and judgments are continually evaluated. They are based on
historical experience and other factors, including expectations of future
events that may have a financial impact on the entity and that are believed
to be reasonable under the circumstances.
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 Group’s control and the Group remains
committed to a sale.
U. Fiji class shares
Fiji Class Shares issued by BSP Convertible Notes (Fiji) Limited, a subsidiary
of the Bank incorporated in Fiji, are classified as equity of the subsidiary.
V. Derivative financial instruments and acceptances
Forward foreign exchange contracts entered into for trading purposes are
initially recognised at fair value 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 Group to pay bills of exchange
drawn on customers. 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.
51
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
2. NET INTEREST INCOME
Net interest income
All amounts are expressed in K’000
Interest income
Cash and balances with Central Bank
Treasury bills
Central Bank Bills
Other financial assets - Inscribed Stock
Loans, advances and other receivables from customers
Other
Less:
Interest expense
Customer deposits
Other banks
Subordinated debt securities
3. FEE AND COMMISSION INCOME
Fee and commission income
Product related
Trade and international related
Electronic banking related
Other
Less:
Fee and commission expenses
Agencies
International Finance Corporation fees
4. OTHER INCOME
Foreign exchange related
Operating lease rentals
Other
Consolidated Bank
2016
2015
2016
2015
4,498
146,692
187
191,333
922,046
3,155
9,069
88,366
8,269
210,270
782,619
2,273
5,935
146,684
187
191,333
867,010
3,522
9,954
88,366
8,269
210,270
763,984
2,438
1,267,911
1,100,866
1,214,671
1,083,281
140,229
11,665
8,331
160,225
1,107,686
73,660
12,647
8,308
94,615
1,006,251
133,757
11,695
8,331
153,783
1,060,888
205,788
19,447
105,758
32,288
363,281
384
560
944
186,258
14,377
87,813
25,483
313,931
532
2,931
3,463
198,864
18,867
100,219
23,720
341,670
346
560
906
72,650
12,140
8,308
93,098
990,183
184,445
14,373
86,213
19,506
304,537
374
2,931
3,305
362,337
310,468
340,764
301,232
253,758
10,104
34,216
298,078
178,943
10,104
20,128
209,175
231,436
10,104
35,505
277,045
170,839
10,104
19,482
200,425
Foreign Exchange related income includes gains and losses from spot and forward contracts and translated foreign currency assets.
52
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
5. OPERATING EXPENSES
All amounts are expressed in K’000
2016
2015
2016
2015
Consolidated
Bank
Administration
Computing
Depreciation
Amortisation of computer development
Non-executive Directors costs
Non-lending losses
Fixed asset impairment expenses
Premises and equipment
Staff costs
Defined contribution plans
Statutory benefit contributions
Wages and salaries
Other staff benefits
6. INCOME TAX
Income tax expense
Current tax
Deferred tax
Current year
Adjustments to prior year estimates
Tax calculated at 30% of profit before tax (2015:30%)
Tax calculated at respective subsidiary tax rates
Expenses not deductible for tax
Tax loss not recognised
Deductible expenses not recognised for accounting purposes
Adjustments to prior year estimates
Provision for Income Tax
At 1 January
Income tax provision
Adjustments to prior year estimates
Tax payments made
At 31 December
137,768
126,095
127,119
108,591
75,205
62,125
32,508
2,798
25,661
12,003
84,238
48,307
70,007
44,713
2,249
17,496
44,666
62,857
63,277
58,299
30,522
1,935
24,845
12,003
77,987
47,307
67,607
44,224
1,713
28,328
44,666
60,656
432,306
416,390
395,987
403,092
13,229
10,318
255,902
57,886
337,335
769,641
290,500
(22,700)
267,800
12,543
280,343
263,729
11,231
6,175
2,668
(16,003)
12,543
280,343
(39,005)
(290,500)
(8,566)
338,647
576
11,463
(676)
209,189
54,718
274,694
691,084
260,995
(35,712)
225,283
8,988
234,271
12,375
9,826
236,020
54,931
313,152
709,139
281,352
(23,335)
258,017
14,407
272,424
11,079
(784)
199,766
52,826
262,887
665,979
257,544
(43,738)
213,806
8,581
222,387
218,441
263,729
218,441
6,510
5,175
2,617
(7,460)
8,988
234,271
(63,022)
(260,995)
2,228
282,784
(39,005)
-
2,563
-
(8,275)
14,407
272,424
(36,168)
(281,352)
(9,141)
330,331
3,670
-
2,825
-
(7,460)
8,581
222,387
(62,738)
(257,544)
1,277
282,837
(36,168)
53
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
6. INCOME TAX (continued)
All amounts are expressed in K’000
2016
2015
2016
2015
Consolidated
Bank
Deferred taxes
Specific allowance for losses on loans, advances and other receivables
from customers
General allowance for losses on loans, advances and other receivables
from customers
Employee related provisions
Prepaid expenses
Other provisions
Property, plant and equipment
Unrealised foreign exchange gains
Accruals
At 31 December
Deferred tax asset
Deferred tax liability
At 31 December
Deferred taxes movement
At 1 January
Current year movement
Revaluation recognised in equity
Adjustments to prior year estimates
Other movements
At 31 December
34,251
32,603
32,666
32,118
117,976
95,541
113,807
92,262
20,459
(1,126)
16,162
(39,842)
(4,250)
26,459
170,089
229,867
(59,778)
17,955
(1,396)
14,028
(32,676)
(3,626)
24,960
147,389
199,444
(52,055)
19,213
(1,204)
29,041
(30,500)
(4,320)
23,922
182,625
218,649
(36,024)
16,378
(1,396)
25,502
(31,240)
(3,626)
29,292
159,290
195,553
(36,263)
170,089
147,389
182,625
159,290
147,389
22,700
-
-
-
111,677
35,712
4,441
(2,999)
(1,442)
159,290
23,335
-
-
-
115,552
43,738
4,441
(2,999)
(1,442)
170,089
147,389
182,625
159,290
54
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
7. INTANGIBLE ASSETS
All amounts are expressed in K’000
2016
2015
2016
2015
Consolidated
Bank
7(a) Goodwill
At 1 January
Net movement
Gross carrying amount
42,374
2,933
45,307
21,271
21,103
42,374
35,672
5,379
41,051
18,267
17,405
35,672
Goodwill was tested for impairment as at 31 December 2016 and no impairment has been recognised in the Statement of Comprehensive Income.
7(b) Computer development costs
At 1 January
Additions
Disposals
Amortisation expense
At 31 December
Total intangible assets
8. INVESTMENTS IN SUBSIDIARIES
All amounts are expressed in K’000
67,852
22,580
(11,605)
(32,508)
46,319
91,626
89,103
34,511
(11,049)
(44,713)
67,852
110,226
63,929
21,871
(11,602)
(30,522)
43,676
84,727
85,943
33,257
(11,047)
(44,224)
63,929
99,601
Principal
activity
Place of Incorporation
and Operation
Ownership
%
Balance of Investment
Name of Subsidiary
BSP Capital Limited
BSP Life Limited
BSP Convertible Notes Limited
BSP Finance Limited
Bank of South Pacific Tonga Ltd
Bank South Pacific (Samoa) Ltd
Bank South Pacific Vanuatu Ltd
At 31 December
Share brokerage/Fund
Management/Capital Raising
Life Insurance
Capital Raising
Credit Institution
Bank
Bank
Bank
PNG
100%
5,500
2,000
2016
2015
Fiji
Fiji
PNG
Tonga
Samoa
Vanuatu
100%
100%
100%
100%
98.7%
100%
87,599
87,599
371
44,449
71,610
70,712
38,020
371
27,958
71,610
70,331
-
318,261
259,869
During the year the Bank acquired one subsidiary as part of its acquisition of interests in regional banks (refer to note 40). Investment in subsidiaries
are stated at cost, less impairment.
Provision for impairment of the Investment in BSP Capital Limited
In the prior year the directors determined that the investment in BSP Capital Limited had been materially impaired as the carrying amount of the
investment was greater than its recoverable value. As of the reporting date that year, the investment amount is written down to its net book value.
Represented by:
All amounts are expressed in K’000
Opening Balance
Additional capital
Provision for Impairment
At 31 December
2016
2,000
3,500
-
5,500
2015
8,959
4,109
(11,068)
2,000
55
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
9. INVESTMENT IN ASSOCIATES AND JOINT VENTURES
Entity
Joint
Venture/
Associate
Principal activity
Place of
incorporation
and operation
Suva Central Ltd
Richmond Ltd
Joint Venture
Property rental
Joint Venture
Hotel operation
Williams and Gosling Ltd
Associate
Freight forwarding
Fiji
Fiji
Fiji
The investments above are accounted for using the equity method in the Financial Statements.
*Both ownership and voting power held, **ownership, ***voting power held.
Proportion of ownership and voting power held
2016
50%*
2015
50%*
61.3%**,50%***
61.3%**,50%***
27.7%*
27.7%*
All amounts are expressed in K’000
2016
2015
2016
2015
Consolidated
Bank
Associates
Investment in associate - equity
Translation movement
Share of profit for the year
Net investment at 31 December
Summarised financial information of associate:
Total assets
Total liabilities
Net assets
Share of profits
Group adjustment
Share of profit in Group
Joint ventures
Investment in joint ventures
Movement
Share of profit for the year
Net investment at 31 December
Summarised financial information of joint ventures:
Total assets
Total liabilities
Net assets
Share of profits
Group adjustment
Share of profit in Group
Associates and Joint Ventures
Share of associate’s net assets - equity
Shares held in jointly owned entity - at cost less impairment
Total investments in associates and joint ventures
56
8,820
442
3,597
12,859
46,131
(9,168)
36,963
1,719
1,878
3,597
93,620
4,804
14,338
112,762
180,793
(57,663)
123,130
6,574
7,764
14,338
12,859
112,761
125,620
8,085
660
75
8,820
43,176
(8,882)
34,294
1,710
(1,635)
75
84,985
6,984
1,650
93,619
159,854
(59,375)
100,479
4,859
(3,209)
1,650
8,820
93,619
102,439
-
-
-
-
-
-
-
-
-
-
14,570
752
1,191
16,513
62,959
(29,933)
33,026
1,191
-
1,191
-
16,513
16,513
-
-
-
-
-
-
-
-
-
-
13,353
1,090
127
14,570
56,017
(26,878)
29,139
127
-
127
-
14,570
14,570
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 10. CASH AND BALANCES WITH CENTRAL BANK
Consolidated
Bank
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
All amounts are expressed in K’000
Notes, coins and cash at bank
2016
2015
483,966
468,712
Balances with Central Bank other than statutory deposit
Total cash and balances with Central Bank
1,172,294
1,656,260
11. TREASURY AND CENTRAL BANK BILLS
2016
445,503
964,505
2015
403,269
607,587
733,754
1,202,466
1,410,008
1,010,856
Treasury and Central Bank bills – face value
3,000,888
2,541,571
2,985,751
2,539,719
Discount for interest receivable
At 31 December
(67,267)
2,933,621
(38,462)
2,503,109
(67,267)
2,918,484
(38,463)
2,501,256
Treasury and Central Bank bills are debt securities issued by Central Banks. These bills are classified as assets held for trading and carried at fair value
by the Insurance business and as assets held to maturity and carried at amortised cost by the Banking businesses.
12. AMOUNTS DUE FROM OTHER BANKS
Items in the course of collection
Placements with other banks
At 31 December
29,779
18,259
29,779
774,453
804,233
691,898
710,157
661,373
691,152
18,260
569,017
587,277
The Group undertakes thorough compliance and due diligence reviews before entering into any correspondent banking relationships.
13. LOANS, ADVANCES AND OTHER RECEIVABLES FROM CUSTOMERS
Overdrafts
Lease financing
Term loans
Mortgages
Policy loans
Gross loans, advance and other receivables due from customers net of
reserved interest
Less allowance for losses on loans, advances and other receivables from
customers
731,500
583,436
692,256
557,746
198,457
7,976,794
245,153
7,059,098
175,445
7,458,125
230,487
6,710,903
1,672,965
1,137,938
1,417,495
1,110,619
46,854
42,761
-
-
10,626,570
9,068,386
9,743,321
8,609,755
(523,661)
(446,872)
(488,241)
(428,528)
At 31 December
10,102,909
8,621,514
9,255,080
8,181,227
The spread of the loans are detailed in the maturity analysis table on Note 34. The loans are well-diversified across various sectors and are further
analysed on Note 33.
Lease financing
The Group and the bank provide lease financing 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, advances and other receivables from customers and are analysed as
follows:
57
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
13. LOANS, ADVANCES AND OTHER RECEIVABLES FROM CUSTOMERS (continued)
All amounts are expressed in K’000
2016
2015
2016
2015
Consolidated
Bank
Gross investment in finance lease 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
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
At 31 December
Provision for impairment
Movement in allowance for losses on loans, advances and other
receivables from customers:
Balance at 1 January
Net new and increased provisioning
Loans written off against provisions / (Write back of provisions
no longer required)
38,130
181,996
220,126
(1,646)
(20,023)
(21,669)
198,457
36,484
161,973
198,457
56,733
215,911
272,644
(4,963)
(22,528)
(27,491)
245,153
51,770
193,383
245,153
35,604
156,783
192,387
(1,441)
(15,501)
(16,942)
175,445
34,163
141,282
175,445
49,816
201,049
250,865
(1,803)
(18,575)
(20,378)
230,487
48,013
182,474
230,487
446,872
75,406
1,383
328,037
74,410
44,425
428,528
70,096
(10,383)
327,087
71,201
30,240
At 31 December
523,661
446,872
488,241
428,528
Provision for impairment is represented by:
Collective provision
Individually assessed or specific provision
At 31 December
Loan impairment expense
Net collective provision funding
Net new and increased individually assessed provisioning
Total new and increased provisioning
Recoveries during the year
Net write back/(write off)
At 31 December
398,988
124,673
523,661
60,786
14,620
75,406
329,641
117,231
446,872
51,406
23,004
74,410
379,355
108,886
488,241
58,491
11,605
70,096
321,468
107,060
428,528
48,656
22,545
71,201
(49,721)
(60,155)
(49,104)
(59,713)
72,937
98,622
75,650
89,905
69,468
90,460
75,169
86,657
58
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
14. PROPERTY, PLANT AND EQUIPMENT
All amounts are expressed in K’000
2016
2015
2016
2015
Consolidated
Bank
Carrying value
Capital Work in Progress
Premises
Accumulated depreciation
Equipment
Accumulated depreciation
At 31 December
Assets held for sale (premises)
Net assets at 31 December
Reconciliation is as follows:
Capital work in progress
At 1 January
Additions
Transfers
At 31 December
Premises
At 1 January
Additions
Disposals
Revaluation gains/ (losses)
Depreciation expense
At 31 December
Equipment
At 1 January
Additions
Disposals
Depreciation expense
At 31 December
157,713
522,393
(119,927)
402,466
335,088
(211,769)
123,319
683,498
-
683,498
158,621
51,932
(52,840)
157,713
469,585
20,723
(78,279)
14,915
(24,478)
402,466
93,254
66,312
(1,752)
(34,495)
123,319
158,621
578,832
(109,247)
469,585
281,633
(188,379)
93,254
721,460
(35,135)
686,325
180,694
127,472
(149,545)
158,621
453,677
77,426
(41,383)
7,400
(27,535)
469,585
92,994
50,174
(10,928)
(38,986)
93,254
144,975
475,696
151,589
527,023
(112,856)
(104,351)
362,840
227,004
(165,651)
61,353
569,168
-
569,168
151,589
45,847
(52,461)
144,975
422,672
15,800
(57,144)
4,249
(22,737)
362,840
58,247
32,014
(1,535)
(27,373)
61,353
422,672
209,931
(151,684)
58,247
632,508
(35,135)
597,373
176,719
112,205
(137,335)
151,589
436,957
66,934
(41,383)
(13,506)
(26,330)
422,672
81,058
21,672
(10,928)
(33,555)
58,247
59
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
14. PROPERTY, PLANT AND EQUIPMENT (continued)
All amounts are expressed in K’000
Assets subject to operating lease
Carrying value
Aircraft
Accumulated depreciation
At 31 December
Reconciliation of carrying value of aircraft is set out below:
Aircraft
At 1 January
Depreciation
Revaluation net increase
At 31 December
Future minimum lease receipts
Not later than 1 year
Later than 1 year and not later than 5 years
At 31 December
Consolidated
Bank
2016
2015
2016
2015
130,122
(85,454)
44,668
130,122
(77,265)
52,857
130,122
(85,454)
44,668
130,122
(77,265)
52,857
52,857
(8,189)
-
44,668
5,219
-
5,219
53,783
(7,722)
6,796
52,857
10,104
5,219
15,323
52,857
(8,189)
-
44,668
5,219
-
5,219
18,433
118,655
18,070
155,158
53,783
(7,722)
6,796
52,857
10,104
5,219
15,323
25,987
128,935
21,834
176,756
The carrying amount of land and buildings and aircraft had they been recognised under the cost model are as follows:
Freehold land
Buildings
Aircraft
At 31 December
18,911
122,706
18,070
159,687
25,987
132,727
21,834
180,548
Freehold land and buildings carried at fair value
Independent valuations of the Bank’s land and buildings were performed by Countrywide Realty Limited and The Professional Valuers of PNG Limited to
determine the fair value of the land and buildings. The valuations, which conform to International Valuation Standards, were determined by reference to
capitalisation of the notional income stream approach on the Market Value basis. The recent valuation was dated 31 December 2014.
Assets subject to operating lease – aircraft
An independent valuation of the Bank’s aircrafts was performed by Ascend Advisory 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 valuation was 31 March 2014 and was extrapolated to 31 December 2015 based on expected fair values per the
aircraft lease contracts.
60
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
15. INVESTMENT PROPERTIES
All amounts are expressed in K’000
2016
2015
2016
2015
Consolidated
Bank
Opening net book value
Additions
Translation movement
Gain on revaluation
At 31 December
16. OTHER FINANCIAL ASSETS
Securities – held to-maturity:
101,019
4,127
5,250
7,194
117,590
70,684
10,325
5,736
14,274
101,019
-
-
-
-
-
-
-
-
-
-
Inscribed stock – issued by Central Bank
2,218,037
2,227,847
2,044,905
2,074,124
Financial assets carried at fair value through profit and loss:
Equity securities
At 31 December
17. OTHER ASSETS
Funds in transit and other assets
Accrued interest income
Intercompany account
Outstanding premiums
Inventory
Prepayments
Accounts receivable
At 31 December
18. AMOUNTS DUE TO OTHER BANKS
Vostro account balances
Other borrowings
At 31 December
19. CUSTOMER DEPOSITS
On demand and short term deposits
Term deposits
At 31 December
113,435
2,331,472
81,079
-
-
2,308,926
2,044,905
2,074,124
150,018
82,409
-
35,902
7,698
16,269
2,689
115,258
83,814
-
30,831
6,896
15,311
3,025
294,985
255,135
24,773
276,518
301,291
39,185
305,161
344,346
145,353
74,093
12,344
-
-
14,999
746
247,535
50,038
277,785
327,823
107,147
78,763
4,614
-
-
14,706
1,328
206,558
38,789
306,088
344,877
12,832,771
4,079,578
16,912,349
11,589,377
12,272,022
11,390,548
3,005,997
3,871,674
2,857,748
14,595,374
16,143,696
14,248,296
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 on note 34.
The deposits are diversified across industries and region.
61
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
20. SUBORDINATED DEBT SECURITIES
At 31 December, there is 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 other breaches with respect to these debt securities since issue.
21. OTHER LIABILITIES
Consolidated
Bank
All amounts are expressed in K’000 Note
2016
2015
2016
2015
Creditors and accruals
Items in transit and all other liabilities
Policy liabilities 39(b)
Premiums received in advance
Outstanding claims
Claims incurred but not reported (IBNR)
104,679
293,870
640,043
5,295
13,211
1,396
115,785
269,958
563,441
5,969
12,462
1,564
82,987
281,447
95,900
257,352
-
-
-
-
-
-
-
-
At 31 December
1,058,494
969,179
364,434
353,252
22. OTHER PROVISIONS
Staff related
Provision for non-lending loss
Provisions – other
Staff related provisions:
At 1 January
Provisions charge
Payouts
At 31 December
76,684
52,163
40,960
169,807
62,205
39,986
(25,507)
76,684
62,205
47,762
33,731
65,206
51,944
39,248
55,274
47,743
29,518
143,698
156,398
132,535
67,665
34,969
(40,429)
62,205
55,274
31,165
(21,233)
65,206
62,547
30,535
(37,808)
55,274
62
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 23. ORDINARY SHARES
Number of shares in '000s, Book value in K'000
At 31 December 2014/1 January 2015
Share buyback
At 31 December 2015 / 1 January 2016
Share buyback
At 31 December 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
Number of shares
Book value
468,137
(612)
467,525
(196)
467,329
379,297
(4,676)
374,621
(1,520)
373,101
In May 2014, the Directors agreed to introduce a share-buyback scheme of up to K15 million. The share-buyback commenced in July 2014 and was
extended to such time when the allocated K15 million buyback was utilised, or if the Board wishes, anytime before that.
All amounts are expressed in K’000
Earnings per ordinary share
Consolidated
Bank
2016
2015
2016
2015
Net Profit attributable to shareholders (K’000)
Weighted average number of ordinary shares in use (‘000)
Basic and diluted earnings per share (expressed in toea)
643,451
467,427
137.7
531,879
467,831
113.7
606,674
467,427
129.8
505,749
467,831
108.1
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 ordinary share
equals diluted earnings per share.
Dividend paid on ordinary shares
Interim ordinary dividend (2016:25 toea; 2015:22.5 toea)
Final ordinary dividend (2015: 63 toea; 2014: 56 toea)
116,832
297,141
413,973
105,938
263,872
369,810
116,832
294,448
411,280
105,218
262,021
367,239
63
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
24. RETAINED EARNINGS AND OTHER RESERVES
All amounts are expressed in K’000
2016
2015
2016
2015
Consolidated
Bank
1,399,490
643,451
(413,973)
42,537
(957)
47
1,219,436
531,879
(369,810)
22,103
(4,118)
-
1,340,000
606,674
(411,280)
42,537
(957)
-
1,183,505
505,749
(367,239)
22,103
(4,118)
-
1,670,595
1,399,490
1,576,974
1,340,000
134,892
166,878
130,470
163,023
635
21,578
32,005
76,980
635
21,578
31,048
34,926
635
-
32,005
46,265
635
-
31,048
21,663
266,090
255,065
209,375
216,369
166,878
(1,265)
(42,537)
11,816
-
134,892
635
635
31,048
957
32,005
166,230
21,450
(22,103)
6,631
(5,330)
166,878
635
635
26,930
4,118
31,048
163,023
(1,832)
(42,537)
11,816
-
130,470
635
635
31,048
957
32,005
166,230
14,304
(22,103)
6,631
(2,039)
163,023
635
635
26,930
4,118
31,048
Retained earnings
At 1 January
Net profit for the year
Dividends paid
Disposal of assets – Asset revaluation
BSP Life policy reserve
Gain in minority interest
At 31 December
Other reserves comprise
Revaluation reserve
Capital reserve
Equity component of Fiji Class Shares
General reserve
Exchange reserve
Movement in reserves for the year:
Revaluation reserve
At 1 January
Asset revaluation increment
Transfer assets revaluation reserve to retained earnings
Deferred tax on disposal of properties
Deferred tax on asset revaluation – prior year
At 31 December
Capital reserve
At 1 January
At 31 December
General reserve
At 1 January
BSP Life policy reserve
At 31 December
64
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
24. RETAINED EARNINGS AND OTHER RESERVES (continued)
All amounts are expressed in K’000
2016
2015
2016
2016
Consolidated
Bank
Exchange reserve
At 1 January
Movement during the year
At 31 December
Equity component of convertible notes
34,926
42,054
76,980
(13,913)
48,839
34,926
21,663
24,602
46,265
(10,249)
31,912
21,663
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.
The notes mandatorily converted to Fiji Class Shares on 20 April 2013 based on a conversion ratio of 1:1. Key rights of Fiji Class Shareholders are as
follows:
The right to receive dividend equal to the amount of dividend to be paid on BSP Ordinary Share.
(i)
(ii) The same voting rights as a BSP Ordinary Share and effected through a special voting share held by the Chairman of BSP.
(iii) The Fiji Class Share may be exchanged on a one for one basis into BSP Ordinary Shares at a subsequent date and at the option of BSP on the
occurrence of certain prescribed events.
25. CONTINGENT LIABILITIES AND COMMITMENTS
Off-balance sheet financial instruments
Standby letters of credit
Guarantees and indemnities issued
Trade letters of credit
Commitments to extend credit
At 31 December
Legal Proceedings
29,230
346,729
92,540
1,195,621
1,664,120
31,164
304,086
46,139
1,224,744
1,606,133
29,230
334,873
85,897
1,163,392
1,613,392
31,164
299,857
45,255
1,223,746
1,600,022
A number of legal proceedings against the Group were outstanding as at 31 December 2016. Based on information available at 31 December 2016,
the Group estimates a contingent liability of K17.9 million (2015: K8.9 million) in respect of these proceedings.
Statutory deposits with Central Banks
Cash reserve requirement: requisite reserve requirements of
respective countries
Commitments for capital expenditure
Amounts with firm commitments, and not reflected in the
accounts
Operating lease commitments - predominantly premises
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
At 31 December
1,474,656
1,359,606
1,440,530
1,341,650
28,753
29,505
19,899
20,631
52,259
60,287
26,082
138,628
22,466
36,421
16,797
75,684
49,776
56,480
25,418
131,674
22,466
36,421
16,797
75,684
65
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
26. FIDUCIARY ACTIVITIES
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. Where the funds incurs 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 Financial Statements.
27. DIRECTORS AND EXECUTIVE REMUNERATION
Directors remuneration
Directors of the company received remuneration including benefits during 2016 as detailed below;
All amounts in Kina
Name of Director
Sir K. Constantinou, OBE
T. E. Fox, OBE, BEc
Dr. I. Temu, PhD, MEc
Sir N. Bogan, KBE, LLB
R. Fleming, CSM, MBA, MMGT
G. Aopi, CBE, MBA
G. Robb, OAM, BA, MBA
F. Talao, LLM, MPHIL
E. B Gangloff, CPA, GAICO
A. Mano, BEc, MSc
A. Sam
Dr. F Lua’iufi
Total remuneration
Meetings attended
/total held
8/8
3/4
7/8
5/7
8/8
7/8
8/8
8/8
8/8
7/8
5/5
-
Appointed/
(Resigned)
-
(21/06/16)
-
(11/11/16)
-
-
-
-
-
-
13/07/16
21/12/16
2016
2015
347,393
182,818
130,511
135,546
-
140,434
373,776
190,511
135,546
117,141
60,268
-
1,813,944
293,105
251,351
133,966
139,000
-
147,872
376,039
137,950
142,119
122,855
-
-
1,744,257
Non-executive Board Members of the Board - Constantinou, Fox and Robb received an allowance of K60,000 as Directors of BSP Capital Limited which
forms part of the Group.
* 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.
66
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
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
K’000
100 – 110
110 – 120
120 - 130
130 - 140
140 - 150
150 - 160
160 – 170
170 – 180
180 – 190
190 – 200
200 – 210
210 – 220
220 – 230
230 – 240
240 – 250
250 – 260
260 – 270
270 – 280
280 – 290
290 – 300
300 - 310
310 – 320
320 – 330
330 – 340
340 – 350
350 – 360
360 – 370
370 – 380
380 - 390
390 - 400
410 - 410
410 - 420
2016
No.
2015
No.
30
27
28
24
16
16
15
9
11
9
7
4
5
2
3
5
1
5
4
3
11
5
2
3
3
3
4
2
5
3
2
4
36
29
21
17
17
12
7
13
9
3
3
3
4
2
2
5
4
8
8
3
3
3
4
3
3
1
5
-
3
0
1
-
Remuneration
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
560 – 570
570 - 580
580 - 590
590 - 600
600 – 610
610 - 620
630 – 640
640 – 650
650 – 660
660 – 670
680 - 690
690 - 700
700 - 710
710 - 720
720 - 730
730 - 740
740 – 750
750 – 760
760 – 770
770 - 780
2016
No.
2015
No.
Remuneration
2016
2015
K’000
No.
No.
3
1
1
-
3
1
2
2
1
2
1
1
1
-
1
2
1
-
-
1
3
2
-
3
1
-
2
1
-
1
5
3
2
-
2
1
4
-
-
-
1
2
-
2
5
1
-
3
1
3
2
1
2
2
3
3
2
2
2
1
-
-
-
1
780 - 790
790 - 800
800 -810
820 – 830
830 – 840
850 – 860
860 – 870
880 – 890
890 – 900
910 – 920
970 - 980
980 - 990
1000 - 1010
1010 - 1020
1040 - 1050
1050 - 1060
1090 - 1100
1100 – 1100
1170 - 1180
1180 - 1190
1220 - 1230
1280 - 1290
1370 - 1380
1530 - 1540
1630 - 1640
1660 - 1670
1700 - 1710
1730 - 1740
1840 - 1850
1880 - 1890
3560 - 3570
4510 - 4520
1
3
-
2
1
-
1
1
1
1
2
-
2
1
1
1
-
-
-
1
2
3
1
1
-
-
1
-
-
1
-
1
-
-
2
2
-
1
-
1
-
1
-
1
-
-
-
-
1
1
1
-
-
-
-
-
2
1
-
1
-
-
1
-
Total
345
296
The specified executives during the year were:
Robin Fleming, CSM
Johnson Kalo
Haroon Ali
Robert Loggia
Peter Beswick
Edward Ruha
Paul Thornton
Rohan George
Christophe Michaud
Hari Rabura
Giau Duruba
Richard Borysiewicz
Aho Baliki, OBE
Specified executives’ remuneration in aggregate (K’000)
Year
Salary
Primary
bonus
Non -
monetary
Super
Post-employment
prescribed benefits
Other
Equity
options
Other
benefits
2016
2015
14,595
11,478
3,274
2,443
272
397
249
222
204
-
-
-
960
-
413
375
Total
19,967
14,915
67
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
28. RECONCILIATION OF OPERATING CASH FLOW
All amounts are expressed in K’000
2016
2015
2016
2015
Consolidated
Bank
Reconciliation of operating profit after tax to operating cash
flow before changes in operating assets
Operating profit after tax
Add: Tax Expense
Operating profit before income tax
Major non-cash amounts
Depreciation
Amortisation of deferred acquisition and computer development
costs
Net profit on sale of fixed assets
Movement in forex income accrual
Impairment on loans and advances
Movement in payroll provisions
Impairment of subsidiary
Impairment of fixed assets
Net effect of other accruals
643,451
280,343
923,794
66,401
32,508
(15,184)
42,037
98,622
39,986
-
12,003
(51,992)
531,879
234,271
766,150
74,243
44,713
(2,621)
45,625
89,905
34,969
-
44,666
(53,929)
606,674
272,424
879,098
58,299
30,522
(15,145)
24,602
90,460
31,165
-
12,003
(69,306)
Operating cash flow before changes in operating assets
1,148,175
1,043,721
1,041,698
505,749
222,387
728,136
67,607
44,224
(2,621)
44,601
86,657
30,535
11,068
44,666
(66,477)
988,396
Cash and cash equivalents
For the purposes of the cash flow statements, cash and cash equivalents comprise the following balances with less than 90 days maturity.
Cash and balances with Central Banks (note 10)
1,656,260
1,202,466
1,410,008
1,010,856
Amounts due from other banks (note 12)
Amounts due to other banks (note 18)
804,233
(301,291)
2,159,202
710,157
(344,346)
1,568,277
691,152
587,277
(327,823)
(344,877)
1,773,337
1,253,256
68
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
29. SEGMENT INFORMATION
The Bank and the Group comprise various segments, these being the provision of banking services and products, stock broking and insurance services and
asset financing. 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 core banking services in
PNG, Banking Services in other jurisdictions outside PNG, insurance operations, stock broking, fund management and asset financing activities. The Bank
and Group’s business segments operate in Papua New Guinea, Fiji, Solomon Islands, Cook Islands, Tonga, Samoa and Vanuatu. Inter segment adjustments
reflect elimination entries in respect of inter segment income and expense allocations included funds transfer pricing.
Consolidated
All amounts are in K’000
Analysis by segments
Year ended 31 December 2016
Net interest income
Other income
Net insurance income
Total operating income
Operating expenses
Impairment expenses
Profit before income tax
Income tax
Net profit after income tax
Year ended 31 December 2015
Net interest income
Other income
Net insurance income
Total operating income
Operating expenses
Impairment expenses
Profit before income tax
Income tax
Net profit after income tax
PNG Bank
Non PNG Bank
Non Bank
Entities
Adjust Inter
Segments
Total
913,532
470,708
-
1,384,240
(556,709)
(68,947)
758,584
(241,352)
517,232
887,970
395,067
-
1,283,037
(560,381)
(73,110)
649,546
(202,005)
447,541
179,807
185,400
-
365,207
(193,365)
(24,642)
147,200
(37,830)
109,370
112,624
119,780
-
232,404
(128,324)
(14,194)
89,886
(23,063)
66,823
14,347
11,753
23,956
50,056
-
1,107,686
(7,446)
660,415
-
23,956
(7,446)
1,792,057
(22,757)
3,190
(769,641)
(5,033)
22,266
(1,161)
21,105
5,657
7,468
21,245
34,370
-
(98,622)
(4,256)
923,794
-
(280,343)
(4,256)
643,451
-
1,006,251
(2,672)
519,643
-
21,245
(2,672)
1,547,139
(15,102)
12,723
(691,084)
(2,601)
16,667
(9,203)
7,464
-
(89,905)
10,051
766,150
-
(234,271)
10,051
531,879
69
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
30. RELATED PARTY TRANSACTIONS
Related parties are considered to be enterprises or individuals with whom 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 Group, by virtue of being able to control, dominate or participate in a fiduciary
capacity, in decision-making functions or processes.
The Group conducted transactions with the following classes of related parties during the year:
n Directors and/or parties in which the director has significant influence
n 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 2016, balances and transactions of accounts for Directors, including companies in which directorships were held by BSP directors, were as
follows:
All amounts are expressed in K’000
2016
2015
Consolidated
Customer deposits
Opening balances
Net movement
Closing balance
Interest paid
Loans, advances and other receivables from customers
Opening balances
Loans issued
Interest
Charges
Loan repayments
Closing balance
102,940
(37,437)
65,503
54
618,985
241,746
24,387
4,228
(215,672)
673,674
142,812
(39,872)
102,940
1,967
599,994
73,272
43,000
6,656
(103,937)
618,985
Incentive-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 2016, staff account balances were as follows:
2016
116,936
42,794
159,730
7,997
-
10,082
18,079
2015
87,090
34,929
122,019
8,920
1
11,399
20,320
All amounts are expressed in K’000
Housing loans
Other loans
Cheque accounts
Foreign currency accounts
Savings accounts
At 31 December
70
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
31. BANK OPERATIONS, RISKS AND STRATEGIES IN USING FINANCIAL INSTRUMENTS
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 Group’s primary financial intermediary role in the financial markets, including the use of financial instruments
including derivatives. These risks (risk of an advance 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 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 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 standing. In addition to directly advancing funds to borrowers, the Group also enters into guarantees and other
commitments such as letters of credit, performance bonds, and other bonds.
The Group also enters into transactions denominated in foreign currencies. This activity generally requires 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 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 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 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
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 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. Additionally, subsidiaries and branches in Fiji, Solomon Islands,
Cooks Islands, Samoa, Tonga and Vanuatu are required to adhere to prudential standards issued by the Reserve Bank of Fiji (RBF), Central Bank of Solomon
Islands (CBSI), The Financial Supervisory Commission (FSC), Central Bank of Samoa (CBS), National Reserve Bank of Tonga (NRBT) and Reserve Bank of
Vanuatu respectively. 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 Group complies
with the prevailing prudential requirements for total capital and leverage capital. As at 31 December 2016, the Group’s total capital adequacy ratio and
leverage capital ratio satisfied the capital adequacy criteria for a ‘well-capitalised’ bank. The minimum capital adequacy requirements set out under the
standard are: Tier 1 8%, total risk based capital ratio 12% and the leverage ratio 6%.
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. 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 Group’s capital adequacy level is as follows:
All amounts are expressed in K’000
Balance sheet assets (net of provisions)
Currency
Loans, advances and other receivables from customers
Investments and short term securities
All other assets
Off-balance sheet items
Total
Balance sheet/Notional amount
Risk weighted amount
2016
2015
2016
2015
3,130,916
10,102,909
5,265,093
2,332,885
1,665,374
2,562,072
8,621,514
4,812,035
2,200,682
1,606,133
-
7,851,477
113,440
1,437,945
279,385
-
6,693,220
-
1,415,736
271,380
22,497,177
19,802,436
9,682,247
8,380,336
71
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
32. CAPITAL ADEQUACY (continued)
Capital Ratios
Capital (K’000)
Capital Adequacy Ratio (%)
All amounts are expressed in K’000
2016
2015
2016
2015
a) Tier 1 capital
Tier 1 + Tier 2 capital
b) Leverage Capital Ratio
33. CREDIT RISK AND ASSET QUALITY
1,916,502
2,233,493
-
1,603,825
1,952,807
-
19.8%
23.1%
9.3%
19.0%
23.1%
8.9%
The Bank incurs risk with regard to loans, advances and other receivables due from 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 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 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 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 2016, the 25 largest exposures totaled K5.4 billion, accounting for over 55% of the
Bank and 51% of the Group’s total loan portfolio (2015: K4.6 billion, accounting for over 53% and 50% 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.
An analysis by Credit quality of loans outstanding at 31 December 2016 as follows:
Consolidated
2016
All amounts are expressed in K’000
Overdrafts
Term loans
Mortgages
Lease financing
Policy loans
Total
Neither past due nor impaired
677,535
7,243,317
1,510,930
98,290
46,854
9,576,926
Past due but not impaired
- Less than 30 days
- 30 to 90 days
- 91 to 360 days
- More than 360 days
Individually impaired loans
- Less than 30 days
- 30 to 90 days
- 91 to 360 days
- More than 360 days
37,403
5,574
1,332
368
44,677
1,838
-
30
7,420
9,288
227,706
443,095
7,773
-
76,080
37,116
2,988
40
678,574
116,224
480
6,920
5,090
42,413
54,903
1,112
1,450
10,239
33,010
45,811
Total gross loans, advances and
other receivables from customers
731,500
7,976,794
1,672,965
58,020
8,146
3,868
-
70,034
16,270
2,567
2,772
8,524
30,133
198,457
-
-
-
-
-
-
-
-
-
-
399,209
493,931
15,961
408
909,509
19,700
10,937
18,131
91,367
140,135
46,854
10,626,570
Less impairment provisions
-
-
-
-
-
(523,661)
Net loans and advances
731,500
7,976,794
1,672,965
198,457
46,854
10,102,909
72
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
33. CREDIT RISK AND ASSET QUALITY (continued)
Credit Related Commitments
These instruments are used to ensure that funds are available to a customer as required. The Group deals principally in the credit related commitments
set out below.
Guarantees and standby letters of credit, which represent irrevocable assurances that 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 Group on behalf of a customer, authorising a third party to draw drafts on 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 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.
Economic sector risk concentrations
Economic sector risk concentrations within the customer loan portfolio are as follows:
Consolidated
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
Ownership risk concentrations
Ownership risk concentrations within the customer loan portfolio are as follows:
Corporate / Commercial
Government
Retail
Net loan portfolio balance
34. LIQUIDITY RISK
2016
5,725,076
2,001,460
331,130
240,974
925,674
202,423
676,172
%
57
20
3
2
9
2
7
2015
5,136,578
%
60
1,669,618
19
126,141
405,766
582,835
244,371
456,205
1
5
7
3
5
10,102,909
100
8,621,514
100
5,305,676
2,252,365
2,544,868
53
22
25
4,625,570
2,110,014
1,885,930
54
24
22
10,102,909
100
8,621,514
100
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 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 2016
The maturity profile of material Assets and Liabilities as at 31 December 2016 is shown in the following schedule. 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 Group, and does not impair the ability of the Group to meet its financial obligations
as they fall due. The Directors are also of the view that 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 Cash Reserve Requirement (“CRR”) set by the regulatory authorities of the jurisdictions that the
Bank operates in. The CRR specifies that a bank must hold an amount equal to a percentage of its total customer deposits in the form of cash in
an account maintained by the respective Central Bank. The Bank 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.
73
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
34. LIQUIDITY RISK (continued)
Maturity of assets and liabilities
Consolidated
All amounts are expressed in K'000
As at 31 December 2016
Up to 1 month
1 - 3 months 3 - 12 months
1 - 5 years
Over 5
years
Total
Assets
Cash and balances with Central Bank
Treasury and Central Bank bills
Amounts due from other banks
Loans, advances and other receivables from
customers
Other financial assets
Total assets
Liabilities
3,130,916
281,398
802,837
-
-
853,071
1,868,998
-
-
-
9,400
1,396
-
-
-
3,130,916
3,012,867
804,233
1,254,576
510,790
1,838,148
4,637,096
4,685,542
12,926,152
184,447
321,154
214,945
1,763,330
720,983
3,204,859
5,654,174
1,685,015
3,922,091
6,411,222
5,406,525
23,079,027
Amounts due to other banks
281,675
19,616
-
-
-
301,291
Customer Deposits
Other liabilities
Other provisions
Total liabilities
Net liquidity gap
As at 31 December 2015
Total assets
Total liabilities
Net liquidity gap
35. OPERATIONAL RISK
12,383,938
1,521,797
1,329,468
263,878
1,573,965
17,073,046
1,045,556
169,807
1,095
4,527
7,316
75,525
1,134,019
-
-
-
-
169,807
13,880,976
1,542,508
1,333,995
271,194
1,649,490
18,678,163
(8,266,802)
142,507
2,588,096
6,140,028
3,757,035
4,400,864
4,986,519
1,351,025
3,047,207
6,248,526
4,812,054
20,445,331
12,614,639
565,759
1,594,016
186,711
1,358,855
16,319,980
(7,628,120)
785,266
1,453,191
6,061,815
3,453,199
4,125,351
Operational risk is the potential exposure to unexpected financial or non-financial losses arising from the way in which the Group conducts its business.
Examples of operational risks 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 organization’s
compliance with them. The Operational Risk Committee coordinates the management process across the organization.
An independent internal audit function also conducts regular reviews to monitor compliance with approved BPNG standards 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.
74
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
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 Group is to minimise the impact on earnings of any such movement.
The Group accepts foreign currency denominated transactions and therefore has exposure to movements in foreign currency. The Group has a policy to
offset these transactions to minimise daily exposure. As foreign exchange contracts generally consist of offsetting commitments, they involve only limited
foreign exchange risk to the Group and material loss is not envisaged.
Currency concentration of assets, liabilities and off-balance sheet items
Consolidated
All amounts are expressed in K'000
As at 31 December 2016
PGK
FJD
SBD
USD
Other
Total
Assets
Cash and balances with Central Bank
Treasury & Central Bank bills
Amounts due from other banks
Loans, advances and other receivables from
customers
Other financial assets
Other assets
Total assets
Liabilities
1,906,100
2,705,620
94,931
469,600
7,571
96,335
6,291,284
2,167,912
461,809
205,294
24,068
344,052
9,237
-
180,380
486,375
284,170
15,136
408,519
813,286
3,130,916
2,933,621
804,233
10,102,909
2,044,905
909,389
286,567
489,411
-
-
-
2,331,472
60,509
5,487
63,856
1,528,652
13,952,229
3,517,396
1,095,732
681,479
1,584,967
20,831,803
Amounts due to other banks
(3,106)
(7,152)
(1,889)
(266,816)
(22,328)
(301,291)
Customer Deposits
Other liabilities
Total liabilities
(11,801,027)
(2,425,255)
(841,747)
(439,296)
(1,405,024)
(16,912,349)
(450,773)
(761,224)
(49,973)
(10,184)
(31,672)
(1,303,826)
(12,254,906)
(3,193,631)
(893,609)
(716,296)
(1,459,024)
(18,517,466)
Net on - balance sheet position
1,697,323
323,765
202,123
(34,817)
Off - balance sheet net notional position
(18,957)
-
-
(122,730)
Credit commitments
1,308,204
307,432
6,588
-
125,943
127,138
41,896
2,314,337
(14,549)
1,664,120
31 December 2015
Total Assets
Total Liabilities
13,098,056
2,633,175
659,841
302,168
1,503,063
18,196,303
(11,756,719)
(2,208,852)
(774,386)
(475,610)
(951,560)
(16,167,127)
Net on - balance sheet position
1,341,337
424,323
(114,545)
(173,442)
551,503
2,029,176
Off - balance sheet net notional position
(45)
-
Credit commitments
1,259,124
338,854
-
4,352
(1,562)
-
6,159
3,802
4,552
1,606,132
The following table presents sensitivities of profit or loss and equity to possible changes in exchange rates applied at the end of the reporting period,
relative to the functional currency of the respective Group entities, with all other variables held constant:
All amounts are expressed in K'000
USD strengthening by 1% (2015 – 1%)
USD dollar weakening by 1% (2015 – 1%)
AUD strengthening by 1% (2015 – 1%)
AUD dollar weakening by 1% (2015 – 1%)
At 31 December 2016
At 31 December 2015
Impact on profit or loss
Impact on equity
Impact on profit or loss
Impact on equity
1,408
(1,380)
-
-
1,408
(1,380)
-
-
1,372
(1,345)
7
(7)
1,372
(1,345)
7
(7)
75
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
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 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 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 2016 and prevailing rates of interest, a 1% increase in markets rates will result in a K38.6
million increase in net interest income, whilst a 1% decrease in rates will result in a K48.9 million decrease in net interest income.
Interest sensitivity of assets, liabilities and off balance sheet items re-pricing analysis
Consolidated
All amounts are expressed in K'000
At 31 December 2016
Assets
Cash and Central Bank assets
Treasury and Central Bank bills
Amounts due from other banks
Statutory deposits - Central Bank
Up to 1
month
-
267,696
313,687
-
1-3 months
3-12 months
1-5 years
Over 5 years
-
-
826,806
1,829,719
1,196
-
-
-
-
9,400
9,281
-
-
-
-
-
Loans, advances and other receivables from
customers
8,775,060
155,994
651,630
385,975
134,250
Investments
Other assets
Total assets
Liabilities
294,354
291,914
128,461
1,238,363
504,000
44,545
-
-
-
-
9,695,342
1,275,910
2,609,810
1,643,019
638,250
Amounts due to other banks
234,119
19,616
-
-
Customer deposits
Other liabilities
Other provisions
Total liabilities
7,542,495
1,512,379
1,285,789
194,552
-
-
-
-
-
-
-
-
7,776,614
1,531,995
1,285,789
194,552
Interest sensitivity gap
1,918,728
(256,085)
1,324,021
1,448,467
-
39
75,525
-
75,564
562,686
Non-interest
bearing
1,656,260
-
480,069
1,474,656
-
-
1,358,487
4,969,472
47,556
6,377,095
1,058,494
169,807
7,652,952
(2,683,480)
As at 31 December 2015
Assets
Cash and Central Bank assets
Treasury and Central Bank Bills
Amounts due from other banks
Statutory deposits - Central Bank
-
441,264
630,079
-
-
157,000
27,731
-
-
-
-
1,202,466
175,395
1,087,400
642,050
52,347
-
-
-
-
-
Loans, advances and other receivables from
customers
7,512,150
150,807
535,575
294,081
128,901
Investments
Other assets
Total assets
Liabilities
1,657
157,000
160,518
1,251,744
840,446
219,023
-
-
-
-
8,804,173
492,538
923,835
2,633,225
1,611,397
Amounts due to other banks
270,943
32,749
36,559
-
6,847,265
536,520
1,501,362
167,803
103,068
-
-
-
-
-
-
-
-
154,177
75,525
-
Customer deposits
Other liabilities
Other Provisions
Total liabilities
Interest sensitivity gap
1,582,897
(76,731)
(614,086)
2,465,422
1,381,695
(2,710,021)
76
7,221,276
569,269
1,537,921
167,803
229,702
6,441,156
-
-
1,359,606
-
-
1,169,063
3,731,135
4,095
5,388,247
866,111
182,703
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 38. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES
There is no material difference between the fair values and carrying values of the financial assets and liabilities of the Group.
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
The table below analyses the Group’s financial instruments carried at fair value, by levels in the fair value hierarchy.
The different levels have been defined as follows:
•
•
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
•
Consolidated
All amounts are expressed in K'000
At 31 December 2016
Financials assets
Equity securities
Non-financial assets
Property, plant and equipment
Total
Financials liabilities
Policy liabilities
At 31 December 2015
Financial assets
Equity securities
Non - financial assets
Assets held for sale
Property, plant and equipment
Total
Financial liabilities
Policy liabilities
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
-
111,612
1,823
113,435
-
111,612
683,498
685,321
683,498
796,933
-
640,043
640,043
79,544
1,535
81,079
-
-
79,544
35,135
686,325
722,995
35,135
686,325
802,539
-
563,441
563,441
There were no changes in valuation technique for Level 3 recurring fair value measurements during the year ended 31 December 2016. Property, plant
and equipment and assets held for sale represents commercial land and buildings owned by the Group based on valuations provided by independent
valuers. The valuation is based on the capitalisation method with an assessment of the property based on its potential earning capacity. Disposal cost for
properties classified as held for sale is not expected to be material.
In the normal course of trading, the Group enters into forward exchange contracts. 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 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.
77
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
38. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES (continued)
Forward exchange contracts outstanding at 31 December 2015 stated at the face value of the respective contracts are:
All amounts are expressed in respective FCY'000 AND K’000
At 31 December 2016
Selling
Buying
At 31 December 2015
Selling
Buying
FCY
Kina
FCY
Kina
FCY
Kina
FCY
Kina
USD
(55,034)
(38,981)
16,374
16,420
USD
(9,979)
(45)
9,459
-
AUD
(1,410)
-
60,315
-
AUD
-
-
12,780
-
EURO
GBP
JPY
-
-
-
-
(1,700)
(360,607)
(4,796)
1,197
-
-
37,100
8,400
EURO
(200)
GBP
JPY
(4,050)
(11,000)
-
-
-
-
-
-
-
3,000
-
Other
(1,094)
Total
-
-
(43,777)
1,914
-
-
24,820
Other
(2,681)
-
820
-
Total
-
(45)
-
-
39. INSURANCE
(a) Net insurance operating income
All amounts are expressed in K’000
2016
2015
2016
2015
Net insurance income
23,956
21,245
-
-
Consolidated
Bank
Presentation of insurance business results in the statement of comprehensive income has been regrouped to more accurately reflect the insurance
business contribution to shareholder profits. Comparative figures have been adjusted to conform to changes in presentation in the current year.
(b) Policy liabilities
Key assumptions used in determining this liability are as follows:
Discount rates
For contracts in Statutory Fund 1 which have a Discretionary Patricipating Feature (DPF), the discount rate used is linked to the assets which back those
contracts. For 31st December 2016 this was 6.24% per annum (31st December 2015: 5.04% per annum), based on current 10 year government bond
yields and expected earnings from the investment portfolio. For contracts without DPF and Accident Business, a rate of 5.16% per annum was used at
31st December 2016 (31st December 2015: 4.16% per annum). These rates were based on the 10 year government bond rate as published by the Reserve
Bank of Fiji.
Investment and maintenance expenses
Future maintenance and investment expenses are based on the budgeted expenses. Future inflation has been assumed to be 3.5% per annum (31st
December 2015: 3.5% per annum) for determining future expenses.
Taxation
The rates of taxation enacted or substantially enacted at the date of the valuation (20%) are assumed to continue into the future.
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 for the Group’s
own experience. The mortality rates used was 70% of the FJ90-94 Male table for participating business in Statutory Fund 1.
Rates of discontinuance
Best estimate assumptions for the incidence of withdrawal and discontinuance vary by product and duration and are based on the Group’s experience
which is reviewed regularly. Rates used for the long term insurance contracts are as follows:
78
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Forward exchange contracts outstanding at 31 December 2015 stated at the face value of the respective contracts are:
39. INSURANCE (continued)
Whole of Life and Endowment Insurance
Term Insurance
Accident Insurance
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
2016
2015
15%
18%
14%
15%
18%
14%
Basis of calculation of surrender values
Surrender values are based on the provisions specified in the policy contracts. There have been no changes to surrender bases 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. Profits
from these policies are split between contract holders and shareholders in accordance with the policy conditions which allow for shareholders to share
in allocations at a maximum rate of 20%. For business written between 1995 and 1998 the shareholder receives 11% of profits.
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 Group with Reinsurers under which the Group is compensated for losses on one or more contracts issued by the Group,
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 profit or loss when they become due and payable in accordance with the reinsurance agreements.
Reinsurance recoveries are recognised as claim recoveries under profit or loss. This is netted off against the claim expenses. Reinsurance premiums are
recognised as Reinsurance Expenses.
All amounts are expressed in K’000
Policy Liabilities
Opening balance
Translation movement
Increase in policy liabilities
Increase in policy liabilities on revaluation of land
Total policy liabilities
40. BUSINESS COMBINATIONS
(a) Summary of Acquisition
During the year the Bank acquired the operations of the following entities:
Acquisition date
Entity
1 July 2016
Westpac Banking Corporation Vanuatu Branch
2016
2015
563,441
24,541
45,036
7,025
640,043
473,753
40,319
34,984
14,385
563,441
% Acquired
100
79
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2016
40. BUSINESS COMBINATIONS (continued)
Acquisition account
Cash
Due from other financial institution and regulatory deposits
Loans and advances
Other assets and intergroup balances
Property, plant and equipment
Deposits
Due to other financial institutions
Provisions and other liabilities
Net identifiable assets acquired
Add: goodwill
Net assets acquired for cash consideration
(1) Acquired loans and advances
K’000
96,205
104,685
187,435
708
5,995
(356,694)
355
(11,142)
27,547
(2,827)
24,720
The fair value of acquired loans and advances is K187.435m. The gross contractual amount for loans and advances due is K199.640m of
which K12.205m is expected to be uncollectible.
(2)
Profit Contribution of acquired businesses
The acquired businesses contributed revenue of K7.49m and net profit of K1.49m to the Group for the period from 1 July 2016 to 31
December 2016. If the acquisitions had occurred on 1 January 2016, consolidated pro-forma revenue and profit for the year ended 31
December 2016 would have been K14.9m and K2.9m respectively.
The acquisition was effected by Bank of South Pacific Vanuatu Limited, a company incorporated in 2016, acquiring the assets and business.
(3)
Purchase consideration - cash outflow
Outflow of cash to acquire subsidiary, net of cash acquired
Cash consideration
Additional capital injection
Less: cash balances acquired
Net inflow of cash – investing activities
(b) Other acquisition related transactions during the year
K’000s
24,720
13,300
(200,890)
(162,870)
During the year, the following transactions were recorded relating to entities acquired in 2016, increasing recorded goodwill for the respective entities:
Acquisition of minority shareholding in Bank South Pacific Samoa Limited
Adjustment to acquired net assets from Westpac Banking Corporation Solomon Island Branch resulting in a
write-off of tax receivable balance
Adjustment to acquired net assets from Westpac Banking Corporation Cook Islands Branch resulting in a write-
off of tax receivable balance
Total increase in goodwill from prior year transactions
K’000s
380
2,128
3,252
5,760
41. EVENTS OCCURRING AFTER BALANCE SHEET DATE
On February 27, 2017, the Bank signed an Agreement with Oracle Corporation Australia Pty Limited (“Oracle”) to procure licences for a new banking
software. The new software will initially be implemented in the Bank’s Papua New Guinea business and expected to be completed by 2018, following
which it will be rolled out to the banking businesses in all other jurisdictions by 2020.
42. REMUNERATION OF AUDITOR
All amounts are expressed in K’000
Financial statement audits
Other services
Consolidated
Bank
2016
2,762
999
3,761
2015
2,372
997
3,369
2016
2,081
947
3,028
2015
1,934
900
2,834
The external auditor PricewaterhouseCoopers is also engaged in providing other services to the Bank and Group as required and as permitted by prudential
standards. The provision of other services included taxation and general training.
80
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
Independent auditor’s report
To the shareholders of Bank of South Pacific Limited
Report on the audit of the financial statements of the Bank and the Group
Our opinion
We have audited the financial statements of Bank of South Pacific Limited (the Bank), which comprise the statements of financial position as at 31
December 2016, and the statements of comprehensive income,statements of changes in shareholders’ equity and statements of cash flows for the year
then ended, and the notes to the financial statements that include a summary of significant accounting policies and other explanatory information
for both the Bank and the Group. The Group comprises the Bank and the entities it controlled at 31 December 2016 or from time to time during the
financial year.
In our opinion the accompanying financial statements:
• comply with International Financial Reporting Standards and other generally accepted accounting practice in Papua New Guinea; and
• give a true and fair view of the financial position of the Bank and the Group as at 31 December 2016, and their financial performance and cash flows
for the year then ended.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of the financial statements section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of the Bank and Group in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for
Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with these requirements.
Our firm carries out services for the Group in the area of audit-related, non-audit related and tax advice. The provision of these other services has not
impaired our independence as auditor of the Bank and the Group.
Our audit approach
An audit is designed to provide reasonable assurance about whether the financial statements are free from material misstatement. Misstatements may
arise due to fraud or error. They are considered material if individually or in aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a whole, taking
into account the management structure of the Bank and the Group, their accounting processes and controls and the industries in which they operate.
PricewaterhouseCoopers, PWC Haus, Level 6, Harbour City, Konedobu, Port Moresby
PO Box 484, Port Moresby, Papua New Guinea
T: +675 321 1500, F:+675 321 1428, www.pwc.com.pg
81
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Materiality
• For the purpose of our audit of the Group we
used overall group materiality of K43.81 million
which represents approximately 5% of the
Group’s profit before taxes.
• We applied this threshold, together with
qualitative considerations, to determine the
scope of our audit and the nature, timing and
extent of our audit procedures and to evaluate
the effect of misstatements on the financial
statements as a whole.
• We chose Group profit before taxes as, in our view,
it is the metric against which the performance of
the Group is most commonly measured and is a
generally accepted benchmark.
Audit Scope
• We (PwC Papua New Guinea) conducted the
audit over all of the Group’s operations in Papua
New Guinea, which are the most significant to
the Group, and directed the scope of the audit
of other subsidiaries included in the Group
financial statements sufficient to express an
opinion on the financial statements as a whole.
• For the Group’s activities in Cook Islands, Fiji,
Samoa, Tonga, Solomon Islands and Vanuatu
the audit work was performed by other PwC
network firms or other firms operating under
our instructions. In addition we visit significant
overseas operations and this year we met with
management and the local audit team in Fiji.
• We selected 5% based on our professional
judgement noting that it is also within the range
of commonly acceptable related thresholds.
• Our audit focused on where the directors made
subjective judgements; for example, significant
accounting estimates involving assumptions
and inherently uncertain future events.
Key Audit Matters
• Amongst other relevant topics, we
following key
the
communicated
audit matters to the Board Audit
Committee:
- Loan loss provisioning
- IT systems and controls
• These matters are further described in
the Key audit matters section of our
report.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements for the
current period. The key audit matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters. We have determined the matters described below to be key matters to be
communicated in our report. Further, commentary on the outcomes of the particular audit procedures is made in that context.
Key audit matter
Loan loss provisioning amounting to K523.66
million - Refer to Note 13
How our audit addressed the key matter
The procedures we performed to support our audit conclusions,
included:
Our audit focused on this area, owing to the significance of loans
and advances to the financial statements, the prevailing economic
environments in the markets in which the group operates, particularly
PNG, and the subjectivity and management judgements involved in
determining whether loans within the portfolio are impaired, and the
amount of impairment loss that should be recognised in the current
period.
In making an assessment ofloans that are impaired and determining the
impairment provision required, the Group generally takes a portfolio
approach, except in the case where a specific provision is required based
on an assessment of individual exposures. In either case, the application
of the Group’s policy is inherently judgmental.
For the individual assessment or specific provision, loans (excluding
retail personal loans) are reviewed for impairment indicators, using
various event thresholds, such as repayment performance. Where
an impairment indicator exists, the amount of the expected future
cash flows related to the loan is estimated, together with the expected
realisable value of collateral held.
All other loans are collectively assessed on a portfolio basis. For this
assessment impairment models are used which aim to build in the impact
of credit conditions and default risk for determining the provision. The
inputs to these models also include judgmental overlays which aim to
take into account emerging trends or particular situations which are
not captured by the models, such as sectoral weaknesses in particular
markets. This assessment involves various judgements, for example
how loans are categorised for credit risk purposes and the probability of
default associated with each risk grade.
Assessing the design and testing the operating effectiveness of the
controls over loan impairment provisioning processes. The key
controls over this process includes the role of the Credit Committee in
ensuring governance and monitoring of the credit function, appropriate
identification of emerging credit risks, including stress testing, and its
impact on key inputs to the loan provisioning process, identification
and management of material exposures and the establishment of
impairment models to capture losses. This assessment and testing gave
us sufficient evidence to be able to rely on these processes and controls
for our audit.
For individually assessed provisions, applying sampling procedures for
testing the operating effectiveness of controls over the Credit Inspection
Unit’s customer loan file reviews, testing the completeness of the
credit watch list and delinquencies, assessing the Group’s estimates of
specific provisions, and re-performing the calculations for accuracy. The
outcomes of this testing were satisfactory.
For collectively assessed provisions, critically examining the model
methodology for consistency and appropriateness, evaluating the
probability of default factors used for appropriateness, testing the
accuracy of data, such as risk grades used in the models and re-
performance of model calculations. This combination of evaluation and
testing gave us sufficient evidence to rely on the model’s design for our
audit.
For judgmental overlays to model calculations, we considered the
potential for impairment to be affected by events not captured in the
models. This included making our own independent assessment of the
credit environment and evaluated the impact of the Group’s stress testing
of loans on the credit watch list. The judgements made by the Group and
the matters considered were consistent with our understanding.
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
Key audit matter
IT systems and controls
We focused on this area because the Group is heavily dependent
on complex IT systems for the processing of significant volumes of
transactions and for financial accounting and reporting purposes. For
example, these systems are also critical to capturing various data that
are used to produce reports which management use to make decisions,
monitor and control the business and for financial reporting purposes.
Our audit approach relies on reports that are generated from these critical
IT systems, and therefore the operating effectiveness of automated
controls as well as IT dependent manual controls is important to enable
that reliance.
In particular, our audit focused on access rights, because they aim
to ensure that changes to applications are authorised and made
appropriately. Ensuring staff have appropriate access to IT systems, and
that access is monitored, are key controls in mitigating the potential for
fraud and error as a result of a change to an application or underlying
data.
How our audit addressed the key matter
The procedures we performed to support our audit conclusions,
included:
We assessed and tested the design and operating effectiveness of the
controls over the continued integrity of the IT systems that are relevant
to financial reporting and upon which we relied for the purpose of
our audit.
We examined the framework of governance over the Group’s IT
organisation, the controls over program changes and development,
access to programs and data and IT operations, including compensating
controls where required. We also carried out procedures over certain
aspects of security of the Group’s IT systems including access
management and segregation of duties.
The combination of the tests of controls and direct tests we performed
gave us sufficient evidence to enable us to rely on the continued and
proper operation of the Group’s IT systems for the purposes of our audit.
Information other than the financial statements and auditor’s report
The directors are responsible for the annual report which includes other information. Our opinion on the financial statements does not cover the other
information included in the annual report and we do not, and will not, express any form of assurance conclusion on the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be
materially misstated. If, based on the work we have performed on the other information that we obtained prior to the date of this auditor’s report, we
conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard,
except that not all other information was available to us at the date of our signing.
Responsibilities of the directors for the financial statements
The directors are responsible, on behalf of the Bank for the preparation of financial statements that give a true and fair view in accordance with
International Financial Reporting Standards and other generally accepted accounting practice in Papua New Guinea and the Companies Act 1997 and
for such internal control as the directors determine is necessary to enable the preparation of financial statements are free from material misstatement,
whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Bank
or any of its subsidiaries, or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements, as a whole, are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with the ISAs will always detect a material misstatement when it exists. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions
of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures
responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a
material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit 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 Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by the
directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence obtained, whether a
material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to continue as a going concern. If we
conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial
statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Group to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
83
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Group to express an
opinion on the consolidated financial statements of the Group. We are responsible for the direction, supervision and performance of the group audit.
We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit
findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence,
and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable,
related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of
the financial statements for the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless
law or regulations preclude public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be
communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of
such communication.
Report on other legal and regulatory requirements
The Companies Act 1997 requires that in carrying out our audit we consider and report on the following matters. We confirm in relation to our audit
of the financial statements for the year ended 31 December 2016:
• We have obtained all the information and explanations that we have required;
• In our opinion, proper accounting records have been kept by the Bank as far as appears from an examination of those records.
Who we report to
This report is made solely to the Bank’s shareholders, as a body, in accordance with the Companies Act 1997. Our audit work has been undertaken so
that we might state to the Bank’s shareholders those matters which we are required to state to them in an auditor’s report and for no other purpose.
We do not accept or assume responsibility to anyone other than the Bank and the Bank’s shareholders, as a body, for our audit work, for this report
or for the opinions we have formed.
PricewaterhouseCoopers
Jonathan Seeto
Partner
Registered under the Accountants Act 1996
Port Moresby
1 March 2017
84
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Shareholder
Information
85
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 SHAREHOLDER INFORMATION
The following is a summary of pertinent issues relating to shareholding in the Group. The Constitution of BSP may be inspected
during normal business at the Registered Office.
RIGHTS ATTACHING TO ORDINARY SHARES
Partly paid 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:
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.
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.
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.
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 be equally divided. 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.
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.
Directors
Issues of further shares
BSP’s Constitution states that the minimum number of directors is three
and the maximum is ten.
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.
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.
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.
86
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.
Powers of the Board
Except otherwise required by the Companies Act, any other law, the
POMSoX Listing Rules or BSP’s constitution, the Directors have the power
to manage the business of BSP and may exercise every right, power or
capacity of BSP to the exclusion of the members.
Share buy backs
Subject to the provisions of the Companies Act and the POMSoX Listing
Rules, BSP may buy back shares by itself on terms and at times determined
by the Directors.
Officers’ indemnities
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.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Twenty largest registered fully paid ordinary shareholders.
At the 31 December 2016, the twenty largest registered fully paid shareholders of the Company were:
1
2
3
4
5
6
7
8
9
10
11
12
13
14
Kumul Consolidated Holdings
Nambawan Super Limited
Petroleum Resources Kutubu Ltd
National Superannuation Fund Limited
Credit Corporation (PNG) Limited
Motor Vehicles Insurance Limited
PNG Sustainable Development Program limited
IFC Capitalization (Equity) Fund lP
International Finance Corporation
Teachers Savings & Loan Society Ltd
Comrade Trustee Services Limited
Lamin Trust Fund
Capital Nominees Limited
Credit Corporation (PNG) Limited
15 Mineral Resources Ok Tedi No 2 Limited
16
17
18
19
Solomon Islands National Provident Fund Board
Nominees Niugini Limited
Catholic Diocese Of Kundiawa
Southern Highlands Holdings Limited
20 Mineral Resources Star Mountain Ltd
Other shareholders
Distribution of Shareholding
At the 31 December 2016, the Company had 5,917 shareholders. The distribution of shareholdings is as follows:
Range (number)
Number of Shareholders
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100, 001 and above
4,942
616
100
175
84
5,917
SHAREHOLDER INFORMATION
Share Held
84,811,597
57,592,261
46,153,840
45,318,417
35,262,051
31,243,736
29,202,767
22,796,644
22,796,644
15,317,366
14,456,052
3,518,132
3,060,737
3,000,000
2,890,000
2,500,001
2,369,495
2,165,688
2,000,000
1,975,799
38,892,428
467,323,655
%
18.15%
12.32%
9.88%
9.70%
7.55%
6.69%
6.25%
4.88%
4.88%
3.28%
3.09%
0.75%
0.65%
0.64%
0.62%
0.53%
0.51%
0.46%
0.43%
0.42%
8.28%
100%
Number of Shares
1,269,599
1,230,658
723,803
6,634,771
457,464,824
467,323,655
Unmarketable Parcels:
As at 31 December 2016, the BSP Share Price was K9.00. There were 1,077 shareholders (2% of total shareholders) who held less than a marketable parcel
of BSP shares, being holdings of K1,000 or less in market value.
Interest in shares in the Bank
Directors hold the following shares in the Bank:
Director
T. E. Fox
Gerea Aopi
R Fleming
Shares Held
44,744
10,000
93,000
%
0.00
0.00
0.00
Registered Office
Bank of South Pacific Limited
PO Box 78,
PORT MORESBY
National Capital District, PAPUA NEW GUINEA
Telephone: +675 322 9700
Australian Registered Office
Level 26
181 William Street, Melbourne
VIC 3000
Home Exchange for BSP Shares
Port Moresby Stock Exchange Ltd (POMSOX)
PO Box 1531
PORT MORESBY
National Capital District, PAPUA NEW GUINEA
Telephone: +675 320 1980
Website
Share Registry
PNG Registries Limited www.bsp.com.pg
PO Box 1265,
PORT MORESBY
National Capital District, PAPUA NEW GUINEA
Telephone: +675 321 6377
Home Exchange for BSP Convertible Notes
South Pacific Stock Exchange
GPO Box 11689
SUVA, FIJI
Telephone: +679 330 4130
Australian Share Registry
Link Market Services Limited
Level 12, 680 George Street, Sydney
NSW 2000
APRA Disclaimer:
BSP is not authorised under the Banking Act 1959 (Commonwealth of Australia) and is not supervised by the Australian Prudential Regulation Authority
(APRA). BSP’s products are not covered by the depositor protection provisions in section 13A of the Banking Act 1959 and will not be covered by the
financial claims scheme under Division 2AA of the Banking Act 1959
87
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
DIRECTORS’ INFORMATION
Name
Nature of Interest
Sir K. Constantinou, OBE
Director
Shareholder
Member
T. E. Fox, OBE, BEc
Director
Bank of South Pacific Ltd, BSP Capital Ltd, Airways Hotel & Apartment Ltd, Lamana
Hotel Ltd, Lamana Development Ltd, Heritage Park Hotel Ltd, Gazelle International
Hotel Ltd, Oil Search Ltd, Alotau International Hotel Ltd, Kimbe Bay Hotel Ltd, Grand
Pacific Hotel Ltd, Taumeasina Island Resort (Samoa), Loloata Island Resort Ltd, City
Centre Development Ltd, Coastwatchers Court Ltd, Waigani Assets Ltd, Southern
Seas Investments Ltd, Texas Chicken South Pacific Ltd. BSP Finance Ltd, Bank of
South Pacific Tonga Ltd, Bank South Pacific (Samoa) Ltd.
Airways Hotel & Apartment Ltd, Lamana Hotel Ltd, Lamana Development Ltd, Texas
Chicken South Pacific Ltd.
Australian Institute of Company Directors, PNG Institute of Directors, Anglicare
Foundation (PNG).
Bank of South Pacific Ltd2, BSP Capital Ltd , Teyo No.1 Ltd5, Akura Ltd, BSP Life (Fiji)
Ltd, BSP Health Care (Fiji) Ltd, BSP Finance (Fiji) Ltd, Future Farms Ltd, Feel Good
Investments Ltd.
Shareholder
Bank of South Pacific Ltd, Teyo No.1 Ltd, FeelGood Investment Ltd and Akura Ltd.
Trustee/Member
Institute of National Affairs8 , PNG Institute of Directors.
R. Fleming, CSM, MBA, MMGT
Director
Bank of South Pacific Ltd9, BSP Capital Ltd, BSP Convertible Notes Ltd, BSP PNG
Holding Ltd, BSP Life (Fiji) Ltd, BSP Capital Ltd, BSP Saleco Ltd, Capital Nominees
Ltd, BSP Nominees Ltd, BSP Finance Ltd, BSP Finance (PNG) Ltd, BSP Finance (Fiji)
Ltd, BSP Services (Fiji) Ltd, BSP Health Care (Fiji) Ltd, Credit & Data Bureau Ltd,
Bank of South Pacific Tonga Ltd, Bank South Pacific (Samoa) Ltd, Bank South Pacific
(Vanuatu) Ltd, 3 Kundu Pte Ltd.
Shareholder
Bank of South Pacific Ltd.
Trustee/Member
Australian Institute of Company Directors, PNG Institute of Directors, Anglicare
Foundation.
G. Aopi, CBE, MBA
Director
Shareholder
Member/Trustee
Bank of South Pacific Ltd, Oil Search Ltd7, Steamships Trading Co Ltd, POMSoX Ltd,
Marsh Ltd, Hirad Ltd, Wahinemo Ltd, FM Morobe Ltd, CDI Foundation, BSP Finance
Ltd.
Bank of South Pacific Ltd, Oil Search Ltd7, Hirad Ltd, Wahinemo Ltd, Newcrest Ltd,
Highlands Pacific Ltd, Melanesian Trustees (ICPNG), Kumul Asset Management.
Institute of National Affairs, Business Council of PNG, PNG Chamber of Mines &
Petroleum, Oil Search Health Foundation, PNG Cancer Foundation1.
Dr. I. Temu, PhD, MEc, BEcon
Director
Bank of South Pacific Ltd, Telemu Ltd, Kina Petroleum Ltd, Kumul Petroleum
Holdings Ltd, Savitec Ltd. Barrick Niugini Ltd
Shareholder
Telstra Ltd, Nautilus Minerals Ltd, Kina Petroleum Ltd.
Employee
Member
Barrick Niugini Ltd
Divine Word University Council.
88
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Name
Nature of Interest
Sir N. Bogan, KBE, LLB
Director
Bank of South Pacific Ltd, In Touch Media Ltd1, Coprez Communications Ltd1, Coprez
Holdings Ltd, Mapai Transport Ltd, Ahi Holdings Ltd.
Shareholder
In Touch Media Ltd, Coprez Holdings Ltd.
G. Robb, BA, MBA, OAM
F. Talao, LLM, MPHIL
E. B. Gangloff, CPA
Member
Director
Graduate
Director
Member
Director
Member
A. Mano, BEcon, MSc.
Director
Chancellor University of Technology, PNG Tax Review Committee1.
Bank of South Pacific Ltd, BSP Capital Ltd, Bank of South Pacific Tonga Ltd.
Australian Institute of Company Directors.
Bank of South Pacific Ltd, BSP Finance Ltd, Chayil Investment Ltd, Partnership
Pacifica Ltd, Human Rights PNG Inc., Hopshop PNG Limited.
Papua New Guinea Law Society, Australian Institute of Company Directors.
Bank of South Pacific Ltd, Gangloff Consulting Ltd, New Britain Palm Oil Ltd, Dubara
Holdings Ltd, Sir Theophilus Constantinou Foundation. BSP Finance (Fiji) Ltd.
PNG Institute of Directors, Certified Practicing Accountants of Papua New Guinea,
Business Council of PNG, Institute of National Affairs, Australian Institute of
Company Directors, MSME Business Council.
Bank of South Pacific Ltd, Mineral Resources Development Company Limited3,
Pearl Resort (Fiji) Ltd1, Speedy Hero Limited1, Insurance Pacific Limited1, Civpac
Ltd1, Handy Group Ltd1, SMA Investments Ltd1 Hevi Lift Group Limited, PNG Air
Ltd, Leisure Holidays Ltd, Gobe Freight Ltd, Mineral Resource Ok Tedi Ltd, Mineral
Resources Star Mountain Ltd, Petroleum Resources Kutubu Ltd, Petroleum
Resources Moran Ltd, Petroleum Resources Gobe Ltd, Mineral Petroleum Resources
Madang Ltd, Mineral Resources Ramu Ltd, Gas Resources Hides Ltd, Gas Resources
Hides 4 Ltd, Gas Resource Angore Ltd, Gas Resource Juha Ltd, Bank South Pacific
(Samoa) Ltd, Star Mountain Plaza, Taumeasima Island Resort.
A. Sam, BComm, CPA
(Appointed 13 July 2016)
Shareholder
Employee
Director
SMA Investments Limited. INSPAC Limited.
Mineral Resources Development Company Limited.
Bank of South Pacific Ltd, JAJ & Associates, Silver Dawn Holdings Ltd
Shareholder
JAJ & Associates, Silver Dawn Holdings Ltd
Member
CPA PNG, Australian Institute of Company Directors
F. Dr Matagialofi Lua’iufi
(Appointed 14th December 2016)
Director
Paradise Consulting Ltd, Bank of South Pacific Ltd.
Councillor /Member of
Executive Committee
Alumni /Member
National University of Samoa.
Kennedy School of Government, Harvard University, Boston, Massachusetts, USA;
British Institute of Consulting.
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
Trainer
UNDP Transformation Leadership Development Programme
89
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 We are you. We are Fiji.
90
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Management Teams
& Directories
91
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 MANAGEMENT TEAMS
SENIOR MANAGEMENT
Robin Fleming
Group Chief Executive Officer
Robin Fleming was appointed CEO of Bank of South Pacific Limited in April 2013. Before his
appointment as 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 & Interna-
tional, and Head of Risk Management with BSP. Prior to the merger of Bank of South Pacific Lim-
ited 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.
Johnson Kalo
Group Chief Financial Officer/Deputy Group CEO
Johnson Kalo was appointed Deputy CEO and Chief Financial Officer in February 2010. Immediately
prior to this appointment as Chief Financial Officer in Sept 2005, he was senior manager of Planning
and Control for BSP. Prior to joining BSP, Mr Kalo’s previous professional experience includes roles
as assistant audit manager with KPMG Port Moresby, and Senior Accounting Manager at Papua New
Guinea Banking Corporation. Mr Kalo is a Commerce graduate from the University of Papua New
Guinea, and has also completed a Graduate Diploma in Applied Finance and Investment with the
Financial Services Institute of Australasia. Mr Kalo is an associate member of CPA PNG.
Roberto Loggia
Group Chief Operating Officer
Roberto Loggia joined BSP in April 2011 after having been CEO of State Bank, Mongolia in its initial stages
of development wherein the sound assets of two failed institutions were consolidated into a new viable
state sponsored bank with the support of EBRD, London. After having obtained his Bachelor of Commerce
degree in Finance from McGill University, Montreal and initiation into banking at Toronto Dominion Bank,
he has spent more than thirty years in the banking sector working mostly throughout Asia but also in
emerging markets in Central Europe, South America and Africa. He has also participated as a key manager
in greenfield banks in Japan, Indonesia, Laos and Angola, and has held senior positions within Retail
Banking in Nigeria as well as consulting assignments within Retail Banking in China and Risk Management
in Thailand.
Haroon Ali
Group Chief Risk Officer
Haroon Ali was appointed Chief Risk Officer in July 2013. Previously, he was the Bank’s Chief Risk Officer
for Fiji. Mr Ali has more than 36 years of banking experience of which 30 years was with ANZ Bank that
included a 2.5 year secondment with ANZ’s Corporate Banking Division where he held the position
of Regional Risk Executive before returning to Fiji to take up the role of Head of Commercial and SME
Banking. Before joining BSP in September 2010, he was the Head of Retail Banking for ANZ Fiji. Mr Ali
holds a Masters of Management Degree in Strategic Management from the Southern Cross University in
Sydney. He is a Fellow of the Financial Institute of Australasia and holds an Honorary Fellowship from the
Fiji Institute of Bankers.
Paul Thornton
Group General Manager Retail Banking
Paul Thornton was appointed Group General Manager Retail Banking in August 2013 and brings to the
position 40 years of retail banking experience, 32 years of which have been in PNG. Mr Thornton was
previously the Executive Manager Strategic Planning with the PNG Banking Corporation and was the
founding Managing Director of PNG Microfinance Limited. Since returning to BSP in 2010, Mr Thornton
has held the positions of Head of BSP Rural, Deputy General Manager Retail and General.
92
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 MANAGEMENT TEAMS
Peter Beswick
Group General Manager Corporate Banking
Peter Beswick was appointed Group General Manager Corporate Banking in June 2011. He
has over 20 years of banking and finance experience, covering Australia and South East Asia
with Commonwealth Bank of Australia, National Australia Bank and Bank of New Zealand;
holding senior executive positions in risk management and business development. Prior to
joining BSP, his most recent appointment was Chief Executive Officer of a national wholesale,
import and retail business in Australia. Mr Beswick has extensive experience in the finance,
government, retail, wholesale, telecommunications, and property sectors, with extensive knowledge
in foreign exchange, risk management and governance. Mr Beswick qualified as a Chartered
Accountant with PricewaterhouseCoopers and most recently completed an MBA with Macquarie
University in Australia.
Eddie Ruha
Group Chief Financial Officer
Eddie Ruha was appointed Group Chief Financial Officer in February 2017, having previously
served as Chief Financial Officer, PNG, since November 2012. Prior to joining BSP, he worked for
Steamships Trading Company in PNG for 22 years, working in the Steamships Merchandising
Division for eight years, before transferring to Head Office as Group Systems Accountant and
then Group Accountant, General Manager Finance and then from 2008 to 2012 as Finance
Director and Company Secretary. In New Zealand, he initially worked for KPMG Auckland office
as an Auditor. Mr Ruha is a commerce graduate from Auckland University in New Zealand
and has a Master of Business Administration from Charles Sturt University and is an associate
member of CPA Papua New Guinea as well as an associate member of the New Zealand Institute
of Accountants.
Aho Baliki
General Manager Paramount Banking
Aho Baliki has been in the banking industry for over 40 years, having joined the Commonwealth
Banking Corporation in February 1974. After joining the bank, he progressed through the banking
hierarchy to the position of Chief Executive Officer of the PNG Banking Corporation in 1999.
He was further appointed as General Manager Human Resources in 2000 when PNG Banking
Corporation merged with BSP. He currently holds the position of General Manager Paramount
Banking since his appointment in 2002.
Rohan George
General Manager Treasury
Rohan George was appointed General Manager Treasury in February 2015. He has extensive
knowledge in developed and emerging f inancial markets. His experience spans 30 years,
covering fixed income, foreign exchange, commodities and structured derivatives markets.
Prior to joining BSP, he worked at ANZ as Head of Global Markets, Cambodia & Laos (5
years), at Westpac as Treasurer PNG & Pacific Islands (8 years), and at BNP Paribas
Investment Management in Sydney, as Head of Fixed Income. Mr George holds a Master of
Applied Finance degree from Macquarie University and is accredited by both the Australian
Financial Markets Association and the Sydney Futures Exchange.
Hari Rabura
General Manager Human Resources
Hari Rabura was appointed General Manager Human Resource in April 2016, having joined
BSP as a graduate trainee in 2001. She is experienced in implementing and delivering human
resources strategies, policies, and services that create, support and sustain a high
performance culture in BSP. She is also a member of the BSP Leadership & Management
Development Program and has attended training in INSEAD Business School, Melbourne
Business School and most recently on secondment with the Oil Search Head Office in
Sydney, Australia.
93
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 MANAGEMENT TEAMS
COOK ISLANDS
FIJI
SAMOA
94
Standing (L - R):
Massey Mateariki - Manager Risk & Compliance
Tokoa Harmon - Branch Manager
Janet Samuel - Business Manager
Chris Doran - Head of Business Banking
Seated (L - R):
Miranda Doran - Finance Manager
David Street - Country Manager
Henry Napa - Operations Manager
Standing (L-R):
Ravindra Singh - GM Retail Bank
Howard Politini - GM Human Resource
William Wakeham - Chief Operating Officer
Omid Saberi - Chief Information Officer
Rajeshwar Singh - Chief Financial Officer
Seated (L - R):
Ashleigh Matheson - Chief Risk Officer
Alvina Ali - GM Legal
Kevin McCarthy - Country Manager
Cecil Browne - GM Corporate & International
Standing (L - R):
Michelle Lemisio - Business Manager
Shirley Greed - Head of Retail
Maryann Lameko-Vaai - Country Manager
Peti Leiataua - Operational Risk & Compliance
Manager
Seated (L - R):
Rod Greed - Project Manager
Nick Rous - Regional Finance Manager
Edward Yee - Head of Business Banking
Absent: Bharat Chovan - Head of Financial Markets,
Epeli Racule - Operations Manager
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 SOLOMON ISLANDS
TONGA
VANUATU
MANAGEMENT TEAMS
Standing (L-R)
Dennis Suia - Manager Operational Risk &
Compliance
Janet Marau - Manager Retail Operations
Sharneet Shalvin Singh - Financial Controller
Giddings Qiqo - Manager Operations & Int. Business
Alphonse Taoti - Manager Retail Banking Services
Jeffery Pitamama - Manager Customer Service
Joyce Nukumuna - Manager Electronic &
Branchless Banking
Winterford Maehau - Manager Information Systems
Sitting(L-R)
Lynette Taoti - Manager Credit Administration
David Anderson - Country Manager
Christopher Robertson - Head of
Relationship Banking
Freda Fa’aitoa - Manager Human Resources
Standing (L - R):
Salesi Fineanganofo - Business Manager
Mele’ana Fifita - Manager Global Transactional
Solution
Josiah Kalfabun - Manager Operational Risk
Seated (L - R):
Linita Tu’ihalangingie - Manager Operations
Daniel Henson - Country Manager
Emele Hia - Branch Manager
Viliami Vailea - Manager Finance
Standing (L - R):
Edmond Williamson – Manager Operational
Risk and Compliance
Teresa Jordan – Manager Operations
Nik Regenvanu - Head of Business Banking
Peter Dinsmore – Manager Finance
Carol Veremaito – Business Manager
Seated (L - R):
Liz David - Manager LMU
Stuart Beren - Country Manager
Moana Korikalo - Head of Retail & Marketing
95
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
Standing (L - R):
Willie Konga – Manager, Funds Management
Gheno Minia – Head of Equities & Dealing
Seated (L - R):
Salaniet Mathew – Manager Settlements & Nominees
Richard Borysiewicz- General Manager, BSP Capital
Theresa Kalivakoyo- Business Controller
Standing (L - R):
Dulcie Pilake - Collections Manager
Sharon Andoiye - Manager OPerational Risk and
Compliance.
Barbara Tolaget - Manager Lending Support
Pochon Lili - Financial Controller
Freda Willyman - Manager Administration
Imelda Samba - Senior Lending Officer
Debra Lessi - Finance Manager
Seated (L - R):
Anna Puri - Credit Manager
Jodi Herbert - Country Manager
Christophe Michaud - General Manager
Shauna Paike - Head of Lending Sales
Standing (L - R):
Anal Sen - Collections Supervisor
Sudeshwar Ram - Senior Lending Officer
Krishna Raju - General Manager
Animul Sheryn Khan - Settlement/Conveyancing
Officer
Sanjeet Narsey - Finance Manager
Shainesh Vikash Lal - Area Manager West
MANAGEMENT TEAMS
BSP CAPITAL LTD
BSP FINANCE - PAPUA NEW GUINEA
BSP FINANCE - FIJI
96
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 BSP LIFE - FIJI
MANAGEMENT TEAMS & OVERSEAS BRANCH DIRECTORY
Standing (L - R):
Michael Nacola - General Manager Distribution
& Marketing
Vandhna Narayan - General Manager Legal &
Compliance
Munendra Naidu - Chief Financial Officer
Pramesh Sharma - General Manager Investments
Seated:
Malakai Naiyaga - Managing Director
OVERSEAS DIRECTORY
Cook Islands
Country Manager
Head of Business Banking
Rarotonga Branch
Aitutaki
Fiji
David Street
Chris Doran
Tokoa Harmon
Rosa Henry
682 22014
682 22014
682 22014
682 22014
Kevin McCarthy
Manjila Goundar
Mohammed Arif
Shailendra Roy
Jennifer Morris
Shalit Kumar
Country Manager
Damodar City Branch
Thomson St Branch
Nausori Branch
Pacific Harbour Branch(OIC)
Pacific House Sales & Bus.Centre
Samabula Sales & Bus. Centre(OIC) Pio Vatanitawake
Suva Central Branch
Ba Branch
Westfield Branch
Nadi Branch
Namaka Branch
Rakiraki Branch (OIC)
Sigatoka Branch
Tavua Branch (OIC)
Labasa Branch
Savusavu Branch (OIC)
Taveuni Branch
Mereani Peters
Anupa Kumar
Madhur Kumar
Devendran Pillay
Ann Pesamino
Ronica Prakash
Reginald Kumar
Sanjeev Sumer
Eka Seduadua
Vineeta Prasad
Marica Mara
3214454
3342333
3314400
3478499
3452030
3314400
3387999
3314400
6674599
6662466
6705111
6728950
6694200
6500900
6681507
8811888
8850199
8880433
Samoa
Country Manager
Retail Head
Savaii Branch
Vaitele Branch
Maryanne Lameko - Vaai 685 66115
685 66170
Shirley Greed
685 51208
Taialofa Toala
685 23005
Amelia Iakopo
Solomon Islands
Country Manager
Auki Branch
Gizo Branch
Heritage Park Branch
Honiara Central
Munda Branch
Noro Branch
Point Cruz Branch
Ranadi Branch
Tonga
Country Manager
Nuku’alofa Branch
Vava’u Branch
Vanuatu
Country Manager
Santo
Port Vila
David Anderson
Gordon Ifuimae
Clotilda Londeka
Joy Vave
Glennise Kuper
Tanya Saiqoro
Tewia Laore
Fred Osifelo
Tricia Tura
677 21874
677 40484
677 60539
677 21814
677 21222
677 62177
677 61222
677 21874
677 39403
Daniel Henson
Emilio Tapueluelu
Sosefina Tangitau
676 23540
676 20827
676 71268
Stuart Beren
Janso Ngwera
Joycelyn Tovovur
678 5580001
678 36625
678 28614
97
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
PAPUA NEW GUINEA BRANCH MANAGERS
Alex Wafimbi
Aitape
Karen George
Arawa
Betty Posangat
Alotau
Maureen Wanu
Boroko
Mary Koi
Bialla
Nelson Kerua
BSP First HC
Julie Warren
Buka
Bevilon Homuo
Bulolo
Antonia Dru
Gordons
Ivy David
Daru
Livikonimo Koki
Goroka
Peter Komon
Harbour City
Marco Hamen
Kainantu
Madeleine Leka
Kavieng
Ruby Patu
Kimbe
Thomas Tembil
Kiunga
Joe Makinta
Kokopo
Rita Singut
Kundiawa
Agnes Mark
Lae Top Town
Robinson Panako
Lae Commercial
Josephine Komuru
Lae Market
Kalat Tiriman
Lihir
Quillan Nongi
Lorengau
Barry Namongo
Madang
Billy Veveloga
Mendi
Meck Kaum
Moro
Rawalo Rawalo
Moro
Mary Kundi
Mt Hagen
Tau Kwarujambi
Motukea
Diana Guria
Port Moresby
Eileen Goviro
Popondetta
Suya Yopahafo
Porgera
Peter Tikot
Rabaul
Jeanette Tami
Tabubil
Samuel Okti
Tari
Jacqueline Mileng
Vanimo
Sibona Kema
Vision City
Rova Olemau
BSP First Gordons
Theresa Pilamp
Wabag
Alex Kuna
Waigani B/Centre
Mathias Manawo
Waigani Drive
Gabriel Ak
Wewak
Tony Waningu
SME - Port Moresby
Richard La’a
SME - Lae
Reuben Elizah
Highlands Area
Manager
Dennis Lamus
Momase Area
Manager
Stanerd Wai
NCD Area Manager
Jeffrey Singer
NGI Area Manager
Nuni Kulu
Southern Area
Manager
98
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Julie Warren
Premium
Poni Tukily
Aitape
Alotau
Arawa
Bialla
Boroko
Branch
Premium
Buka
Branch
Bulolo
Daru
Goroka
Gordons
BSP First
Premium
Harbour City
Branch
Premium
BSP First
Kainantu
Kavieng
Kimbe
Kiunga
Kokopo
Branch
Premium
Alex Wafimbi
Betty Posangat
Karen George
Mary Koi
457 2042
641 1284
276 9244
983 1095
Maureen Wanu
Sheila John
303 4333
303 4354
973 9042
7202 9203
973 9087
7202 9202
474 5366
645 9062
532 1633
Bevilon Homuo
Ivy David
Livikonimo Koki
Rova Olemau
Antonia Dru
302 5245
302 5271
Peter Komon
Bau Kiso
Nelson Kerua
Marco Hamen
Madeleine Leka
Ruby Patu
Thomas Tembil
305 7731
305 6189
305 6560
537 1065
984 2066
983 5166
649 1073
Joe Makinta
Jennifer Tiolam
982 9088
982 9068
Kundiawa
Rita Singut
535 1025
Lae
Top Town
Main Market
Commercial
BSP First
Premium
Lihir
Lorengau
Agnes Mark
Josephine Komoru
Robinson Panako
Elizabeth Gavul
Wendy Poka
Kalat Tiriman
Quillan Nongi
473 9820
473 9606
473 9877
478 4949
478 4930
478 4923
986 4052
970 9050
SUB BRANCH DIRECTORY
AIYURA
BANZ
BUIN
CHUAVE
DAULO
GEMBOGL
GUSAP
HENGANOFI
HIGATURU
HOSKINS
KABWUM
KAMTAI
KEREMA
KEREVAT
Gomah Benson
Kessy Elly
Melchior Tania
Koiya Kupa
7230 8313
7100 9078
7100 7855
7197 6001
Merolyn Sirifave
7100 6763
William Koima
Michael Yakep
Emos James
7313 4177
7091 1396
7100 7859
Ruddy Samson
Rachael Watu
Robert Kom
Aisi Aua
Kilala Kindau
7031 2627
7346 1426
7243 4695
7091 2298
7190 8231
7100 9077
KEROWAGI
Leah Taia
KINIM
KIKORI
KOMO
KONOS
Malapun Bannick
7100 7861
Leah Kimave
Lobe Arawi
Maureen Nick
716 30597
7362 0760
7197 6006
PAPUA NEW GUINEA BRANCH DIRECTORY
Madang
Branch
Premium
Mendi
Moro
Motukea
Mt Hagen
Branch
Premium
Popondetta
Porgera
Port Moresby
Branch
Premium
BSP First
Rabaul
Tabubil
Tari
Vanimo
SME
Port Moresby
Lae
Vision City
Branch
Premium
BSP First
Barry Namongo
Ruth Makel
Billy Veveloga
Meck Kaum
Tau Kwarujambi
Mary Kundi
Beverly Elizah
Eileen Goviro
Suya Yopahafo
Diana Guria
Lina Popal
Nelson Kerua
Peter Tikot
Tony Waningu
Samuel Okti
Jacqueline Mileng
422 2477
422 2621
549 1070
276 1566
321 7699
542 1877
542 1877
629 7171
547 6900
305 7790
305 7943
305 7731
982 1744
649 9179
276 1650
457 1209
Tony Waningu
Richard La’a
305 6400
479 5676
Sibona Kema
Damaris Toran
Dianne Sawala
300 9100
300 9103
300 9109
Wabag
Theresa Pilamp
547 1176
Waigani Banking Centre
Branch
Premium
Alex Kuna
Lorraine Siaoa
300 9600
300 9645
Waigani Drive
Wewak
Mathias Manowo
Gabriel Ak
302 5300
456 2344
Highlands Region
Momase Region
NGI Region
NCD Region
Southern Region
Reuben Elijah
Dennis Lamus
Jeffrey Singer
Stanerd Wai
Nuni Kulu
542 2002
478 4998
982 9285
305 7703
305 7628
LABA
Auda Morea
LAKURUMAU
Lorraine Koma
LOUSIA
MAPRIK
MINJ
Lorna Solomon
Christian Tatu
Kui Tai
MUTZING
Gordon Robert
7197 6008
7197 6005
7031 2617
7168 7815
7100 9076
7100 2488
NAMATANAI
Mathew Tabakas
7197 6007
NAVO
Sinith Salum
OKAPA
PADIPADI
PALMALMAL
PANGIA
TAMBUL
Arafat Tovari
Alfred Robert
Freda Nablup
Karen James
Joseph Paul
TELEFOMIN
Jobartan Bickie
WAKUNAI
WALIUM
Melvin Kusa
Brenda Igusam
WAPENAMANDA
Feta Isin
YANGORU
Brendon Iromo
7090 4272
7031 8497
7374 5623
7090 4463
7323 9181
7197 6003
7100 7863
7255 8421
7100 7856
7106 8357
7100 7862
7127 0000
71855768
99
Stephanie Orovo
72751365
NINGERUM
Mathew Tware
KUPIANO
Andrew Baine Jnr
7288 4140
YONKI
Usik Asino
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
We are you. We are Tonga.
100
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 Corporate Social
Corporate Social
Responsibility
Responsiblity
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016
101
101
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CORPORATE SOCIAL RESPONSIBILITY
COMMUNITY PROJECTS IN PAPUA NEW GUINEA
Mendi Branch constructed a new
basketball court for the Taguru community
We recognise that as a growing Bank in the Pacific, we have a special responsibility to our
people, our customer and our community. BSP Community Projects are executed through all
our Branches in PNG, Fiji, Solomon Islands, Cook Islands, Samoa, Tonga and Vanuatu. Our
staffs volunteer their time to contribute to helping to complete each project. Our Community
Project are also undertaken by Strategic Business Units (SBUs).
Quick Facts about BSP Community Projects
a project in their local community in partnership with community leaders.
We are 100% committed to the people of PNG and the Pacific, Fiji, Solomon Islands, Tonga,
Samoa, Cook Islands and Vanuatu.
09 2009 – The year that BSP introduced Community Projects where every Branch in PNG delivered
100
287 287 Worthy Community Projects delivered since 2009
6.7
Amount in Kina (Million) BSP has invested in community project throughout PNG since 2009.
BSP fully funds these projects focusing on Education, Health, Sports and Environment.
BSP Samoa launch of the cobranded Manu Samoa Visa Debit Card.
BAIUNE AID POST - Bulolo
ST. MICHAELS PRIMARY - Port Moresby
WATER TANK LAUNCH - Tari
102
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CORPORATE SOCIAL RESPONSIBILITY
Stenard Wai, cutting the ribbon
to officially hand over the water tanks to
Mt. Diamond Secondary School.
“These two tanks will now solve our water problem and also give us great
confidence and positive perception towards BSP.” - Mr. Martin Sepe, Mt Diamond
Secondary School Principal.
Our Community Projects typically include:
Renovating, rebuilding hospitals & health facilities or providing medical equipment.
Building new and renovating libraries,classrooms & school bus stops.
Renovating sporting facilities & giving sport equipment.
Renovating ablution blocks or providing water tanks at schools.
Renovating or building parks & playgrounds for children.
Supporting community events & initiatives or simply lending a helping hand.
In 2016 we focused on “Provision of clean water & Renewable Energy”
24 Water Tanks donated as part of the BSP Community Project in PNG.
• Most Water tanks were donated to Schools and Health Centres
VILELO PRIMARY SCHOOL - Bialla
CHRISTIAN ACADEMY - Port Moresby
LEMAKOT - Kavieng
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CORPORATE SOCIAL RESPONSIBILITY
Lumi Health Centre, Aitape received
new solar panels and lights for the clinic.
Here, contractors setting up the panels to test.
“The Health Centre operated with poor lighting in the wards, Staff had to do birth deliveries
using the torches and Mobile phone lights. This will help the staff especially during our night
shifts.”Jack Seimoni, Provincial Director of Public Health.
Each year we deliver many worthy projects that make a meaningful difference to
recipient communities
Renewable Energy focused Project by our Aitape, Lae, Vanimo and Kavieng Branches.
Installation of Solar Lights to Lumi Health Centre.
Installation of 1x water tank & solar light package at Gelam Musom Christian School.
Installation of 2x water tank & solar light package at Waromo Catholic Church.
Installation of Solar Light at Lemakot Primary School.
Renovation of the PNG Blind Service Centre
BSP First assisted the Centre 2012.
Services of Rehabilitation, Education and Primary Eye Care.
BSP Presented two more speakers and a computer set to the
centre to help them with their ICT programs.
PNG BLIND SERVICE CENTRE - Port Moresby
BUIMO - Lae
MARIANVILLE SEC. SCHOOL - Port Moresby
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CORPORATE SOCIAL RESPONSIBILITY
BSP’s Board of Directors
and Senior Management at the
community project handover, Madang.
Our staff continue to deliver projects that are aimed to enrich communities and build unity. This is supported
by the Board and Management. In Madang, Board Members took the opportunity to visit the Madang Holy
Spirit Primary School to hand over new tanks that were installed by BSP Madang staff.
Some of the BSP Community Project in PNG.
• Renovation of Ablution block at Buimo Health Centre
•
Installation of water tank at Goroka Technical College
• Refurbishment of the Daru CIS Aid Post
• Renovation of the Widows Association Office
•
•
Installation of Solar Lights to Lumi Health Centre
Installation of 2x water tank to Darava Elem. School
•
•
Installation of Solar Light at Lemakot Primary School
Installation of Water tank & Construction of playground
• Refurbishment of Baiune Aid Post
at Popondetta General Hospital
• Water tank and sports pack to Tokarara Primary School
• Renovation of school hall and Installation of water
•
Installation of Water tank to Samo School
tank to Arawa Primary School
• Maintenance of classroom at St Pauls Primary School
•
Installation of Water tank at Gagan Health Centre
• Renovation of Admin Office at Raluana Primary School
• Renovation of the Basketball & Volleyball court for the
• Renovation of the PNG Blind Service Centre
Correctional Services Unit
•
•
Installation of 4 x Tuffa Tanks Mt Hagen Primary School
• Renovation of Library at Gordons Secondary School
Installation of 3x water tanks to Holy Spirit Primary
• Renovation of CIS Meeting Building
TOKARARA PRIMARY - Port Moresby
CIS AID POST - Daru
GOROKO TECHNICAL COLLEGE
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CORPORATE SOCIAL RESPONSIBILITY
COMMUNITY CONTRIBUTIONS: OFFSHORE BRANCHES
Our friend Piggy and the Tonga
Under 19 Girls team at the official opening
ceremony of the netball court. BSP Tonga’s first
Community Project
Our teams in Fiji, Solomon Islands, Cook Islands, Samoa and Tonga also delivered
Community Projects in 2016.
16 A total of 16 community projects were handed over in 2016.
Fiji - 5 | Solomon Islands - 8 | Tonga - 1 |Cook Islands - 1 | Samoa - 1
Fiji Branch Projects
• Westfield & Namaka: Installation of water tank at Lololo Primary school and renovation of kindergarten
• Savusavu: Repairs to classrooms at Tacilevu Primary School and installation of water tank
• Rakiraki: Repairs to the Namarai Health Centre
Solomon Islands Branch Projects
• Heritage Park Branch: Presentation of three Wheel Chairs towards The National Referral Hospital Medical Ward
• Gizo: Installation of water tanks to St Luke’s Anglican Kindy and Gizo United Church Kindy.
• Noro: Refurbishment of St Eusebius Catholic Kindy
Cook Islands Branch Projects
• Installation of the Sports Score Boards at Tupapa, Titikaveka & Ngatangiia
Samoa Branch Projects
• Installation of Water tanks to under-developed communities
Tonga Branch Projects
• Construction of netball court at the BSP Car Park
UNVEILING THE PLAQUE - Fiji
READY, SET, PAINT - Tonga
STAFF WORKS - Samoa
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CORPORATE SOCIAL RESPONSIBILITY
Staff and Village
repsresentatives from Gataivai, Samoa.
Some of the activities & organisations we supported in 2016 include:
Tropical Cyclone Winston
FIJI
•
• Chinese Media Soccer Tournament
• Melanesian Games 2016
• 11th Oceania Swimming Championship
• Oceania Weightlifting Championship
• Pacific Microfinance Alliance
sponsorship
• 2016 Top Executives Conference
• BSP Blood Drive - Fiji National Blood
Service
• South Pacific Tourism Exchange Event
• 2016 Rotary Charity Golf Day
• Suva Marathon Challenge
• Nadi Airports Ladies Golf Tournament
SOLOMON ISLANDS
• SIWIBA
• G’Day Solomon Islands Fun Run
• BSP Golf Sponsorship.
• Financial Inclusion Committee
• Pinktober
• Rotary Club of Honiara
• Australia/Solomon Is. Business Forum
• Various School Awards
COOK ISLANDS
• Cook Islands Youth National Council
• Cook Islands Canoeing Association
• Ministry of Education
• Cook Islands Triathlon International
• Cook Islands Breast Cancer Foundation
• Climate Change Cook Islands
• Cook Islands Badminton
• Cook Islands Squash
• Cook Islands Police
• Ministry of Cultural development
• The Rotary Club of Rarotonga
SAMOA
• Table Tennis Federation
• Samoa Chamber of Commerce
• Samoa Victim Support Group
• Samoa Beach Volleyball Association Inc
• Samoa Golden Oldies Rugby Club
• Goshen Trust Mental Health Services
•
• Samoa Arts Council
• Samoa Stationery and Books
• Samoa Events Inc
• Samoa Institute of Accountants
Iva White Lions Sports Club
TONGA
• ON THE SPOT- NGO
• Miss Heilala Beauty Pagent- NGO
• Vava’u Billfish Fishing Tournament- Sports
•
• Christmas in the Park- Charitable group
• Nuku’alofa Outrigger Canoe Club-
Tonga Rotary Club- NGO
Sports
Tonga Primary School Rugby
Tournament- Sports
Tonga Breast Cancer Committee - NGO
•
•
VANUATU
• Vila Pro Med Yrly S/Ship
• Santo Golf Day
• Vanuatu Senior Golf Open
• USP Open Day
• Pro Med Survivor Games
• Rural Women’s Day
• Rotary Golf Day
• Netball
• Malapoa College Grad Day
• Port Vila Golf Club Corporate
Membership
• Business Council
Quick fact: BSP acquired Westpac
Operations in Vanuatu in July 2016.
TUFF TUMAS BSP - Vanuatu
SWIM CLUB SUPPORTED - Tonga
ROAD TO RIO - Fiji
107
Fiji Branch Projects
Solomon Islands Branch Projects
Cook Islands Branch Projects
Samoa Branch Projects
Tonga Branch Projects
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CORPORATE SOCIAL RESPONSIBILITY
SPONSORSHIPS & DONATIONS
Sarenah Pini receiving the
cheque from BSPs Nancy Knight
“I acknowledge with sincere appreciation the continued support received from BSP
for the ongoing education and development of our sport volunteers and athletes
and growing the sport in Papua New Guinea,” - Elizabeth Wells, PNG Swimming Inc
(PNGSI) President
BSP Sponsorship and Donations focuses on many aspects of the community such as:
Sports initiatives promoting healthy, active lifestyle
Educational initiatives promoting literacy
Art & Cultural activities
Health & Environmental initiatives
Nation building and encouraging investment
Humanitarian and charitable initiatives
Catagories BSP has assisted in. Cultural Events, Sports, Fundraising Events, and Corporate
Events, Conferences and Expo
6
265 Thousand Kina sponsored and donated In-Kind - 2016.
2.3
Million Kina sponsored and donated In-Cash - 2016.
SEPIK RIVER CROCODILE FESTIVAL
ST. THERESA U/15 BOYS
SUSTAINABLE COASTLINE PNG
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CORPORATE SOCIAL RESPONSIBILITY
At BSP our commitment is to help communities prosper in all areas we operate in. Some of the
activities and organisations we supported in 2016 include:
Surfing Association receiving
the support from BSP Vanuatu.
• PNG Mining & Petroleum Conference
• PNG International Business Summit
• Certified Practicing Accountants (CPA)
•
Institute of Internal Auditors - POM
• PNG Australia Business Forum
• PNG Human Resource Institute
• UPNG MBA Pinnacle
• PNG Womens Forum
• PNG Industrial & Mining Resource Exhibit
• Medical Symposium
• Niugini Coffee Expo
• Madang Investment Summit
• BPNG Financial Inclusion Expo
• Goroka Show
• Morobe Agricultural Show
• Sepik Crocodile Festival
• National Kenu & Kundu Festival
• Warwagira & Mask Festival
• Bulolo Cultural Show
• Frangipani Festival
• PNG Cricket
• PNG Swimming Inc
• PNG Paralympic Committee
• BSP Pennants Team
• Game Fishing Club
• PNG Golf Open
• Ramu Agri - Golf Event - BSP Ramu Open
• PNG Snooker & Billiards - BSP National Title
• Kanu Kundu Klab
• Morobe Golf Open
• Prime Minsters Golf events
Morobe Province
Agricultural Society Inc
The Institute of
Internal Auditors
PNG Chapter
• National Sports Conference
• Leader’s Summit 2016
• SME Policy & Masterplan Launch
• Pacific MMI T20 Legendary Bash Cricket
• Bulolo Golf Ambrose event
• AROB Rugby Football Association
• PIH Corporate Indoor Cricket Competition
• Rotary Club of POM Golf Event
• NCD Governors Corporate Golf
• Charity Soccer Cup
• New Britain Palm Oil Open - Golf Event
• Madang Golf Open
• PNG Institute of Directors Golf event
• Rotary Jumbo Tennis
• Private Company Netball Event
• Lae Bowling Team
• Lae Golf Members Key Draw
• Jonah Lomu Legacy Cup Rugby 7s Tournament:
• Business & Professional Women’s Club
• Pink Ribbon Day brunch
• Buk Bilong Pikinini
• Burnet Institute
• Operation Open Heart Program
• Australia Doctors International
• Anglicare Inc PNG
• Salvation Army - Red Shield Appeal
• TIPNG Walk Against Corruption
• Aviat Club Key draw - POM
• PriceWaterhouseCoopers Corporate Walk
• RSPCA Paws Walk
• Pom Touch Competition
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CORPORATE SOCIAL RESPONSIBILITY
Students at St. Theresa Primary School
taking part in the BSP Go Green Program.
We are demonstrating socially responsible actions which positively impact the community. Our
major Go Green activity is the Annual School Clean Up Day.
November 2016, Annual BSP Clean Up Day.
Thousand students participated in PNG, 6,000 across the Pacific.
18
20
40
180 Number of Schools that registered and participated in the Event in PNG.
Number of schools that took part in Cook Islands, Fiji, Samoa, Solomon Islands, Tonga and
Vanuatu for the event.
Some events on Environmental Responsibility:
EARTH HOUR
SATURDAY
19 MARCH
2016
EARTH DAY
FRIDAY
22APRIL
2016
WORLD ENVIRONMENT
DAY
SATURDAY
04 JUNE
2016
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GO GREEN - Tonga
EARTH DAY - Cook Islands
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 FINANCIAL LITERACY & BANKING EDUCATION
CORPORATE SOCIAL RESPONSIBILITY
Conducting Training in a remote
village in East Sepik Province
Whether it’s teaching people how to manage money, using the right product and service or opening
new accounts for children, students and adults...we go to where our customers are - even if it means
enduring rugged terrain. Here are some highlights:
BSP has delivered financial literacy training to thousands of Papua New Guineans since 2014.
Training involves learning basic money management tools to help every Papua New Guineans learn the
importance of spending wisely and saving for the future.
We are focused on delivering financial literacy programs to the general public as we are committed to
promoting a savings culture.
Financial Literacy training includes providing the right products and services to the people in rural areas.
Helping individuals and communities make more informed banking decisions.
BSP promotes a banking ecosystem; Banking Education provides a platform for individuals to select the right
products to suit their banking needs.
30,178
In 2016, BSP reached 30,178
people across Papua New
Guinea. 46% of participants
are women.
120
We have 120 qualified
Financial Literacy Trainers
based throughout all our
branches in PNG.
409
BSP reached 60 Villages,113
Communities, 55 Businesses,
142 Schools and 39 Church
Groups across PNG in 2016.
178
BSP has 178 Agents in
communities PNG wide,
providing basic banking
closer to home.
PARTICIPANTS IN DISCUSSION - PNG
PARTICIPANTS TAKING NOTES - PNG
PARTICIPANTS PRESENTATION - PNG
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016 CORPORATE SOCIAL RESPONSIBILITY
FINANCIAL LITERACY & BANKING EDUCATION
Financial Literacy in Cook Islands.
We reached schools, communities, and families with basic Financial Literacy and Banking Education
Programs. We believe that education and information will help our customers to make informed
decisions on banking and savings products. Banking Education and Financial Literacy programs
are free and delivered through our branches across the Pacific.
KIDS SAVINGS - Solomon Islands
STUDENTS FL TRAINING - Tonga
ACCOUNT OPENING - Fiji
FL PRESENTATION - Tonga
EMPOWERING WOMEN - Fiji
KINGS DEFENCE FL TRAINING - Tonga
STUDENT ACCOUNT - Solomon Islands
FL PARTICIPANTS - Solomon Islands
ACCOUNT OPENING - Fiji
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2016