Local Knowledge,
Global Solution.
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BSP is a modern and energetic bank providing world class banking.
When we were considering concepts for the
Annual Report 2017, we looked at many annual
reports that we have produced over the years.
One of these, was an iconic cover that showed
our then General Manager, Human Resources,
Aho Baliki. The image merged customary dress
and our work uniform.
30 years on, we illustrate the growth and change
in the Bank, and the cover design is a remake of
the 1983 Annual Report cover.
1983 ANNUAL REPORT COVER
HARI RABURA
General Manager, Human Resources
The traditional attire hails from the Motu Koitabuan area within Port Moresby,
Papua New Guinea.
The tattoos are significant, as they identify clans, family lines and status in
society. The face tattoos suggest that she comes from Kirakira village, that of a
chief’s family and the markings on the neck signifies marital status.
The necklace is made from wild banana seeds (black) and a pearl shell worn in
the centre, signifying wealth. The grass skirt is made from nipa palm leaves,
while the headdress is made from parrot and cassowary feathers.
WE ARE YOU,
WE ARE BSP
| www.bsp.com.pg
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 and Subsidiaries
Financial Statements
• Directors’ Report
• Statements of Comprehensive Income
• Statements of Financial Position
• Statements of Changes in Shareholders’ Equity
• Statements of Cash Flows
• Notes to the Financial Statements
Independent Auditor’s Report
Shareholder Information
Directors’ Information
Management Teams and Directories
Corporate Social Responsibility
5
6
8
11
14
21
29
29
31
37
38
40
41
42
43
44
79
83
86
89
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 and Service
High Performing Teams
Operational Excellence
Profitable Growth
OUR CORE VALUES
INTEGRITY
We are honest, committed, trustworthy and reliable in our dealings with our customers and each other.
LEADERSHIP
We inspire, we change, and we live our values, and lead by example.
PROFESSIONALISM
We commit ourselves to continual self-developement to achieve standards of excellence in our performance.
PEOPLE
QUALITY
We respect and value our people and our customers.
We are commited to excellence whilst striving for continous improvement in products and services.
COMMUNITY
We respect, value and support the communities in which we operate.
TEAMWORK
We work with, and for, each other; we progress together.
BSP Cook Islands Team
2
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 BRANCH
79 Branches
Our Team Is Comprised Of Professionals With
351 Agents
52 Sub-Branches
Over 370 Years Of Collective Experience..
4,261 Staff
11,343 EFTPoS
350 Agents
50 Sub-Branches
499 ATMs
80 Branches
SUB-BRANCH
SUB-BRANCH
BRANCH
STAFF
APRA Disclaimer:
BSP is not authorised under the Banking Act 1959 (Commonwealth of Australia) and is not supervised by the Australian Prudential Regulation
11,000 EFTPoS
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.
4,000 Staff
500 ATMs
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 2017 Sir Kostas G. Constantinou, OBE
Chairman
4
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CHAIRMAN’S REPORT
BSP Group has once again achieved a record financial result for 2017 on the back of an excellent growth that was noted in 2016.
Audited net profit after tax for 2017 was PGK757 million, an increase of 17.6% (or K113.55 million) over 2016. Total assets have
grown by 7% to PGK22.37 billion. Nearly all BSP businesses have performed well throughout a year that presented various
macroeconomic challenges.
In 2017, BSP embarked on two strategically important initiatives that will
substantially shape the business of banking in the countries in which we
operate in for many years to come. The implementation of a new Core
Banking system (which I will touch on later) and Digital Banking, the growth
and technological development of which will be an area of increasing focus
for the BSP Group.
While global growth has strengthened over the year, business conditions
were challenging, given the modest economic growth in most of the
countries in which BSP operates. The Pacific region forecast growth is at
2.9% for 2017, primarily reflecting slow recovery in international commodity
prices and flow-on impacts of natural disasters. Commodity prices for LNG
and gold increased moderately, while agricultural commodities declined
over the course of the year. PNG’s economy grew by an estimated 2.2% in
2017, due to the impact of low commodity prices on government revenue
and continued fiscal challenges. In the non-PNG economies, growth has
been mixed with Cambodia, Cook Islands and Vanuatu expecting relatively
strong levels of growth, while Tonga, Solomon Islands and Fiji reported
moderate growth in 2017, and Samoa experienced minimal growth.
Notwithstanding this, demand fundamentals and activity indicators
remain positive hence BSP is cautiously optimistic about its future growth
prospects.
The latest Standard and Poor’s assessment of BSP continues to be at
the maximum rating possible for a Papua New Guinea based entity (B+/
negative/B).
BSP’s 2017 results reflect the continued realisation of its strategic initiative
of rebalancing the proportionate concentration of profit from our home
market of PNG, with approximately 21% of profit and 27% of balance sheet
assets now generated from outside of PNG. Our branches and subsidiaries
continue to make good progress, and I am pleased to repeat my previous
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.
The diversification of our financial service lines continues with BSP Life PNG
commencing its operations in early 2018. This is again another milestone for
BSP, which will permit us to offer life cover for our Personal Loan customers
initially and in the second half of 2018 to be able to sell an endowment
product across our network in PNG. The existing Life Insurance business
in Fiji has once again produced good results in 2017, with continued
profitability improvements and balance sheet management. BSP’s Asset
Finance operations continue to grow with operations commencing in both
Cambodia and Solomon Islands during 2017.
In 2017, BSP also introduced a new EMV Chip Card with contactless “Touch
and Go” capability which has been well received by our customers who
appear to be adapting well to the “Touch and Go” feature. Our objective
is to provide as many customers as possible with the new cards and
our branch and operation staff are ensuring we are delivering these as
efficiently and promptly as possible.
This year BSP embarked on a project to implement a new Core Banking
system across our regional network, using Oracle’s FlexCube product.
The new FlexCube system implementation will result in BSP having one
common operating system, including ancillary systems for Treasury, loan
origination, Mobile Banking, Internet Banking, etc. for the very first time
since BSP commenced its expansion strategy over 10 years ago. Another
focal point for the Group is “Digital Banking”, its growth, technological
developments and how such developments will affect the way our
customers interact with BSP and what that means for the branch of the
future and our customers.
In 2017, two long serving and highly respected Directors retired from
the BSP Group Board. Dr Ila Temu retired in August after 14 consecutive
years of service on the Board, while Gerea Aopi retired in September after
15 years of uninterrupted contribution. Both also served on Board sub-
committees throughout their tenures. Their professional contributions
and support for BSP over many years deserve special mention and we
wish both gentlemen every future success. The Board has welcomed new
members to fill these vacant positions.
Stuart Davis, a former HSBC India CEO joined the board in August 2017
and prominent PNG lawyer, Robert Bradshaw also joined the board in
September 2017. They are two very capable replacements.
BSP Group has managed to produce yet another year of record results
in 2017, at a time when economic conditions across its markets have
been subdued. The BSP Group has once again outperformed its major
competitors. Our key metrics of ROE, ROA and cost to income continue to
trend positively. 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, however
notwithstanding less buoyant economic conditions, I remain confident that
BSP will perform resolutely. The support of its stakeholders, its competitive
operations, and the effective execution of our strategy will enable BSP
Group to produce another successful year in 2018.
Sir Kostas G. Constantinou, OBE
Chairman
5
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 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
Pacific. BSP’s operations date back to 1957, when it was founded in Port Moresby as a branch of National Bank of Australasia Ltd. 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 (PNGBC) in 2002, creating the largest bank in PNG. Other acquisitions followed,
including Habib Bank in Fiji in 2006, National Bank of Solomon Islands in 2007 and Colonial Bank and Colonial Fiji Life Insurance Ltd 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 PNG and the 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
1974
1993
2002
2003
2005
2006
2007
2009
Commenced operations in Port Moresby on 1 May 1957 as a branch of National Bank of Australasia Ltd.
BSP incorporated as Bank of South Pacific Ltd, a wholly owned subsidiary of the Australian parent.
National Investment Holdings Ltd, 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 & Poor’s 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 Ltd from Commonwealth Bank of Australia and rebranded to BSP
and BSP Life, respectively.
2014 - 2015
2015 - 2016
Commenced BSP Finance (Fiji) Ltd in 2014 and commenced BSP Finance (PNG) Ltd in 2015.
Acquired Westpac’s operations in Solomon Islands, Cook Islands, Samoa, Tonga and Vanuatu for A$125 million.
2017
Commenced Asset Finance operations in May 2017, in Cambodia (rebranded to BSP Finance Cambodia Ltd in January 2018) and commenced BSP
Finance (Solomon Islands) Ltd in September 2017. Provisional licence issued in November 2017 for a life insurance company (BSP Life (PNG) Ltd).
6
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Diana Guria - Branch Manager, Port Moresby
and David Mead - BSP Brand Ambassador
7
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 BOARD OF DIRECTORS
SIR KOSTAS G. CONSTANTINOU, OBE
Chairman. Director since April 2009. Appointed Chairman February 2011.
Sir Kostas is a prominent business figure in Papua New Guinea (PNG), holding a number of high level public sector and
private sector appointments. He is Chairman of various companies, including Airways Hotel and Apartments Ltd, Lamana
Hotel Ltd, Lamana Development Ltd, Alotau International Hotel and Bank of South Pacific Ltd. He is a Director of Oil Search
Ltd, Heritage Park Hotel in Honiara, Gazelle International Hotel in Kokopo, City Centre Development Ltd, Coastwatchers Court
Ltd, Waigani Assets Ltd, OPH Ltd, Rangeview Heights Ltd, Grand Pacific Hotel in Fiji, Taumeasina Island Resort in Samoa,
Good Taste Company in New Zealand and Loloata Island Resort Ltd in Papua New Guinea. Sir Kostas is also Vice President of
the Employers Federation of PNG, Honorary Consul for Greece in Papua New Guinea and Trade Commissioner of Solomon
Islands to PNG.
ROBIN FLEMING, CSM, MBA, MMGT
Chief Executive Officer. Director since April 2013.
Robin Fleming was appointed CEO of Bank of South Pacific Ltd 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. Prior to the merger of BSP and PNG-
BC, Mr. Fleming held senior management roles with PNGBC. He has worked in PNG for over 35 years and holds an MBA
and a Master of Management from Charles Sturt University. Mr. Fleming was made a Companion of the Star of Melanesia
(CSM) in 2015 by the PNG Government for services to banking and the community.
FREDA KANEK 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. Previously she was a member of the External Stakeholders Advisory Panel (ESAP) to the Hidden Valley Joint
Venture (HVJV) Mine owned by Newcrest Ltd and Harmony Gold in Wau, PNG, Deputy Registrar National Court, Executive
Director, PEACE Foundation Melanesia and Senior Development Specialist with AUSAID. Ms Talao’s previous Board roles
includes Director on former Civil Aviation Authority (CAA), PNG Mama Graun Conservation Trust Fund, National Airports
Corporation (NAC), Airport City Development Limited (ACDL) Board and the Individual and Community Rights Advocacy
Forum (ICRAF). She was one of six PNG women nominated for the Nobel Peace Prize in 2005 as part of the 1000 Peace
Women Project and awarded 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, MAICD, GAICD
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, 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 Ltd
and Bank South Pacific Tonga Ltd.
ERNEST BRIAN GANGLOFF, CPA, MAICD, MIIA, PNGID
Non - Executive Director. Director since November 2013.
Ernest Gangloff is an Accountant, registered with CPA PNG and the Accountants’ Registration Board. Ernest 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 Ltd. He is the President of the Institute of National Affairs, the Vice President of the SME Business Council and member
of Australian Institute of Company Directors. He is also Adjunct Professor of the School of Business, University of Papua
New Guinea.
8
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 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 9 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 Papua New Guinea (PNG) Liquefied Natural Gas (LNG)
project, 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 Directorships in a number of
entities, including MRDC and its subsidiary companies, Hevilift Group, Insurance Pacific, Pearl Resort, PNG Air, GFS and
Handy Group.
ARTHUR SAM, BComm, CPA, MAICD
Non- Executive Director. Director since 2016.
Arthur Sam is a qualified and experienced accountant, registered under CPA PNG. He holds a Bachelor of Commerce from
the University of Papua New Guinea and is the Audit and Managing Partner of Sam Kiak Tubangliu Certified Practising
Accountants. Mr. Sam previously worked with global accounting firms - PriceWaterhouseCoopers, Deloitte and Ernest &
Young, in managerial roles specialising in external and internal audit and risk management. He has held roles with NASFUND
Board Audit and Risk Committee and is a Member of the PNG Accountants Registration Board. Mr. Sam has also been a
member of the BSP Board Audit & Risk Compliance Committee since June 2013.
FAAMAUSILI DR. MATAGIALOFI LUA’IUFI, BA, MSC, PhD
Non-Executive Director. Director since December 2016.
Faamausili Dr Lua’iufi holds a Doctorate in Philosophy in Management, a Master of Science (Management Sciences), a
Bachelor of Arts, in Sociology and Political Science and Diplomas in Training and Management. She served in the Samoa
Public Service for 28 years and close to 12 of those years as the Chief Executive Officer of the Public Service Commission.
Dr Lua’iufi is currently the Principal Director of Paradise Consulting established in 2008 after resigning from the CEO position
of the Samoa Public Service Commission. As a full time consultant she specialises in the fields of Public Sector governance,
organisation development and human resources management and to date has undertaken more than 50 assignments
in Samoa, Solomon Islands, Niue, Tonga, Cook Island, Tuvalu, Tokelau, Papua New Guinea and Nigeria. Faamausili Dr
Lua’iufi has extensive board experience and is a member of the Council and the Executive Committee of the National
University of Samoa, Samoa Institute of Directors and the British Institute of Consulting. She has actively participated in
many public sector Councils and Policy Committees in Samoa, Asia Eastern Region and the Commonwealth. She was the
Pacific Residential Fellow of the Australia New Zealand School of Government (ANZSOG), responsible for the development
of emerging young Pacific Public Sector leaders (PACE).
STUART DAVIS, LLB, GAICD
Non-executive Director. Director since August 2017
Stuart Davis is currently a Non-Executive director and Chairman of the Audit and Risk Committee of ASX 200 company NextDC
Ltd, which builds and operates Data Centres in Australia, Non-Executive Director and Chairman of the Risk Committee of
PayPal Australia Ltd, and Non-Executive Director and member of the Audit and Risk Committee of Bank South Pacific, and
Treasurer and Board Member of the Avondale Golf Club Ltd in Pymble, New South Wales. Mr. Davis previously was CEO of
HSBC Bank in India from 2009 to 2012, one of the largest foreign banks in India with staff of 8,000 and pretax earnings in
excess of USD800 million. Prior to that appointment, he was CEO of HSBC Bank in Australia from 2002 to 2009 and CEO of
HSBC in Taiwan from 1999 to 2002, having joined the HSBC Group in 1981. Mr. Davis previously served as a member of the
Australia Bankers Association from 2003 to 2009, being Deputy Chairman from 2006 to 2009, was Chairman of the British
India Chamber of Commerce in Mumbai and Chairman of the Taiwan British Chamber of Commerce in Taipei. He holds a
Bachelor of Law Degree from the University of Adelaide and is a Graduate of the AICD.
ROBERT BRADSHAW, LLB
Non-executive Director. Director since September 2017
Robert Bradshaw was appointed to the BSP Board in September 2017. He is a Lawyer by profession, admitted to practice
law in Papua New Guinea (PNG) in 1995. Mr. Bradshaw holds a Bachelor of Laws from the University of PNG and has
practised law for over 20 years. He was formerly a Partner in the firm Blake Dawson Waldron (now Ashurst). He commenced
practice on his own as Bradshaw Lawyers in 2005. Mr. Bradshaw has been involved in different areas of law, particularly in
resource development, industrial relations, banking and finance and commercial litigation.
9
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Robin Fleming, CSM
Group Chief Executive Officer
10
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 GROUP CEO’S REPORT
I am most delighted to report on another successful year for the BSP Group. Our Chairman, Sir Kostas Constantinou OBE, in his
report to shareholders highlighted our exceptional profit outcome for 2017 of K757 million, which represents an increase of
17.6% from 2016. This is a most pleasing result, recognising that Papua New Guinea’s 2017 economic conditions were not as
buoyant as prior years.
BSP achieved a number of significant milestones in 2017. Our group net
profit before tax exceeded K1 billion for the first time, BSP extended
its business operations outside of the Pacific region with completion of
participation in the BSP Finance Cambodia Plc joint venture with our
partners RMA Group, and BSP obtained provisional approval from the
Bank of Papua New Guinea to commence a life insurance business in PNG,
BSP Life (PNG) Ltd.
Our board recognised some years ago that strategically there was a need for
BSP to broaden its revenue base and catchment from our traditional PNG
banking market to across the Pacific region and potentially outside of the
Pacific. BSP Finance, a wholly owned asset finance business was therefore
established towards the end of 2014, with operations commencing in Fiji
that year, and PNG in 2015. BSP Finance Solomon Islands was opened in
September 2017, which provides BSP Finance with presence in each of the
larger South Pacific markets.
BSP Group CEO with BSP Finance staff in Cambodia
BSP Finance’s move into South East Asia has been a partnership model
with the RMA Group who have undertaken business in the region for
over 50 years. The 50% purchase of RMA Financial Services in Cambodia
was concluded in May 2017, with formal rebranding to BSP Finance
(Cambodia) Plc in January 2018. Whilst small in the overall context of BSP’s
group operations, BSP Finance Cambodia has the potential to develop its
business in a very fast growing and developing economy.
The BSP Group has owned and operated a life insurance business in Fiji
since the purchase of Commonwealth Bank’s Fiji Colonial Bank and Life
assets in 2010. BSP Life is the largest Fiji life insurance business, the second
largest funds management business and its endowment products remain
popular in the Fiji market.
Noting the ongoing success and profitability of BSP Life Fiji, our board had
determined that in developing markets such as PNG, there was consumer
demand for this type of life insurance product, and following a detailed
assessment and analysis process, embarked on a project to establish a life
insurance business in PNG. The Bank of PNG approved our life insurance
application towards the end of 2017, and in January 2018 BSP Life PNG
commenced operations, initially with risk based products for BSP bank’s
retail customers, and later in 2018 endowment products.
Bank of PNG issued operating license for BSP Life PNG
The business of banking and our business in PNG remain of course BSP’s
priority, and the focus of much of our strategic and operational activities.
Our new Head Office at Waigani in Port Moresby was completed during
the year. All head office and back office staff moved into this building at
the end of 2017. This relocation of teams from Finance and Planning,
Support Services, Operations, IT, Human Resources, Operational Risk,
Audit, International and Retail provides an opportunity for more effective
collaboration across the Group, productivity improvements, over and
above cost savings from exiting external commercial property leases.
In his report to shareholders, Sir Kostas talked about the initiation of our
core banking system replacement project, which will see the introduction
of Oracle’s FlexCube solution across each of our businesses in the Pacific.
BSP currently has three legacy operating systems in our various banking
businesses and the deployment of FlexCube in each country will permit
increased operating efficiency, common training and product development,
and lower operational costs with the use of fewer preferred Oracle vendors
for some of the ancillary solutions that will support the new system.
Launch of EMV chip card
The introduction of Euro-Mastercard Visa or EMV Chip enabled Visa and
MasterCard at the end of 2017, was also a significant accomplishment for
BSP. The chip enabled cards will be rolled out in all other countries by the
11
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 third quater of 2018. As well as continuing to offer our customers world
class products, the mandatory upgrades to our EFTPoS, ATM hardware and
switching systems, that was required to satisfy stringent EMV compliance
requirements, introduces a higher level of risk mitigation within BSP
for e-banking products that continue to be exploited world-wide by
predominantly off shore criminals.
BSP’s financial performance during 2017 was most pleasing with the Group
reporting a profit after tax of K757 million (17.6% above 2016), PNG Bank
reporting a profit of K598 million (16.4% above 2016), Cook Islands, K4.8
million (63.6% above 2016), Fiji Bank K59.7 million (-0.1% below 2016),
Samoa K7.9 million (9.3% above 2016), Solomon Islands K33.5 million
(23.5% above 2016), Tonga K12.5 million (16.6% above 2016), Vanuatu K6.8
million (352.9% above 2016-6 months for 2016), BSP Finance K3 million
(425% above 2016), and BSP Life Fiji K31.1 million (50.9% above 2016).
Each of our General Managers and Country Managers provide some
of their respective highlights of 2017 in this report. A common theme
throughout though is understanding our customers’ needs and meeting or
exceeding those expectations, recognition of capabilities and roles across
every strategic business unit, country and subsidiary that assist us deliver a
“whole of BSP” outcome for our customers, and a desire to bring financial
services to as many people as possible, regardless of their socio-economic
status.
Our Corporate team with the support of its Credit and Treasury colleagues
continued to perform strongly in lending, assisting growth of our market
share in PNG from 54% to 59%, deposit acquisition using our relationship
team and branch network for maximum leverage to attract new deposits,
and also actively promoting BSP as the preferred bank for foreign exchange
transactions in PNG. During the year Corporate also provided specialist
lending support to our teams across the Pacific.
In PNG, our Retail team opened 13,552 Kids Savings, 33,468 Sumatin or
youth accounts, 151,266 Kundu transaction accounts and 19,933 Plus
Saver accounts. In total almost 220,000 new savings / transaction accounts
opened for new customers in PNG, many of which are for customers
outside of Port Moresby. To encourage savings the Kids Savings, Sumatin
and Plus Saver are fee free accounts with higher rates of interest and in
total we now have 211,184 fee free accounts with a balance of just over
K25 million. Pleasingly almost 60,000 of these fee free accounts with a
balance of K15 million are for children.
Recognising the increasing importance of digital banking, continued
emphasis is placed on enrolling as many customers as possible onto our
Mobile Banking platforms, which in addition to a BSP Card for card based
transactions, provides access to mobile phone banking using USSD, smart
phone banking using our BSP app, and Internet Banking. We now have
419,000 customers enrolled on Mobile Banking with approximately 35%
using these digital banking services at least once a month. This extended
to our Corporate customers as well, with a structured plan to have as many
of this customer segment enrolled and using our business internet banking
solution.
The table below also illustrates the contribution BSP is making to growing
the economies of the other countries in which we operate. As with our
PNG strategic business units, in addition to growing the business of BSP in
these countries, emphasis is also placed on bringing new customers into
the financial system.
Tonga
Samoa
Vanuatu
Solomon
Islands
Fiji
Cook
Islands
New Kids accounts
63
454
0
73
4,326
78
New savings accounts
5,926
2,733
1,241
2,352
9,019
534
New transaction accounts
3,799
3,066
5,331
11,888
42,949
728
Number of housing loans funded 310
93
40
20
2,196
107
Value of housing loans funded
(LCY000s)
24,000 22,263
438,000
15,421
67,800
9,100
Number of SME deposits
101
346
361
N/A
11,655
168
(LCY000s)
6,000
6,475
1,057,000 N/A
212,321
32,800
Number of SME loans
46
86
59
N/A
1,155
433
Value of SME loans (LCY000s) 6,200
1,612
873,000
N/A
163,233
33,700
New mobile banking
N/A
N/A
N/A
18,063
26,996
N/A
N/A
N/A
N/A
17,248
53,511
Active users of mobile banking N/A
The operational effort to maintain the largest branch and electronic banking
network across the South Pacific cannot be underestimated, and our
Operations team has to be congratulated for their performance. In addition
to project managing the commissioning of our Waigani Head Office in Port
Moresby, branches were refurbished in Port Moresby, Boroko, Waigani
Banking Centre, Lihir, and Lae in PNG. A new sub branch was constructed
and opened at Simberi in New Ireland province in PNG. Our premier branch
in Apia, Samoa was substantially refurbished and contracts executed for a
similar upgrade of the Honiara Central branch in Honiara, Solomon Islands.
In Vanuatu, a new branch was opened at Tanna and plans progressed for a
second branch in Port Vila, Vanuatu.
Smart Business Loans has helped SMEs to grow.
BSP’s investment in customers of the future extends beyond developing
a savings culture with children and youth, but also Small to Medium
Enterprise (SME) businesses. Our Smart Business products for SME’s has
successfully attracted 30,000 SME deposit customers with balances of K466
million and 1,200 Micro, Small and Medium Enterprise (MSME) borrowers
with a portfolio of K55 million.
A determined approach to making finance for housing available in PNG
has also been a clear commitment of BSP and we have funded almost
1,800 housing loans at a value of K414 million. Over and above the macro
economic benefits of housing in a developing economy such as PNG, home
ownership is an important enabler of wealth creation for an emerging
middle class.
12
Opening of Tanna Branch, Vanuatu.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
BSP also understands the importance of investing in our staff as well as
physical assets and systems. Our Leadership Management Development
Program (LMDP) which involves 45 leaders from every country is integral to
the development of the future executives of the BSP Group. The program of
activities includes study overseas, secondments internally across the group,
guest speaker sessions, mentoring, attendance at Executive Committee
meetings and Board meetings on a rotational basis, and participation in
projects associated with our various strategic initiatives.
The program was initiated in 2015 and a measure of the success of the
program is that two of the 2015 cohort have been promoted to very senior
roles within the BSP executive with Ms Hari Rabura being promoted to
General Manager Human Resources in the middle of 2016 and Mrs Nuni
Kulu being promoted to Deputy General Manager Digital towards the end
of 2017. Equally pleasing, is that their merit based promotions provides
more gender balance within the Executive of BSP, an ongoing objective of
BSP both within the executive and the board.
As we look forward to 2018, much focus will be directed towards improving
our customer service standards, generating productivity improvements
across BSP and increasing customer use of our digital banking offerings.
This involves both ongoing enhancement of the technologies we use, but
more importantly changing the behaviours of our customers by illustrating
to them the benefits of banking outside of the traditional branch network.
Our board led by our Chairman, Sir Kostas Constantinou continued
its board renewal process and we welcomed Stuart Davis and Robert
Bradshaw in 2017, and farewelled Dr Ila Temu and Gerea Aopi, both of
whom contributed to the success of BSP with a combined 29 years of
service on the board. The Board places much emphasis on developing and
refining the 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.
In closing, 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 2018.
Robin Fleming, CSM
Group Chief Executive Officer
Net Profit After Tax (K’million)
643.5
757.0
507.3
531.9
436.8
2013
2014
2015
2016
2017
13
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 STRATEGIC BUSINESS
UNIT REPORTS
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 and Planning. Here are reports and highlights of each SBU performance in 2017.
CORPORATE
Corporate delivers an extensive range of financial solutions to small
corporates, commercial,
institutional and Government customers
operating in Papua New Guinea and internationally. The core of our
business is delivered by experienced relationship and products specialists
in Papua New Guinea and the South Pacific, with expert knowledge in
transactional banking, lending, infrastructure, e-channels and foreign
exchange. Our relationship teams are where our customers are located in
Port Moresby, Lae, Mt Hagen, Madang and Kokopo. Corporate customers
are supported across the South Pacific by dedicated relationship teams in
Fiji, Samoa, Tonga, Cook Islands, Vanuatu and Solomon Islands.
Corporate operates in an integrated way with all of BSP’s internal partners
under our “whole of BSP” culture, leveraging the largest retail branch
networks across Papua New Guinea and the South Pacific. BSP is the
leading business partner in the region.
Our teams across Papua New Guinea and the South Pacific provide BSP
with a distinct competitive advantage, combined with our “whole of BSP”
solutions. We continue our focus to invest in attracting, retaining and
motivating the best relationship teams and product specialists working
collaboratively with all stakeholders.
Customer satisfaction remains our top priority and we have delivered
improved customer satisfaction scores for the last five years. Our “icare”
customer service culture is our constant focus and a key driver for
Corporate’s strong results in 2017, but as always we strive for continuous
improvement across the entire team. During the year we completed our
fifth independent market research customer satisfaction survey, involving
feedback from over 400 of our customers. The survey results highlighted
a solid increase in customer satisfaction across the key drivers of Service,
Relationship Management, Products, Fees, Charges and Rates and Treasury
and Foreign Exchange.
BSP’s corporate business performed well in 2017 growing market shares
delivering a significant uplift in deposits, foreign exchange market share,
customer satisfaction and profitability. We continue to focus on total
business performance with direct costs decreasing by 3.7% year on year.
BSP’s strong credit culture within Corporate has a focus on prudent credit
risks and maintains a strong partnership with the Group Risk Management
team. Together we visit our customers, proactively monitor and control
the quality of the loan portfolio and promptly respond to any sector or
customer demonstrating stress in the slowing economic and currency
liquidity environment.
Corporate is well positioned to deliver on its objectives for 2018 with the
prospect of growth in infrastructure, oil and gas and mining projects.
RETAIL BANKING
The strong growth experienced in our Retail operations over the past few
years continued in 2017. Lending income increased by K36.6 million during
the 12 months with Consumer loans, Housing Finance and Micro, Small
and Medium Enterprise (MSME) lending all contributing to this growth.
Outstanding loan balances for Housing Finance increased by K121 million
largely as a result of serviced land becoming available and the uptake of
BSP’s First Home Ownership Scheme (FHOS) loan product. In 2017, BSP
introduced a new micro loan product aimed at smallholder farmers with
this and our continued push to support Small to Medium Entrepreneur
(SME) customers with loan finance, payment processing facilities and
transaction banking services all contributing to a growing and vibrant
MSME segment. We advanced more than K60 million to MSME borrowers
during 2017.
BSP’s effort for greater financial inclusion continued during 2017 and as a
result 218,000 new customers were acquired. Our Retail customers made
more than 115 million transactions in 2017 which is a 5% increase on the
2016 volume. This was a significant achievement when considering 2017
was a more challenging year due to the prevailing economic conditions.
88% of customer transactions during 2017 were performed using
Electronic Channels.
Given this continued heavy weighting of customer activity being performed
through our Electronic Channels, a new division – BSP Digital – was established
within the Retail Strategic Business Unit. Mrs Nuni Kulu was appointed
Deputy General Manager - BSP Digital with a Whole of Group responsibility
for the development and promotion of Digital Financial Services. Also during
2017, we completed an upgrade of our Electronic Funds Transfer Point of
Sale (EFTPoS) fleet in Papua New Guinea using Ingenico terminals and
throughout the Non-PNG Countries (NPCs) using Verifone terminals. An
upgrade of the fleet in Fiji is scheduled to be completed in 2018.
BSP also launched its EMV Visa and MasterCard chip cards in 2017 and we
are currently in the process of replacing all Visa and MasterCard cards with
the new EMV chip cards. The EMV chip cards are being rolled out in all
BSP operating environments. As part of this development, BSP is offering
a “Touch and Go” option on our EFTPoS terminals. The EMV chip cards
and associated technology offers our customers, both cardholders and
merchants, with convenience and a higher level of card security.
BSP staff assisting customer with BSP products and services enquiries
Our Mobile Banking product continued to be well embraced by our
customers and we are seeing that this service is bringing about changes
in the way customers are making payments particularly to third parties.
We commenced an upgrade of our Mobile Banking platform in 2017 to
take advantage of enhanced security and risk monitoring features available
with newer generation platforms.
The continuous training of Retail staff across a number of themes remained
a priority during 2017 and resulted in improved Customer Satisfaction
results.
PARAMOUNT BANKING
Paramount Banking’s partnership with the National Government and its
banking relationship has been and will continue to be of major focus.
Paramount Banking will ensure this relationship is maintained for 2018
and the future.
Paramount Banking’s Community Liaison officer employed to maintain
Landowner groups banking relationships in conjunction with Retail staff
visited the following areas: - Ramu Nickel project area, Wabag, Kainantu,
Kimbe/Bialla and Lae, which included beneficiaries of Ramu Agri Industries
Ltd. About 139 new landowner group bank accounts were established
with another 40 related accounts, with over 200 senior landowner people
attending financial literacy programs.
15
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 STRATEGIC BUSINESS UNIT REPORTS
Overall, Paramount Banking continued to embark on a consistent and
sustainable growth strategy and maintained operations within budget
forecast.
TREASURY
The BSP Group operates across the South Pacific in seven countries. Each
country has their own local currency, discrete foreign exchange regulations
and operates in financial markets where foreign exchange (FX) liquidity
is derived from a narrow base of export industries and sources, and the
dependence on imports are relatively high.
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 also 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 seven jurisdictions, and complying with all regulatory and internal
guidelines and limits.
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 (FX) earnings were above prior year levels
even though 2017 was again challenging, as import demand far exceeded
export supply of foreign currency. These difficult trading conditions
continued throughout the year.
The official Bank of Papua New Guinea (BPNG) rate of exchange was
stable for the first half of the year(falling 10 bps to USD 0.3145), before
experiencing a decreased adjustment of 45 bps from August onwards to
end the year at USD 0.3095.
BSP’s FX market share in PNG increased from 41.83% in 2016 to 43.41%
in 2017. The Bank’s FX turnover rose 1.1% in 2017, while PNG’s FX market
turnover fell by 2.6%. The gain in market share came predominantly from
the Mining and Agricultural sectors.
Operationally, PNG Treasury continues to mitigate risk and is actively
focused on providing technical training, empowering staff to continue
their development journey. Treasury dealing staff training encompasses
weekly technical training (Australian Financial Markets Association Foreign
Exchange Markets Accreditation), regulatory and internal compliance
training, on the job cross training and sales training. The strong focus on
training will continue in 2018. The customer centric Treasury team will
continue to provide thorough leadership in the PNG FX and Interest Rate
Markets, providing the best financial market solutions to responsibly
satisfy customer needs, within the current and evolving PNG regulatory
framework.
OPERATIONS AND INFORMATION TECHNOLOGY
The year commenced with the finalisation of selection for the new Core
Banking system vendor. After a rigorous process lasting more than one
year where five world class systems were benchmarked to an exhaustive
list of BSP requirements, the choice was made to proceed with the
purchase of FlexCube from one of the premier global software providers,
Oracle Corporation. The process to build and customise is expected
to take three to four years and will be implemented for all our banking
operations throughout the Pacific. The benefits of this work will include
reduction of the IT infrastructure and Core Banking systems from three
different operating systems to one integrated solution, maximisation of
centralisation potential across both the infrastructure and operational
processes, increased straight through processing, a greater level of
digitalisation and seamless customer functionality across channels as well
16
as rationalisation in the number of technology providers through vertical
integration. This will result in a technology infrastructure which will enable
a greater level of customer centricity, operational control, product flexibility
and operating efficiency whilst reducing the overall cost of maintaining
that infrastructure.
Following the execution of contracts in March 2017, we assembled a team
of Subject Matter Experts (SME) from the various businesses that have
been provided training in the new system and workflows. This has enabled
the SME team to identify any customisation of the standard FlexCube
module. At the end of 2017, Oracle was in the process of assessing these
customisation requests to determine potential resource, time and cost
impacts after which BSP will distinguish the critical requirements from those
which could be relegated to post Go Live. Once that is determined, the
bulk of the work for 2018 will be hardware build, software customisation,
interfaces across applications including local Kina Automated Transfer
System (KATS) and commencement of system and user testing.
The new Core Banking Team
A major technology achievement of 2017 was the build and implementation
of EMV (chip enabled cards) acquiring and issuing for both Visa and
MasterCard for transactions at both EFTPoS and ATM channels in PNG. In
addition to a greater level of security for customers, this will enable BSP to
shift liability for any fraudulent transactions to other banks not providing
EMV processing. Given the difference in IT infrastructures, this same
functionality is still in process of being rolled out in Fiji and NPCs and is
expected to be completed within mid-year 2018.
Another area where BSP has improved its security stance is in the area
of USSD Mobile Banking. We have begun migration to a new vendor
who has installed a security layer which reduces significant risk for some
frauds which have been experienced. We are now in process of finalising
implementation of the application layer which will be rolled out to all
locations except Fiji as well as making use of behavioural analysis tools to
improve transaction filtering to identify transactional anomalies.
In addition to the above projects, significant other projects affecting
customers were implemented such as:
•
•
EFTPoS integration to the most used customer point of sale system
(Pronto) used in PNG. This process is continuing for other systems
and it is expected that this will improve our market positioning
significantly.
Replacement of EFTPoS fleet in Non PNG Countries (NPC) as well as
significant refresh of ATM fleet in these countries.
• Migration of internet payment gateway provider from Doku to
Wirecard, a world class gateway provider for PNG and NPCs.
• Microfinance switching for non-bank financial institutions such as
People’s Micro Bank Limited allowing their customers access to the
ATM and EFTPoS networks within PNG.
During 2017, BSP also implemented a BSP Intranet for improvement of
communications, documentation, workflows and ultimately monitoring of
key performance processes.
Continuation of work for Payment Card Industry Compliance (PCI) which
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 includes implementation of best practice information security policies,
regular internal vulnerability scanning of all computing equipment for PCI
risks as well as implementation of a new system for event and security
incident monitoring and collection.
strategy that identifies the Bank’s target market providing a platform to
grow the business within defined parameters to build and maintain a quality
loan portfolio across a diversified range of sectors and countries where BSP
operates.
STRATEGIC BUSINESS UNIT REPORTS
Lastly, and very significantly, we have consolidated most head office
staffing from three different locations in Port Moresby into our new
Waigani Head Office (WHO). Having overcome numerous challenges, we
now have almost 900 staff within one location which creates the possibility
for improved communications and working relationships across the
businesses. In addition, the centralised location will allow for efficiencies
in centralised support services which will be worked on during the course
of this coming year. Moreover, we will also be introducing a medical clinic
for staff in partnership with one of the local hospitals which will provide
immediate access to first level diagnosis and treatment.
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.
Moderate lending growth across all sectors of the PNG economy was
achieved in 2017. Diversification of the loan portfolio across key economic
sectors continues to be closely monitored, providing a mitigant to the overall
loan portfolio exposures, to ensure that no significant concentration risk
develops that may impact the stability of the asset portfolio performance.
The property and transport markets continue to be sectors experiencing a re-
adjustment with supply outstripping demand leading to lower rental yields,
capital growth and margins.
Overall performance of the loan portfolio remains sound in PNG. The Bank’s
market share in PNG has increased to circa 59%. Loan growth was achieved
in all other countries as well. The total loan portfolio for the Group was
recorded at K11.2bn as at 31 December, 2017.
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.
During 2017, various lending policies and procedures were reviewed and
will continue to be reviewed on an ongoing basis in response to changes
in the banking, regulatory and industry environment. Changing market and
product trends require corresponding changes in controls and reporting, to
keep the Bank aligned with industry best practice for credit risk management
standards.
Training remained a key focus in 2017 and will continue into 2018. The
Moody’s online training was completed for all Credit staff during the year.
Weekly in-house training sessions consisting of 45 specific credit related
learnings, were delivered for Credit and Corporate staff. In addition, weekly
training sessions are held with Retail Credit and Staff Lending teams.
Staff in front of the new Waigani Head Office (WHO)
Operational Risk
GROUP RISK MANAGEMENT
Effective risk management is necessary for the achievement of BSP’s vision.
BSP has a Board approved Group Risk Appetite Statement (GRAS) that
reflects the level of aggregated risk that BSP is willing to assume and
manage in the pursuit of its business objectives. The GRAS 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 (BUs) within the Group Risk Management strategic
business unit 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
standards, monitoring sector concentration limits and portfolio management
responsibilities.
Credit in collaboration with Corporate and Retail Banking, manages credit
risk by developing and undertaking an ongoing review of the credit risk
The Operational Risk and Compliance Business Unit has broad and
independent 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 Bank’s
business activities and processes performed within the Group. To manage
and mitigate these risks, this second line of defence provides oversight and
challenge to the business through an operational risk framework. Tools to
manage this include risk and control assessments and mitigation planning
at both Business Unit and enterprise levels, risk event management
processes and new product approval processes. Risk events are managed
through identification, reporting and resolution in order to prevent risk
events from recurring.
BSP has an independent Operational Risk and Compliance function in PNG,
covering the Banking and Asset Finance operations respectively. It also
has Operational Risk Management (ORM) teams in Fiji, Solomon Islands,
Tonga, Samoa, Cook Islands and Vanuatu.
BSP is cognisant that both domestic and foreign regulations shape the risk
environment in which it operates hence, significant focus has been placed
on the Compliance and Anti-Money Laundring (AML) function throughout
the year to ensure BSP’s continuous adherence to laws, regulations,
prudential standards and guidelines that govern its conduct.
Compliance and AML is a second line of defence function and its
primary role is to identify and translate relevant compliance risk-related
laws, regulations and standards into compliance obligations and assist
Management to identify compliance risks and mitigate them based on BSP
Group’s risk appetite.
17
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 STRATEGIC BUSINESS UNIT REPORTS
During 2017, there has been great focus by international and supra-national
agencies on the Anti-Money Laundering and Counter Terrorism Financing
(AML/CTF) regimes globally including Papua New Guinea, Vanuatu, Cook
Islands and Samoa. With the issuance of new and amended AML/CTF laws,
BSP has had to translate those laws into specific compliance obligations
and implement robust policies and procedures to manage the associated
compliance risk.
The Compliance and AML unit continues to work with other second line of
defence functions to provide objective challenge and support, escalating
matters when necessary to help optimise the trade-off between risk and
reward.
Risk awareness workshops across BSP targeted general operational risks,
compliance, sanctions, anti-money laundering and fraud detection. The
Operational Risk & Compliance Business Unit continued to provide support
to the Operational Risk Committee and Board Risk and Compliance
Committee, facilitating analysis and regular reporting of operational risk
issues.
Asset Management
Asset Management manages the non-performing asset portfolio. Non-
accrual loans volume remained steady at circa 1.1% of the Bank’s overall
lending volumes in PNG and decreased from 1.4% to 1.3% for the Group.
We have seen a circa 2% increase in defaulting unsecured consumer loans
for 2017. This is a result of several larger employer groups reducing staff
levels underpinned by a softening economy plus teachers having been
put off the payroll due to non-filing of renewal certificates. Previous
tightening of the approval process and further experience gained with the
new automated collection system has limited the impact. Debt recovery
for unsecured consumer loans has been encouraging with recovery rate of
84% for the year compared to 71% in 2016.
Careful monitoring on business/corporate loan segment continues with
immediate remedial action being taken for any business/companies
showing signs of stress. Early warning signs and adverse account patterns
are identified with remedial plans in place for Watch List customers.
Credit Inspection
Credit Inspection provides an independent assessment of the Bank’s
compliance with credit policy and also of portfolio quality. Functionally,
it has an independent and direct reporting line to the Board Risk &
Compliance Committee and administratively to the Group Chief Risk Officer
and Group Chief Executive Officer.
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 and 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.
The unit’s independent assessment activities are executed through “on-
site” inspections, and where applicable, “off-site” inspections of the credit
risk portfolio within the Bank and related entities, in all jurisdictions. The
main aim is to achieve early detection of material shortcomings of credit
risk and compliance with Group policies.
In 2017, Credit Inspection completed 12 monthly reports for Retail Banking
(Personal Lending) and 13 reports for Corporate and Commercial Banking
Relationship Portfolios including BSP Finance (PNG) Ltd (BSPF – PNG). For
Corporate Banking including Commercial, approximately 62% of the Loan
Portfolio was reviewed by Credit Inspection. In addition BSPF (PNG) loan
portfolio was reviewed covering approximately 22% of the portfolio.
Audit
Audit undertakes regular risk based internal audits of processes and
18
procedures to maintain compliance with regulations and BSP standards
and retains an independent and direct reporting line to the Board Audit
Committee (BAC). It literally provides the third element of defence in the
business unit structure of Group Risk Management, and acts as the last line
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
administratively to the Group Chief Risk Officer and Group Chief Executive
Officer.
Key audits during 2017 included Operational Risk, BSP Capital Ltd, BSP
Finance (PNG) Ltd, Information Security, Human Resources, Treasury
and all Retail branches. The Internal Audit team also conducted audits in
Vanuatu, Samoa, Tonga and Cook Islands.
BSP’s Alu Kala explains the new security features of BSP Visa Debit Cards
Legal
The Legal Services 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), regulatory compliance, employment law and property. To the
extent possible, these services are provided by the five in house lawyers
with external lawyers being engaged where deemed necessary or prudent.
2017 saw a higher level of engagement with Tonga, Cook Islands, Samoa,
Vanuatu and Solomon Islands primarily in the areas of banking, property,
construction and other general commercial law matters. Litigation matters
are outsourced to external lawyers in country.
HUMAN RESOURCES
Human Resources (HR) Strategic Business Unit (SBU) continued its support
role for BSP’s operations through its core HR Management functions for
employees in Papua New Guinea (PNG) and the other countries within the
Pacific. A major highlight for the year was HR receiving the award for “Best
Private Sector Employer” from the Papua New Guinea Human Resources
Institute Inc. (PNGHRI), for the fourth year in a row. The award recognises
BSP as a model organisation with best human resource practices in PNG.
This award is a testament of BSP’s commitment to continuously supporting
the employees across our network with people initiatives that matter. One
of the examples of this people initiative in 2017 was the successful rollout
of the new HR and Payroll system called iChris and the employee self-
service HR21 across PNG and the NPCs (Non-PNG Countries).
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Talent Management
Remuneration and Benefits
STRATEGIC BUSINESS UNIT REPORTS
(BU)
in 2017 continued
The Talent Management Business Unit
implementation of the HR Best Practice project first rolled out in 2016.
Since 2016 and in 2017, the Talent Management BU was able to deliver
critical project deliverables such as job profiling, coaching and mentoring
for our Leadership and Management Development Program (LMDP),
Performance Enhancement Process and the roll out of the Assessment
Centre for the Graduate Development Program. Our Career Development
in the Talent Management BU continues to give its endless support to the
LMDP to ensure that our promising leaders are trained and developed for
the future.
Employee Relations
Employee Relations had a very successful 2017 with the signing of the ten
year old Union Award in PNG. The Team completed the negotiations of
BSP and Union Award with the Award itself signed by both parties and
registered with the Department of Labour in October, 2017. The successful
negotiation was a result of the harmonious relationship, BSP and the Union
had on matters concerning industrial relations. The BSP Code of Conduct
was also reviewed and improved with nationwide awareness conducted in
PNG and further awareness to be conducted outside of PNG during 2018.
The code of conduct sets out the foundation of BSP’s guiding principles for
appropriate workplace behaviour.
Training and Development
Training and Development delivered soft skills and computing courses to
the NPCs for the first time as part of HR’s focus in supporting the workforce
in the NPCs. HR in-country training also provided the opportunity for our
Head Office trainers to engage with and understand the training needs of
the NPCs. In addition to this, a more structured BSP Graduate Development
Program (GDP) was re-introduced to support the future needs of BSP in
relation to management and leadership roles for the future. Ten new
graduates from various disciplines will join BSP in 2018 to undergo the 18
month GDP.
In 2017, we also welcomed eight new high potential employees who joined
BSP’s elite LMDP cohort. We also celebrate the milestone of Mrs Nuni Kulu,
a LMDP participant, appointed to the role of Deputy General Manager
Retail Digital Banking. The appointment of Mrs Kulu is a strong testament
of BSP achieving its objective of LMDP in grooming and preparing a pool of
high potential employees who can take up Senior Leadership roles in the
organisation.
2017 LMDP Cohorts at the Leadership Forum
HR Strategy and Change
Strategy and Change Business Unit continued to coordinate the Group’s
icare program, BSP’s in-house customer service culture program. We
successfully supported most of our Business Units/Branches who
completed their Business Process Blackspots initiative. The iCare program
will continue in 2018 with an aim to reinforce the Minimum Service
Standards principles as it is a very important part of developing BSP’s
culture of service excellence and continuous improvement. The team
also administered the first ever BSP Group Employee Engagement Survey
covering the BSP Group. The results assess the engagement levels of our
employees in different countries of which the results will guide us to
improving engagement at the Group level.
Remuneration and Benefits (R&B) Business Unit successfully assisted 24
employees to participate in the National Staff Home Ownership Scheme
(NSHOS) in PNG. This was made possible through the schemes competitive
suspensory loan assistance, equity contribution and the choice to select an
approved local contractor for house construction.
The R&B team together with the HR Projects team and the Payroll team
were also responsible for the successful roll out of the HR and Payroll
system, iChris in PNG and the NPCs.
Human Resources Projects and BSP Overseas Operations
The Human Resources Projects team also supported the successful
implementation of the new HR/Payroll system (iChris) in PNG and the
NPCs. The HR system provides employees the self-service portal whilst the
Payroll system improved processing and turnaround time for employees.
The Pacific Support team also identified key HR transactions that can be
done in country and implemented a HR Transaction guide for the NPCs. The
guide was developed to support the NPCs with much improved turnaround
time at the same time empowering respective NPCs to take ownership of
their key HR transactions.
FINANCE AND PLANNING
A key focus area for the Finance and Planning (F&P) team in 2017 was
the Core Banking System (CBS) replacement project. Three members of
our team were seconded to the CBS project on a full time basis. Their
role; the conduit between the business requirements, the implementation
consultants, development of Subject Matter Experts (SME) in the fields of
General Ledger, Treasury and Analytical Applications.
The design of a new general ledger, while requiring a complete re-
numbering of the chart of accounts, has provided the opportunity to
optimise the chart of accounts, significantly reducing the number of
General Ledger (GL) accounts whilst maintaining the current reporting
structures. Given that the GL impacts almost all areas of the bank, there
has been a lot of cross Strategic Business Units (SBUs) interaction with
other SMEs during this phase.
Apart from the Core Banking System project, the banks General Ledger
system was rolled out to our banking entities in Samoa, Cook Islands,
Vanuatu and Tonga. Having a common and dedicated general system has
enabled a number of reports to be streamlined and the additional financial
controls that accompany a dedicated general system makes financial
reporting more efficient.
The Middle Office team has worked hard to embed the requirements of the
Market Risk policy across all banking entities. Compliance monitoring for
non PNG entities have been streamlined and turnaround time for End of
Month (EOM) reporting reduced. Improvements were made to reporting
of foreign exchange (FX) and liquids income as well as compliance
monitoring of BSP PNG operations. Changes were made to the reporting
to Group Asset and Liability Committee (GALCO) with greater involvement
in disseminating relevant information from the Group’s operations to the
Group ALCO.
The payroll team reporting to F&P were instrumental in the successful
implementation of the new payroll system for BSP PNG, Tonga, Samoa,
Cook Islands and Vanuatu. The new system has automated certain
functions that were previously manual which has assisted the team greatly.
Rollout to Solomon Islands and Fiji will be completed in 2018.
Our Strategy team continues to manage the strategic planning and
reporting cycles across the Group. Processes for planning, monitoring
and reporting of strategic initiatives have been enhanced in 2017. The
team’s analytical capabilities are continuously improving, in areas such as
monitoring BSP’s financial data integrity and the extraction and analysis of
operational and financial data to assess the performance of our business
units. A notable achievement was the introduction of refreshed branch
and channel profitability reporting in 2017.
F&P look forward to another exciting year in 2018.
19
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Kay Moripi
Document & Sharepoint
Assistant,Retail Banking, PNG
Kay is from Kukipi in the Gulf
Province, Papua New Guinea.
Her head piece is made from
the feathers of a cassowary. The
necklaces are made from small
sea shells and betel nuts. The arm
bands are selected and woven
from bush canes decorated
with
is
called “ma’te” in the local Toaripi
language, and made from palm
leaves and dyed to various colors.
leaves. The grass skirt
CORPORATE
GOVERNANCE
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. These Corporate Governance Principles
provide a framework that helps to ensure that BSP deals fairly and openly
with all its stakeholders – Shareholders, customers and staff alike.
• 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 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:
BSP’s Corporate Governance Principles are available in the Investor
Relations section of BSP’s website at www.bsp.com.pg.
• developing the annual operating and capital expenditure budgets for
Board approval, and monitoring performance against these budgets;
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 was 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 Australian Securities
Exchange (ASX) Corporate Governance Council’s Corporate Governance
Principles and Recommendations . These sections have been adopted by
the Board as BSP’s Corporate Governance Statement.
THE BOARD OF DIRECTORS
Roles 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’s 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
• 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 would not have been
involved in the approval process for that transaction.
Under the Constitution, at each Annual General Meeting (AGM) 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.
Details regarding the length of service of each Director are set out in the
“Board of Directors” section.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
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.
Consistent with Recommendation 2.6, BSP has a program for inducting
new Directors and providing appropriate professional development
opportunities for Directors.
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 six 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 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.
Director Independence and Conflict of Interest
Directors are determined to be independent if they are judged to be free
CORPORATE GOVERNANCE
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.
BSP fully complies with the requirements of the BPNG Prudential Standard
4/2003 – Limits on Loans to Related Parties.
Related Party Transactions are summarised in Financial Note 30. The
Directors’ information on page 86 provides details of the Directors’
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 2017.
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 2017 Performance Review are available in
Investor Relations section of BSP’s website at www.bsp.com.pg.
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
23
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CORPORATE GOVERNANCE
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 Audit Commitee
Geoff Robb
Ernest Gangloff
Arthur Sam
Charles Lee1
Frank Bouraga1
Sir Kostas Constantinou*
Augustine Mano*
6/6
5/6
5/6
2/2
2/2
2/2
2/2
Board Risk & Compliance Committee
Geoff Robb
Ernest Gangloff
Arthur Sam
Stuart Davis
Charles Lee1
Frank Bouraga1
6/6
5/6
5/6
2/2
2/2
2/2
Remuneration and Nomination Committee
Gerea Aopi
Freda Talao
Ila Temu
2/2
2/2
2/2
1/2
Board Access to Information and Advice
Faamausili Dr. M. Lua’iufi
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.
1 Charles Lee and Frank Bouraga are non executive and non directors, appointed by the
board for board development purposes.
* Board members who attend BAC to discuss the year end and half year accounts.
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.
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.
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.
Company Secretary
The Company Secretary, through the Chairman, is 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 2017, four Committees of the Board were in operation whose
functions and powers were governed by their respective charters. These
Committees were the Board Audit Committee (BAC), Board Risk and
Compliance Committee (BRCC), the Remuneration and Nomination
Committee (RNC) and the Disclosure Committee. 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 28.
Membership of Board Committees during 2017:
Board Audit Commitee
Geoff Robb
Ernest Gangloff
Arthur Sam
Charles Lee1
Frank Bouraga1
Sir Kostas Constantinou*
Augustine Mano*
6/6
5/6
5/6
2/2
2/2
2/2
2/2
Board Risk & Compliance Committee
Sir Kostas G. Constantinou and Augustine Mano are not members of any
Board committees.
Stuart Davis and Robert Bradshaw were appointed as Directors by the
Board to fill casual vacancies in 2017, and are eligible for election at the
Annual General Meeting in May 2018.
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.
Board and Committee Charters
BSP’s Board and Committee Charters are available in the Investor Relations
section of BSP’s website at www.bsp.com.pg
Committee Structure
Committee members are chosen for the skills, experience and other
qualities they bring to the Committee. At the next Board meeting following
each Committee meeting, the Board is given a report by the Chairman of
the respective Committees and minutes of the meeting are tabled.
Board Audit Committee
The BAC assists the Board to discharge its responsibilities of oversight and
governance in relation to financial and audit matters. The responsibilities
of the BAC include monitoring:
• the integrity of BSP’s financial statements and their independent audit;
• the financial reporting principles and policies, controls and procedures;
• BSP’s internal audit process;
• the effectiveness of internal controls;
• the systems for ensuring operational efficiency and cost control; and
• the systems for approval and monitoring of expenditure including
capital expenditure.
Membership of the BAC is formed amongst the Non-Executive Directors,
excluding the Chairman. The BAC must have a minimum of three Non-
Executive Directors, the majority of whom must be independent. The
Board may also appoint to the BAC additional individuals who are not
executives or members of the Board who have specialised skills to assist
the BAC. The chairman of the BAC must be an appropriately experienced
independent Non-Executive Director, other than the Chairman (or other
Board committee chairman).
The BAC must meet at least four times annually and special meetings
may be convened as required. All meetings must be minuted and tabled
at the subsequent BAC meeting. The BAC regularly reports to the Board
at the earliest possible Board meeting after each BAC meeting about any
Geoff Robb
24
Ernest Gangloff
Arthur Sam
Stuart Davis
Charles Lee1
Frank Bouraga1
Gerea Aopi
Freda Talao
Ila Temu
Faamausili Dr. M. Lua’iufi
6/6
5/6
5/6
2/2
2/2
2/2
2/2
2/2
2/2
1/2
Remuneration and Nomination Committee
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
matters that should be brought to the attention of the Board and any
recommendations requiring Board action.
Board Risk and Compliance Committee
The BRCC assists the Board to discharge its responsibilities of oversight and
governance in relation to the implementation of BSP’s risk management
framework and for the management of BSP’s compliance obligations. The
responsibilities of the BRCC are to:
• review and monitor the principles, policies, strategies, processes and
control frameworks for the management of risk (such as credit risk,
market risk, liquidity risk, operational risk, compliance risk, reputational
risk and other risks);
• oversee BSP’s risk profile and risk management strategy, and
recommend BSP’s risk appetite statement; and
• review and monitor the processes for monitoring compliance with laws
and regulations (both in PNG and in overseas jurisdictions, where BSP
operates) and the implementation of Board decisions by management.
Membership of the BRCC is formed amongst the Non-Executive Directors,
excluding the Chairman. The BRCC must have a minimum of three Non-
Executive Directors, the majority of whom must be independent. The
Board may also appoint to the BRCC additional individuals who are not
executives or members of the Board who have specialised skills to assist
the BRCC. The chairman of the BRCC must be an appropriately experienced
independent Non-Executive Director, other than the Chairman (or other
Board committee chairman).
The BRCC must meet at least four times annually and special meetings
may be convened as required. All meetings must be minuted and tabled
at the subsequent BRCC meeting. The BRCC regularly reports to the Board
at the earliest possible Board meeting after each BRCC meeting about
any matters that should be brought to the attention of the Board and any
recommendations requiring Board action.
Remuneration and Nomination Committee
The RNC assists BSP in fulfilling its oversight responsibilities regarding the
remuneration, succession and recruitment of Directors, Executives and
other BSP employees. The responsibilities of the RNC are:
• to oversee the selection and appointment of a Group Chief Executive
Officer, and setting of an appropriate remuneration and benefits
package for recommendation to the full Board;
•
• to determine and review appropriate remuneration and benefits of
Directors for recommendation to the full Board, and subsequently to
the shareholders;
in conjunction with the Group Chief Executive Officer, to 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; and
• to 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.
The Remuneration and Nomination Committee is comprised of three
Non-Executive Directors, with the chairman being one of the independent
Directors of the Board other than the Chairman.
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.
Disclosure Committee
The Board has established a new disclosure committee comprising of the
Chairman (or in his absence another Non-Executive Director), the CEO,
the Chief Financial Officer of BSP, the Chief Risk Officer and the Company
Secretary (Disclosure Committee). The chairman of the Disclosure
CORPORATE GOVERNANCE
Committee is the most senior Director present. The members of the
Disclosure Committee may vary from time to time, but will consist of at
least a Non-Executive Director, two Executive Employees (not including the
Company Secretary) and the Company Secretary.
The Disclosure Committee is responsible for, among other things:
(a) approving the release of any announcement to POMSOX, other than:
(i) an announcement that relates to a matter which is both material and
strategically important, which will require approval by the Board; or
(ii) procedural matters such as notice of changes to equity securities or
directors’ holdings, which will require approval by the Disclosure
Officer;
(b) considering whether BSP is obliged or is required to respond to a market
rumour or media speculation; and
(c) overseeing the Disclosure Officer’s administration of the Continuous
Disclosure Policy.
Annual Financial Statements
The BAC reviews the annual financial statements to determine whether
they are complete and consistent with the information known to
Committee members and to assess whether the financial statements
reflect appropriate accounting principles. In particular it:
• pays attention to complex and/or unusual transactions;
• focuses on judgmental areas, for example those involving valuation
of assets and liabilities; provisions; litigation reserves; and other
commitments and contingencies;
• meets with management and the external auditors to review the
financial statements and the results of the audit; 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.
External Audit
The BAC 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.
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 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 BAC 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.
BSP’s external audit firm
is currently PricewaterhouseCoopers (PwC).
Representatives of PwC will attend the next Annual General Meeting in May
2018, and be available to answer shareholder questions regarding the audit.
25
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CORPORATE GOVERNANCE
Internal Audit
highest tier of risks within these risk registers.
BSP has an
internal audit function. The BAC approves, on the
recommendation of management, the appointment of the Head of Internal
Audit. The Committee meets regularly with the Head of Internal Audit.
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:
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 BAC also reviews the
qualifications of internal audit personnel and endorses the appointment,
replacement, reassignment or dismissal of the internal auditors.
The BAC 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 BAC
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 BRCC 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.
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.
Reviews of the findings of any examinations by regulatory agencies are
undertaken and the Chairman of the BAC has the right to approach a
regulator directly in the event of a prudential issue arising.
RISK MANAGEMENT
Approach to Risk Management
The Group’s Risk Management activities are aligned to the achievement
of the Group’s Objectives, Goals and Strategy. The Board, in consultation
with the Executive Committee, determines the Group’s risk appetite and
risk tolerance and this is expressed in the Group Risk Appetite Statement.
These benchmarks are used in the risk identification, analysis and risk
evaluation processes.
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 its 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.
Interest Risk: Risk to earnings from movement in interest rates.
Operational Risk: The risk of loss resulting from inadequate or failed
internal processes, people, or from external events, including legal and
compliance risk.
The 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
26
• 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;
•
• 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 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 Enterprise Risks.
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 BRCC
responsibility for overview of loss control and for overseeing the risk
management function.
The BRCC 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.
Management Assurance
The Board is provided with regular reports about BSP’s financial condition
and its operating performance. Annually, the Chief Executive Officer and
the Chief Financial Officer certify to the Board that:
•
•
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
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CORPORATE GOVERNANCE
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-
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.
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:
• a Code of Conduct for both Directors and members of the Executive
Management Team of the Group and stipulated that each Director, and
relevant employees 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 in 2018.
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.
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.
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.
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.
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.
MARKET DISCLOSURE
The Group’s continuous disclosure regime is fundamental to the rights of
Shareholders to receive information concerning their securities. The most
important aspect of the Group’s shareholder communication policy is to
comply with the continuous disclosure regime and to implement best
practice disclosure policy. 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 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
Consistent with Recommendation 6.4, BSP gives Shareholders the option
27
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CORPORATE GOVERNANCE
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.
REMUNERATION
Executive Remuneration
BSP remuneration policy for Senior Management (including the Chief
Executive Officer and the Chief Financial Officer) is comprised of a fixed
component and an at risk component that is a combination of short term
rewards and long term incentives.
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% 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.
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.
Remuneration packages are approved by the Remuneration and
Nomination Committee, and details are provided by the Committee to the
Board.
Exercising the 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.
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 the Annual
General Meeting. Shareholders are required to approve any change to this
aggregate amount. In 2014, 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 2017 is produced on page 65.
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
28
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%
Performance
Rights
100%
50%
79% and below
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
BSP
its material exposures to economic,
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 in 2018.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 HISTORICAL SUMMARY
Profit and Loss (K’000)
Net interest income
Non interest income
Bad and doubtful debt (expense)/recovery
2012
681,554
614,951
(70,952)
2013
740,857
793,487
(78,573)
2014
2015
2016
2017
884,761
1,006,251
1,107,686
1,277,676
613,970
540,888
684,371
720,674
(76,796)
(89,905)
(98,622)
(77,678)
Other operating expenses
(680,257)
(833,849)
(703,085)
(691,084)
(769,641)
(852,148)
Operating Profit
Impairment of non-current asset
Profit before tax
Income tax (expense)
Profit/(loss) after tax
Dividends (toea)
Dividends paid per share1
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
545,296
-
545,296
621,922
(14,967)
606,955
718,850
766,150
923,794
1,068,524
-
-
-
-
718,850
766,150
923,794
1,068,524
(137,552)
(170,127)
(211,511)
(234,271)
(280,343)
(311,521)
407,744
436,828
507,339
531,879
643,451
757,003
55.0
58.0
66.0
79.0
88.0
111.0
4,804,626
5,306,362
6,756,997
8,621,514
10,102,909
11,209,493
13,333,102
15,761,420
15,816,507
18,196,303
20,831,803
22,369,861
10,860,522
12,200,999
12,708,383
14,595,374
16,912,349
17,901,692
1,465,893
1,619,060
1,800,193
2,029,176
2,314,337
2,628,335
3.3%
29.0%
52.5%
22.3%
38.9%
9.0%
0.4755
0.4580
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%
3.3%
29.6%
42.9%
23.1%
35.8%
9.3%
0.3325
0.4552
0.3150
0.4354
3.5%
30.6%
42.6%
24.5%
36.9%
10.0%
0.3095
0.3965
1BSP 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
2012
2013
2014
2015
2016
2017
Company income taxes paid to PNG
Government
Other taxes paid to PNG Government (IWT,
FCWT,BWT)
GST paid and not able to be recouped
Donations and Sponsorhips
Total
212,081
155,391
188,627
249,210
292,443
257,210
6,204
12,836
4,192
4,989
14,082
9,267
2,568
11,024
9,358
3,701
16,793
8,219
10,226
21,268
4,345
8,214
22,101
5,217
235,313
183,729
211,577
277,923
328,282
292,742
29
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Michael Ah Chong
Senior Dealer
Financial Markets
Michael is from Pesaga, Samoa
and is wearing a head piece
called Tuiga which is made from
dyed chicken
feathers, mirrors,
human hair, sea shells and tapa
cloth.
He is wearing a necklace made
from wild boars
is
wearing a mat also worn by
Tongan’s called ‘Toga’ covering his
waist.
teeth and
OVERSEAS BRANCHES
& SUBSIDIARIES
OVERSEAS BRANCHES & SUBSIDIARIES
TONGA
Economic growth in Tonga improved in 2017, with GDP increasing by 3.7%
in real terms. Sectors underpinning this growth included construction,
utilities, fisheries and mining & quarry. Tourist arrivals increased in 2017
reflecting annual church conferences and the commemoration of Mother’s
and Father’s Day. Remittance inflows also remained strong despite
challenges in the market following the closures of some corresponding
banks. GDP growth is projected to decline to 2.6% in 2018, due largely to
lower construction activities and tourism inflows, following the decision
not to host the 2019 Pacific Games.
Economic growth in Tonga improved in 2017
BSP Tonga produced a strong financial result in 2017, NPAT was TOP8.6
million up 13.9% in 2016. BSP Tonga market share decreased in loans from
38.7% to 37.8% in 2017 and our deposit share remained steady at 83.2%;
while the Tongan banking systems continues to see high levels of liquidity.
Customer numbers increased from 29,000 to 34,000 and we continued our
good work in the SME market.
Our EFTPoS points of representation increased from 303 to 362 during the
year and income was up 33%, the roll out of the new Verifone terminals
has had a positive impact on the market and BSP is the merchant of choice
in the Tongan market.
BSP Tonga’s community work has been excellent, with over 10,000
Tongan people put through BSP’s financial literacy programme in 2017. In
addition, we have supplied rubbish bins throughout the islands, donated
blood to support Open Heart International, and continued with last year’s
community project by completing our children’s playground to complement
our Netball court project from 2016.
BSP Tonga’s continued commitment to BSP’s Group’s vision and values has
been the key drivers to our continued success in the market, and all the
staff are to be commended for the hard work, loyalty and commitment in
making BSP Tonga the leading financial service provider in Tonga. 2018
promises to be another exciting year and we are ready to continue to build
on our success.
VANUATU
Economic growth in Vanuatu improved in 2017, with GDP increasing by
4.3% in real terms compared to 3.8% in 2016. This was driven by ongoing
recovery in tourism and agriculture, cyclone reconstruction and new
infrastructure projects. A new strategic plan, ‘Vanuatu 2030’ launched this
year will guide the development aspirations of the country going forward.
GDP growth is projected to decline to 3.8% in 2018 as construction,
recovery in agriculture and tourism balances out.
This year saw the business gain significant momentum and deliver a
NPAT of 29% above plan. All areas of the business have shown improved
32
productivity although excellent performances from Business Banking and
the Agency Team cannot go unnoticed. An important measure for any bank
is customer numbers and Vanuatu’s is up 35% from 2016, with this growth
expected to continue in 2018.
BSP also undertook a placement program via long and short term
Government securities that has seen yield improvement on surplus deposit
funds.
From a compliance perspective, the business was subject to three different
audits, all which illustrated strong management practices and system
protocols. The challenge is ensuring we maintain those high standards
whilst also growing the business at an accelerated rate.
Marketing and brand awareness has been of critical importance in 2017,
with BSP Vanuatu engaging in a number of community focussed events;
brand recognition is now very high.
Cost control was a focus for the management team in 2017 and has seen
a significant improvement in the businesses Cost to Income ratio (10%
below budget). Capital adequacy remains strong at 18.5%, and is within all
prudential and internal requirements and is sufficient to fund 2018 balance
sheet aspirations.
2017 also saw the business open a new branch on the island of Tanna with
plans well advanced for two more in 2018. BSP’s expansion into the islands
has been well received by Government and the Reserve Bank. The official
opening of the Tanna branch was on 6th February, 2018, with the Chairman
and CEO present.
Vanuatu’s economy has stabilised and there is optimism that 2018 beyond
will see continued GDP growth, especially off the back of the infrastructure
projects that have been on-going throughout 2017.
Vanuatu remains on the Financial Action Task Force (“FATF”) Grey list,
however, government have worked extremely hard and in conjunction
with private sector to ensure appropriate legislation has passed into law to
hopefully see a removal in May/June of 2018.
2018 will have its challenges, however, the leadership team has the
capability to ensure another successful year.
Vanuatu Branch Staff celebrating their 1st anniversary of operations
FIJI
The estimated GDP growth rate for Fiji’s economy in 2017 was 4.2%. This
is a significant rebound from the 2016 result of 0.4%. This was impacted
by Cyclone Winston in February 2016. The statistics now indicate nine
consecutive years of positive economic growth.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 OVERSEAS BRANCHES & SUBSIDIARIES
Inflation has levelled off at 2.6%. Foreign reserves have increased to FJD2.3
billion and 5.5 months import cover. Monetary conditions have eased
somewhat with system liquidity hovering around FJD600 million. Private
sector credit growth slowed to 9%, due to a contraction in consumption
lending.
Islands have far exceeded this growth and recorded a NPAT of SBD82.7
million, which is an increase of 24% on 2016 results. However, this result
could not have been achieved without the assistance of many in PNG which
is a great example of the BSP value of “Teamwork” and we thank them for
playing a major part in our great result.
Financial results for 2017 reported a net profit after tax and before
extraordinary items of FJD42.7 million compared to the 2016 result of
FJD40.2 million, an improvement of 6%.
BSP Fiji’s Howard Politini, Malakai Naiyaga, RBF’s Lorraine Seeto and Sharyne Fong
at the 2016 AFI Global Policy Forum in Suva.
BSP Fiji Management Team and Rotary International partners
Our Corporate area performed strongly with portfolio growth of 19% 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 (FX) income grew by 12% continuing from the large
increase achieved in 2016. This result once again came from an experienced
team in the FX dealing area using established and new relationships, and
providing value added advice to our clients.
The Retail bank showed reasonable growth in Housing Loans. The team
were challenged by contractions in the Unsecured Personal Loan market
due to the need to tighten eligibility guidelines and a softening in demand
for car loans due to changes in customs duties. Our team of Personal
Bankers continue to provide quality service and meet competitive
timeframes to provide the best service to our clients.
BSP Solomon Islands in partnership with Noro community renovated
classroom
BSP SI has once again far exceeded the industry average and recorded a
21% growth in our Loan Portfolio for 2017. This growth was seen both in
the Consumer and Business Portfolios. Unfortunately, we have seen some
stress with some old consumer loans and the above growth has been
achieved despite some tightening of policies on the consumer portfolio.
This growth is a result of the lending team building their relationship with
our customers and going out of their way to meet our customer’s needs.
This in turn brought with it the reputation that BSP SI was keen to do
business and saw us win a number of Business transactions from other
banks.
Foreign Exchange was another very good result for us in 2017 and income
grew by 19%. This is also a result of providing quality service and proactively
seeking Foreign Exchange business from other bank customers.
From the Retail side of the business, we have opened just under 12,000
accounts and provided financial literacy training to 9,500 individuals with
approximately half of these training being conducted in Provincial areas of
the Solomon Islands. BSP has branches in four Provincial towns with three
of those branches being the only banking business in the town.
2017 has seen us concentrate on improving our Electronic Banking
(e-Banking) channels and this has seen a significant increase in usage
across all channels.
Revenues from our Electronic Channels – ATM’s, EFTPoS, SMS Banking
& Internet Banking - continue to grow and provide our clients with
convenience and world class options for their banking.
2018 will see us continue to have a focus on Electronic Banking and also
to improve our customer service in our Retail Network. Part of this will see
a complete refit of our Honiara Central branch (former Westpac) which is
well overdue.
In 2018, the bank in Fiji expects to deliver a number of new products and
service delivery improvements. These initiatives will enhance customer
experience and access.
SOLOMON ISLANDS
In 1997, BSP’s purchase of The National Bank of the Solomon Islands
was the first major overseas acquisition by BSP and we are pleased to
say that the business has continued to grow and has proved an excellent
investment by BSP. This year saw the 10 year anniversary of the purchase
and a number of functions were held across the country to celebrate the
anniversary and staff were supplied with a special 10 year anniversary
uniform. We were also privileged that the entire BSP Board of Directors
visited Solomon Islands to join the celebrations in Honiara.
Solomon Islands economy over 2017 has remained consistent with
previous years with year-end growth expected to be approximately 3%.
Inflation which was negative in 2016 has seen a return to positive numbers
in 2017 and headline inflation is expected to be around 2%.
With economic growth of 3%, we are pleased to advise that BSP Solomon
All staff here in the Solomon Islands are to be congratulated on the
exceptional year that was 2017 as it could not have been achieved without
their dedication and loyalty to the business. Additionally, we thank those
staff in PNG who assisted in making 2017 an exceptional year for BSP SI and
we look forward to their continued support in 2018.
COOK ISLANDS
Cook Islands economic growth more than halved to 3.2% in 2017, compared
to 8.4% in 2016. The lower than anticipated growth was primarily due to
low investment in the economy, which more than offset the positive impact
from tourism growth. Economic growth is expected to decline to 1.6% in
2018. However, Cook Islands tourism sector continues to remain strong
with 155,800 tourists visiting in 2017. This is expected to increase by 3.3%
to 161,000 in 2018.
Despite the softening economy, BSP Cook Islands has delivered a strong
financial result in 2017, a NPAT result of NZD2.03 million has been achieved,
representing a 48% increase on 2016. The performance underpinned
through solid loan growth of 6.1%, with 2017 finishing with a balance sheet
position of NZD88.3 million. The growth has been driven by strong results
33
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Pleasingly, BSP performed above system growth and it continued to
strengthen its balance sheet through a growth strategy which resulted in
the loan book increasing by 18% to WST290 million year-on-year. Samoa
reported a 4% growth in profit after tax of WST6.3 million, largely driven
by a disciplined approach that increased operating income by 11% and
managed total expenditure at 3% below budget.
During the year, there has been a 16% growth in customer numbers
to 48,700 and 31% growth in consumer lending. Our commitment
to excellence in customer experience is reflected in the $4 million
refurbishment of our main branch, which now includes Premium Personal
and Commercial Banking facilities. This is supported by an expansion of our
electronic channel (e-channel) network that includes 20 ATMs, 36 agencies
and over 360 EFTPoS terminals across the country.
We supported our vision by participating in various community events
throughout the year, placing priority on the empowerment of women
and children, health, youth development, sports, education and the
environment. BSP’s main Community Project this year was conducted in
partnership with the Samoa Victim Support Group, which focused on the
provision of cooking facilities, sales booths and numerous other activities
throughout the year to empower women and children who are victims of
abuse and domestic violence.
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.
Staff are to be acknowledged for their ongoing dedication and commitment
to our customers and business, making possible a good result in 2017.
The economic outlook for 2018 is a rebound in economic activity to
around 4% percent real growth and 6% in nominal terms. Underpinning
this improvement in real GDP are sharp increases expected mainly in
manufacturing, commerce, construction, agriculture, communications
and transport. In essence, this supports BSP’s growth momentum as we
continue to build a high performing culture by on-going investment in our
people and digital innovation and embedding the BSP values in all our
actions.
OVERSEAS BRANCHES & SUBSIDIARIES
BSP Solomon Islands opens two Branchless Banking Agent in Dunde and Noro,
Western Province.
Overall, 2017 has been an exceptional year and staff are to be
congratulated for their efforts
in the retail sector and a strengthening commercial pipeline. Total deposits
have grown 21% to NZD148.0 million, however this aggressive growth is
not expected to continue with the Cook Island Government expected to
increase spending on key infrastructure projects such as Te Mato Vai and
Mei Ti Vai Ki Te Vai and the Manatua Cable in 2018. The ongoing focus on
non-performing loans has continued and efforts have been rewarded with
a total reduction of 2.8% in non-accrual loans.
Overall, 2017 has been an exceptional year and staff are to be congratulated
for their efforts. Other successes include the delivery of financial literacy
programs, Money Basics and Financial First Steps to all school students
throughout Rarotonga and the outer islands of Aituaki, Atiu and Mangaia.
New products and initiatives have been launched in 2017, including Visa
Business Credit Cards and Personal Asset Loans with market penetration
exceeding expectations. New and refreshed ATMs have been installed at
key locations, a total upgrade of the EFTPoS fleet completed, and a new
Mobile ATM has been introduced to service tourist and locals alike at the
Punganui Market, the Avatiu wharf and the many festivals and events
throughout Rarotonga.
With a productive and rewarding 2017 completed, we are confident the
platform has been set for continued improvement throughout 2018. Our
2018 strategic focus includes solidifying our position as the leading bank
of choice for merchant terminals and e-channel solutions. An investment
has been made in acquiring an experienced Manager for Digital Banking
to drive transformational change, customer advocacy and subsequent
increasing profitability.
SAMOA
BSP Samoa reported a solid financial performance in 2017. This performance
has been achieved despite a slowdown in real economic activity to around
0.1% compared to 6.5% in 2016. This economic decline is driven by sharp
reductions in fishing, manufacturing, construction, transport and business
as the significant growth from these sectors recorded in 2016 could not be
replicated in 2017.
BSP Staff showing hotel staff the new EFTPoS features
BSP FINANCE
BSP Finance PNG recorded strong growth in its loan portfolio during
the first two quarters of 2017 which resulted in an increase in revenue.
However, more subdued economic activity contributed to an increase in
delinquencies. These challenges meant that an inward focus was needed
and the beginning of quarter three saw a reengineering of key internal
processes which by quarter four led to a stabilisation of the level of
arrears and increased efficiencies in the collections process. This and other
measures resulted in improvements in the bottom line in quarter four and
means that the business starts with a clean loan book in 2018. Despite
these challenges, BSP Finance (PNG) has managed to maintain a stable
BSP Samoa reported a solid financial performance in 2017
34
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 market share of 17% and now looks forward to growing its market share
further in 2018.
BSP Finance Fiji performed exceedingly well in 2017, recording a profit for
the year of FJD2.8 million which was 27% above budget. Loan volumes as
well finished above target by 17% finishing at FJD44.3 million for the year.
BSPF Fiji had a market share of 17.9% as of 31 October 2017 which means
it was the third biggest asset financier in Fiji at that point. In November
2017, Loan Protection Insurance Cover was launched as an added feature
for the Asset Finance (Consumer) segment, this announcement was well
received by the consumer market. The BSP Finance brand continues to be
aggressively marketed in Fiji and 2018 will be a year of further growth in
the business and continued customer service excellence.
The acquisition of a 50% stake in BSP Finance Cambodia officially took
place in May 2017 which was a landmark event for BSP Finance as well as
BSP Group. Growth in the loan portfolio was slow for most of quarter three
due to the rainy season however, by quarter four new loan volumes started
to pick up again and by December 2017, a portfolio of US$15 million was
recorded. The business now operates out of a new premises and has
recruited qualified people in key positions in the Finance and Operational
Risk departments which should hold BSPF Cambodia in good stead going
into 2018. A key strategic imperative of the business next year will be to
expand the type of assets financed with a view to increasing market share
which was 10% as at 31 December, 2017.
BSP Finance Solomon Islands was officially launched in September 2017
and as at 31 December 2017, had a portfolio of SBD5.7 million. The team
continues to build brand awareness through marketing campaigns and
visits to potential customers. 2018 is shaping as a year of growth for BSPFSI
as efforts to increase traction in the market will intensify and to this end
the business will continue to leverage off the BSP network in the Solomon
Islands and enhance its speed to market proposition.
Other opportunities to launch an Asset Financing Business in South East
Asia continue to be explored.
BSP Staff showing hotel staff the new EFTPoS features
BSP CAPITAL LIMITED
The acquisition of a 50% stake in BSP Finance Cambodia officially took place in
May 2017 which was a landmark event for BSP Finance as well as BSP Group
Challenging business conditions continued into 2017, despite a slight
improvement in the economy with a growth rate of 2.4% compared to a
2.0% growth in 2016. BSP Capital net result saw a modest improvement
compared to its 2016 performance with revenue streams remaining stable
and steady reduction of costs reflecting the difficult trading conditions.
Stockbroking
The domestic bourse saw the total market turnover value more than
doubled recording a total value of K74 million in 2017 compared to K31
million in 2016. The improvement in the value was attributed to increased
share trades in BSP, Credit Corporation and Oil Search Limited. BSP Capital
remains the largest broker by value with 75% market share in 2017. We
OVERSEAS BRANCHES & SUBSIDIARIES
were successful in 2017 by sourcing a greater share of corporate business
generating higher brokerage.
Corporate Advisory
2017 was a difficult year for Corporate Advisory as a number of assignments
dragged over the year with a low success rate. BSP Capital also assisted
clients with valuation work, strategic advice on capital raising, asset
disposal and potential listings in 2017.
Funds Management
Funds under management remained stable at K1.458 billion as revenues
declined 4% compared to the previous year.
We continued to see an interest in the retail segment while on the
wholesale front saw BCAP miss out on a few opportunities in 2017 but we
remain optimistic to see this area of our business grow stronger in the next
12 months. We expect steady growth in our Funds Management business
in 2018, with several new opportunities on the horizon.
BSP LIFE FIJI
The Insurance business performance and achievements in 2017 in both
financial and strategic initiatives overall, were pleasing in an environment
that posed challenges for the Life Insurance business. The strong financial
performance recorded in 2016 in our Life business and its investments
continued into 2017 with results exceeding expectations. The Health
business also showed further improvement in profitability driven by an
exceptionally strong new business growth and good business retention.
Our key strategic initiative for 2017 was the implementation of the Life
functionalities of our new core system. While significant progress was
made on this important initiative, the implementation had to be deferred
to 2018. The complex nature of the business meant more time was required
to properly bed certain functionalities and the General Ledger Interface.
2017 also saw strong performances in our subsidiary businesses particularly
Richmond Limited trading as Sofitel Fiji and Future Farms Limited trading
as Rooster Poultry. Planned developments in our private hospital joint
venture business were also successfully completed in the launch of its
new Cardiac and Accident Emergency Centre at the Madras Institute of
Orthopaedics and Traumatology (MIOT) Pacific Hospital in Suva.
The Insurance Group profit for 2017 was FJD20.1 million, 41% above the
profit in 2016. Both the Life and Health businesses showed significant
improved performance when compared to last year results. Life policyholder
profits achievement was also pleasing at a record FJD28 million.
The Health new business also set a new record, achieving 83% above
2016 numbers which increased the inforce to FJD22.6 million, a staggering
30.3% growth. Life new business, however, was 19% below 2016 due to a
specific change in salary deduction practice in one of our largest markets
and also as a result of the changes implemented in our sales processes to
improve business quality. Life inforce portfolio increased by FJD1.2 million
to FJD69.0 million, 1.7% growth. The 13-month persistency rate on annual
policy premium of 76.3% was 2.5% lower than last year. This relates to
policies sold prior to 2017 and is anticipated to improve in 2018 following
the changes in sales and performance standards implemented from 2017.
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
2016. The same sources state that BSP Health Term Life market share on
premium income was 60% while the Medical market share was 43% in
2016 which are expected to show significant improvements in 2017.
In 2018, 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 exercise with the implementation of our Life system which will
further strengthen our service delivery capability and bring efficiency gains.
The business will also provide support to the BSP Life insurance business in
Papua New Guinea which started operations from 1 January, 2018.
35
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Kirsten Tangapiri
Merchant Officer, Retail
Kirsten comes from Titikaveka in Cook
Islands and is seen wearing a head piece
made from chicken feathers called Kiriau
– Pata apuka.
Her traditional attire is worn during local
dancing festivals and island night shows.
FINANCIAL STATEMENTS
DIRECTORS’ REPORT
for the Year Ended 31 December 2017
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 2017. In order to comply with the provisions of the Companies Act 1997, the
Directors report as follows:
Principal activities
The principal activity of the Bank of South Pacific Limited (BSP) is the provision of commercial banking and finance services. The Group’s activities also
include stock broking, fund management and life business services throughout Papua New Guinea and the Asia Pacific region. BSP is a company 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 Group is also licensed to operate in the Solomon Islands, Fiji Islands, Cook Islands, Samoa, Tonga,
Vanuatu and Cambodia. The registered office is at Douglas Street, Port Moresby.
Review of operations
For the year ended 31 December 2017, the Group’s profit after tax was K757.003 million (2016: K643.451 million). The Bank’s profit after tax was
K720.953 million (2016: K606.674 million).
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 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 payments totalling K521.858 million were paid in 2017 (2016: K413.973 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 2017:
Sir K G Constantinou, OBE
Mr. S Davis
Ms. F Talao
Mr. G Robb, OAM
Mr. A Sam
Mr. R Fleming, CSM
Mr. E B Gangloff
Mr. R Bradshaw
Mr. A Mano
Dr. F Lua’iufi
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 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 79. Details of amounts paid
to the auditors for audit and other services are shown in Note 41 of the Notes to the Financial Statements.
Donations and Sponsorships
Donations and sponsorship by the Group during the year amounted to K6.457 million (2016: K5.789 million).
38
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
DIRECTORS’ REPORT
for the Year Ended 31 December 2017
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 28th day of February, 2018.
Sir Kostas G. Constantinou, OBE
Chairman
Robin Fleming, CSM
Group Chief Executive Officer/Director
39
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
STATEMENTS OF COMPREHENSIVE INCOME
for the Year Ended 31 December 2017
A ll amo unts are expr essed in K’0 0 0
Note
2017
2016
2017
201 6
Consolidated
Ban k
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)
1,432,640
1,267,911
1,349,134
1,214,671
(154,964)
(160,225)
(141,106)
(153,783)
1,277,676
1,107,686
1,208,028
1,060,888
373,673
307,171
362,337
298,078
345,919
310,059
340,764
277,045
1,958,520
1,768,101
1,864,006
1,678,697
131,022
137,479
(64,813)
(95,078)
(90,393)
21,613
39,830
118,418
85,616
(45,036)
(80,395)
(71,390)
16,743
23,956
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net operating income before impairment and operating expenses
1,998,350
1,792,057
1,864,006
1,678,697
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
(77,678)
(98,622)
(65,111)
(90,460)
-
(852,148)
1,068,524
(311,521)
-
(6,749)
-
(769,641)
923,794
(280,343)
(777,891)
(709,139)
1,014,255
879,098
(293,302)
(272,424)
757,003
643,451
720,953
606,674
48,326
42,054
25,589
24,602
(10,165)
38,064
76,225
11,816
(1,265)
52,605
(8,977)
30,314
46,926
11,816
(1,832)
34,586
833,228
696,056
767,879
641,260
Earnings per share - basic and diluted (toea)
23
162.0
137.7
154.3
129.8
The attached notes form an integral part of these financial statements.
40
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
STATEMENTS OF FINANCIAL POSITION
As at 31 December 2017
All amounts are expressed in K’000
Note
2017
2016
2017
2016
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
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
9
8
7
15
6
6
17
18
19
20
21
6
22
23
24
24
1,205,196
3,298,626
949,214
1,598,378
2,457,327
1,656,260
2,933,621
804,233
1,474,656
2,331,472
985,803
3,287,162
887,337
1,541,096
2,062,341
1,410,008
2,918,484
691,152
1,440,530
2,044,905
11,209,493
10,102,909
10,094,470
9,255,080
738,670
70,689
154,135
-
107,818
134,020
-
181,934
264,361
683,498
44,668
125,620
-
91,626
117,590
576
170,089
294,985
574,305
70,689
19,157
338,400
100,750
-
-
200,021
202,142
569,168
44,668
16,513
318,261
84,727
-
3,670
182,625
247,535
22,369,861
20,831,803
20,363,673
19,227,326
160,400
47,323
238,272
73,855
17,901,692
16,912,349
16,843,756
16,143,696
75,525
75,525
1,382,888
1,312,462
31,708
189,313
-
169,807
75,525
596,633
25,231
173,254
75,525
618,402
-
156,398
19,741,526
18,517,466
17,952,671
17,067,876
373,001
1,904,462
346,388
373,101
1,670,595
266,090
373,001
1,777,627
260,374
373,101
1,576,974
209,375
Equity attributable to the members of the company
2,623,851
2,309,786
2,411,002
2,159,450
Minority interests
Total shareholders’ equity
Total equity and liabilities
4,484
4,551
-
-
2,628,335
2,314,337
2,411,002
2,159,450
22,369,861
20,831,803
20,363,673
19,227,326
Sir Kostas G. Constantinou OBE
Chairman
Robin Fleming, CSM
Group Chief Executive Officer/Director
The attached notes form an integral part of these financial statements.
41
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
for the Year Ended 31 December 2017
BANK
Share capital
Reserves
Ret. earnings Min. Interests
Total
All amounts are expressed in K’000
Note
Balance as at 1 January 2016
374,621
216,369
1,340,000
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
Net profit
Other comprehensive income
Total comprehensive income
2016 final dividend paid
2017 interim dividend paid
Share buyback
Total transactions with owners
Recognition of deferred tax
Transfer from Asset Revaluation Reserve
BSP Life policy reserve
Balance at 31 December 2017
GROUP
Balance as at 1 January 2016
Net profit
Other comprehensive income
Total comprehensive income
2015 final dividend paid
2016 interim dividend paid
Minority interest capital
Share buyback
Total transactions with owners
Loss attributable to minority interests
Transfer from Asset Revaluation Reserve
BSP Life policy reserve
Balance at 31 December 2016
Net profit
Other comprehensive income
Total comprehensive income
2016 final dividend paid
2017 interim dividend paid
Share buyback
Loss attributable to minority interests
Total transactions with owners
Recognition of deferred tax
Transfer from asset revaluation reserve
BSP Life policy reserve
Balance at 31 December 2017
23
23
23
24
24
23
23
23
24
24
23
23
23
24
24
23
23
23
24
24
24
-
-
-
-
-
(1,520)
(1,520)
-
-
-
606,674
34,586
34,586
-
-
-
-
(42,537)
957
-
606,674
(294,448)
(116,832)
-
(411,280)
42,537
(957)
373,101
209,375
1,576,974
-
-
-
-
-
(100)
(100)
-
-
-
-
720,953
46,926
46,926
-
-
-
-
-
(1,418)
5,491
-
720,953
(369,414)
(149,541)
-
(518,955)
3,739
407
(5,491)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,930,990
606,674
34,586
641,260
(294,448)
(116,832)
(1,520)
(412,800)
-
-
2,159,450
720,953
46,926
767,879
(369,414)
(149,541)
(100)
(519,055)
3,739
(1,011)
-
373,001
260,374
1,777,627
-
2,411,002
374,621
255,065
1,399,490
-
-
-
-
-
-
(1,520)
(1,520)
-
-
-
-
643,451
52,605
52,605
-
-
-
-
-
-
(42,537)
957
-
643,451
(297,141)
(116,832)
-
-
(413,973)
47
42,537
(957)
-
-
-
-
-
-
4,598
-
4,598
(47)
-
-
2,029,176
643,451
52,605
696,056
(297,141)
(116,832)
4,598
(1,520)
(410,895)
-
-
-
373,101
266,090
1,670,595
4,551
2,314,337
-
-
-
-
-
(100)
-
(100)
-
-
-
-
757,003
76,225
76,225
-
-
-
-
-
-
(1,418)
5,491
-
757,003
(372,317)
(149,541)
-
67
(521,791)
3,739
407
(5,491)
-
-
-
-
-
-
(67)
(67)
-
-
-
757,003
76,225
833,228
(372,317)
(149,541)
(100)
-
(521,958)
3,739
(1,011)
-
373,001
346,388
1,904,462
4,484
2,628,335
The attached notes form an integral part of these financial statements.
42
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 STATEMENTS OF CASH FLOWS
for the Year Ended 31 December 2017
All amounts are expressed in K’000
Note
2017
2016
2017
2016
Consolidated
Bank
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
1,432,265
1,269,316
1,330,842
1,185,621
700,928
(145,505)
(727,730)
669,187
(161,093)
(629,235)
655,978
(135,083)
(674,116)
581,669
(155,774)
(569,818)
28
1,259,958
1,148,175
1,177,621
1,041,698
Increase in loans, advances and other receivables from customers
(1,164,516)
(1,392,582)
(887,123)
(1,130,592)
Increase in statutory deposits with the Central Banks
(123,723)
(115,050)
(100,566)
(Increase)/decrease in bills receivable and other assets
Increase in customer deposits
Increase in bills payable and other liabilities
(4,430)
989,343
120,241
(78,874)
1,960,281
92,305
Net cash flow from operations before income tax
1,076,873
1,614,255
54,287
700,060
38,252
982,531
(98,880)
(48,610)
1,895,400
20,999
1,680,015
Income taxes paid
6
(293,697)
(338,647)
(282,645)
(330,331)
Net cash flow from operating activities
783,176
1,275,608
699,886
1,349,684
CASH FLOW FROM INVESTING ACTIVITIES
Increase in government securities
Expenditure on property, plant and equipment
(490,860)
(118,518)
(453,058)
(386,113)
(388,010)
(69,179)
(72,321)
(39,597)
Expenditure on software development costs
(50,096)
(22,580)
(48,109)
(21,871)
Proceeds from disposal of property, plant and equipment
Purchase of controlled entities, net of cash acquired
Additional funding of subsidiaries
Net cash flow used in investing activities
CASH FLOW FROM FINANCING ACTIVITIES
Share buyback
Non-controlling interests shares
Dividends paid
Proceeds from borrowings
Principal and interest repayments of borrowings
Net cash flow used in financing activities
Net (decrease)/increase 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
21
21
28
28
2,182
-
-
70,250
162,870
2,165
69,982
-
(38,020)
-
(26,889)
(20,372)
(657,292)
(311,697)
(531,267)
(437,888)
(100)
-
(1,520)
4,551
(100)
-
(1,520)
-
(521,858)
(413,973)
(518,955)
(411,280)
253,969
33,127
253,969
33,127
(101,973)
(590,804)
-
(156,973)
(101,973)
(587,901)
(464,920)
806,938
(419,282)
45,760
37,955
26,845
2,413,170
1,994,010
1,568,277
2,027,305
1,253,255
2,413,170
1,634,868
2,027,305
-
(158,831)
752,965
21,085
The attached notes form an integral part of these financial statements.
43
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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.
A. Basis of Presentation and General Accounting
Policies
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 financial statements are presented in Papua New Guinea Kina,
expressed in thousands of Kina, as permitted by International Financial
Reporting Standards.
Standards, amendment and interpretations effective in the year ended
31 December 2017
There are a number of standards, amendments and interpretations
that became applicable for the first time during the accounting period
beginning 1 January 2017. Listed below is the amendment relevant to the
Bank and Group:
•
Amendments to IAS 7 ‘Statement of Cash Flows’ on disclosure
initiative. 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.
Standards, amendments and interpretations issued but not yet effective
for the year ended 31 December 2017 or adopted early
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 2018 or later periods,
but the entity has not early adopted them:
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 more 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 Other Comprehensive Income; this
change can be adopted early without adopting IFRS 9. IFRS 9’s new
•
•
44
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.
Governance and project management
The adoption of IFRS 9 is a significant initiative for the Group, involving
substantial resources and effort from both the finance and credit teams.
The Group’s existing credit policies are being refined and revised where
required to meet the requirements of IFRS 9. The Group has applied many
components of its existing credit risk management framework to ensure
that appropriate validations and controls will be in place over new key
processes and significant areas of judgment.
Adoption of IFRS 9 in 2018 will result in revisions to accounting policies
and procedures, changes and amendments to internal control documents,
applicable credit risk manuals, and implementation of new models
to create expected loss rates and associated methodologies and new
processes within risk management. Progress updates have been provided
to executive management and the BSP Board throughout the span of this
project and BSP is well positioned to adopt in 2018.
The following is a summary of key items that are important in understanding
the impact of IFRS 9:
Classification and measurement
The Standard introduces new requirements to determine the measurement
and classification of financial assets on the basis of cash flow characteristics
and observable business model within which the financial assets are being
managed. Accordingly, the basis of measurement for the Group’s financial
assets may change. The Standard allows recording of fair value changes
through Other Comprehensive Income (OCI) where cash flows from the
financial asset is solely payments of principal and interest and the business
model is ‘hold to collect and sell’.
The Group’s insurance business measures its investments in fixed interest
securities at ‘Fair Value Through Profit and Loss’ under IAS 39. However,
these securities are held in the business model of hold to collect or sell
and they meet the requirements of SPPI. Under IFRS 9, these assets could
be classified as Fair Value through Other Comprehensive Income which
will reduce volatility in the profit or loss account. Discussions are being
held with the actuaries to ascertain the impact this will have, if any, on
valuation of policy liabilities before a decision is made. For other financial
instruments, the Group does not expect the implementation will result in
a significant change in the classification and measurement of the Group’s
financial assets, between Amortized Cost, Fair Value through OCI and Fair
Value through Profit and Loss.
Impairment
The adoption of IFRS 9 will have an impact on the Group’s loan impairment
methodology. The IFRS 9 expected credit loss (ECL) model is forward looking
compared to the current incurred loss approach. Expected credit losses
reflect the present value of all cash shortfalls related to default events
either (i) over the following twelve months or (ii) over the expected life of
a financial instrument depending on credit deterioration from inception.
ECL should reflect an unbiased, probability-weighted outcome as opposed
to the single best estimate allowed under the current approach. The
probability-weighted outcome considers multiple scenarios based on
reasonable and supportable forecasts.
IFRS 9 considers the calculation of ECL by multiplying the Probability of
Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD).
S&P Global Market Intelligence (S&P), given their understanding of the
Group’s internal rating system and comprehensive data bank accumulated
over a significant time period, were engaged to assist with calculating the PD
rates that are compliant with IFRS requirements. S&P’s default experience
is blended with BSP’s internal default experience to derive a recalibrated
master scale to produce Through the Cycle (TTC) PDs. Macroeconomic
forecasts are applied to convert the TTC PDs into Point in Time (PiT) PDs
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
as required by IFRS 9 (refer “Macroeconomic Factors and Forward Looking
Information” section below). This methodology of producing blended PDs
is grounded in the theoretical principle as elucidated in paragraph 462 of
the Revised Basel Accord, whereby attributing external credit assessment
institution’s observed default rates to internal grades is acceptable as
long as the underlying methodology of the internal models mimic the
methodology of the external credit assessment institution. Management
is still determining the most appropriate LGD and EAD to use in the
calculation.
Expected Life
When measuring ECL, the Group must consider the maximum contractual
period over which the Group is exposed to credit risk. All contractual
terms should be considered when determining the expected life, including
prepayment options and extension and rollover options. For certain
revolving credit facilities that do not have a fixed maturity, the expected life
is estimated based on the period over which the Group is exposed to credit
risk and where the credit losses would not be mitigated by management
actions.
The IFRS 9 Impairment model uses a three stage approach based on the
extent of credit deterioration since origination:
Stage 1 – includes financial assets that have not had a significant increase
in credit risk since initial recognition. For these assets, 12-month expected
credit losses (ECL) are recognized. The ECL will be computed using a
12-month PD that represents the probability of default occurring over the
next 12 months.
Stage 2 – includes financial instruments that have had a significant increase
in credit risk since initial recognition but that do not have objective evidence
of impairment at balance date. This requires the computation of ECL based
on lifetime PD that represents the probability of default occurring over the
remaining estimated life of the financial asset. Provisions are higher in this
stage because of an increase in risk and the impact of a longer time horizon
being considered compared to 12 months in Stage 1.
Stage 3 – includes financial assets that have an objective evidence of
impairment at reporting date. Similar to Stage 2, the allowance for credit
losses will continue to capture the lifetime expected credit losses. Revenue
recognition in stage 3 is based on the effective interest rate on the net
balances as opposed to gross balances.
Some of the key concepts in IFRS 9 that have the most significant impact
and require a high level of judgement are:
Definition of Default and Write-off
Material exposures classified as stage 3 or approaching stage 3 are
monitored on a monthly basis by the Restructure Committee which is
governed by its own charter. Exposures are reviewed and decisions
made on ongoing strategies to manage such accounts and appropriate
provisioning requirements. The policy on the write-off of loans remains
unchanged with the introduction of IFRS 9.
Transition impact
Given that the Group’s existing provisioning policies have adopted a
prudent approach in respect to Stage 1 loans with the application of TTC
probability of defaults whilst under IAS 39, it is expected that changes in
provisions with the transition to IFRS 9 will not be material. The Group is
in the process of assessing the actual impact upon transition. The Group
continues to revise, refine and validate the impairment models and related
processes leading up to the effective date of the standard of 1st January
2018 and applicable to the first financial reporting period for BSP ending
30th June 2018.
•
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.
Assessment of Significant Increase in Credit Risk (SICR)
The assessment of SICR is done on a relative basis. To assess whether the
credit risk on a financial asset has increased significantly since origination,
the Group compares the risk of default occurring over the expected life of
the financial asset at the reporting date to the corresponding risk of default
at origination, using key risk indicators that are used in the Group’s existing
risk management processes. At each reporting date, the assessment of
a change in credit risk will be individually assessed for those considered
individually significant and at a portfolio level for retail exposures. This
assessment is symmetrical in nature, allowing credit risk of financial assets
to move back to Stage 1 if the increase in credit risk since origination has
reduced and is no longer deemed to be significant. BSP will consider
qualitative, quantitative factors and a backstop of 30 days in determination
of SICR.
Macroeconomic Factors and Forward Looking Information
IFRS 9 requires an unbiased and probability-weighted estimate of credit
losses by evaluating a range of possible outcomes that incorporates forecasts
of future economic conditions. The systemic factors used by S&P include
widely accepted economic indicators, market indicators as well as industry
indicators. Some forecasts can be national, regional or global, reflecting
the specificities of an institution’s exposure. The aim of the overlay is to
convert PD curves based on long term average default rates (blended TTC
PDs as described above) into forward looking PD curves (PiT PD) taking
into account current and future economic conditions, as required by IFRS
9. The conversion process looks at the historical relationship between long
term PDs for a particular year and the observed default rate for the same
year (known as the Z-factor) and a set of systematic factors for the year.
This is then compared to the expected systematic factors and long-term
PDs for a future year to estimate the PiT PDs for that future year.
Experienced credit judgment
The Group’s ECL allowance methodology requires the Group to use its
experienced credit judgement to incorporate the estimated impact of
factors not captured in the modelled ECL results, in all reporting periods.
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.
The entity is in the process of determining the impact of IFRS 15 but
does not expect the new standard to have a significant impact on current
revenue practice.
•
IFRS 16, ‘Leases’ (effective 1 January 2019) replaces the guidance in
IAS 17 and will have an 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. The entity expects that certain
leases of property and equipment that are currently accounted for as
operating leases will, from January 2019, be required to be recognised
as right-of-use assets and depreciated, with a corresponding lease
liability. This will increase reported debt levels in the statement
of financial position and will increase the reporting charges for
depreciation and interest expense. The timing of expense recognition
will also be brought forward although the impact on reported profit is
not expected to be significant.
45
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
•
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:
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:
- 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.
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.
IFRS 17 ‘Insurance contracts” (effective 1 January 2021) replaces IFRS
4. IFRS 17 will fundamentally change the accounting by all entities that
issue insurance contracts and investment contracts with discretionary
participation features.
IFRIC 23, ‘Uncertainty over income tax treatments’ (effective 1 January
2019) clarifies how the recognition and measurement requirements
of IAS 12 ‘Income Taxes’ are applied where there is uncertainty over
income tax positions. IFRIC 23 explains how to recognise and measure
deferred and current income tax assets and liabilities where there is
uncertainty over a tax treatment.
•
Annual improvements 2015 - 2017 Cycle
Makes amendments to the following standards:
- IFRS 3 and IFRS 11 - The amendments to IFRS 3 clarify that
when an entity obtains control of a business that is a joint
operation, it remeasures previously held interests in that
business. The amendments to IFRS 11 clarify that when an entity
obtains joint control of a business that is a joint operation, the
entity does not remeasure previously held interests in that
business.
- IAS 12 - The amendments clarify that all income tax
consequences of dividends (ie distribution of profits) should be
recognized in profit or loss, regardless of how the tax arises.
- IAS 23 - The amendments clarify that if nay specific borrowings
remains outstanding after the related assets is ready for its
intended use or sale, that borrowing becomes part of the funds
that an entity borrows generally when calculating the
capitalisation rate on general borowings.
B. Consolidation
The Financial Statements incorporate the assets and liabilities of all
controlled entities of the Group as at 31 December 2017, 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
46
acquisition cost is measured at fair value of assets transferred, equity
issued, liabilities assumed and any directly attributable costs of the
transaction;
identifiable net assets are recorded initially at acquisition, at their fair
values;
any excess of the acquisition cost over the relevant share 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
income and expense are recognised
Interest income and expense
Interest
in the Statement 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 policy
holder. There are no maturity or surrender benefits.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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.
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).
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.
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.
F. Borrowing expenses
Expenses associated with the borrowing of funds are charged to the
Statement of Comprehensive Income in the period in which they are
incurred.
G. 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 Statement 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
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.
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.
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.
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.
Insurance policy liabilities are further detailed in Note 39.
J. Property, plant and equipment
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.
Land and buildings are carried at revalued amounts, being their fair value
at the date of revaluation less subsequent accumulated depreciation
and impairment losses. Fair value is determined on the basis of regular
independent valuations 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 and are reviewed at
the end of each reporting period to ensure that the carrying value of land
and buildings are 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
47
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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
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.
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
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.
Depreciation is provided on property, plant and equipment, including
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.
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 Statements 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.
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 their initial
recognition and reassesses 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.
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 income
statement 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 income statement 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 balance sheet 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.
M. Financial assets
N. Provisions
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.
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
48
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
obligation at reporting date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash
flows estimated to settle the present obligation, its carrying amount is the
present value of those cash flows.
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 date, to recover or settle the carrying amount of
its assets and liabilities.
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.
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.
O. Employee benefits
A liability is recognised 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 recognised and they are capable of being measured
reliably.
Liabilities recognised in respect of employee benefits expected to be
settled within 12 months, are measured at their nominal values using the
remuneration rate expected to apply at the time of settlement.
Liabilities recognised in respect of employee benefits which are not
expected to be settled within 12 months are measured as the present value
of the estimated future cash outflows to be made by the consolidated
entity in respect of services provided by employees up to reporting date.
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.
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.
P. Income tax
Current Tax
Current tax is calculated by reference to the amount of income taxes
payable or recoverable in respect of the taxable profit or tax loss for the
period. It is calculated using tax rates and tax laws that have been enacted
or substantively enacted by 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.
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.
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.
R. Share capital
Share issue costs
External costs directly attributable to the issue of new shares are deducted
from equity net of any related income taxes.
Dividends on ordinary shares
Dividends on ordinary shares are recognised in equity in the period in
which they are declared.
Dividends for the year, declared after the balance sheet date, are dealt with
in the subsequent events note.
S. Asset impairment
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.
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.
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)
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
49
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
goodwill is not subsequently reversed.
to the Statement of Comprehensive Income.
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 current market assessments of the time value of money and the
risks specific to the asset for which the estimates of future cash flows have
not been adjusted.
If the recoverable amount of an asset (or cash-generating unit) is estimated
to be less than its carrying amount, the carrying amount of the asset (cash-
generating unit) is reduced to its recoverable amount. An impairment
loss is recognised in profit or loss immediately, unless the relevant asset
is carried at fair value, in which case the impairment loss is treated as a
revaluation decrease.
Where an impairment loss subsequently reverses, the carrying amount
of the asset (cash-generating unit) is increased to the revised estimate
of its recoverable amount, but only to the extent that the increased
carrying amount does not exceed the carrying amount that would have
been determined had no impairment loss been recognised for the asset
(cash-generating unit) in prior years. A reversal of an impairment loss is
recognised in profit or loss immediately, unless the relevant asset is carried
at fair value, in which case the reversal of the impairment loss is treated as
a revaluation increase.
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.
The Group does not actively enter into or trade in complex forms of
derivative financial instruments such as currency and interest rate swaps
and options.
W. 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
T. Non-current assets held for sale
Comparative figures have been adjusted to conform to changes in
presentation in the current year.
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)
Estimated goodwill impairment – note 1(h) and 7(a)
Estimated insurance liability – note 1(d), note 21 note 39
Estimation of fair value of financial assets and liabilities – note 1(m)
and note 38
Estimation of fair value of non-financial assets - note 38
•
•
•
•
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. Investment property
Property held for long-term rental yields is classified as investment
property. Investment property comprises freehold land and buildings. It
is carried at fair value. The fair value have been arrived at on the basis
of the valuation carried out by Rolle and Associates and Pacific Valuations
Limited, independent valuers not related to the group. The valuers have
appropriate qualifications and recent experience in the valuation of
properties in Fiji. The valuations were arrived at by reference to current
net rental income and capital expenditure and external factors in the
Fiji commercial and residential environment such as current supply and
demand and expected growth.
Changes in fair values are recorded in profit or loss.
Property located on land that is held under an operating lease is classified
as investment property as long as it is held for long-term rental yields and is
not occupied by more than 50% by the companies in the Group. The initial
cost of the property is the lower of the fair value of the property and the
present value of the minimum lease payments. The property is carried at
fair value after initial recognition.
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
50
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
2. NET INTEREST INCOME
Net interest income
All amounts are expressed in K’000
Interest income
Loans, advances and other receivables from customers
Other financial assets - inscribed stock
Treasury bills
Cash and balances with Central Bank
Central Bank bills
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
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
Consolidated Bank
2017
2016
2017
2016
1,027,861
204,685
195,093
2,802
83
2,116
922,046
191,333
146,692
4,498
187
3,155
944,201
204,378
194,093
3,417
83
2,962
867,010
191,333
146,684
5,935
187
3,522
1,432,640
1,267,911
1,349,134
1,214,671
134,381
12,276
8,307
154,964
140,229
11,665
8,331
160,225
120,177
12,622
8,307
141,106
133,757
11,695
8,331
153,783
1,277,676
1,107,686
1,208,028
1,060,888
206,882
18,542
114,181
35,142
374,747
627
447
1,074
373,673
275,576
9,430
22,165
307,171
205,788
19,447
105,758
32,288
363,281
384
560
944
362,337
253,758
10,104
34,216
298,078
195,720
17,800
106,657
26,771
346,948
582
447
1,029
345,919
249,538
9,430
51,091
310,059
198,864
18,867
100,219
23,720
341,670
346
560
906
340,764
231,436
10,104
35,505
277,045
51
Foreign exchange related income includes gains and losses from spot and forward contracts and translated foreign currency assets.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
5. OPERATING EXPENSES
All amounts are expressed in K’000
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 (2016:30%)
Tax calculated at respective subsidiary tax rates
Expenses not deductible for tax
Tax loss not recognised
Income not recognised for tax purposes1
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
Consolidated
Bank
2017
136,209
121,922
72,331
27,427
2,379
20,156
6,682
92,978
2016
138,176
75,205
62,125
32,508
2,390
25,661
12,003
84,238
2017
121,797
104,682
61,701
26,359
1,961
26,780
6,682
85,089
2016
127,119
63,277
58,299
30,522
1,935
24,845
12,003
77,987
480,084
432,306
435,051
395,987
13,943
9,389
288,116
60,616
372,064
852,148
326,675
(11,845)
314,830
(3,309)
311,521
294,622
16,770
4,069
4,681
(5,312)
(3,309)
311,521
576
(326,675)
694
293,697
(31,708)
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
12,890
8,485
264,233
57,232
342,840
777,891
313,512
(17,396)
296,116
(2,814)
293,302
304,277
-
1,494
-
(9,655)
(2,814)
293,302
3,670
(313,512)
1,966
282,645
(25,231)
12,375
9,826
236,020
54,931
313,152
709,139
281,352
(23,335)
258,017
14,407
272,424
263,729
-
2,563
-
(8,275)
14,407
272,424
(36,168)
(281,352)
(9,141)
330,331
3,670
1Income not recognised for tax purpose for the Bank includes dividends received from Subsidiaries which are eliminated upon consolidation whilst the
Group number represents actuarial liabilities deductions allowable for BSP Life Fiji Limited.
52
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
6. INCOME TAX (continued)
All amounts are expressed in K’000
2017
2016
2017
2016
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
Represented by
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
At 31 December
33,694
34,251
30,109
32,666
132,752
23,390
(1,228)
32,294
(60,565)
(897)
22,494
181,934
244,625
(62,691)
117,976
20,459
(1,126)
16,162
(39,842)
(4,250)
26,459
170,089
229,867
(59,778)
131,576
22,809
(1,228)
31,604
(34,969)
(897)
21,017
200,021
237,115
(37,094)
113,807
19,213
(1,204)
29,041
(30,500)
(4,320)
23,922
182,625
218,649
(36,024)
181,934
170,089
200,021
182,625
170,089
27,798
(10,165)
(5,788)
147,389
182,625
159,290
12,448
11,816
(1,564)
32,161
(8,977)
(5,788)
13,083
11,816
(1,564)
181,934
170,089
200,021
182,625
53
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
7. INTANGIBLE ASSETS
All amounts are expressed in K’000
2017
2016
2017
2016
Consolidated
Bank
7(a) Goodwill
At 1 January
Net movement
Gross carrying amount
45,307
-
45,307
42,374
2,933
45,307
41,051
-
41,051
35,672
5,379
41,051
Goodwill was tested for impairment as at 31 December 2017 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
Name of Subsidiary
BSP Capital Ltd
BSP Life (Fiji) Ltd
BSP Life PNG Ltd
BSP Convertible Notes Ltd
BSP Finance Ltd
Bank of South Pacific Tonga Ltd
Bank South Pacific Samoa Ltd
Bank South Pacific (Vanuatu) Ltd
At 31 December
Represented by:
All amounts are expressed in K’000
At 1 January
Additional capital
Provision for Impairment of BSP Capital Limited
At 31 December
46,319
50,096
(5,727)
(28,177)
62,511
107,818
67,852
22,580
(11,605)
(32,508)
46,319
91,626
43,676
48,109
(5,727)
(26,359)
59,699
100,750
63,929
21,871
(11,602)
(30,522)
43,676
84,727
Principal
activity
Place of Incorporation
and Operation
Ownership
%
Balance of Investment
Share brokerage/Fund
Management/Capital Raising
Life Insurance
Life Insurance
Capital Raising
Credit Institution
Bank
Bank
Bank
PNG
Fiji
PNG
Fiji
PNG
Tonga
Samoa
Vanuatu
100%
100%
100%
100%
100%
100%
98.7%
100%
2017
2016
2,251
87,599
6,000
371
61,837
71,610
70,712
38,020
5,500
87,599
-
371
44,449
71,610
70,712
38,020
338,400
318,261
2017
2016
318,261
259,869
26,888
(6,749)
58,392
-
338,400
318,261
Provision for Impairment of the Investment in BSP Capital Limited
During the 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.
54
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 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
BSP Finance Cambodia Plc
Joint Venture
Finance
Cambodia
The investments above are accounted for using the equity method in the Financial Statements.
*Both ownership and voting power held, **ownership, ***voting power held.
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
Proportion of ownership and voting power held
2017
50%*
2016
50%*
61.3%**,50%***
61.3%**,50%***
-
50%*
27.7%*
-
Shares held in Williams and Gosling Limited (Associate) was divested in 2017. As at 31 December 2016, the net investment in the Associate was
K12.859 million. The total net assets of the business was K36.963 million and the Group’s share of profit in the Associate was K3.597 million.
All amounts are expressed in K’000
2017
2016
2017
2016
Consolidated
Bank
Joint ventures
Investment in joint ventures
Investments during the year
Translation 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 fair value alignment
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
112,762
11,370
6,715
23,288
154,135
275,782
(117,841)
157,941
12,470
10,818
23,288
-
154,135
154,135
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
16,513
14,570
-
969
1,675
19,157
81,740
(43,426)
38,314
1,675
-
1,675
-
19,157
19,157
-
752
1,191
16,513
62,959
(29,933)
33,026
1,191
-
1,191
-
16,513
16,513
55
All amounts are expressed in K’000
At 1 January
Additional capital
At 31 December
Provision for Impairment of BSP Capital Limited
2017
2016
318,261
259,869
26,888
(6,749)
58,392
-
338,400
318,261
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
10. CASH AND BALANCES WITH CENTRAL BANK
All amounts are expressed in K’000
Notes, coins and cash at bank
Balances with Central Bank other than statutory deposit
Total cash and balances with Central Bank
11. TREASURY AND CENTRAL BANK BILLS
Consolidated
Bank
2017
2016
475,020
483,966
730,176
1,205,196
1,172,294
1,656,260
2017
461,827
523,976
985,803
2016
445,503
964,505
1,410,008
Treasury and Central Bank bills – face value
3,370,252
3,000,888
3,358,788
2,985,751
Discount for interest receivable
At 31 December
(71,626)
3,298,626
(67,267)
2,933,621
(71,626)
3,287,162
(67,267)
2,918,484
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
29,156
920,058
949,214
29,779
774,454
804,233
29,154
858,183
887,337
29,779
661,373
691,152
The Group undertakes thorough compliance and due diligence reviews before entering into any correspondent banking relationships. There is also a
cash and cash equivalent of K26.742 million held with counter-party Banks that are not available for use by the Group.
13. LOANS, ADVANCES AND OTHER RECEIVABLES FROM CUSTOMERS
Overdrafts
Lease financing
Term loans
Mortgages
Policy loans
830,851
731,500
776,190
692,256
172,334
8,675,849
198,457
7,976,794
135,700
8,016,448
175,445
7,458,125
2,054,173
1,672,965
1,705,081
1,417,495
53,472
46,854
-
-
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
At 31 December
11,786,679
10,626,570
10,633,419
9,743,321
(577,186)
(523,661)
(538,949)
11,209,493
10,102,909
10,094,470
(488,241)
9,255,080
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.
56
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
13. LOANS, ADVANCES AND OTHER RECEIVABLES FROM CUSTOMERS (continued)
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:
All amounts are expressed in K’000
2017
2016
2017
2016
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)
50,224
142,734
192,958
(6,212)
(14,412)
(20,624)
172,334
44,012
128,322
172,334
38,130
181,996
220,126
(1,646)
(20,023)
(21,669)
198,457
36,484
161,973
198,457
30,372
118,539
148,911
(2,595)
(10,616)
(13,211)
135,700
27,777
107,923
135,700
35,604
156,783
192,387
(1,441)
(15,501)
(16,942)
175,445
34,163
141,282
175,445
523,661
63,181
(9,656)
446,872
75,406
1,383
488,241
52,853
(2,145)
428,528
70,096
(10,383)
At 31 December
577,186
523,661
538,949
488,241
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
461,389
115,797
577,186
40,926
22,255
63,181
398,988
124,673
523,661
60,786
14,620
75,406
438,585
100,364
538,949
38,386
14,467
52,853
379,355
108,886
488,241
58,491
11,605
70,096
(64,563)
(49,721)
(63,067)
(49,104)
79,060
77,678
72,937
98,622
75,325
65,111
69,468
90,460
57
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
14. PROPERTY, PLANT AND EQUIPMENT
All amounts are expressed in K’000
2017
2016
2017
2016
Consolidated
Bank
70,711
650,409
(90,390)
560,019
355,667
(247,727)
107,940
738,670
157,713
85,536
(172,538)
70,711
402,466
192,702
(1,683)
(5,418)
(28,048)
560,019
123,319
24,099
(1,485)
(37,993)
107,940
157,713
522,393
(119,927)
402,466
335,088
(211,769)
123,319
51,065
532,564
(81,283)
451,281
265,504
(193,545)
71,959
144,975
475,696
(112,856)
362,840
227,004
(165,651)
61,353
683,498
574,305
569,168
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
144,975
64,049
(157,959)
51,065
362,840
139,884
(1,527)
(23,338)
(26,578)
451,281
61,353
40,401
(962)
(28,833)
71,959
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
Carrying value
Capital Work in Progress
Premises
Accumulated depreciation
Equipment
Accumulated depreciation
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
58
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 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
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
Consolidated
Bank
2017
2016
2017
2016
74,267
(3,578)
70,689
44,668
(6,290)
32,311
70,689
3,334
-
3,334
130,122
(85,454)
44,668
52,857
(8,189)
-
44,668
5,219
-
5,219
74,267
(3,578)
70,689
44,668
(6,290)
32,311
70,689
3,334
-
3,334
18,363
178,447
14,962
211,772
130,122
(85,454)
44,668
52,857
(8,189)
-
44,668
5,219
-
5,219
18,433
118,655
18,070
155,158
The carrying amount of land and buildings and aircraft had they been recognised under the cost model are as follows:
Land
Buildings
Aircraft
At 31 December
18,951
187,607
14,962
221,520
18,911
122,706
18,070
159,687
Land and buildings carried at fair value
Independent valuations of the Bank’s land and buildings were performed by 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 30th November 2017.
Assets subject to operating lease – aircraft
An independent valuation of the Bank’s aircrafts was performed by Charles Taylor Aviation Asset Management 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 31st May 2017.
59
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
15. INVESTMENT PROPERTIES
All amounts are expressed in K’000
Opening net book value
Additions
Translation movement
Gain on revaluation
At 31 December
16. OTHER FINANCIAL ASSETS
Securities – held to-maturity:
Consolidated
Bank
2017
117,590
5,006
6,652
4,772
2016
101,019
4,127
5,250
7,194
134,020
117,590
2017
2016
-
-
-
-
-
-
-
-
-
-
Inscribed stock – issued by Central Bank
2,310,279
2,218,037
2,062,341
2,044,905
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
147,048
2,457,327
113,435
-
-
2,331,472
2,062,341
2,044,905
107,399
82,784
-
39,513
12,749
19,664
2,252
150,018
82,409
-
35,902
7,698
16,269
2,689
264,361
294,985
24,479
135,921
160,400
24,773
22,550
47,323
97,642
75,007
10,665
-
-
17,851
977
202,142
55,811
182,461
238,272
145,353
74,093
12,344
-
-
14,999
746
247,535
50,038
23,817
73,855
13,438,449
4,463,243
17,901,692
12,832,771
12,800,761
12,272,022
4,079,578
4,042,995
3,871,674
16,912,349
16,843,756
16,143,696
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.
60
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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
All amounts are expressed in K’000 Note
Policy liabilities 39(b)
Items in transit and all other liabilities
Borrowings
Creditors and accruals
Premiums received in advance
Outstanding claims
Claims incurred but not reported (IBNR)
Consolidated
Bank
2017
749,876
259,582
199,294
150,525
6,327
15,060
2,224
2016
640,043
293,870
253,968
104,679
5,295
13,211
1,396
2017
-
271,407
199,294
125,932
-
-
-
2016
-
281,447
253,968
82,987
-
-
-
At 31 December
1,382,888
1,312,462
596,633
618,402
Reconciliation of changes in liabilities arising from financing activities
A loan amounting to K253.969 million (USD80 million) was obtained in 2016 with principal repayment to commence in 2017. During the year, the
Bank paid K90.775 million and additional loan of K33.127 million was received. Foreign currency loss of K2.974 million was recognised arising from
translation.
22. OTHER PROVISIONS
Staff related
Provision for non-lending loss
Provisions – other
Staff related provisions:
At 1 January
Provisions charge
Payouts
At 31 December
88,071
64,310
36,932
189,313
76,684
62,476
(51,089)
88,071
76,684
52,163
40,960
75,233
64,260
33,761
65,206
51,944
39,248
169,807
173,254
156,398
62,205
54,303
(39,824)
76,684
65,206
58,438
(48,411)
75,233
55,274
51,157
(41,225)
65,206
61
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
23. ORDINARY SHARES
Number of shares in '000s, Book value in K'000
At 31 December 2015/1 January 2016
Share buyback
At 31 December 2016 / 1 January 2017
Share buyback
At 31 December 2017
Number of shares
Book value
467,521
(196)
467,325
(13)
467,312
374,621
(1,520)
373,101
(100)
373,001
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
2017
2016
2017
2016
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)
757,003
467,323
162.0
643,451
467,427
137.7
720,953
467,323
154.3
606,674
467,427
129.8
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 (2017:32 toea; 2016:25 toea)
Final ordinary dividend (2016:79 toea; 2015:63 toea)
149,541
372,317
521,858
116,832
297,141
413,973
149,541
369,414
518,955
116,832
294,448
411,280
62
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
24. RETAINED EARNINGS AND OTHER RESERVES
All amounts are expressed in K’000
2017
2016
2017
2016
Consolidated
Bank
Retained earnings
At 1 January
Net profit for the year
Dividends paid
Disposal of assets – Asset revaluation
Recognition of deferred tax
BSP Life policy reserve
Loss 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 – current year
At 31 December
Capital reserve
At 1 January
At 31 December
General reserve
At 1 January
BSP Life policy reserve
At 31 December
1,670,595
757,003
(521,858)
407
3,739
(5,491)
67
1,399,490
643,451
(413,973)
42,537
-
(957)
47
1,576,974
720,953
(518,955)
407
3,739
(5,491)
-
1,340,000
606,674
(411,280)
42,537
-
(957)
-
1,904,462
1,670,595
1,777,627
1,576,974
161,373
635
21,578
37,496
125,306
346,388
134,892
38,064
(1,418)
426
(10,591)
161,373
635
635
32,005
5,491
37,496
134,892
150,389
130,470
635
21,578
32,005
76,980
635
-
37,496
71,854
635
-
32,005
46,265
266,090
260,374
209,375
166,878
(1,265)
(42,537)
11,816
-
134,892
635
635
31,048
957
32,005
130,470
30,314
(1,418)
426
(9,403)
150,389
635
635
32,005
5,491
37,496
163,023
(1,832)
(42,537)
11,816
-
130,470
635
635
31,048
957
32,005
63
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
24. RETAINED EARNINGS AND OTHER RESERVES (continued)
All amounts are expressed in K’000
2017
2016
2017
2016
Consolidated
Bank
Exchange reserve
At 1 January
Movement during the year
At 31 December
Equity component of convertible notes
76,980
48,326
125,306
34,926
42,054
76,980
46,265
25,589
71,854
21,663
24,602
46,265
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
35,637
367,866
60,505
1,001,653
1,465,661
29,230
346,729
92,540
1,196,875
1,665,374
35,637
352,525
58,462
966,118
1,412,742
29,230
334,873
85,897
1,163,392
1,613,392
A number of legal proceedings against the Group were outstanding as at 31 December 2017. Based on information available at 31 December 2017,
the Group estimates a contingent liability of K18.6 million (2016: K17.9 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
1,598,378
1,474,656
1,541,096
1,440,530
32,714
28,753
26,665
19,899
32,434
70,974
20,418
52,259
60,287
26,082
29,333
67,333
19,591
49,776
56,480
25,418
123,826
138,628
116,257
131,674
64
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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 incur liabilities in respect of these activities, and the primary obligation is incurred in an agency
capacity, for the fund or clients rather than its own account, a right of indemnity exists against the assets of the applicable fund or trust. As these assets
are sufficient to cover the liabilities and it is therefore not probable that the Group will be required to settle the liabilities, the investments in the assets
and liabilities of these activities are not included in the Financial Statements.
27. DIRECTORS AND EXECUTIVE REMUNERATION
Directors remuneration
Directors of the company received remuneration including benefits during 2017 as detailed below:
All amounts in Kina
Name of Director
Sir K. G. Constantinou, OBE
T. E. Fox, OBE
Dr. I. Temu
Sir N. Bogan, KBE
R. Fleming, CSM
G. Aopi, CBE
G. Robb, OAM
F. Talao
E. B. Gangloff
A. Mano
A. Sam
Dr. F Lua’iufi
S. Davis
R. Bradshaw
Total remuneration
Meetings attended
/total held
Appointed/
(Resigned)
2017
8/8
-
2/4
-
8/8
5/5
8/8
7/8
8/8
6/8
8/8
8/8
4/4
3/3
-
358,533
(21/06/16)
(25/08/17)
(11/11/16)
-
(13/09/17)
-
-
-
-
-
-
25/08/17
13/09/17
-
102,680
-
-
110,486
400,366
199,508
175,366
122,881
161,488
126,387
115,107
36,627
1,909,429
2016
347,393
182,818
130,511
135,546
-
140,434
373,776
190,511
135,546
117,141
60,268
-
-
-
1,813,944
Non-executive Board Members of the Board - Constantinou, Fox and Robb received an allowance of K60,000 as Directors of BSP Capital Ltd 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.
65
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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
400 – 410
410 – 420
420 – 430
430 – 440
2017
No.
2016
No.
58
41
24
35
22
14
20
11
15
14
5
9
5
9
3
2
5
-
2
3
9
6
1
3
5
9
4
2
4
5
2
2
3
1
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
3
1
Remuneration
K’000
440 – 450
460 – 470
470 – 480
480 – 490
490 – 500
500 – 510
510 – 520
520 – 530
530 – 540
540 – 550
550 – 560
580 – 590
590 – 600
600 – 610
620 – 630
640 – 650
650 – 660
660 – 670
670 – 680
680 – 690
690 – 700
700 – 710
710 – 720
720 – 730
730 – 740
740 – 750
750 – 760
760 – 770
770 – 780
780 – 790
790 – 800
820 – 830
830 – 840
850 – 860
2017
No.
2016
No.
Remuneration
2017
2016
K’000
No.
No.
-
5
4
-
-
-
2
2
-
1
1
-
-
-
1
-
1
4
2
1
-
1
1
2
-
1
2
2
-
1
1
2
1
2
1
3
-
1
2
2
1
2
1
1
1
1
2
1
-
1
3
2
-
-
3
1
-
2
1
-
1
5
3
1
3
2
1
-
860 – 870
870 – 880
880 – 890
890 – 900
910 – 920
920 – 930
930 – 940
960 – 970
970 – 980
1000 – 1010
1010 – 1020
1040 – 1050
1050 – 1060
1060 – 1070
1100 – 1110
1120 – 1130
1130 – 1140
1180 – 1190
1220 – 1230
1280 – 1290
1290 – 1300
1370 – 1380
1380 – 1390
1400 – 1410
1460 – 1470
1530 – 1540
1680 – 1690
1700 – 1710
1880 – 1890
2050 – 2060
2220 – 2230
4510 – 4520
4670 – 4680
-
3
1
-
-
2
1
1
-
1
1
-
1
1
2
1
1
1
-
-
1
-
1
1
1
-
1
-
-
1
1
-
1
1
-
1
1
1
-
-
-
2
2
1
1
1
-
-
-
-
1
2
3
-
1
-
-
-
1
-
1
1
-
-
1
-
The specified executives during the year were:
Robin Fleming, CSM
Peter Beswick
Haroon Ali
Robert Loggia
Rohan George
Edward Ruha
Paul Thornton
Christophe Michaud
Richard Borysiewicz
Hari Rabura
Aho Baliki, OBE
Johnson Kalo (Resigned April 2017)
Total
419
345
66
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
27. DIRECTORS AND EXECUTIVE REMUNERATION (continued)
Specified executives’ remuneration in aggregate (K’000)
Year
2017
2016
Salary
14,163
14,595
Primary
bonus
Non -
monetary
3,802
3,274
426
272
Super
33
249
Post-employment
prescribed benefits
1,955
204
Other
-
-
Equity
options
Other
benefits
-
960
401
413
Total
20,780
19,967
28. RECONCILIATION OF OPERATING CASH FLOW
All amounts are expressed in K’000
2017
2016
2017
2016
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
757,003
311,521
1,068,524
643,451
280,343
923,794
720,953
293,302
1,014,255
606,674
272,424
879,098
72,331
66,401
61,701
58,299
27,427
-
(436)
53,525
11,387
-
6,682
20,518
32,508
(15,184)
2,385
76,789
14,479
-
12,003
35,000
26,359
-
(436)
50,708
10,027
6,749
6,682
1,576
30,522
(15,145)
2,385
59,713
9,932
-
12,003
4,891
Operating cash flow before changes in operating assets & liabilties
1,259,958
1,148,175
1,177,621
1,041,698
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)
Amounts due from other banks (note 12)
Amounts due to other banks (note 18)
1,205,196
949,214
(160,400)
1,994,010
1,656,260
804,233
(47,323)
2,413,170
985,803
887,337
(238,272)
1,634,868
1,410,008
691,152
(73,855)
2,027,305
67
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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, Vanuatu and Cambodia. 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 2017
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 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
PNG Bank
Non PNG Bank
Non Bank
Entities
Adjust Inter
Segments
Total
1,053,079
499,794
-
1,552,873
(626,860)
(44,633)
881,380
(257,967)
623,413
913,532
470,708
-
1,384,240
(556,709)
(68,947)
758,584
(241,352)
517,232
200,692
204,295
-
404,987
(212,647)
(24,732)
167,608
(42,360)
125,248
179,807
185,400
-
365,207
(193,365)
(24,642)
147,200
(37,830)
109,370
22,302
11,391
41,266
74,959
(20,937)
(8,313)
45,709
(11,194)
34,515
14,347
11,753
23,956
50,056
1,603
1,277,676
(34,636)
680,844
(1,436)
39,830
(34,469)
1,998,350
8,296
(852,148)
-
(77,678)
(26,173)
1,068,524
-
(311,521)
(26,173)
757,003
-
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
-
(98,622)
(4,256)
923,794
-
(280,343)
(4,256)
643,451
68
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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:
•
•
Directors and/or parties in which the director has significant influence.
Key management personnel and other staff and/or parties in which the individual officer has significant influence.
A number of banking transactions are entered into with these related parties in the normal course of business, and include loans, deposits, property
rentals, share transfers and foreign currency transactions. These transactions are carried out on commercial terms and market rates. For the year ended
31 December 2017, 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
2017
2016
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
65,503
(47,772)
17,731
18
673,674
166,939
27,901
3,752
(240,616)
631,650
102,940
(37,437)
65,503
54
618,985
241,746
24,387
4,228
(215,672)
673,674
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 2017, staff account balances were as follows:
All amounts are expressed in K’000
Housing loans
Other loans
Cheque accounts
Savings accounts
At 31 December
2017
145,551
51,819
197,370
6,097
15,583
21,680
2016
116,936
42,794
159,730
7,997
10,082
18,079
69
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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,
Cook Islands, Samoa, Tonga, Vanuatu and Cambodia 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), Reserve
Bank of Vanuatu and the National Bank of Cambodia (NBC). 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 2017,
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
2017
2016
2017
2016
2,803,574
11,209,493
5,755,953
2,600,841
1,465,661
3,130,916
10,102,909
5,265,093
2,332,885
1,665,374
-
8,333,566
147,048
1,611,670
303,195
-
7,851,477
113,440
1,437,945
279,385
23,835,522
22,497,177
10,395,479
9,682,247
70
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
Capital (K’000)
Capital Adequacy Ratio (%)
2017
2,212,167
2,549,443
-
2016
1,916,502
2,233,493
-
2017
21.3%
24.5%
10.0%
2016
19.8%
23.1%
9.3%
32. CAPITAL ADEQUACY (continued)
Capital Ratios
All amounts are expressed in K’000
a) Tier 1 capital
Tier 1 + Tier 2 capital
b) Leverage Capital Ratio
33. CREDIT RISK AND ASSET QUALITY
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 2017, the 25 largest exposures totaled K5.5 billion, accounting for over 51% of the Bank and 47% of the Group’s total
loan portfolio (2016: K5.4 billion, accounting for over 55% and 51% of the bank and the Group 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 2017 is as follows:
Consolidated 2017
All amounts are expressed in K’000
Overdrafts
Term loans
Mortgages
Lease financing
Policy loans
Total
Neither past due nor impaired
738,615
7,859,834
1,819,614
151,258
53,472
10,622,793
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
80,923
1,144
3,384
583
86,034
4,076
37
1,413
676
6,202
399,877
283,988
19,283
-
132,249
65,245
6,967
-
14,249
3,763
-
-
703,148
204,461
18,012
12,159
4,822
36,185
55,701
112,867
3,219
1,886
10,668
14,325
30,098
585
471
1,804
204
3,064
-
-
-
-
-
-
-
-
-
-
627,298
354,140
29,634
583
1,011,655
20,039
7,216
50,070
74,906
152,231
Total gross loans, advances and
other receivables from customers
830,851
8,675,849
2,054,173
172,334
53,472
11,786,679
Less impairment provisions
-
-
-
-
-
(577,186)
Net loans and advances
830,851
8,675,849
2,054,173
172,334
53,472
11,209,493
71
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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
2017
5,910,485
2,421,546
374,109
249,295
%
53
22
3
2
2016
5,725,076
2,001,460
331,130
240,974
1,149,570
10
925,674
226,427
878,061
2
8
202,423
676,172
%
57
20
3
2
9
2
7
11,209,493
100
10,102,909
100
5,885,419
2,728,957
2,595,117
53
24
23
5,222,193
2,665,135
2,215,581
52
26
22
11,209,493
100
10,102,909
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 2017
The maturity profile of material Assets and Liabilities as at 31 December 2017 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 jurisdications 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.
72
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
34. LIQUIDITY RISK (continued)
Maturity of assets and liabilities
Consolidated
All amounts are expressed in K'000
As at 31 December 2017
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
2,803,574
518,700
934,197
1,775,843
1,465,879
-
-
-
875,315
1,950,772
35,521
5,305
9,712
-
-
-
-
2,803,574
3,380,308
949,214
489,111
256,100
3,010,777
4,530,950
4,307,179
14,113,860
654,317
1,767,456
725,339
4,869,091
7,498,193
1,625,831
5,625,578
6,333,927
5,032,518
26,116,047
Amounts due to other banks
82,146
78,254
-
-
-
160,400
Customer Deposits
Other liabilities
Other provisions
Total liabilities
Net liquidity gap
As at 31 December 2016
Total assets
Total liabilities
Net liquidity gap
35. OPERATIONAL RISK
12,732,092
1,208,856
2,247,610
202,782
1,672,447
18,063,787
1,183,594
221,021
-
-
-
-
274,819
-
-
-
1,458,413
221,021
14,218,853
1,287,110
2,247,610
477,601
1,672,447
19,903,621
(6,720,660)
338,721
3,377,968
5,856,326
3,360,071
6,212,426
5,654,174
1,685,014
3,922,091
6,411,222
5,406,525
23,079,026
13,880,976
1,542,508
1,333,995
271,194
1,649,490
18,678,163
(8,226,802)
142,506
2,588,096
6,140,028
3,757,035
4,400,863
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 organisation’s
compliance with them. The Operational Risk Committee coordinates the management process across the organisation.
An independent internal audit function also conducts regular reviews to monitor compliance with approved BPNG standards and examines the general
standard of control.
The Operational Risk Committee and the internal audit function mandatorily report to the Board Risk and Compliance Committee.
73
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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 2017
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
1,632,181
3,033,881
89,932
497,338
5,537
67,902
342,486
252,175
9,699
6,647,588
2,634,127
440,326
2,941
-
170,893
415,889
328,628
7,033
610,788
2,803,574
3,298,626
949,214
1,071,563
11,209,493
2,059,729
911,412
360,789
578,386
-
70,533
-
861
36,809
90,435
2,457,327
1,651,627
14,374,723
4,144,079
1,115,219
590,584
2,145,256
22,369,861
Amounts due to other banks
(75,016)
(71,883)
(1,251)
-
(12,250)
(160,400)
Customer Deposits
Other liabilities
Total liabilities
(11,875,688)
(2,782,064)
(843,836)
(513,112)
(1,886,992)
(17,901,692)
(480,311)
(906,215)
(41,428)
(201,640)
(49,840)
(1,679,434)
(12,431,015)
(3,760,162)
(886,515)
(714,752)
(1,949,082)
(19,741,526)
Net on - balance sheet position
1,943,708
383,917
228,704
(124,168)
196,174
2,628,335
Off - balance sheet net notional position
(299)
-
-
(46,380)
Credit commitments
1,032,450
373,703
9,355
-
30,583
52,072
(16,097)
1,467,580
31 December 2016
Total Assets
Total Liabilities
13,952,229
3,517,396
1,095,732
681,479
1,584,967
20,831,803
(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
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
At 31 December 2017
At 31 December 2016
Impact on profit or loss
Impact on equity
Impact on profit or loss
Impact on equity
USD strengthening by 1% (2016 – 1%)
USD dollar weakening by 1% (2016 – 1%)
AUD strengthening by 1% (2016 – 1%)
AUD dollar weakening by 1% (2016 – 1%)
1,146
(1,123)
(39)
38
1,146
(1,123)
(39)
38
1,408
(1,380)
-
-
1,408
(1,380)
-
-
74
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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 2017 and prevailing rates of interest, a 1% increase in markets rates will result in a K40.2
million increase in net interest income, whilst a 1% decrease in rates will result in a K49.5 million decrease in net interest income.
Interest sensitivity of assets, liabilities and off balance sheet items re-pricing analysis
1-3 months
3-12 months
1-5 years
Over 5 years
Non-interest
bearing
Consolidated
All amounts are expressed in K'000
At 31 December 2017
Assets
Cash and Central Bank assets
Treasury and Central Bank bills
Amounts due from other banks
Statutory deposits - Central Bank
Loans, advances and other receivables from
customers
Other Financial Assets
Other assets
Total assets
Liabilities
Up to 1
month
-
502,496
483,195
-
9,618,884
115,710
-
-
-
-
848,977
1,911,632
35,521
9,712
-
-
-
-
-
-
-
783,207
498,884
509,298
1,346,239
-
-
130,541
476,530
-
5,305
-
177,977
163,685
-
10,720,285
1,195,944
3,213,849
1,880,644
607,071
Amounts due to other banks
93,829
18,806
-
-
Customer deposits
Other liabilities
Other provisions
Total liabilities
7,928,614
1,196,875
2,148,215
153,629
-
-
-
-
199,294
75,525
-
-
8,022,443
1,215,681
2,347,509
229,154
-
65
-
-
65
Interest sensitivity gap
2,697,842
(19,737)
866,340
1,651,490
607,006
(3,174,606)
As at 31 December 2016
Assets
Cash and Central Bank assets
Treasury and Central Bank Bills
Amounts due from other banks
Statutory deposits - Central Bank
Loans, advances and other receivables from
customers
Investments
Other assets
Total assets
Liabilities
-
267,696
313,687
-
8,775,060
294,354
44,545
1,196
-
155,994
291,914
-
-
-
826,806
1,829,719
-
9,400
9,281
-
-
-
-
-
-
-
651,630
385,975
128,461
1,238,363
-
-
134,250
504,000
-
9,695,342
1,275,910
2,609,810
1,643,019
638,250
Amounts due to other banks
-
-
-
-
Customer deposits
Other liabilities
Other Provisions
Total liabilities
7,542,495
1,512,379
1,285,789
194,552
-
-
-
-
253,969
75,525
-
-
7,542,495
1,512,379
1,539,757
270,077
-
39
-
-
39
Interest sensitivity gap
2,152,847
(236,469)
1,070,053
1,372,942
638,211
(2,683,246)
75
1,205,196
-
451,002
1,598,378
-
-
1,497,492
4,752,068
47,765
6,474,294
1,183,594
221,021
7,926,674
1,656,260
-
480,069
1,474,656
-
-
1,358,487
4,969,472
47,323
6,377,095
1,058,493
169,807
7,652,718
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
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.
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 2017
Financials assets
Equity securities
Non-financial assets
Land and buildings
Assets subject to operating lease
Total
Financials liabilities
Policy liabilities
At 31 December 2016
Financial assets
Equity securities
Non - financial assets
Land and buildings
Assets subject to operating lease
Total
Financial liabilities
Policy liabilities
Total liabilities
Financial asset at fair value through profit & loss
Opening balance
Total gains and losses recognized in:
- Profit & loss
- Other comprehensive income
Closing balance
Level 1
Level 2
Level 3
Total
-
-
-
-
-
-
-
-
-
-
-
144,911
2,137
147,048
560,019
-
704,930
-
70,689
72,826
560,019
70,689
777,756
-
749,876
749,876
111,612
1,823
113,435
402,466
-
514,078
-
44,668
46,491
-
-
640,043
640,043
2017
46,491
(5,977)
32,311
72,825
402,466
44,668
560,569
640,043
640,043
2016
54,392
(7,901)
-
46,491
There were no changes in valuation technique for Level 3 recurring fair value measurements during the year ended 31 December 2017. Property, plant
and equipment 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.
76
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
38. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES (continued)
Forward exchange contracts outstanding at 31 December 2017 stated at the face value of the respective contracts are:
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
All amounts are expressed in respective FCY'000 and K’000
At 31 December 2017
Selling
Buying
At 31 December 2016
Selling
Buying
USD
(21,155)
(10,189)
6,801
9,890
USD
(55,034)
(38,981)
16,374
16,420
AUD
(572)
-
9,850
-
AUD
(1,410)
-
60,315
-
FCY
Kina
FCY
Kina
FCY
Kina
FCY
Kina
39. INSURANCE
(a) Net insurance operating income
All amounts are expressed in K’000
Net insurance income
EURO
GBP
JPY
(270)
(540,715)
Other
(3,319)
Total
-
-
-
(10,189)
56,000
10,207
-
-
-
EURO
GBP
(1,700)
(360,607)
-
JPY
-
Other
(1,094)
-
9,890
Total
-
(4,796)
-
-
(43,777)
1,197
37,100
1,914
-
-
8,400
-
24,820
-
-
-
-
-
-
-
-
Consolidated
2017
39,830
2016
23,956
Bank
2017
-
2016
-
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.
(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 2017 this was 5.916% per annum (31st December 2016: 6.24% 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 4.8% per annum was used at 31st
December 2017 (31st December 2016: 5.16% 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 in Fiji has been assumed to be 3.5% per annum (31st
December 2016: 3.5% per annum) for determining future expenses.
Taxation
The rates of taxation in Fiji 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 rate 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 were adjusted for recent experience at certain durations. Rate used for the long term insurance contracts are as
follows:
77
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2017
39. INSURANCE (continued)
Whole of Life and Endowment Insurance
Term Insurance
Accident Insurance
2017
14%
16%
17%
2016
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
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 shareholders’ 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
2017
2016
640,043
38,525
64,813
6,495
749,876
563,441
24,541
45,036
7,025
640,043
40. EVENTS OCCURRING AFTER BALANCE SHEET DATE
The Bank of Papua New Guinea (BPNG) granted BSP a licence to operate a life insurance company in PNG on 25 January 2018. The life insurance business
will be conducted by BSP Life PNG Limited, a fully owned subsidiary of BSP. The business will be launching a variety of life insurance products during the
course of 2018.
41. REMUNERATION OF AUDITOR
All amounts are expressed in K’000
Financial statement audits
Other services
Consolidated
Bank
2017
2,871
1,350
4,221
2016
2,762
999
3,761
2017
2,137
1,130
3,267
2016
2,081
947
3,028
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.
78
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 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 2017, 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 2017 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 2017, 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 areas of audit-related, non-audit related and tax advice services. 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
79
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Materiality
• For the purpose of our audit of the Group we
used overall group materiality of K52.3 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.
• We selected 5% based on our professional
judgement noting that it is also within the range
of commonly acceptable related thresholds.
Audit Scope
• We (PwC Papua New Guinea) conducted the
audit over all of the Group’s operations in
Papua New Guinea (PNG), 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 Fiji, Samoa, Tonga,
Solomon Islands, Cook 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,
Samoa and Solomon Islands.
• 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
communicated
following key
the
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 K577.186m - 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 of loans 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 include 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.
individually assessed provisions, applying
For
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.
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.
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 evaluating the impact of the Group’s
stress testing of loans on the credit watch list.
80
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
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 substantive audit
procedures 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 other information. The other information comprises the Directors’ Report (but does not include the financial
statements and the auditors’ report thereon), which we obtained prior to the date of this auditor’s report, and the annual report, which is expected to
be made available after that date. Our opinion on the financial statements does not cover the other information and we do not, and will not, express
any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above 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.
When we read the annual report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to those
charged with governance.
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.
81
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 • 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.
• 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 2017:
• 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 2018
82
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 SHAREHOLDER
INFORMATION
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.
84
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 2017 Twenty largest registered fully paid ordinary shareholders.
At the 31 December 2017, 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 Ltd
Petroleum Resources Kutubu Ltd
National Superannuation Fund Ltd
Credit Corporation (PNG) Ltd
Motor Vehicles Insurance Ltd
PNG Sustainable Development Program Ltd
IFC Capitalization (Equity) Fund lP
International Finance Corporation
Teachers Savings & Loan Society Ltd
Comrade Trustee Services Ltd
Lamin Trust Fund
Capital Nominees Ltd
Credit Corporation (PNG) Ltd
15 Mineral Resources Ok Tedi No 2 Ltd
16
17
18
19
Solomon Islands National Provident Fund Board
Nominees Niugini Ltd
Catholic Diocese Of Kundiawa
Southern Highlands Holdings Ltd
20 Mineral Resources Star Mountain Ltd
Other shareholders
Distribution of Shareholding
At the 31 December 2017, the Company had 5,745 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
Unmarketable Parcels:
4,793
600
95
168
89
5,745
SHAREHOLDER INFORMATION
Share Held
84,811,597
57,592,261
46,153,840
45,318,417
33,692,696
31,243,736
29,202,767
22,796,644
22,796,644
15,317,366
14,456,052
3,518,132
3,135,131
3,000,000
2,890,000
2,500,001
2,369,495
2,165,688
2,000,000
1,975,799
40,375,925
467,312,191
%
18.15%
12.32%
9.88%
9.70%
7.21%
6.69%
6.25%
4.88%
4.88%
3.28%
3.09%
0.75%
0.67%
0.64%
0.62%
0.53%
0.51%
0.46%
0.43%
0.42%
8.64%
100%
Number of Shares
1,224,805
1,213,803
684,228
6,381,583
457,807,772
467,312,191
As at 31 December 2017, the BSP Share Price was K9.55. There were 958 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
R Fleming
Shares Held
93,000
%
0.00
Registered Office
Bank of South Pacific Ltd
PO Box 78,
PORT MORESBY
National Capital District, PAPUA NEW GUINEA
Telephone: +675 322 9700
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 Ltd www.bsp.com.pg
PO Box 1265,
PORT MORESBY
National Capital District, PAPUA NEW GUINEA
Telephone: +675 321 6377
Australian Registered Office
Level 26
181 William Street, Melbourne
VIC 3000
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 Ltd
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
85
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
DIRECTORS’ INFORMATION
Name
Nature of Interest
Sir K. G. Constantinou, OBE
Director
Shareholder
Member
R. Fleming, CSM, MBA, MMGT
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, Grand Pacific Hotel Ltd, City
Centre Development Ltd, Coastwatchers Court Ltd, Waigani Assets Ltd, Southern Seas
Investments Ltd, Texas Chicken South Pacific Ltd. BSP Finance Ltd, Bank South Pacific
(Tonga) Ltd, Bank South Pacific (Samoa) Ltd, Loloata Island Resort and K G Property
Ltd
Airways Hotel & Apartment Ltd, Lamana Hotel Ltd, Lamana Development Ltd, Texas
Chicken South Pacific Ltd and K G Property Ltd
Australian Institute of Company Directors, PNG Institute of Directors, Anglicare
Foundation
Bank of South Pacific Ltd, BSP Capital Ltd, BSP Convertible Notes Ltd, BSP PNG
Holding Ltd, BSP Life (Fiji) 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 South Pacific (Tonga)
Ltd, Bank South Pacific (Samoa) Ltd, Bank South Pacific (Vanuatu) Ltd, 3 Kundu Pte
Ltd
Shareholder
Bank of South Pacific Ltd
Member/Trustee
Australian Institute of Company Directors, PNG Institute of Directors, Anglicare
Foundation
G. Aopi, CBE, MBA
(Resigned September, 2017)
Director
Shareholder
Member/Trustee
Bank of South Pacific Ltd, Oil Search Ltd, 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 Ltd, 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 Foundation
Dr. I. Temu, PhD, MEc, BEcon
(Resigned August, 2017)
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
S. Davis, LLB
(Appointed August, 2017)
R. Bradshaw, LLB
(Appointed September, 2017)
Employee
Member
Director
Member
Director
Member
Barrick Niugini Ltd
Divine Word University Council
Bank of South Pacific Ltd, Next DC Ltd, PayPal Australia Ltd, NextDC Ltd, Avondale
Golf Club Ltd, Asia Society of Australia, Australia India Business Council
Australian Institute of Company Directors, Avondale Golf Club Ltd
Bank of South Pacific Ltd
Papua New Guinea Law Society
86
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Name
Nature of Interest
G. Robb, BA, MBA, OAM, MAICD,
GAICD
Director
Bank of South Pacific Ltd, BSP Capital Ltd, Bank of South Pacific Tonga Ltd
Member/Graduate
Australian Institute of Company Directors
F. K. Talao, LLM, MPHIL
Director
E. B. Gangloff, CPA, MAICD, MIIA,
PNGID
Member
Director
Member
A. Mano, BEcon, MSc.
Director
Bank of South Pacific Ltd, Director Partnership Pacifica, Chayil Investment ltd,
Human Rights PNG, Consultant to Holding Redlich Lawyers - Australia
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, Pacific
Training Consortium Ltd
PNG Institute of Directors, Certified Practicing Accountants of Papua New Guinea,
MSME Business Inc, Institute of National Affairs, Australian Institute of Company
Directors, Institute of Internal Auditors
Bank of South Pacific Ltd, Mineral Resources Development Company Ltd, Pearl
Resort (Fiji) Ltd, Speedy Hero Ltd, Insurance Pacific Ltd, Civpac Ltd, Handy Group
Ltd, SMA Investments Ltd, Hevi Lift Group Ltd, 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
Shareholder
Employee
SMA Investments Ltd, INSPAC Ltd
Mineral Resources Development Company Ltd
A. Sam, BComm, CPA, MAICD
Director
Bank of South Pacific Ltd, Sam Kiak Tubangliu Certified Practising Accountants, Silver
Dawn Holdings Ltd
Shareholder
JAJ & Associates, Silver Dawn Holdings Ltd
Faamausili Dr. M. Lua’iufi, BA,
MSc, PhD
Member
Director
CPA PNG, Australian Institute of Company Directors
Bank of South Pacific Ltd, Paradise Consulting, National University of Samoa
Shareholder
Paradise Consulting
Member
Executive Committee of the National University of Samoa, Samoa Institute of
Directors, British Institute of Consulting
A. Mano, BEcon, MSc.
Director
G. Robb, BA, MBA, OAM, MAICD,
Director
Bank of South Pacific Ltd, BSP Capital Ltd, Bank of South Pacific Tonga Ltd
Name
GAICD
F. Talao, LLM, MPHIL
E. B. Gangloff, CPA, MAICD, MIIA,
Director
PNGID
Bank of South Pacific Ltd, Gangloff Consulting Ltd, New Britain Palm Oil Ltd, Dubara
Holdings Ltd, Sir Theophilus Constantinou Foundation, BSP Finance (Fiji) Ltd, Pacific
Australian Institute of Company Directors
Bank of South Pacific Ltd, Director Partnership Pacifica, Chayil Investment ltd,
Human Rights PNG, Consultant to Holding Redlich Lawyers - Australia
Papua New Guinea Law Society, Australian Institute of Company Directors
Training Consortium Ltd
PNG Institute of Directors, Certified Practicing Accountants of Papua New Guinea,
MSME Business Inc, Institute of National Affairs, Australian Institute of Company
Directors, Institute of Internal Auditors
Bank of South Pacific Ltd, Mineral Resources Development Company Ltd3, Pearl
Resort (Fiji) Ltd1, Speedy Hero Ltd1, Insurance Pacific Ltd1, Civpac Ltd1, Handy Group
Ltd1, SMA Investments Ltd1, Hevi Lift Group Ltd, 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
SMA Investments Ltd, INSPAC Ltd
Mineral Resources Development Company Ltd
Dawn Holdings Ltd
A. Sam, BComm, CPA, MAICD
Director
Bank of South Pacific Ltd, Sam Kiak Tubangliu Certified Practising Accountants, Silver
Shareholder
JAJ & Associates, Silver Dawn Holdings Ltd
CPA PNG, Australian Institute of Company Directors
Dr. M. Lua’iufi, BA, MSc,PhD
Bank of the South Pacific Ltd, Paradise Consulting, National University of Samoa
Paradise Consulting
Executive Committee of the National University of Samoa, Samoa Institute of
Directors, British Institute of Consulting
Nature of Interest
Graduate
Director
Member
Member
Shareholder
Employee
Member
Director
Shareholder
Member
87
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Western Midi
Recovery Officer,
Asset Management
Western Midi is from East New Britain
Province. His head piece is made from
four pieces of sticks tied together with
birds feathers.
The necklace worn is traditional shell
money called “Tabu”.
The black face paint consist of charcoal
and coconut oil, while the red is soil
mixed with water, lime and coconut oil.
MANAGEMENT TEAMS
& DIRECTORIES
MANAGEMENT TEAMS
SENIOR MANAGEMENT
Robin Fleming, CSM
Group Chief Executive Officer
Robin Fleming was appointed CEO of Bank of South Pacific Ltd 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. Prior
to the merger of BSP and PNGBC, Mr. Fleming held senior management roles with PNGBC. He has worked
in PNG for over 35 years and holds an MBA and a Master of Management from Charles Sturt University. Mr.
Fleming was made a Companion of the Star of Melanesia (CSM) in 2015 by the PNG Government for services
to banking and the community.
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 eventually
became a career banker with more than thirty years’ experience working mostly throughout Asia but also
in emerging markets in Central Europe, South America and Africa. In terms of scope of responsibility, most
of his assignments have been as Chief Operating Officer responsible for middle and back office functions
supporting businesses in Retail Banking, Corporate & Investment Banking and Private Banking. Mr. Loggia has
also participated as a key Manager in Greenfield Banks in Japan, Indonesia, Laos and Angola. Lastly, he has held
senior line management responsibility within Retail Banking in Nigeria as well as consulting assignments within
Retail Banking in China and Risk Management in Thailand.
Eddie Ruha
Group Chief Financial Officer
Eddie Ruha was appointed to Group Chief Financial Officer on the 3rd April 2017, after the resignation of Mr
Johnson Kalo. Prior to that Mr. Ruha joined BSP on the 1st of November 2012, as the Chief Financial Officer
– PNG. Previously he worked for Steamships Trading Company here in PNG for 22 years, commencing there
in 1990, 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 Mr. Ruha initially worked for KPMG
Auckland office as an Auditor. Mr. Ruha is a commerce graduate from Auckland University in New Zealand
(1984) and has a Master of Business Administration from Charles Sturt University (2000) and is a member of
CPA Papua New Guinea and a member of the Chartered Accountants Australia and New Zealand as well as a
member of the Australia Institute of Company Directors.
Haroon Ali
Group Chief Risk Officer
Haroon Ali is a highly skilled Senior Banking Executive with 38 years of diverse experience in Fiji, Australia
and Papua New Guinea. He was appointed Group Chief Risk Officer in July 2013 taking over from Robin
Fleming who is now the Group Chief Executive Officer. Prior to joining BSP as the Bank’s Chief Risk Officer
in Fiji, Mr Ali worked for the ANZ Group for more than 30 years with his last role as Head of Retail Banking
in Fiji. He is a generalist banker specialising in risk management, corporate/commercial/SME banking,
trade finance and retail banking. Mr. Ali holds a Master of Management 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 General Manager Retail in August 2013 and brings to the position 44
years of retail banking experience, 36 years of which have been in Papua New Guinea. 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, he has held
the positions of Head of BSP Rural, Deputy General Manager Retail and General Manager Network before
being appointed to this current position.
90
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 MANAGEMENT TEAMS
Peter Beswick
Group General Manager Corporate Banking
Peter Beswick was appointed General Manager of BSP Corporate Banking in June 2011. He has over 25
years 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. Mr. Beswick’s most recent appointment has been CEO of a national
wholesale, import and retail business in Australia. He 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 PWC and most
recently completed an MBA with Macquarie University in Australia.
Hari Rabura
General Manager Human Resources
Hari Rabura was appointed General Manager Human Resource in April 2016. She first joined BSP as a
graduate trainee in 2001 and worked in various positions within HR in BSP and various private firms. Ms
Rabura is the first female employee to reach executive management level as a General Manager in one
of the key Strategic Business Unit (SBU) within the organisation. She is experienced in implementing and
delivering HR strategies, policies, and services that create, support and sustain a high performance culture
in BSP. As a former member of the Leadership and Management Development Program (LMDP) in BSP, she
has undergone General Management training in INSEAD Business School in France and Melbourne Business
School in Australia.
Aho Baliki, OBE
General Manager Paramount Banking
Aho Baliki is a career Banker having joined the Commonwealth Banking Corporation on 11th February 1974.
Since joining the bank, he has progressed through the banking hierarchy to the position of Chief Executive
Officer of the PNG Banking Corporation (PNGBC) in 1999. He was further appointed as General Manager
Human Resources in 2000 when PNGBC merged with Bank of South Pacific Ltd (BSP). Mr. Baliki 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. Mr George has extensive
knowledge in developed and emerging financial markets. His experience spans over 30 years, covering fixed
income, foreign exchange, commodities and structured derivatives markets. He is passionate about financial
markets, managing market risk, liquidity risk and providing value add solutions for clients. Prior to joining BSP,
Mr. George worked at ANZ as Head of Global Markets, Cambodia & Laos (5 years), at Westpac as Treasurer
PNG & Pins (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.
Christophe Michaud
General Manager and Director BSP Finance Ltd
Christophe Michaud was appointed General Manager and Director of BSP Finance Ltd in May 2015. Prior
to this appointment, he spent 4 years with BSP in corporate banking as Senior Relationship Manager then
Deputy General Manager. Prior to joining BSP, Mr. Michaud held various positions in the banking industry in
corporate banking, project finance, private banking with BNPParibas, Banque Indosuez and Crédit Agricole in
France, India, Pakistan, Turkey, Indonesia and Singapore. He brings with him more than 35 years of banking
experience. Christophe holds a Master of Business Administration from Neoma Business School in France.
91
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 92
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 MANAGEMENT TEAMS
COOK ISLANDS
FIJI
SAMOA
94
Standing (L - R):
Achaal Pandesi - Manager of Technology
Tutu Inamata - Business Manager
Massey Mateariki - Risk and Compliance
Manager
Gabe Raymond - Finance Manager
Seated (L - R):
David Street - Country Manager
Tokoa Harmon - Branch Manager
Chris Doran - Head of Business Banking
Standing (L-R):
Rajeshwar Singh - Chief Financial Officer
Howard Politini - GM Human Resource
William Wakeham - Chief Operating Officer
Omid Saberi - Chief Information Officer
Ravindra Singh - GM Retail Bank
Seated (L - R):
Alvina Ali - GM Legal
Kevin McCarthy - Country Manager
Cecil Browne - GM Corporate & International
Ashleigh Matheson - Chief Risk Officer
Standing (L - R):
Rodney Greed - Manager Projects
Bharat Chovan - Head of Financial Markets
Taitu’uga Maryann Lameko-Vaai - Country Manager
Epeli Racule - Operations Manager
Edward Yee - Head of Business Banking
Seated (L - R):
Jennifer Fruean - Head of Finance
Shirley Pauga - Head of Retail Banking
Peti Leiataua - Manager Operational Risk and
Compliance
Michelle Lemisio - Business Manager
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 SOLOMON ISLANDS
TONGA
VANUATU
MANAGEMENT TEAMS
Standing (L-R)
Lucy Bonunga - Senior Internal Auditor
Lynette Taoti - Manager Credit Administration
Alphonse Taoti - Manager Retail Services
Christopher Robertson - Head of Relationship Banking
Rolland Manetiva - Manager Risk & Compliance
Sharneet Singh - Financial Controller
Joan Ramo - Manager International Operations
Sitting(L-R)
Lyn Fa’arodo - Manager E-Channels/Electronic
Banking
David Anderson - Country Manager
Freda Fa’aitoa- Manager Human Resources
Winterford Maehau - Manager Information Systems
Standing (L - R):
Salesi Fineanganofo - Business Manager
Viliami Vailea - Manager Finance
Josiah Kalfabun - Manager Operational Risk
Seated (L - R):
Emilio Tapueluelu - Manager Operations
Mele’ana Fifita - Manager Global Transactional
Solution
Daniel Henson - Country Manager
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 2017
MANAGEMENT TEAMS
BSP CAPITAL LTD
BSP FINANCE - GROUP
Standing (L - R):
Willie Konga – Manager, Funds Management
Gheno Minia – Head of Equities & Dealing
Salaniet Mathew – Manager Settlements & Nominees
Theresa Kalivakoyo- Business Controller
Standing (L - R):
Christophe Michaud (General Manager),
Pochon Lili (Financial Controller)
Anna Puri (Credit Manager),
Mea Manasseh (Credit Manger),
Sharon Andoiye (Operational Risk & Compliance
Manager)
BSP FINANCE - PAPUA NEW GUINEA
Standing (L - R):
Brett Tayler (Country Manager)
Shauna Paike (Head of Lending –Sales),
Debra Lessi (Finance Manger),
Dulcie Pilake (Collections Manager)
BSP FINANCE - FIJI
96
Standing (L - R):
Sudeshwar Ram (Area Manager – East),
Vimal Raj (Senior Lending Officer – SME/Hire
Purchase), Sanjeet Narsey (Finance Manager)
Shainesh Vikash Lal (Area Manager – West)
Seated (L-R):
Shelvina Sharon Lata (Accountant),
Krishna Raju (General Manager)
Animul Sheryn Khan (Supervisor Lending
Support
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 BSP FINANCE - CAMBODIA
MANAGEMENT TEAMS & OVERSEAS BRANCH DIRECTORY
Centre:
Etienne Kettenmeye (Country Manager), with
Management and staff of BSP Finance Cambodia
BSP LIFE - FIJI
Standing (L - R):
Michael Nacola (GM Distribution & Marketing)
Vandhna Narayan (GM Legal and Compliance)
Munendra Naidu (Chief Financial Officer)
Pramesh Sharma (GM Investments)
Atelina Muavono (Chief Operating Officer)
Seated:
Malakai Naiyaga (Managing Director)
OVERSEAS DIRECTORY
Cambodia
Country Manager
Etienne Kettenmeye
855 (0) 2388 52064
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
Ravikashni Prakash
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
Razia Tahir
Eka Takayawa
Vineeta Prasad
Marica Mara
679 3214454
679 3342333
679 3314400
679 3478499
679 3452030
679 3314400
679 3387999
679 3314400
679 6674599
679 6661769
679 6700988
679 6627320
679 6694200
679 6500900
679 6681507
679 8811888
679 8850199
679 8880433
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
Ha’apai Sub Branch
‘Eua Sub Branch
Vanuatu
David Anderson
Michael Noda
Clotilda Londeka
Joy Vave
Gordon Ifiumae
Tanya Saiqoro
Richard Bero
Fred Osifelo
Tricia Tura
677 21874
677 40484
677 60539
677 21814
677 21222
677 62177
677 61222
677 21874
677 39403
Daniel Henson
Emele Hia
Sosefina Tangitau
Mo’unga Akoteu
Tokilupe Toe’api
676 20807
676 20809
676 71268
676 60933
676 50145
Country Manager
Head of Retail & Marketing
Santo
Port Vila
Tanna Branch
Stuart Beren
Moana Korikalo
Edwige Wensi
Danica Rapouel
Dolores Charlie
678 5580001
678 5580009
678 5580034
678 5580016
678 5580041
Samoa
Country Manager
Retail Head
Savaii Branch
Vaitele Branch
Maryanne Lameko - Vaai 685 66115
685 66170
Shirley Greed
685 51208
Leilani Kelemete
685 23005
Amelia Iakopo
97
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
PAPUA NEW GUINEA BRANCH MANAGERS
Alex Wafimbi
Aitape
Karen George
Arawa
Betty Posangat
Alotau
Maureen Wanu
Boroko
Dora Raphael
Bialla
Nelson Kerua
BSP First HC
Julie Warren
Buka
Bevilon Homuo
Bulolo
Antonia Dru
Gordons
Reuben Attai
Daru
Livikonimo Koki
Goroka
Mary Kundi
Habour City
Marco Hamen
Kainantu
Mathias Manawo
Kavieng
Ruby Patu
Kimbe
Ivy David
Kiunga
Joe Makinta
Kokopo
Rita Singut
Kundiawa
Agnes Mark
Lae Top Town
Robinson Panako
Lae Commercial
Josephine Komuru
Lae Market
Johnson Tetaga
Lihir
Ruth Kagl
Lorengau
Barry Namongo
Madang
Philip Solala
Mendi
Meck Kaum
Moro
David Ila
Moro
Theresa Pilamp
Mt Hagen
Susie Yapen
Motukea
Diana Guria
Port Moresby
Eileen Goviro
Popondetta
Mary Koi
Porgera
Kalat Tiriman
Rabaul
Dianne Rali
Tabubil
Samuel Okti
Tari
Delilah Kanit
Vanimo
Rawalo Rawalo
Vision City
Rova Olemau
BSP First Gordons
Thomas Tembil
Wabag
Alex Kuna
Waigani B/Centre
Madeleine Leka
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
Natasha Sirimai
NCD Area Manager
Jeffrey Singer
NGI Area Manager
Billy Veveloga
Southern Area
Manager
98
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Aitape
Alotau
Arawa
Bialla
Boroko
Branch
Premium
Buka
Branch
Alex Wafimbi
Betty Posangat
Karen George
Dora Raphael
457 2042
641 1284
276 9244
983 1095
Maureen Wanu
Sheila John
303 4320
303 4354
Julie Warren
973 9042
7202 9203
Premium
Rosemary Paula Seeto 973 9087
Bulolo
Daru
Goroka
Gordons
BSP First
Premium
Harbour City
Branch
Premium
BSP First
Kainantu
Kavieng
Kimbe
Kiunga
Kokopo
Branch
Premium
Bevilon Homuo
Ruben Attai
Livikonimo Koki
474 5331
645 9416
532 1633
Rova Olemau
Antonia Dru
302 5245
302 5202
Mary Kundi
Merai Nureo
Nelson Kerua
Marco Hamen
Mathias Manowo
Ruby Patu
Ivy David
305 6110
3056105
305 7935
537 1251
9842082
983 5166
649 1313
Joe Makinta
Jennifer Tiolam
982 9088
982 9068
Kundiawa
Rita Singut
535 1025
Lae
Top Town
Main Market
Commercial
BSP First
Lihir
Lorengau
Madang
Branch
Premium
Agnes Mark
Josephine Komoru
Robinson Panako
Elizabeth Gavul
Johnson Tetaga
Ruth Kagl
473 9876
473 9609
472 9088
478 4949
986 4062
970 9244
Barry Namongo
Ruth Makel
422 2477
422 2621
SUB BRANCH DIRECTORY
AIYURA
BANZ
BUIN
CHUAVE
DAULO
Gomah Benson
Kessy Elly
Melchior Tania
Koiya Kupa
7230 8313
7100 9078
7100 7855
7197 6001
Merolyn Sirifave
7100 6763
GUSAP
HENGANOFI
HIGATURU
HOSKINS
IALIBU
KABWUM
KAMTAI
KEREMA
KEREVAT
KINIM
KIKORI
KOMO
KONOS
Lee Sinemaue
7091 1396
Emos James
7100 7859
Stephanie Orovo
7275 1365
Ruddy Samson
Philemon Kumi
Inna Buneng
Robert Kom
Aisi Aua
Kilala Kindau
7031 2627
7041 1624
7346 1426
7243 4695
7100 2889
7190 8231
7100 9077
Malapun Bannick
7100 7861
Leah Kimave
Mark Tom
7163 0597
7362 0760
KEROWAGI
Leah Taia
PAPUA NEW GUINEA BRANCH DIRECTORY
Mendi
Moro
Motukea
Mt Hagen
Branch
Philip Solala
Meck Kaum
David Ila
Susie Yapen
Theresa Pilamp
Premium
Beverly Elizah
Eileen Goviro
Mary Koi
Diana Guria
Bau Kiso
Jessie Toran
Kalat Tiriman
Dianne Rali
Samuel Okti
Delilah Kanit
Tony Waningu
Richard La’a
Samuel Mulina
Popondetta
Porgera
Port Moresby
Branch
Premium
BSP First
Rabaul
Tabubil
Tari
Vanimo
SME
Port Moresby
Lae
Goroka
Vision City
Branch
Premium
549 1070
276 1566
276 1569
305 7849
542 1877
542 2022
542 1877
629 7443
547 6900
305 7104
305 6189
305 7724
982 1744
649 9179
276 1651
457 1209
305 6400
479 5676
479 5676
Rawalo Rawalo
Damaris Toran
300 9100
300 9103
Wabag
Thomas Tembil
547 1237
Waigani Banking Centre
Branch
Premium
Alex Kuna
Lorraine Siaoa
Waigani Drive
Wewak
Madeleine Leka
Gabriel Ak
Highlands Region
Momase Region
NGI Region
NCD Region
Southern Region
Reuben Elijah
Dennis Lamus
Jeffrey Singer
Natasha Sirimai
Billy Veveloga
305 6102
300 9645
302 5301
456 2344
542 2002
478 4998
982 9285
305 7195
305 7886
LABA
Heni Nao
LAKURUMAU
Lorraine Koma
LOUSIA
MAPRIK
MINJ
Lorna Solomon
Christian Tatu
Kui Tai
7197 6008
7197 6005
7031 2617
7168 7815
7100 9076
7100 2488
NAMATANAI
Mathew Tabakas
7197 6007
NAVO
NINGERUM
OKAPA
PADIPADI
Hennah Brunim
Todin Kasi
Arafat Tovari
Lelly Mick
PALMALMAL
Freda Nablup
PANGIA
TAMBUL
Karen James
Joseph Paul
TELEFOMIN
Jobartan Bickie
WAKUNAI
WALIUM
Melvin Kusa
Brenda Igusam
WAPENAMANDA
Feta Isin
YANGORU
Brendon Iromo
7090 4272
7916 5583
7055 0955
7090 4463
7323 9181
7197 6003
7100 7863
7255 8421
7100 7856
7031 2127
7100 7862
7127 0000
7185 5768
99
GEMBOGL
William Koima
7313 4177
MUTZING
Gordon Robert
Clarinda Tangabe
7197 6006
YONKI
Usik Asino
KUPIANO
Andrew Baine Jnr
7288 4140
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
Alena Naiyala
Associate IT Client Support Engineer
Alena is part Nadi and Yasawa-i-rara,
Fiji.The necklace she wears is called a
“salusalu” and is the Fijian traditional
garland
special
occasions.
during
used
Alena’s attire is a three-piece masi,
which is a Fijian traditional attire worn
at weddings known locally as ‘Sulu ni
Vakamau’.
CORPORATE SOCIAL
RESPONSIBILITY
CORPORATE SOCIAL RESPONSIBILITY
SPONSORSHIPS AND DONATIONS
BSP Staff and their families visit to
Gerehu Hospital in Port Moresby, prior to
christmas
BSP takes great pride in supporting the organisations and worthy causes that are important
to our employees and customers throughout PNG and the Pacific. BSP has built strong
partnerships with various Organisations, Committees, Events and Charities who champion,
cultural unity, environmental sustainability, professional development, sports and health and
wellbeing. Through our respected and valuable partnerships, we are able to increase our
reach and support to these areas financially. In 2017, BSP as a Group supported to the tune of
K6.6 million in sponsorships and donations.
Sponsorships
Donations
Events
K4.4
Million in
Sponsorships
K2.2
Million in
Donations
K753
Thousand in
Events
At BSP we respect, value and support the communities in which we operate in. Some of the organisations and
activites we supported in 2017 in PNG included:
Cricket PNG
SPORTS AND CULTURE
•
• Game Fishing Club
• Morobe Agricultural Show
•
• National Mask and Warwagira Festival
• PNG Golf Open and BSP Junior Pro Am
• PNG Snooker and Billiards Nationals
•
• Rabaul Frangipani Festival
Morobe Golf Open
PNG Swimming Inc
CONFERENCES AND EVENTS
• Certified Practicing Accountants
• BPNG Financial Inclusion Expo
•
Institute of Internal Auditors
•
Australia PNG Business Council Forum
•
PNG Mining and Petroleum Conference
•
PNG Human Resource Institute Event
• PNG International Business Summit
• Regional Tuna Industry and Trade
Conference
• University of PNG MBA Pinnacle
Anglicare
CHARITY AND NGO
•
• Buk Bilong Pikinini
•
Burnett Institute
• Business and Professional Women
• Coalition for Change PNG
• Kokoda Track Foundation
• Operation Open Heart
•
• Salvation Army
Port Moresby Cancer Society
102
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 COMMUNITY PROJECTS IN PAPUA NEW GUINEA
CORPORATE SOCIAL RESPONSIBILITY
Port Moresby Branch presented cooking utensils and officially
opened the newly constructed “hauswin” to Moale Haus, Four
Square Church in Kaugere
Themed “Empowering Women and Children,” BSP Community Projects were focused on
improving the lives of women and children in the communities we operate. In PNG 49
projects were handed over to respective communities and partners to the value of K1.2
million.
35% of projects focused to the community | Renovated playgrounds, libraries, and shelters.
43% of projects focused on health, water and sanitation | Water tanks and refurbished health centres
22% of projects focused on education | Renovated classrooms, ablution blocks and donated books
Quick Facts - PNG
K7.8
million invested
in projects since
2009.
336
projects
delivered in the
past 8 years.
K1.2
million
invested in
2017.
Moale Haus is an orphanage centre run by the church. It has been in operation for over 10 years. The
centre runs literacy programs for the community, and feeds orphans and the homeless. I am pleased
to handover this project on behalf of BSP” - Diana Guria, Branch Manager, Port Moresby
BSP Buka built a haus win for
Nazareth Centre for Rehabilitation (NCFR)
BSP Bulolo construction of
Violence against Women office
BSP Kundiawa Installation of water tank and pump
for Kundiawa Urban Clinic
103
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CORPORATE SOCIAL RESPONSIBILITY
Boreboa school gets new water tank
“Classes were suspended due to water disruptions, but with the new tank and water pump,
we now have reliable back up of clean water for students and staff. The renovated ablution
blocks reinforce our schools aim to promote a healthy living environment.” Brian Kagayabi,
Head Master of Boreboa Primary School.
Projects delivered through our Strategic Business Units
• Safe House at Femili PNG Lae, Installation of solar lights, Corporate
• Konedobu Clinic, Installation of 2x water tanks and refurbishment,
Lae
Operations
• POM General Hospital
- Family Planning, extension and
maintenance of Susu Mama Clinic, Corporate POM
• St Theresa Clinic refurbishment, Finance and Planning
• Gerehu Hospital, Construction of a hauswin, Group Risk
Management
• Hohola Demonstration Primary School, Construction of drinking
shed and tank, Human Resource
• St Martin De Poress Clinic - Morata, Installation of water tank,
repairing of benches and donation of medical equipment,
Paramount Banking
• Lifeline PNG - Renovation of rooms for the abused women - Retail
Banking
• Operation Food for Life, Construction of a new fence and Resource
Centre, Treasury
Projects Delivered through our Subsidiary Companies
• The Sacred Heart Brothers – Save our children and youth program,
• Evadahana Primary School, Renovation of ablution block and
Construction of shelter and ablution block, BSP Capital
installation of water pump, BSP Finance
BSP Daru built a cop shop at the main market
BSP Capital Ltd renovated an ablution block for
Save our Children and Youth
BSP Kokopo renovated the ablution block for
Napapar Health Clinic
104
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CORPORATE SOCIAL RESPONSIBILITY
Madang Branch
Renovation of the Gynaecology Ward at
Modilon General Hospital, Madang Province
“As a patient, I felt that it was important for women recovering from an operation to stay in a
clean environment. “Through BSP and this community project initiative, I know that many women
will benefit from the project. They will now have well protected and better living environment to
rest and recover.” Sea Moa, BSP Madang Staff.
Other projects delivered through our Branches
Aitape Branch - Construction of a double classroom at Lumi
Primary School.
Alotau Branch - Installation of water tank, donation of mattresses,
pillows, curtains & repainting of two birthing houses, Losuia Island.
Arawa Branch - Installation of 2x water tanks, Arawa General
Hospital.
Bialla Branch - Installation of water tank and donation of mattresses
at Silanga & Ullamona Catholic Health Centre.
Boroko Branch - Construction of waiting shelter for the Antenatal
ward at 6mile clinic.
BSP First - Drainage, installation of Tuffa Tank & donation of Davy
Pump, PNG Children’s Foundation.
BSP Haus - Installation of water tank & construction of a store room
at the Haus of Hope.
Buka Branch - Construction of Hauswin at Nazareth Centre for
Rehabilitation (NCFR),
Bulolo Branch - Construction of Violence against Woman office &
Installation of water tank at Bulolo Police Station
Daru Branch - Renovation of Daru Police Station Cop Shop.
Gordons Commercial - Renovation of 2x storage containers,
Cheshire Disability Centre.
Goroka Branch - Installation of water tanks at 7-Mile Notofana
Village
Kainantu Branch - Construction of sewing machine tables &
presentation of sewing machines to All Churches in Kainantu.
Kavieng Branch - Refurbishment of Maternity Ward for Kavieng
General Hospital.
Kimbe Branch - Construction of Mini Library and donation of
mattresses for the Children’s ward at Kimbe Provincial Hospital.
Kiunga Branch - Construction of a new Baking shelter for the
Home of Hope Women Centre.
Kokopo Branch - Renovation of Cervix Examination Room for St
Mary’s Hospital – Vunapope
Kundiawa Branch - Installation of water tank and pump for
Kundiawa Urban Clinic
Lae Commercial - Extension of the Patients’ waiting bay for Centre
of Mercy.
BSP Lae Market Branch cleaned up Family Support
Centre
BSP Alotau renovated two Birth Houses and
installed water tanks
BSP Treasury built a new fence and donated
computers to Operation Food for Life program
105
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CORPORATE SOCIAL RESPONSIBILITY
Operations and IT renovated the Konedobu Clinic and installed
two water tanks
Other projects delivered through our Branches
• Lae Market Branch - General clean up and donation at Family
• Porgera Branch - Installation of water tank at Foursquare Christian
Support Centre
Elementary School
• Lae Top Town - Construction of an antenatal waiting house for
• Rabaul Branch - Renovation of ablution block at Napapar Health
pregnant mothers at Situm Health Centre
Centre
• Lihir Branch - Renovation of Kids Centre at Kunaye Adventist
• Tabubil Branch - Renovation of a classroom at Kwrioknai Primary
• Lorengau Branch - Clean up of East and West Clinic in Lorengau
School
Town and donation of health equipment and furniture
• Tari Branch - Purchase of 2x Obstetric beds and cleanup of Hela
• Madang Branch - Renovation of Gynaecology Ward in Modilon
Provincial Hospital
General Hospital
• Mendi Branch - Renovation of persons with disabilities classroom,
ablution block and construction of a mini children’s play area at
Callan Services
• Moro Branch - Water catchment area and installation of tank at
Ibutaba village
• Mt Hagen Branch - Donation of furniture and computer Set for
Women Well Clinic at Mt Hagen General Hospital
• Port Moresby Branch - Construction of hauswin and supply of
• Vanimo Branch - Donation of library books and General Clean up
of Vanimo Primary, Damili Primary and Dapu Primary
• Wabag Branch - Installation of audio visual, construction of laundry
room & waiting shed for the mothers and children’s ward for
Emmanuel Lutheran Hospital
• Waigani Banking Centre - Renovation of Classroom for Taurama
Army Barracks Pre-School
• Waigani Drive - Installation of water tank/water pump and general
maintenance of the ablution block for Taurama Elementary School
utensils, Moale Ministry
• Wewak Branch - Construction of cabin haus for Mission Franciscan
• Popondetta Branch - Installation of water tank and renovation of
classroom at Popondetta Elementary School
Sisters that caters for abused women
BSP Bialla donated mattresses for Bialla clinic
BSP Human Resource built a drinking shed for
Hohola Demonstration School
BSP Group Risk Management built a waiting area
for patients at Gerehu Hospital
106
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CORPORATE SOCIAL RESPONSIBILITY
BSP Tonga built a playground at the carpark behind the
Branch
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
staff volunteer their time to assist in the completion of each project. Our Community
Project are also undertaken by Strategic Business Units (SBUs).
BSP Group Project Initiatives 2017
26
Health
Projects
18
Education
Projects
13
Projects focused
on Community
Wellbeing
6
projects focused
on Water and
Sanitation
BSP Vanuatu Soccer Sevens
Paddling for Healthy Oceans Rubbish collection
along Rewa & Navua Villages
BSP Fiji Marketing Team: Agatha, Jessie, Michael,
Nirdesh with Iris and Eroni of Save the Children Fiji
BSP Cook Islands built scoreboards
BSP Solomon Islands renovated a market shelter
BSP Solomon Islands donate to Ambae
Community
107
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CORPORATE SOCIAL RESPONSIBILITY
Vanuatu BSP Women’s Grant Scholarship has assisted
young women pursue and further their education.
Our teams in the Pacific Islands also delivered worthy projects in their communities.
14 A total of 14 community projects were handed over in 2017.
Fiji - 4 | Solomon Islands - 6 | Tonga - 1 |Cook Islands - 1 | Samoa - 1 | Vanuatu - 1
SOLOMON ISLANDS
•
Gizo Branch - Rebuilding and Painting
of Market House for Vonunu Secondary
School
• BSP Auki Branch - Building a Leaf hut for
•
sick Patients waiting place
BSP Noro Branch - Painting and
donating Reading Books and toys for
Auki Clinic
• BSP Munda Branch – Repainting Helena
•
•
Goldie Hospital Chapel
BSP Pointcruz- Donation of Gabbage
Bins and Rakes for Kakabona and
Kauvare community
BSP Ranadi Branch- Building Ablution
Block for Madela Inclusive Primary
School
• G’Day Solomon Islands Fun Run
•
•
•
Financila Inclusion Committee
Pinktober
Rotary Club of Honiara
COOK ISLANDS
• Rotary Club of Rarotonga
• Aututaki Vaka Iti
SAMOA
• The Two Million Trees Campaign
• Samoa Small Business Enterprise Centre
(Sbec)
• Pinktober
• Little Sisters Of The Poor And Residents Of
Mapuifagalele
• Samoa Weightlifting Federation
• Samoa Medical Association (Sma)
• 29th Marist Sevens 2017
• Manu Samoa
• Goshen Trust, Samoa Victim Support And
Ola Toefuataina (Tafaigata Prisons)
TONGA
• Tonga Red Cross Society
VANUATU
• Renovation of Vanuatu netball house
• Amicale Football Club
• Vanuatu Pro Medical Services
• Port Vila Women’s Futsal League
• Vanuatu Chricket
• Santo Rodeo
• Vila Rodeo
• Kiwanis Golf day
• Vanuatu Aquatics Swim
• Ambae Volcano Relief
• Tanna Hospital
• Vanuatu Women’s Center
• Kaweriki Road Market
• International Women’s Group
• Vanuatu Red Cross Society
• National Forestry Day
• Sumalapa Community
BSP School Kriket
BSP Samoa Staff with donation to Samoa Victim
Support
Fishing Club Committee with BSP Sponsors and
Representatives Tutu Inamata and Jacqui Lemaire
108
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017
COMMUNITY CONTRIBUTIONS: OFFSHORE BRANCHES
CORPORATE SOCIAL RESPONSIBILITY
BSP Fiji participated in Oceans Day and partnered with
Paddle for Healthy Oceans to do rubbish collection.
Our Contributions in Fiji go beyond banking.
CORPORATE SOCIAL
RESPONSIBILITY PARTNERS
• Save the Children Fiji - Provision of
for Nuku District School
stationery
Students
• Fiji Cancer Society - Donation of
recliner chairs for cancer patients on
chemotherapy
• WOWS - “Shave or Save” Campaign to
raise funds for Children’s Cancer. Staff
collected over $14k. This was topped up
to $20,000 by the company
• PinkTober - Observance of Pinktober
to raise awareness on Breast Cancer.
Staff are also fundraising for this. Funds
collected were donated to the Fiji
Cancer Society
SPONSORSHIPS
• South Pacific Tourism Organisation -
Sponsorship of the South Pacific Tourism
Exchange Convention, Sydney
• Friends of Fiji Heart Foundation -
Donation towards Heart Surgery Team
• Fiji Hobies - Oceania Hobies
Championship
• Suva Marathon - Sponsorship of the
event
• Ba Women’s Forum - Donation of
laptops
• Fiji Human Resources Institute -
Sponsorship of FHRI Convention
OTHER
• Toea Wisil - Fiji Visit - BSP Brand Ambassador,
Toea Wisil visited two girls high schools to
deliver motivational speeches
49
Every penny we make from this will go a long way in the fight against this terrible
disease” Kali Turagaiviu of the Fiji Cancer Society, acknowledged BSP’s support.
PinkTober Breast cancer awareness
BSP Brand Ambassador Toea Wisil visits schools
in Fiji
BSP Fiji A brave team, Inoke Ruramate, Kevin
McCarthy and Krishna Raju volunteered to shave
and save
109
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CORPORATE SOCIAL RESPONSIBILITY
BSP Samoa staff at the launch of Go Green Clean Up
Students at St. Theresa Primary School
taking part in the BSP Go Green Program.
Bank South Pacific is proud to be a part of the community and continues to
promote the Go Green message to encourage our staff and communities to
respect the environment we live in.
As part of our environment strategy, we observed environment related events such as
the Earth Hour, Earth Day and World Environment Day. We also support organisations
and initiatives that foster an understanding of environmental issues and provide
practical support to building sustainable communities.
We are continually seeking new ways to decrease our environmental impact in our
daily operations by reduction of resources and materials used wherever possible. A
recent initiative by the bank can be seen in our community Projects for 2018. The theme,
“Solar Lights in the Community” will see BSP Staff in their respective Branches, SBUs and
BUs selecting schools and institutions to install solar powered lights to brighten up their
Schools and encouraging students to study more effectively combating greenhouse
gas emissions.
EARTH
HOUR
24 MARCH
EARTH DAY
22APRIL
WORLD
ENVIRONMENT
DAY
05 JUNE
Some events on Environmental Responsibility:
World Environment Day PNG,
at the Port Moresby Nature Park
BSP Samoa take on Go Green Clean Up
110
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 FINANCIAL LITERACY & BANKING EDUCATION
CORPORATE SOCIAL RESPONSIBILITY
Conducting Training in a remote
village in East Sepik Province
Banking Education and Financial Literacy remains an
important part of BSP and its customers
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:
43 new certified trainers joined in March 2017 to continue driving FLT program.
Business Developments Skills was also introduced to the trainers as one of the important training modules
targeting MSME customers.
BSP and ADB signed a MoU for Banking Education Assessment Study project piloted in ESP in September
2017 which BSP Wewak Branch visited wards and districts to drive FLT to actually determine their behavioural
change in terms of utilising new kundu and savings accounts that they opened.
SMS Blast service was organised every Mondays from September – December to promote the importance
of savings.
21,985
Individuals participated
in the Financial Literacy.
48% of the participants are
women.
137
We have 137 qualified
Financial Literacy Trainers
based throughout all our
branches in PNG.
148
BSP reached over 148
Communities, across PNG
in 2017.
8,378
BSP eduacted over 8,378
students in 108 schools
throughout PNG.
Customers opening account after
Financial Literacy Training
Financial Literacy Training for
fashion designers
Banking Education Team conducting training
111
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 CORPORATE SOCIAL RESPONSIBILITY
FINANCIAL LITERACY AND BANKING EDUCATION
BSP trained an additional 143 Financial Literacy Trainers
BANKING EDUCATION &
FINANCIAL LITERACY IN PNG
In 2017, More Customers chose Smarter and Affordable Ways to Bank.
1.26 Million
Customers use
Fee Free Accounts
This means that 77% of BSP’s personal
customers have a transaction account
where they do not pay a monthly
account maintenance fee.
22 Million
Visa and KunduCard
Transactions in 2017
More customers use Cards to purchase
their shopping avoiding the need for
cash and reducing security risks for
cardholders and merchants.
2.5 Million
Transfers via
Mobile Banking
BSP’s Mobile Banking customers made
2,500,000 transfers of funds in 2017 to
other customers, family and friends
using their mobile phone rather than
paying in cash or visiting the Bank to
make a deposit.
112
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2017 Local Knowledge,
Global Solution.
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BSP is a modern and energetic bank providing world class banking.
When we were considering concepts for the
Annual Report 2017, we looked at many annual
reports that we have produced over the years.
One of these, was an iconic cover that showed
our then General Manager, Human Resources,
Aho Baliki. The image merged customary dress
and our work uniform.
30 years on, we illustrate the growth and change
in the Bank, and the cover design is a remake of
the 1983 Annual Report cover.
1983 ANNUAL REPORT COVER
HARI RABURA
General Manager, Human Resources
The traditional attire hails from the Motu Koitabuan area within Port Moresby,
Papua New Guinea.
The tattoos are significant, as they identify clans, family lines and status in
society. The face tattoos suggest that she comes from Kirakira village, that of a
chief’s family and the markings on the neck signifies marital status.
The necklace is made from wild banana seeds (black) and a pearl shell worn in
the centre, signifying wealth. The grass skirt is made from nipa palm leaves,
while the headdress is made from parrot and cassowary feathers.
WE ARE YOU,
WE ARE BSP
| www.bsp.com.pg