ANNUAL
REPORT
BANK OF S OUTH PACIFIC LIMITED
CONTENT
Strategic Report
Chairman’s Report
A Brief History of BSP
Board of Directors
Group CEO’s Report
Group Historical Summary
Contributions by BSP to PNG
Group Highlights
Sales
Operations & Support
Broader Group Highlights
Cook Island
Fiji
Samoa
Solomon Islands
Tonga
Vanuatu
Subsidiaries
BSP Finance
BSP Capital
BSP Life
Corporate Governance
Financial Statements
Directors’ Report
Statements of Comprehensive Income
Statements of Financial Position
Statements of Changes in Shareholders’ Equity
Statements of Cash Flow
Notes to the Financial Statements
Independent Auditor’s Report
Shareholder Information
Directors’ Information
Management Teams
Executive Management Team
Management Teams
Overseas Directory
PNG Branch Directories
Corporate Social Responsibility
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Mt Tauvurvur, Rabaul, East New Britain
Photo by Rocky Roe Photographics
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 inspire, we change, and we
live our values, and lead by
example.
COMMUNITY
We respect, value and support the
communities in which we operate.
PEOPLE
We respect and value our people
and our customers.
TEAMWORK
We work with, and for, each
other; we progress together.
QUALITY
We are commited to excellence
whilst striving for continous
improvement in products and
services.
APRA Disclaimer:
BSP is not authorised under the Banking Act 1959 (Commonwealth of Australia) and is not supervised by the Australian Prudenti al Regulati on
Authority (APRA). BSP’s products are not covered by the depositor protecti on provisions in secti on 13A of the Banking Act 1959 and will not be
covered by the fi nancial claims scheme under Division 2AA of the Banking Act 1959.
Chairman’s Report
Sir Kostas Constantinou, OBE
Despite challenging conditions continuing in 2019, our profit of K890.4m was up 5.5% on the previous year. BSP has continued to
perform well, despite economic headwinds and uncertainties. Through capital discipline and prudent balance sheet management,
we maintained our commitment to financial strength across all capital, funding and liquidity metrics. We finished 2019 with a capital
adequacy ratio of 22% (2018 = 22.9%) and leverage ratio of 10.5% (2018 =10.3%) ... ratios that remain well in excess of the 12% and 6%
prudential requirement respectively.
Strategy
Our diversification strategy is working, with growing offshore branch and
subsidiary contributions.
My fellow directors and I are pleased to report that BSP’s diversification
strategy initiated in 2015 is gaining momentum. Just over 41% of BSP’s
2019 profit growth was generated by our offshore branches, with the
remaining 45% and 14% from PNG and our subsidiaries respectively.
Our offshore branches continue to grow, with four of the six now ranked
“number one” in both loans and deposits in the countries they operate.
Consequently, BSP has grown to become the South Pacific’s leading bank.
We are also pleased to report that our expansion of BSP Finance continues
to progress, with the Lao JV joining our portfolio in early 2020. Accordingly,
our 2020 focus will be on bedding down the Lao JV and transitioning it to
BSP Finance’s operating model. In short, we will apply the same successful
approach deployed in Cambodia, that is beginning to produce strong
results. Specifically, BSP Finance Cambodia delivered an outstanding 2019
profit result, where it more than tripled its 2018 profit and now matches
BSP Finance PNG’s profit contribution.
With our focus on delivering sustainable growth, we will continue to
adopt a measured approach to exploring future asset finance growth
opportunities within the Mekong Delta.
BSP Life PNG is the youngest subsidiary of the BSP Group, with its
operations commencing in January 2018. In 2019, it successfully launched
its new life insurance system and introduced its new “Wantok Group Term
Life” product to meet the needs of PNG’s employer based groups and
associations. In late 2019, a sales team was established to market BSP
Life’s new product “Wantok Delite”, a savings insurance product that was
launched in early 2020.
Enhancing Governance
In 2019 we have invested in strengthening BSP’s governance practices,
to ensure we meet the high standards expected of us. The recent Royal
Commission in Australia identified that the Australian Banks had failed
to implement policies and effective controls to fully comply with existing
industry standards. In the BSP Group's efforts to ensure that we are in
compliance with the regulatory requirements in all our jurisdictions,
BSP’s Board has approved the establishment of an independent Group
Compliance SBU (and added 16 new positions) to specifically implement
and monitor the effectiveness of BSP's policies across the Group.
In October 2019, the SBU began overseeing the Anti-Money Laundering
/ compliance business unit, audit business unit and the credit inspection
business unit. Group Compliance will ensure that BSP continues to meet its
ongoing compliance requirements, regulatory requirements and changes
in the industry standards.
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ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport BSP has continued to perform well, despite economic headwinds and uncertainties. In 2019, we continued to invest and expand our
digital footprint across all our countries to better serve our growing customer base.
Standard & Poors Global (S&P) in its ratings assessment of BSP released
on 20 May 2019, maintained BSP’s stand-alone credit profile of “b+”,
which is an endorsement of BSP’s strong underlying performance. S&P
reiterated that the maintaining of BSP’s overall rating at ‘B/Stable/B’ is not
a reflection of BSP’s underlying performance, but as a consequence of its
exposure to PNG.
Given the latter, BSP Group’s net profit after tax increased by 5.5% over
the previous year, to reach K890.4 million, with 75% of Group profit
contributed by the PNG bank. Furthermore, our 2019 profit result equates
to a compound annual growth rate (CAGR) of 13.7% between 2014 and
2019, an outstanding achievement.
New Banking System
As reported last year, BSP has embarked on the replacement of its existing
core banking system (ICBS) with a new system (Oracle Flexcube). A project
of this size and complexity is very challenging to deliver. Accordingly,
to reduce risk we have made the decision to revise our implementation
approach, which will see Vanuatu go live in October 2020, PNG in April
2021 and the remaining Offshore branches thereafter.
Board Renewal
Board renewal remains a continuing process and in December we
farewelled Freda Talao, who retired as a BSP Director. Freda joined the
Board in April 2012 and most recently chaired BSP’s Remuneration and
Nomination Committee. I would like to thank Freda for her service,
commitment and contribution to BSP over the past seven years.
Financial Performance
This year our revenue performance was slightly higher than last year, with
only a small 0.3% increase in income to K2.17 billion. However, the result
wasn’t unexpected, given slow global growth, coupled with delays to key
domestic resource projects, producing a challenging period for PNG, our
largest market. Recognising this challenge, cost control measures were
employed that reduced expenditure by 5.3% to K918.4m in 2019.
Outlook
With a stagnating global economy and uncertainty around the timing of
PNG’s key domestic resource projects, we expect challenging trading
conditions to continue for the foreseeable future.
Despite this uncertainty the Board and myself are confident we have the
team and financial strength to execute effectively against our strategy.
Finally, on behalf of the Board, I would like to thank our more than 4,300
staff for their hard work in challenging conditions that has benefited our
customers, community and shareholders.
Sir Kostas Constantinou, OBE
BSP Group Chairman
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate
Social
Responsibility
KEY MILESTONES IN BSP’S DEVELOPMENT
1957
Commenced operations
in Port Moresby in May
1957 as a branch of
National Bank of
Australasia Ltd.
1993
National Investment
Holdings Ltd, a nationally
owned company, acquired
BSP from National
Australia Bank.
2003
BSP is listed on the Port
Moresby Stock Exchange.
2007
Acquired the National
Bank of Solomon
Islands Ltd and
rebranded to BSP.
2014-2015
Commenced BSP Finance (Fiji)
Ltd in 2014 and commenced
BSP Finance (PNG) Ltd in 2015.
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.
1974
BSP incorporated as Bank of
South Pacific Ltd, a wholly owned
subsidiary of the Australian
parent.
2002
Merged with the state owned
Papua New Guinea Banking
Corporation (PNGBC).
2006
Established a presence in
Fiji through the acquisition
of Habib Bank Ltd’s Fiji
operations, which were
rebranded to BSP.
2009
Acquired Colonial Bank and
Colonial Fiji Life Insurance Ltd
from Commonwealth Bank of
Australia and rebranded to
BSP and BSP Life, respectively.
2015-2016
Acquired Westpac’s
operations in Solomon
Islands, Cook Islands, Samoa,
Tonga and Vanuatu for
A$125 million.
2018
Commenced a life
insurance business in
Papua New Guinea on
2nd January, 2018.
Provisional licence issued in
2017 for a life insurance
company (BSP Life (PNG) Ltd).
Commenced a life
insurance Wantok
Delite Product 2nd
January, 2019.
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
Pacifi c. BSP’s operati ons date back to 1957, when it was founded in Port Moresby as a branch of Nati onal Bank of Australasia Ltd. In 1993, a consorti um
of PNG businesses acquired the bank and created the fi rst and only PNG private sector owned bank at that ti me.
BSP merged with the state-owned Papua New Guinea Banking Corporati on (PNGBC) in 2002, creati ng the largest bank in PNG. Other acquisiti ons followed,
including Habib Bank in Fiji in 2006, Nati onal Bank of Solomon Islands in 2007 and Colonial Bank and Colonial Fiji Life Insurance Ltd in 2009. In 2015 and
2016, BSP completed the acquisiti on of Westpac’s operati ons in Cook Islands, Samoa, Solomon Islands, Tonga and Vanuatu, signifi cantly expanding and
strengthening BSP’s geographic reach. In 2014, BSP Finance was launched in PNG and Fiji, followed by Cambodia and Solomon Islands in 2017. We expect
BSP Finance Lao to commence its operati ons in early 2020.
BSP Life PNG commenced its operati ons in January 2018.
Today, BSP conti nues to be a leading force in PNG and the South Pacifi c markets with the largest branch network, and is a pioneer in bringing fi nancial
innovati on and technology to the region.
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ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Social
Teams
Responsibility
Corporate
1957
Commenced operations
in Port Moresby in May
1957 as a branch of
National Bank of
Australasia Ltd.
1993
National Investment
Holdings Ltd, a nationally
owned company, acquired
BSP from National
Australia Bank.
2003
BSP is listed on the Port
Moresby Stock Exchange.
2007
Acquired the National
Bank of Solomon
Islands Ltd and
rebranded to BSP.
2014-2015
Commenced BSP Finance (Fiji)
Ltd in 2014 and commenced
BSP Finance (PNG) Ltd in 2015.
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.
2002
BSP incorporated as Bank of
South Pacific Ltd, a wholly owned
subsidiary of the Australian
Merged with the state owned
Papua New Guinea Banking
Corporation (PNGBC).
1974
parent.
2006
Established a presence in
Fiji through the acquisition
of Habib Bank Ltd’s Fiji
operations, which were
rebranded to BSP.
2009
Acquired Colonial Bank and
Colonial Fiji Life Insurance Ltd
from Commonwealth Bank of
Australia and rebranded to
BSP and BSP Life, respectively.
2015-2016
Acquired Westpac’s
operations in Solomon
Islands, Cook Islands, Samoa,
Tonga and Vanuatu for
A$125 million.
2018
Commenced a life
insurance business in
Papua New Guinea on
2nd January, 2018.
Provisional licence issued in
2017 for a life insurance
company (BSP Life (PNG) Ltd).
Commenced a life
insurance Wantok
Delite Product 2nd
January, 2019.
OUR REACH IN THE ASIA-PACIFIC REGION
BRANCH
80+ Branches
SUB-BRANCH
50 Sub-Branches
500 ATMs
350 Agents
11,000+ EFTPoS
4,000+ Staff
STAFF
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
7
Board of
Directors
SIR KOSTAS G. CONSTANTINOU, OBE
Chairman. Director since April 2009.
Appointed Chairman February 2011.
ROBIN FLEMING, CSM, MBA, MMGT
Chief Executive Officer. Director since
April 2013.
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, Bank of South
Pacific Ltd and Air Niugini Limited. He is a Director
of Alotau International Hotel, Gazelle International
in Kokopo, Loloata Island Resort Ltd,
Hotel
Coastwatchers Court Ltd, Waigani Assets Ltd, OPH
Ltd, Rangeview Heights Ltd in Papua New Guinea,
Heritage Park Hotel in Honiara, Taumeasina Island
Resort in Samoa, Good Taste Company in New
Zealand and Oil Search Ltd. Sir Kostas is also Vice
President of the Employers Federation of PNG,
Honorary Consul for Greece and Cyprus in Papua
New Guinea and Trade Commissioner of Solomon
Islands to PNG.
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.
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ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport ERNEST BRIAN GANGLOFF, CPA,
MAICD, MIIA, PNGID
Non - Executive Director. Director since
November 2013.
ROBERT BRADSHAW, LLB
Non-executive Director. Director since
September 2017
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.
Mr Gangloff is an Adjunct Professor of Accounting
at the University of Papua New Guinea and
specialises in Risk Management and Governance.
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.
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.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Board of
Directors
(continues )
ARTHUR SAM, BComm, CPA, MAICD,
GAICD
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 a Graduate of the
Australian Institute of Company Directors. He
is the Audit and Managing Partner of Sam Kiak
Tubangliu Certified Practising Accountants. Mr
Sam previously worked with global accounting
firms - PricewaterhouseCoopers, Deloitte and
Ernst & Young, in managerial roles specialising in
external and internal audit and risk management.
Prior to joining the Board of BSP, he served on the
NASFUND Board Audit and Risk Committee and
the PNG Accountants Registration Board. Mr Sam
has also been a member of the BSP Board Audit
& Risk Compliance Committee since June 2013.
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. 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.
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ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport AUGUSTINE MANO, BEcon, MSc
Non - Executive Director. Director since
August 2014.
FAAMAUSILI DR. MATAGIALOFI
LUA’IUFI, BA, MSC, PhD
Non-Executive Director. Director since
December 2016.
FREDA TALAO, LLB, LLM, MPHIL,
MAICD
Non - Executive Director. Director since
April 2012. Resigned December 2019
Mr Augustine Sanga Mano was appointed the
Managing Director & CEO of Mineral Resources
Development Company in March 2008. MRDC is
a state-owned entity that manages all Royalties
and Equities for Landowners and Provincial
Governments in Petroleum and Mining Projects
in PNG. Mr Mano graduated with double
Degrees in Economics and Arts majoring in
Environmental Science from the University of
Papua New Guinea and holds Master of Science
in Petroleum Economics from Dundee University,
Scotland in the United Kingdom. Prior to his
appointment, Mr Mano has been involved in
the civil construction, real estate, transport
and insurance. He has been involved with the
Petroleum industry in various capacities before his
appointment as Managing Director. He currently
serves as Director on the board of MRDC, Mineral
Resources Star Mountains, Mineral Resources Ok
Tedi No. 2, Mineral Resources Ramu, Petroleum
Resources Kutubu, Petroleum Resources Moran
and Petroleum Resources Gobe and many other
subsidiaries of MRDC in Mining and Petroleum
Projects in PNG by virtue of his position. He is
Chairman of the Pearl South Pacific Resort in Fiji,
Star Mountains Plaza and Taumeasina Resort in
Samoa. He is also serving as a Director on the
boards of Hevilift, PNG Air, Bank South Pacific and
Ok Tedi Mining Limited. He is also a Director in
other private companies.
in
Faamausili Dr M. Lua’iufi is an experienced
Public Sector practitioner and consultant.
She holds a PhD in Management, an MSc in
Management Sciences and a BA in Sociology
and Political Science. Prior to establishing her
own consultancy firm in late 2008, she worked
in the Samoa Public Service Commission Office
for 25 years, almost 12 of those years as Chief
Executive Officer. Under her stewardship, the
Samoa Public Service undertook various change
management programmes to improve service
delivery. Fa’amausili served in many Government
SOE Boards in her capacity as CEO.
late 2008,
Since becoming a consultant
she has performed more than 50 consultancy
assignments in the domains of Human Resources
Management, Organisational Development,
Performance Management and Governance.
She has performed consultancies in just about
every Pacific island country and also worked very
closely with most Pacific Island countries when
she was a CEO. Currently a Councilor, member
of the Executive Committee and member of the
Finance Committee of the National University of
Samoa. She is a Director of the Bank of the South
Pacific Board and a member of the Remuneration
and Nominations Committee. Is a member of
the Australian Institute of Company Directors,
member of the PNG Institute of Directors, Samoa
Institute of Director and Samoa Human Resource
Institute. She was the Pacific Residential Scholar
(2007-2012) of the Australia New Zealand School
of Government (ANZSOG) responsible for the
development of emerging young Pacific Public
Sector leaders.
is a
Freda Talao
lawyer and development
specialist. 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.
She was formally a consultant to Australian Law
Firm Holding Redlich in Brisbane. 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).
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate
Social
Responsibility
Group CEO’s Report
Robin Fleming, CSM
Group Chief Executi ve Offi cer
I am extremely pleased to report to our shareholders that 2019 was another successful year fi nancially for the BSP group, with a record net
profi t aft er tax (NPAT) of K890.4m. Our Group Chairman Sir Kostas Constanti nou OBE menti oned in his report a number of the headline
fi nancial metrics BSP achieved in 2019 including profi t growth of 5.5% and a “Compound Average Growth Rate” (CAGR) of 13.7% over the
past 6 years. Equally pleasing was the positi ve contributi ons from every one of the seven countries in which BSP operates and each of our
business lines of banking, asset fi nance, life insurance and capital advisory.
+K20m
+3.1%
668
648
458
+K19m
+12.5%
170
151
+K7m
+16.4%
48
41
67
5
2015
2018
2019
2015
2018
2019
2015
2018
2019
PNG BANK [Km]
Improved profi tability was achieved notwithstanding that economic
conditi ons were somewhat more diffi cult in a number of countries. PNG’s
GDP growth for 2019 was esti mated at 5.0%, which in part refl ected a full
year of uninterrupted gas producti on following a number of months of
disrupti ons to gas in 2018 following the devastati ng earthquake in February
2018. Growth in the non mining sector was forecast at 2.9% with lower
outputs in palm oil due to volcanic acti vity in West New Britain contributi ng.
OFFSHORE BRANCHES [Km]
SUBSIDIARIES [Km]
of years, foreign exchange availability and an absence of a headline resource
project that would provide external sti mulus to the economy with foreign
direct investment, has seen more borrowers experience credit stress. Our
NPL’s as a percentage of total loans increased slightly to 1.9%. Furthermore,
BSP is IFRS 9 compliant and our provisions to NPL coverage is sti ll conservati ve
at 4.9%.
Across the region most economies in which BSP operates experienced
positi ve growth. Samoa’s GDP remained at around 3.4%, Tonga’s moderated
to 3.5%, Cook Islands was strong at 4.2%, Solomon Islands moderated to
around 2.8%, and Vanuatu’s was steady at 3.2%. Fiji’s economy contracted to
around 1.7%. Whilst the region conti nues to be more suscepti ble to extreme
weather events, in 2019 there was no cyclone or other weather event of
nati onal signifi cance. Although, Samoa did suff er from a measles epidemic in
the last quarter of 2019, which sadly saw the loss of life of many children and
from an economic perspecti ve impacted visitor arrivals. Our prayers are with
those families who lost loved ones.
BSP’s fi nancial performance was both positi ve and pleasing when viewed
in the context of the economic acti vity in our home market, Papua New
Guinea. At a group level NPAT increased by 5.5% to K890.4m with PNG profi t
increasing by 3.1%to K668m.
Net interest income conti nued to increase with growth in lending in all
countries. A combinati on of lower non mining GDP growth over a number
Customer acquisiti on acti viti es saw conti nued increases in overall customer
numbers and consequent uplift in transacti on numbers. Pleasingly, and
whilst there is sti ll much more work required in relati on to changing customer
behaviours, the number of banking transacti ons undertaken outside of our
branch network increased by approximately 20% to an average of 12m per
month. Conti nued focus will be placed on moving more of our customers to
digital channels.
Profi t [NPAT, Km]
Net assets [Kb]
Cost-to-income rati o [%]
Capital adequacy rati o [%]
Earnings per share [toea]
Dividend per share [toea]
Market Capitalisati on [Kb]
2019
2019 vs 2018
890
24.5
37.7
22.0
191
139
5.5
+5.5%
+6.2%
-323bps
-91bps
+5.5%
+9.4%
+14.8%
12
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
Strategic
Report
Group
Highlights
Broader
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NPAT CONTRIBUTION MIX
OFFSHORE BRANCH AND SUBSIDIARY 2019 NPAT CONTRIBUTION [%]
0.9%
13%
4.9%
18%
86%
77%
5.4%
19%
75%
38%
BSP Fiji
BSP Solomon Islands
BSP Samoa
BSP Tonga
BSP Cook Islands
BSP Vanuatu
BSP Life Fiji
18%
9%
8%
4%
3%
15%
BSP Life PNG
0%
BSP Finance PNG
BSP Finance Fiji
BSP Finance Cambodia
2%
3%
2%
BSP Finance SI
BSP Capital
0%
0%
Subsidiaries
OSBs
PNG Banks
2015
2018
2019
The board has maintained its dividend policy of 70% to 75% of prior year
earnings, to the extent that this does not impact capital adequacy nor put
growth at risk and a total of K653.94m was paid out in dividends in 2019 with
the dividend yield a strong 12.2%. With a shareholder base that is 90% Papua
New Guinean and includes Kumul Consolidated Holdings (18.2%), each of the
four superannuati on funds in PNG being Nambawan Super (12.3%), Nasfund
(9.7%), Teachers Savings & Loans (3.3%), Comrade Trustees (2.7%) as well as
Fiji Nati onal Provident Fund (6.5%), Solomon Islands Nati onal Provident Fund
(0.5%) and Samoa Provident Fund (0.027%) a majority of workers around the
Pacifi c benefi t from BSP’s fi nancial performance and dividend distributi ons.
Our investment in our new banking system Flexcube conti nued, with
commitment of more people to the project and an increase in our fi nancial
investment. This is a multi -year, multi -country task with the objecti ve of
migrati ng the three existi ng banking systems we operate across the Pacifi c
to one common platf orm with integrated applicati ons that will reduce our
dependency on multi ple vendors. As is oft en the case with projects of this
magnitude and complexity, recognising that conversion involves seven
diff erent countries, the project has extended beyond the ti meframe that was
initi ally envisaged. Current planning anti cipates a cut over date of October
2020 for Vanuatu and April 2021 for Papua New Guinea with other countries
to follow. Senior executi ve and the board are provided with regular reports
on progress with extensive focus on risks and issues, and as we move closer
to conversion implementati on plans that minimise impacts on our customers
and risks to our business will be the priority.
Equal att enti on and management ti me was given to compliance and
governance. This involved data integrity reviews across each country to
ensure all fees and interest rates were aligned to products, regular publishing
of interest rates publicly irrespecti ve of any regulatory requirement to publish
or otherwise, and if any discrepancy was identi fi ed that our customers were
not disadvantaged. To support this work new compliance positi ons were
established in every country, and a new Strategic Business Unit was created,
Compliance SBU with AML, Compliance, Audit and Credit Inspecti on moving
from Group Risk to Compliance. This was complemented by increased
weighti ngs in staff KPI’s used for short term incenti ves for compliance, audit
and AML related acti viti es.
Staff training and development, and especially development of future leaders
within BSP conti nued to be a key strategy objecti ve. These investments
include a graduate development program that has seen over 50 graduates
join BSP over the past 5 years, and our marquee Leadership Management
Development Program (LMDP). Our LMDP has been in place since 2014 and
identi fi es future leaders in emerging, developing and senior role categories
with development training in Australia, Singapore and internal secondments
to provide parti cipants with skills necessary to take on more senior roles
within BSP.
The outlook for 2020 across the Group is for slower growth giving regard
to economic conditi ons that remain challenged in most countries. Economic
growth in PNG will be slower than previous years and will be dependent
upon successful negoti ati on of a headline extracti ve industry project. Events
of early 2020 related to the Coronavirus in China will also have an impact on
the global economy and economies that are commodity based (PNG) and
tourism based, (Fiji, Vanuatu and Cook Islands). Notwithstanding somewhat
slower growth, key return on equity (ROE) and yield metrics are not expected
to be challenged.
Our board led by our Chairman Sir Kostas Constanti nou maintained eff ecti ve
oversight of BSP’s operati onal performance, risk management systems and
governance whilst also ensuring the board determined strategic objecti ves
for BSP were acti vely monitored and managed. Their guidance and support
greatly assisted with BSP’s achievements in 2019.
In closing, our staff in all of our businesses and each of the countries in
which we operate, are to be congratulated for their eff orts and support in
delivering these record results for our shareholders, and I look forward to
their ongoing commitment in 2020.
Robin Fleming, CSM
Group Chief Executi ve Offi cer
Customer acquisiti on acti viti es saw conti nued
increases in overall customer numbers and
consequent uplift in transacti on numbers.
Pictured customer opening his account at
Kinim Sub-Branch in Madang, PNG.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
13
Strategic
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South Pacific
market leader
We continue to grow and build scale ... in
pursuit of sustainable market leadership
LENDING
DEPOSIT
K13.2b
In lending
K19.3b
In deposits
DIVIDENDS PAID
K677m
Dividends paid
MARKET
CAPITALISATION
K5.5b
Market Capitalisati on
14
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
Vanimo
Aitape
WEST SEPIK
Wewak
EAST SEPIK
Lorengau
MANUS
NEW IRELAND
Kavieng
EAST NEW BRITAIN
Rabaul
Lihir
Kokopo
Tabubil
Kiunga
MADANG
Madang
ENGA
Porgera
JIWAKA
HELA
Tari
Wabag
WHP
Mt. Hagen
Mendi
SHP
Kundiawa
CHIMBU
Goroka
EHP
Kainantu
Moro
MOROBE
WEST NEW BRITAIN
Bialla
Kimbe
WESTERN
PROVINCE
GULF
Lae
Lae Top Town
Bulolo
Lae Market
Lae Commercial Centre
Daru
Popondetta
NORTHERN
Buka
AUTONOMOUS
REGION OF
BOUGAINVILLE
Arawa
NATIONAL
CAPITAL
DISTRICT
Port Moresby
Boroko Banking Centre
Gordons Commercial
Waigani Drive
Waigani Banking Centre
Vision City
Habour City
Motukea
CENTRAL
Alotau
MILNE BAY
FIJI
Labasa
VANUA LEVU
Taveuni
Savusavu
TARO
Lomaloma
Gizo
Noro
Munda
SOLOMON IS.
VANUATU
Auki
Honiara
Honiara
Point Cruz
Ranadi
Espiritu Santos
PORT VILLA
Nabowalu
Rakiraki
Tavua
Lautoka
Ba
Nadi
Korovou
VITI LEVU
Ovalau
Sigatoka
Navua
Suva
Suva Central
Dominion House
Pacific House
Centre Point
Vunisea
SAMOA
COOK IS.
TONGA
Vava’u
Salelologa
APIA
Apia
Vaitelei
Branch
RAROTONGA
NUKU’ ALOFA
Strategic
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Corporate
Vanimo
Aitape
WEST SEPIK
Wewak
EAST SEPIK
Lorengau
MANUS
NEW IRELAND
Kavieng
EAST NEW BRITAIN
Rabaul
Lihir
Kokopo
Tabubil
Kiunga
MADANG
ENGA
Porgera
JIWAKA
Madang
HELA
Tari
Wabag
WHP
Mt. Hagen
Mendi
SHP
Kundiawa
CHIMBU
Goroka
EHP
Kainantu
MOROBE
Moro
WEST NEW BRITAIN
Bialla
Kimbe
Buka
AUTONOMOUS
REGION OF
BOUGAINVILLE
Arawa
WESTERN
PROVINCE
GULF
Lae
Bulolo
Lae Top Town
Lae Market
Lae Commercial Centre
Daru
Popondetta
NORTHERN
NATIONAL
CAPITAL
DISTRICT
Port Moresby
Boroko Banking Centre
Gordons Commercial
Waigani Drive
Waigani Banking Centre
Vision City
Habour City
Motukea
CENTRAL
Alotau
MILNE BAY
FIJI
Labasa
VANUA LEVU
Taveuni
Savusavu
TARO
SOLOMON IS.
VANUATU
Nabowalu
Rakiraki
Tavua
Lautoka
Korovou
Ba
Nadi
VITI LEVU
Sigatoka
Navua
Ovalau
Suva
Suva Central
Dominion House
Pacific House
Centre Point
Vunisea
SAMOA
Salelologa
APIA
Apia
Vaitelei
Branch
Lomaloma
Gizo
Noro
Munda
Auki
Honiara
Honiara
Point Cruz
Ranadi
Espiritu Santos
PORT VILLA
COOK IS.
TONGA
Vava’u
RAROTONGA
NUKU’ ALOFA
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
15
HISTORICAL
SUMMARY
16
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Strategic
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Historical
Summary
BSP Group NPAT
K890.4m
5.5% Increased from 2018
Dividend paid per Share
K1.39
9.4% Increased from 2018
Expense/Income Rati o
37.7%
Reduced by 3.3% from 2018
Profi t and Loss (K’000)
2016
2017
2018
2019
Net interest income
1,107,686
1,277,676
1,380,796
1,391,784
Non interest income
684,371
720,674
784,909
779,566
Bad and doubtf ul debt expense
(98,622)
(77,678)
(82,440)
(99,183)
Other operati ng expenses
(769,641)
(852,148)
(887,097)
(819,248)
Operati ng Profi t
Profi t before tax
Income tax (expense)
Profi t/(loss) aft er tax
Dividends (toea)
Dividends paid per share1
Balance Sheet (K’000)
923,794
1,068,524
1,196,168
1,252,919
923,794
1,068,524
1,196,168
1,252,919
(280,343)
(311,521)
(352,096)
(362,556)
643,451
757,003
844,072
890,363
88.0
111.0
127.0
139.0
Net loans and advances
10,102,909
11,209,493
12,530,649
13,200,807
Total assets
Deposits
Capital
Performance Rati os
Return on Assets
Return on Equity
Expense/Income
Key Prudenti al Rati os
Capital adequacy
Liquid Asset Rati o
Leverage rati o
Exchange rates (One (1) PNG Kina
buys):
US Dollar
AUS Dollar
20,831,803
22,369,861
23,081,223
24,527,118
16,912,349
17,901,692
18,232,766
19,339,056
2,314,337
2,628,335
2,872,135
3,117,033
3.3%
29.6%
42.9%
23.1%
35.8%
9.3%
3.5%
30.6%
42.6%
24.5%
36.9%
10.0%
3.7%
30.7%
41.0%
22.9%
33.6%
10.3%
3.7%
29.7%
37.7%
22.0%
30.0%
10.5%
0.3150
0.4354
0.3095
0.3965
0.2970
0.4208
0.2935
0.4188
1BSP has adopted the practi ce of paying an interim dividend based on half year results, in October of
each year, and paying a fi nal dividend based on audited full year results, aft er the end of the fi nancial
year, and no later than the end of the second quarter of the succeeding year.
Contributi ons
by BSP to PNG
Taxes paid to PNG
Government
K362m
Tax Payment (2019)
All Amounts are expressed in K'000
2016
2017
2018
2019
Company income taxes paid to PNG
Government
Other taxes paid to PNG Government (IWT,
FCWT,BWT)
292,443
257,210
354,947
361,987
10,226
8,214
10,018
16,872
GST paid and not able to be recouped
21,268
22,101
25,337
15,821
Donati ons, Sponsorships and Community Project
4,345
5,217
6,482
5,581
Total
328,282
292,742
396,784
400,261
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
17
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Our Group
Highlights
PROFESSIONALISM
We inspire, we change, and
we live our values, and lead
by example.
18
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
19
SALES
Channel Growth
BSP Treasury fosters and enhances relationships with clients, providing Financial Markets
services, solutions and ensuring clients remain aware of the regulatory environment and
its implications.
12 Million
Digital Transactions
PNG Treasury foreign exchange (FX) earnings were above prior year levels even though 2019 was again
challenging, as import demand exceeded export supply of foreign currency. These difficult trading
conditions continued throughout the year.
90% of total transactions were via
digital channels.
The official Bank of Papua New Guinea (BPNG) rate of exchange fell by 1.2% gradually over the year, to
finish at USD 0.2935. The Bank’s PNG FX market share remained flat in 2019, increasing marginally to
43.5%. The Bank’s FX turnover rose 5.8% in 2019, while PNG’s FX market turnover rose 5.6%.
54% via mobile phones.
2.5 Million
BSP Account Holders
Over 25,000 SME Accounts
3 SME Banking Centres
The SME market, and emerging and
vibrant sector in the PNG Economy.
80+ Branches
The Bank continued to invest surplus funds in government securities. Movements in the Government
debt yield curve reflected evolving fiscal conditions. The 28 day Central Bank Bills were unchanged at
1.39%, 91 day Treasury Bills fell from 2.63% to 2.50%, 182 day Treasury Bills fell from 4.71% to 4.68%,
whilst one (1) year Treasury fell from 7.93% to 7.06%. Yields on longer dated Government issued
Inscribed Stock were generally stable.
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 2020.
BSP’s Corporate and Retail businesses maintained momentum in 2019 with growth in our core business
of housing and personal lending segments. Overall lending market share in PNG was 63% and whilst
other countries market share was not as dominant, BSP is still ranked number one (1) in four Pacific
countries.
Corporate relationship teams remain located where our customers operate in Port Moresby, Lae, Mt
Hagen, Madang and Kokopo. To meet the banking needs of all Papua New Guineans, Retail operates out
of all provinces and districts.
Customer satisfaction is Corporate’s top priority and once again we have achieved improved customer
satisfaction scores in 2019. BSP’s survey results highlight continued gains in customer satisfaction on the
Great emphasis is placed on
Banking
Education/Financial
Literacy, offering deposit and
savings products such as our
Kid’s Account for youngsters
and the Sumatin Account for
students.
20
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD Market Strength
44%
Increased FX Market Share in PNG
Banks FX Turnover increased by 5.8% in 2019
PNG’s FX Market Turnover increased by 5.6%
63%
Overall Lending Market Share in PNG
#1 in lending in 5 countries
#1 in deposits in 4 countries.
Our loan and deposit portfolios are predominantly
PNG domiciled.
key business drivers of: service, products, fees, charges and rates, premium
branches and foreign exchange. Highlights were our BSP Digital Hub (Internet
Banking) and Kundupei (electronic Payroll) and Relationship Managers fully
meeting customers’ expectations.
BSP’s “icare” customer service culture remains the team’s unwavering focus,
leveraging all areas of the Bank through our “whole of BSP” network. Our
People and leading Retail branch networks across Papua New Guinea and
the South Pacific continue to provide solutions to enhance the financial
health of our customers and communities.
Around 80% of PNG’s population is rural based, and as PNG’s economy is
heavily weighted towards domestic and export driven agriculture as well as
extractive resource industries that are located in rural areas of PNG, we have
1,400 staff providing banking services to 1.8 million account holders at 89
branches and sub branches located across the country. All BSP’s points of
representation provide real-time transaction banking services.
The cash economy in PNG is still quite significant and the population of
PNG is relatively young, with 50% aged less than 25. Both aspects provide
unique challenges and our response is to place great emphasis on Banking
Education/Financial Literacy and offering deposit and savings products such
as our Kid’s Account for youngsters and the Sumatin Account for students.
This is an investment in the future that it is already reaping rewards as the
transactional volumes of our consumer customers increasing year on year.
We have 160 trained trainers, delivering financial literacy courses across
PNG, and a substantial effort is also being made through our branch network
to educated customers and the community about the legal requirements of
Anti-Money Laundering obligations and laws as they transition away from
cash and into the formal financial system.
The Small and Medium Enterprice (SME) market is also an emerging and
vibrant sector of the PNG economy and BSP has more than 25,000 customers
identifying themselves as part of this market segment. Specifically designed
loan and transaction products are offered by BSP to our SME customers and
we maintain three (3) dedicated branches in major centres in PNG to service
this market. During 2019, BSP partnered with Australian Business Volunteers
to support a “YES” program of training and mentoring SME customers of BSP
to assist them develop their business activities. The program continues in
2020.
BSP’s Corporate and Retail Sales Strategy was supported by the Digital SBU,
which focuses on customer experience and the adoption of digital financial
services as the better way to bank and make banking easier, quicker and
more secure.
Continued efforts to move customers from branches to digital platforms,
included the development of the All-Aboard App on a new technology Axium
device with android and Point-of-Sale functionality. The app has improved
branch and customer service delivery, by enabling new customers’ pre-
generated card transaction accounts with Mobile Banking, Internet Banking
and Visa Debit card.
BSP continues to strive to be digital relevant in all our markets across the
Pacific and apply technology to gain greater efficiency. This is also influencing
a new demand for collaboration and partnership from central banks, fintech
and BSP corporates for system integration to achieve improved services.
To better leverage our digital platforms, development and enhancement
projects during the year included the creation of a BSP Digital Sandbox and a
number of published APIs that will be launched in early 2020 to improve our
technology delivery and internal processes.
Banking 24/7 on your mobile, tablet or desktop computer gives the freedom
to do everyday banking where and when you want, remains the focus for
Digital. The BSP App and internet banking services, provide awareness
and understanding for new banking self-service portals, expand financial
inclusion in communities with the provision of Agency Banking services and
contactless transactions with new Point-of-Sale devices at all retailers.
Our People and leading Retail Branches across PNG
and the Pacific continue to provide solutions to
enhance the financial health of our customers
21
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19 OPERATIONS
AND SUPPORT
Key Operations Summary
BSP Launched SWIFT GPI Payments
Enabled and improved cross border payments across
corresponding banks.
Awarded Security Champion Award
2019 by Visa Australia
For demonstrated high standards of payment security
excellence.
The first bank from the South Pacific to win the award,
and joins the Steller Group of Financial Institutions in
Asia Pacific
Awarded Best Private Sector
Employer 2019 , by the PNGHRI
BSP has been awarded this award consecutively since
2013.
22
BSP’s operation extends across seven (7) different countries
and significant effort is undertaken daily to maintain operating
effectiveness.
Improvement included a common Payment Switch in the Cook Islands,
Solomon Islands, Samoa and Tonga, similar to that in PNG. The new
Payments Switch is EMV capable and with each installation old magnetic
strip Visa cards are replaced with highly secure EMV chip cards, to enable
secure payment at compatible point of sale (POS) terminals.
BSP’s Operations SBU was awarded with the VISA Australasia Security
Champion Award for 2019. The Award is presented to financial institution
partners who have demonstrated the highest standards of payment security
excellence, in line with international best practices. BSP is the first bank
from the South Pacific to win the Award and joins a stellar group of financial
institutions in Asia Pacific that have made significant contributions to the
security and reliability of electronic payments.
In November 2019, BSP successfully launched SWIFT GPI – a new standard
of global payments which allows BSP to send and receive funds quickly and
securely to anyone, anywhere in the world with full transparency over where
a payment is at any given moment. SWIFT GPI dramatically improves cross-
border payments across the correspondent banking network, especially for
corporates for which speed, certainty and a smooth international payments
experience is an absolute must.
BSP also successfully deployed Retail Electronic Payments System (REPS) the
interface between the Bank of Papua New Guinea (BPNG) and first round
participants. This allows BSP cardholders to perform transactions on any
BSP was recognised as best Private Sector
Employer by the PNG Human Resource Institute
(PNGHRI) in 2019
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD ATM or EFTPoS devices throughout the country, regardless of which financial
institution owns the hardware.
before choosing a final career path. The aim of the GDP is to provide training
programmes that ease graduates into the world of work and give them the
skills necessary to become part of the larger BSP team.
During 2019 BSP also worked on implementing a BSP Learning Portal to
strengthen the new Core Banking Program (Compass), by implementing
a software solution that drives enterprise opportunities and enhances
business management processes with a tool that enables analysis of change
impacts and equips our people with knowledge and competencies.
The ability to measure staff’s awareness and understanding of BSP’s policies,
procedures and processes; it will provide targeted training on the Group's
processes and links results to the new Learning & Development module
in our Human Resource system. Systems support is complimented by
supporting our people.
BSP was recognised as the “Best Private Sector Employer” by the PNG
Human Resources Institute for the sixth consecutive year. This key
achievement recognises BSP as a model organisation, leading in the best HR
practices in PNG and the Pacific. This award has always been a testament of
BSP’s commitment to continuously supporting our employees with people
initiatives that matter. An example of such an initiative is the introduction of
the maternity leave, with 12 weeks full pay, for our female employees across
the BSP Group in 2019.
BSP also completed and developed a Group wide Engagement Survey and
Group Performance appraisals and developed new key partnership with the
Australian Business Volunteers (ABV). The ABV partnership pairs up staff
in BSP’s Leadership Development Program with experienced Australian
mentors for our leadership group outside of PNG.
A major achievement for the BSP HR Team was the successful implementation
of the new HR/Payroll System (iChris) in Fiji. Consequently, the whole of BSP's
operations are now using the same HR information system. The addition of
other iChris modules going forward, will ensure a lot of our manual processes
are automated.
Effective risk management is necessary for the achievement of BSP’s vision.
BSP has a Board approved Group Risk Appetite Statement that reflects the
level of aggregated risk that BSP is willing to assume and manage in the pursuit
of its business objectives. The 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.
HR focused on further strengthening BSP Group’s approach to recruitment,
which is merit-based, systematic, fair and transparent.
BSP recruited 19 Graduates to undergo the BSP Graduate Development
Program (GDP). The one year GDP Program offers graduates the opportunity
to experience several different areas of business within the BSP Group
BSP’s Credit Business Unit is responsible for underwriting and monitoring of
the BSP’s loan portfolio within the Group Risk Appetite Statement. In addition
to overall credit quality, Credit oversees compliance with credit policies,
procedures and underwriting standards, monitoring sector concentration
limits, implementation and management of Social and Environmental
Management System and portfolio management reporting.
Retail Electronic Payments System (REPS) the
interface between the Bank of Papua New Guinea
and first round participants. This allows BSP
cardholders to perform transactions on any ATM or
EFTPoS devices throughout the country, regardless
which financial institution owns the hardware.
23
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
OPERATIONS AND
SUPPORT (continued)
BSP’s credit risk strategy underpins our Credit culture, as well as providing
the blueprint to grow the business within defined parameters, sustain a
quality loan portfolio across a diversified range of economic sectors and
countries in which BSP operates.
Key credit policies and procedures continue to be reviewed on an ongoing
basis to ensure BSP is aligned with the banking, regulatory, compliance
and industry environment and preserves prudent credit risk management
standards.
Credit Risk training and staff development was a key focus during the
year. Through investment in Training resources our staff benefited from
comprehensive internal credit training program designed to enhance the,
effective delivery of key policy and procedures and BSP’s credit risk culture.
BSP’s operational risk section focused on the identification, understanding
and management of operational risks, reinforcement of existing controls and
strengthening of the first and second line of defences in BSP. The Business
Continuity Plans were also tested during the year to ensure that they
operated as intended and where deficiencies had been identified that they
were rectified appropriately across the Group.
Annual risk awareness training is provided to all employees via an online
course (and assessment) that targets general operational risks, fraud
detection and prevention. The Operational Risk Business Unit continued
to provide support to the Operational Risk Committee and Board Risk
Committee, facilitating analysis and regular reporting of operational risk
issues.
Non-accrual loans for the Group increased to 2.0% (from 1.8% 2018) which
reflects more subdued conditions in PNG and Solomon Islands in particular.
Defaulting unsecured consumer loans rate increased by 10%, while the
recovery rate of unsecured consumer loans remained consistent.
BSP’s Market and Liquidity functions were enhanced during 2019 with
additional staff and a broader remit across the Group.
Market and Liquidity Risk Business Unit represents Group Risk at all Offshore
Branches (OSB) and BSP Finance Asset and Liability Committees as well as
Group Asset and Liability Committee for PNG and OSB’s preparing stress
testing on Market and Liquidity Risk for PNG and all Offshore Branches.
Market risk is focused on managing risk to BSP’s earnings arising from
movements in Foreign Currency Exchange Rates and Interest Rates Risk.
Market Risk arises through BSP’s trading and balance sheet activities and
comprises general market risk and specific market risk. Liquidity risk captures
the risk that BSP has capacity to fund increases in assets, or the risk of loss
due to increased costs of ensuring that demands to meet financial obligations
are met without disrupting normal day-to-day business.
In 2019 Group Compliance was established as its own Strategic Business
Unit (after previously being a Business Unit under Risk Management) in
recognition of the evolving significance and impact of compliance functions,
the growing expectations of stakeholders, and the increased levels of
regulatory complexity, scrutiny and reporting. Group Compliance consists
of 3 business units: Compliance & Anti-Money Laundering (AML), Internal
Audit, and Credit Inspection.
The Compliance & Anti-Money Laundering Business Unit ensures compliance
risk is effectively managed and all applicable laws, regulations, standards,
The Compliance & Anti-Money Laundering Business
Unit ensures compliance risk is effectively managed
and all applicable laws, regulations, standards,
guidelines and rules are adhered with.
24
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD guidelines and rules are adhered with. In addition it ensures compliance with
all AML/CTF laws and guidelines to avoid criminal and regulatory sanctions
and to minimise the risk of the Bank being used for money laundering and
terrorist financing. In line with the increased domestic and international
focus in compliance and AML/CTF, BSP has further strengthened this function
throughout 2019 by more than doubling its team size, all of whom are
ACAMS trained, and introducing industry leading technology to detect and
prevent financial crime. A major focus has been developing a compliance
culture through the organisation with all staff required to complete at least
two AML trainings during the year.
The Internal Audit Business Unit independently evaluates and reports the
effectiveness of BSP Group’s risk management, controls, and governance
processes. It does this by conducting regular risk-based audits of BSP’s Papua
New Guinea and offshore branch, sub-branch and agency network, and it’s
technology, operations and support functions. Ninety-four (94) audits were
completed across all countries and subsidiaries in 2019 with a major focus
on adherence to AML/CTF policies and Central Bank requirements. Key areas
audited throughout included various human resources functions, business
continuity management and disaster recovery testing, the procurement to
payables process, and transaction and channel.
This Credit Inspection Business Unit independently assess loan submissions,
compliance with credit policies & procedures, and portfolio quality assurance
in order to enhance the standard of credit decisioning by detecting any
material shortcomings in the assessment, approval, management, control,
and reporting of credit and counterparty risk. Credit Inspection continues to
review material credits and its coverage in 2020 will increase across all loan
portfolios within the BSP Group.
BSP’s Financial Reporting continued to improve/streamline the processes
and now finalises PNG Bank results by the first working day of the month.
It is also delivering cleaner reconciliations, reduced Group consolidation
completion times, financial statements for both half year and annual
reporting, and improved Subsidiary Reporting and Budgeting. In addition, the
team has improved the capitalisation of fixed assets from work in progress,
through increased cooperation with Business Units. Despite the recent
efficiency gains, the team will continue to identify and address improvement
areas where required in 2020.
The Finance team has continued to support the Core Banking team with the
data migration exercises and other modules. The successful implementation
of IFRS 16 within the Bank and the Group was a major achievement.
The growing expectations of stakeholders and
the increased regulatory complexity, scrutiny and
report paved way for the BSP to establish a new
Group Compliance SBU.
Key Operations Summary
Training Focus
Credit Risk training and staff development was a key
focus during the year.
2.0% increase Group Non-accrual loans
Reflecting more subdued conditions in PNG and
Solomon Islands in particular.
Meeting AML/CTF policies
Ninety-four (94) audits were completed across all
countries and subsidiaries in 2019 with a major focus
on adherence to AML/CTF policies and Central Bank
requirements.
25
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsBANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19 Strategic
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Broader Group
PEOPLE
We respect and value our
people and our customers.
26
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
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BROADER GROUP
Key Metrics
COOK ISLANDS
NPAT
NZ$3.3m
Net Profi t Aft er Tax 11.1%
increase from 2018
DEPOSITS
NZ$231.1m
18.5% increase from 2018
BSP Cook Islands has delivered a good fi nancial result in 2019, a Net Profi t Aft er
Tax (NPAT) of NZD3.3m was achieved, representi ng an 11.1% increase on 2018.
The performance was underpinned through loan growth of 2.1% in 2019, resulti ng
in a gross loan positi on of NZD94.3m and a digital banking focus returning uplift in
merchant revenue of 7.2%.
Strong deposit growth has conti nued in 2019, BSP Cook Islands fi nished with total
deposits of NZD231.1m, an 18.5% increase on 2018. Increases in Government and
wholesale funds and general economic acti vity has underpinned the result. Overall,
2019 has been a good year and staff should be congratulated for their eff orts. Further
investment has been made to expand services and reach throughout the Pa Enua,
with all Southern Group Islands now represented with BSP agents. Parti cipati on in
BSP fi nancial literacy programs conti nues to increase with over 1,300 completi ng the
program in 2019.
BSP’s strategic focus for 2020 conti nues to be based around customer e-channel
experience and we expect to introduce several new initi ati ves to promote merchant
acti vity and assist with online payments. Preparati on in anti cipati on of project
compass, diligent management of the balance sheet, including placements, and
maximising cost reducti on opportuniti es will be also is key focuses, to drive conti nual
improvement in income and overall fi nancial returns.
BSP’s strategic focus for 2020 conti nues to be based
around the customer’s e-channel experience.
Overall for BSP Cook Islands, 2019 has been a good
year and staff should be congratulated for their
eff orts.
28
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
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FIJI
BSP Fiji delivered another strong year of fi nancial performance in 2019, with Net
Profi t aft er Tax (NPAT) of $52.1m, representi ng a substanti al increase of 23.2% over
the prior year's result. The favourable result was underpinned by conti nued growth in
the loan portf olio resulti ng in a further uplift in market share from 25.2% in December
2018 to 25.9% in December 2019, while operati ng expenses were ti ghtly controlled
through diligent cost management.
This result was achieved in a challenging business environment and refl ects the high-
level commitment of BSP’s staff . The Fijian economy recorded its lowest growth rate
in a decade (GDP growth forecast between 1.0% and 1.7% for 2019). The banking
system liquidity dropped from an average of $650m in 2018 to around $300m in 2019
putti ng pressure on deposit rates. As a consequence, lending interest rates had to be
increased by all Banks to counter the increased Cost of Funds.
The business remained highly focused on good risk management practi ces by aligning
operati ng policies, procedures and processes to that of the ‘Group’ and also on
compliance with high Corporate Governance standards set by the Group Board.
In 2019, BSP Fiji launched an EMV chip enabled Visa Debit card, whereby customers
can use a combinati on of a ‘Touch & Go’, ‘Touch & PIN’ and ‘Insert & PIN’ payment
methods depending on the number of transacti ons and the values.
BSP’s strategic focus for 2020 will be to further improve our Digital capabiliti es and
the overall customer experience through product enhancements and high service
standards, as we strive to become the number one Bank in Fiji.
Key Metrics
NPAT
FJ$52.1m
Net Profi t Aft er Tax 23.2%
increase from 2018
LOAN PORTFOLIO
25.9%
Uplift in market share from 25.2%
in December 2018 to 25.9% in
December 2019
The business remained highly focused on good risk
management practi ces by aligning operati ng policies,
procedures and processes to that of the ‘Group’ and
also on compliance with high Corporate Governance
standards set by the Group Board.
Customer service is our priority
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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BROADER GROUP
�CONTINUES�
Key Metrics
NPAT
SB$94.1m
2% decrease from 2018
SAMOA
SOLOMON ISLANDS
BSP Samoa had a strong year in 2019. In a stable economic environment
and despite the impact of the measles outbreak in the last quarter of the
year, we achieved record fi nancial results, refl ecti ng strong underlying
performance across our business. The strength of our balance sheet and
a prudent growth strategy has led to the Bank maintaining strong market
shares in both lending and deposits.
In 2019, the Bank grew Net Profi t Aft er Tax (NPAT) by 46% to ST$15.4m,
which generated a return on assets of 2.8% and return on equity of 17.5%.
Loans grew 12% to $363m, while deposits grew 21% to $447m. Total assets
rose to $553m, which was a 19% increase over the prior period. These
results were achieved whilst maintaining focus on strong asset quality.
Customer retenti on had been achieved by quicker credit decisions, effi cient
drawdown processes and an expanded electronic footprint that included
20+ ATMs, 30+ agencies and over 420 EFTPoS terminals. The introducti on
of BSP EMV chip enabled Visa Debit Cards with added security levels that
match world class standards, also reaffi rms our commitment to innovati ve
and technology soluti ons that provide convenience and security for our
customers.
We grew our commitment to our community via numerous events,
placing priority on health and quality of life projects, renewable energy,
the environment, fi nancial literacy, youth and sports development and
educati on. BSP’s main community project in 2019, involved the installati on
of water tanks for 3 villages and the funding of dining faciliti es for the
Samoa Victi m Support Group’s School of Hope. BSP in support of the seven
(7) staff members who were aff ected by the measles outbreak, donated
$1,000 plus supplies to each member. In additi on, the bank joined the
nati onal eff orts to provide much needed resources for the hospitals, by
donati ng $60,000 in cash and supplies to the Government of Samoa.
Our success is predicated upon the dedicati on and talent of BSP people
delivering superior services to our customers, and the strength of our
culture has been refl ected in the way we embed a values-driven approach
to our work. Staff are to be acknowledged for their ongoing commitment,
making possible strong results in 2019.
As we move through 2020 and beyond, BSP is well positi oned to execute
our long-term strategic vision.
Key Metric
NPAT
ST$15.4m
46% increase from 2018
30
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
BSP Solomon Islands increased its loan portf olio by 5%, which is a very
good result in the context of our overall market share. Market share
reduced slightly from 55.5% in 2018 to 54.8% in 2019. While our deposits
decreased by 0.03% in 2019, our market share increased to 53.3% from
52.2% in 2018.
BSP Solomon Islands fi nancial result for 2019 was a Net Profi t Aft er Tax
(NPAT) of SBD$94.1m, which represented a 2% decline on the prior year.
The result was impacted by a number of operati onal issues, which have
now been resolved with improved processes and controls in place. A
Disaster recovery site was established and tested during the year.
This year also saw BSP Solomon Islands introduce EMV Chip Cards
technology to provide our customers greater protecti on and enhanced
capability through tap and go functi onality.
With eight (8) branches and seven (7) offi cial agents and 55 Branchless
Agents, all BSP staff are to be proud of serving the majority of the Solomon
Islands.
The 2019 result for BSP Solomon Islands could not have been achieved
without the eff orts of all of our 260 staff and they are thanked for their
conti nued commitment to ensuring BSP remains the Premier Bank in the
Solomon Islands.
With eight (8) Branches and seven (7) offi cial agents and 55
Branchless Agents, BSP is the only Bank that is serving the majority
of the Solomon Islands.
Pictured, offi cial opening of SIPA’ ATM.
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NPAT
TOP$11.2m
5% increase from 2018
NPAT
VUV186.5m
Behind budget due to lower income
generati on and credit quality
TONGA
VANUATU
BSP Tonga Ltd has delivered another strong year of fi nancial performance
in 2019, with a Net Profi t aft er Tax of T$11.2m, representi ng growth of 5%
over the prior year. The favourable result was underpinned by conti nued
growth in the loan portf olio of 6%, solidifying our No 1 positi on in the
market, at 42% in loans and 40% in deposits. In additi on, operati ng
expenses were ti ghtly controlled.
February 2019 saw the completi on of Nuku’alofa Branch refurbishment,
off ering customers and staff a spacious and modern banking experience.
This was received extremely well by the Tongan market, refl ected in
positi ve feedback and by our excellent customer survey results.
BSP also successfully installed its backup Disaster Recovery site and
upgraded its electronic channels network by introducing EMV Chip Card
technology, which provides increased enhanced security for customers and
touch and go capabiliti es on our EFTPoS machines.
The other highlight of 2019 was the fi rst visit by the BSP Group Board to
Tonga in July, which was greatly appreciated by staff and customers alike.
In additi on to this, BSP has conti nued to expand its agency network with
one (1) new MoneyGram agent and four (4) new BSP agents. The Island
of Nomuka, situated in the Ha’apai group of islands was one of these new
agents - BSP is the fi rst bank to provide banking services to these islands.
BSP Tonga conti nued its commitment to the community with our digital
fi nancial literacy program delivered to over 8,000 people throughout the
Kingdom of Tonga. BSP Tonga also supported various community initi ati ves,
including the upgrade our netball court and children’s playground, as well
as major sponsorships to Open Heart Internati onal, SPAW, Heilala Festi val,
One Tonga, Kolomotu’a Rugby 7s, Vava’u Tourist Associati on and Tonga
Diabetes Associati on.
Finally, I would like to acknowledge the staff both in Tonga and the support
provided by PNG in their commitment to the business and in making the
2019 result possible.
Our expanding footprint also allows us to work in conjuncti on with
government initi ati ves, to bring fi nancial inclusion to a greater porti on
of the populati on in the Pacifi c.
Vanuatu will be the fi rst BSP country to implement the new Core Banking
System (Oracle FLEXCUBE) in October 2020. The benefi ts of the new
Core Banking System will include standardisati on of business processes
within the group, improved ti melines through automated regulatory and
management reporti ng, web based soluti on, common training across the
group, greater level of customer centricity, operati onal control, product
fl exibility and operati ng effi ciency whilst reducing the overall cost of
maintaining the infrastructure.
BSP Vanuatu conti nues to focus on expanding its banking services and
being an acti ve corporate member in the community. With 27 ATMs,
30+ acti ve agents and over 450 EFTPoS terminals, BSP Vanuatu works to
support communiti es and bring banking services to all Vanuatu populati on
segments. Our expanding footprint also allows us to work in conjuncti on
with government initi ati ves, to bring fi nancial inclusion to a greater porti on
of the populati on. This is refl ected in the opening of three (3) new agencies
in 2019 and plans for further expansion of the agency business in 2020. In
March 2019, the second Port Vila Branch located at Freswota was offi cially
opened. This additi onal presence in Port Vila enabled BSP to meet the
needs and expectati ons of our growing customer base. In December 2019,
our disaster recovery site was installed and operati onal.
BSP Vanuatu acti vely parti cipates in the community as one of the major
investors and employers in Vanuatu. With a strong focus on corporate
responsibility, BSP Vanuatu plays an acti ve role in supporti ng the broader
business community,
initi ati ves
and promoti ng go green projects within schools and communiti es. In
September 2019, BSP Vanuatu appointed its fi rst ever Ni-Vanuatu female
independent Director.
including backing government
led
Financially, BSP Vanuatu declared a Net Profi t aft er Tax of VUV186m in
2019, with performance behind budget due to lower income generati on
and credit quality, given more trying economic conditi ons. The outlook
for 2020 is more positi ve and the business will look to further increase
its profi tability and market share through various strategic and growth
initi ati ves.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
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TEAMWORK
We work with, and for, each
other; we progress together.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
33
Subsidiaries
Key Highlights
BSP FINANCE
PGK4.3m
Full Year Profit
FJ$4.4m
Full Year Profit
US$2.9m
Full Year Profit
US$47m
Loan Portfolio
BSP CAPITAL
PGK876k Profit
Compared to a loss of
K803k in 2018
34
BSP FINANCE
Papua New Guinea
BSP Finance PNG achieved a full year profit of K4.3m in 2019. Delays in key resource projects in the
country meant marginal growth in profitability compared to the prior year. However, the loan book
quality improved significantly, with the business reporting a lower level of defaults when compared
to prior years.
The next 12 months will be spent expanding our footprint in the country, by leveraging off the wider
BSP network and establishing relationships with key personnel involved in major resource projects.
Internally, the business will continue to review all its procedures from an efficiency standpoint, whilst
ensuring that available technologies and systems are utilised more effectively.
Fiji
BSP Finance Fiji continued to perform well in 2019, recording a profit of FJ$4.4m despite a somewhat
subdued economy.
Depressed liquidity in the market threatened to derail operations in 2019, however the business was
able to successfully navigate through this with support from BSP Bank Fiji. The opening of the Lautoka
branch in 2019 was well received by the local community and reaffirmed the commitment of the
company to offering financial products and services to as many Fijians as possible.
Cambodia
The business reported a profit of USD2.9m in 2019 that exceeded budget expectations. With a loan
portfolio of USD47m, the business has fast established itself as one of the leading asset finance
companies in Cambodia, despite a very competitive market. Internally, the business will continue
to work closely with the BSP Group to develop a compliance focused culture and strong internal
controls. While there will be some short term liquidity challenges until funding arrangements are
finalised in 2020, the business is poised to experience another year of strong growth in a fast growing
economy with great potential.
Solomon Islands
The establishment of procedures and improvement of processes were the main activities in 2019.
With the business now stabilised, the team is focused on growing market share and increasing brand
presence in 2020. Our speed to market will continue to be the key selling point amongst target
customers in Honiara, with a view to increasing penetration in locations outside of the capital as well.
Similarly, the company will continue to leverage off the BSP Group to maximise sales opportunities.
From a resourcing perspective, the business will continue to invest in its people in 2020 through
training and provision of support from PNG Head Office.
BSP CAPITAL
In 2019, BSP Capital delivered a significant turnaround with improvements across its business,
resulting in a profit of K876k, compared to a loss of K803k in 2018. Funds under Management grew
by 7.4% from K6.8bn to K7.2bn as at 31 December 2019.
During the year BSP Capital entered into an agreement to sell its stockbroking business to JMP
Securities (a subsidiary of Pertusio Capital). The sale was contingent on the PNG Securities Commission
granting Securities licenses as well as PNGX granting membership to JMP Securities. Both conditions
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTDGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams Key Highlights
BSP LIFE
FJ$46.9m
Investment portfolio grew by $46.9m in
2019, exceeding $760m
Launch
Wantok Group Term Life in March 2019
were satisfied in late 2019 and we are now in the process of transitioning
the business to JMP Securities.
data indicates BSP Life’s market share on Life inforce (annual premium) at
54%, Medical market share at 54% market and Term Life at 42%.
Advisory transactions were also mired by the slow economic environment
experienced during 2019. Nonetheless, we remain positive that a number
of advisory initiatives will be progressed in 2020.
The investment portfolio grew by $46.9m in 2019, exceeding $760m and
placing BSP Life as Fiji’s largest institutional investor, outside of the Fiji
National Provident Fund.
BSP LIFE
Fiji
2019 was the first full year of operations for BSP Life Fiji’s new core system.
With the new system in place, it allowed the business to re-focus initiatives
to support strategic goals and financial targets.
The year started with our new managing director Michael Nacola replacing
Malakai Naiyaga, who had built the BSP Life brand since acquisition from
Colonial in 2010. Malakai’s term marked a significant chapter in BSP
Life’s history, transitioning the Life and Health Insurance businesses from
turbulent waters to a steady growth state. Sound financial outcomes
through the decade are testament to Malakai’s leadership, laying the
foundation for future growth.
A new program on work-place culture called “The BSP Life Way” was
introduced to invigorate our Vision and Values and strengthen our service
excellence focus. Under the BSP Life Way, a number of strategic initiatives
were implemented including developing a stronger risk and compliance
culture; streamlining processes to optimise resources and improve
customer outcomes; heightened focus on cost management; broadening
our markets; improving our on-line presence through a website re-design
and introduction of a customer self-service portal; development of a
new endowment product for Life and new suite of Medical products for
Health; new marketing positioning to support the brand; support for
the rollout of BSP Life in PNG; plus strategic investments to support the
growing investment portfolio. The year culminated with a new organisation
structure to support the strategic focus for the next decade.
BSP Life also continued its financial literacy education, advocating life and
health insurance as integral parts of strengthening financial futures for all
Fijians.
Financially, 2019 delivered above budget profit outcomes for the Health
and Life businesses. Group shareholder profit was $20.6m, above budget
by 40%. The Life business recorded a profit of $20.4m, above budget by
41%. The Health business recorded a profit of $1.5m, above budget by 22%
and doubling 2018 profit. These were positive outcomes considering the
subdued economic environment and competitive landscape.
New Business for both Companies improved by 19% over the prior year.
Inforce growth (total premiums received) for the Life business was 12%
above budget and a 60% improvement on the prior year’s growth. Industry
The favorable investment returns experienced in 2018 continued in 2019.
The strong performance of our listed equities contributed significantly
to the overall portfolio performance. Our private equities comprising
the Sofitel Resort and Spa, Rooster Poultry and the Oceania Hospital in
Suva, performed satisfactorily and are poised for further growth in 2020.
New key investments included a 15% share acquisition in Port Denarau
Marina, further strengthening our presence in the growing tourism sector;
a property earmarked for a mixed retail and commercial development
in Nadi; and a major refurbishment of the Sofitel Resort and Spa of
approximately $40m.
Returns from the portfolio supports dividends to our parent Company, BSP,
and provides sustainable bonuses to policyholders. BSP Life will undertake
further substantive investments in 2020 and will also explore opportunities
to increase offshore investments and the private equities portfolio.
The outlook for 2020 is challenging with only 1.7% GDP growth anticipated,
however the business is well positioned to expand, focussing on developing
stronger relationships with key partners to grow value for shareholders and
policyholders.
PNG
BSP Life PNG Limited (BSP Life PNG) is the youngest subsidiary of the BSP
Group which commenced operations in PNG in January 2018 and 2019 was
a continuation of the businesses establishment phase.
In March 2019, BSP Life PNG launched its second life insurance product
called “Wantok Group Term Life”, which is largely distributed via the
Broker channel. This product is mainly targeted towards employer
based groups and associations who want to provide life insurance cover
to their employees or members. At the end of 2019, BSP Life PNG had
inforce premium of K2.5m from this product. BSP Life PNG successfully
implemented its Life Insurance System (BLIS) – Phase 1 for the Group Term
Life product in May 2019 and Phase 2 in December 2019 for the anticipated
endowment product (AEP).
A new Sales Unit was established at Level 1 Boroko Banking Centre in
November 2019.
BSP Life’s strategic focus for 2020 is to deliver rapid premium income
growth from the Wantok Group Term Life and Wantok Delite, endowment
product and continue capacity building for staff and agents through regular
training programs.
35
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Governance Report
LEADERSHIP
We inspire, we change, and we live
our values, and lead by example.
36
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Corporate
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 practi ce. The Board ensures that it complies with
the requirements of the PNG Exchange Markets (PNGX).
The Board, management and staff of BSP are very much aware of their responsibiliti es 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 – regulators, shareholders , customers
and staff alike.
BSP’s Corporate Governance Principles are available in the Investor Relati ons secti on of BSP’s website
at www.bsp.com.pg.
BSP also complies with the Prudenti al Standards/Statements dealing with corporate governance
issued by the regulators/central banks in the various countries that it operates in. These Prudenti al
Standards/Statements currently include: -
• The Bank of Papua New Guinea (BPNG) introduced its new Banking Prudenti al Standard BPS300:
Corporate Governance (issued under Secti on 27 of the Banks and Financial Insti tuti ons Act 2000)
in August 2016. The Eff ecti ve Date of this Prudenti al 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 Nati onal Reserve Bank of Tonga Prudenti al Statement No. 9 (revised 2014): Governance.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
37
Corporate Governance Report
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, 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, financial, 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 BSP complies with the law and relevant regulations, and
conforms with the highest standards of financial and ethical behaviour;
• 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:
• developing the annual operating and capital expenditure budgets for
Board approval, and monitoring performance against these budgets;
• developing and
implementing strategies within the framework
approved by the Board, and providing the Board with recommendations
on key strategic issues;
• appointing management below the level of General Manager and
preparing and maintaining succession plans for these senior roles;
• developing and maintaining effective risk management policies and
procedures; and
• keeping the Board and the market fully
informed of material
developments.
Membership, Expertise, Size and Composition of the Board
The Corporate Governance Principles affirm that the majority of the Board
should be independent.
Directors of BSP are meticulous in handling situations where there could
potentially be conflicts of interest, by declaring their interest in advance,
and absenting themselves from any consideration of matters where a
conflict might arise. The BSP’s Corporate Governance Principles require
Directors to disclose any new directorships and equity interests at each
Board Meeting.
38
The maximum number of Directors, as prescribed by the Constitution
approved by Shareholders, is ten. At the date of this report there are
nine Directors, with eight Non - Executive 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.
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 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 - 11. 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.
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTDGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams Consistent with Recommendation 2.6, BSP has a program for inducting
new Directors and providing appropriate professional development
opportunities for Directors.
Director and those of BSP. These arrangements are designed to ensure that
the independence and integrity of the Board are maintained.
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
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 106 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 2019.
• reviewing the performance of Non-Executive Directors.
Review of Board Performance
Director Independence and Conflict of Interest
Directors are determined to be independent if they are judged to be free
from any material or other business relationship with 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
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 2019 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
of the Board as a whole to include an assessment of the contribution of
each individual Director. The Board is cognisant of the need to continually
identify areas for improvement; to ensure that it meets the highest
standards of corporate governance; and for the Board and each Director
to make an appropriate contribution to the Group’s objective of providing
value to all its stakeholders. The performance review is facilitated annually
by an external consultant.
The Board with the assistance of the Remuneration and Nomination
Committee sets the targets for the Chief Executive Officer and Senior
Management members under BSP’s employee incentive arrangements
described below. These incentive arrangements are administered by the
Remuneration and Nomination Committee. Performance against the
relevant targets is assessed periodically throughout the year and a formal
evaluation is undertaken annually.
Board Access to Information and Advice
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.
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
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BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams Corporate Governance Report
to meet with the Chief Executive Officer, General Managers, Heads of
Subsidiaries and Country Heads for further consultation, and to discuss
issues associated with the fulfilment of their roles as Directors.
enhanced monitoring of BSP's Compliance Risk, AML/CTF & regulatory requirements.
Sir Kostas G. Constantinou and Augustine Mano are not members of any
Board committees.
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 2019, 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 2019:
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. The BRCC and BRC Charters
were updated to reflect the changed responsibilities.
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 & Compliance Committee
The BACC assists the Board to discharge its responsibilities of oversight and
governance in relation to financial and audit matters. The responsibilities
of the BACC 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;
• monitor the controls and effectiveness of BSP's compliance obligations;
• the systems for ensuring operational efficiency and cost control;
• the systems for approval and monitoring of expenditure including
Board Audit & Compliance Commitee *
capital expenditure; and
Geoff Robb
Ernest Gangloff
Arthur Sam
Stuart Davis
Frank Bouraga1
Board Risk Committee *
Geoff Robb
Ernest Gangloff
Arthur Sam
Stuart Davis
Charles Lee1
Priscilla Kevin1
Remuneration and Nomination Committee
Freda Talao (Chairperson)
Faamausili Dr Matagialofi Lua’iufi
Robert Bradshaw
5/6
6/6
6/6
6/6
6/6
5/6
6/6
6/6
6/6
6/6
6/6
7/7
6/7
7/7
1Charles Lee, Frank Bouraga and Priscilla Kevin 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.
* During the year the Board allocated the responsibility of compliance to the BAC which was
renamed BACC with BRCC now BRC focusing on risk issues the amendment was to provide
40
• 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 BACC is formed amongst the Non-Executive Directors,
excluding the Chairman. The BACC must have a minimum of three Non-
Executive Directors, the majority of whom must be independent. The
Board may also appoint to the BACC additional individuals who are not
executives or members of the Board who have specialised skills to assist
the BACC. The chairman of the BACC must be an appropriately experienced
independent Non-Executive Director, other than the Chairman (or other
Board committee chairman).
The BACC 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 BACC meeting. The BACC regularly reports to the Board
at the earliest possible Board meeting after each BACC meeting about
any matters that should be brought to the attention of the Board and any
recommendations requiring Board action.
Board Risk and Compliance Committee
The BRC (formerly 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 BRC 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);
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTDGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams • oversee BSP’s risk profile and risk management strategy, and
(b) considering whether BSP is obliged or is required to respond to a
recommend BSP’s risk appetite statement; and
market rumour or media speculation; and
(c) overseeing the Disclosure Officer’s administration of the Continuous
Membership of the BRC is formed amongst the Non-Executive Directors,
excluding the Chairman. The BRC must have a minimum of three Non-
Executive Directors, the majority of whom must be independent. The
Board may also appoint to the BRC additional individuals who are not
executives or members of the Board who have specialised skills to assist
the BRC. The chairman of the BRC must be an appropriately experienced
independent Non-Executive Director, other than the Chairman (or other
Board committee chairman).
The BRC 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 BRC meeting. The BRC regularly reports to the Board
at the earliest possible Board meeting after each BRC 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 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 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 fulfill its responsibilities to shareholders
while maintaining a world class Corporate Governance regime.
The RNC is comprised of three Non-Executive Directors. 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
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 PNGX, 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;
Disclosure Policy.
Annual Financial Statements
The BACC 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 BACC 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 BACC 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
2020, and be available to answer shareholder questions regarding the audit.
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Internal Audit
BSP has an
internal audit function. The BACC approves, on the
recommendation of management, the appointment of the Head of Internal
Audit. The Committee meets regularly with the Head of Internal Audit.
Reviews are undertaken of the scope of the work of the internal audit
function to ensure no unjustified restrictions or limitations have been
placed upon the Internal Audit Business Unit. The BACC also reviews the
qualifications of internal audit personnel and endorses the appointment,
replacement, reassignment or dismissal of the internal auditors.
The BACC 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 BACC
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 BACC 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 BACC 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.
IT Risk: The current and potential threat to earnings, capital or reputation
as a result of a failure of information systems managed, maintained and
operated by the Bank.
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.
Compliance Risk: The risk of loss or penalties imposed by a regulator for
non compliance with regulations, prudential standards and policies.
Operational Risk: The risk of loss resulting from inadequate or failed
internal processes, people, or from external events, including legal.
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.
Compliance and AML is monitored by the recently established Compliance
and AML business unit, including the maintenance of a risk register system
that has been implemented across the Group. The Executive Committee
and the Board overview the highest tier of risks within these risk registers.
The Group’s Risk Management Policy ensures that the Group has in
place acceptable limits for the risks identified by employees. The risk
management approach encompasses the following:
• defining the types of risks that will be addressed by each functional or
policy area (i.e. credit risk, interest rate risk, liquidity risk, operational
risk;
• 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.
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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 BRC responsibility for overview
of loss control and for overseeing the risk management function.
The BRC 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
position and performance of BSP; and
• their opinions above have been formed on the basis of a sound system
of risk management and internal control applying to BSP, which is
operating effectively;
• Additionally all General Managers and Country Managers provide bi-
annual statements attesting that;
• they have assessed and documented the risks and internal control
procedures in their Strategic Business Unit;
• they have identified any changes in business, operations and computer
systems and the risks that may arise from those changes;
• the risk management and internal compliance and control systems are
appropriate and operating efficiently and effectively; and
• any weaknesses in the risk management and internal compliance and
control systems have been identified and remedial action taken.
ETHICAL BEHAVIOUR
BSP acknowledges the need for Directors and employees at all levels to
observe the highest standards of ethical behaviour when undertaking BSP
business. To this end, the Board has adopted:
• a Code of Conduct for both Directors and members of the Executive
Management Team of the Group and stipulated that each Director
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.
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;
43
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams Corporate Governance Report
• other unethical conduct;
•
• abuse of power, or use of the Group’s powers and authority for any
failure to comply with appropriate professional standards;
unauthorised purpose or personal gain; and
• breach of statutory codes of practice.
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.
BSP’s Code of Conduct for Employees and Directors is available at www.
bsp.com.pg in the Investor Relations section.
Directors and management of the Group are subject to Securities Act 1997
restrictions for buying, selling or subscribing for securities in the Group
if they are in possession of inside information, i.e. information which is
not generally available and, if it were generally available, a reasonable
person would expect to have a material effect on the price or value of the
securities of the Group.
Further, Directors and management may only trade in the securities of
the Group, subject to the foregoing insider trading restrictions, during
each of the eight weeks following the announcements of half yearly
profit and yearly profit or the date of issue of a prospectus. Management
should discuss proposed share trades with the Chief Executive Officer in
advance, who in turn will keep the Chairman of the Board appraised of
management activities. Directors should discuss proposed share trades
with the Chairman in advance.
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 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. An
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.
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.
Consistent with Recommendation 6.4, BSP gives Shareholders the option
to send and receive communications from BSP and its share registry
electronically. From 2017, BSP and its share registry will 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.
Remuneration packages are approved by the Remuneration and
Nomination Committee, and details are provided by the Committee to the
Board.
Fixed remuneration is reviewed at the time of contract renewal taking
into account the nature of the role, comparable market pay levels, and
individual and business performance.
Members of Senior Management who serve as Directors of subsidiaries of
BSP receive no fees for their service as a Director.
44
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTDGroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams Non-Executive Director Remuneration
Non-Executive Directors are remunerated on a fixed basis within an
aggregate Directors’ fee pool approved periodically by Shareholders.
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 planned changes to the
Board for approval.
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 2018, the Shareholders approved an increase in the
pool to PGK 4.5 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 programs or
the employee incentive schemes described below.
If the EPS target for a cycle is achieved, the matrix set out below is used to
determine the award at the end of that cycle.
Exercising the performance rights is subject to the condition that BSP’s net
profit after tax (NPAT) for the vesting year is above BSP’s NPAT in the issuing
year.
Participants are personally responsible for any income tax liability in
respect of payments made under the LTIP.
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.
A table of fees paid to Directors during 2019 is produced on page 77.
WEBSITE
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.
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.
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.
Long Term Incentive Plan
BSP also has a Long Term Incentive Plan (LTIP) for certain senior employees.
The LTIP is currently in use.
SUSTAINABILITY RISKS
identifies and manages
its material exposures to economic,
BSP
environmental and social sustainability risks within the risk management
framework described above. In particular, BSP has a separate Social and
Environmental Management Systems Policy which identifies and manages
these risks. This policy applies to all Directors and employees of BSP.
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.
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.
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.
#
1
2
3
Approved EPS Hurdles
EPS target to achieved
Target NPAT
Percentage of Performance Rights to exercise
107.5% >
102.5% >
97.5% >
As recommended by RNC
and approved by Board each
LTIP cycle.
As recommended by RNC
and approved by Board each
LTIP cycle
150% of Performance Rights
100% of Performance Rights
50% of Performance Rights
45
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate
Social
Responsibility
Financial Statements
Directors' Report
Statements of Comprehensive Income
Statements of Financial Positi on
Statements of Changes in Shareholders’ Equity
Statements of Cash Flows
Notes to the Financial Statements
Independent Auditor's Report
INTEGRITY
We are honest, committ ed, trustworthy
and reliable in our dealings with our
customers and each other.
46
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Social
Teams
Responsibility
Corporate
Directors’ Report
for the year ended 31 December 2019
The Directors take pleasure in presenti ng the Financial Statements of the Bank of South Pacifi c Limited and its subsidiaries (Bank
and the Group) for the year ended 31 December 2019. In order to comply with the provisions of the Companies Act 1997, the
Directors report as follows:
Principal acti viti es
The principal acti vity of the Bank of South Pacifi c Limited (BSP) is the provision of commercial banking and fi nance services. The Group’s acti viti es also include
fund management and life business services throughout Papua New Guinea and the Asia Pacifi c region. BSP is a company listed on the PNG Exchange Markets
(PNGX), incorporated under the Companies Act of Papua New Guinea, and is an authorised Bank under the Banks and Financial Insti tuti ons Act of Papua
New Guinea. The Group is also licensed to operate in the Solomon Islands, Fiji, Cook Islands, Samoa, Tonga, Vanuatu and Cambodia. The registered offi ce is
at Secti on 34, Allotment 6 & 7, Klinki Street, Waigani Drive, Port Moresby.
Review of operati ons
For the year ended 31 December 2019, the Group’s profi t aft er tax was K890.363 million (2018: K844.072 million). The Bank’s profi t aft er tax was K845.828
million (2018: K787.446 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 att ached fi nancial statements and notes thereto are in accordance with the PNG Companies Act 1997, including compliance
with accounti ng standards and give a true and fair view of the fi nancial positi on and performance of the Bank and the Group.
The results of the Bank and the Group operati ons during the fi nancial year have, in the opinion of the Directors, not been materially aff ected by items of an
abnormal nature, other than those disclosed in the fi nancial statements. In the opinion of the Directors, no circumstances have arisen, that make adherence
to the existi ng method of valuati on of assets or liabiliti es 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 att ributed to current assets in the fi nancial statements
misleading.
No conti ngent liability other than that disclosed in the notes to the att ached fi nancial 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 aff ect the Bank and the Group in its ability to meet obligati ons as and when
they fall due.
Dividends
Dividend totalling K653.940 million were paid in 2019 (2018: K597.364 million). A detailed breakup of this is provided in Note 24.
Directors and offi cers
The following were directors of the Bank of South Pacifi c Limited at 31 December 2019:
Sir K Constanti nou, OBE
Mr. E B Gangloff
Mr. G Robb, OAM
Mr. R Fleming, CSM
Mr. A Mano
Dr. F Lua’iufi
Mr. S Davis
Mr. R Bradshaw
Mr. A Sam
Details of directors’ tenure and directors and executi ves’ remunerati on during the year are provided in Note 28 of the Notes to the Financial Statements. The
CEO Robin Fleming is the only executi ve director.
The company secretary is Mary Johns.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
47
Directors’ Report (continued)
for the year ended 31 December 2019
Independent auditor’s report
The financial statements have been audited and should be read in conjunction with the independent auditor’s report on page 98. Details of amounts paid to
the auditors for audit and other services are shown in Note 42 of the Notes to the Financial Statements.
Donations and sponsorships
Donations and sponsorship by the Group during the year amounted to K5.581 million (2018:K8.004 million).
Change in accounting policies
Changes to accounting policies that impacted the Group's result during the year are included in Note 1(A) of the Notes to the Financial Statements.
For, and on behalf of, the Directors.
Dated and signed in accordance with a resolution of the Directors in Port Moresby this 26th day of February 2020.
Sir Kostas G. Constantinou, OBE
Chairman
Robin Fleming, CSM
Group Chief Executive Officer/Managing Director
48
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD STATEMENTS OF COMPREHENSIVE INCOME
for the Year Ended 31 December 2019
Consolidated
Bank
All amounts are expressed in K’000
Note
2019
2018
2019
2018
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
40(b)
40(a)
1,585,773
1,561,691
1,477,235
1,460,484
(193,989)
(180,895)
(180,464)
(166,090)
1,391,784
1,380,796
1,296,771
1,294,394
384,761
364,130
382,508
363,488
346,951
373,366
347,892
353,528
2,140,675
2,126,792
2,017,088
1,995,814
152,233
168,829
(59,746)
(119,138)
(116,927)
5,424
30,675
143,097
156,547
(71,616)
(111,385)
(97,295)
19,565
38,913
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Net operating income before impairment and operating expenses
2,171,350
2,165,705
2,017,088
1,995,814
Impairment on financial assets
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
Fair value gain on remeasurement of investment securities
Net movement in asset revaluation
Other comprehensive income, net of tax
Total comprehensive income for the year
Earnings per share - basic and diluted (toea)
5
8
5
6
25
25
25
25
24
(99,183)
(82,440)
(88,092)
-
(819,248)
1,252,919
-
(887,097)
1,196,168
-
(740,729)
1,188,267
(71,639)
(803)
(806,833)
1,116,539
(362,556)
(352,096)
(342,439)
(329,093)
890,363
844,072
845,828
787,446
10,620
1,052
5,493
1,267
3,642
(14)
(5,719)
8,529
898,892
4,948
8
1,624
7,632
851,704
3,664
(14)
(5,714)
3,429
849,257
5,435
8
-
6,710
794,156
190.6
180.6
181.0
168.5
The attached notes form an integral part of these Financial Statements.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
49
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams STATEMENTS OF FINANCIAL POSITION
As at 31 December 2019
All amounts are expressed in K’000
Note
2019
2018
2019
2018
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 joint ventures
Investment in subsidiaries
Intangible assets
Investment properties
Deferred tax assets
Tax receivable
Other assets
Total assets
LIABILITIES
Amounts due to other banks
Customer deposits
Subordinated debt securities
Other liabilities
Deferred tax liabilities
Other provisions
Total liabilities
SHAREHOLDERS’ EQUITY
Ordinary shares
Retained earnings
Other reserves
10
11
12
17
13
14
14
9
8
7
16
6
6
18
19
20
21
22
6
23
24
25
25
1,816,564
2,459,497
1,022,469
1,766,601
1,253,449
2,494,700
1,510,406
2,420,088
966,707
2,480,356
854,019
997,816
796,180
1,685,544
1,693,300
1,622,035
2,121,071
2,555,443
1,572,755
2,073,873
13,200,807
12,530,649
11,819,970
11,232,725
879,942
48,133
202,040
-
196,206
168,360
250,846
27,588
366,994
693,277
52,433
175,579
-
174,623
153,665
239,607
12,753
205,482
698,755
48,133
20,787
378,263
177,601
-
246,086
30,275
276,618
538,181
52,433
20,038
347,597
152,551
-
234,391
17,020
162,293
24,527,118
23,081,223
21,890,853
20,696,380
83,931
51,539
162,145
116,019
19,339,056
18,232,766
17,981,756
16,959,170
-
75,525
-
1,751,894
1,623,992
759,755
31,542
31,163
-
75,525
766,981
-
203,662
194,103
186,574
177,799
21,410,085
20,209,088
19,090,230
18,095,494
372,310
372,364
372,310
372,364
2,394,382
2,156,873
2,173,836
1,976,138
346,513
339,320
254,477
252,384
Equity attributable to the members of the company
3,113,205
2,868,557
2,800,623
2,600,886
Minority interests
Total shareholders’ equity
Total equity and liabilities
3,828
3,578
-
-
3,117,033
2,872,135
2,800,623
2,600,886
24,527,118
23,081,223
21,890,853
20,696,380
The attached notes form an integral part of these Financial Statements.
50
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD All amounts are expressed in K’000
Note
Share capital
Reserves
Retained
earnings
Minority
Interests
Total
STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
for the Year Ended 31 December 2019
Bank
Balance as at 1 January 2018
IFRS 9 transition provisions
373,001
260,374
-
-
Restated balance as at 1 January 2018
373,001
260,374
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Share buyback
Total transactions with owners
Transfer from asset revaluation reserve
BSP Life policy reserve
Balance at 31 December 2018
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Share buyback
Total transactions with owners
Transfer from asset revaluation reserve
BSP Life policy reserve
Balance at 31 December 2019
Group
Balance as at 1 January 2018
IFRS 9 transition provisions
Restated balance as at 1 January 2018
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Share buyback
Loss attributable to minority interests
Total transactions with owners
Transfer from asset revaluation reserve
BSP Life policy reserve
Balance at 31 December 2018
Net profit
Other comprehensive income
Total comprehensive income
Dividends paid during the year
Share buyback
Gain attributable to minority interests
Total transactions with owners
Transfer from asset revaluation reserve
BSP Life policy reserve
Balance at 31 December 2019
25
24
25
25
25
24
25
25
25
24
25
25
25
25
24
25
25
25
-
-
-
-
(637)
(637)
-
-
372,364
-
-
-
-
(54)
(54)
-
-
372,310
373,001
-
373,001
-
-
-
-
(637)
-
(637)
-
-
372,364
-
-
-
-
(54)
-
(54)
-
-
372,310
1,777,627
(10,221)
1,767,406
787,446
-
787,446
(593,414)
-
(593,414)
18,116
(3,416)
1,976,138
845,828
-
845,828
(649,466)
-
(649,466)
4,933
(3,597)
2,173,836
-
6,710
6,710
-
-
-
(18,116)
3,416
252,384
-
3,429
3,429
-
-
-
(4,933)
3,597
254,477
346,388
1,904,462
-
(9,903)
346,388
1,894,559
-
7,632
7,632
-
-
-
-
(18,116)
3,416
339,320
-
8,529
8,529
-
-
-
-
(4,933)
3,597
346,513
844,072
-
844,072
(597,364)
-
906
(596,458)
18,116
(3,416)
2,156,873
890,363
-
890,363
(653,940)
-
(250)
(654,190)
4,933
(3,597)
2,394,382
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,484
-
4,484
-
-
-
-
-
(906)
(906)
-
-
3,578
-
-
-
-
-
250
250
-
-
2,411,002
(10,221)
2,400,781
787,446
6,710
794,156
(593,414)
(637)
(594,051)
-
-
2,600,886
845,828
3,429
849,257
(649,466)
(54)
(649,520)
-
-
2,800,623
2,628,335
(9,903)
2,618,432
844,072
7,632
851,704
(597,364)
(637)
-
(598,001)
-
-
2,872,135
890,363
8,529
898,892
(653,940)
(54)
-
(653,994)
-
-
3,828
3,117,033
The attached notes form an integral part of these Financial Statements.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
51
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams
STATEMENTS OF CASH FLOWS
for the Year Ended 31 December 2019
All amounts are expressed in K’000
Note
2019
2018
2019
2018
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 &
liabilities
1,605,387
1,544,691
1,480,232
1,442,960
779,565
784,910
719,567
680,110
(167,913)
(776,812)
(183,137)
(722,282)
(153,354)
(646,339)
(169,364)
(628,865)
29
1,440,227
1,424,182
1,400,106
1,324,841
Increase in loans, advances and other receivables to customers
(737,195)
(1,377,537)
(644,594)
(1,188,543)
Increase in statutory deposits with the Central Banks
Increase in bills receivable and other assets
Increase in customer deposits
Movement in bills payable and other liabilities
Net cash flow from operations before income tax
(81,058)
(87,166)
(201,387)
(121,256)
1,106,290
(184)
1,526,693
446,549
232,175
516,947
(71,265)
(98,089)
1,022,586
(207,231)
1,401,513
Income taxes paid
6
(383,287)
(420,430)
(363,837)
Net cash flow from/(used in) operating activities
1,143,406
96,517
1,037,676
(80,939)
(103,872)
250,889
152,467
354,843
(402,213)
(47,370)
CASH FLOW FROM INVESTING ACTIVITIES
Decrease in government securities
Expenditure on property, plant and equipment
Expenditure on software development costs
Proceeds from disposal of property, plant and equipment
Additional funding of subsidiaries
Net cash flow used in investing activities
CASH FLOW FROM FINANCING ACTIVITIES
Share buyback
Dividends paid
Principal repayments of borrowings
Proceeds from borrowings
Subordinated debt securities matured
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
8
24
25
22
22
21
29
29
429,961
(82,780)
695,907
(32,766)
561,386
(79,249)
785,053
(25,804)
(52,108)
(79,163)
(49,979)
(75,468)
7,076
-
966
-
302,149
584,944
(54)
(637)
(653,940)
(61,153)
(597,364)
(102,866)
7,076
(30,666)
408,568
(54)
(649,466)
(61,153)
966
(10,000)
674,747
(637)
(593,414)
(102,866)
33,670
80,273
33,670
80,273
(75,525)
-
(75,525)
-
(757,002)
(620,594)
(752,528)
(616,644)
688,553
60,867
693,716
10,620
2,055,929
2,755,102
1,052
1,994,010
2,055,929
5,493
1,646,868
2,346,077
10,733
1,267
1,634,868
1,646,868
The attached notes form an integral part of these Financial Statements.
52
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
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(i) 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.
- IFRS 3 ‘Business combination’ – a company remeasures its previously
held interest in a joint operation when it obtains control of the
business.
- IFRS 11 ‘Joint arrangements’ – a company does not remeasure its
previously held interest in a joint operation when it obtains control
of the business.
- IAS 12 ‘Income taxes’ – a company accounts for all income tax
consequences of dividend payments in the same way.
- IAS 23 ‘Borrowing costs’ – a company treats as part of general
borrowings any borrowings originally made to develop an asset when
the asset is ready for its intended use or sale.
• Amendments to IAS 28 ‘Investments in associates’ on long term
interests in associates and joint ventures. These amendments clarify
that long-term interests in an associate or joint venture to which the
equity method is not applied should be accounted for using IFRS 9.
This includes the impairment requirements in IFRS 9.
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.
• Amendments to IAS 19, ‘Employee benefits’ on plan amendment,
curtailment or settlement. These amendments require an entity to:
- use updated assumptions to determine current service cost and net
interest for the remainder of the period after a plan amendment,
curtailment or settlement, and
- recognise in profit or loss as part of past service cost, or a gain or loss
on settlement, any reduction in a surplus, even if that surplus was not
previously recognised because of the impact of the asset ceiling.
The financial statements are presented in Papua New Guinea Kina,
expressed in thousands of Kina, as permitted by International Financial
Reporting Standards.
Standards, amendments and interpretations effective in the year ended
31 December 2019
The following standards, amendments and interpretations to existing
standards became applicable for the first time during the accounting
period beginning 1 January 2019.
•
IFRS 16, ‘Leases’ removes the previous IAS 17 distinction between
finance leases and operating leases and 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.
• Amendment to IFRS 9 on prepayment features with negative
compensation. This amendment confirms that when a financial liability
measured at amortised cost is modified without this resulting in de-
recognition, a gain or loss should be recognised immediately in profit
or loss. The gain or loss is calculated as the difference between the
original contractual cash flows and the modified cash flows discounted
at the original effective interest rate.
•
IFRIC 23, ‘Uncertainty over income tax treatments’ clarifies how the
recognition and measurement requirements of IAS 12 ‘Income Taxes’
are applied where there is uncertainty over income tax positions. The
IFRS IC had clarified previously that IAS 12, not IAS 37 ‘Provisions,
contingent liabilities and contingent assets’, applies to accounting for
uncertain income tax treatments. IFRIC 23 explains how to recognise
and measure deferred and current income tax assets and liabilities
where there is uncertainty over a tax treatment. A subsequent IC
agenda decision also provided guidance on the presentation of
uncertain tax positions.
• Annual improvements 2015 – 2017. These amendments include minor
changes to:
Standards, amendments and interpretations issued but not yet effective
for the year ended 31 December 2019 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 2020 or later periods,
but the entity has not early adopted them:
• Amendments to IFRS 3 – definition of a business (effective 1 January
2020). This amendment revises the definition of a business. According
to feedback received by the IASB, application of the current guidance
is commonly thought to be too complex, and it results in too many
transactions qualifying as business combinations.
• Amendments to IAS 1 and IAS 8 on the definition of ‘material’
(effective 1 January 2020). These amendments to IAS 1, ‘Presentation
of financial statements’, and IAS 8, ‘Accounting policies, changes in
accounting estimates and errors’, and consequential amendments to
other IFRSs:
- use a consistent definition of materiality throughout IFRSs and the
Conceptual Framework for Financial Reporting
- clarify the explanation of the definition of material; and
- incorporate some of the guidance in IAS 1 about immaterial
information.
• Amendments to IFRS 9, IAS 39 and IFRS 7 – interest rate benchmark
reform (effective 1 January 2020). Following the financial crisis, the
replacement of benchmark interest rates such as LIBOR and other
inter-bank offered rates (‘IBORs’) has become a priority for global
regulators. These amendments relate to hedge accounting and
have the effect that IBOR reform should not generally cause hedge
accounting to terminate. However, any hedge ineffectiveness should
continue to be recorded in the income statement under both IAS 39
and IFRS 9. Furthermore, the amendments set out triggers for when
the reliefs will end, which include the uncertainty arising from interest
rate benchmark reform no longer being present.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
53
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
•
IFRS 17 ‘Insurance contracts' (effective 1 January 2022) replaces IFRS
4. IFRS 17 will fundamentally change the accounting by all entities that
issue insurance contracts and investment contracts with discretionary
participation features.
IFRS 16 are only applied after that date. The re-measurements to the lease
liabilities were recognised as adjustments to the related right-of-use assets
immediately after the date of initial application.
It requires a current measurement model where estimates are re-
measured at each reporting period. Contracts are measured using the
building blocks of:
o Discounted probability-weighted cash flows
o An explicit risk adjustment; and
o A contractual service margin (“CSM”) representing the
unearned profit of the contract which is recognised as
revenue over the coverage period.
The standard allows a choice between recognising changes in discount rates
either in the statement of profit or loss or directly in other comprehensive
income. The choice is likely to reflect how insurers account for their
financial assets under IFRS 9.
An optional, simplified premium allocation approach is permitted for the
liability for the remaining coverage for short duration contracts, which are
often written by non-life insurers.
There is a modification of the general measurement model called the
‘variable fee approach’ for certain contracts written by life insurers where
policyholders share in the returns from underlying items. When applying
the variable fee approach the entity’s share of the fair value changes of
the underlying items is included in the contractual services margin. The
results of insurers using this model are therefore likely to be less volatile
than under the general model.
The new rules will affect the financial statements and key performance
indicators of all entities that issue insurance contracts or investments
contracts with discretionary participation features. The group is in the
process of assessing the impact of IFRS 17 to its insurance entities: BSP Life
(Fiji) Limited and BSP Life PNG Limited.
A (ii) IFRS 16 Transitional Impact effective 1st January 2019
The Group adopted IFRS 16 Leases as issued by the IASB with a date of
transition of 1 January 2019, which resulted in changes in accounting
policies and adjustments to the amounts previously recognised in the
financial statements. The Group did not early adopt IFRS 16 in previous
periods.
As permitted by the transition provisions of IFRS 16, the Group elected
not to restate comparative figures. On the initial application of IFRS 16,
no adjustments had to be made to the opening retained earnings as at
1 January 2019 as the right of use assets were recognised at the amount
equal to the corresponding lease liabilities. Consequently, for note
disclosures, the consequential amendments have only been applied to
the current period. The comparative period note disclosures repeat those
disclosures made in the prior year.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities in relation to
leases which had previously been classified as ‘operating leases’ under the
principles of IAS 17 Leases. These liabilities were measured at the present
value of the remaining lease payments, discounted using the lessee’s
incremental borrowing rate as of 1 January 2019. The average lessee’s
incremental borrowing rate applied to the lease liabilities on 1 January
2019 was 2.25%.
For leases previously classified as finance leases the entity recognised the
carrying amount of the lease asset and lease liability immediately before
transition as the carrying amount of the right of use asset and the lease
liability at the date of initial application. The measurement principles of
54
All amounts are expressed in K’000
2019
Operating lease commitments disclosed as at 31
December 2018
Discounted using the lessee’s incremental borrowing
rate of at the date of initial application
(Less): short-term leases recognised on a straight-line
basis as expense
Add/(less): adjustments as a result of a different
treatment of extension and termination options
Lease liability recognised as at 1 January 2019
Of which are:
Current lease liabilities
Non-current lease liabilities
117,370
107,048
(2,381)
93,207
197,874
24,435
173,439
197,874
The associated right-of-use assets for property leases were measured on a
modified retrospective basis as if the new rules had always been applied.
There were no onerous lease contracts that would have required an
adjustment to the right-of-use assets at the date of initial application.
The recognised right-of-use assets relate to the commercial and residential
properties, and also considered dataline leases totaling K200,325. The
change in accounting policy affected the following items in the balance
sheet on 1 January 2019:
•
•
right-of-use assets – increase to K197,874.
lease liabilities – increase to K197,874.
The net impact on retained earnings on 1 January 2019 was nil.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the following
practical expedients permitted by the standard:
•
•
•
•
the use of a single discount rate to a portfolio of leases with
reasonably similar characteristics
the accounting for operating leases with a remaining lease term
of less than 12 months as at 1 January 2019 as short-term leases
the exclusion of initial direct costs for the measurement of the
right-of-use asset at the date of initial application, and
the use of hindsight in determining the lease term where the
contract contains options to extend or terminate the lease.
B. Consolidation
The Financial Statements incorporate the assets and liabilities of all
controlled entities of the Group as at 31 December 2019, and their results
for the year then ended.
Controlled entities are those over which the Group has the power to govern
financial and operating policies, generally accompanied by a shareholding
that commands the majority of voting rights, and are commonly referred
to as subsidiaries.
Subsidiaries are accounted for at acquisition under the acquisition cost
method of accounting, where:
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
• 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.
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.
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 rate
(“EIR”) 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.
income and
interest expense for all financial
Interest
instruments
measured at amortised cost is recognised using the effective interest rate
method. Interest income is recognised for Stage 1 and Stage 2 financial
assets measured at amortised cost by applying the EIR to gross carrying
amounts of the financial instruments. For Stage 3 financial instruments,
interest income is recognised by applying EIR on the net carrying value of
the financial instrument.
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
Insurance policy liabilities are further detailed in Note 40.
Short term insurance contracts
These contracts are the Term Life, Medical and Travel policies sold and
underwritten by BSP Health Care (Fiji) Limited and BSP Life PNG Limited.
These contracts protect the Group’s customers from the consequences of
events such as death, medical emergency or loss on travel. Guaranteed
benefits paid on occurrence of the specified insurance event are either fixed
or linked to the extent of the economic loss suffered by the policyholder.
There are no maturity or surrender benefits.
For all these contracts, premiums are recognised as revenue (earned
premiums) proportionally over the period of coverage. The portion of
premium received on in-force contracts that relates to unexpired risks
at the Statement of Financial Position date is reported as the unearned
premium liability. Premiums are shown before deduction of commission.
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 or losses
Realised and unrealised gains or losses from foreign currency trading,
or from changes in the fair value of the trading assets and liabilities are
recognised as income in the Statement of Comprehensive Income in the
period in which they arise.
E. Fee and commission income
Fees and commissions are generally recognised on an accrual basis when
the service has been provided. All other risk related fees that constitute
cost recovery are taken to income when levied. Loan origination fees are
deferred over the expected term of the financial instrument according to
the effective interest method. The effective interest method uses the rate
that exactly discounts estimated future payments and receipts through the
expected life of the instrument or when appropriate, a shorter period to
the net carrying amount of the financial asset.
F. Borrowing expenses
Expenses associated with the borrowing of funds are charged to the
Statement of Comprehensive Income in the period in which they are
incurred.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
55
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NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
G. Provision for loan impairment
method. Costs associated with maintaining computer software programs
are recognised as an expense when incurred.
Loans are originated by providing funds directly to the borrower and are
recognised when cash is advanced to borrowers.
J. Property, plant and equipment
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.
Impairment
The Group assesses on a forward-looking basis the expected credit losses
(‘ECL’) associated with its debt instrument assets carried at amortised
cost and with the exposure arising from loan commitments and financial
guarantee contracts. The Group recognises a loss allowance for such losses
at each reporting date. The measurement of ECL reflects:
• An unbiased and probability-weighted amount that
determined by evaluating a range of possible outcomes;
is
• The time value of money; and
• Reasonable and supportable information that is available
without undue cost or effort at the reporting date about past
events, current conditions and forecasts of future economic
conditions.
Note 34 provides more detail of how the expected credit loss allowance
is measured.
H. Goodwill
Goodwill represents the excess of the cost of any acquisition over the
acquirer’s interest in the fair value of the identifiable assets and liabilities
acquired as at the exchange transaction. Goodwill is reported in the
Statement of Financial Position as an intangible asset.
In determining goodwill, management considers various factors including
net selling price of the acquired business, existing market share, potential
growth opportunities, and other factors inherent in the acquired business.
This assessment is reviewed at each balance date, so that any indication
of impairment with implications for the recoverability of goodwill can
be tested, and adjustments to the carrying value of goodwill made if
necessary.
I. Computer systems development costs
Costs incurred to develop and enhance the Group’s computer systems
are capitalised to the extent that benefits do not relate solely to revenue
that has already been brought to account and will contribute to the future
earning capacity of the economic entity. These costs are amortised over
the estimated economic life of four to eight years using the straight-line
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
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.
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.
The following basis and method of depreciation is used:
Class of asset
Method
Property (excluding land)
Straight line basis
Plant and equipment
Equipment under
operating lease
Straight line basis
Straight line basis
Rate
2 - 3% pa
10 - 25% pa
3 - 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
(i) The Group’s leasing activities and how these are accounted for
The Group leases various offices and branches for its retail operations.
Rental contracts are typically made for fixed periods of 3 to 5 years but
may have extension options as described in (iii) below. Lease terms are
negotiated on an individual basis and contain a wide range of different
terms and conditions. The lease agreements do not impose any covenants,
but leased assets may not be used as security for borrowing purposes.
56
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
Until the 2018 financial year, leases of property, plant and equipment were
classified as operating leases. Payments made under operating leases (net
of any incentives received from the lessor) were charged to profit or loss on
a straight-line basis over the period of the lease.
From 1 January 2019, leases are recognised as a right-of-use asset and a
corresponding liability at the date at which the leased asset is available for
use by the Group. Each lease payment is allocated between the liability
and finance cost. The finance cost is charged to profit or loss over the
lease period so as to produce a constant periodic rate of interest on the
remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term
on a straight-line basis.
Assets and liabilities arising from a lease are initially measured on a present
value basis. Lease liabilities include the net present value of the following
lease payments:
• fixed payments (including in-substance fixed payments), less
any lease incentives receivable
•
variable lease payment that are based on an index or a rate
• amounts expected to be payable by the lessee under residual
•
value guarantees
the exercise price of a purchase option if the lessee is reasonably
certain to exercise that option, and payments of penalties
for terminating the lease, if the lease term reflects the lessee
exercising that option.
The lease payments are discounted using the interest rate implicit in
the lease. If that rate cannot be determined, the lessee’s incremental
borrowing rate is used, being the rate that the lessee would have to pay to
borrow the funds necessary to obtain an asset of similar value in a similar
economic environment with similar terms and conditions.
Right-of-use assets are measured at cost comprising the following:
the amount of the initial measurement of lease liability
•
• any lease payments made at or before the commencement
date less any lease incentives received any initial direct costs,
and
restoration costs.
•
Payments associated with short-term leases and leases of low-value assets
are recognised on a straight-line basis as an expense in profit or loss. Short-
term leases are leases with a lease term of 12 months or less.
(ii) Variable lease payments
The Group does not have any property leases that contain variable payment
terms that are linked to sales generated from a branch.
(iii) Extension and termination options
Extension and termination options are included in a number of property
leases across the group. These terms are used to maximise operational
flexibility in terms of managing contracts. The majority of extension and
termination options held are exercisable only by the Group and not by the
respective lessor.
(iv) Critical judgements in determining the lease term
In determining the lease term, management considers all facts and
circumstances that create an economic incentive to exercise an extension
option, or not exercise a termination option. Extension options (or periods
after termination options) are only included in the lease term if the lease is
reasonably certain to be extended (or not terminated).
The assessment is reviewed if a significant event or a significant change in
circumstances occurs which affects this assessment and that is within the
control of the lessee. During the current financial year, the financial effect
of revising lease terms to reflect the effect of exercising extension and
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
termination options did not have an impact on recognised lease liabilities
and right-of-use assets.
(v) Residual value guarantees
The Group does not provide residual value guarantees in relation to its
leases.
L. Cash and cash equivalents
For the purpose of the cash flow statement, Cash and cash equivalents
comprise notes and coins, and balances due to and from other banks with
original maturities of less than three months.
M. Financial assets & Liabilities
M(1) Financial Assets
Classification and subsequent measurement
The Group classifies its financial assets in the following measurement
categories:
Fair value through profit or loss (FVPL); or
•
• Amortised cost.
The classification requirements for debt and equity instruments are
described below:
a) Debt instruments
Debt instruments are those instruments that meet the definition of a
financial liability from the issuer’s perspective, such as loans, government
and corporate bonds and trade receivables purchased from clients in
factoring arrangements without recourse.
Classification and subsequent measurement of debt instruments depend
on:
(i)
(ii)
the Group’s business model for managing the asset; and
the cash flow characteristics of the asset.
Based on these factors, the Group classifies its debt instruments into one of
the following measurement categories:
• Amortised cost: Assets that are held for collection of contractual
cash flows where those cash flows represent solely payments of
principal and interest (‘SPPI’), and that are not designated at
FVPL, are measured at amortised cost. The carrying amount of
these assets is adjusted by any expected credit loss allowance
recognised and measured as described in note 34.1.2. Interest
income from these financial assets is included in ‘Interest
income’ using the effective interest rate method.
•
Fair value through profit or loss: Assets that do not meet the
criteria for amortised cost are measured at fair value through
profit or loss. A gain or loss on a debt investment that is
subsequently measured at fair value through profit or loss and
is not part of a hedging relationship is recognised in profit or
loss and presented in the profit or loss statement within ‘Net
trading income’ in the period in which it arises, unless it arises
from debt instruments that were designated at fair value or
which are not held for trading, in which case they are presented
separately in ‘Net investment income’. Interest income from
these financial assets is included in ‘Interest income’ using the
effective interest rate method.
Business model: the business model reflects how the Group manages
the assets in order to generate cash flows. That is, whether the Group’s
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
57
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NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
objective is solely to collect the contractual cash flows from the assets or
is to collect both the contractual cash flows and cash flows arising from
the sale of assets. If neither of these is applicable (e.g. financial assets are
held for trading purposes), then the financial assets are classified as part of
‘other’ business model and measured at FVPL. Factors considered by the
Group in determining the business model for a group of assets include past
experience on how the cash flows for these assets were collected, how
the asset’s performance is evaluated and reported to key management
personnel, how risks are assessed and managed and how managers are
compensated. For example, the Group’s business model for the mortgage
loan book is to hold to collect contractual cash flows, for this portfolio
there has been no history of prior period sales and no intention of future
sales, hence the classification is amortised cost. Another example is debt
securities held within the insurance entities of the bank which are held
at FVPL to prevent an accounting mismatch with the associated insurance
contract liabilities which are held at fair value through income statement.
SPPI: Where the business model is to hold assets to collect contractual
cash flows or to collect contractual cash flows and sell, the Group assesses
whether the financial instruments’ cash flows represent solely payments
of principal and interest (the ‘SPPI test’). In making this assessment, the
Group considers whether the contractual cash flows are consistent with
a basic lending arrangement i.e. interest includes only consideration
for the time value of money, credit risk, other basic lending risks and a
profit margin that is consistent with a basic lending arrangement. Where
the contractual terms introduce exposure to risk or volatility that are
inconsistent with a basic lending arrangement, the related financial asset
is classified and measured at fair value through profit or loss.
The Group reclassifies debt investments when and only when its business
model for managing those assets changes. The reclassification takes place
from the start of the first reporting period following the change. Such
changes are expected to be very infrequent and none occurred during the
period.
b) Equity instruments
Equity instruments are instruments that meet the definition of equity
from the issuer’s perspective; that is, instruments that do not contain a
contractual obligation to pay and that evidence a residual interest in the
issuer’s net assets. Examples of equity instruments include basic ordinary
shares.
The Group subsequently measures all equity investments at fair value
through profit or loss. Gains and losses on equity investments at FVPL are
included in the ‘Investment revenue’ line in the statement of profit or loss.
Measurement methods
Amortised cost and effective interest rate
The amortised cost is the amount at which the financial asset or financial
liability is measured at initial recognition minus the principal repayments,
plus or minus the cumulative amortisation using the effective interest
method of any difference between that initial amount and the maturity
amount and, for financial assets, adjusted for any loss allowance.
The effective interest rate is the rate that exactly discounts estimated future
cash payments or receipts through the expected life of the financial asset
or financial liability to the gross carrying amount of a financial asset (i.e. its
amortised cost before any impairment allowance) or to the amortised cost
of a financial liability. The calculation does not consider expected credit
losses and includes transaction costs, premiums or discounts and fees and
points paid or received that are integral to the effective interest rate, such
as origination fees.
When the Group revises the estimates of future cash flows, the carrying
amount of the respective financial assets or financial liability is adjusted
58
to reflect the new estimate discounted using the original effective interest
rate. Any changes are recognised in profit or loss.
Interest income
Interest income is calculated by applying the effective interest rate to the
gross carrying amount of financial assets.
Initial recognition and measurement
Financial assets and financial liabilities are recognised when the entity
becomes a party to the contractual provisions of the instrument. Regular
way purchases and sales of financial assets are recognised on trade-date,
the date on which the Group commits to purchase or sell the asset.
At initial recognition, the Group measures a financial asset or financial
liability at its fair value plus or minus, in the case of a financial asset or
financial liability not at fair value through profit or loss, transaction costs
that are incremental and directly attributable to the acquisition or issue
of the financial asset or financial liability, such as fees and commissions.
Transaction costs of financial assets and financial liabilities carried at fair
value through profit or loss are expensed in profit or loss. Immediately after
initial recognition, an expected credit loss allowance (ECL) is recognised for
financial assets measured at amortised cost, as described in note 34.1.2,
which results in an accounting loss being recognised in profit or loss when
an asset is newly originated.
When the fair value of financial assets and liabilities differs from the
transaction price on initial recognition, the entity recognises the difference
as follows:
(a) When the fair value is evidenced by a quoted price in an active
market for an identical asset or liability (i.e. a Level 1 input) or
based on a valuation technique that uses only data from observable
markets, the difference is recognised as a gain or loss.
In all other cases, the difference is deferred and the timing of recognition
of deferred day one profit or loss is determined individually. It is either
amortised over the life of the instrument, deferred until the instrument’s
fair value can be determined using market observable inputs, or realised
through settlement.
Modification of loans
The Group sometimes renegotiates or otherwise modifies the contractual
cash flows of loans to customers. When this happens, the Group assesses
whether or not the new terms are substantially different to the original
terms. The Group does this by considering, among others, the following
factors:
•
If the borrower is in financial difficulty, whether the modification
merely reduces the contractual cash flows to amounts the
borrower is expected to be able to pay.
•
• Whether any substantial new terms are introduced, such as a
profit share/equity-based return that substantially affects the
risk profile of the loan.
Significant extension of the loan term when the borrower is not
in financial difficulty.
Significant change in the interest rate.
•
• Change in the currency the loan is denominated in.
•
Insertion of collateral, other security or credit enhancements
that significantly affect the credit risk associated with the loan.
If the terms are substantially different, the Group derecognises the original
financial asset and recognises a ‘new’ asset at fair value and recalculates
a new effective interest rate for the asset. The date of renegotiation
is consequently considered to be the date of initial recognition for
impairment calculation purposes, including for the purpose of determining
whether a significant increase in credit risk has occurred. However, the
Group also assesses whether the new financial asset recognised is deemed
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
to be credit-impaired at initial recognition, especially in circumstances
where the renegotiation was driven by the debtor being unable to make
the originally agreed payments. Differences in the carrying amount are also
recognised in profit or loss as a gain or loss on derecognition.
If the terms are not substantially different, the renegotiation or modification
does not result in derecognition, and the Group recalculates the gross
carrying amount based on the revised cash flows of the financial asset
and recognises a modification gain or loss in profit or loss. The new gross
carrying amount is recalculated by discounting the modified cash flows at
the original effective interest rate (or credit-adjusted effective interest rate
for purchased or originated credit-impaired financial assets).
De-recognition other than on a modification
Financial assets, or a portion thereof, are derecognised when the contractual
rights to receive the cash flows from the assets have expired, or when they
have been transferred and either (i) the Group transfers substantially all
the risks and rewards of ownership, or (ii) the Group neither transfers nor
retains substantially all the risks and rewards of ownership and the Group
has not retained control.
The Group enters into transactions where it retains the contractual rights
to receive cash flows from assets but assumes a contractual obligation to
pay those cash flows to other entities and transfers substantially all of the
risks and rewards. These transactions are accounted for as ‘pass through’
transfers that result in derecognition if the Group:
(i) Has no obligation to make payments unless it collects equivalent
amounts from the assets;
(ii) Is prohibited from selling or pledging the assets; and
(iii Has an obligation to remit any cash it collects from the assets
without material delay.
Collateral (shares and bonds) furnished by the Group under standard
repurchase agreements and securities lending and borrowing transactions
are not derecognised because the Group retains substantially all the risks
and rewards on the basis of the predetermined repurchase price, and the
criteria for derecognition are therefore not met. This also applies to certain
securitisation transactions in which the Group retains a subordinated
residual interest.
M(2) Financial Liabilities
Classification and subsequent measurement
Financial liabilities are classified as subsequently measured at amortised
cost, except for:
•
•
Financial liabilities arising from the transfer of financial assets
which did not qualify for de-recognition, whereby a financial
liability is recognised for the consideration received for the
transfer. In subsequent periods, the Group recognises any
expense incurred on the financial liability; and
Financial guarantee contracts and loan commitments.
is denominated in, changes in the type of interest rate, new conversion
features attached to the instrument and change in covenants are also taken
into consideration. If an exchange of debt instruments or modification of
terms is accounted for as an extinguishment, any costs or fees incurred
are recognised as part of the gain or loss on the extinguishment. If the
exchange or modification is not accounted for as an extinguishment, any
costs or fees incurred adjust the carrying amount of the liability and are
amortised over the remaining term of the modified liability.
Financial guarantee contracts and loan commitments
Financial guarantee contracts are contracts that require the issuer to make
specified payments to reimburse the holder for a loss it incurs because a
specified debtor fails to make payments when due, in accordance with the
terms of a debt instrument. Such financial guarantees are given to banks,
financial institutions and others on behalf of customers to secure loans,
overdrafts and other banking facilities.
Financial guarantee contracts are initially measured at fair value and
subsequently measured at the higher of:
• The amount of the loss allowance (calculated as described in
note 34.1.2);
• The premium received on initial recognition less income
recognised in accordance with the principles of IFRS 15.
Expected credit loss on loan commitments provided by the Group are
measured as the amount of the loss allowance (calculated as described
in note 34.1.2). The Group has not provided any commitment to provide
loans at a below-market interest rate, or that can be settled net in cash or
by delivering or issuing another financial instrument.
For loan commitments and financial guarantee contracts, the loss
allowance is recognised as a provision.
N. Provisions
Provisions are recognised when the Group has a present obligation (legal
or constructive) as a result of a past event, it is probable that the Group will
be required to settle the obligation, and a reliable estimate can be made
of the amount of the obligation. The amount recognised as a provision
is the best estimate of the consideration required to settle the present
obligation at reporting date, taking into account the risks and uncertainties
surrounding the obligation. Where a provision is measured using the cash
flows estimated to settle the present obligation, its carrying amount is the
present value of those cash flows.
When some or all of the economic benefits required to settle a provision are
expected to be recovered from a third party, the receivable is recognised as
an asset if it is virtually certain that reimbursement will be received and the
amount of the receivable can be measured reliably.
O. Employee benefits
De-recognition
Financial liabilities are derecognised when they are extinguished (i.e. when
the obligation specified in the contract is discharged, cancelled or expires).
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.
The exchange between the Group and its original lenders of debt
instruments with substantially different terms, as well as substantial
modifications of the terms of existing financial liabilities, are accounted for
as an extinguishment of the original financial liability and the recognition
of a new financial liability. The terms are substantially different if the
discounted present value of the cash flows under the new terms, including
any fees paid net of any fees received and discounted using the original
effective interest rate, is at least 10% different from the discounted present
value of the remaining cash flows of the original financial liability. In
addition, other qualitative factors, such as the currency that the instrument
Liabilities recognised in respect of employee benefits are measured at their
nominal values using the remuneration rate expected to apply at the time
of settlement.
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.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
59
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NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
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.
In principle, deferred tax liabilities are recognised for all taxable temporary
differences. Deferred tax assets are recognised to the extent that it is
probable that sufficient taxable amounts will be available against which
deductible temporary differences or unused tax losses and tax offsets can
be utilised. However, deferred tax assets and liabilities are not recognised
if the temporary differences giving rise to them arise from the initial
recognition of assets and liabilities which affects neither taxable income
nor accounting profit.
Deferred tax assets and liabilities are measured at the tax rates that are
expected to apply to the period(s) when the asset and liability giving
rise to them are realised or settled, based on tax rates (and tax laws)
that have been enacted or substantively enacted by the reporting date.
The measurement of deferred tax liabilities and assets reflects the tax
consequences that would follow from the manner in which the Group
expects, at the reporting date, to recover or settle the carrying amount of
its assets and liabilities.
Deferred tax assets and liabilities are offset when they relate to income
taxes levied by the same taxation authority and the Group intends to settle
its current tax assets and liabilities on a net basis.
Current and deferred tax for the period
Current and deferred tax is recognised as an expense or income in the
Statement of Comprehensive Income, except when it relates to items
credited or debited directly to equity, in which case the deferred tax is also
recognised directly in equity.
Q. Foreign currency
The Financial Statements of the Group are presented in the currency of the
primary economic environment in which the entity operates (its functional
currency). For the purpose of these Financial Statements, the results and
financial position of the Bank are expressed in Papua New Guinea kina,
which is the Bank’s functional and presentation currency.
In preparing the Financial Statements, transactions in currencies other
than the entity’s functional currency (foreign currencies) are recorded at
the rates of exchange prevailing on the dates of the transactions. At each
balance sheet date, monetary items denominated in foreign currencies
60
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
At each reporting date, the Group reviews the carrying amounts of its
tangible and intangible assets to determine whether there is any indication
that those assets have suffered an impairment loss. If any such indication
exists, the recoverable amount of the asset is estimated in order to
determine the extent of the impairment loss (if any). Where the asset does
not generate cash flows that are independent from other assets, the Group
estimates the recoverable amount of the cash-generating unit to which the
asset belongs.
Goodwill, intangible assets with indefinite useful lives and intangible assets
not yet available for use are tested for impairment annually and whenever
there is an indication that the asset may be impaired. An impairment of
goodwill is not subsequently reversed.
Recoverable amount is the higher of fair value less cost of disposal and
value in use. In assessing value in use, the estimated future cash flows
are discounted to their present value using a pre-tax discount rate that
reflects 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.
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
T. Non-current assets held for sale
X. Earnings per share
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.
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.
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
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 values have been arrived at on the basis of
the valuations 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
to the Statement of Comprehensive Income.
Acceptances comprise undertakings by the Group to pay bills of exchange
drawn on customers. The Group expects most acceptances to be settled
simultaneously with the reimbursement from the customers. Customer
acceptances are accounted for as off-balance sheet transactions and are
disclosed as contingent liabilities and commitments.
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.
Y. Comparatives
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.
This note provides an overview of the areas that involve a higher degree
of judgement or complexity, and major sources of estimation uncertainty
that have a significant risk of resulting in a material adjustment within the
next financial year. Detailed information about each of these estimates
and judgements is included in the related notes together with information
about the basis of calculation for each affected line item in the financial
statements.
The areas involving significant estimates of judgments are:
• Estimated impairment of financial or 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 22 and note 40
• Estimation of fair value of financial assets and liabilities – note
1(m) and note 39
• Estimation of fair value of non-financial assets - note 39
Measurement of credit loss allowance for financial assets measured at
amortised cost in line with IFRS 9 is an area that requires the use of complex
models and significant assumptions about future economic conditions
and credit behaviour (e.g. the likelihood of customers defaulting and the
resulting losses). Explanation of the inputs, assumptions and estimation
techniques used in measuring ECL is further detailed in note 34.1.2.3, which
also sets out key sensitivities of the ECL to changes in these elements.
A number of significant judgements are also required in applying the
accounting requirements for measuring ECL, such as:
• Determining criteria for significant increase in credit risk;
• Choosing appropriate models and assumptions for the
measurement of ECL;
• Establishing the number and relative weightings of forward-
looking scenarios for each type of product/market and the
associated ECL; and
• Establishing groups of similar financial assets for the purposes
of measuring ECL.
Detailed information about the judgements and estimates made by the
Group in the above areas are set out in note 34.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
61
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NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
2. NET INTEREST INCOME
Net interest income
All amounts are expressed in K’000
Interest income
Consolidated
Bank
2019
2018
2019
2018
Loans, advances and other receivables from customers1
1,238,453
1,156,426
1,125,395
1,053,335
Other financial assets - inscribed stock
Treasury and Central Bank bills
Cash and balances with Central Bank
Other
Less: Interest expense
Customer deposits
Other banks
Subordinated debt securities
198,484
141,573
6,189
1,074
205,333
194,816
4,042
1,074
198,164
140,086
9,714
3,876
205,051
193,322
5,664
3,112
1,585,773
1,561,691
1,477,235
1,460,484
178,053
12,396
3,540
193,989
152,008
20,330
8,557
180,895
162,912
14,012
3,540
180,464
135,167
22,366
8,557
166,090
1,391,784
1,380,796
1,296,771
1,294,394
1Group interest income includes K13.079m (Bank K12.957m) recognised on impaired loans (Stage 3) to customers. The Group takes up required provisions on
such interest income as detailed in the accounting policy in note 1D.
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 related1
Operating lease rentals
Other2
182,220
21,259
143,801
37,797
385,077
181
135
316
384,761
198,017
18,900
129,829
37,098
383,844
687
649
1,336
382,508
169,131
20,366
132,861
24,904
347,262
176
135
311
346,951
185,188
18,073
118,927
27,004
349,192
651
649
1,300
347,892
327,705
7,503
28,922
364,130
313,785
8,473
41,230
363,488
291,308
7,503
74,555
373,366
281,205
8,473
63,850
353,528
1Foreign exchange related income includes gains and losses from spot and forward contracts and translated foreign currency assets.
22018 other income includes K19m insurance recovery for an aircraft destroyed by fire.
62
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD 5. (A) OPERATING EXPENSES
All amounts are expressed in K’000
2019
2018
2019
2018
Consolidated
Bank
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
Administration
Computing
Depreciation
Amortisation of computer development
Non-executive directors costs
Non-lending losses1
Fixed asset impairment expenses
Premises and equipment
Staff costs
Defined contribution plans
Statutory benefit contributions
Wages and salaries
Other staff benefits
95,246
125,412
107,906
28,173
3,639
2,318
1,975
60,993
425,662
15,531
10,929
312,239
54,887
393,586
118,334
136,973
81,000
27,399
5,044
33,226
13,888
88,924
504,788
15,262
12,168
296,885
57,994
382,309
90,694
111,245
90,352
22,577
3,044
1,654
1,975
56,495
378,036
14,133
10,320
286,004
52,236
362,693
114,897
119,599
64,572
22,546
4,559
33,094
13,888
80,795
453,950
14,021
11,216
272,331
55,315
352,883
819,248
887,097
740,729
806,833
1Non-Lending losses for 2018 included K13.5m loss on aircraft destroyed by fire, offset by insurance recovery.
(B) IMPAIRMENT ON FINANCIAL ASSETS
Loans and advances (note 13)
Treasury and Central Bank Bills (note 11)
Other Financial Assets (note 17)
6. INCOME TAX
Income tax expense
Current tax
Deferred tax
Current year
Adjustment to prior year estimates
Tax calculated at 30% of profit before tax (2018:30%)
Tax calculated at respective subsidiary tax rates
Expenses not deductible for tax
Tax loss not recognised
Income not recognized for tax purposes1
Adjustment to prior year estimates
101,882
(1,865)
(834)
99,183
368,467
(8,675)
359,792
2,764
362,556
344,898
22,341
6,072
5,548
82,380
40
20
82,440
365,551
(12,443)
353,108
(1,012)
352,096
341,712
14,798
4,453
5,379
90,861
(1,865)
(904)
88,092
348,760
(9,510)
339,250
3,189
342,439
71,599
40
-
71,639
347,673
(20,623)
327,050
2,043
329,093
356,480
334,961
-
995
-
-
5
-
(7,916)
2,043
(19,067)
(13,234)
(18,225)
2,764
(1,012)
3,189
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.
362,556
352,096
342,439
329,093
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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for the Year Ended 31 December 2019
6. INCOME TAX (continued)
All amounts are expressed in K’000
Tax receivable
At 1 January
Income tax provision
Adjustment to prior year estimates
Other tax related items
Tax payments made
At 31 December
Deferred taxes
Consolidated
Bank
2019
2018
2019
2018
12,753
(31,708)
17,020
(25,231)
(368,467)
(365,551)
(348,760)
(347,256)
579
(564)
383,287
27,588
(10,418)
-
420,430
12,753
1,004
(2,826)
363,837
30,275
(12,706)
-
402,213
17,020
Specific allowance for losses on loans, advances and other receivables from
customers
General allowance for losses on loans, advances and other receivables from
customers
56,215
48,186
53,558
45,011
137,768
132,757
131,960
127,518
26,721
(1,349)
47,422
23,983
(1,361)
46,690
(70,969)
(70,128)
(1,876)
25,372
219,304
250,846
(31,542)
219,304
208,444
8,675
2,185
-
659
27,658
208,444
239,607
(31,163)
208,444
181,934
12,443
9,823
4,244
25,944
(1,323)
45,396
(30,223)
(1,876)
22,650
246,086
23,103
(1,337)
45,017
(30,338)
659
24,758
234,391
246,086
234,391
-
-
246,086
234,391
234,391
9,510
2,185
-
200,021
20,623
9,367
4,380
219,304
208,444
246,086
234,391
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
Adjustment to prior year estimates
Other movements
At 31 December
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
7. INTANGIBLE ASSETS
All amounts are expressed in K’000
2019
2018
2019
2018
Consolidated
Bank
7(a) Goodwill
At 1 January
Net movement
Gross carrying amount
45,307
45,307
41,051
41,051
-
-
-
-
45,307
45,307
41,051
41,051
To assess whether goodwill is impaired, the carrying amount of a cash-generating unit is compared to the recoverable amount. The recoverable
amount is determined based on fair value less cost to sell, primarily using an earnings multiple applicable to that cash-generating unit. The category
of this fair value is Level 3 as defined in Note 39.
Earnings multiples used in the impairment assessment for Non PNG Banks are sourced from publicly available data associated with operations
displaying similar characteristics to the Non PNG Banks plus a control premium, and are applied to the current forecast earnings. The key assumption
is the Price-Earnings (P/E) multiple observed, which for the Non PNG Banks were in the range of 8.3x – 13.6x (2018: 8.3x – 13.6x).
The goodwill allocated to the Non Bank Entities is not significant.
7(b) Computer development cost
At 1 January
Additions
Disposals
Amortisation expense
At 31 December
Computer development cost
Accumulated amortisation
At 31 December
Total intangible assets
129,316
52,108
(2,352)
(28,173)
62,511
95,326
(1,122)
(27,399)
111,500
49,978
(2,351)
(22,577)
150,899
129,316
136,550
59,699
75,469
(1,122)
(22,546)
111,500
291,324
245,186
256,417
212,614
(140,425)
(115,870)
(119,867)
(101,114)
150,899
196,206
129,316
174,623
136,550
177,601
111,500
152,551
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
8. INVESTMENTS IN SUBSIDIARIES
Principal activity
Fund Management/
Investment Banking
Life Insurance
Life Insurance
Capital Raising
Credit Institution
Bank
Bank
Bank
Name of Subsidiary
BSP Capital Limited
BSP Life (Fiji) Limited
BSP Life (PNG) Limited
BSP Convertible Notes Limited
BSP Finance Limited
Bank of South Pacific Tonga Ltd
Bank South Pacific (Samoa) Ltd
Bank South Pacific Vanuatu Ltd
At 31 December
Represented by:
All amounts are expressed in K’000
At 1 January
Additional capital
Provision for impairment of BSP Capital Limited
At 31 December
9. INVESTMENT IN JOINT VENTURES
Place of Incorporation and
Operation
Ownership
%
Balance of Investment
2019
2018
PNG
Fiji
PNG
Fiji
PNG
Tonga
Samoa
Vanuatu
100%
100%
100%
100%
100%
100%
98.7%
100%
2,448
87,599
25,000
371
82,503
71,610
70,712
38,020
2,448
87,599
15,000
371
61,837
71,610
70,712
38,020
378,263
347,597
2019
2018
347,597
30,666
-
338,400
10,000
(803)
378,263
347,597
Entity
Suva Central Ltd
Richmond Ltd
Joint Venture/
Associate
Principal activity
Place of
incorporation and
operation
Joint Venture
Property rental
Joint Venture
Hotel operation
Fiji
Fiji
Proportion of ownership and
voting power held
2019
50%*
2018
50%*
61.3%**,50%***
61.3%**,50%***
BSP Finance Cambodia Plc
Joint Venture
Finance
Cambodia
50%*
50%*
The investments above are accounted for using the equity method in the Financial Statements.
*Both ownership and voting power held, **ownership, ***voting power held.
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD 9. INVESTMENT IN JOINT VENTURES (continued)
All amounts are expressed in K’000
2019
2018
2019
2018
Consolidated
Bank
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
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
10. CASH AND BALANCES WITH CENTRAL BANK
175,579
154,135
20,038
19,157
14,458
1,812
10,191
202,040
-
137
21,307
175,579
-
219
530
-
(40)
921
20,787
20,038
444,720
340,266
(212,455)
(159,450)
232,265
10,449
(258)
10,191
180,816
14,354
6,953
21,307
85,039
(43,464)
41,575
530
-
530
81,740
(43,426)
38,314
921
-
921
Notes, coins and cash at bank
513,241
509,588
496,694
500,332
Balances with Central Bank other than statutory deposit
Total cash and balances with Central Bank
1,303,323
1,816,564
743,861
1,253,449
1,013,712
1,510,406
466,375
966,707
11. TREASURY AND CENTRAL BANK BILLS
Treasury and Central Bank bills – face value
2,517,999
2,553,051
2,478,589
2,538,706
Discount for interest receivable
Less allowance for impairment
At 31 December
Allowance for impairment
At 1 January
Provision/(release) for impairment
At 31 December
(50,788)
(7,714)
(48,772)
(9,579)
(50,787)
(7,714)
(48,771)
(9,579)
2,459,497
2,494,700
2,420,088
2,480,356
9,579
(1,865)
7,714
9,539
40
9,579
9,579
(1,865)
7,714
9,539
40
9,579
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
29,692
992,777
1,022,469
35,426
818,593
854,019
29,693
968,123
997,816
35,426
760,754
796,180
The Group undertakes thorough compliance and due diligence reviews before entering into any correspondent banking relationships. Amounts due from
other banks includes deposits of K31.275 million held with counter-party Banks that are not available for use by the Group.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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for the Year Ended 31 December 2019
13. LOANS, ADVANCES AND OTHER RECEIVABLES FROM CUSTOMERS
All amounts are expressed in K’000
2019
2018
2019
2018
Consolidated
Bank
Overdrafts
Lease financing
Term loans
Mortgages
Policy loans
Gross loans, advance and other receivables due from customers net of
reserved interest
Less allowance for losses on loans, advances and other receivables from
customers
At 31 December
1,008,876
295,381
912,057
252,293
933,819
258,659
848,196
205,744
9,903,563
9,510,991
9,114,411
8,767,253
2,605,311
2,403,278
2,159,668
2,000,770
88,280
85,597
-
-
13,901,411
13,164,216
12,466,557
11,821,963
(700,604)
(633,567)
(646,587)
(589,238)
13,200,807
12,530,649
11,819,970
11,232,725
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 in Note 34. Allowance for losses includes K29.976m (Bank K28.192m) provision taken up for interest recognized on stage 3 loans.
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:
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 payments receivable
Present value of minimum lease payments receivable is analysed as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
At 31 December
23,152
309,154
332,306
(1,319)
(35,606)
(36,925)
295,381
21,833
273,548
295,381
34,358
252,531
286,889
(1,961)
(32,635)
(34,596)
252,293
32,397
219,896
252,293
19,241
269,514
288,755
(1,116)
(28,980)
(30,096)
258,659
18,125
240,534
258,659
29,746
200,775
230,521
(1,713)
(23,064)
(24,777)
205,744
28,033
177,711
205,744
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD 13. LOANS, ADVANCES AND OTHER RECEIVABLES FROM CUSTOMERS (continued)
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
All amounts are expressed in K’000
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)
At 31 December
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
14. PROPERTY, PLANT AND EQUIPMENT
Carrying value
Capital Work in Progress
Premises
Accumulated depreciation
Equipment
Accumulated depreciation
Right of Use Assets
Accumulated depreciation
At 31 December
Consolidated
Bank
2019
2018
2019
2018
633,567
79,064
(12,027)
700,604
477,305
223,299
700,604
17,552
61,512
79,064
(64,042)
86,860
101,882
577,186
66,073
(9,692)
633,567
454,345
179,222
633,567
15,034
51,039
66,073
589,238
65,049
(7,700)
646,587
439,866
206,721
646,587
13,478
51,571
65,049
538,949
57,277
(6,988)
589,238
423,965
165,273
589,238
11,526
45,751
57,277
(58,936)
(58,178)
(57,508)
75,243
82,380
83,990
90,861
71,830
71,599
51,290
635,068
39,295
646,574
(109,191)
(108,905)
525,877
397,817
537,669
366,593
45,930
498,827
(94,309)
404,518
296,823
32,540
523,923
(96,809)
427,114
266,170
(277,449)
(250,280)
(207,875)
(187,643)
120,368
209,354
(26,947)
182,407
116,313
-
-
-
88,948
184,608
(25,249)
159,359
78,527
-
-
-
879,942
693,277
698,755
538,181
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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14. PROPERTY, PLANT AND EQUIPMENT (continued)
All amounts are expressed in K’000
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
Right of Use Assets
At 1 January
Additions
Depreciation expense
At 31 December
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
Disposal of aircraft
At 31 December
70
Consolidated
Bank
2019
2018
2019
2018
39,295
70,711
32,540
51,065
129,033
(117,038)
118,851
(150,267)
120,758
(107,368)
108,347
(126,872)
51,290
39,295
45,930
32,540
537,669
26,067
(4,720)
(5,416)
(27,723)
525,877
116,313
53,562
(571)
(48,936)
120,368
-
209,354
(26,947)
182,407
560,019
20,492
(12,049)
(488)
(30,305)
537,669
107,940
55,789
(1,465)
(45,951)
116,313
-
-
-
-
427,114
13,479
(4,478)
(6,419)
(25,178)
404,518
78,527
46,465
(419)
(35,625)
88,948
-
184,608
(25,249)
159,359
451,281
14,355
(12,049)
-
(26,473)
427,114
71,959
41,258
(1,335)
(33,355)
78,527
-
-
-
-
59,600
(11,467)
48,133
59,600
(7,167)
52,433
59,600
(11,467)
48,133
59,600
(7,167)
52,433
52,433
(4,300)
-
48,133
70,689
(4,743)
(13,513)
52,433
52,433
(4,300)
-
48,133
70,689
(4,743)
(13,513)
52,433
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD 14. PROPERTY, PLANT AND EQUIPMENT (continued)
All amounts are expressed in K’000
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 2019
Consolidated
Bank
2019
2018
2019
2018
8,253
2,751
11,004
8,253
11,004
19,257
8,253
2,751
11,004
20,319
140,871
9,274
170,464
8,253
11,004
19,257
20,312
146,989
11,165
178,466
The carrying amount of land, buildings and aircraft had they been recognised under the cost model are as follows:
Land
Buildings
Aircraft
At 31 December
21,695
148,514
9,274
179,483
20,865
155,727
11,165
187,757
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 capitalization of the
notional income stream approach on the Market Value basis. The recent valuation was dated 30 November 2017 for all properties except for PNG Bank
residential properties which were revalued at 30 November 2019.
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 31 May 2017.
15. LEASES
i) Amounts recognised in the balance sheet
Right of use assets1
Properties
Equipment
At 31 December
1Included in the line item ‘Property, plant and equipment’ in the balance sheet.
Lease liabilities2
Current
Non-Current
At 31 December
178,290
4,117
182,407
30,493
159,671
190,164
-
-
-
-
-
-
155,979
3,380
159,359
24,099
139,163
163,262
-
-
-
-
-
-
2Included in the line item ‘other liabilities’ in the balance sheet. In the previous year, the group only recognized lease liabilities in relation to leases
that were classified as ‘finance leases’ under IAS 17 Leases. These were presented as part of the group’s borrowings. For adjustments recognized on
adoption of IFRS 16 on 1 January 2019, please refer to note 1.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
15. LEASES (continued)
All amounts are expressed in K’000
2019
2018
2019
2018
Consolidated
Bank
Additions to the right of use assets during the 2019 financial year
11,026
ii) Amounts recognised in the statement of profit or loss
The statement of profit or loss shows the following amounts relating to leases:
Depreciation charge of right of use assets
Properties and equipment
Interest expense (included in finance cost)
28,239
4,572
Expense relating to short-term leases(included in administrative expenses)
22,225
Expense relating to leases of low value assets that are not short term leases
(included in administrative expenses)
35
Total cash outflow for leases in 2019
48,432
-
-
-
-
-
-
16. INVESTMENT PROPERTIES
Opening net book value
Additions
Translation movement
Gain on revaluation
At 31 December
Investment properties have been accounted for in accordance with Note 1 (u).
153,665
6,619
1,632
6,444
134,020
13,930
(299)
6,014
168,360
153,665
10,143
25,359
3,943
21,717
-
45,173
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD 17. OTHER FINANCIAL ASSETS
All amounts are expressed in K’000
Inscribed stock – issued by Central Bank
Less allowance for impairment
Financial assets carried at fair value through profit and loss:
Equity securities
At 31 December
Allowance for impairment
At 1 January
Provision/(release) for impairment
At 31 December
18. OTHER ASSETS
Funds in transit and other assets
Accrued interest income
Intercompany account
Outstanding premiums
Inventory
Prepayments
Accounts receivable
At 31 December
19. AMOUNTS DUE TO OTHER BANKS
Vostro account balances
Other borrowings
At 31 December
20. CUSTOMER DEPOSITS
On demand and short term deposits
Term deposits
At 31 December
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
Consolidated
Bank
2019
2018
2019
2018
1,870,869
2,373,104
1,577,701
2,079,723
(5,170)
(6,004)
(4,946)
(5,850)
1,865,699
2,367,100
1,572,755
2,073,873
255,372
188,343
-
-
2,121,071
2,555,443
1,572,755
2,073,873
6,004
(834)
5,170
194,315
101,066
-
17,681
17,837
32,524
3,571
5,984
20
6,004
48,466
99,785
-
14,954
12,263
25,656
4,358
5,850
(904)
4,946
146,054
93,535
6,960
-
-
27,815
2,254
5,850
-
5,850
41,863
92,532
3,067
-
-
22,201
2,630
366,994
205,482
276,618
162,293
47,083
36,848
83,931
29,375
22,164
51,539
66,786
95,359
62,465
53,554
162,145
116,019
15,322,280
13,903,428
14,605,182
13,168,693
4,016,776
4,329,338
3,376,574
3,790,477
19,339,056
18,232,766
17,981,756
16,959,170
The majority of the amounts are due to be settled within 12 months of the balance sheet date as shown in the maturity analysis table on note 35. The
deposits are diversified across industries and region.
21. SUBORDINATED DEBT SECURITIES
Outstanding debt securities of K75.525m were settled in May 2019. The notes were issued during 2009, with a maturity date in May 2019, and interest
payable semi-annually at 11% per annum. They were valued at amortised cost. There were no defaults of interest or other breaches with respect to
these debt securities since issue.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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for the Year Ended 31 December 2019
22. OTHER LIABILITIES
All amounts are expressed in K’000
Policy liability
Items in transit and all other liabilities
Borrowings
Creditors and accruals
Premiums received in advance
Outstanding claims
Claims incurred but not reported (IBNR)
Note
40(b)
Consolidated
Bank
2019
2018
2019
2018
890,147
532,684
116,817
184,941
6,329
18,679
2,297
818,198
431,950
144,300
202,789
5,895
18,429
2,431
-
520,720
116,817
122,218
-
-
-
-
447,460
144,300
175,221
-
-
-
At 31 December
1,751,894
1,623,992
759,755
766,981
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 2018. During 2019, the Bank
paid K69.493 million and an additional loan of K33.670 million was received. Foreign currency gain of K8.340 million was recognised arising from
translation, offset by depreciation of the counter party loan.
23. OTHER PROVISIONS
Staff related
Provision for non-lending loss
Provisions – other
At 31 December
Staff related provisions:
At 1 January
Provisions charge
Payouts
At 31 December
24. ORDINARY SHARES
99,629
57,726
46,307
89,674
65,217
39,212
84,934
57,726
43,914
76,543
65,215
36,041
203,662
194,103
186,574
177,799
89,674
76,227
(66,272)
99,629
88,071
74,525
(72,922)
89,674
76,543
71,812
(63,421)
84,934
75,233
69,787
(68,477)
76,543
Number of shares in '000s, Book value in K'000
At 31 December 2017/1 January 2018
Share buyback
At 31 December 2018 / 1 January 2019
Share buyback
At 31 December 2019
Number of
shares
Book value
467,312
(66)
467,246
(6)
373,001
(637)
372,364
(54)
467,240
372,310
In May 2014, the Directors introduced 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. As at 31 December 2019, a total of K9.192m
has been bought back under this scheme.
74
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD 24. ORDINARY SHARES (continued)
All amounts are expressed in K’000
Earnings per ordinary share
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)
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
Consolidated
Bank
2019
2018
2019
2018
890,363
467,242
190.6
844,072
467,279
180.6
845,828
467,242
181.0
787,446
467,279
168.5
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.
Dividends paid on ordinary shares
Interim ordinary dividend (2019: 38 toea; 2018:36 toea)
Final ordinary dividend (2018:101 toea; 2017:91 toea)
25. RETAINED EARNINGS AND OTHER RESERVES
Retained earnings
At 1 January
IFRS 9 transition provisions
Tax impact on IFRS 9 transition provisions
Restated balance as at 1 January 2019
Net profit for the year
Dividends paid
Interim Dividends paid
Disposal of assets – Asset revaluation
BSP Life policy reserve
(Gain)/loss in minority interest
At 31 December
Other reserves comprise
Revaluation reserve
Capital reserve
Equity component of Fiji Class Shares
General reserve
Exchange reserve
At 31 December
177,551
476,389
653,940
169,341
428,023
597,364
177,551
471,915
649,466
168,210
425,204
593,414
2,156,873
1,904,462
1,976,138
1,777,627
-
-
(14,147)
4,244
-
-
(14,601)
4,380
2,156,873
1,894,559
1,976,138
1,767,406
890,363
(476,389)
(177,551)
4,933
(3,597)
(250)
844,072
845,828
(428,023)
(471,915)
(169,341)
(177,551)
18,116
(3,416)
906
4,933
(3,597)
-
787,446
(425,204)
(168,210)
18,116
(3,416)
-
2,394,382
2,156,873
2,173,836
1,976,138
142,819
149,829
130,725
137,708
635
21,578
44,503
136,978
346,513
635
21,578
40,920
126,358
339,320
635
-
44,503
78,614
635
-
40,920
73,121
254,477
252,384
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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for the Year Ended 31 December 2019
25. RETAINED EARNINGS AND OTHER RESERVES (continued)
All amounts are expressed in K’000
2019
2018
2019
2018
Consolidated
Bank
Movement in reserves for the year:
Revaluation reserve
At 1 January
Asset revaluation increment/(decrement)
Transfer asset revaluation reserve to retained earnings
Deferred tax on disposal of properties
At 31 December
Capital reserve
At 1 January
At 31 December
General reserve
At 1 January
BSP Life policy reserve
Fiji Government green bond revaluation
At 31 December
Exchange reserve
At 1 January
Movement during the year
At 31 December
Equity component of convertible notes
149,829
161,373
137,708
150,389
(5,719)
(4,933)
3,642
1,624
(18,116)
4,948
(5,714)
(4,933)
3,664
-
(18,116)
5,435
142,819
149,829
130,725
137,708
635
635
635
635
635
635
635
635
40,920
3,597
(14)
44,503
126,358
10,620
136,978
37,496
3,416
8
40,920
125,306
1,052
126,358
40,920
3,597
(14)
44,503
73,121
5,493
78,614
37,496
3,416
8
40,920
71,854
1,267
73,121
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:
(i)
(ii)
(iii)
The right to receive dividend equal to the amount of dividend to be paid on BSP Ordinary Share.
The same voting rights as a BSP Ordinary Share and effected through a special voting share held by the Chairman of BSP.
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.
26. CONTINGENT LIABILITIES AND COMMITMENTS
Off balance sheet financial instruments
Letters of credit
Guarantees and indemnities issued
Commitments to extend credit
At 31 December
121,600
366,170
135,219
473,748
117,057
341,373
133,560
433,978
2,088,924
1,626,879
2,003,881
1,497,722
2,576,694
2,235,846
2,462,311
2,065,260
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
26. CONTINGENT LIABILITIES AND COMMITMENTS (continued)
Legal Proceedings
A number of legal proceedings against the Group were outstanding as at 31 December 2019. Based on information available at 31 December 2019, the
Group estimates a contingent liability of K15.8 million (2018: K21.1 million) in respect of these proceedings.
All amounts are expressed in K’000
Commitments for capital expenditure
Consolidated
Bank
2019
2018
2019
2018
Amounts with firm commitments not reflected in the accounts
55,829
21,017
51,313
19,702
Operating lease commitments (premises)
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
At 31 December
27. FIDUCIARY ACTIVITIES
34,603
105,573
115,811
255,987
38,848
56,210
22,312
28,238
89,486
78,861
36,341
52,491
20,226
117,370
196,585
109,058
The Group especially through BSP Capital Limited conducts investment fund management 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.
28. DIRECTORS AND EXECUTIVE REMUNERATION
Directors remuneration
Directors of the company received remuneration including benefits during 2019 as detailed below:
All amounts in Kina
Name of Director
Sir K. Constantinou, OBE**
R. Fleming, CSM*
G. Robb, OAM**
F. Talao
E. B Gangloff
A. Mano**
A. Sam
Dr. F Lua’iufi
S. Davis
R. Bradshaw
Meetings attended
/total held
Appointed/
(Resigned)
8/8
8/8
7/8
8/8
8/8
6/8
8/8
8/8
8/8
8/8
-
-
-
(Dec 2019)
-
-
-
-
-
-
Total remuneration
2019
Bank
Subsidiaries
Total
2018
Total
561,304
360,000
921,304
1,311,304
-
343,152
318,152
343,152
280,652
330,652
305,652
330,652
305,652
-
-
120,000
463,152
60,000
60,000
60,000
-
-
-
-
378,152
403,152
340,652
330,652
305,652
330,652
305,652
-
613,152
378,152
403,152
490,652
330,652
305,652
330,652
305,652
3,119,020
660,000
3,779,020
4,469,020
Shareholder Approved Cap
4,500,000
4,500,000
* 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.
** The 2018 remuneration included backdated allowances from 2015 to 2017 paid to directors for BSP Subsidiary boards as follows: Constantinou -
K390,000, Robb - K150,000 and Mano K150,000.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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for the Year Ended 31 December 2019
28. 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:
2019
No.
53
61
47
31
29
17
20
23
16
11
15
14
9
8
16
4
4
5
-
5
4
5
-
2
1
2
2
5
-
1
2
1
11
2
3
1
4
3
2
4
2018
Remuneration
No.
72
53
41
22
30
21
21
14
20
10
10
11
11
9
6
2
1
2
4
2
2
1
3
3
2
7
-
4
3
4
1
7
3
4
1
4
2
4
2
1
K’000
500 – 510
510 – 520
520 – 530
530 – 540
540 – 550
550 – 560
560 – 570
570 – 580
580 – 590
590 – 600
600 – 610
610 – 620
620 – 630
630 – 640
640 – 650
650 – 660
660 – 670
670 – 680
680 – 690
690 – 700
700 – 710
720 – 730
730 – 740
740 – 750
750 – 760
770 – 780
780 – 790
790 – 800
810 – 820
820 – 830
840 – 850
860 – 870
870 – 880
880 – 890
890 – 900
900 – 910
910 – 920
920 – 930
930 – 940
950 – 960
2019
No.
3
2
4
2
-
1
-
2
1
2
1
3
1
-
1
2
2
-
1
-
1
1
1
1
1
2
3
3
-
1
1
1
2
1
1
1
-
-
2
-
2018
Remuneration
No.
2
-
-
1
1
-
2
2
2
3
-
2
2
1
-
-
1
1
-
1
-
2
-
-
-
-
2
1
1
1
1
2
-
-
1
1
2
1
-
1
K’000
960 – 970
980 – 990
990 – 1000
1000 – 1010
1010 – 1020
1020 – 1030
1040 – 1050
1050 – 1060
1060 – 1070
1070 – 1080
1090 – 1100
1110 – 1120
1120 – 1130
1130 – 1140
1140 – 1150
1150 – 1160
1180 – 1190
1220 – 1230
1260 – 1270
1280 – 1290
1290 – 1300
1300 – 1310
1400 – 1410
1430 – 1440
1470 – 1480
1480 – 1490
1490 – 1500
1550 – 1560
1740 – 1750
1750 – 1760
1760 – 1770
1770 – 1780
1850 – 1860
1870 – 1880
2150 – 2160
2190 – 2200
2500 – 2510
2580 – 2590
5960 – 5970
6280 – 6290
2019
No.
2018
No.
1
1
-
1
-
1
-
-
2
1
-
1
1
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
2
1
1
1
1
1
-
1
1
-
-
1
1
-
1
1
1
-
-
-
-
1
1
1
-
1
-
1
-
1
1
-
Total
523
487
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
440 – 450
450 – 460
460 – 470
470 – 480
480 – 490
490 – 500
78
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD 28. DIRECTORS AND EXECUTIVE REMUNERATION (continued)
The specified executives during the year received these remuneration:
2019
Short Term
Incentive
Non -
monetary
Super-
annuation
Officer
R Fleming CSM
R Loggia
E Ruha
P Beswick
R George
M Hallinan
P Thornton
D Faunt
C Michaud
N Kulu
H Rabura
A M Fenech
Total
Officer
R Fleming CSM
R Loggia
E Ruha
P Beswick
R George
P Thornton
M Hallinan
C Michaud
H Rabura
D Faunt
N Kulu
A Baliki
Total
Salary
4,148
1,501
1,321
1,095
1,080
1,095
1,095
887
901
739
747
255
929
267
323
268
264
247
262
168
217
208
139
-
14,864
3,292
Salary
3,823
1,513
1,332
1,104
1,088
1,104
984
908
752
871
507
335
Short Term
Incentive
1,053
356
365
296
282
283
246
205
180
-
-
-
43
113
67
68
68
66
30
67
66
153
111
4
856
21
102
57
57
57
21
57
57
75
57
21
10
14,321
3,266
592
-
-
-
-
-
-
-
75
-
62
63
-
-
-
-
-
-
-
-
-
62
41
41
29
173
2018
Non -
monetary
Super-
annuation
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
Long term
incentive
1,112
439
387
320
316
320
320
260
264
219
219
-
Benefits
49
188
54
103
37
30
40
40
39
28
22
15
Total
6,281
2,508
2,152
1,854
1,765
1,758
1,747
1,497
1,487
1,409
1,301
274
200
4,176
645
24,033
Long term
incentive
1,039
444
391
324
320
324
247
267
210
-
70
-
Benefits
27
174
48
96
23
36
18
36
9
27
15
20
Total
5,963
2,589
2,193
1,877
1,770
1,768
1,552
1,473
1,288
996
654
394
3,636
529
22,517
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
29. RECONCILIATION OF OPERATING CASH FLOW
All amounts are expressed in K’000
2019
2018
2019
2018
Reconciliation of operating profit after tax to operating cash flow before changes in operating assets
Consolidated
Bank
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 (Gain)/loss on sale of fixed assets
Movement in forex income accrual
Impairment on financial assets
Movement in payroll provisions
Impairment of subsidiary
Impairment of fixed assets
Net effect of other accruals
890,363
362,556
844,072
352,096
845,828
342,439
787,446
329,093
1,252,919
1,196,168
1,188,267
1,116,539
107,906
28,173
(2,088)
10,620
99,183
9,956
-
1,975
(68,417)
81,000
27,399
1,879
1,052
82,440
1,603
-
13,888
18,753
90,352
22,577
33
5,493
88,092
8,391
-
1,975
(5,074)
64,572
22,546
1,879
1,267
71,639
1,310
803
13,888
30,398
Operating cash flow before changes in operating assets & liabilities
1,440,227
1,424,182
1,400,106
1,324,841
Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise the following balances with less than 90 days maturity.
Cash and balances with Central Banks (note 10)
1,816,564
1,253,449
1,510,406
Amounts due from other banks (note 12)1
Amounts due to other banks (note 19)
At 31 December
1,022,469
(83,931)
854,019
(51,539)
997,816
966,707
796,180
(162,145)
(116,019)
2,755,102
2,055,929
2,346,077
1,646,868
1The Group undertakes thorough compliance and due diligence reviews before entering into any correspondent banking relationships. There is also a cash
and cash equivalent of K31.275 million held with counter-party Banks that are not available for use by the Group.
80
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for the Year Ended 31 December 2019
30. 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
Papua New Guinea, Banking Services in other jurisdictions outside Papua New Guinea, 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 2019
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 2018
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
1,115,454
542,027
-
1,657,481
(582,740)
(58,555)
1,016,186
(297,480)
718,706
1,118,342
532,234
-
1,650,576
(632,386)
(56,190)
962,000
(287,802)
674,198
241,808
243,347
-
485,155
(220,439)
(36,244)
228,472
(58,085)
170,387
232,513
228,731
-
461,244
(236,598)
(22,227)
202,419
(51,409)
151,010
30,772
18,496
34,999
84,267
(20,393)
(4,384)
59,490
(6,991)
52,499
27,707
11,735
40,512
79,954
(18,624)
(4,023)
57,307
(12,885)
44,422
3,750
1,391,784
(54,979)
(4,324)
(55,553)
4,324
-
(51,229)
-
(51,229)
2,234
(26,704)
(1,599)
(26,069)
511
-
(25,558)
-
(25,558)
748,891
30,675
2,171,350
(819,248)
(99,183)
1,252,919
(362,556)
890,363
1,380,796
745,996
38,913
2,165,705
(887,097)
(82,440)
1,196,168
(352,096)
844,072
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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for the Year Ended 31 December 2019
31. 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 fiducia-
ry 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 2019, 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
Customer Deposits
Opening balances
Net movement
Closing balance
Interest paid
Loans, advances and other receivables from customers
Opening balances
Loans issued1
Interest
Charges
Loan repayments
Closing balance
Consolidated
2019
2018
30,925
14,295
45,220
17
899,451
61,750
66,032
3,869
17,731
13,194
30,925
24
631,650
458,213
44,390
3,376
(116,634)
(238,178)
914,468
899,451
12018 included Air Niugini Limited loan following Director Constantinou’s appointment to the Board of Air Niugini Limited during 2018. Air Niugini
Limited has been a customer of BSP since inception and had pre-existing facilities with BSP prior to 2018.
Subsidised transactions are provided for staff. Such transactions include marginal discounts on interest rates, and specific fee concessions. These
benefits 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 2019, staff account balances were as follows:
Housing loans
Other loans
At 31 December
Cheque accounts
Savings accounts
At 31 December
192,749
68,197
260,946
6,643
20,824
27,467
169,858
43,826
213,684
7,533
13,532
21,065
32. 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 adverse event in
the financial markets that may result in loss of earnings) include liquidity
risk, foreign exchange risk, interest rate risk and credit risk.
The 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
82
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
32. BANK OPERATIONS, RISKS AND STRATEGIES IN USING FINANCIAL INSTRUMENTS (continued)
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.
33. 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 (RBV)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 2019, the Group’s
total capital adequacy ratio and leverage capital ratio satisfied the capital
adequacy criteria for a ‘well-capitalised’ bank. The minimum capital
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.
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.
All amounts are expressed in K’000
Balance sheet assets (net of provisions)
Balance sheet / notional amount
Risk-weighted amount
2019
2018
2019
2018
Currency
3,583,165
2,938,993
69,942
19,502
Loans, advances and other receivables from customers
13,230,783
12,530,649
10,539,279
9,813,150
Investments and short term securities
All other assets
Off-balance sheet items
Total
Capital Ratios
a) Tier 1 capital
Total capital
b) Leverage capital ratio
4,580,568
3,132,602
2,576,694
5,050,143
2,530,275
2,235,846
224,510
1,839,673
286,666
188,343
1,444,738
322,716
27,103,812
25,285,906
12,960,070
11,788,449
Capital (K’000)
Capital Adequacy Ratio (%)
2019
2018
2019
2018
2,526,509
2,848,723
2,338,587
2,694,901
19.5%
22.0%
10.5%
19.8%
22.9%
10.3%
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
34. CREDIT RISK AND ASSET QUALITY
34.1 Credit Risk
The Group 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.
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.
Group Internal Scale
S&P Letter Grade
Description
1
2
3
4
5
6
7
8
9
10
11
12
13
14
BBB+
BBB
BBB-
BB+
BB
BB-
B+
B
B-
CCC+
CCC
CCC-
D-I
D-II
Standard Monitoring
Special Monitoring
Substandard
Doubtful
Loss
34.1.1 Credit Risk Measurement
34.1.2 Expected Credit Loss Management
Loans and advances (incl. loan commitments and guarantees)
The estimation of credit exposure for risk management purposes is complex
and requires the use of models, as the exposure varies with changes in
market conditions, expected cash flows and the passage of time. The
assessment of credit risk of a portfolio of assets entails further estimations
as to the likelihood of defaults occurring, of the associated loss ratios and
of default correlations between counterparties. The Group measures credit
risk using Probability of Default (PD), Exposure at Default (EAD) and Loss
Given Default (LGD).
Credit risk grading
The Group uses an internal credit risk grading system that reflects its
assessment of the probability of default of individual counterparties.
Borrower and loan specific information collected at the time of application
(such as disposable income, and level of collateral for retail exposures; and
turnover and industry type for wholesale exposures) is fed into this rating
model. This is supplemented with external data such as credit bureau
scoring information on individual borrowers. In addition, the models
enable expert judgement from the Chief Risk Officer to be fed into the
final internal credit rating for each exposure. This allows for considerations
which may not be captured as part of the other data inputs into the model.
The Group’s rating method comprises 11 rating levels for instruments not
in default (1 to 11) and three default classes (12 to 14). The master scale
assigns each rating category a specified range of probabilities of default,
which is stable over time. The rating methods are subject to an annual
validation and recalibration so that they reflect the latest projections in the
light of all actually observed defaults.
IIFRS 9 outlines a ‘three-stage’ model for impairment based on changes in
credit quality since initial recognition, as summarised below:
•
•
•
A financial instrument that is not credit-impaired on initial recognition
is classified in ‘Stage 1’ and has its credit risk continuously monitored
by the Group.
If a significant increase in credit risk (‘SICR’) since initial recognition
is identified, the financial instrument is moved to ‘Stage 2’ but is not
yet deemed to be credit-impaired. Please refer to note 34.1.2.1 for a
description of how the Group determines when a significant increase
in credit risk has occurred.
If the financial instrument is credit-impaired, the financial instrument
is then moved to ‘Stage 3’. Please refer to note 34.1.2.2 for a
description of how the Group defines credit-impaired and default.
Financial instruments in Stage 1 have their ECL measured at an amount
equal to the portion of lifetime expected credit losses that result from
default events possible within the next 12 months. Instruments in Stages 2
or 3 have their ECL measured based on expected credit losses on a lifetime
basis. Please refer to note 34.1.2.3 for a description of inputs, assumptions
and estimation techniques used in measuring the ECL.
•
A pervasive concept in measuring ECL in accordance with IFRS 9 is
that it should consider forward- looking information. Note 34.1.2.4
includes an explanation of how the Group has incorporated this in
its ECL models.
84
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
34. CREDIT RISK AND ASSET QUALITY (continued)
The following diagram summarises the impairment requirements under IFRS 9.
Change in credit quality since initial recognition
Stage 1
(Initial recognition)
Stage 2
Stage 3
(Significant increase in credit risk since initial
recognition)
(Credit-impaired assets)
12-month expected credit losses
Lifetime expected credit losses
Lifetime expected credit losses
The key judgements and assumptions adopted by the Group in addressing the requirements of the standard are discussed below:
34.1.2.1 Significant Increase in Credit Risk (SICR)
The Group considers a financial instrument to have experienced a
significant increase in credit risk when one or more of the following
quantitative, qualitative or backstop criteria have been met:
•
•
It is becoming probable that the borrower will enter bankruptcy
Financial assets are purchased or originated at a deep discount that
reflects the incurred credit losses.
•
Qualitative Criteria - if the instrument meets one or more of the
following criteria:
- Significant adverse changes in business, financial and/or
economic conditions in which the borrower operates
- Actual or expected forbearance or restructuring
- Actual or expected significant adverse change in operating
The criteria above have been applied to all financial instruments held by
the Group and are consistent with the definition of default used for internal
credit risk management purposes. The default definition has been applied
consistently to model the Probability of Default (PD), Exposure at Default
(EAD) and Loss given Default (LGD) throughout the Group’s expected loss
calculations.
results of the borrower
- Significant change in collateral value (secured facilities only)
which is expected to increase risk of default
- Early signs of cash flow/liquidity problems such as delay in
servicing of trade creditors/loans
•
•
Quantitative criteria - applies to performing loans risk graded at 10 or
11 as per BSPs credit rating system which are ‘watch list’ categories.
By definition, these have experienced a SICR event since inception
hence needs to be classified as Stage 2, with lifetime PDs applicable.
This criteria applies regardless of whether loans in these two RGs are
in arrears or not.
Backstop - A backstop is applied and the financial instrument
considered to have experienced a significant increase in credit risk
if the borrower is more than 30 days past due on its contractual
payments. The Group has not used the low credit risk exemption for
any financial instrument in the year ending 31 December 2019.
34.1.2.2 Definition of default and credit-impaired assets
The Group defines a financial instrument as in default, which is fully
aligned with the definition of credit- impaired, when it meets one or more
of the following criteria:
Quantitative criteria
The borrower is more than 90 days past due on its contractual payments.
Qualitative criteria
The borrower meets unlikeliness to pay criteria, which indicates the
borrower is in significant financial difficulty. These are instances where:
•
•
•
•
•
•
The borrower is in long-term forbearance
The borrower is deceased
The borrower is insolvent
The borrower is in breach of financial covenant(s)
An active market for that financial asset has disappeared because of
financial difficulties
Concessions have been made by the lender relating to the borrower’s
financial difficulty
An instrument is considered to no longer be in default (i.e. to have cured)
when it no longer meets any of the default criteria for a consecutive period
of six months. This period of six months has been determined based on an
analysis which considers the likelihood of a financial instrument returning
to default status after cure using different possible cure definitions.
34.1.2.3 Measuring ECL – Explanation of inputs, assumptions and
estimation techniques
The Expected Credit Loss (ECL) is measured on either a 12-month (12M)
or Lifetime basis depending on whether a significant increase in credit risk
has occurred since initial recognition or whether an asset is considered to
be credit-impaired. Expected credit losses is the product of the Probability
of Default (PD), Exposure at Default (EAD), and Loss Given Default (LGD),
defined as follows:
•
•
•
The PD represents the likelihood of a borrower defaulting on
its financial obligation (as per “Definition of default and credit-
impaired” above), either over the next 12 months (12M PD), or over
the remaining lifetime (Lifetime PD) of the obligation.
EAD is based on the amounts the Group expects to be owed at
the time of default, over the next 12 months (12M EAD) or over
the remaining lifetime (Lifetime EAD). For example, for a revolving
commitment, the Group includes the current drawn balance plus
any further amount that is expected to be drawn up to the current
contractual limit by the time of default, should it occur.
Loss Given Default (LGD) represents the Group’s expectation of
the extent of loss on a defaulted exposure. LGD varies by type of
counterparty, type and seniority of claim and availability of collateral
or other credit support. LGD is expressed as a percentage loss per
unit of exposure at the time of default (EAD).
Forward-looking economic information is also included in determining
the 12-month and lifetime PD, EAD and LGD. These assumptions vary by
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
85
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NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
34. CREDIT RISK AND ASSET QUALITY (continued)
product type. Refer to note 34.1.2.4 for an explanation of forward- looking
information and its inclusion in ECL calculations. Model adjustments are
also included within the ECL allowance. Model adjustments are used in
circumstances where it is judged that the existing inputs, assumptions and
model techniques do not capture all relevant risk factors. The emergence
of new macroeconomic, microeconomic factors, changes to parameters or
credit risk data not incorporated current parameters are examples of such
circumstance.
The Group used statistical models to convert historical PDs into forward
looking lifetime PDs. The conversion process looks at the historical
relationship between long-term PDs for a particular year and the observed
(annual) default rate for the same year (called the ‘Z-factor’) and a set
of systematic factors for the year. The Group has performed historical
analysis and identified the key economic variables impacting credit risk and
expected credit losses which are as follows:
•
•
GDP Growth (%)
Change in Unemployment (%)
•
•
•
•
Change in Equity Index (%)
Change in Energy Index (%)
Change in Non-Energy Index (%)
Change in the Proportion of Downgrades (%)
These are then compared to the expected systematic factors and long-
term PDs for a future year to estimate the PiT PDs for that future year.
Forecasts of these economic variables (the “base economic scenario”) are
provided by the Group’s Strategy team and provide the best estimate view
of the economy over the next five years. Z-factors are estimated for five
years based on forecast systematic data and all future years from year 6
are adjusted using Z- factors which diminish in magnitude from the one
estimated for year 5.
Economic variable assumptions
The period-end assumptions used for the ECL estimate as at 31 December
2019 are set out below. The scenarios “base”, “upside” and “downside”
were used for all portfolios.
Economic Variable
GDP Growth (%)
Change in Unemployment
(% total lab force) (%)
Change in Equity Index (%)
Change in Energy Index (%)
Change in Non-Energy Index (%)
Change in the Proportion of Downgrades (%)
Scenario
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
Downside
Base
Upside
2020
2.70%
3.20%
2.20%
0.00%
2021
2.80%
3.50%
2.30%
0.00%
-1.00%
-1.00%
5.00%
5.00%
-2.90%
-1.04%
-2.40%
-0.54%
-3.40%
-1.54%
-0.25%
-0.37%
0.25%
0.13%
-0.75%
-0.87%
2019
2.60%
3.60%
2.10%
0.40%
-1.00%
5.00%
-6.69%
-5.69%
-7.69%
-7.26%
-6.76%
-7.76%
-4.06%
-3.56%
-4.56%
0.45%
-1.00%
The weightings assigned to each economic scenario at 31 December 2019 were as follows:
Downside
10.00%
2023
2.80%
3.50%
2.30%
0.00%
-1.00%
5.00%
-1.06%
-0.56%
-1.56%
-0.38%
0.12%
-0.88%
2022
2.80%
3.50%
2.30%
0.00%
-1.00%
5.00%
-1.05%
-0.55%
-1.55%
-0.38%
0.12%
-0.88%
Downside
30.00%
Upside
10.00%
follows:
Scenario
Weight
Base
60.00%
Other forward-looking considerations not otherwise incorporated within
the above scenarios, such as the impact of any regulatory, legislative or
political changes, have also been considered, but are not deemed to have
a material impact and therefore no adjustment has been made to the ECL
for such factors. This is reviewed and monitored for appropriateness on an
annual basis.
Sensitivity Analysis
The most significant assumptions affecting the ECL allowance are as
86
i) GDP given the significant impact on business performance and collateral
valuations; and
ii) Change in proportion of downgrades given that it is “BSP specific” and
addresses potential signs of stress both within credit markets in general
and in client specific portfolios.
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
34. CREDIT RISK AND ASSET QUALITY (continued)
Set out below are the changes to the ECL as at 31 December 2019 that would result from reasonably possible changes in these parameters from the actual
assumptions used in the Group’s economic variable assumptions:
All amounts are expressed in K’000
GDP Growth Rate
2019
[-20%]
42,060
(GDP growth rate assumptions tested at 80% and 110% for all 3 scenarios)
All amounts are expressed in K’000
Change in proportion of downgrades
2019
[-7%]
(1,088)
[+10%]
(19,342)
[+20%]
5,662
(Upside scenario increased from -1% to-7% (2018:-5%), downside scenario increased from 10% to 20% )
2018
2018
[-20%]
48,446
[-5%]
(1,451)
[+10%]
(17,586)
[+20%]
4,391
All amounts are expressed in K’000
2019
2018
Change in Scenario weighting
(32,714)
(30,002)
(Upside scenario increased from 10% to 30%, downside scenario decreased from 30% to 10%).
34.1.2.4 Grouping of instruments for losses measured on a collective basis
For expected credit loss provisions modelled on a collective basis, a grouping of exposures is performed on the basis of shared risk characteristics, such
that risk exposures within a group are homogeneous.
In performing this grouping, there must be sufficient information for the group to be statistically credible. Where sufficient information is not available
internally, the Group has considered benchmarking internal/external supplementary data to use for modelling purposes. The characteristics and any
supplementary data used to determine groupings are outlined below:
Retail – Groupings for collective measurement
Loan to value ratio band
•
• Risk Grade
• Product type (e.g. Residential/Buy to Let mortgage, Overdraft, Credit Card)
• Repayment type (e.g. Repayment/Interest only)
• Utilisation band
Notwithstanding the grouping detailed above, all stage 3 loans are individually assessed.
The appropriateness of groupings is monitored and reviewed on a periodic basis by the Credit Risk team.
34.1.3 Credit Risk Exposure
34.1.3.1 Maximum exposure to credit risk – Financial instruments subject to impairment
The following table contains an analysis of the credit risk exposure of financial instruments for which an ECL allowance is recognised. The gross carrying
amount of financial assets below also represents the Group’s maximum exposure to credit risk on these assets.
ECL staging
(PGK’000)
Credit grade
Standard monitoring
Special monitoring
Default
2019
2018
Stage 1
Stage 2
Stage 3
12-month ECL
Lifetime ECL
Lifetime ECL
Total
Total
15,423,086
160,322
-
15,583,408
14,457,564
-
503,009
-
503,009
588,756
-
-
391,688
391,688
Gross carrying amount
15,423,086
663,331
391,688
16,478,105
Loss allowance
Carrying amount
(277,795)
(199,510)
(223,299)
(700,604)
15,145,291
463,821
168,389
15,777,501
350,285
15,396,605
(633,567)
14,763,038
Information on how the Expected Credit Loss (ECL) is measured and how the three stages above are determined is included in note 34.1.2 ‘Expected
credit loss measurement’. The gross carrying amount includes off balance sheet items which are in scope for impairment.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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34. CREDIT RISK AND ASSET QUALITY (continued)
34.1.3.2 Maximum exposure to credit risk – Financial instruments not subject to impairment
The following table contains an analysis of the maximum credit risk exposure from financial assets not subject to impairment (i.e. FVPL):
Maximum exposure to credit risk (PGK000's)
2019
2018
Trading assets
Equity Securities
34.1.3.3 Collateral and other credit enhancements
255,372
188,343
The Group employs a range of policies and practices to mitigate credit risk.
The most common of these is accepting collateral for funds advanced.
The Group has internal policies on the acceptability of specific classes of
collateral or credit risk mitigation.
depends on the nature of the instrument. Debt securities, treasury and
other eligible bills are generally unsecured, with the exception of asset-
backed securities and similar instruments, which are secured by portfolios
of financial instruments.
The Group prepares a valuation of the collateral obtained as part of the
loan origination process. This assessment is reviewed periodically. The
principal collateral types for loans and advances are:
• Mortgages over residential properties;
•
Charges over business assets such as premises, inventory and
accounts receivable; and
Charges over financial instruments such as debt securities and
equities.
•
The Group’s policies regarding obtaining collateral have not significantly
changed during the reporting period and there has been no significant
change in the overall quality of the collateral held by the Group since the
prior period.
The Group closely monitors collateral held for financial assets considered
to be credit-impaired, as it becomes more likely that the Group will take
possession of collateral to mitigate potential credit losses.
Longer-term finance and lending to corporate entities are generally
secured; revolving individual credit facilities are generally unsecured.
Financial assets that are credit-impaired and related collateral held in order
to mitigate potential losses are shown below:
Collateral held as security for financial assets other than loans and advances
31 December 2019
Gross exposure
Impairment
allowance
Carrying amount
Fair value of collateral
held
Credit-impaired assets
Loans to individuals:
• Overdrafts
• Credit cards
• Term loans
• Mortgages
Loans to corporate entities:
• Large corporate customers
PGK’000
PGK’000
PGK’000
PGK’000
6,588
1,437
5,151
11,739
-
-
-
-
18,112
3,263
14,849
23,739
99,008
40,295
58,713
165,415
197,754
142,074
55,680
127,761
• Small and medium-sized enterprises (SMEs)
67,172
33,771
33,401
79,439
• Others
3,054
2,459
595
5,745
Total credit-impaired assets
391,688
223,299
168,389
413,838
31 December 2018
Total credit-impaired assets
350,285
179,222
171,063
301,488
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34.1.4 Loss allowance
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
The loss allowance recognised in the period is impacted by a variety of factors, as described below:
•
Transfers between Stage 1 and Stages 2 or 3 due to financial instruments experiencing significant increases (or decreases) of credit risk or becoming
credit-impaired in the period, and the consequent “step up” (or “step down”) between 12-month and Lifetime ECL;
Additional allowances for new financial instruments recognised during the period, as well as releases for financial instruments de-recognised in
the period;
Impact on the measurement of ECL due to changes in PDs, EADs and LGDs in the period, arising from regular refreshing of inputs to models;
Foreign exchange retranslations for assets denominated in foreign currencies and other movements; and
Financial assets derecognised during the period and write-offs of allowances related to assets that were written off during the period.
•
•
•
•
The following tables explain the changes in the loss allowance between the beginning and the end of the annual period due to these factors:
31 December 2019
Expected Credit Loss
Movements with P&L impact
Transfers:
Transfer from Stage 1 to Stage 2
Transfer from Stage 1 to Stage 3
Transfer from Stage 2 to Stage 1
Transfer from Stage 2 to Stage 3
Transfer from Stage 3 to Stage 2
Transfer from Stage 3 to Stage 1
New financial assets originated or purchased
Changes in PDs/LGDs/EADs/others
Total net P&L charge during the period
31 December 2018
Stage 1
12-month ECL
PGK’000
Stage 2
Lifetime ECL
PGK’000
Stage 3
Lifetime ECL
PGK’000
(3,790)
(857)
4,316
-
-
7
118,207
(81,067)
36,816
25,930
-
(22,327)
(3,993)
76
-
14,232
(33,183)
(19,265)
-
18,171
-
12,451
(83)
(100)
8,168
22,906
61,513
51,039
Total
PGK’000
22,140
17,314
(18,011)
8,458
(7)
(93)
140,607
(91,344)
79,064
66,073
Total net P&L charge during the period
(19,446)
34,480
The movement in gross carrying amounts between the beginning and the end of the annual period are included in the table below:
31 December 2019
Gross Carrying Amount
Stage 1
Stage 2
Stage 3
12-month Balance
Lifetime Balance
Lifetime Balance
PGK’000
PGK’000
PGK’000
Total
PGK’000
Movements in gross carrying amount with P&L impact
Transfers:
Transfer from Stage 1 to Stage 2
(146,559)
188,204
-
41,645
Transfer from Stage 1 to Stage 3
Transfer from Stage 2 to Stage 1
Transfer from Stage 2 to Stage 3
(66,009)
-
61,607
(4,402)
128,598
(153,149)
-
(24,551)
-
(35,089)
32,205
(2,884)
Transfer from Stage 3 to Stage 2
-
848
(1,238)
(390)
Transfer from Stage 3 to Stage 1
396
-
(398)
(2)
New financial assets originated or purchased
4,774,634
82,056
5,606
4,862,296
Changes in PDs/LGDs/EADs/others
(3,554,951)
(176,397)
(58,864)
(3,790,212)
Total movement in gross carrying amount
with P&L impact
31 December 2018
Total movement in gross carrying amount
with P&L impact
1,136,109
(93,527)
38,918
1,081,500
1,325,422
138,738
90,154
1,554,314
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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34. CREDIT RISK AND ASSET QUALITY (continued)
34.1.5 Write-off policy
The Group writes off financial assets, in whole or in part, when it has exhausted all practical recovery efforts and has concluded there is no reasonable
expectation of recovery. Indicators that there is no reasonable expectation of recovery include (i) ceasing enforcement activity and (ii) where the Group’s
recovery method is foreclosing on collateral and the value of the collateral is such that there is no reasonable expectation of recovering in full.
The Group may write-off financial assets that are still subject to enforcement activity. The Group still seeks to recover amounts it is legally owed in full,
but which have been partially written off due to no reasonable expectation of full recovery.
34.1.6 Credit Quality – Prudential Guidelines
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 2019 is as follows:
Consolidated (PGK’000)
Overdrafts
Term loans
Mortgages
Lease financing
Policy loans
Total
Neither past due nor impaired
917,146
9,182,602
2,266,451
281,535
88,280
12,736,014
Past due but not impaired
- Less than 30 days
- 30 to 90 days
Individually impaired loans
- Less than 30 days
- 30 to 90 days
- 91 to 360 days
- More than 360 days
Total gross loans, advances and other
receivables from customers
Less impairment provisions
Net Loans and Advances
34.1.7 Credit related commitments
78,078
2,703
80,781
3,183
169
1,504
6,093
10,949
315,403
259,078
574,481
4,160
9,173
31,535
101,612
146,480
135,827
73,368
209,195
3,641
10,711
28,139
87,174
129,665
3,334
1,311
4,645
328
2,064
1,339
5,470
9,201
-
-
-
-
-
-
-
-
532,642
336,460
869,102
11,312
22,117
62,517
200,349
296,295
1,008,876
9,903,563
2,605,311
295,381
88,280
13,901,411
(700,604)
13,200,807
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.
They are collateralised by the underlying shipments of goods to which they
relate and therefore carry less risk than a conventional loan.
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.
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.
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34. CREDIT RISK AND ASSET QUALITY (continued)
34.1.8 Economic sector risk concentrations
Economic sector risk concentrations within the customer loan portfolio are as follows:
Consolidated as at 31 December
All amounts are expressed in K’000
Commerce, finance and other business
Private households
Government and public authorities
Agriculture
Transport and communication
Manufacturing
Construction
Net loan portfolio balance
34.1.9 Ownership risk concentrations
Ownership risk concentrations within the customer loan portfolio are as follows:
Corporate / Commercial
Government
Retail
Net loan portfolio balance
35. LIQUIDITY RISK
NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
2019
7,159,863
2,987,459
252,134
327,151
1,311,306
332,344
830,550
%
54
23
2
2
10
3
6
2018
6,824,314
2,569,986
356,166
277,228
%
54
21
3
2
1,393,929
11
231,717
877,309
2
7
13,200,807
100
12,530,649
100
7,703,341
2,510,817
2,986,649
58
19
23
7,206,355
2,661,688
2,662,606
58
21
21
13,200,807
100
12,530,649
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 2019
The maturity profile of material Assets and Liabilities as at 31 December
2019 is shown in the following schedule. The mismatching of maturity of
assets and liabilities indicates an apparent negative net “current” asset
position. However, as stated in the preceding paragraph, mismatched
positions are established and managed to achieve profit opportunities
that arise from them, particularly in a normal yield curve environment.
Accordingly, this mismatched maturity position is considered manageable
by the Group, and does not impair the ability of the Group to meet its
financial obligations as they fall due. The Directors are also of the view that
the Group is able to meet its financial obligations as they fall due for the
following additional reasons:
•
The Bank and the Group complies with the Cash Reserve Requirement
(“CRR”) set by the regulatory authorities of the jurisdictions that the
Bank operates in. The CRR specifies that a bank must hold an amount
equal to a percentage of its total customer deposits in the form of
cash in an account maintained by the respective Central Bank. The
Bank and Group complies with this daily requirement on an ongoing
basis.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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35. LIQUIDITY RISK (continued)
Maturity of assets and liabilities
Consolidated
All amounts are expressed in K'000
As at 31 December 2019
Up to 1 month
1 - 3 months
3 - 12 months
1 - 5 years
Over 5 years
Total
Assets
Cash and balances with Central Bank
Treasury and Central Bank bills
Amounts due from other banks
Loans, advances and other receivables from
customers
Other financial assets
Total assets
Liabilities
3,171,384
380,142
745,062
1,648,820
2,163,885
-
-
-
411,781
688,229
1,429,812
14,760
229,336
48,071
-
-
-
3,583,165
2,512,943
1,022,469
1,057,253
3,022,749
95,236
663,474
5,510,377
1,160,027
5,077,068
16,316,267
772,329
4,854,951
8,109,293
2,070,054
5,164,106
6,685,164
6,261,178
28,289,795
Amounts due to other banks
-
81,468
2,463
-
-
83,931
Customer Deposits
Other liabilities
Other provisions
Total liabilities
Net liquidity gap
As at 31 December 2018
Total assets
Total liabilities
Net liquidity gap
36. OPERATIONAL RISK
14,019,851
1,109,765
1,794,963
719,301
1,912,151
19,556,031
1,761,480
258,809
2,750
159
5,048
35
472
188
105,141
1,874,891
4,153
263,344
16,040,140
1,194,142
1,802,509
719,961
2,021,445
21,778,197
(7,930,847)
875,912
3,361,597
5,965,203
4,239,733
6,511,598
8,381,534
1,336,540
5,201,238
6,137,115
6,076,958
27,133,385
15,069,532
1,013,223
2,073,361
274,900
1,969,331
20,400,347
(6,687,998)
323,317
3,127,877
5,862,215
4,107,627
6,733,038
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. Opera-
tional risk is managed through formal policies, documented procedures, business practices and compliance monitoring.
An operational risk management function is responsible for the maintenance of these policies, procedures, practices and monitoring the organization’s
compliance with them. The Operational Risk Committee coordinates the management process across the 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.
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for the Year Ended 31 December 2019
37. 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 2019
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
2,211,457
2,252,907
146,354
478,799
15,702
110,404
7,740,010
3,161,274
1,578,722
1,277,703
507,057
667,813
439,403
157,886
8,788
526,566
258
60,500
6,488
-
234,437
499,203
447,018
33,002
3,583,165
2,459,497
522,486
1,022,469
1,273,754
13,200,807
-
352
35,034
2,121,071
133,741
2,140,109
15,207,153
4,941,049
1,193,401
740,480
2,445,035
24,527,118
Amounts due to other banks
(22,119)
(59,412)
(2,400)
-
-
(83,931)
Customer Deposits
Other liabilities
Total liabilities
(12,739,985)
(3,180,962)
(907,317)
(538,226)
(1,972,566)
(19,339,056)
(564,135)
(1,183,690)
(37,080)
(117,512)
(84,681)
(1,987,098)
(13,326,239)
(4,424,064)
(946,797)
(655,738)
(2,057,247)
(21,410,085)
Net on - balance sheet position
1,880,914
516,985
246,604
84,742
Off - balance sheet net notional position
798
-
-
(139,868)
387,788
140,009
3,117,033
939
Credit commitments
1,873,731
512,960
60,433
-
118,418
2,565,542
As at 31 December 2018
Total Assets
Total Liabilities
14,553,848
4,576,805
1,213,537
614,523
2,122,510
23,081,223
(12,839,667)
(4,043,203)
(940,514)
(534,160)
(1,851,544)
(20,209,088)
Net on - balance sheet position
1,714,181
533,602
273,023
80,363
Off - balance sheet net notional position
(3,263)
-
-
(171,679)
Credit commitments
1,274,345
522,309
76,059
-
270,966
174,006
176,890
2,872,135
(936)
2,049,603
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 2019
At 31 December 2018
Impact on profit or loss
Impact on equity
Impact on profit or loss
Impact on equity
USD strengthening by 1% (2018 – 1%)
USD dollar weakening by 1% (2018 – 1%)
AUD strengthening by 1% (2018 – 1%)
AUD dollar weakening by 1% (2018 – 1%)
356
(349)
(36)
35
356
(349)
(36)
35
613
(601)
(37)
36
613
(601)
(37)
36
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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38. 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 2019 and
prevailing rates of interest, a 1% increase in markets rates will result in a
K45 million increase in net interest income, whilst a 1% decrease in rates
will result in a K52.2 million decrease in net interest income.
Interest sensitivity of assets, liabilities and off balance sheet items re-pricing analysis
Consolidated
All amounts are expressed in K'000
As at 31 December 2019
Up to 1 month
1-3 months
3-12 months
1-5 years
Over 5 years
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
-
347,001
867,654
-
11,355,031
437,339
-
-
705,379
46,543
-
211,132
151,520
-
-
1,401,412
6,016
-
813,765
559,890
-
-
5,081
-
-
656,055
800,520
-
-
624
-
-
164,824
211,415
-
13,007,025
1,114,574
2,781,083
1,461,656
376,863
Amounts due to other banks
16,678
7,612
-
-
Customer deposits
Other liabilities
Other provisions
Total liabilities
8,678,235
1,071,740
1,628,037
299,468
8,248
6,193
2,720
-
-
-
-
-
8,709,354
1,082,072
1,628,037
299,468
Interest sensitivity gap
4,297,671
32,502
1,153,046
1,162,188
As at 31 December 2018
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
-
501,889
451,160
-
-
-
617,953
1,344,620
-
-
-
30,238
1,560
-
10,754,609
192,658
435,077
51,591
-
-
557,100
1,265,005
-
219,639
267,621
-
12,142,735
862,202
2,695,847
1,853,903
487,260
8,435
-
806,643
536,149
-
Amounts due to other banks
17,338
16,885
-
-
Customer deposits
Other liabilities
Other Provisions
Total liabilities
Interest sensitivity gap
94
8,058,906
925,624
1,761,696
156,585
-
5,637
-
-
-
-
-
-
8,081,881
4,060,854
942,509
(80,307)
1,761,696
156,585
934,151
1,697,318
-
4
105,525
-
105,529
381,731
-
10
73,009
-
73,019
303,844
-
-
-
-
Non-interest
bearing
1,816,564
-
102,256
1,766,601
-
162,427
1,938,069
5,785,917
59,641
7,661,566
1,699,459
197,469
9,618,135
(3,832,218)
1,253,449
-
392,864
1,685,544
-
175,579
1,531,840
5,039,276
17,316
7,329,951
1,625,155
188,466
9,160,888
(4,121,612)
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
39. 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 2019
(a) Financial assets
Equity securities
Non-financial assets
Land & buildings
Assets subject to operating lease
Total Assets
(b) Financial liabilities
Policy liabilities
Total liabilities
At 31 December 2018
(a) Financial assets
Equity securities
Non - financial assets
Land & buildings
Assets subject to operating lease
Total Assets
(b) 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
-
-
-
-
-
-
-
-
-
-
-
-
177,313
3,095
180,408
708,284
-
885,597
-
48,133
51,228
-
-
890,147
890,147
708,284
48,133
936,825
890,147
890,147
118,831
2,696
121,527
537,669
-
656,500
-
-
-
52,433
55,129
818,198
818,198
537,669
52,433
711,629
818,198
818,198
2019
2018
54,570
72,825
(3,342)
-
51,228
(18,255)
-
54,570
There were no changes in valuation technique for Level 3 recurring fair value measurements during the year ended 31 December 2019. 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.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
39. FAIR VALUES OF FINANCIAL ASSETS AND LIABILITIES (continued)
Forward exchange contracts outstanding at 31 December 2019 stated at the face value of the respective contracts are:
All amounts are expressed in respective FCY'000 AND K’000
As at 31 December 2019
USD
AUD
EURO
GBP
JPY
Other
Total
Selling
Buying
As at 31 December 2018
Selling
Buying
FCY
Kina
FCY
Kina
FCY
Kina
FCY
Kina
(49,183)
(15,371)
8,132
16,169
(55,913)
(8,793)
4,924
5,530
(2,529)
(900)
(21)
(181,179)
(2,110)
-
-
14,800
-
(958)
-
55,700
-
-
20
-
-
-
-
-
-
-
-
(15,371)
1,200
137,500
34,444
-
-
-
-
-
-
-
-
16,169
(149,380)
(1,000)
-
-
-
(8,793)
5,000
15,353
-
-
-
5,530
40. INSURANCE
(a) Net insurance operating income
All amounts are expressed in K’000
Net insurance income
(b) Policy liabilities
Consolidated
Bank
2019
2018
2019
2018
30,675
38,913
-
-
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 2019 this was 6.097% per annum (31st
December 2018: 6.005% 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 4.80% per annum
was used at 31st December 2019 (31st December 2018: 4.80% per annum).
These rates were based on the 10 year government bond rate as published
by the Reserve Bank of Fiji.
Investment and maintenance expenses
Future maintenance and investment expenses are based on the budgeted
expenses. Future inflation has been assumed to be 3.5% per annum (31st
December 2018: 3.5% per annum) for determining future expenses.
Taxation
The rates of taxation enacted or substantially enacted at the date of the
valuation (20%) are assumed to continue into the future.
Mortality and morbidity
Projected future rates of mortality for insured lives are based on the Fiji
Mortality Statistics table FJ90-94 Male. These are then adjusted for the
Group’s own experience. The mortality rates used was 65% (31st December
2018: 65%) 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 the same as last
year.
Whole of Life and Endowment Insurance
Term Insurance
Accident Insurance
96
2019
2018
14%
16%
17%
14%
16%
17%
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeamsANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD NOTES TO THE FINANCIAL STATEMENTS
for the Year Ended 31 December 2019
40. INSURANCE (continued)
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.
future bonus rates included in the liability for the long term insurance
contracts were set such that the present value of the liabilities equates
to the present value of assets supporting the business together with
assumed future investment returns, allowing for the shareholder's right to
participate in distributions.
Discretionary Participating Business
For most participating business, bonus rates are set such that, over long
periods, the returns to contract holders are commensurate with the
investment returns achieved on the pool of assets which provide security
for the contract, together with other sources of profit arising from this
business. Profits from these policies are split between contract holders
and shareholders in accordance with the policy conditions which allow for
shareholders to share in allocations at a maximum rate of 20%. For business
written between 1995 and 1998 the shareholder receives 11% of profits.
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.
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
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
2019
2018
818,198
11,221
59,746
982
890,147
749,876
(3,227)
71,616
(67)
818,198
41. EVENTS OCCURRING AFTER BALANCE SHEET DATE
On February 7, 2020, the Bank acquired 50% shares in Devco Lao Leasing Company Limited for a consideration of USD2 million. The acquired entity will
be renamed BSP Lao Leasing Company, an asset finance business which will be treated as a joint venture in the Group accounts.
42. REMUNERATION OF AUDITOR
All amounts are expressed in K’000
2019
2018
2019
2018
Consolidated
Bank
Financial statement audits
Other services
4,347
514
4,861
3,326
1,031
4,357
3,126
463
3,589
2,363
818
3,181
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.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams 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 2019, 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 which 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 2019
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 2019, 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 opinion.
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 other services for the Group in the areas of 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 / (675) 305 3100, F: (675) 321 1428, www.pwc.com/pg
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Materiality
Audit Scope
Key Audit Matters
• For the purpose of our audit of the Group we
used overall group materiality of K60.8 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 (PwC Papua New Guinea) conducted
the audit over all of the Group’s operations
in Papua New Guinea (PNG) and Solomon
Islands, 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, Cambodia, 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 in the Solomon Islands.
• We selected 5% based on our professional
judgement noting that it is also within the range
of commonly acceptable related thresholds.
• Our audit focused on where the directors made
subjective judgements; for example, significant
accounting estimates involving assumptions
and inherently uncertain future events.
• 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.
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams 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
How our audit addressed the key matter
Loan loss provisioning - Refer to Note 1G & M of
the financial statements for a description of the
accounting policies and to Note 34 for an analysis of
credit risk
Due to the magnitude of the loans and advances balances
and the extent of management judgement inherent in the
impairment calculations, impairment of loans and advances is
an area of significance in the current year audit of the Bank and
its subsidiaries.
The procedures we performed to support our audit conclusions,
included:
• Consideration of the appropriateness of accounting policies
and assessment of the loan impairment methodology applied,
compared to the requirements of IFRS 9. This included obtaining
an understanding and assessment of the reasonableness of the key
outputs of the model, as well as key judgements and assumptions
used by management in implementation of the model.
IFRS 9 Financial Instruments (IFRS 9) is a complex accounting
standard which has required considerable judgement and
interpretation in its application.
• Reviewing the design and operating effectiveness of key controls
around the credit origination processes, the credit monitoring
processes and the credit inspection unit’s customer loan file
reviews.
The key areas of judgement included:
• Review of the impairment methodology to establish the critical
• The determination of the impairment in applying IFRS
9, which is reflected in the allowance for losses on loans,
advances and other receivables (refer to Note 13 and Note 34)
• The identification of exposure for which there has been a
significant increase in credit risk
• Assumptions used in the expected credit loss model such
as valuation of collateral and assumptions made on future
values, financial condition of counterparties, expected future
cash flows and forward looking macroeconomic factors
fields used in the computation of Stage 1 and Stage 2 provisions. On
a sample basis tested the critical fields identified to have an impact
on the expected credit loss provision by agreeing this back to source
documentation.
• For loans and advances in Stage 1 and Stage 2, critically examining
the model methodology for consistency and appropriateness. This
included evaluation of the appropriateness of the estimates made
on the Probability of Default, Loss Given Default and Exposure
at Default. This also included assessing the appropriateness of
probability-weighted and staging criteria.
• The need to apply additional model adjustments to reflect
current or future external factors that are not appropriately
captured by the expected credit loss model
• For Stage 3 loans and advances, audit procedures were carried out
over the completeness of the credit watch list and delinquencies,
assumptions made in the valuation of collateral and recovery cash
flows and mathematical accuracy of the IFRS 9 provisioning model.
• For model adjustments, we considered the basis for and data
used to determine the adjustments. This included making an
independent assessment of both the credit environment and the
macro- environment in which the Group operates.
• For IFRS 9 related disclosures in the financial statements,
we reviewed the accuracy and completeness in line with BSP
accounting policies and IFRS 9 requirements.
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams Key audit matter
IT systems and controls
We focused on this area because the Group is heavily dependent
on complex IT systems for the capture, processing, storage and
extraction of significant volumes of transactions.
There are some areas of the audit where we seek to place reliance
on system functionality including certain automated controls,
system calculations and reports.
Our reliance on these is dependent on the Group’s IT General
Control (ITGC) environment, in particular, user access mainte-
nance and changes to IT systems being authorised and made in an
appropriate manner.
How our audit addressed the key matter
For significant financial statement line items, we gained an understanding
of the business processes, key controls and IT systems used to generate and
support those line items.
Where relevant to our planned audit approach, we assessed the design and
tested the operating effectiveness of the key ITGCs which support the con-
tinued integrity of the in-scope IT systems.
Our procedures over ITGCs focused on user access and change management
and we also carried out tests, on a sample basis, of system functionality that
was key to our audit approach.
Where we identified design or operating effectiveness matters relating to IT-
GCs and system functionality relevant to our audit, we performed alternative
or additional audit procedures.
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 the financial statements that give a true and fair view and
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 the Group 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.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the ISAs will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional scepticism throughout the audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform
audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our
opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may
involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Group’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made
by the directors.
• Conclude on the appropriateness of the directors’ use of the going concern basis of accounting and, based on the audit evidence
obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report
to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are
based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Group
to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that achieves fair presentation.
• 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.
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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 2019:
• 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
Peter Buchholz
Engagement Leader
Christopher Hansor
Partner
Registered under the Accountants Act 1996
Port Moresby
26 February 2020
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate
Social
Responsibility
Shareholder
Information
QUALITY
We are committ ed
to excellence whilst
striving for conti nuous
improvement in
products and services.
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ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
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 hour at the Registered Office.
RIGHTS ATTACHING TO ORDINARY SHARES
The rights attaching to shares are set out in Bank of South Pacific Limited’s
Constitution and in certain circumstances, are regulated by the Companies
Act 1997, the PNGX Listing Rules and general law. There is only one class
of share. All shares have equal rights. Other rights attached to ordinary
shares include:
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.
The Directors may decline to register a transfer of shares (other than a
proper transfer in accordance with the PNGX Business Rules) where
permitted to do so under the PNGX 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 PNGX
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 PNGX Listing Rules or by the PNGX
Business Rules.
Partly paid shares
The Directors may, subject to compliance with BSP’s constitution, the
Companies Act and the PNGX 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.
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.
Issues of further shares
Liquidation
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 PNGX
Listing Rules, the Companies Act and any rights for the time being attached
to the shares in any special class of those shares.
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.
Variation of rights
Directors
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 PNGX Listing
Rules, ordinary shares are freely transferable.
The shares may be transferred by a proper transfer effected in accordance
with the PNGX Business Rules, by any other method of transferring or
dealing with shares introduced by PNGX 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 PNGX that is
permitted by the Companies Act.
BSP’s Constitution states that the minimum number of directors is three
and the maximum is ten.
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 PNGX
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.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams Shareholder Information (Continues)
Share buy backs
Subject to the provisions of the Companies Act and the PNGX 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.
Twenty largest registered fully paid ordinary shareholders.
As at 31 December 2019, 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
15
16
17
18
19
20
Kumul Consolidated Holdings Limited
Nambawan Super Limited
Petroleum Resources Kutubu Limited
NASFUND
Credit Corporation (PNG) Limited
Motor Vehicles Insurance Limited
Fiji National Provident Fund
PNG Sustainable Development Program Limited
Teachers Savings and Loans Society
Comrade Trustee Services Limited
IFC Capitalization (Equity) Fund LP
International Finance Corporation
Lamin Trust Fund
Capital Nominees Limited
Mineral Resources OK Tedi No. 2 Limited
Solomon Islands National Provident Fund
Nominees Niugini Limited
Catholic Diocese of Kundiawa
Southern Highlands Provincial Government
Mineral Resources Star Mountains Ltd
Other Shareholders
Distribution of shareholding
As at 31 December 2019, the Company had 5,580 shareholders. The distribution of shareholdings is as follows:
Range (number)
1 to 1000
1001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and above
106
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
Share Held
84,811,597
57,592,261
46,153,840
45,318,417
36,294,081
31,243,736
30,461,552
29,202,767
15,317,366
12,456,052
7,440,464
7,440,464
3,518,132
3,054,729
2,890,000
2,500,001
2,369,495
2,217,798
2,000,000
1,975,799
42,981,083
467,239,634
%
18.15%
12.33%
9.88%
9.70%
7.77%
6.69%
6.52%
6.25%
3.28%
2.67%
1.59%
1.59%
0.75%
0.65%
0.62%
0.54%
0.51%
0.47%
0.43%
0.42%
9.20%
100%
Number of
Shareholders
Number of Shares
4,621
581
99
186
93
5,580
38,027
2,356,469
747,752
6,965,871
457,131,515
467,239,634
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams Unmarketable Parcels:
As at 31 December 2019, the BSP Share Price was K11.78. There were 621 shareholders (0.1% 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
Section 34, Allotment 6 & 7,
Klinki Street, Waigani Drive, Port Moresby.
National Capital District, PAPUA NEW GUINEA
Telephone: +675 322 9700
Home Exchange for BSP Shares
PNG Exchange Markets (PNGX)
PO Box 1531
PORT MORESBY
National Capital District, PAPUA NEW GUINEA
Telephone: +675 320 1980
Share Registry
PNG Registries Ltd
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
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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DIRECTORS’ INFORMATION
Name
Nature of Interest
Sir K. Constantinou, OBE
Director
Shareholder
Patron
Member
R. Fleming, CSM, MBA, MMGT
Director
Bank of South Pacific Ltd, BSP Capital Ltd, BSP Finance Ltd, Bank South Pacific (Tonga)
Ltd, Bank South Pacific (Samoa) Ltd, Bank South Pacific (Vanuatu) 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,
Coastwatchers Court Ltd, Waigani Assets Ltd, Southern Seas Investments Ltd, Texas
Chicken South Pacific Ltd, Loloata Island Resort, OPH Ltd, Rangeview Heights Ltd in
Papua New Guinea, Taumeasina Island Resort in Samoa, Good Taste Company in New
Zealand, K G Property Ltd, Air Niugini and Anglicare Foundation
Airways Hotel & Apartment Ltd, Lamana Hotel Ltd, Lamana Development Ltd, Texas
Chicken South Pacific Ltd and K G Property Ltd
Burnet Institute and Kokoda Track Foundation
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, Bank South Pacific (Tonga) Ltd, Bank South
Pacific (Samoa) Ltd, Bank South Pacific (Vanuatu) Ltd, 3 Kundu Pte Ltd, BSP Finance
(Solomon) Ltd, BSP Life PNG Ltd, BSP Finance (Cambodia) Plc
Shareholder
Bank of South Pacific Ltd, BSP Saleco Ltd
Member/Trustee
Australian Institute of Company Directors, PNG Institute of Directors, Anglicare
Foundation
A. Sam, BComm, CPA, MAICD,
GAICD
Director
Bank of South Pacific Ltd, Sam Kiak Tubangliu Certified Practising Accountants, Silver
Dawn Holdings Ltd
Shareholder
Sam Kiak Tubangliu Certified Practising Accountants, Silver Dawn Holdings Ltd
Member/Graduate
CPA PNG, PNG Institute of Directors, Australian Institute of Company Directors
S. Davis, LLB
Director
Bank of South Pacific Ltd, Next DC Ltd, PayPal Australia Ltd, NextDC Ltd, Asia Society
of Australia, Australia India Business Council
Graduate/Member
Australian Institute of Company Directors, Avondale Golf Club Ltd
R. Bradshaw, LLB
Director
Member
Bank of South Pacific Ltd, Kumul Agriculture Ltd
Papua New Guinea Law Society
108
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityStrategicReportManagementTeams 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. Talao, LLB, LLM, MPHIL, MAICD
(Resigned December, 2019)
Director
Bank of South Pacific Ltd, Director Partnership Pacifica, Chayil Investment ltd,
Human Rights PNG
E. B. Gangloff, CPA, MAICD, MIIA,
PNGID
Member
Director
Member
A. Mano, BEcon, MSc.
Director
Faamausili Dr. M. Lua’iufi, BA,
MSc, PhD
Shareholder
Employee
Director
Shareholder
Member
Papua New Guinea Law Society, Australian Institute of Company Directors
Bank of South Pacific Ltd, Gangloff Consulting Ltd, New Britain Palm Oil Ltd,
Sir Theophilus Constantinou Foundation, BSP Finance (Fiji) Ltd, Pacific Training
Consortium Ltd, Highlands Pacific Ltd
Institute of National Affairs (President), MSME Council Inc. (Vice President),
Australian Institute of Company Directors, Papua New Guinea Institute of Directors
(Founding member), CPA PNG, Institute of Internal Auditors, School of Business and
Public Administration, University of Papua New Guinea (Adjunct Professor).
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, 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 in Samoa, Davara Estate, Bogasi Investments Ltd, Terra
Resources Ltd
SMA Investments Ltd, INSPAC Ltd
Mineral Resources Development Company Ltd
Bank of 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, Technical Advisor to the newly establsihed
Samoa Human Resources Institute (November 2018), Australian Institute of Company
Directors
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate
Social
Responsibility
Management Teams
PROFESSIONALISM
We inspire, we change, and we live
our values, and lead by example.
110
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Corporate
Management
Social
Teams
Responsibility
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
111
Management Team
Executive Management
Robin Fleming, CSM
Group Chief Executive Officer
Roberto Loggia
Group Chief Operating Officer
Eddie Ruha
Group Chief Financial 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 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 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
In New
Director and Company Secretary.
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 graduate of the Australia Institute of
Company Directors.
112
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD 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.
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,
sectors,
Telecommunications and Property
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.
Mike Hallinan
Group Chief Risk Officer
Mike Hallinan, was appointed Group Chief Risk
Officer, following Haroon Ali’s move to Fiji as
Country Head in 2018. Mr Hallinan, commenced
employment with BSP in 2013, as Chief Credit
Officer. His professional career expands over 40
years in Banking and Finance holding various
senior positions in Risk Management and Senior
Relationship Executive roles with Commonwealth
Bank of Australia, specifically managing corporate
and
including
government departments, both domestically and
internationally. Recent experience prior to joining
BSP included the financial industry group and
infrastructure project financing. Mike is familiar
with PNG having previously worked for the
former Papua New Guinea Banking Corporation
holding the position of Executive Manager
Lending Division. Mike is a qualified CPA and is a
Fellow of the Australian Bankers Institute.
relationships
institutional
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Management Team
Executive Management (continued)
Rohan George
General Manager Treasury
structured
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,
and
commodities
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, 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.
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.
114
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD Daniel Faunt
General Manager Offshore Branches
and Director BSP Finance Ltd
Daniel was appointed to General Manager
Offshore Branches in 2018 with responsibility
over banking operations in Fiji, Solomon Islands,
Tonga, Samoa, Vanuatu and the Cook Islands.
Faunt has 20 years of banking experience in PNG,
Australia and the Pacific and has held senior
management roles in Corporate and Commercial
Banking, Retail Banking and Operations. Mr Faunt
holds a Masters of Business Administration in
Economics from Deakin University and Bachelor
of Business in Banking from the Queensland
University of Technology.
Nuni Kulu
General Manager Digital
Adam Fenech
Group General Manager Compliance
Nuni Kulu was appointed as General Manager
Digital effective as of 1st January, 2019. Her
appointment makes her the second female to
be appointed to the Executive of BSP as she joins
Hari Rabura, General Manager Human Resources.
Nuni joined the former PNG Banking Corporate
(PNGBC) as a graduate and has undertaken
numerous roles in Treasury and Retail Banking
during the course of her career. She was a
member of the BSP's Leadership Development
Program and has benefited from leadership and
management training at Melbourne Business
School and Insead College in France. Nuni hails
from Manus Province and holds a Bachelor of
Commerce attained at the Australian National
University with many years of experience with
PNGBC / BSP. She is now the President of the
Business Council of PNG.
Adam Fenech was appointed to Group General
Manager Compliance
in October 2019. Mr
Fenech oversees BSP’s Anti-Money Laundering &
Compliance; Internal Audit; and Credit Inspection
business units to ensure BSP continues to
meet its ongoing regulatory requirements and
advancements in industry standards. Mr Fenech
has over 22 years’ diverse leadership experience
in Australia and Papua New Guinea including
senior roles at Bankers Trust, Commonwealth
Bank of Australia, and more recently at PwC as
Director of Advisory Services, and Kina Bank as
General Manager Wealth and Chief Operating
Officer. He holds a Bachelor of Commerce
from the University of New England, an MBA
and Master of Project Management from the
University of Southern Queensland, and has
attended leadership programs at the Harvard
Business School and the National University of
Singapore. He is also a member of the Association
of Certified Anti-Money Laundering Specialists
(ACAMS) and both the Australian and PNG
Institute of Company Directors.
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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Broader Group
116
COOK ISLANDS
Middle [front]
David Street – Country Head
Left to Right [back]
Henry Napa – Head of Operations
Tokoa Harmon – Branch Manager
Chris Doran – Head of Corporate
Grace Tangata – Operational Risk and Compliance
Manager
Gabe Raymond – Head of Finance
Achaal Narayan – Manager Digital
Tutu Inamata – Business Manager
FIJI
Standing (L-R):
Omid Saberi – Chief Information Officer
Sunil Rohit – Head of Credit
Ravindra Singh – General Manager Retail Bank
Haroon Ali – Country Head
Maikash Ali – General Manager Corporate
Alvina Ali – General Manager Legal & Compliance
Esala Halafi – Head of Operational Risk &
Compliance
Rajeshwar Singh – General Manager Corporate
Services & Chief Financial Officer
Not in photo:
William Wakeham – Chief Operating Officer
SAMOA
Standing (L - R):
Maiava Iaeli Tovia-Leota – Business Manager
Shirley Greed – Head of Retail Banking
Taitu’uga Maryann Lameko-Vaai – Country Manager
Peti Leiataua – Manager Operational Risk and
Compliance
Jennifer Fruean – Head of Finance
Seated (L - R):
Epeli Racule – Operations Manager
Bharat Chovan – Head of Financial Markets
Edward Yee – Head of Business Banking
Rodney Greed – Manager Projects and Premises
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD SOLOMON ISLANDS
Left to Right [back]
Christopher Robertson – Head of Relationship
Banking
Alphonse Taoti – Manager Retail Services
Joan Ramo – Manager International Operations
Dennis Suia – Manager Retail Operations Manager
Giddings Qiqo – Manager Operations and
International Business
Sharneet Singh – Head of Finance
David Anderson – Country Head
Left to Right [front]
Freda Fa’aitoa – Manager Human Resources
Lucy Bonunga – Manager Operational Risk &
Compliance
Lynnette Taoti – Manager Credit Administration
Genevieve Apusae – Senior Audit Officer
TONGA
Standing (L - R):
Marcellina Wolfgramm Haapai – Country Head
Viliami Vailea – Head of Finance
Alvina Manu – Manager Operational Risk
Emele Hia – Head of Corporate
Meleana Fifita – Head of Operations
Mele Ikahihifo Latu – Head of Treasury
Mr Emilio Tapueluelu – Head of Retail
VANUATU
Left to Right [back]
Ronal Prasad – Head of Finance
Nik Regenvanu – Country Head
Bethy Nafuki – Business Manager
Left to Right [front]
Moana Korikalo – Head of Retail
Josiah Kalfabun – Manager Compliance
Irene Tabi – Head of Treasury
Edmond Williamson – Manager Operational Risk
Teresa Jordan – Head of Operations
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate
Social
Responsibility
Management Teams
Subsidiaries
BSP FINANCE HOLDING
Standing (L - R):
Pochon Sauriroa Lili – Financial Controller
Susan Asi – Assistant Compliance & ORM Offi cer
Anna Puri – Credit Manager
Christophe Michaud – General Manager
Bernadett e Name’a – Finance Offi cer
Janet Seta – Quality Assurance Manager
Remu Ruape – AML/CTF Compliance Offi cer
BSP FINANCE - PAPUA NEW GUINEA
Standing (2nd from Left ):
Brett Tayler – Country Manager with Management
and staff of BSP Finance PNG
BSP FINANCE - FIJI
Standing (L - R):
Sanjeet Narsey – Finance Manager
Vimal Raj – Senior Lending Offi cer
Shelvina Sharon Lata – Accountant
Shirraz Narayan – Collecti ons Supervisor
Krishna Raju – Country Manager
Shainesh Vikash Lal – Area Manager West
Animul Sheryn Khan – Supervisor Lending Support
Niranjan Singh – Compliance & Operati onal Risk
Management Offi cer
Sudeshwar Ram – Area Manager East
BSP FINANCE - CAMBODIA
Standing (L - R):
Kou Polai – Senior Reovery Offi cer
Heng Brosoer – Finance Manager
Mom Sokhouch – Senior Admin Support
Seng Sokha – Sale Lending Manager
Khay Bunthoeun – Operati on Manager
Sitti ng (L - R):
Im Boramey – Senior Compliance Offi cer
Buo Choeun – Country Manager
Phum Sreyneang – Sale Lending Coordinator
BSP CAPITAL LTD
Standing (L - R):
Willie Konga – Senior Manager (Funds Management)
Marie Sourimant – Senior Portf olio Offi cer
Theresa Kalivakoyo – Business Controller
Michelle Koredong – Senior Dealer Fixed Asset
Ruth Roandi – Research Analyst
Gheno Minia – General Manager
118
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
Directory
Broader Group
OVERSEAS DIRECTORY
Cambodia
Country Manager
Cook Islands
Country Head
Head of Corporate
Rarotonga Branch
Aitutaki Branch
Buo Choeun
855 (0) 2388 52064
David Street
Chris Doran
Tokoa Harmon
Rosa Henry
682 22829
682 22014
682 22014
682 31714
Haroon Ali
Sanjani Devi
Shailendra Roy
Pio Vatanitawake
Ravikashni Prakash
Fiji
Country Head
Damodar City Branch
Thomson St Branch
Nausori Branch
Pacific Harbour Branch(OIC)
Pacific House Sales & Bus.Centre Manjila Goundar
Samabula Sales & Bus. Centre(OIC) Mereani Peters
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
Shalit Kumar
Reginald Kumar
Devendran Pillay
Ann Pesamino
Razia Tahir
Ronica Prakash
Anupa Kumar
Nacanieli Vadei
Eka Takayawa
Vineeta Prasad
Anaseini Senivika
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
BSP LIFE - PNG
Standing (L - R):
Gynellevin Tanabi-Hemetsberger – Operations
Manager
Jennifer Manimua – Administration Accountant
Nilson Singh – Country Manager
Matthew Hasu – Business Development Manager
BSP LIFE - FIJI
Standing (L - R):
Curtis Mar – General Manager Distribution &
Marketing,
Pramesh Sharma – Chief Investments Officer
Michael Nacola – Managing Director
Munendra Naidu – Chief Financial Officer
Sitting (L - R):
Shayne Sorby – General manager Legal & Compliance
Atelina Muavono – Chief Operating Officer
Samoa
Country Head
Retail Head
Apia Branch
Vaitele Branch
Salelologa Branch
Maryanne Lameko - Vaai
Shirley Greed
Siuli Aiono
Folototo Leaumoana
Leilani Kelemete
685 66115
685 66170
685 66172
685 23005/685 23057
685 51208/685 51066
Solomon Islands
Country Head
Auki Branch
Gizo Branch
Heritage Park Branch
Honiara Central
Munda Branch
Noro Branch
Point Cruz Branch
Ranadi Branch
David Anderson
Lency Saeni
Clotilda Londeka
Joy Vave
Jeremy Bosukuru
Joseph Rabaua
Richard Bero
Saverio Votu
Tricia Tura
677 21874
677 40484
677 60539
677 21814
677 21222
677 62177
677 61222
677 21874
677 39403
Tonga
Country Head
Nuku’alofa Branch
Vava’u Branch
Ha’apai Sub Branch
‘Eua Sub Branch
Marcellina Wolfgramm Haapai
Melaia Tu’ipulotu
Sosefina Tangitau
Selu Lausii
Tokilupe Toe’api
676 20807
676 20879
676 71268
676 60933
676 50145
Vanuatu
Country Head
Head of Retail & Marketing
Santo Branch
Port Vila Branch
Tanna Branch
Freswota Branch
Nik Regenvanu
Moana Korikalo
Edwige Wensi
Danica Rapouel
Dolores Charlie
Lina Niatu
678 5580038
678 5580009
678 5580034
678 5580016
678 5580041
678 5580051
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
119
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport
Management Team
PNG Branch Managers
Cliff Yoka
Aitape
Martin Gilo
Alotau
Rose Paula Seeto
Arawa
Dora Raphael
Bialla
Ruby Patu
Boroko
Julie Warren
Buka
Roslyne P. Kanini
Bulolo
Reuben Attai
Daru
Livikonimo Koki
Goroka
Antonia Dru
Gordons
Rawalo Rawalo
Harbour City
Marco Hamen
Kainantu
Mathias Manawo
Kavieng
Betty Posangat
Kimbe
Ivy David
Kiunga
Joe Makinta
Kokopo
Rita Singut
Kundiawa
Bevilon Homuo
Lae Top Town
Gabriel Ak
Lae Market
Robinson Panako
Lae Commercial
Johnson Tetaga
Lihir
Ruth Kagl
Lorengau
Barry Namongo
Madang
Philip Solala
Mendi
Meck Kaum
Moro
David Ila
Moro
Theresa Pilamp
Mt Hagen
Samuel Okti
Popondetta
Mary Koi
Porgera
Stanley Bole
Port Moresby
Kalat Tiriman
Rabaul
Dianne Rali
Tabubil
John Tomba
Tari
Delilah Kanit
Vanimo
Susie Yapen
Vision City
Thomas Tembil
Wabag
Alex Kuna
Waigani B/Centre
Madeleine Leka
Waigani Drive
Nelson Kerua
BSP First HC
Richard La’a
SME - Lae
Samuel Mulina
SME - Goroka
Carol Nokop
SME - Port Moresby
Reuben Elijah
Highlands Area
Manager
Dennis Lamus
Momase Area
Manager
Jeffrey Singer
NGI Area Manager
Natasha Sirimai
NCD Area Manager
Billy Veveloga
Southern Area
Manager
120
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReportANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD PAPUA NEW GUINEA BRANCH DIRECTORY
Aitape
Alotau
Arawa
Bialla
Boroko
Branch
Premium
Cliff Yoka
Martin Gilo
Rosemary Paula Seeto
Dora Raphael
Ruby Patu
Sheila John
Buka
Julie Warren
Bulolo
Daru
Goroka
Gordons
BSP First
Premium
Harbour City
Branch
Premium
BSP First
Kainantu
Kavieng
Kimbe
Kiunga
Kokopo
Branch
Premium
Roselyn P. Kanini
Ruben Attai
Livikonimo Koki
Antonia Dru
Rawalo Rawalo
Iru Tabe
Nelson Kerua
Marco Hamen
Mathias Manowo
Betty Posangat
Ivy David
Joe Makinta
Kessie Guboro
Kundiawa
Rita Singut
Lae
Top Town
Main Market
Commercial
BSP First
Lihir
Lorengau
Madang
Branch
Premium
Mendi
Bevilon Homuo
Gabriel Ak
Robinson Panako
Elizabeth Gavul
Johnson Tetaga
Ruth Kagl
Barry Namongo
Jennifer Passingan
Philip Solala
SUB BRANCH DIRECTORY
AIYURA
BANZ
BUIN
CHUAVE
DAULO
GEMBOGL
GUSAP
HENGANOFI
HIGATURU
HOSKINS
IALIBU
KABWUM
KAMTAI
KEREMA
KEREVAT
KEROWAGI
KINIM
KIKORI
KOMO
KONOS
KUPIANO
Gomah Benson
Kessy Elly
Rosemary Paula Seeto
Shandah Bai
Kurai Gunurei
William Koima
Lee Sinemaue
Rachael Saime
Stephanie Orovo
Genevieve Sela
Philemon Kumi
Inna Buneng
Josephine Kun
Toru Levo
Minamar Mathew
Gariki Towa
Malapun Bannick
Leah Kimave
Mark Tom
Helen Warange
Andrew Baine Jnr
457 2042
641 1284
276 9244
983 1095
303 4320
303 4354
973 9042
7202 9203
474 5331
645 9416
532 1633
302 5245
302 5202
305 7135
305 6190
305 7935
537 1251
9842082
983 5166
649 1313
982 9088
982 9068
535 1025
473 9876
473 9609
472 9088
478 4949
986 4062
970 9244
422 2477
422 2621
549 1070
7230 8313
7100 9078
7106 3610
7197 6001
7100 6763
7313 4177
7091 1396
7100 7859
7275 1365
7031 2627
7041 1624
7346 1426
7243 4695
7100 2889
7190 8231
7100 9077
7100 7861
7163 0597
7362 0760
7197 6006
7288 4140
Moro
Meck Kaum
David Ila
Motukea
Stanley Geno
Mt Hagen
Branch
Theresa Pilamp
Premium
Maggie Wara
Popondetta
Porgera
Samuel Okti
Mary Koi
Stanley Bole
Imelda Konabe
Jessie Toran
Kalat Tiriman
Dianne Rali
John Tomba
Delilah Kanit
Carol Nokop
Richard La’a
Samuel Mulina
Port Moresby
Branch
Premium
BSP First
Rabaul
Tabubil
Tari
Vanimo
SME
Port Moresby
Lae
Goroka
Vision City
Branch
Premium
276 1566
276 1569
3217701
542 1877
542 2022
542 1877
629 7443
547 6900
305 7104
305 7790
305 7724
982 1744
649 9179
276 1651
457 1025
305 6400
479 5676
532 1006
Susie Yapen
300 9103
Wabag
Thomas Tembil
547 1237
Waigani Banking Centre
Branch
Premium
Alex Kuna
Pakar Tata
Waigani Drive
Wewak
Madeleine Leka
Robert Jomino
REGIONAL AREA MANAGERS
Highlands Region
Momase Region
NGI Region
NCD Region
Southern Region
Reuben Elijah
Dennis Lamus
Jeffrey Singer
Natasha Sirimai
Billy Veveloga
LABA
LAKURUMAU
LOSUIA
MAPRIK
MINJ
MUTZING
NAMATANAI
NAVO
NINGERUM
OKAPA
PADIPADI
PALMALMAL
PANGIA
TAMBUL
TELEFOMIN
WAKUNAI
WALIUM
WAPENAMANDA
YANGORU
YONKI
Auda Morea
Lorraine Koma
Lorna Solomon
Christian Tatu
James Mare
Gordon Robert
Mathew Tabakas
Hennah Brunim
Todin Kasi
Arafat Tovari
Lelly Mick
Freda Nablup
Debra Poria
Willie Yapi
Jobartan Bickie
Melvin Kusa
Brenda Igusam
Feta Isin
Brendon Iromo
Usik Asino
305 6102
300 9131
302 5301
456 2344
542 2002
478 4998
982 9088
305 7195
305 7886
7197 6008
7197 6005
7031 2617
7168 7815
7100 9076
7100 2488
7197 6007
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
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate
Social
Responsibility
Corporate Social
Responsibility
COMMUNITY
We respect, value and support the
communiti es in which we operate.
122
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Strategic
Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Corporate
Management
Social
Teams
Responsibility
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
123
Corporate Social Responsibility
Investing in PNG and the Pacific
BSP delivers more than just banking to the communities, customers and the countries that we operate in. We
deliver balanced and sustainable outcomes for our customers, community, people and shareholders.
We respect, value and support the communities in which we operate in. At the core of our business, we know that, our
people belong to a bigger community.
In 2019, BSP's Corporate Social Responsibility (CSR) contribution was over K5.5 million including sponsorships and
donations as a group.
Corporate Social Responsibility
K5.5m
Sponsorships and Donations
Groupwide including BSP
Subsidiary
Corporate Social Responsibility
Total amount invested in CSR in 2019. This includes
Sponsorships, Donations and Community Projects in
Corporate Social Responsibility
BSP Groupwide
K4.2m
Sponsorships and Donations in Papua
New Guinea
Corporate Social Responsibility
Total amount invested in CSR in 2019. This includes
Sponsorships, Donations and Community Projects in
Papua New Guinea
124
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
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Responsibility
across the Pacific
K249k
CSR Spend in
Cook Is.
K296k
CSR Spend
in Fiji
K261k
CSR Spend in
Samoa
K102k
CSR Spend in
Solomon Is.
K178k
CSR Spend in
Tonga
K237
CSR Spend
in Vanuatu
BSP takes pride in supporting professional groups, organisations, and worthy causes that are important to our
customers, employees and people throughout PNG and the Pacific.
BSP has built partnerships with various organising committees, events and charities who champion, cultural unity,
professional development, environment sustainability, education, sports, health and well being.
BSP TONGA SPONSORS STUDENTS
TO MEXICO
BSP TONGA SUPPORTS HAKULA SWIM
CLUB
BSP SI SUPPORTS PINKTOBER
BSP SAMOA OFFERS SCHOLARSHIPS
FOR STUDENTS
BSP SAMOA SUPPORTS
INTERNATIONAL WOMEN’S DAY
BSP PNG SUPPORTS OPERATION OPEN
HEART
Donations
K800k
for Donations in
Papua New Guinea
Our Donations
Support Charities, Hospitals,
Orphanages and other worthy
causes.
CHARITY AND NGO
Rotary Club of Port Moresby
• Salvation Army Red shield Appe
• Gateway Children’s Fund(PNG)Inc
• Sir Buri Kidu Heart Foundation
• City Mission PNG Ltd
HEALTH
Operation Open Heart Foundation
• Karama Health Limited
• Soroptomist International POM
• PNG Cancer Foundation
• Burnett Institute
EDUCATION
Buk Bilong Pikinini
• Kokoda Track Foundation Limited
COMMUNITY
• Bel isi Campaign
• Mt Ulevun Disaster
• Digicel Foundation - Man of Honour
Community Leadership Award
Tsak Valley Landslide Disaster
•
• Life PNG Care Inc
• Branch Hospital Donations (Lae,
Rabaul, Kavieng, POM)
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Everyday
Donations
BSP Fiji supports the Walk on Walk Strong
campaign by shaving their heads to raise
funds for Cancer Awareness and children
living with Cancer.
Each year, BSP staff volunteer to shave their
heads for this worthy cause.
Sponsorship
SPORTS AND WELL BEING
• BSP School Cricket Programme
• WNB Rugby League Franchise Board
• Papua New Guinea Swimming Inc.
• PNG Volleyball Federation - Indoor
• Surfing Association of PNG Inc.
• Papua New Guniea Snooker Assoc
• Port Moresby Golf Club
• Port Moresby Tennis and Racquets Club
• Lloyd Robson Oval Trustee Limited
• Ramu Golf Club
• Port Moresby Game Fishing Club
• Bulolo Golf Club
• PNG Squash Racquets Federation
• Port Moresby Cricket Association
• Private Companies Netball club
• Port Moresby Corporate Touch
• PNG Olympic Committee Fundraising
• PNG Soccer Charity Trust Account
• POM Women’s Softball Association
• Sportz Events Limited
• Rabaul Golf & Squash Club
• Lae Golf Club Inc.
CULTURAL FESTIVALS
• Sepik River Crocodile Festival
• Morobe Agriculture Show
• Motu Koita Festivals
• Goroka Show
• Mount Hagen Cultural Show
• 8th National Mask Festival
• National Kenu and Kundu Festival
•
• Frangipani Festival
• Karimui Conseration, Agriculture &
Tufi Tapa & Tattoo Festival
Cultural Show
K2.1m
for Sponsorship in
Papua New Guinea
K160k
for Go Green in
Papua New Guinea
Our Sponsorships
Investing in Sports, Environment, Corporate Events,
Professional Development and Culture & Tourism.
India Association of PNG
COMMUNITY
• Grass Skirt Project
• Port Moresby Golf Club
• Filipino Association of PNG Inc.
•
• Moresby Arts Theartre Inc.
• National Capital District Comm
• PNG Tumbuna Visual Arts
• Business & Professional Women
• Rotary Club of Boroko
• Womens Leaders Network Inc.
• Divine Word University
• Quebri Media & Marketing PNG
• Namatanai RFL
•
Transparency International
• Provincial Celebration Account
• Soroptimist International Lae
• Strategic Communications
CONFERENCES
• Australia PNG Business Council
• PNG Investment Week
• Haus Ples Home Loan Expo
• National Fisheries Authority
• CPA 2019 Conference
• CWC Group Limited
• Lowy Institute_Australia-PNG Networking
• 33rd Australia Papua New Guinea
Business Forum
• PNG HR Institute
• POM Chamber Of Commerce
• Business Council Of PNG
• Demeter Resources - Security Congress
• Business Advantage International
• PNG Mining and Petroleum Conference
•
• PNG Investment Conference
• PNG Institute of Directors
• UPNG MBBA Pinnacle
•
Investment Promotion Authority
• Business & Professional Women
• Kokonas Indastri Koporesen
• PNG Digital & Communications
Institute of Internal Auditors
Technology (ICT) Cluster
• PNG Law Society
• Kumul Petroleum Holdings Ltd
BSP FIJI SUPPORTS THE SUVA
MARATHON
BSP PNG JOINS THE BEL ISI WALK TO
SAY NO TO VIOLENCE
BSP VANUATU PROVIDES
SCHOLARSHIPS TO WOMEN
126
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Giving Back to
the Community
In celebrating the core value of community, staff
visited the Mirigini Mustard Seed Early Childhood
Learning Centre to donate books and sporting
equipment. Part of the visit allowed staff to share
the Go Green message and plant some trees.
Through our respected and valuable partnerships, we are able to reach more communities, more children,
enhancing the lives of many, and contributing positively, through Community Projects and delivering Financial
Literacy.
As part of our community, social responsibility, all staff are encouraged to lend a helping hand to deliver a community
project. Community is one of the Bank’s core values in which we respect, value and support the communities in
which we operate.
Community Projects in Papua New Guinea
48 projects in total for PNG in 2019
K10.06m
invested in community Projects
since 2009
K1.1m
invested in community Projects
in 2019
39%
46%
Education
22 Projects
Community
22 Projects
15%
Health
7 Projects
GO GREEN - BSP TRASH TO
TREASURE
SUPPORTING WOMEN IN SPORTS -
PNG WOMENS’ SOCCER TEAM
CULTURE & TOURISM MOTU KOITA
FESTIVALS
SUPPORTING THE PORT MORESBY
RACQUETS CLUB
JUNIOR GOLF PROAM
PINK BREAKFAST FUNDRAISER
BANK OF SOUTH PACIFIC LTD ANNUAL REPORT 2 19
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Lending a Helping Hand
Labasa Branch staff in Fiji volunteered to help with the
refurbishment of the walkway at Naseakula District School.
As a part of the communities we live in, we would like to build these relationships and strengthen our
community involvement. BSP's Community Projects initiative provided an avenue for each of our branch
staff to contribute to make a difference. Since its inception in 2009, we’re proud that every Branch Manager,
Head of Department and Senior Manager and their teams have made a personal commitment to this
program, devoting their own time, backed by all the resources of BSP.
Aitape
Lumi Primary School - Completion of
Double Classroom
Alotau
Alotau Inclusive Education Resource
Centre - Renovation of the Centre
Arawa
Arawa township - Repainting of bus stops
and installation of rubbish bins
Bialla
Bialla market - Renovation & Extension of
the Market shelter
Boroko
6 Mile Antenatel Clinic - Renovation &
Extension of the Clinic Waiting Shelter
BSP Capital
Gordon Secondary School Library
- Maintenance & Installation of Computers
BSP Finance
POM General Hospital - Renovation of the
Children’s Playground
BSP First
Murray Barracks- Renovation of the
Basketball Courts
BSP Haus
Hohola Demonstration Elementary School
- Maintenance of the Library
Buka
Buka branch past project sites - Repainting
of all past projects sites
Bulolo
Sambio - Renovation of the Basketball
Court
Lae Corporate & BSP Finance
Lae Salvation Army - Renovation of
Hauswin
Corporate POM
Red Cross Special Education Centre
building renovation
Daru
Daru town - Renovation of Sports Field
Grandstand
F&P
Vabokori Village clinic - Maintenance of
the Clinic
Gordons
Gerehu Primary School - Renovation of
School library
Goroka
Sir Danny Leahy - Renovation of Grand
Stand
HR
Sabusa Primary School - Cementing of 5x
Classroom Floors
Kainantu
Kainantu township - Renovation &
Maintenance of the main town bus stop
Kavieng
Kavieng Police Station - Renovation of
Police Station, Family Sexual Violence Unit
Kimbe
Ruango Primary School - Replenishment
of desks
RETAIL SBU
AITAPE BRANCH
KAINANTU BRANCH
MT HAGEN BRANCH
LAE TOP TOWN BRANCH
BOROKO BRANCH
128
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
GroupHighlightsBroader GroupSubsidiariesCorporateGovernanceFinancialStatementsShareholderInformationCorporate SocialResponsibilityManagementTeamsStrategicReport Giving Back to
the Environment
The BSP Go Green Campaign has continued to drive the
message of awareness and education through schools
and ensuring that our youngsters are more responsible
in the communities that they live in.
The BSP Annual Go Green School Clean-up day, aims
to put a practical aspect to the program where children
across PNG, Vanuatu, Samoa, Fiji, Tonga, Solomon
Islands and the Cook Islands can participate.
Kiunga
Kiunga town - Renovation & Maintenance
of the town basketball & volleyball courts
Kokopo
Callen Disable centre, Kabaleo -
Renovation & Maintenance of the Callen
Disable Centre
Kundiawa
Prenorkwa Primary School - Renovation &
Maintenance of the water tank foundation
Lae Commercial
Taraka Primary School - Repair &
Maintenance of the Basketball Court
Lae Market
Lae Botanical Garden -
Renovation of the Kids Recreational Area
Lae Top Town
Buimo CIS - Repair & Maintenance of
Buimo Correctional Services Clinic
Lihir
Londolovit Elementary School & Kul Bus
stop - Repair & Maintenance of double
classroom & Bus stop
Lorengau
Lorengau General Hospital - Renovation &
Maintenance
Madang
Madang town - Repair & Maintenance of
Laiwaden Basketball Courts
Mendi
Mendi town - Installation of Rubbish bins
Moro
Primega Health Centre - Installation of
Solar Lights
Mt Hagen
Mt Hagen Secondary School - Upgrade of
the Basketball Court
Operations & IT
Hagara Primary School - Maintenance of
School Water Fountain
Paramount & Risk Management
Morata Clinic - Maintenance & Extension
of the Clinic waiting area
Port Moresby
Konedobu Clinic - Renovation &
Maintenance of the Clinic
Popondetta
Resurrection Primary School -
Maintenance of double classrooms
Porgera
Paiam Elementary School - Maintenance
& Replenishment of desks and chairs
Rabaul
Rabaul Police Station - Renovation &
Maintenance of Police Station
Retail
Waigani Elementary School - Renovation
of Ablution block
Tabubil
Wangbin Primary School - Renovation &
Maintenance of Ablution Block
Tari
Tari Secondary School - Renovation of
School Basketball Court & Donation of
Sporting Gear
Treasury
Boreboa Primary School - Maintenance to
Water Tank
Vanimo
Dasi Elementary School - Renovation of
the Double Classroom
Wabag
Sakin Ipalya Village - Provision of Relief
Assistance to Sakin Ipalya village, Sak
Valley
Waigani BC
RPNGC Bomana Training College Clinic -
Maintenance of the Clinic
Waigani Dr
Cheshire Home - Renovation of the
Hauswin
Wewak
Brandi Secondary School - Renovation
of Boys Ablution Block
BSP FINANCE
WAIGANI BANKING CENTRE
RABAUL BRANCH
BSP PARAMOUNT & GROUP RISK TEAM
WAIGANI DRIVE
BSP HAUS
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Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate
Social
Responsibility
Community Projects in the Pacifi c
62 Community
Projects
Delivered across the group
15
Projects delivered
through Offshore
Branches
in the Pacific
Projects delivered
through
BSP Subsidiaries
Projects delivered
through
SBUs
2
9
TONGA
2 Project in Tonga
Renovation of the main netball
court and
Renovation of children’s
playground
Renovation of children’s
playground
COOK ISLANDS
2 Project in Cook Is.
Installation of 6 x BBQ tables in
Central Avarua
Distribution of non-woven shopping
bags for Market use
37
Projects delivered
through
PNG Branches
Installation of 6 x BBQ tables in
Central Avarua
SAMOA
2 Project in Samoa
Donation of tank by BSP Samoa
to Lotofaga Primary School
Samoa staff cleaning up the Monestry
Carmelites
130
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
Extension of roofing to the Samoa
Victim Support Group Centre (SVSG)
to shelter dining area
Donation of 2 x 5000L Water Tanks to
Lotofaga Primary School
VANUATU
3 Projects in Vanuatu
VILA CENTRAL
Hospital painting and donation
PORT VILA
Basketball court at No2 Lagoon
SOLOMON ISLANDS
4 Projects in Solomon Islands
DIGITAL & POINT CRUZ
Installation of Solar Powered
Water tank to Auriligo Primary
School, Guadal Canal Province
RANADI
Lunga School Ablution Block renovation
FIJI
4 Projects in Fiji
SAVUSAVU BRANCH
Maintenance and refurbishment
of bridge walkway.
WESTFIELD BRANCH
General maintenance and
installation of Solar lights for
Golden Age Home
Investing in the Pacific
No2 Lagoon Basketball Court
renovation
Vila Central Hospital interior design
and donation of furniture
Freswota School Special Needs
Classroom Project
Auki Branch
Auki CHS Concrete base for water tank
Gizo Branch
Kukundu SDA College Basket Ball Court
facelift
Ranadi
Lunga School Ablution Block renovation
Digital & Point Cruz
Installation of Solar Powered Water
tank to Auriligo Primary School,
Guadal Canal Province.
Labasa Branch
Naseakula District School
Savusavu Branch
Bridge refurbishment
Tauveni Branch
Wainkeli District Primary School building
repairs to Kindergaten
Westfield Branch
Maintenance and Solar Installation for
Golden Age Home
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Report
Group
Highlights
Broader
Group
Subsidiaries
Corporate
Governance
Financial
Statements
Shareholder
Information
Management
Teams
Corporate
Social
Responsibility
Financial Literacy and Banking Educati on
With growth, comes added responsibilities of ensuring that our
people, shareholders and customers are empowered in fi nancial
literacy and banking education.
Our Education and Community reach to deliver fi nancial literacy
goes hand in hand with our reach, from the corporate business
houses, the schools and to the more remote areas in PNG and the
Pacifi c.
In 2019, our key focus areas are fi nancial education, contributing to
the community and good business practices.
Delivering
Financial
Literacy in PNG
18,775
Individuals participated in
Financial Literacy in PNG.
47% are women.
140
We have 140 qualified
Financial Literacy Trainers in
branches in PNG.
230
Communities and
organisations reached since
2014
BANKING EDUCATION
AND FINANCIAL LITERACY
Financial Literacy Training
delivered to Tusbab Secondary
School students in Madang
Province.
132
ANNUAL REPORT 2 19 BANK OF SOUTH PACIFIC LTD
BANK OF SOUTH PACIFIC LIMITED 2 19 ANNUAL REPO RT
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