Kina Securities Limited
Annual Report 2021
ARBN 606 168 594
Key Highlights.
Underlying NPAT
Organic growth momentum
Deposits
19%
27%
Total Assets
13%
Foreign Exchange
income 17%
Lending
21%
Contents.
About Kina
Chairman’s Message
Managing Director and
Chief Executive Officer’s Review
Our Segments
Strategic Overview
Total Societal Impact
Board of Directors
Senior Executive Team
Remuneration Report
Corporate Governance
Directors’ Report
Directors’ Declaration
Independent Auditor’s Report
Statements of Comprehensive Income
Statements of Financial Position
Statements of Changes in Equity
Statements of Cash Flows
Notes to the Financial Statements
Shareholder Information
Corporate Directory
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133
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55
In memoriam
Nancy Moka, had a long and successful career in Banking in PNG,
starting in 1999 in Mt Hagen and became part of the Kina team in
2019. She was a valued member of the Banking operations division.
Apart from work Nancy was a Board Member of Links of Hope PNG
helping children with HIV AIDS and women released from prison
to settle back into their communities. Late Nancy passed away on
Wednesday 31st March 2021, in Port Moresby after being sick for
some time.
Hetahu Lohia was the Head of Support Services and joined Kina
Bank in 2018, he was known throughout as a true gentlemen.
Solomon Kabaru joined Kina Bank in 2009 as a graduate. He was a
highly regarded member of the Finance and Technology team and
his last role was Chief Data Officer. The late Solo made immense
contributions in the use of technology for Kina Bank, functionality we
use today in our APP and online can be attributed to the late Solo.
He will be greatly missed.
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Annual Report 2021 2
We’re committed to the core promise of constantly improving the
prosperity of the people, communities and markets we serve. We
strive to be the bank that represents change – consistently challenging
the status quo, not just by creating more choices, but by creating
better choices.
But this purpose goes beyond creating a better banking experience.
On many levels, it’s also about building a better future for PNG, its
people and the businesses – large and small – that are critical to
the country’s progress. Because at its heart, PNG’s progress is our
progress, with our past, present and futures intertwined as one
common thread.
Together, we’re rolling up our sleeves and shaping the future of PNG,
with a focus on making it better every day.
That’s what we mean by ‘together it’s possible’.
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Annual Report 2021 4
Rogu Gabiobu
About Kina.
Kina
Securities Limited
(amalgamated
entity)
Kina Funds
Management
Limited
Kina Investment
and Superannuation
Services Limited
Kina Nominees
Limited
Kina Wealth
Management
Limited
Kina Securities Limited and its related entities (KSL,
Kina, the Kina Group, the Group, or the Company) was
established in 1985 as a diversified financial services
company offering banking products, funds administration
and wealth advice across Papua New Guinea (PNG).
Kina offers customers end-to-end financial solutions
from savings accounts to business loans, investments to
mortgages, financial advice and investment management.
We are committed to delivering exceptional service and
this is what sets us apart in the market.
Since our inception, we have grown to reaching over
650,000 people, administering 850,000 superannuation
accounts for beneficiaries and have a total asset base
of PGK 3.8 billion.
Kina Securities Limited has two key divisions.
Kina Bank and Kina Wealth.
Kina Bank delivers home, business and corporate loans,
everyday banking transactions, credit cards, merchant
and payment facilities and banking services to smaller
institutions.
Kina Wealth encompasses Kina Investment and
Superannuation Services, Kina Funds Management and
Kina Nominees servicing funds administration, wealth
advice, stockbroking, funds management and nominee
custodial services.
Kina’s Corporate Governance Statement is available
on the Company’s website:
investors.kinabank.com.pg/Investors/?page=corporate-
governance
Kina Group Vision Statement
Our Vision is to be the most dynamic, progressive and accessible
financial services organisation in the Pan Pacific region.
Kina’s Purpose
Our defining purpose is to constantly improve the prosperity
of the people, communities, and markets that we serve.
Kina’s Culture
Our people are here to make a difference.
They are passionate about empowering customers
to effect life change.
Our Values.
Fairness
Reflection
Honesty
Imagination
Togetherness
Our Strategy.
Strategic Pillars
Prosperity for our communities is Kina’s DNA. Serving
our communities, supporting the growth of Papua New
Guinea and continually developing innovative customer-led
solutions is at the core of our organisation.
Growth &
Prosperity
Multiple business lines providing customers with a full
range of services, strong organic growth, value added
services, and synergistic acquisitions.
Building
Resilience
Strong company, well capitalised, well governed, managing
risk versus rewards, and insulated against economic or
market shocks.
Service
Excellence
Dynamic
People
Digital from the inside and out, simple processes, great
customer service, always first when it matters.
We love people, our culture is everything, our people are
well trained, adaptable and care.
Sustainable
Communities
We are in the business of doing good, building trust, and
creating long-term value for all our stakeholders.
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Annual Report 2021 6
Chairman’s
Message.
Mi hamamas tru lo gutpela na strongpela wok
yumi mekim lo luksave lo halivim ol sindaun na
welbing blo ol pipol, ol kastoma na komuniti.
Wanbel I stap wantaim yupela.
I am proud of the resilience and significant progress we have
made in delivering our purpose of continually improving the
prosperity of our people, our customers and our communities.
Contributions to PNG economy
PGK 447 million1
Customer Acquisition = Net
Customer Growth 8%
50% of females in
executive roles2
Underlying Cost-to-Income
Ratio 58%
FX Income growth 2021
17%
Dear Shareholders,
I am pleased to introduce Kina’s Annual Report for the
financial year ended 31 December 2021 (2021).
Kina Group is a resilient company. Established in 1985,
Kina listed in 2015 in both Papua New Guinea (PNG) and
Australia. In the years since, we have come through both
challenging and profitable times. Kina’s results in 2021
demonstrate the ongoing strength of the continued
successful execution of our organic growth strategy that
we have been implementing since 2019. Well executed
by our Managing Director and Chief Executive Officer
Greg Pawson and his leadership team, the success of
the Kina Bank business model has contributed to our
growth agenda and our desire to continually improve the
prosperity of the communities we serve.
Strong results in 2021
The underlining net profit after tax has increased by 27%.
Our footings have grown to just over PGK 5 billion. Our
foreign exchange (FX) income grew by 17% and we have
been averaging return on equity (ROE) of above 16%.
Our Funds Administration business continued to record
growth in revenue, consistent with increased funds under
management. Earnings per share coming in at 24.68 toea
per share, compared with 37.25 toea last year, reflect
that the economies we are operating in are beginning to
recover from the impacts of COVID-19.
As customers across the globe adapt to the impacts of
COVID-19, a reassessment of the provisions we took in
2020 meant a slight adjustment to our provisions held
and this combined with strong revenue and growing
FX revenue across all markets led to a solid financial
performance in 2021.
1 In TSi sector
2 As at 1 February 2022
Final dividend 2021 and capital position
In September 2021, the Company paid a dividend of PGK
8.25 toea (AUD 3.0 cents) per share in relation to the profit
for the half year ended 30 June 2021. Subsequent to the
balance sheet date, the directors have declared a final
dividend of PGK 18.5 toea (AUD 7.0 cents) per share on
underlying NPAT for the second half of 2021, making it a
cumulative dividend for the full year at PGK 26.75 toea,
that converts to AUD 10.0 cents. This demonstrates the
Board’s commitment to repatriate earnings back to the
owners of our business when growth is achieved.
The simplified corporate structure and rights issue carried
out in 2021 has enabled Kina’s balance sheet to grow.
Our total capital adequacy is 23% and this positions us
well for future organic growth. In 2021, we managed our
capital adequacy well in response to market conditions
and we will maintain a close eye on this in 2022/23. Our
shareholders would expect nothing less from a publicly
listed bank.
Strategic execution continues
Publicly listed as a bank in PNG and Australia, Kina has the
energy and spirit of innovation, coupled with the desire to
provide customers with more choice and to deliver more
value for shareholders.
During 2021, the Board, Greg and his leadership team
continued to deliver on our strategic priorities to drive
the growth of the business. We are now in the third year
of our five-year refreshed strategic plan and our initiatives
will focus on growing organically in the segments of
corporate, small-to-medium sized businesses (SMEs) and
home lending while we monitor opportunities in the Pan
Pacific region.
Our strategy is a key contribution to our overall business
objectives, however, both our organic and inorganic
strategies were tested during 2021. The announcement
of the separation from the proposed Westpac PNG and
Westpac Fiji acquisition in September 2021 gave the
Board an opportunity to review and refresh our strategic
initiatives. While the proposed acquisition ultimately did
not materialise due to competition concerns at a regulatory
level, the Board’s view is that opportunities remain. The
program of work that supported this proposed acquisition
has now placed Kina in a strong position to expand our
product and service offerings with improvements in risk
management, ICT, and digital platforms.
Growing the Kina Bank of the future
Expansion, therefore, continues to be a key focus and we
will drive our growth strategy with investments when the
business case is strong. We are not chasing growth for
the sake of growing. Instead, we are looking for organic
opportunities that make a meaningful proposition to our
business and profitability, and ultimately contribute to our
communities. The Board will navigate a sensible course
between investigating any suitable business opportunities
that arise and investing for the future while protecting our
strong balance sheet in the here and now.
Priorities for 2022 and beyond include to deepen both our
shareholder base and profitability, while managing market
risk effectively as we continue to grow the business. We
are actively expanding our shareholder base and further
investing in people, local businesses and the overall
contribution we make to PNG’s economy.
A subdued economy in PNG
Kina enjoys the support of the local market. The economy
in PNG is one of the strongest in the Pan Pacific region,
although economic growth at 5.4% was somewhat subdued
in 2021. Real gross domestic product (GDP) increased by
5% from -3% in 2020 to 2% in 2021. Several key mining
projects were put on hold and key resources such as coffee,
vanilla and sugar experienced a slowdown due to COVID
impacts. Despite this backdrop, growth in our targeted
segments of corporate lending and FX products supported
the strong underlying growth, demonstrating Kina’s
expertise in the corporate market here.
Adding value for all Kina stakeholders
Kina’s goals and those of its stakeholders can only be
achieved through effective and successful relationships
with all our stakeholders – our shareholders, customers,
people, suppliers and our communities. The Board takes
its governance role most seriously on our investors’ behalf.
As we actively seek to expand our investor base, Kina’s
future success will depend on attracting the best investors
who share a common goodwill to our cause.
Pursuing a value creation strategy entails innovation
and agility. In a rapidly evolving technological world, the
development of digital assets, adding channels and value-
adding products is imperative to maintain a footing in this
market. The use of digital technology in PNG continues
to increase rapidly, and Kina is at the forefront of this
adoption as a bank with the spirit of innovation.
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Annual Report 2021 8
Final thoughts
I have had the privilege of chairing Kina since May 2017,
in that time, the evolution of Kina as a challenger brand
in the market and industry has come full circle. The 2021
year has seen us grow and our footprint continues to
expand in a fast and demanding marketplace. We are now
PNG’s second largest bank in lending and we maintain
our position as its leading fund administrator and fund
manager, securing revenues in excess of PGK 30 million.
Kina is a company with exciting future growth
opportunities and potential. The challenge for us at the
helm will be to make the best and most profitable choices
for future investment. While some uncertainty surrounds
the global economic outlook for 2022, the Board considers
there is strong momentum across the Group and is
confident of further growth and margin improvement in
the 2022 financial year.
My gratitude extends towards our shareholders for their
steadfast support. I appreciate their commitment to us
and as I look ahead with an optimistic view on growth and
our ability to deliver value to all of our communities, I have
genuine faith that, collectively, we are living proof that
‘together it’s possible.’
Isikeli Taureka
Chairman
14 April 2022
We have grown our customer base from 25,000 three years
ago to more than 185,000 – with much of that organic
customer growth following the acquisition of the ANZ retail
business in PNG in 2019. The ANZ PNG acquisition was a
complex program of work, taking 18 months to complete.
A primary focus in 2020 was to successfully transition this
portfolio into our existing operations which we have now
done effectively, increasing Kina’s ability to provide a better
banking experience for customers and ongoing investment
in market-leading digital products and services.
Digital channels allow customers to
bank anywhere anytime
In 2021, we have made significant enhancements to
estabilising our core banking network and infrastructure,
including our digital assets and digital channels. Our
mobile banking experienced a 98% year-on-year uplift in
usage and we continue to align our service offerings and
banking access to banking anywhere anytime.
We have trialled the electronic ‘Know your customer’
(e-KYC) identification platform which will make a significant
difference in local customer experiences. e-KYC is
expected to play a game-changing role in acquiring new
customers and will help us achieve 25% market share
within the next three years.
Revenue diversification is also a key initiative for Kina and
we are actively partnering with and providing banking
services to other institutions. Two such partnerships are
with MiBank and TISA (The Teachers Savings and Loans
Society) and our payment partnerships are also helping
us pave the way to offer full digital solutions to our SME
businesses and larger corporate customers. The Strategic
Overview on pages 17 to 20 has more detail.
Enabling resilience in our communities
In terms of competition, it’s vital that we collaborate
in appropriate ways and in areas that can advance our
collective interests and leverage the full potential of our
capacity and capabilities.
The community, which is partly represented by the
regulators, gives Kina its licence to operate and our
Environmental, Social and Governance (ESG) strategy
and stakeholder framework reflects how our stakeholders
create value for each other through us. Relationships such
as these are crucial and we are committed as a company to
working within our industry to promulgate our ESG strategy
to the full. Naturally, all our stakeholders will look to offer us
a transparent and considered view of our ESG performance
and progress. As your Chair, I welcome these views as does
our full Board and executive leadership team.
Encouraging our people
Finally, the Board salutes Kina’s people – our employees.
As an essential service, banking has never been more
important for PNG. Being a bank provides us at Kina with a
commercial advantage, but it also means we ask a lot from
our people. Day in and day out, they continue to deliver for
us and for shareholders.
The Board congratulates all of our employees for their
flexibility, professionalism and the pride they take in
their purpose to realise the Kina Vision of being the most
dynamic, progressive and accessible financial services
organisation in the Pan Pacific region. We extend our
sincere appreciation to everyone for the extra mile they
went to in 2021 to deliver value for our communities.
We have very capable leadership and I assure you there
is a continual assessment of priorities and the allocation
of our people resources. I am proud to be a Chair of an
ASX-listed company with a 50% female executives (as at
February 2022) and female leadership in 52% of its senior
manager roles.
I would like to thank my Board of Directors for their
continued service and robust governance. Their
invaluable insights, rigour and support towards building
a resilient, customer-centric organisation is helping lead
the way in innovation and, in turn, is building a better
future in PNG. It humbles me to witness their pride in our
brand and company.
This year we embarked on a Board mentoring program to
drive PNG talent into our Board room. This program sets
us apart from our peers in the industry as we proudly strive
to develop the skills and capability for the future of our
company and our country.
Culture transformation
An ambitious culture transformation program is now
well progressed at Kina. The role of culture in achieving
harmony, growth, resilience and competitive advantage
cannot be understated, and Greg and his team have
significantly uplifted Kina’s culture through an expansive
program of work. This level of strategic focus has
translated positively into an organisational culture
development strategy. The Strategic Overview and Total
Societal Impact sections on pages 17 to 24 further expand
on this program of work.
In memoriam
I am saddened to report the loss of three valued and
beloved employees during 2021 and at the start of 2022. I
thank all of our people for the extraordinary effort that they
have made to help their families rebuild their lives. Our
support and sympathies are extended the families of the
late Nancy Moka, Hetahu Lohia and Solomon Kabaru.
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Annual Report 2021 10
Managing
Director and
Chief Executive
Officer’s Review.
2021 ibin wanpla gudpla yia blo yumi lo Kina.
Kina bin establisim Grup na kamapim gudpla
kompatisin lo banking na wealth insait lo PNG.
Mi gat bikpla bilip osem bai yumi deliverim planti
gudpla samtin wer istap lo strategic plan blo yumi
2021 was a remarkable year for Kina, establishing the Group
as a viable competitor in banking and wealth products and
services in PNG. I look ahead in 2022 with a sense of optimism
as we continue to deliver on our strategic plan.
Total customers1
615,000
Mobile banking
98% year on year
1 This is a combined customer base with Kina and MiBank
11
‘Challenging, difficult and unique’ are examples of how I
have heard the past two years described – and all three of
these resonate with our experiences at Kina.
As a viable competitor in banking and wealth in PNG,
2021 was a remarkable year in many ways. We saw strong
positive growth and momentum achieved across the
business as the global economy continued its recovery
from the impacts of COVID-19. We were able to respond
quickly to our customers’ needs. In particular, our digital
program of work has seen material changes in the way our
customers bank with us day to day.
As I sit here in mid April 2022, the economic outlook
remains encouraging although inflation continues to
be a concern worldwide. Since our financial results
release and the date of writing this report, we have seen
war erupt between Russia and Ukraine and witnessed
unprecedented flooding along the eastern coast of
Australia. War, natural disasters, ongoing disruption to
global supply chains, surging oil and gas prices and rising
global unrest have combined to create a tableau that
paints a picture of continuing uncertainty in our world.
Our strong COVID-19 response
Providing accessibility to financial services is at the core
of Kina’s purpose and in 2021 we continued to see a
material uplift in our digital products. Over the course of
the year, our ability to respond to the ongoing pandemic,
subsequent economic matters and a realignment of
strategy presented opportunities for Kina to deliver on
shareholders’ expectations.
The impacts of COVID-19 in PNG required the business
to be agile, innovative and a market leader. Yet the toll
on the health of our country compelled Kina to rise to the
challenges that impacted our staff and customers.
Where possible, our branches remained open to help our
customers and medium-sized business clients deliver their
necessary services to the broader community.
We worked tirelessly to support staff in providing
transportation to and from the office, introducing
Pandemic leave and greater flexibility into our working
environment. Our leadership team played a key role
in executing timely and effective support as we are
committed to supporting a COVID-safe workplace. The
Company’s vaccination program has received a 50% uptake,
significantly higher than the national average of 10%.
A pleasing result in 2021
In 2021, the Kina Group progressed towards transforming
and growing the Company as we moved into year three of
the current strategic planning cycle.
Revenue continued to grow in a tough environment still
affected by the lingering aftershocks of COVID-19, as
well as other business restrictions. Nonetheless, income
grew to PGK 334 million (2020: PGK 315 million ) with
the increase coming about largely through a 3% growth
in net interest income, a 17% growth in FX income and a
26% growth in fees and commission incomes, primarily
from digital channels. The digital channels – one of our
key strategic areas – showed very strong growth at an
increase of 65% on the previous year, and rapidly improved
accessibility for many Kina customers.
Despite the challenges of the Westpac acquisition not
going ahead due to regulatory concerns, 2021 still saw
Kina deliver a NPAT of PGK 70.8 million compared with
PGK 76.0 million in 2020. NPAT (on an underlying basis)
was just north of the adjusted forecast and reflects revenue
growth, controlled operating expenses and improved
management of the loan portfolio. While the statutory
NPAT result was impacted by the one-off cost of the fees
incurred as a result of the proposed Westpac transaction,
on an underlying basis this still represents a 27% growth
on the prior year. This affirms our base business remains
strong and poised for future growth into 2022.
Total dividend for 2021
The cumulative dividend for the full year at PGK 26.75 toea
converts to AUD 10 cents. This is a payout ratio of 80% on
our underlying profit, which is within our dividend policy,
and the Board remains comfortable that the Company has
adequate capital to support this payout while maintaining
both capital adequacy levels and capital growth.
Strong capital management
Capital adequacy management was, in fact, a key area of
focus for the Board during the year. Kina’s total capital ratio
is at 23% ensuring we are well capitalised for future growth
initiatives and , in particular, our strategic objectives. The
total leverage ratio is in line with the requirements of the
Bank of Papua New Guinea – Kina is ahead of the minimum
requirement of 6% in terms of the leverage ratio.
We will continue to strengthen our investor base. More
specifically, we are broadening our investor profile and
market coverage as a source of future capital. This is
underpinned by an aspiration to join the ASX top 300
listed companies by market capitalisation by 2025.
ROE and net interest margin (NIM)
On an underlying basis, ROE is at 16.7% while the statutory
ROE – impacted because of the cost of the proposed
Westpac acquisition – was 12.3%. However, we are confident
ROE and our earnings per share will recover in 2022.
Our target NIM range is between 6% and 8%, which is
reflective of the PNG market. In 2021, we were at the
lower end, at slightly above 6%, and this reflects the mix
of increased lending to the corporate sector and a strong
deposit growth to maintain the loan to deposit ratio.
Focusing on developing strategic
partnerships
Our partnerships include MiBank, TISA (The Teachers
Savings and Loan Society), and Nasfund Savings and Loan
Society. And in 2022 we will be working with Nambawan
Super – these are all relatively small organisations, but as a
fee for service model, this is still another income stream for
us that will build over time as these organisations grow.
An exciting partnership is with Xero, the New Zealand-
based software accounting organisation, with whom we
Annual Report 2021 12
teamed up to launch our Kina Xero Bank Feed. Xero is
a cloud-based accounting software designed for small
business and provides clients with the online tools to
manage their everyday business needs. At Kina Bank, we
want to make keeping on top of business transactions
easier for our customers so partnerships such as these
make perfect sense.
Growing the Kina brand
In parallel to the strong organic growth opportunity in
PNG, there exists positive market sentiment toward the
Kina brand and we aspire to capitalise on this goodwill to
build our profits and capital base. The challenge for our
leadership team will be to make the smartest and most
profitable choices for sustainable growth.
Kina now has the second largest market share in lending at
about 15%, the largest bank is Bank of South Pacific at 65%
and the remaining share is held by Westpac and ANZ.
Delivering for our stakeholders
Maintaining stability, especially during uncertain times
is of paramount importance for all our stakeholders.
Our customers want us to continue to deliver optimal
experiences and continue to support their own ability to
make a fair and decent living.
Our shareholders – and that includes many of the
people we employ – do not want to see the value of their
investment in us erode over time and want to feel confident
in our future prospects and business plans. Kina Bank
employees are representative of PNG society and deserve
the opportunity to work and enjoy future prospects. We are
investing in our people as we deepen our footprint in PNG.
Building our people capability
I thank our people for continuing to go the extra mile in
2021. Watching them deliver for our customers brings
me joy. I am pleased to report that much is happening
at Kina around continuing to build our people capability
and leadership development across the organisation. The
Strategic Overview on pages 17 to 20 has more details.
Some challenges exist with accessing the right talent,
particularly in technology, and we are exploring a number
of options to build out that capability. Our Pan Pacific
strategy has also looked to expansion in the less expensive
market of Fiji. We have already made solid investment
in Fiji around incorporation and banking licences – and
now, as well as exploring future growth prospects, we are
investigating how we might further invest in strengthening
our ICT and digital innovation capability there.
The cost of technology infrastructure in Fiji is significantly
less (about a quarter) of what it is in PNG. There is scope to
leverage this, and the fact that Fiji also has high quality ICT
talent is a very attractive proposition that could bring us
significant advantages.
Total Societal Impact Strategy (TSI)
We have made significant progress with the implementation
of our Total Societal Impact (TSI) strategy in 2021 as the
global pandemic and economic consequences that
followed continued to drive us to improve the prosperity of
our people, customers and communities.
There are a significant number of people in PNG (as many
as 70%) who are still without a bank account. The potential
to make a significant impact on these people’s lives by
giving them access to financial services is enormous.
Through our microfinance partnership with MiBank, we
now provide access to financial services to 119,000 Papua
New Guineans who previously did not have a banking
facility. Our foothold in microfinance banking continues to
grow. Kina’s TSI initiatives are described in more detail in
the Strategic Overview on pages 17 to 20.
Balancing today with the future
I remain clear-eyed about our strategic approach. In
2021, we proved we are resilient, adaptable, and a strong
challenger brand in PNG. We are a living example of our
mission statement ‘together it’s possible.’
We have an optimistic outlook for Kina and the Pan
Pacific region. Our current strategy is the right one to
achieve the growth we aspire to. Our approach to future
investments will be considered and pragmatic in a way
that is supportive of our strategy and desire for expansion,
while managing risks and protecting Kina’s balance sheet.
Doing the basics well, always remaining conscious of cost
structures and growing market access and maintaining
profitability for all our stakeholders will enable us to stay
sustainable and stable today. Then we can look to the
longer term.
We are now on a pathway towards realising the Kina Vision
of being the most dynamic, progressive and accessible
financial services organisation in the Pan Pacific region.
Getting closer to our customers and stakeholders, and
doing so ‘sustainably’, is a key part of that. Sustainable and
stable may sound a little dull, yet looking around at the
world today, stability appears to be what everyone craves.
Greg Pawson
Managing Director and Chief
Executive Officer
14 April 2022
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Annual Report 2021 14
Supporting SME.
Our Segments.
Retail customer growth 2021
Business loan book growth 2021
15%
22%
Account balances growth 2021
Home loan book growth 2021
28%
14%
New business accounts 2021
Funds Administration NPAT Growth
1,600
22%
Kina Bank
Kina Bank delivers home, business and corporate loans,
everyday banking transactions, credit cards, merchant
and payment facilities and banking services to smaller
institutions. In 2021, the focus was on delivering results in
the Corporate lending sector and FX revenues.
Growing FX and other revenues
During the year, we delivered on our objective of working
with larger corporates and gaining access to relationships
with FX income to grow FX revenue. This meant facilitating
transactions with larger corporate clients (such as Oil
Search) and the strategy delivered a significant impact on
our business growth as FX income grew 17%.
Five such new corporate customers provided us a material
increase in opportunities across corporate lending, FX
products and other banking and funds services. These,
together with an increase in the loan book, investment
in high-yielding government securities and lower cost of
funds contributed positively to our overall performance.
Harnessing these relationships with larger corporates
will help deliver sustainable revenue growth over the
next three years.
Growing current account balances
It was pleasing to see a 28% growth in our current account
balances during 2021. The cost of funds – always a key
focus – remained within manageable areas. We onboarded
1,600 new business accounts with customers who also
have current accounts with us and retail customer growth
saw a 15% increase.
Growing the Loan Book by 20%
The business loan book grew by 22% over the year – a
milestone achievement to exceed PGK 2 billion in lending.
This positions us well for the remainder of 2022 and into
2023. For the full year the loan book was up to PGK 1,998
million as we focused on growing key corporate clients. We
successfully onboarded over 29 Corporate relationships.
There are now a number of large global operations
considering Kina Bank as a definite alternative to their
other potential banking arrangements in PNG.
The home loan book also saw a very positive growth of
14% with competitive offers and an enhanced website to
build greater acquisition.
Kina Wealth
Record funds administration growth
We maintained our leading position, and a differentiator
for us here in PNG, as the country’s leading funds
administrator and fund manager. Our Funds
Administration business continued to record growth,
consistent with increased funds under management,
securing revenues in excess of PGK 30 million.
We are launching Kina Private Bank before the end
of June 2022, leveraging the significant capability we
have as part of our funds administration and investment
management business.
15
Annual Report 2021 16
We’re behind Papua New Guinea owned startups.
Strategic Overview.
Over the next three years our strategic intent is built on our banking and wealth capabilities to provide services and
partnerships to create value for our communities.
Supporting our strategic evolution are the key strategic pillars of Growth and Prosperity, Resilience, Service Excellence,
Dynamic People and Sustainable Communities.
Traditional banking • Digital banking
Purpose
To constantly improve the prosperity of the people, communities and markets that we serve
Strategic
Pillars
Growth &
Prosperity
Resilience
Service
Excellence
Dynamic
People
Sustainable
Communities
Retail
Corporate
Superannuation Partners
2020-21
Your trusted
bank
Commercial
SME
Banking Partners
Initiatives
Target Growth in
Corporate, SME
and Home lending
Bank to Market
Maker
Increase Funds
under Management
Robust balance
sheet
Digital-first
customer
experiences
API middle
ware to improve
partnerships
Highly engaged
and innovative
team
Delivering value to
our communities
Sell, service, grow, digitise
• Grow banking market share
• Digital customer solutions
• Digitise core business
• Test and learn partnerships and innovative
business models
Traditional banking • Digital banking • Investment
Banking Bank as a service • Partnership Platform
Key
Metrics
Market share
Capital ratios
Digital usage
Digital revenues
Engagement
scores and
gender balance
Financial Inclusion
acquisition
2022-24
Your trusted
financial services
partner
Ecosystem
Services
Corporate
Commercial
Superannuation Partners Banking Partners
Outcome
Return on equity
Return on equity,
Earnings per share
Return on equity
Cost to income
Increases in
engagement
scores
Maintain gender
balance
Customer growth
Infrastructure
Partner
API enabled
Digital Partners
Partnering to create and capture value (B2B, B2C)
• Maturing technology and infrastructure
• Targeted acquisitions
• Maturing partnerships capability
• Selectively scale new
business models
Pan Pacific diversified investment bank.
Digital Partners
2025
Your trusted
partner in the
Pan Pacific
Region
Modules and Partners
Markets
Infrastructure Partner
API enabled
Convene a marketplace of assets, capabilities and services (B2B, B2C)
• Geographical reach; digital-only bank
• Customer and partnership marketplace
• Bank as a service – B2B
• Diversified investment bank
Growth & Prosperity
The revenue growth benefits realised from in-branch-focus, digital onboarding and targeted marketing,
supported by a focus on merchant relationship management, were key to 2021’s results. (See Kina Bank
and Kina Wealth segment review on page 15.)
Growing partnerships
MiBank
The 15% strategic investment in, and partnership with, MiBank creates a solid platform from which to
reach further into the community and deploy Kina Bank’s capabilities and assets, creating a mutual
value exchange across both companies.
Bringing to life our Bank as a service model, we have added MiBank to our digital platforms as a funds
transfer destination for fee-free digital transfers. The design and testing for in-branch onboarding
for new MiBank customers was implemented using the cloud-based fast-field app that transfers data
directly from MiBank systems. This initiative extends our reach and approach to servicing smaller
institutions that require banking services, while deploying cloud-based technology that positions Kina
to move at scale across the Pan Pacific region.
Other new offerings likely to drive strong income growth are Kina Private, our independent e-KYC
payments platform, and Pei Beta a market-first, new domestic market payments platform due to
launch in the second half of 2022.
e-KYC
Digital onboarding at scale and inclusive of what we call e-KYC, which is ‘digital know your customer’
onboarding is common in Australia, but unique in PNG. Kina is the first bank to launch this in 2022 – and
it significantly advances our ability to onboard thousands of customers digitally through our partnership
17
Annual Report 2021 18
with PNG’s two largest superannuation provident funds here – Nambawan Super and Nasfund.
This program will be scaled in 2022, which is material in this market, accelerating our customer
acquisition ability.
Through our partnership with Everest, developments have been finalised for the e-KYC
enabled FX app, called ‘Xchange’.
Pei Beta – bill payments platform
We continue our leadership in first-to-market offerings with digital products and services.
In the payments space – and a first for PNG – we launched a prototype for an independent
bill payments platform, Pei Beta, that can be used by customers of any bank. This is aimed at
facing into potential disruption of traditional payments channels, and adds further weight to
Kina Bank being a market leader in digital payments in PNG.
Resilience
Kina has simplified its corporate structure over the past two years and the completion of a
Non-Renounceable Rights Issue back in 2020 further strengthened the capital base. The total
regulatory capital adequacy of 23.4% remains well above the (regulatory) minimum of 12%.
Alongside our strong balance sheet, we have seen significant improvements in our credit
modelling, Anti-Money Laundering monitoring systems and Enterprise Risk Management.
Strengthening our risk frameworks and asset management procedures ensures the Bank is
resilient in times of volatility.
Automated and modernised technology-enabled platforms
Kina’s business strategy is underpinned by technology with a focus on improving the
experience of our customers. In 2021, we invested in our existing technology assets,
modernising the core banking platform.
A material opportunity to substantially shift the number of simple manual banking transactions
exists by investing in automation and digitisation and this enables our people to focus on
providing high-value support to Kina customers. Our ICT program includes a considerable
number of initiatives across the Group which will enable further innovation and flexibility to
launch the new technologies planned for later in 2022, moving away from an over-reliance on
our core banking platform. We will continue to strengthen our technology capability.
Service Excellence
Digital first – enhancing core banking and digital assets
While making significant enhancements to stabilising our core banking network and
infrastructure, we also developed our digital assets and channels. Digital banking continues to
be a major focus and will be one of our key innovative programs of work to continue over the
course of 2022/23. We have always had the aspiration to be the leading digital bank in PNG,
and in 2021 we saw tremendous market sentiment towards us in this regard. This mirrors our
belief that Kina has ultimately transformed into a strong digital proposition – so much so that
we consider we are now proudly PNG’s leading digital bank. In 2021, our digital revenue saw a
65% increase to PGK 23.4 million in 2021, the highest growth by any bank in this market.
Kina Konnect mobile banking expanded
In another first, we developed and launched digital self-registration for Kina Konnect,
meaning existing customers can sign up for mobile banking without having to visit a
branch. The functionality for Konnect mobile banking has been significantly enhanced, with
customers now able to make loan repayments, check credit card and account balances, and
block cards on the go.
The destination billers list for Konnect and other digital platforms was expanded, providing
more reasons for customers to use these channels and more revenue for Kina Bank through
increased fee income.
Internet payment gateway (IPG) enhanced
Our Internet Payment Gateway (IPG) capability is now enhanced to include the collection
of EFT (electronic funds transfer) payments, along with automation of manual processes to
19
improve back-end efficiency and quality. Via our partnership with NiuPay, Kina Bank will soon
be the largest local provider of IPG services, overtaking BSP. We have also recently signed
an agreement with SNS Technologies for online payment gateway services for their SME
ecosystem. This represents another step forward in supporting the growth of digital services
for SMEs, and scaling our existing IPG asset.
Dynamic people
Our people are at the centre of our business. Their passion and drive help our customers
with their financial security and prosperity. During the year, we aimed to support our people
to have a safe and secure workplace.
There is a strong business continuity program to support our 691 staff in staying safe during
COVID with transport to and from work for over 12 months. COVID vaccination leave, access
to vaccination centres and transportation to and from their homes were vital measures we
took during the year to ensure our staff remained safe and protected.
We also implemented Kina’s first Family and Sexual Violence assistance program.
Our values are our DNA
The five values at Kina have been systemically embedded over the course of the past two
years. As we build a ‘One team’ culture to drive our innovative mindset various programs of
work have provided opportunities.
Building the pipeline of the future
Kina’s commitment to developing talent locally included a formalised internship and
graduate program where we have onboarded 10 new graduates at the start of 2022.
Providing employment opportunities for our people to build rich careers in PNG is core to
our purpose. We also embarked on a scaled leadership program for 80 current and potential
leaders through one-on-one coaching and building essential leadership skills to ensure our
talent pipeline remains robust.
Addressing gender imbalance
Many exceptional women leaders have come from PNG over the years in the areas of politics,
business, academia, government and public service. These women have been trailblazers
in their respective areas of work and have made a significant contribution to the country’s
development.
However, despite their achievements, many women face roadblocks in a predominantly
traditional Melanesian society where they are provided limited opportunities, including for
leadership prospects1. Fewer than 10 women have been elected to the national parliament
since Independence and currently there are no female members, making PNG one of only a
handful of countries in the world to have no women in its parliament. It was welcomed that
the government announced in 2021 that there will be five seats for women in the national
parliament in 2022. This was received by many as a positive shift after the results of the 2017
elections, in which no women were voted in. It is hoped in the upcoming 2022 elections that
change will be ushered in.
A significant milestone at Kina is the gender balance we have achieved in our executive and
senior management teams. With the appointment of three new female executives, there is
an equal gender balance on the senior leadership team with 50% also reflecting a strong
pipeline of strong female PNG talent.
Health and Safety
A sustained focus remains on Occupational Health and Safety disciplines designed to keep our
people and customers safe with improved health awareness, reporting and strong leadership.
Sustainable communities
We are in the business of doing good, building trust, and creating long-term value for all our
stakeholders.’ A separate section on our Sustainable Communities follows on pages 21 to 23.
1Women in leadership: reforms to bring about attitudinal change in PNG by Andrew Anton Mako, The Devpolicy Blog, The Australian National University, 24 May 2021
Annual Report 2021 20
Total Societal Impact.
Revenues
PGK 334 million
Employee Salaries
PGK 75 million
Income Tax Paid
PGK 30 million
Dividends paid to PNG Residents
PGK 8 million
Sustainable communities
Total Societal Impact
At Kina, we are committed to becoming one of the most
sustainable companies in PNG. We are in the business of
doing good work, building trust, and creating long-term
value for all our stakeholders – including our communities
where we want to make a meaningful contribution – while
balancing the needs of our customers, people
and shareholders. This is in our DNA.
In 2021, Kina delivered in excess of PGK 447 million to
the PNG economy through the salaries we pay to our
691 staff, our tax contribution, dividends to PNG
residents and revenues that we share with our customers
and our suppliers.
We have growth ambitions that will help build a more
competitive market in PNG. Our offering of better
products and experiences for our small-to-medium
sized customers helps contribute to critical employment
opportunities across all regions in PNG.
The TSI strategy identified three key areas of focus being:
2019
2020
2021
Expanding
financial
inclusion
Established
partnership
with MiBank
• 130,000 customers included
in the Financial system
• Fee free online banking for
Consumer customers
• Bank services to MiBank card
issuance and payments
• 66,800 customers included in
Financial system
• Total of 196,800 customers across three
years and 432,800 at MiBank
Creating a
workplace
for the future
• Project Wok
• Individual
Coaching and
Support
• Kokoda Track Foundation
helping with Flexible Open
and Distance education
(FODE) centres
• Expanded Graduate
program
• WAN PNG supporting job seekers
• Domestic violence leave for our staff
• Board mentoring program
• 50% of females in senior executive roles*
• 50% PNG nationals in executive roles
Promoting
enterprise
and innovation
• Women in
Digital program
• Business
Coalition for
Women
• Women in Digital network
• Launched the Prime
Minister’s breakfast
• Fee free accounts online for SMEs
• Partnership with Xero
• Entrepreneurial partnerships
Kina’s Total Societal Impact (TSI) strategy recognises the need to foster and grow sustainable communities broadly across
social, environmental, and economic development.
The TSI strategy has been in operation since 2019 with the aim of addressing key social matters that impede the
development and economic progress for people and communities in PNG. The TSI has been executed on several levels –
through strategic partnerships and leveraging both our combined assets across core businesses of Banking and Wealth.
This also allows our partnerships’ collective expertise to develop market-leading products that support growth across
the whole PNG economy.
This multi-layered approach complements our purpose and digital-first mindset, using ever-expansive technology and
our people to build a better life in PNG. Over the last three years, progress has been made across all three pillars of
the TSI strategy. In this third year of this TSI strategy, we delivered several material changes to the way we think about and
deliver sustainable outcomes.
Expanding financial inclusion
The strategic investment with MiBank has been a key focus over the past year. Financial inclusion remains one
of the most prominent structural issues for the PNG economy with over 70% of the population unbanked.
Mibank onboarded 66,800 new customers during the year, resulting in 432,800 customers in total. The
program was significantly impacted by COVID lockdowns in provincial regions, therefore limiting access to
branches. Progress in building digital services for the MiBank partnerships is steadily increasing productivity
and ultimately accessibility to financial services and products. Our ability to onboard MiBank customers in Kina
branches will materially improve accessibility across provincial areas.
A vital piece of infrastructure for Financial Inclusion and SME development is our branch expansion plans.
We will look to open seven new branches in regional areas that will include a Commercial centre that will not
only provide Lending products but will be a Hub for local business to utilise our expertise. Another important
program is the rollout of our Point of Sale terminals to business in provincial areas. We will be adding another
1,000 terminals in 2022.
Creating a workplace for the future
Youth unemployment continues to challenge the prosperity of the PNG economy. We have worked since the
inception of the TSI program with various partners to help bridge the gap in capabilities and job opportunities.
WAN PNG is a key partner whose goal is to increase the development and employment of local talent.
The key obstacles people face in PNG are a shortage of employment opportunities, unclear pathways to gainful
employment and a shortage of training and upskilling. In the last two years, the Kina team has volunteered over
150 hours in mentoring, coaching and tutoring secondary students to help set them up for success following
the completion of their formal education. We have a dedicated resource in our People and Culture team who
works with WAN PNG with various upskilling, resumé development and career opportunity advice.
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Annual Report 2021 22
* As at February 2022
Promoting enterprise and innovation
The SME thought leadership program was delivered throughout PNG despite the impact of COVID-19.
Enhancing opportunities and development is a focus for the PNG government and Kina has worked alongside
many government programs providing expertise and sponsorship this year.
This included sponsorship of the annual Prime Minister’s Back to Business Breakfast, Kokoda Track Foundation
teaching centres and leadership through the Flexible, Open and Distance Education (FODE) scholarships and
in-training services.
The Emstret Hub is the first co-working space in PNG to help entrepreneurs, small businesses and
professionals to deliver their services and products. Kina hosts monthly events and provides economic insight
to the network.
Environment-related commitments
Following on from introducing the TSI strategy, Kina has now embarked on the first stage of our
environmentally sustainable commitments. In 2021, we began addressing environmental issues within our
operating landscape.
The E&S Policy is designed to support the execution of Kina’s Environmental and Social Management
System (ESMS). The objective is to avoid or minimise and mitigate potential risks or adverse impacts of our
lending on the environment and affected people.
The practical application of the E&S policy is an assessment tool for our lending and credit teams. The tool
will be used across credit-related products in reviewing environmental and gender aspects of our current
and perspective customers. We have trained 60 credit and lending specialists in the assessment framework
with a continued educational program being implemented in 2022. The ESMS will be integrated into our
annual credit review cycle to ensure compliance with the policy.
A summary of the E&S policy can be found on the website at investors.kinabank.com.pg/investors
Looking ahead, our formal ESG strategy will likely be completed in mid-2022, and this will incorporate
materiality assessments with extensive engagement with all key stakeholders on what is important for our Kina
community to grow sustainably in our chosen markets.
Helping our communities
In honour of our valued staff member Nancy Moka,
we donated PGK 100,000 to the Links of Hope charity
where Nancy was a director. Nancy passed away during
2021 and was a committed volunteer and supporter of
Links of Hope, which supports children impacted by the
HIV epidemic and women released from prison in the
creation of small business enterprises.
Children in the program are supported by monthly
nutrition care packages, educational programs, school
fees and uniforms.
We continued to sponsor various events and
programs to promote sustainable communities. In
2021, we focused on health initiatives. This included
the sponsorship of meals for a week with our Brand
Ambassador Julz for the Port Moresby General Hospital.
Kina also provided much-needed donations for urgent
medical supplies and the sponsorship of the Eskies for
Milk campaign.
23
Annual Report 2021 24
Links of Hope operates a child sponsorship program.
Board of Directors.
25
Annual Report 2021 26
Managing Director/Chief Executive Office Gregory Pawson (left)
and Chairman Isikeli (Keli) Taureka (right).
Isikeli (Keli) Taureka
Non-Executive Chairman
Chair of the Disclosure Committee
Mr Isikeli Taureka was appointed as a Director of Kina in
April 2016.
As at 14 March 2022, Mr Taureka holds the position
of Managing Director of Laba Holdings Limited which
comprises shareholdings from four local areas supporting
PNG LNG projects. Previously, he held the position of
Managing Director of Kumul Consolidated Holdings which
is the trustee and shareholder for the Government of PNG
in major state-owned entities including Air Niugini, Water
PNG, PNG Power Limited, Kumul Telikom Holdings, Ports
PNG, Post PNG and Motor Vehicles Insurance Limited.
Isikeli previously held a number of senior executive roles
with Chevron Corporation. Before joining Chevron,
he was the Managing Director of the PNG-owned Post
and Telecommunication Corporation and held senior
management positions in the Bank of South Pacific Limited.
Isikeli provides extensive knowledge and networks across
PNG and Fiji.
He holds a Bachelor of Economics degree from the
University of Papua New Guinea and is a graduate member
of the Australian Institute of Company Directors.
Gregory Pawson
Managing Director/Chief Executive Officer
Mr Greg Pawson was appointed Managing Director
and Chief Executive Officer of Kina in 2018. He joined
the Group with an extensive knowledge of the financial
services industry in Australia, New Zealand, South East
Asia and the Pacific.
Before his appointment, Greg was Regional Head of
South Asia Pacific for the Westpac Group and held senior
executive roles in retail banking, corporate financial
services, financial planning, and funds management. His
extensive banking experience includes more than 16 years
at Westpac where he had accountability for Westpac’s
Country/Institutional, Retail and Commercial banking
businesses operating in India, Singapore, Indonesia, PNG
and Fiji, and the divestment of Westpac’s retail businesses
in the Cook Islands, Tonga, Samoa, Vanuatu and the
Solomon Islands. Prior to this role he was Westpac’s
General Manager Commercial Banking for three years
leading the Australian Commercial banking customer
segment with revenue in excess of $1.2 billion and
responsible for 1,500 employees.
Greg holds a Master of Business Administration from
the Australian Institute of Management Adelaide and is
a graduate member of the Australian Institute of
Company Directors.
27
Annual Report 2021 28
Andrew Carriline
Non-Executive Director
Member of the Audit and Risk Committee,
Remuneration and Nomination Committee
and the Disclosure Committee
Mr Andrew Carriline was appointed as a Director of Kina
on 16 August 2018.
Andrew is an experienced business executive, highly
skilled at operating successfully in regulated environments.
He was an executive at a major Australian bank, where until
2017 he was the Chief Risk Officer in the Institutional Bank,
as well as Chairman of the bank’s business in PNG. Since
2017 Andrew has accepted a number of non-executive
roles in the ‘for profit’ and ‘not-for-profit’ sectors.
Before his focus on purely risk roles, Andrew practised
corporate law in the public and private sectors and has
held a number of senior legal and operational roles.
Andrew holds Bachelor degrees in Law and Commerce
from UNSW and is a graduate member of the Australian
Institute of Company Directors.
Paul Hutchinson
Non-Executive Director
Member of the Audit and Risk Committee
Mr Paul Hutchinson was appointed as a Director of Kina on
16 August 2018.
Paul is currently employed by the University of Adelaide
in the capacity of Program Director, responsible for large
scale organisation restructuring and major projects.
Previously, Paul was the Managing Director and Chief
Executive Officer of Rural Bank (specialising in the
provision of financial services to the agribusiness sector),
Chief Operating Officer of New Zealand Post and held
various other senior appointments with Westpac , National
Australia Bank and Bank of New Zealand.
Paul’s extensive background in strategy, finance, sales and
distribution, commercial operations and risk management
has been honed over 30 years in the financial services
sector. He is well versed in corporate governance
practices and currently holds directorships with RSPCA
(South Australia), the Planning, Finance and Performance
Committee for the SACE Board, Regional Council for the
Financial Services Institute of Australasia (FINSIA) and is
the Chair of the University of Adelaide’s Business School
Advisory Board and International Centre for Financial
Services. Previous board appointments include Rural Bank
Ltd, Outsource Australia Ltd and Datamail Group Ltd.
Paul has attended the Bankers Course in conjunction with
the New Zealand Bankers’ Association and the University
of Victoria and is a graduate of the Harvard Business
School General Management Program. He is a Fellow of
the Institute of Financial Services and is a member of the
Australian Institute of Company Directors, having attended
both the Company Directors Course and International
Company Directors Course.
29
Annual Report 2021 30
Karen Smith-Pomeroy
Non-Executive Director
Chair of the Audit and Risk Committee,
Member of the Remuneration and Nomination
Committee and the Disclosure Committee
Ms Karen Smith-Pomeroy was appointed as a Director of
Kina on 12 September 2018.
Karen is an experienced non-executive director, with
involvement across a number of industry sectors. Karen
has many years of experience in the financial services
sector, including a period of five years as Chief Risk Officer
for Suncorp Bank.
Karen has specific expertise in risk and governance, deep
expertise in credit risk and specialist knowledge of a
number of industry sectors, including energy, property
and agribusiness.
Karen is currently a non-executive director of Queensland
Treasury Corporation and Stanwell Corporation Limited
and is Chair of the Regional Investment Corporation and
National Affordable Housing.
Karen holds accounting qualifications and is a Fellow of
the Institute of Public Accountants, a Senior Fellow of
the Financial Services Institute of Australasia (FINSIA), a
certificate member of the Governance Institute of Australia
and a graduate member of the Australian Institute of
Company Directors.
Dr Ila Temu
Non-Executive Director
Member of the Remuneration
and Nomination Committee
Dr Ila Temu was appointed as a Director of Kina on
14 December 2020.
Ila is Country Manager for Barrick (Niugini) Limited (BNL),
a role he has held for some time now. Dr Temu has held
various senior roles with Placer Dome Niugini since
2000 including General Manager Government Relations,
Director Corporate Affairs and Country Manager Tanzania.
Prior to joining Placer Dome, Ila was Managing Director
of Mineral Resources Development Company (MRDC),
a state-owned organisation that held PNG’s equity in
major mining and petroleum projects throughout PNG.
He has also held senior positions within a number of
public organisations, including a term as a Director of the
National Research Institute in PNG, Research Director
for the Pacific Islands Program at the Australian National
University, Canberra and Senior Lecturer at the University
of Papua New Guinea.
Ila has also held a number of board directorships/
memberships in PNG including Dome Resources Ltd,
MRDC, Kina Finances Ltd, PNG Incentive Fund, National
Economic Fiscal Commission, Independent Public
Business Corporation, the Employees Federation of PNG
and Bank of South Pacific where he was Director for 13
years. He was Chairman of PNG Ports Corporation for five
years, Chairman of Bank South Pacific (BSP) Capital for
three years, and President of the Chamber of Mines and
Petroleum for three years. He is currently a Director of Kina
Petroleum Ltd, Director of Kumul Petroleum Holdings Ltd,
and a Council Member of the Divine Word University.
Ila holds a Bachelor of Economics from the University of
Papua New Guinea, a Masters in Agricultural Development
Economics from the Australian National University,
Canberra Australia and a Ph.D in Agricultural Economics
from the University of California, Davis, USA.
31
Annual Report 2021 32
Dr Jane Thomason
Non-Executive Director
Chair of the Remuneration
and Nomination Committee
Dr Jane Thomason was appointed as a Director of Kina on
27 April 2018.
An entrepreneur and innovator, Jane has worked in
international development implementation in the Asia
Pacific region for 30 years. Her international career has
included work for governments and donors including the
Asian Development Bank, WHO, World Bank, USAID and
AusAID.
Since 2017, she has focused on Fintech and Blockchain
and is a thought leader in the applications of blockchain
technology to solve social problems. She is the Co-
Founder of the British Blockchain and Frontier Technology
Association, Chair, Kasei Holdings Blockchain Securities),
Aquis Stock Exchange, London, and is on the Editorial Board
of both Frontiers in Blockchain and Journal of Metaverse.
Dr Thomason co-authored the books Blockchain
Technologies for Global Social Change and Applied
Ethics in a Digital Age. She is a Thinkers 360 in the Top 50
Global Thought Leaders and Influencers on Blockchain
and Sustainability.
Jane is an active role model for future women leaders and
an active supporter of innovation and new technologies,
especially blockchain, and their application to the world’s
poverty problems.
33
Annual Report 2021 34
Diane Igal (left), Annartha Peter (right)
We strive for continual improvement in the
prosperity of our customers and communities.
Senior Executive Team.
Chetan Chopra
Chief Financial Officer
Chetan is the Chief Financial Officer, reporting to the CEO. He is a Chartered
Accountant from India. Chetan joined Kina Bank in May 2016 and been part of
the senior leadership group since listing on the ASX.
A practising accountant by profession, Chetan worked earlier for nine years
as a Papua New Guinea partner for KPMG (formerly Touche Ross & Co.) based
in Lae, prior to returning to India as CFO for Dun and Bradstreet India and
Cognizant Technology Solutions in 1993. He returned to PNG in 2013 as the
CFO of PNG’s largest superannuation fund, Nambawan Super Ltd. His extensive
knowledge of businesses and communities through working in provinces in
PNG has helped develop critical banking relationships for the Bank.
Chetan also holds a Bachelor of Chemical Sciences from Mumbai University and
an MBA from Melbourne Business School, University of Melbourne. Chetan is a
member of Certified Practising Accountants Australia and PNG.
Lesieli Taviri
Executive General Manager Banking & PNG Country Head
Lesieli joined Kina Bank in 2020 and is responsible for running the national
branch network and a seamless banking experience to personal and small
business customers. In her role, Lesieli leads the focus on customer service
satisfaction in branch and through the contact centre, along with the
development of digital concierge services.
Prior to joining Kina Bank, Lesieli was the CEO of Origin Energy and she is
one of PNG’s most highly regarded executive leaders. She holds a number of
high-profile board roles including Founding Chair of the Business Coalition
for Women. She served as the Deputy Chair of Nambawan Super Limited,
PNG’s largest superannuation fund and was formerly a director of Nationwide
Microbank Limited.
Lesieli is also a graduate member of the Australian and PNG Institute of
Company Directors.
Johnson Kalo
Chief Information Officer
Johnson Kalo was appointed Chief Information Officer in September 2019.
Johnson has substantial industry experience in Papua New Guinea having
previously held the positions of Deputy Chief Executive Officer and Chief
Financial Officer for BSP.
Johnson played a central role in BSP’s acquisition of Westpac’s Pacific Island
Nations and he brings to Kina Bank exceptional leadership qualities. His
previous roles also include independent Director of the Board of Credit
Corporation and Executive Director of the Port Moresby Stock Exchange
(PNGX). He is a fellow of the Financial Services Institute of Australasia and an
associate member of Certified Practising Accountants PNG.
Deepak Gupta
Executive General Manager Business Partners and Wealth
Deepak Gupta is Executive General Manager Business Partners and Wealth
is responsible for Wealth management and Corporate banking at Kina. He
has held a variety of senior positions with Westpac, AMP and domestic New
Zealand institutions. These roles have spanned all facets of institutional funds
management, private equity investment, funds administration, financial
planning and corporate trusteeship.
In addition, Deepak has strong governance experience having acted as a non-
executive director on the boards of NZX and ASX-listed companies. He brings
substantial experience and a track record of success and innovation across a
number of areas in financial services including successful development of New
Zealand’s first institutional private equity fund for retail investors.
Deepak holds a Bachelor of Commerce and Administration from Victoria
University, New Zealand, and an MBA from Massey University, New Zealand.
He has a Certificate of Investment Analysis from the University of Otago, New
Zealand and is a Fellow of the Institute of Finance Professionals New Zealand.
35
Annual Report 2021 36
Karen Mathers
Chief Risk Officer
Karen is our Group Chief Risk Officer and responsible for overseeing Kina’s
strategy for holistic risk management and compliance*. This includes best
practice governance and regulatory management from the various supervisory
authorities. She is a member of the company’s executive management team.
Karen has enjoyed a career in finance that spans over 25 years. She has held
executive positions at ANZ Banking Group (Australia, and overseas) as Chief
Finance, Chief Operating and Chief Risk Officer and is well versed in the
multidisciplined divisions in Banking. With her unique skillset (accounting, law
and risk management), she has had responsibilities that had oversight of all
financial operations of the companies in a multitude of industries in Australia,
Europe, Asia and the Pacific.
Karen is degree qualified as an accountant with post-graduate qualifications in
commercial law and forensic accounting.
Samantha Miller
Executive General Manager Investor Relations,
Corporate Affairs and ESG
Sam joined Kina Bank in February 2022*. In the role of Executive General
Manager Investor Relations, Corporate Affairs and ESG, Sam is responsible
for managing KSL investors, management of corporate affairs and the
implementation of Kina’s ESG framework.
Sam has 20 years’ experience across a diverse range of roles in financial
services. Prior to her joining Kina she worked in Treasury, Investor Relations,
Group Finance, Strategy Customer solutions at Suncorp and Heritage Bank.
Sam holds a Bachelor of International Business from Queensland University of
Technology, Masters of Applied Finance from Macquarie University and is a
graduate of the Australian Institute of Company Directors.
Judith Ugava-Taunao
Chief of Staff
Judith Ugava-Taunao was appointed Chief of Staff in June 2021.
She is responsible for developing and delivering key strategic business
priorities. For 18 years Jude has built a career that spans across
international borders and sectors. She has worked in international
development, organisational transformation, and human resource
development and leadership.
Prior to joining Kina Bank, she was at Oil Search where she served as the
Vice President, Change Management Lead and as the General Manager
for OSL’s Citizen Development Program.
Asi Nauna
Executive General Manager Lending
Asi joined Kina Bank in 2018 to assist with the acquisition of ANZ’s Retail,
SME and Commercial operations leading the integration of the SME and
Commercial customer streams.
In the last two years she has held a senior leadership role in our Business
Partners and Wealth team, establishing herself as a dynamic and successful
leader with a track record of delivering exceptional results.
In her role as Executive General Manager Lending, Asi is responsible for end
to end retail and business lending. Prior to joining Kina Bank, Asi was ANZ’s
Associate Director, Institutional Banking.
*Karen Mathers started with Kina on 1 October 2021 and Samantha Miller on 1 February 2022
37
Annual Report 2021 38
Ivan Vidovich
Chief Transformation Officer
Ivan joined Kina Bank in 2019. In the role of Chief Transformation Officer Ivan
is responsible for Group Strategy and Planning, People and Culture, Digital
Channels, Innovation, Design, Product and Marketing.
Ivan has 20 years senior leadership experience in Australia, Asia and Europe
in the financial services and logistics industries with companies including
Suncorp, TNT Express and DBS Bank, where he has managed large-scale
sales and service operations, strategy, customer experience, innovation
and multi-country integration and transformation programs.
He brings significant experience in people and culture transformational
change and is a strong advocate of diversity and inclusion in the workplace.
Ivan holds a Bachelor of Arts from La Trobe University and is a member
of the Australian Institute of Company Directors.
Nathaniel Wingti
Group Manager Treasury and Financial Markets
Nathan joined Kina in February 2016 as GM Treasury and Financial Markets.
Prior to joining Kina, he spent 15 years at ANZ Bank where his last role was
Head of Global Markets PNG and Balance Sheet Manager for ANZ across
the Pacific. Nathan has 20 years’ experience in foreign exchange, money
markets and balance sheet management across the Pacific region having
worked in PNG, Fiji and Australia.
Nathan holds a bachelor of business from the Queensland University
of Technology. He has also completed the AFMA Dealer Accreditation
Program and the PNG Institute of Directors Program. He is a current serving
Board Member of the Business Council of PNG.
39
Annual Report 2021 40
Tara Uru
We’re driven by the desire to provide
customers with more choice and to deliver
increased value for shareholders.
Remuneration
Report.
Contents
1
2
3
Introduction and overview to shareholders
Kina’s Key Management Personnel (KMP)
Executive remuneration
4 Non-executive director arrangements
5
Related party transactions
6 Directors’ interests in shares
1. Introduction and overview to Shareholders
The Remuneration Report is focused on providing information that the Board considers important for shareholders to
understand the Company’s remuneration framework which is designed to support the delivery of targeted operating
financial and non-financial results. This Remuneration Report has not been prepared in accordance with section 300A of the
Australian Corporations Act 2001 (Cth) and the Company is not required to have this report audited. However, the expected
level of disclosure of an Australian-incorporated company has been provided throughout.
During the year, Kina reviewed its incentive plans to ensure they align with market best practice and that they continue to
attract, motivate and retain high calibre management and employees. No material amendments have been made to the
Company’s incentive plan for the 2021 financial year.
41
Annual Report 2021 42
2. Kina’s Key Management Personnel (KMP)
This report covers the remuneration arrangements of Kina’s Key Management Personnel (KMP) who are the people with the
authority and responsibility for planning, directing and controlling the activities of the Kina Group directly or indirectly. Kina’s
KMP comprise the non-executive directors, the Managing Director and Chief Executive Officer (MD&CEO) and the direct
reports to the MD&CEO, who are collectively called the Senior Executive Team. For the purposes of this report, ‘executive’
refers to the MD&CEO and the members of the Senior Executive Team (Senior Executives). The KMP disclosed in this
Remuneration Report for 2021 were:
Non-executive directors (refer to section 4 of this Remuneration Report)
Name
Isikeli Taureka
Andrew Carriline
Paul Hutchinson
Karen Smith-Pomeroy
Ila Temu
Jane Thomason
Position held during the financial year ended 31 December 2021*n
Non-executive Chairman
Non-executive director
Non-executive director
Non-executive director
Non-executive director
Non-executive director
MD&CEO and Senior Executive Team (direct reports to the MD&CEO)
Name
Greg Pawson
Chetan Chopra
Deepak Gupta
Position held during the financial year ended 31 December 2021*
MD&CEO
Chief Financial Officer (CFO) and Company Secretary
Executive General Manager, Business Partners and Wealth
Michael Van Dorssen1
Chief Risk Officer
Gavin Heard
Johnson Kalo
Ivan Vidovich
Nathan Wingti
Lesieli Taviri
Asi Nauna
Judith Ugava-Taunao2
General Manager Corporate Affairs and Investor Relations
Chief Information Officer
Chief Transformation Officer
Head of Treasury
Executive General Manager, Banking
Executive General Manager, Lending
Chief of Staff
* The term as KMP was for the full year unless otherwise indicated.
1 resigned 12 November 2021
2 appointed 26 May 2021
Remuneration and Nomination Committee
The Board has established the Remuneration and Nomination Committee (RNC) to ensure the Company:
• has a Board with an effective composition, size and commitment to adequately discharge its responsibilities and duties and
to bring transparency, focus and independent judgment to decisions regarding its composition
• has coherent remuneration policies and practices to attract and retain directors and Senior Executives who will create
value for shareholders
• observes those remuneration policies and practices; and
• rewards executives fairly and responsibly having regard to the performance of both the Kina Group and its executives and the general
external pay environment (including the level of fees for non-executive directors).
The RNC assists the Board in the performance of its constitutional and regulatory duties by:
• advising the Board on the remuneration of the MD&CEO, Senior Executive Team and employees holding Responsible Person position
(as defined in accordance with Banking Prudential Standard BPS310 Corporate Governance – Fit and Proper Requirements (BPS310),
issued by the Bank of Papua New Guinea (BPNG)
• providing an objective, non-executive review of the effectiveness of Kina’s remuneration policies and practices
• recommending to the Board for approval by shareholders, the amount and structure of non-executive directors’ fees
• overseeing aspects of the ’Fit and Proper’ requirements of BPNG BPS310; and
• identifying the mix of skills and individuals required to allow the Board to contribute to the successful oversight and stewardship of
the Company.
43
To align remuneration, performance and strategy, the RNC regularly reviews:
• remuneration policy
• the structure and quantum of the remuneration of the MD&CEO, members of the Senior Executive Team, staff holding Responsible
Person positions and selected risk and compliance staff; and
• the structure and level of non-executive directors’ board fees and committee fees.
For more information on the RNC, refer to Kina’s Corporate Governance Statement – available on Kina’s website at
investors.kinabank.com.pg/Investors/?page=corporate-governance
3. Executive remuneration
Remuneration policy and governance framework
The RNC reviews and determines Kina’s remuneration policy and structure annually, for approval by the Board, to ensure it
remains aligned to the Company’s business needs and meets its remuneration principles. The RNC also engages external
remuneration consultants to assist with this review as required. In particular, the RNC aims to ensure Kina’s remuneration
practices are:
• transparent, competitive and reasonable, enabling the Company to attract and retain key talent
• aligned to the Company’s strategic and business objectives and values, and the creation of shareholder value; and
• acceptable to shareholders.
Remuneration Policy
The key tenets of Kina’s Remuneration Policy include that:
• Remuneration should be set at levels that reflect the relative size of the position, the remuneration ranges for positions of equivalent
‘size’ in the relevant market, the performance of the person holding the position and any position-specific factors such as location or
the strategic importance of the role.
• Remuneration levels must reflect what the Group can afford. The Board through the RNC will provide the MD&CEO with advice on
affordability and this must be factored into the MD&CEO’s annual review of remuneration.
• The levels of every role in the organisation shall be identified through a professional Job Evaluation exercise and endorsed by the
selected Job Evaluation Panel.
• Pay structures and levels may be reviewed based on the organisational growth and maturity over a period; and from time to time
benchmarked against identified market participants. This survey cycle period shall typically be not more than once in any two years.
• Remuneration packages may comprise a mix of base pay, performance-related pay and other benefits where this is consistent in the
market with the structure of packages for similar sized roles, and must take into account the value of all such elements.
• Remuneration packages, including any performance-based component, must not compromise the independence of any risk and
financial control officers of the Group.
• Where a remuneration package includes a variable performance-based component the package must be structured to:
– motivate the employee to achieve personal goals that demonstrably contribute to the Group’s overall strategic direction
and medium to long-term financial performance objectives
– encourage the employee to work within the Group’s risk management framework and to comply with the Group’s
prudential policies
– specify measurable, objective, verifiable performance targets which have to be met or exceeded before any additional
payment is due
– specify a measurement period that takes into account the time to observe the real outcomes of the employee’s business
activities and efforts
– discourage the employee from taking extreme risks to achieve short-term performance targets that could jeopardise the
financial stability and viability of the Group in the medium to long term
– provide for the Board to set aside part or all of the performance-based payments due if in the Board’s judgment this is necessary to
protect the financial soundness of the Group or address unintended and unforeseen consequences when the performance-based
measures were originally formulated.
• Where a package includes equity or equity-linked deferred remuneration the package must be structured to prohibit the employee
leveraging the equity in any way until it is fully vested. The Group will cancel the vested equity and rights to future equity of any
employees found to be in breach of this provision of their employment agreement.
• On an overall basis, Kina Group would like to position itself between the 50th and 75th percentile of the defined market, with flexibility
to adjust based on market dynamics and organisational strategy.
Under the Company’s Securities Trading Policy, Relevant Persons (which includes all directors and officers of Kina (MD&CEO,
CFO and Company Secretary and all direct reports of the MD&CEO), are prohibited from entering into any hedging
arrangements that limit the economic risk of holding Kina securities under Kina equity plans. This helps align the interests of
directors, the Senior Executive Team and shareholders.
Annual Report 2021 44
3. Executive remuneration (continued)
Remuneration components, approach and mix
To align the interests of Kina’s Senior Executive Team with Kina’s strategic goals and to assist in the attraction, motivation
and retention of management and employees of Kina, the Board has determined that the remuneration packages of the
MD&CEO and the Senior Executive Team should comprise the following components:
Fixed remuneration
Short-term incentive award
(STI Award)
Long-term incentive award
(LTI Award)
Retention Award
Total fixed remuneration comprises base salary, other non-cash
benefits and includes superannuation. There was no change to the
fixed remuneration for the MD&CEO and other executive KMP during
the year.
The short-term incentive award (STI Award) provides participants with
an opportunity to earn an incentive calculated as a percentage of
their salary each year, conditional upon achievement of individual key
performance indicators (KPIs) which may consist of financial and, if
applicable, non-financial performance measures.
The incentive earned will be paid:
- 65% in cash
- 35% in an offer of performance rights.
The cash portion of the incentive will be paid in the next pay cycle
following confirmation of the performance outcomes being achieved.
The performance rights portion (STI Performance Rights) will be
issued under Kina’s Performance Rights Plan (Plan) in one tranche and
will lapse upon resignation or termination, subject to the absolute
discretion of the Board.
The Board has the right to vary the STI Award.
The long-term incentive award (LTI Award) provides an opportunity for
employees to receive an equity interest in Kina through the granting of
Performance Rights (LTI Performance Rights) under the Plan.
Under the LTI Award, LTI participants may be offered LTI Performance
Rights that are subject to vesting conditions set by the Board.
The Board has the absolute discretion to vary the LTI Award.
A one-off equity-based Retention Rights allocation under the Plan
that was utilised at the time of the Company’s listing on ASX and
PNGX in July 2015, to assist in the retention and reward of key eligible
employees at that time.
The Kina Board has the absolute discretion as to whether the allocation
of Retention Rights will continue and apply to other KMP.
Fixed Remuneration (FR)
The Senior Executive Team members may receive their fixed remuneration (FR) as cash, or cash with non-monetary benefits
such as insurance, allowances and tax advisory services. FR is reviewed annually, or on promotion. It is benchmarked against
market data for comparable roles in companies in a similar industry and with similar market capitalisation. The RNC aims to
recommend to the Board a remuneration package that would position the respective member of the Senior Executive Team
at or near the median for a corresponding role, with flexibility to take into account capability, experience, and value to the
organisation and performance of the individual.
STI Award Structure of STI Award
FEATURES
Eligibility
STI Award components
Performance measures
DESCRIPTION
The MD&CEO and Senior Executive Team are eligible to participate in the
STI Award (STI Participants).
Cash bonus: 65% of the STI Participant’s STI Award.
STI Performance Rights: 35% of the STI Participant’s Award.
Individual KPIs specific to each STI Participant are agreed during the
performance appraisal process each year. These KPIs consist of both
financial and non-financial performance measures and are agreed with the
MD&CEO and the Senior Executive at the start of each year.
No STI Award is payable unless a minimum Group Net Profit After Tax
(NPAT) is achieved. The Board has the absolute discretion to vary this
requirement.
The Board allocates an annual pool to the STI Award each year. There are
levels of targeted performance for allocation of the pool for 2021:
• Minimum (85% of budget)
• Threshold (85% – 100% budget):
• Target (Budget 100%)
50%
90%
• Stretch (100+ to 110%+)
100%
• Stretch (120%+)
up to 120%
The pool is then allocated in accordance with the maximum and target STI
Award for each STI participant (which is detailed later) as a percentage of
gross pay.
The Board has the absolute discretion to vary the STI Award.
Calculation of STI Performance Rights The number of STI Performance Rights granted is determined by dividing
the award value by the 10-day volume weighted average price per share
prior to 31 December of the year of award (VWAP).
Vesting of STI Performance Rights
STI Performance Rights are restricted from exercise until the second
anniversary after the grant date and will vest on the second anniversary.
These are not subject to any further measurement after award and allotment.
Period
Financial Year (FY) ended 31 December 2018
FY ended 31 December 2019
FY ended 31 December 2020
FY ended 31 December 2021
Forfeiture of STI Performance Rights
Payments and grants
Target STI and maximum STI that can
be awarded
Date granted
01/04/2019
01/04/2020
01/04/2021
01/04/2022
Vesting date
01/04/2021
01/04/2022
01/04/2023
01/04/2024
STI Performance Rights are subject to Kina’s clawback policy. Under the
clawback policy, unvested STI Performance Rights may be forfeited if the
Board determines that adverse events or outcomes arise that should impact
on the grant of STI Performance Rights to a STI Participant.
Payment of the cash component under the STI Award will be made in
April of each year after the release of the full year financial results to the
ASX and PNGX.
MD&CEO
CFO
Other Senior Executives
Target
100% of base salary
40% of base salary
30% of base salary
Maximum
150% of base salary
50% of base salary
45% of base salary
45
Annual Report 2021 46
3. Executive remuneration (continued)
Long-term incentive Award (LTI Award)
The MD&CEO and the Senior Executive Team participate, at the Board’s discretion, in the LTI Award comprising annual
grants of Performance Rights. Further details are shown in the table below:
Structure of LTI Award
FEATURES
Eligibility
LTI components
Performance measures
DESCRIPTION
Participants must be a permanent full-time or part-time employee or
executive director of Kina or any of its subsidiaries (LTI Participants).
The LTI Award will be delivered as performance rights (LTI Performance
Rights) with each right conferring on its owner the right to be issued or
transferred one (1) fully paid ordinary share in the Company.
Since 2016, the LTI Performance Rights will only vest subject to Board
assessed satisfaction of the following conditions:
• Meeting the required Total Shareholder Return (TSR) performance level
based on peer group – 50% weighting
• Over a three-year period, whereby:
Peer group relative TSR performance
Below 50th percentile of peer group
At 50th percentile
Between 50th – 75% percentile
75% and above
Vesting outcome
Nil
50% vesting
Pro rata between 50% to 100%
100% vesting
• Meeting Earnings Per Share (EPS) target level based on peer group – 50%
weighting
• Compound Annual Growth rate over a three-year period, whereby:
EPS performance
< 5% compound annual growth
5%
>5% and < 10%
10%
Vesting outcome
Nil
50% vesting
Pro rata between 50% – 100%
100% vesting
In 2021, the Board worked with an independent advisor to identify the
comparator group companies and the advisor calculates the vesting schedule.
Calculation of LTI Performance Rights Grants are approved annually. The number of LTI Performance Rights for
each year will be determined by dividing the LTI Awards by the 10-day
volume weighted average price per share prior to 31 December in the year
of grant (VWAP).
Vesting and exercise of LTI
Performance Rights
While the grants are approved annually, they will vest no earlier than the third
anniversary of the commencement of the performance period and subject to
satisfaction of the vesting conditions and performance measures.
The performance periods for the outstanding awards are as follows:
Financial
Year
Date
granted
2018
01/04/2019
2019
01/04/2020
2020
01/04/2021
2021
01/04/2022
Performance
Period
01/04/2019 to
31/03/2022
01/04/2020 to
31/03/2023
01/04/2021 to
31/03/2024
01/04/2022 to
31/03/2025
Measures
Vesting date (subject to
performance testing)
EPS assessment compound till FY 2020 – 50%
Relative TSR assessment compounded to FY 2020 – 50%
EPS assessment compound till FY 2021 – 50%
Relative TSR assessment compounded to FY 2021 – 50%
EPS assessment compound till FY 2021 – 50%
Relative TSR assessment compounded to FY 2021 – 50%
EPS assessment compound till FY 2021 – 50%
Relative TSR assessment compounded to FY 2021 – 50%
01/04/2022
01/04/2023
01/04/2024
01/04/2025
Forfeiture of LTI Performance Rights
Unvested LTI Performance Rights may be forfeited:
Lapse of LTI Performance Rights
• if the Board determines that any vesting condition applicable to the LTI
Performance Right has not been satisfied in accordance with its terms or is
not capable of being satisfied
• in certain circumstances if the LTI Participant’s employment is terminated; or
• in other circumstances specified in the LTI Award under the Plan (for
example, if the Board determines that the LTI Participant has committed an
act of fraud or gross misconduct in relation to the affairs of Kina).
Unless otherwise specified in the vesting conditions or otherwise
determined by the Board, a LTI Performance Right lapses on the earliest of:
• if the Board determines that any vesting condition applicable to the LTI
Performance Right has not been satisfied in accordance with its terms or is
not capable of being satisfied
• the expiry of the exercise period (if any)
• in circumstances of cessation of employment, i.e. either resignation or
termination
• in other circumstances specified in the LTI Award under the Plan (for
example, if the Board determines that the LTI Participant has committed an
act of fraud or gross misconduct in relation to the affairs of Kina); or
• if the LTI participant purports to deal in the LTI Performance Right in breach
of any disposal or hedging restrictions in respect of the Performance Right.
Target LTI and maximum LTI that can
be awarded
MD&CEO
CFO
Other Senior Executives
Target
50%
40%
30%
Maximum
50%
40%
30%
Calculation of Fair Value of LTI
Performance Rights
Fair value of the LTI performance rights subject to TSR and EPS vesting
conditions for financial reporting purposes is generally estimated based on
Kina’s ASX market share price at grant date and using a simulation pricing
model applying the assumptions of price volatility, risk-free interest rates
and dividend yields. Kina engages an independent valuation expert who
performs the fair value calculations on the grants based on the valuation
methodologies referenced above and below.
TSR
A Monte Carlo simulation approach is used to value the LTI Awards subject
to the relative TSR performance condition as it incorporates an appropriate
amount of flexibility with respect to different features of the award. This
approach is assumed to follow Geometric Brownian motion under a risk-
neutral measure as follows:
• simulates correlations between Kina’s proxy and other peer companies as
well as correlations between other companies in the peer group
• ranks simulated performances and the proportion of relative TSR award
vested as calculated based on vesting schedule; and
• records present value of TSR-hurdle award vested.
The above process is repeated multiple times and the estimated fair value is
the average of the results.
EPS
Fair value of awards subject to EPS is calculated using a risk-neutral
assumption. The fair value is the difference between the share prices of the
underlying asset, minus the expected present value of future dividends over
the expected life if holders of the underlying asset are not entitled to receive
future dividends. The fair value of the awards subject to EPS performance
conditions will be equal to the share price of the underlying asset if holders
are entitled to receive future dividends.
47
Annual Report 2021 48
3. Executive remuneration (continued)
Retention Rights
FEATURES
Eligibility
Retention Rights
Vesting conditions
DESCRIPTION
The Board determines the Participants eligible for participation in the
allocation of Retention Rights, also taking into account any recommendation
made by the RNC.
The allocation of Retention Performance Rights was a once-off award under
the Plan of performance rights (Retention Rights) at the time of listing on
ASX and PNGX in July 2015, to assist in the retention and reward of key
eligible participants at that time.
Vesting of the Retention Rights is subject to a service condition wherein
Retention Performance Rights only vest upon successful completion of a
service period as determined by the Board at the time of grant.
Calculation of Retention Rights
During 2021, there were no awards of any Retention Rights.
During 2018, $300,000 worth of ‘Commencement’ performance rights
equalling 402,685 Retention Rights were granted to the MD&CEO, and
approved by shareholders at the 2018 Annual General Meeting on
23 May 2018, vesting in equal instalments over three years as follows;
• 134,229 vested on 4 December 2019
• 134,227 vested on 4 December 2020; and
• 134,227 vested on 4 December 2021.
Forfeiture of Retention Rights
Unvested Retention Rights may be forfeited:
Lapse of Retention Rights
• if the Board determines that any vesting condition applicable to the
Retention Right has not been satisfied in accordance with its terms or is not
capable of being satisfied
• in certain circumstances if the Retention Rights Award Participant’s
employment is terminated; or
• in other circumstances specified in the Retention Rights Award (for
example, if the Board determines that the Retention Rights Award
Participant has committed an act of fraud or gross misconduct in relation
to the affairs of Kina).
Unless otherwise specified in the vesting conditions or otherwise
determined by the Board, a Retention Right lapses on the earliest of:
• if the Board determines that any vesting condition applicable to the
Retention Right has not been satisfied in accordance with its terms or is not
capable of being satisfied
• the expiry of the exercise period (if any)
• in circumstances of cessation of employment
• in other circumstances specified in the Retention Rights Award (for example,
if the Board determines that the Retention Rights Award Participant has
committed an act of fraud or gross misconduct in relation to the affairs of
Kina); or
• if the participant purports to deal in the Retention Right in breach of any
disposal or hedging restrictions in respect of the Retention Rights.
Timing of grants
Grants of Retention Rights only apply to new hires (as a one-off).
Performance-based and non-performance based components
All STI and LTI elements of the remuneration of the KMP who are executives are performance-based.
Participant
Greg Pawson
Chetan Chopra
Michael Van Dorssen
Ivan Vidovich
Deepak Gupta
Johnson Kalo
Nathan Wingti
Gavin Heard
Asi Nauna1*
Lesieli Taviri2*
Judith Ugava-Taunao3*
* pro-rata based on start dates
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Cash salary/fees/short-term compensated absences $ Non-monetary benefits $
Total $
591,300
591,300
400,000
400,000
398,549
398,549
375,000
375,000
350,000
350,000
309,680
324,162
290,325
303,901
220,000
220,000
226,454
65,942
310,488
71,049
124,195
-
206,709
183,800
126,431
163,296
61,976
150,816
61,748
42,546
174,977
161,270
22,602
13,777
112,468
108,999
23,736
12,764
15,924
4,076
20,713
3,020
8,839
-
798,009
775,100
526,431
563,296
460,525
549,365
436,748
417,546
524,977
511,270
332,282
337,939
402,793
412,900
243,736
232,764
242,378
70,018
331,201
74,069
133,033
-
External Advisor Services
The Kina Performance Rights Plan is administered independently by Link Market Services Pty Ltd. Orient Capital Pty Limited is
engaged to provide the assessment of EPS Growth and Relative TSR Performance in relation to the LTI Awards and valuation
of the VWAP. During 2020, the Board engaged EY to complete an Executive Incentives Review (STI and LTI), and McGuirk
Management Consultants Pty Limited to undertake: (a) a Total Shareholder Return Hurdle Comparison Group Analysis; and
(b) a Board Remuneration Benchmarking Review. It is proposed that this be reviewed in 2022.
Holdings in Company Shares
The table below sets out the current holdings of Company shares by KMP.
KMP Shareholding
Gregory Pawson
Chetan Chopra
Deepak Gupta
Michael Van Dorssen
Nathan Wingti
Ivan Vidovich4
1 appointed 11 September 2020
2 appointed 11 September 2020
3 appointed 26 May 2021
4 aquried on market
Current balance
630,803
273,745
191,404
291,055
51,127
46,704
49
Annual Report 2021 50
3. Executive remuneration (continued)
Performance Rights holdings
The table below sets out the current holdings of Performance Rights (PR) by KMP or former KMP.
Employment agreements
KMP employment contracts
First Name
Surname
Award
Year
Grant Date
Vesting date
Value of PR
granted (AUD)
VWAP
period
VWAP $
applied
FY2021
PR
• All Senior Executive Team members’ employment contracts are over a period of three years with a notice period of three months.
Gregory
Pawson
Chetan
Chopra
Michael
Van
Dorssen
Deepak
Gupta
Nathan
Wingti
Gavin
Heard
Ivan
Vidovich
Adam
Downie
Wayne
Beckley
Johnson
Kalo
Lesieli
Taviri
Asi
Nauna
STI
STI
LTI
LTI
LTI
STI
STI
LTI
LTI
LTI
STI
STI
LTI
LTI
LTI
STI
STI
LTI
LTI
LTI
STI
STI
LTI
LTI
LTI
STI
STI
LTI
LTI
STI
STI
LTI
STI
LTI
LTI
STI
LTI
STI
LTI
STI
LTI
2019
2020
2018
2019
2020
2019
2020
2018
2019
2020
2019
2020
2018
2019
2020
2019
2020
2018
2019
2020
2019
2020
2018
2019
2020
2019
2020
2019
2020
2019
2020
2020
2019
2019
2018
2020
2020
2020
2020
2020
2020
19/05/2020
01/04/2021
01/04/2019
19/05/2020
01/04/2021
01/04/2020
01/04/2021
01/04/2019
01/04/2020
01/04/2021
01/04/2020
01/04/2021
01/04/2019
01/04/2020
01/04/2021
01/04/2020
01/04/2021
01/04/2019
01/04/2020
01/04/2021
01/04/2020
01/04/2021
01/04/2019
01/04/2020
01/04/2021
01/04/2020
01/04/2021
01/04/2020
01/04/2021
01/04/2020
01/04/2021
01/04/2021
01/04/2020
01/04/2020
01/04/2019
01/04/2021
01/04/2021
01/04/2021
01/04/2021
01/04/2021
01/04/2021
19/05/2022
01/04/2023
01/04/2022
01/04/2023
01/04/2024
01/04/2022
01/04/2023
01/04/2022
01/04/2023
01/04/2024
01/04/2022
01/04/2023
01/04/2022
01/04/2023
01/04/2024
01/04/2022
01/04/2023
01/04/2022
01/04/2023
01/04/2024
01/04/2022
01/04/2023
01/04/2022
01/04/2023
01/04/2024
01/04/2022
01/04/2023
01/04/2023
01/04/2024
01/04/2022
01/04/2023
01/04/2024
01/04/2022
01/04/2023
01/04/2022
01/04/2023
01/04/2024
01/04/2023
01/04/2024
01/04/2023
01/04/2024
268,197
288,189
295,641
294,722
274,466
70,000
105,225
144,000
160,000
148,009
42,000
48,566
107,882
120,000
111,006
43,750
48,566
91,499
105,000
97,131
49,000
56,660
48,000
48,000
83,255
23,100
25,902
66,000
61,053
38,500
64,754
138,758
42,000
90,000
104,999
24,282
61,053
38,852
88,805
16,189
88,805
31/12/2019
31/12/2021
31/12/2018
31/12/2019
31/12/2021
31/12/2019
31/12/2021
31/12/2018
31/12/2019
31/12/2021
31/12/2019
31/12/2021
31/12/2018
31/12/2019
31/12/2021
31/12/2019
31/12/2021
31/12/2018
31/12/2019
31/12/2021
31/12/2019
31/12/2021
31/12/2018
31/12/2019
31/12/2021
31/12/2019
31/12/2021
31/12/2019
31/12/2021
31/12/2019
31/12/2021
31/12/2021
31/12/2019
31/12/2019
31/12/2018
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
1.4300
0.8233
0.9072
1.4300
0.8233
1.4300
0.8233
0.9072
1.4300
0.8233
1.4300
0.8233
0.9072
1.4300
0.8233
1.4300
0.8233
0.9072
1.4300
0.8233
1.4300
0.8233
0.9072
1.4300
0.8233
1.4300
0.8233
1.4300
0.8233
1.4300
0.8233
0.8233
1.4300
1.4300
0.9072
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
187,550
350,041
325,883
206,099
333,373
48,951
127,809
158,730
111,888
179,775
29,371
58,989
118,918
83,916
134,831
30,594
58,989
100,859
73,427
117,978
34,266
68,820
52,910
33,566
101,124
16,154
31,461
46,154
74,157
26,371
78,652
168,539
29,371
62,937
115,740
29,494
74,157
47,191
107,865
19,663
107,865
Subsequent to, and in relation to, the year ended 31 December 2021 (FY2021 Awards), the Board approved the following
STI and LTI Awards for eligible participants. The STI Performance Rights and LTI Performance Rights components of the
FY2021 STI and LTI Awards are subject to shareholder approval at the 2022 AGM to be held on 24 May 2022.
First Name
Surname
Award
Year
Grant Date
Vesting date
Value of PR
Granted (AUD)
VWAP Period
VWAP $
applied
FY2021
PR
Gregory
Pawson
Chetan
Chopra
Deepak
Gupta
Nathan
Wingti
Ivan
Vidovich
Johnson
Kalo
Lesieli
Taviri
Asi
Judith
Nauna
Ugava-
Taunao
STI
LTI
STI
LTI
STI
LTI
STI
LTI
STI
LTI
STI
LTI
STI
LTI
STI
LTI
STI
LTI
2021
2021
2021
2021
2021
2021
2021
2021
2021
2021
2021
2021
2021
2021
2021
2021
2021
2021
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2022
01/04/2024
01/04/2025
01/04/2024
01/04/2025
01/04/2024
01/04/2025
01/04/2024
01/04/2025
01/04/2024
01/04/2025
01/04/2024
01/04/2025
01/04/2024
01/04/2025
01/04/2024
01/04/2025
01/04/2024
01/04/2025
294,911
280,868
108,063
152,000
49,875
99,750
58,188
85,500
66,500
142,500
39,900
91,200
39,900
91,200
24,938
62,700
16,625
62,700
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
31/12/2021
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
0.8233
358,206
341,149
131,255
184,623
60,579
121,159
70,676
103,850
80,773
173,084
48,464
110,774
48,464
110,774
30,290
76,157
20,193
76,157
MD&CEO employment agreement
The MD&CEO’s employment agreement is for a term of five years with a notice period of six months. Kina may terminate the
MD&CEO’s employment without notice or payment in lieu of notice in circumstances where the MD&CEO:
• is bankrupt or has made any arrangement or composition with his creditors or taken advantage of any legislation for relief of an
insolvent debtor; or
• is convicted of any criminal offence, other than an offence which in the reasonable opinion of the Board does not affect his position as
MD&CEO of Kina.
On termination of the MD&CEO’s employment agreement, the MD&CEO will be subject to a restraint of trade period of 12
months. The enforceability of the restraint clause is subject to all usual legal requirements.
Remuneration of employees
During the year, the number of employees or former employees (not being directors of the Company), receiving
remuneration in excess of PGK 100,000 per annum from the Group, stated in bands of PGK 10,000, were as follows:
in PGK
330,000 - 340,000
320,000 - 330,000
310,000 - 320,000
300,000 - 310,000
280,000 - 290,000
270,000 - 280,000
260,000 - 270,000
250,000 - 260,000
240,000 - 250,000
220,000 - 230,000
210,000 - 220,000
200,000 - 210,000
190,000 - 200,000
180,000 - 190,000
170,000 - 180,000
160,000 - 170,000
150,000 - 160,000
140,000 - 150,000
130,000 - 140,000
120,000 - 130,000
110,000 - 120,000
100,000 - 110,000
*impact of foreign exchange conversion.
2021
2
2
1
1
1
1
-
2
-
3
1
1
4
7
5
8
9
6
11
6
16
21
2020
-
2
3
-
1
-
2
-
1
2
-
1
2
4
10
4
7
9
8
2
18
23
in PGK
1,530,000 - 1,540,000
1,450,000 - 1,460,000
1,030,000 - 1,040,000
980,000 - 990,000
920,000 - 930,000
900,000 - 910,000
860,000 - 870,000
800,000 - 810,000
770,000 - 780,000
750,000 - 760,000
740,000 - 750,000
710,000 - 720,000
640,000 - 650,000
610,000 - 620,000
600,000 - 610,000
580,000 - 590,000
570,000 - 580,000
550,000 - 560,000
540,000 - 550,000
510,000 - 520,000
500,000 - 510,000
490,000 - 500,000
470,000 - 480,000
460,000 - 470,000
450,000 - 460,000
440,000 - 450,000
420,000 - 430,000
400,000 - 410,000
390,000 - 400,000
380,000 - 390,000
360,000 - 370,000
2021
1*
-
2
-
-
1
-
1
1
1
1
1
1
-
1
2
1
1
-
2
1
1
1
-
1
1
1
-
1
1
-
2020
-
1*
-
2
1
-
1
1
-
1
1
-
-
1
-
2
-
1
1
-
-
2
1
1
-
2
-
1
1
2
1
51
Annual Report 2021 52
4. Non-executive director arrangements
Remuneration policy
Non-executive directors receive a Board fee and fees for chairing or participating on Board Committees as shown in the
table below. They do not receive performance-based awards or retirement allowances.
The fees are exclusive of superannuation.
Directors’ fees are reviewed annually by the Board, taking into account comparable roles and market data provided by the
Board’s independent remuneration advisor. The current base fees were reviewed in 2021 and increases were applied with
effect from 1 October 2020.
Remuneration components
Kina’s Board and Committee fee structure as at 31 December 2021 was:
Board fees
Chairman
Non-executive director/committee member
Board
Board
Committee fees
$180,000 (excluding superannuation
entitlements)
$90,000 (excluding any superannuation
entitlements)
Audit and Risk Committee
Remuneration and Nomination
Committee
Committee Chair: $22,500 (excluding any
superannuation entitlements)
Committee Chair: $22,500 (excluding any
superannuation entitlements)
Members: $11,250 (excluding any
superannuation entitlements)
Members: $11,250 (excluding any
superannuation entitlements)
Disclosure Committee
No additional fees are paid
No additional fees are paid
Fee pool
Under the Company’s Constitution, the Board decides the total amount paid to each non-executive director as
remuneration for their services as a director of the Company. However, the total amount of fees (including statutory
superannuation entitlements, if any) paid to the directors for their services (excluding, for these purposes, the remuneration
of any executive director) must not exceed in aggregate in any financial year the amount fixed by the Company in a general
meeting of shareholders.
For the financial year ended 31 December 2021, this has been fixed at $1.28 million per annum (no change from the prior
year, and the amount set out in the Company’s Listing Prospectus). Any increase in the total amount payable by the Company
to the non-executive directors as remuneration for services must be approved by shareholders in a general meeting.
The aggregate sum includes any special and additional remuneration for special exertions and additional services
performed by a director as determined appropriate by the Board.
Committee fees
The Committee Chair fees are not duplicated for those directors who are appointed to the Chair of more than one
Committee or the Board.
Non-executive director remuneration details
The following payments were made to non-executive directors in the 2021 and 2020 financial years.
Director
Isikeli Taureka
Andrew Carriline
Paul Hutchinson
Karen Smith-Pomeroy
Ila Temu
Jane Thomason
Year
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
Fees $
222,020
146,250
112,500
91,875
101,250
85,313
131,310
108,803
98,769
3,750
112,500
95,625
Short-term benefits
Post-employment benefits
Total
Non-monetary
benefits $
Superannuation
contributions $
-
-
-
-
-
-
-
-
-
-
-
-
18,650
36,001
7,560
6,615
7,560
6,615
-
-
5,415
315
-
6,615
$
240,669
182,251
120,060
98,490
108,810
91,928
131,310
108,803
104,184
4,065
112,500
99,300
Variable remuneration
Special remuneration
Directors may be paid such special or additional remuneration as the Board determines for performing extra services or
making any special exertions for the benefit of Kina which, in the Board’s opinion, are outside of the scope of the ordinary
duties of a director.
Reimbursement for out-of-pocket expenses
Directors may be reimbursed for travel and other expenses incurred in attending and returning from any Board, Board
Committee or general meetings of Kina shareholders, or otherwise in connection with the business or affairs of the
Kina Group.
Retirement benefits
There are no retirement benefit schemes for directors, other than statutory superannuation contributions.
Participation in incentive schemes
The non-executive directors are not entitled to participate in any Kina Group employee incentive scheme.
5. Related party transactions
Please refer to Note 29 to the financial statements, for further comments on related party transactions.
6. Directors’ interests in shares
Directors are not required under the Constitution to hold any shares in the Company. As at the date of this Remuneration
Report, the directors have the following interests in shares in Kina (either directly or through beneficial interests or entities
associated with the director).
Director
Isikeli Taureka
Greg Pawson
Andrew Carriline
Paul Hutchinson
Karen Smith-Pomeroy
Jane Thomason
Ila Temu
Number of Shares
Shareholding as at the date of this Remuneration Report (%)
65,000
630,803
125,000
80,299
90,000
35,000
-
0.02%
0.22%
0.04%
0.03%
0.03%
0.01%
0.00%
53
Annual Report 2021 54
Corporate Governance.
The Board of Directors of Kina Securities Limited (the Board) is responsible for the Group’s overall corporate governance,
including adopting appropriate policies and procedures designed to ensure it is properly managed to protect and
enhance shareholders’ and stakeholders’ interests.
The Board of Kina Securities Limited and its related entities places great emphasis on the continued development of a strong
corporate governance, risk management and compliance culture. In an emerging marketplace, Kina seeks to be innovative
as well as to provide a safe and secure environment for its customers and clients, which in turn brings value to shareholders.
Kina’s governance practices and policies reflect, and are consistent with, each of the ASX and PNGX Listing Rules. The Board
considers the governance practices we have adopted as following these principles for the year ended 31 December 2021.
Ethical leadership for value creation
The Board is committed to building long-term value for its shareholders, employees, communities and customers. We
choose to honour this commitment by maintaining high standards of corporate governance that are, in turn, supported
by skilled people as well as sound business practices and policies. This commitment also extends to maintaining high
standards of business integrity and business ethics in all our activities.
This section provides an overview of Kina’s corporate governance framework and discloses information on governance, the
independence of directors and other relevant information in addition to that disclosed in the Director’s Report.
For further details on our government structure, policies and practices, please refer to the full Kina Corporate Governance
Statement 2021 available at investors.kinabank.com.pg/Investors/?page=corporate-governance
Governance Framework
The Board regularly reviews the Company’s governance structure, systems and processes to ensure that these support
effective and ethical leadership and corporate governance, corporate citizenship and sustainability. Overseeing governance
means the Board ensures that these principles apply in the best interests of Kina Bank and all our stakeholders.
As the highest governing structure in the Company, the Board provides effective leadership in the best interests of Kina Bank
and is responsible for its strategic direction and control. The Board is supported by three Board Committees, and together
with these committees benchmarks our governance practices to best practice standards.
The Board exercises its control through a governance framework which includes detailed reporting up to the Board and
its committees, with effective delegation, robust risk management and a system of assurance regarding the veracity and
efficacy of financial reporting and internal control systems.
Kina’s Constitution and each of the charters, policies and codes are referred to in our full Corporate Government
Statement 2021 available at www.kinabank.com.pg
Board Composition
The Company’s Constitution provides for a minimum of three and a maximum of ten directors. Board members have a
diverse range of skills and experience which ensure they are able to contribute effectively to Board-level decisions and act
in the best interests of shareholders.
The Board Charter recognises the respective roles of the Board members and Kina executive management and
distinguishes between Board-level strategic guidance and the work of executives.
Director
Appointment date
Length of service
Non-executive
Independent
Isikeli Taureka
19 April 2016
5 years, 0 months
Karen Smith-Pomeroy 12 September 2016
5 years, 7 months
Gregory Pawson
1 January 2018
4 years, 4 months
Jane Thomason
27 April 2018
4 years, 0 months
Andrew Carriline
16 August 2018
3 years, 8 months
Paul Hutchinson
16 August 2018
3 years, 8 months
Ila Temu
14 December 2020
1 year, 4 months
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
More information about each director is available at www.kinabank.com.pg
55
Independence of the Board
The Board considers each of the non-executive directors are independent of the Kina Group. An ‘independent’ director
is a non-executive director who is not a member of Kina’s Senior Executive Team and who is free of any business or other
relationship that could materially interfere with, or reasonably be perceived to materially interfere with, the independent
exercise of their judgment.
As at 31 December 2021, all directors are considered by the Board to be ‘independent’ directors, except for Mr Greg
Pawson who is the Managing Director and Chief Executive Officer.
The six non-executive directors are considered to be independent, having regard to (amongst other things) the
following factors:
• They are non-executive directors who are free of any interest, business or other relationship that could reasonably influence, or
could reasonably be perceived to influence, in a material way, their capacity to bring an independent judgment to bear on issues
before the Board, and to act in the best interests of the Company’s shareholders generally.
• They have not been employed or retained, within the last three years, to provide material professional services to the Company.
• Within the last 12 months they were not a partner, director, senior executive or material shareholder of a firm that provided material
professional services to the Company .
• They do not receive performance-based remuneration from, or participate in, any employee share scheme of the Company.
At least once a year, the Board reviews the independence of each director in the light of interests the directors disclose.
Determining directors’ conflicts of interest
The Company’s Constitution, Board Charter and Code of Conduct provide clear procedures regarding the management of
actual, potential or perceived conflicts of interest. Each director has a continuing obligation to keep the Board advised of
any interest that has arisen that could potentially conflict with those of the Group. Where a director has an actual, potential
or perceived conflict in a matter being considered by the Board, the director will: declare that conflict of interest, not receive
the relevant Board papers, not be present when the matter is considered during a Board or Committee meeting, and not
participate in any decision on the matter, unless the Board Chairman determines otherwise.
Board Chair
In accordance with the Board Charter, the Board Chair is an independent director. The roles and responsibilities of the
Board Chair are contained within the Board Charter and the role of the Board Chair and that of Managing Director and
Chief Executive Officer may not be exercised by the same individual.
Board Committees
The Board may establish and delegate powers to sub-committees that are formed to facilitate effective decision-
making. The Board has established the following three Committees:
• Audit and Risk Committee
• Remuneration and Nomination Committee, and
• Disclosure Committee.
Each Committee has a separate Charter which details the membership and powers of the respective Committee
including its roles and responsibilities. However, the Board ultimately has full accountability for matters it delegates to
those Committees. The Board reviews the Charters of the Committees at least annually. These documents are available
on the Company’s website at: investors.kinabank.com.pg
Audit and Risk Committee
The Board has established an Audit and Risk Committee to fulfil its responsibilities with respect to financial policies
and financial processes, including internal and external audit matters, and risk management and compliance within the
Company and its subsidiaries.
As set out in its Charter, the Audit and Risk Committee must comprise:
• at least three directors, and
• all non-executive directors.
The Chair of the Audit and Risk Committee is appointed by the Board and must be an independent director. The Chair of
the Board may be a member of the Committee but must not be the Committee Chair.
When appointing members of the Audit and Risk Committee, the Board shall have regard to the need for:
• at least one member to hold a recognised qualification in a finance-related discipline
• all members to be financially literate
• all members to have a sound understanding of the concept of risk and the principles of managing risk.
Annual Report 2021 56
Corporate Governance (continued)
The Audit and Risk Committee met eight times during the year ended 31 December 2021.
Remuneration and Nomination Committee
The Board has established a Remuneration and Nomination Committee to ensure that the Company has a Board of
an effective composition, size and commitment to adequately discharge its responsibilities and duties and to bring
transparency, focus and independent judgment to decisions regarding the composition of the Board, and remuneration
policies and practices. In its function as a Nomination Committee, the Remuneration and Nomination Committee assists
the Board in fulfilling its corporate governance responsibilities in regard to:
• Board appointments, re-elections and performance
• Board and Committee membership
• directors’ induction, continuing development and succession planning, and
• strategies to address Board diversity.
As set out in its Charter, the Remuneration and Nomination Committee must comprise at least three directors and all non-
executive directors. The Board has regard to diversity in constituting the Remuneration and Nomination Committee. This
Committee may obtain information from, and consult with, management and external advisers, as it considers appropriate.
The Remuneration and Nomination Committee met six times during the year ended 31 December 2021.
Disclosure Committee and Continuous Disclosure
The Board has established a Disclosure Committee, the purpose of which is to assist the Board in the performance of its
statutory and regulatory obligations by ensuring market sensitive and/or Company information is disclosed through the
appropriate channel promptly and without delay. The Disclosure Committee has absolute right of access to any information
held by the Kina Group. The Disclosure Committee meets regularly, and is engaged between scheduled meetings as
required, to consider matters that may require disclosure, and to review and approve the content of proposed material for
lodgement with the ASX/PNGX. The Disclosure Committee met two times during the year ended 31December 2021.
The Disclosure Committee is to comprise at least three members appointed by the Board. Members include the Chair
of the Board, the Managing Director and Chief Executive Officer and the Chair of the Audit and Risk Committee. The
Disclosure Committee Chair shall be appointed by the Chair of the Board.
Kina’s Continuous Disclosure Policy and associated procedures set out our approach to ensure awareness and compliance
with the continuous disclosure obligations of the ASX and PNGX. This includes the disclosure of required material
information about Kina’s activities in a timely and balanced manner to all market participants equally, through lodgement
with the ASX/PNGX. This policy is available on the Company’s website at: investors.kinabank.com.pg
Board skills matrix
The Board seeks an appropriate mix of skills, experience, expertise and diversity to enable it to effectively discharge its
responsibilities and add value to the Company. As at 14 April 2022, the directors collectively contribute the following key
skills and experience:
Skills and
experience
Banking and/or
financial services
experience
Explanation
Extent present
among directors
Experience outside Kina in, with global business perspectives of,
significant components of the financial services industry, including
retail and commercial banking services and adjacent sectors, equity
and debt capital markets, with strong knowledge of their economic
drivers and the regulatory environment.
Customer focus and
outcomes
Experience in developing and overseeing the embedding of a strong
customer-focused culture in large complex organisations, and a
demonstrable commitment to achieving customer outcomes.
Environment, social
and sustainability
Understanding the potential risks and opportunities from an
environmental and social perspective, and experience in developing
and monitoring sustainability frameworks and related practices.
Financial acumen
Good understanding of financial statements and drivers of financial
performance for a business of significant size, including ability to
assess the effectiveness of financial controls.
Governance
Publicly listed company experience, extensive experience in and
commitment to the highest standards of governance, experience in
the establishment and oversight of governance frameworks, policies
and processes.
International
experience
Senior leadership experience involving responsibility for operations
across borders, and exposure to a range of political, cultural,
regulatory and business environments in that position.
Leadership and
commercial acumen
Skills gained whilst performing at a senior executive level for a
considerable length of time. Includes delivering superior results,
running complex businesses, leading complex projects and issues,
and leading workplace culture.
People, culture and
conduct
Risk and compliance
Stakeholder
engagement
Strategy
Experience at a senior executive level in people matters including
building workforce capability, workplace cultures, management
development, succession and setting a remuneration framework that
attracts and retains a high calibre of executives, and promotion of
diversity and inclusion.
An understanding of compliance and experience in anticipating and
evaluating macro, strategic, operational, financial, social, technological
including digital disruption and cyber security risks that could impact
the business. Recognising and managing these risks by developing
sound risk management frameworks and providing oversight. Includes
experience in managing compliance risks and regulatory relationships.
Demonstrated ability to build and maintain key relationships with
industry, government or regulators.
Experience in leading, developing, setting and executing strategic
direction. Experience in driving growth and transformation, executing
against a clear strategy.
Technology and
digital
Experience in businesses of a significant size with major technology
focus, including adaptation to digital change and innovation, with
knowledge of developments in Decentralised Finance (DeFi).
83%
74%
66%
86%
77%
71%
97%
86%
74%
91%
86%
66%
57
Annual Report 2021 58
Corporate Governance (continued)
Membership of the Committees
Membership of the Committees during the reporting period, the number of Board and Committee meetings and the
attendance at those meetings are set out below and also in the Directors’ Report.
Diversity (continued)
The Board comprises seven members (2020: seven), five of whom are male and two female.The numbers of females
within Kina’s workforce, including the Board, Senior Executive Team and Team Leaders are set out below:
Director
Board
Meetings
Audit & Risk
Committee
Meetings
Remuneration &
Nomination Committee
meetings
Disclosure Committee
Meetings
A
B
A
B
A
Isikeli Taureka
212
201
Greg Pawson
Andrew Carriline
Paul Hutchinson
20
21
21
Karen Smith-Pomeroy
21
Ila Temu
Jane Thomason
21
21
20
21
21
21
191
191
8
8
82
8
8
8
6 6
6
5
62
A Meetings held that the director was eligible to attend
B Meetings attended
1 These absences were known and approved prior to the meeting
2 Chair
A
2222
2
2
2
B
2
2
2
2
B
6
6
5
6
Senior Executive Team
Senior executives are those individuals who report directly to the Managing Director and Chief Executive Officer.
Our strong Senior Executive team, who are all experts in their respective fields, is accountable for implementing
Kina’s strategy which is aligned to our vision to be the most dynamic, progressive and accessible financial services
organisation in the Pan Pacific region, proudly domiciled in PNG.
More information about our executive team is at: investors.kinabank.com.pg/Investors
Diversity
The Company’s Diversity Policy emphasises Kina’s commitment to the maintenance and promotion of a workplace that
ensures equity and fairness and is free from discrimination, harassment, bullying and victimisation. Kina recognises the
importance of embracing diversity, specifically in valuing the unique qualities, attributes, skills and experiences each
employee brings to the workplace.
The Company’s vision for diversity incorporates a number of different factors, including but not limited to: gender,
ethnicity and cultural background, disability, age and educational experience. The Diversity Policy provides a framework
to help Kina achieve its diversity goals, while creating a commitment to a diverse work environment where staff are treated
fairly and with respect and have equal access to workplace opportunities.
The Board has been focused on the improvement of diversity reporting, which is regularly provided to the Board, and
through the Remuneration and Nomination Committee plans to set measurable objectives for achieving gender diversity
in the composition of its Board, Senior Executive Team and workforce generally. This is also disclosed in relation to each
reporting period: the measurable objectives set for that period to achieve gender diversity; the entity’s progress towards
achieving those objectives; and the respective proportions of men and women on the Board, in senior executive positions
and across the whole workforce (including how the Company has defined ‘senior executive’ for these purposes).
Board
Senior Executive Team*
Team Leaders
Other employees
Total employees
31 December 2021
31 December 2020
Females
Males
Total
Females
Males
Total
2
4
40
344
390
5
5
34
257
301
7
9
74
601
691
2
2
47
348
399
5
7
39
251
302
7
9
86
599
701
* The Company defines a senior executive as a person who is a direct report to the Managing Director and Chief Executive Officer.
The ratio of women to men at Kina is 56% female to 44% male. Since December 2020, Kina has achieved a 40:40:20
gender balance in the executive team. As at February 2022 there is now 50% female on the executive, and 50% of the
executives are Papua New Guinean.
Kina was an inaugural member of the PNG Business Coalition for Women and through the year, has provided specialist
training to female team leaders to assist with their career development. Kina is a strong advocate for gender smart
policies in the workplace and provides both maternity and paternity leave for its workers. This is complemented by the
opportunity of flexible working arrangement when returning to work. Also, within the first six months of a child’s life, new
parents are provided with paid leave to enable time out of the workplace.
In 2021, Kina renewed its subscription to the Bel isi PNG program, which provides safe housing and case management
services for employees and family members who are survivors of domestic violence. Kina also trained 21 employees
as family and sexual violence Contact Persons, providing more opportunities for survivors of violence to safely and
confidentially reach out for assistance.
Company Secretary
The Company Secretary is accountable directly to the Board, through the Chair, on all matters to do with the proper
functioning of the Board and providing advice and support to the Board for all corporate governance matters relating to
the Board’s efficient functioning. The Company Secretary is appointed and removed by the Board, and each director can
communicate directly and freely with the Company Secretary.
Mr Chetan Chopra was appointed Company Secretary and Chief Financial Officer on 21 June 2016. Chetan holds a
Bachelor of Chemical Sciences from Mumbai University and an MBA from Melbourne Business School, University of
Melbourne. Chetan is a member of Certified Practising Accountants Australia and PNG.
Indemnity insurance
In accordance with section 140 of the PNG Companies Act 1997 (‘Act’) and the constitution of the Company, Kina Group
has indemnified, and has either directly or indirectly effected insurance for, the directors and executives of the Company
and its related companies. Except for some specific matters that are expressly excluded, the indemnities and insurance
indemnify and insure directors and executives for any costs incurred or liability, to another person for any act or omission
in their capacity as a director or employee, or costs incurred by that director or employee in defending or settling any
claim or proceeding relating to any such liability, not being criminal liability or liability in respect of a breach, in the case of
a director, of the duty specified in Section 112 of the Act, or, in the case of an employee, of any fiduciary duty owed to the
company or related company.
59
Annual Report 2021 60
Directors’ Report.
The directors of Kina Securities Limited and its subsidiaries (the Group, Company, Kina) submit herewith the annual
financial report of the Company and its subsidiaries for the year ended 31 December 2021.
Principal activities
The principal continuing activities of the Company and its subsidiaries during the year were the provision of commercial
banking and financial services (including asset financing, provision of commercial and personal loans, money market
operations and corporate advice), fund administration, investment management services and share brokerage.
The directors consider there are no unusual or other matters that warrant their comments and the Group’s financial position
and results from operations are properly reflected in these financial statements.
Operating results and review of operations
The net profit attributable to equity holders for the year for the Group was PGK 70.8 million compared with PGK 76.0 million
in 2020.
The profit includes the following items:
• net interest income of PGK 177.3 million, compared with PGK 169.7 million in the prior year to 31 December 2020
• net fee and commission income of PGK 89.3 million compared with PGK 76.2 million in the prior year
• operating income before impairment losses and other operating income of PGK 334.4 million, up from PGK 314.8
million in the prior year
• expected credit losses on financial instruments at amortised cost of PGK 6.5 million, compared with PGK 22.0 million in
the prior year
• other operating expenses of PGK 194.1 million, compared with PGK 182.9 million in the prior year.
Dividends
The Company paid a dividend of PGK 16.9 toea (AUD 6.0 cents) per share (PGK 48.3 million) in April 2021 in relation to the
profit for the half year ended 31 December 2020. In September 2021, the Company paid a dividend of PGK 8.25 toea (AUD
3.0 cents) per share (PGK 23.7 million) in relation to the profit for the half year ended 30 June 2021.
After balance sheet date events
Subsequent to the balance sheet date, the directors declared a final dividend of PGK 18.5 toea (AUD 7.0 cents) per share
(PGK 53.1 million) on underlying NPAT for the second half of the financial year ended 31 December 2021. See also note 40
for other subsequent events.
Donations
During the year the Group made donations totalling PGK 401,718 (2020: PGK 258,491).
Auditor’s fees
Fees paid to the auditor during the year for professional services are shown in note 37 to the financial statements.
The external auditor is Deloitte Touche Tohmatsu Ltd.
Remuneration of employees
During the year, the number of employees or former employees (not being directors of the Company) receiving
remuneration in excess of PGK100,000 per annum from the Group stated in bands of PGK10,000 was as follows:
in PGK
250,001 - 260,000
240,001 - 250,000
220,001 - 230,000
210,001 - 220,000
200,001 - 210,000
190,001 - 200,000
180,001 - 190,000
170,001 - 180,000
160,001 - 170,000
150,001 - 160,000
140,001 - 150,000
130,001 - 140,000
120,001 - 130,000
110,001 - 120,000
100,000 - 110,000
2021
2
-
3
1
1
4
7
5
8
9
6
11
6
16
21
2020
-
1
2
-
1
2
4
10
4
7
9
8
2
18
23
The company’s Renumeration Report is set out on pages
41 to 54.
in PGK
1,530,001 - 1,540,000
1,450,001 - 1,460,000
1,030,001 - 1,040,000
980,001 - 990,000
920,001 - 930,000
900,001 - 910,000
860,001 - 870,000
800,001 - 810,000
770,001 - 780,000
750,001 - 760,000
740,001 - 750,000
710,001 - 720,000
640,001 - 650,000
610,001 - 620,000
600,001 - 610,000
580,001 - 590,000
570,001 - 580,000
550,001 - 560,000
540,001 - 550,000
510,001 - 520,000
500,001 - 510,000
490,001 - 500,000
470,001 - 480,000
460,001 - 470,000
450,001 - 460,000
440,001 - 450,000
420,001 - 430,000
400,001 - 410,000
390,001 - 400,000
380,001 - 390,000
360,001 - 370,000
330,001 - 340,000
320,001 - 330,000
310,001 - 320,000
300,001 - 310,000
280,001 - 290,000
270,001 - 280,000
260,001 - 270,000
*impact of foreign exchange conversion
2021
1*
-
2
-
-
1
-
1
1
1
1
1
1
-
1
2
1
1
-
2
1
1
1
-
1
1
1
-
1
1
-
2
2
1
1
1
1
-
2020
-
1*
-
2
1
-
1
1
-
1
1
-
-
1
-
2
-
1
1
-
-
2
1
1
-
2
-
1
1
2
1
-
2
3
-
1
-
2
61
Annual Report 2021 62
Directors’ Declaration.
The directors declare that:
• in the directors’ opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as
and when they become due and payable
• in the directors’ opinion, the attached consolidated financial statements and notes thereto are in accordance with
the PNG Companies Act 1997, including compliance with International Financial Reporting Standards (IFRS) and
giving a true and fair view of the financial position and performance of the Group as at and for the year ended 31
December 2021.
Signed in accordance with a resolution of the Board of Directors.
On behalf of the directors
Mr. Isikeli Taureka
Director and Chairman
Port Moresby, 30 March 2022
Mr. Greg Pawson
Managing Director and
Chief Executive Officer
Port Moresby, 30 March 2022
Directors’ remuneration amounts for 2021 and 2020 were as follows:
2021
PGK’000
2020
PGK’000
451
360
309
278
306
274
1,978
362
269
236
211
227
-**
1,305
1,533*
1,460*
454
1,987
3,965
454
1,914
3,219
Non-Executive Directors
I. Taureka
K. Smith-Pomeroy
J. Thomason
P. Hutchinson
A. Carriline
I. Temu
Total
Managing Director
G. Pawson
- Salaries
- Other benefits including leave
entitlements
Total
*impact of foreign exchange conversion
**payment made in 2021
Signed at Port Moresby
on behalf of the Board on 30 March 2022
Mr. Isikeli Taureka
Director and Chairman
Mr. Greg Pawson
Managing Director and
Chief Executive Officer
63
Annual Report 2021 64
Deloitte Touche Tohmatsu
Deloitte Haus, Level 9
MacGregor Street
Port Moresby
PO Box 1275 Port Moresby
National Capital District
Papua New Guinea
Tel: +675 308 7000
Fax: +675 308 7001
www.deloitte.com/pg
Deloitte Touche Tohmatsu
ABN 74 490 121 060
Level 23, Riverside Centre
123 Eagle Street
Brisbane, QLD, 4000
Australia
Phone: +61 7 3308 7000
www.deloitte.com.au
IInnddeeppeennddeenntt AAuuddiittoorr’’ss RReeppoorrtt ttoo tthhee sshhaarreehhoollddeerrss ooff
KKiinnaa SSeeccuurriittiieess LLiimmiitteedd
RReeppoorrtt oonn tthhee AAuuddiitt ooff tthhee CCoonnssoolliiddaatteedd FFiinnaanncciiaall SSttaatteemmeennttss
Opinion
We have audited the accompanying consolidated financial statements of Kina Securities Limited (the “Company”)
and its subsidiaries (the “Group”) which comprise the consolidated statement of financial position as at 31
December 2021, the consolidated statement of comprehensive income, the consolidated statement of changes
in equity and the consolidated statement of cash flows for the year then ended, and notes to the consolidated
financial statements, including a summary of significant accounting policies and other explanatory information
and directors’ declaration.
In our opinion, the accompanying consolidated financial statements, give a true and fair view of the Group’s and
the Company’s financial position as at 31 December 2021 and of their financial performance and consolidated
cash flows for the year then ended in accordance with International Financial Reporting Standards and the
requirements of the Companies Act 1997 (amended 2014).
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 Consolidated Financial
Statements section of our report. We are independent of the Group in accordance with the International Ethics
Standards Board for Accountants’ International Code of Ethics for Professional Accountants (including International
Independence Standards) (IESBA Code) together with the ethical requirements that are relevant to our audit of the
financial statements in Papua New Guinea, and we have fulfilled our other ethical responsibilities in accordance
with these requirements and the IESBA Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of
the consolidated financial statements for the current period. These matters were addressed in the context of our
audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt
MMaatttteerr
IImmppaaiirrmmeenntt ooff llooaannss aanndd aaddvvaanncceess
As at 31 December 2021, the Group has
recognised provisions amounting to K38.10m for
impairment losses on loans and advances held at
amortised cost in accordance with the Expected
Credit Loss (ECL) model as disclosed in Note 3.
Loans and advances subject to provisioning
Our audit procedures, in conjunction with our specialists,
included, but were not limited to:
CCoonnttrrooll ddeessiiggnn aanndd iimmpplleemmeennttaattiioonn::
We tested the design and implementation of controls over
the impairment provision including:
•
The accuracy of data input into the system used for
determining the past due status and approval of credit
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
65
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt
MMaatttteerr
judgement was
KKeeyy AAuuddiitt MMaatttteerr
using the ECL model include the residential
lending portfolio, personal loan portfolio and
loan commitments.
using the ECL model include the residential
in
Significant
lending portfolio, personal loan portfolio and
determining the provision for credit impairment
loan commitments.
(including the timing of recognition and the
in
Significant
amount of the provision).
determining the provision for credit impairment
Key areas of the judgement include:
(including the timing of recognition and the
amount of the provision).
•
Key areas of the judgement include:
impairment under
judgement was
involved
involved
impairment under
The application of the requirements to
determine
IFRS 9
Financial Instruments, which is reflected in
The application of the requirements to
the Company’s and the Group’s expected
IFRS 9
determine
credit loss model;
Financial Instruments, which is reflected in
Identification of exposures with a significant
the Company’s and the Group’s expected
movement in credit quality to determine
credit loss model;
whether 12-month or lifetime expected
Identification of exposures with a significant
credit loss should be recognised; and
movement in credit quality to determine
Assumptions used in the expected credit
whether 12-month or lifetime expected
loss model such as the financial condition of
credit loss should be recognised; and
the counterparty, repayment capacity and
Assumptions used in the expected credit
forward-looking macroeconomic factors as
loss model such as the financial condition of
disclosed in Note 3.
the counterparty, repayment capacity and
forward-looking macroeconomic factors as
disclosed in Note 3.
•
•
•
•
•
IImmppaaiirrmmeenntt ooff nnoonn--ccuurrrreenntt aasssseettss
As at 31 December 2021 the Group has
recognised goodwill amounting to K92.7m,
IImmppaaiirrmmeenntt ooff nnoonn--ccuurrrreenntt aasssseettss
arising from the acquisitions of Maybank (PNG)
As at 31 December 2021 the Group has
Limited and Maybank Property (PNG) Limited as
recognised goodwill amounting to K92.7m,
disclosed in Note 38.
arising from the acquisitions of Maybank (PNG)
In accordance with IAS 36 Impairment of Assets,
Limited and Maybank Property (PNG) Limited as
Cash Generating Units (CGUs) including goodwill
disclosed in Note 38.
must be tested for impairment at least annually.
In accordance with IAS 36 Impairment of Assets,
The
significant
Cash Generating Units (CGUs) including goodwill
judgement due to assumptions required in
must be tested for impairment at least annually.
preparing a discounted cash flow model (‘value
significant
impairment
The
in use’), including:
judgement due to assumptions required in
•
Identification of appropriate CGUs to which
preparing a discounted cash flow model (‘value
goodwill is allocated for the purpose of
in use’), including:
impairment testing
Identification of appropriate CGUs to which
goodwill is allocated for the purpose of
impairment testing
impairment
requires
requires
test
test
•
•
•
•
facilities; and
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt
MMaatttteerr
•
The ongoing monitoring and identification of loans
displaying indicators of impairment and whether they
facilities; and
are migrating on timely basis to appropriate default
The ongoing monitoring and identification of loans
stages including generation of days past due reports.
displaying indicators of impairment and whether they
are migrating on timely basis to appropriate default
stages including generation of days past due reports.
AAsssseessssiinngg iimmppaaiirrmmeenntt mmooddeell aaddeeqquuaaccyy::
We assessed the appropriateness of management’s
internally developed model in determining the impairment
AAsssseessssiinngg iimmppaaiirrmmeenntt mmooddeell aaddeeqquuaaccyy::
loss provision. Our procedures included, but were not
We assessed the appropriateness of management’s
limited to:
internally developed model in determining the impairment
•
Assessing whether the impairment model adequately
loss provision. Our procedures included, but were not
addresses the requirements of the relevant accounting
limited to:
standard
Assessing whether the impairment model adequately
Assessing, on a sample basis, the individual exposures
addresses the requirements of the relevant accounting
to determine if they are classified into appropriate
standard
default stages and aging categories for the purpose of
Assessing, on a sample basis, the individual exposures
determining the impairment loss provision
to determine if they are classified into appropriate
Assessing the reasonableness of the assumptions
default stages and aging categories for the purpose of
driving Probabilities of Default (PD), Loss Given Default
determining the impairment loss provision
(LGD) and Exposure at Default (EAD); and
Assessing the reasonableness of the assumptions
Assessing the adequacy of management overlays to
driving Probabilities of Default (PD), Loss Given Default
the modelled collective provision by recalculating the
(LGD) and Exposure at Default (EAD); and
coverage provided by the collective
impairment
Assessing the adequacy of management overlays to
provision (including overlays) to the loan book, taking
the modelled collective provision by recalculating the
into account recent history, performance and de-
coverage provided by the collective
impairment
risking of the relevant portfolios.
provision (including overlays) to the loan book, taking
We also assessed appropriateness of the disclosures in
into account recent history, performance and de-
Note 3 to the consolidated financial statements.
risking of the relevant portfolios.
•
•
•
•
•
We also assessed appropriateness of the disclosures in
In conjunction with our valuation specialists, our
Note 3 to the consolidated financial statements.
procedures included, but were not limited to:
•
•
including
•
Evaluating the appropriateness of management’s
In conjunction with our valuation specialists, our
identification of the Group’s CGUs and testing of
procedures included, but were not limited to:
design and implementation of key controls over the
Evaluating the appropriateness of management’s
the
impairment assessment process,
identification of the Group’s CGUs and testing of
identification of indicators of impairment
design and implementation of key controls over the
Assessing the reasonableness of cash flow projections
the
impairment assessment process,
and growth rates against external economic and
identification of indicators of impairment
financial data, the Group’s own historical performance
Assessing the reasonableness of cash flow projections
and historical forecasting accuracy
and growth rates against external economic and
Assessing the key assumptions and methodology used
financial data, the Group’s own historical performance
by management in the impairment model, in particular
and historical forecasting accuracy
the weighted average cost of capital, the cost of debt
Assessing the key assumptions and methodology used
and the terminal growth rate
by management in the impairment model, in particular
Evaluating the value in use estimate determined by
the weighted average cost of capital, the cost of debt
and the terminal growth rate
including
•
•
•
•
•
Evaluating the value in use estimate determined by
Annual Report 2021 66
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt
MMaatttteerr
•
•
•
Future cash flows for the Cash Generating
Unit (‘CGU’)
management
capitalisation; and
against
the Company’s market
Discount rates; and
Terminal value growth rates.
•
Testing the mathematical accuracy of the impairment
model.
We also assessed the appropriateness of the disclosures in
Note 38 to the consolidated financial statements.
IInnffoorrmmaattiioonn tteecchhnnoollooggyy
Our procedures included, but were not limited to:
IT systems for processing
The Group’s banking operations are heavily
reliant on
large
volumes of transactions as well as automated
calculations supporting both
internal and
external financial reporting. These systems are
vital to the ongoing operations of the business
and to the integrity of the financial reporting
process and as a result, the assessment of IT
systems forms a key component of our audit.
•
•
•
Obtaining understanding of the IT environment and
identification of the key systems relevant to financial
reporting
Testing the design and implementation of IT controls
including but not limited to access administration,
change management and segregation of duties; and
Responding to deficiencies identified by designing and
performing additional procedures which included the
identification and testing of compensating controls
and varying the nature, timing and extent of the
substantive procedures performed.
Other Information
The directors are responsible for the other information. The other information comprises the Directors’ Report,
which we obtained prior to the date of this auditor’s report, and the annual report (but does not include the
consolidated financial statements and our auditor’s report thereon), which is expected to be made available to us
after that date.
Our opinion on the consolidated 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 consolidated 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 consolidated 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 the directors and use our professional
judgement to determine the
appropriate action.
Responsibilities of the Directors for the Consolidated Financial Statements
The directors of the Company are responsible for the preparation of the consolidated financial statements that
give a true and fair view in accordance with International Financial Reporting Standards and the Companies Act
1997 (amended 2014) and for such internal control as the directors determine is necessary to enable the
preparation of the consolidated financial statements that give a true and fair view and are free from material
misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the directors are responsible for assessing the ability of the
Group and the Company 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 Group or the
Company or to cease operations, or has no realistic alternative but to do so.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole
are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with the International Standards on Auditing 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
consolidated financial statements.
As part of an audit in accordance with the International Standards on Auditing, we exercise professional judgement
and maintain professional scepticism throughout the audit. We also:
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the consolidated 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
consolidated 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 consolidated financial statements, including
the disclosures, and whether the consolidated 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. We are responsible
for the direction, supervision and performance of the Group’s audit. We remain solely responsible for our
audit opinion.
We communicate with the directors 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 the directors of the Company with a statement that we have complied with relevant ethical
requirements regarding independence, and to communicate with them all relationships and other matters that
may reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats
or safeguards applied.
67
Annual Report 2021 68
From the matters communicated with the directors, we determine those matters that were of most significance
in the audit of the consolidated financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes 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.
RReeppoorrtt oonn OOtthheerr LLeeggaall aanndd RReegguullaattoorryy RReeqquuiirreemmeennttss
In accordance with section 200 of the Companies Act 1997 (amended 2014), in our opinion:
• We obtained all information and explanations that were required; and
•
Proper accounting records have been kept by the Group and the Company for the year ended
31 December 2021.
Our firm carries out other services for the Group and the Company in the areas of assurance, Information
Technology (IT) and advisory in relation to risk management. The provision for these other services has not
impaired our independence as auditors of the Group and the Company.
The engagement partners on the audit resulting in this independent auditor’s report are Benjamin Lee and David
Rodgers.
DDEELLOOIITTTTEE TTOOUUCCHHEE TTOOHHMMAATTSSUU
DDEELLOOIITTTTEE TTOOUUCCHHEE TTOOHHMMAATTSSUU
BBeennjjaammiinn LLeeee
Partner
Chartered Accountants
Registered under the Accountants Act 1996
DDaavviidd RRooddggeerrss
Partner
Chartered Accountants
Registered Company Auditor in Australia
Port Moresby, 30 March 2022
Brisbane, 30 March 2022
69
Annual Report 2021 70
Statements of
Comprehensive Income.
For the year ended 31 December 2021
Statements of Financial Position.
As at 31 December 2021
Note
Consolidated
Parent
Note
Consolidated
Parent
Interest income
Interest expense
Net interest income
Fee and commission income
Fee and commission expense
Net fee and commission income
Foreign exchange income
Dividend income
Net gains from financial assets at fair value through profit
and loss
Other income
Operating income before impairment losses and other
operating expenses
Expected credit losses on financial instruments at amortised
cost
Administrative and operating expenses
Other one-off expenses
Profit before tax
Income tax expense
z
5
5
6
6
7
15
8
3b
9
31
10
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
206,935
(29,623)
177,312
199,687
(29,964)
169,723
206,842
(29,533)
177,309
89,176
(13,719)
75,457
89,391
(55)
89,336
76,352
(134)
76,218
58,459
(69)
58,390
65,632
562
55,239
136
817
2,510
66,316
50
467
20,960
(122)
20,838
25,772
-
2,666
703
10,968
4,117
25,097
334,362
314,794
306,649
149,830
(6,519)
(22,018)
(6,665)
(11,828)
(194,127)
(27,700)
106,016
(35,206)
(182,870)
-
109,906
(33,932)
(186,127)
(27,700)
86,157
(29,634)
(83,309)
-
54,693
(17,226)
Net profit for the year attributable to the equity holders of
the Company
70,810
75,974
56,523
37,467
Assets
Cash and due from banks
Central bank bills
Regulatory deposits
Financial assets at fair value through profit or loss
Loans and advances to customers
Investments in government inscribed stocks
Due from subsidiaries
Current income tax assets
Deferred tax assets
Investments in subsidiaries
Property, plant and equipment
Goodwill
Intangible assets
Other assets
Liabilities
Due to other banks
Due to customers
Current income tax liabilities
Due to subsidiaries
Employee provisions
Lease Liabilities
Other liabilities
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
408,334
795,362
212,874
11,652
1,950,447
112,107
-
31
16,988
-
90,467
92,786
48,663
45,947
3,785,658
4,701
3,036,921
11,697
-
10,906
48,851
95,959
3,209,035
335,147
647,874
185,711
10,682
1,614,731
114,519
-
83
16,482
-
86,274
92,786
49,449
145,813
3,299,551
5,385
2,560,715
4,966
-
11,538
47,342
92,571
2,722,517
366,302
795,362
212,874
6,771
1,944,273
112,107
65,518
-
16,474
248
90,467
92,786
48,364
42,393
3,793,939
4,701
3,079,454
11,493
9,612
9,802
48,851
94,917
3,258,830
361,614
647,874
185,711
6,151
1,609,969
114,519
1,387
-
15,956
248
86,274
92,786
49,150
145,204
3,316,843
5,385
2,599,474
3,761
8,988
10,593
47,342
91,493
2,767,036
12
13
14
15
16
17
29
23
11
18
19
38
20
21
22
23
29
24
25
26
Other comprehensive income
-
-
-
-
Net assets
576,623
577,034
535,109
549,807
Total comprehensive income for the year attributable to the
equity holders of the Company
70,810
75,974
56,523
37,467
Earnings per share – basic (toea)
Earnings per share – diluted (toea)
27 b
27 b
2021
24.68
24.39
2020
37.25
37.06
The notes on pages 75 to 130 are an integral part of these consolidated financial statements.
Shareholders’ equity
Issued and fully paid ordinary shares
Share-based payment reserve
Retained earnings
27 a
27 c
394,693
3,587
178,343
394,693
2,774
179,567
394,693
3,587
136,829
394,693
2,774
152,340
Total equity
576,623
577,034
535,109
549,807
The notes on pages 75 to 130 are an integral part of these consolidated financial statements.
These financial statements have been approved for issue by the Board of Directors and signed on its behalf by:
71
Annual Report 2021 72
Mr Isikeli Taureka
Director and Chairman
Mr Greg Pawson
Managing Director and Chief Executive Officer
Statements of Changes in Equity.
For the year ended 31 December 2021
Statements of Cash Flows.
For the year ended 31 December 2021
Consolidated
Attributable to the equity holders of the Group
Balance as at 31 December 2019
Profit for the year
Other comprehensive income
Additional shares issued
Employee share scheme – vested rights
Employee share scheme – value of employee services
Dividend paid
Balance as at 31 December 2020
Profit for the year
Other comprehensive income
Additional shares issued
Employee share scheme – vested rights
Employee share scheme – value of employee services
Dividend paid
Balance as at 31 December 2021
Share
Capital
Share-Based
Payment Reserve
PGK ‘000
176,970
-
-
217,723
-
-
-
394,693
-
-
-
-
-
-
394,693
PGK ‘000
2,063
-
-
-
(2,297)
3,008
-
2,774
-
-
-
(3,476)
4,289
-
3,587
Retained
Earnings
PGK ‘000
148,243
75,974
-
-
-
-
(44,650)
179,567
70,810
-
-
-
-
(72,034)
178,343
Parent
Attributable to the equity holders of the Parent
Balance as at 31 December 2019
Profit for the year
Additional shares issued
Other comprehensive income
Employee share scheme – vested rights
Employee share scheme – value of employee services
Amalgamation adjustment
Dividend paid
Balance as at 31 December 2020
Profit for the year
Additional shares issued
Other comprehensive income
Employee share scheme – vested rights
Employee share scheme – value of employee services
Dividend paid
Share
Capital
Share-Based
Payment Reserve
Retained
Earnings
PGK ‘000
176,970
-
217,723
-
-
-
-
-
394,693
-
-
-
-
-
-
PGK ‘000
2,063
-
-
-
(2,297)
3,008
-
-
2,774
-
-
-
(3,476)
4,289
-
PGK ‘000
52,029
37,467
-
-
-
-
107,494
(44,650)
152,340
56,523
-
-
-
-
(72,034)
Balance as at 31 December 2021
394,693
3,587
136,829
Total
PGK ‘000
327,276
75,974
-
217,723
(2,297)
3,008
(44,650)
577,034
70,810
-
-
(3,476)
4,289
(72,034)
576,623
Total
PGK ‘000
231,062
37,467
217,723
-
(2,297)
3,008
107,494
(44,650)
549,807
56,523
-
-
(3,476)
4,289
(72,034)
535,109
Cash flows from operating activities
Interest received
Interest paid
Foreign exchange gain
Dividend received
Fee and commission income received
Fee and commission expense paid
Net trading and other operating income
Recoveries on loans previously written off
Support fees charged from subsidiaries
Cash payments to employees and suppliers
Income tax paid
Cash flows from operating profits before changes in operating
assets and liabilities
Changes in operating assets and liabilities:
- net (increase)/decrease in regulatory deposits
- net increase in loans and advances to customers
- net decrease/(increase) in other assets
- net increase in due to customers
- net (decrease)/increase due to other banks
- net (decrease)/increase in other liabilities
Net cash inflow/(outflow) generated from/(used in)
operating activities
Cash flows from investing activities
Purchase of property, equipment and software
Proceeds from sale of property and equipment
Cash acquired on amalgamation
Net movement in investment securities
Other one-off expenses
Refund of deposit from Westpac
Net cash inflow/(outflow) generated from/(used in)
investing activities
Cash flows from financing activities
Dividend paid
Proceeds on issuance of shares
Net cash inflow/(outflow) generated from/(used) in
financing activities
Net increase in cash and cash equivalents
Effect of exchange rate movements on cash and cash
equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
206,779
(33,943)
65,632
562
87,978
(55)
1,415
1,750
-
(179,188)
(28,918)
202,364
(27,376)
55,239
136
78,271
(134)
13,256
1,943
-
(169,183)
(36,195)
206,686
(33,853)
66,316
50
58,459
(69)
2,588
1,750
1,890
(239,076)
(22,419)
85,218
(3,704)
25,772
-
20,960
(123)
25,791
1,943
1,751
(32,784)
(32,394)
122,012
118,321
42,322
92,430
(27,163)
(336,052)
14,904
476,206
(684)
(2,201)
64,002
(217,160)
(82,487)
99,748
4,814
(60,110)
(27,163)
(336,053)
17,850
479,979
(684)
(2,164)
(14,687)
(138,215)
(111,488)
51,011
5,364
1,025
28c
247,022
(72,872)
174,087
(114,560)
(28,431)
148
-
(50,494)
(8,407)
84,567
(22,924)
264
-
52,355
-
-
(28,431)
148
-
(50,144)
(8,407)
84,567
(22,924)
264
243,321
103,088
-
-
(2,617)
29,695
(2,267)
323,749
31
32
(72,034)
-
(44,650)
217,723
(72,034)
-
(44,650)
217,723
(72,034)
173,073
(72,034)
173,073
172,371
129,896
99,786
382,262
(4,184)
400,147
568,334
549
(98)
515
269,702
400,147
426,614
526,302
43,837
426,614
28a
The notes on pages 75 to 130 are an integral part of these consolidated financial statements.
The notes on pages 75 to 130 are an integral part of these consolidated financial statements.
73
Annual Report 2021 74
Notes to the Financial Statements.
For the year ended 31 December 2021
1. Summary of significant accounting policies
1.1 General information
The Company and its subsidiaries are incorporated in Papua New Guinea. The Group’s business activities include the
provision of banking services, personal and commercial loans, money market operations, provision of share brokerage,
fund administration, investment management services, asset financing, and corporate advice.
Effective 9 July 2020, Kina Securities Limited amalgamated with Kina Bank Limited (KBL), Kina Ventures Limited (KVL) and
Kina Properties Limited (KPL) and is now known as Kina Securities Limited.
1.2 Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with International Financial Reporting
Standards (IFRS) and the requirements of the Papua New Guinea Companies Act 1997.
The consolidated financial statements as at and for the year ended 31 December 2021 were authorised for issue by the
Board of Directors on 30 March 2022.
The consolidated financial statements have been prepared on a historical cost basis, except for the revaluation of certain
financial instruments at fair value. Cost is based on the fair values of the consideration given in exchange for assets.
1.3 Amendments to IFRSs that are mandatorily effective for the current reporting period
New and revised Standards and amendments thereof effective for the current financial year, and which have been applied in
the preparation of these financial statements, that are relevant to the Group include the:
• impact of the initial application of Interest Rate Benchmark Reform
• impact of the initial application of COVID-19-Related Rent Concessions beyond 30 June 2021—Amendment to IFRS 16
Impact of the initial application of Interest Rate Benchmark Reform
The Group has adopted the Phase 2 amendments Interest Rate Benchmark Reform—Amendments to IFRS 9, IAS 39, IFRS
7, IFRS 4 and IFRS 16. Adopting these amendments enables the Group to reflect the effects of transitioning from interbank
offered rates (IBOR) to alternative benchmark interest rates (also referred to as ‘risk-free rates’ or RFRs) without giving rise to
accounting impacts that would not provide useful information to users of financial statements. The Group has not restated
the prior period. Instead, the amendments have been applied retrospectively with any adjustments recognised in the
appropriate components of equity as at 1 January 2021. The Group determined that there is no material impact.
Impact of the initial application of COVID-19-Related Rent Concessions beyond 30 June 2021—
Amendment to IFRS 16
The Group has applied the amendment to IFRS 16 (as issued by the Board in May 2021) that extends practical expedient to
apply to reduction in lease payments originally due on or before 30 June 2022. The practical expedient permits a lessee to
elect not to assess whether a COVID-19-related rent concession is a lease modification. A lessee that makes this election shall
account for any change in lease payments resulting from the COVID-19-related rent concession applying IFRS 16 as if the
change were not a lease modification.
The practical expedient applies only to rent concessions occurring as a direct consequence of COVID-19 and only if all of the
following conditions are met:
• the change in lease payments results in revised consideration for the lease that is substantially the same as, or less
than, the consideration for the lease immediately preceding the change
• any reduction in lease payments affects only payments originally due on or before 30 June 2022 (a rent concession
meets this condition if it results in reduced lease payments on or before 30 June 2022 and increased lease payments that
extend beyond 30 June 2022)
• there is no substantive change to other terms and conditions of the lease.
The Group determined that there is no material impact.
1.4 New and revised IFRS standards in issue but not yet effective
At the date of authorisation of these financial statements, the Group has not applied the following revised IFRS standards
that have been issued but are not yet effective:
IFRS 17 (including the June 2020 amendments to IFRS 17)
Insurance Contracts
Amendments to IFRS 10 and IAS 28
Amendments to IAS 1
Amendments to IFRS 3
Amendments to IAS 16
Amendments to IAS 37
Annual Improvements to IFRS Standards 2018-2020 Cycle
Amendments to IAS 1 and IFRS Practice Statement 2
Amendments to IAS 8
Amendments to IAS 12
Sale or Contribution of Assets between an Investor and its Associate
or Joint Venture
Classification of Liabilities as Current or Non-current
Reference to the Conceptual Framework
Property, Plant and Equipment—Proceeds before Intended Use
Onerous Contracts—Cost of Fulfilling a Contract
Amendments to IFRS 1 First-time Adoption of International Financial
Reporting Standards, IFRS 9 Financial Instruments, IFRS 16 Leases,
and IAS 41 Agriculture
Disclosure of Accounting Policies
Definition of Accounting Estimates
Deferred Tax related to Assets and Liabilities arising from a Single
Transaction
The directors do not expect that the adoption of the Standards listed above will have material impact on the financial
statements of the Group in the future period.
1.5 Basis of consolidation
The consolidated financial statements incorporate the financial statements of the Company and its controlled entities (its
subsidiaries) made up to 31 December each year. Control is achieved when the Company:
• has the power over the investee;
• is exposed, or has rights, to variable returns from its involvement with the investee; and
• has the ability to use its power to affect its returns.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are changes to
one or more of the three elements of control listed above. When the Group has less than a majority of the voting rights of an
investee, it considers that it has power over the investee when the voting rights are sufficient to give it the practical ability to
direct the relevant activities of the investee unilaterally. The Group considers all relevant facts and circumstances in assessing
whether or not the Group’s voting rights in an investee are sufficient to give it power, including:
• the size of the Group’s holding of voting rights relative to the size and dispersion of holdings of the other vote holders;
• potential voting rights held by the Group, other vote holders or other parties;
• rights arising from other contractual arrangements; and
• any additional facts and circumstances that indicate that the Group has, or does not have, the current ability to
direct the relevant activities at the time that decisions need to be made, including voting patterns at previous
shareholders’ meetings.
Consolidation of a subsidiary begins when the Group obtains control over the subsidiary and ceases when the Group loses
control of the subsidiary. Specifically, the results of subsidiaries acquired or disposed of during the year are included in the
consolidated profit or loss account from the date the Group gains control until the date when the Group ceases to control
the subsidiary.
Profit or loss and each component of OCI (other comprehensive income) are attributed to the owners of the Group and to
the non-controlling interests (NCI), if any. Total comprehensive income of the subsidiaries is attributed to the owners of the
Group and to the NCI even if this results in the NCI having a deficit balance.
Where necessary, adjustments are made to the financial statements of subsidiaries to bring the accounting policies used
into line with the Group’s accounting policies. All intragroup assets and liabilities, equity, income, expenses and cash flows
relating to transactions between the members of the Group are eliminated on consolidation, with the exception of foreign
currency gains and losses on intragroup monetary items denominated in a foreign currency of at least one of the parties.
1.6 Segment reporting
Operating segments are presented on a basis that is consistent with information provided internally to the Group’s key
decision-makers. The chief operating decision-maker, who is responsible for allocating resources and assessing performance
of the operating segments, has been identified as the Chief Executive Officer. The Group has two reportable segments,
which are the two business divisions – Bank and Wealth Management.
75
Annual Report 2021 76
1. Summary of significant accounting policies (continued)
1. Summary of significant accounting policies (continued)
1.7 Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the functional currency). The consolidated financial statements are
presented in Kina, which is the Company’s and the Group’s functional and presentation currency.
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the
translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
the statement of comprehensive income.
1.8 Interest income and interest expense
Interest income and expense for all financial instruments except for those classified as held for trading or those measured
or designated as at fair value through profit and loss (FVTPL) are recognised as ‘Interest income’ or ‘Interest expense’ in the
profit or loss account using the effective interest method.
The effective interest rate (EIR) is the rate that exactly discounts estimated future cash flows of the financial instrument through
the expected life of the financial instrument or, where appropriate, a shorter period, to the net carrying amount of the financial
asset or financial liability. The future cash flows are estimated taking into account all the contractual terms of the instrument.
The calculation of the EIR includes all fees and points paid or received between parties to the contract that are incremental
and directly attributable to the specific lending arrangement, transaction costs, and all other premiums or discounts. For
financial assets at FVTPL transaction costs are recognised in profit or loss at initial recognition.
The interest income/expense is calculated by applying the EIR to the gross carrying amount of non-credit impaired financial
assets (i.e. at the amortised cost of the financial asset before adjusting for any expected credit loss allowance), or to the
amortised cost of financial liabilities. For credit-impaired financial assets the interest income is calculated by applying the EIR
to the amortised cost of the credit-impaired financial assets (i.e. the gross carrying amount less the
allowance for expected credit losses (ECLs)). For financial assets originated or purchased credit-impaired (POCI) the EIR
reflects the ECLs in determining the future cash flows expected to be received from the financial asset.
1.9 Fee and commission income
The Group recognises fee and commission income from following major services it provides to customers;
• investment and portfolio management - The Group manages investments for a number of superannuation funds
and corporate clients. These services are provided by the Group on monthly basis and therefore billed accordingly.
Revenue is recognised as and when the bill is raised i.e. when performance obligation is satisfied.
• fund administration - The Group earns a fee through administration of funds for its customers based on the fee rates
agreed under the terms of the contract. The services are billed to customers on monthly basis at which point revenue is
recognised, i.e. at the time when performance obligation is satisfied.
To assess whether a contract conveys the right to control the use of an identified asset, the Group assesses whether:
• the contract involves the use of an identified asset – this may be specified explicitly or implicitly and should be
physically distinct or represent substantially all of the capacity of a physically distinct asset. If the supplier has a
substantive substitution right, then the asset is not identified;
• the Group has the right to obtain substantially all of the economic benefits from use of the asset throughout the
period of use; and
• the Group has the right to direct the use of the asset. The Group has this right when it has the decision-making rights
that are most relevant to changing how and for what purpose the asset is used. In rare cases where the decision about
how and for what purpose the asset is used is predetermined, the Group has the right to direct the use of the asset if
either:
– the Group has the right to operate the asset; or
– the Group designed the asset in a way that predetermines how and for what purpose it will be used.
At inception or on reassessment of a contract that contains a lease component, the Group allocates the consideration in
the contract to each lease component on the basis of their relative stand-alone prices. However, for the leases of land and
buildings in which it is a lessee, the Group has elected not to separate non-lease components and account for the lease and
non-lease components as a single lease component.
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is
initially measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at
or before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove
the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the
earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-
of-use assets are determined on the same basis as those of property and equipment. In addition, the right-of-use asset is
periodically reduced by impairment losses, if any, and adjusted for certain re-measurements of the lease liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement
date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, at the Group’s
incremental borrowing rate.
Lease payments included in the measurement of the lease liability comprise the following:
• fixed payments, including in-substance fixed payments, less any lease incentive receivable;
• variable lease payments that depend on an index or a rate, initially measured using the index or rate as at the
commencement date;
• the amount expected to be payable under a residual value guarantee, if any; and
• share brokerage - The Group generates share brokerage from trading services for customers on Port Moresby Stock
Exchange (‘PNGX’) and Australian Stock Exchange (‘ASX’). Revenue is recognised upon settlement of the trade which is
commensurate with when the performance obligation is satisfied.
• the exercise price, if any, under a purchase option that the Group is reasonably certain to exercise, lease payments in
an optional renewal period if the Group is reasonably certain to exercise an extension option, and penalties for early
termination of a lease unless the Group is reasonably certain not to terminate early.
• loan fee and bank commission - The Group charges various loan fee and commissions to its customers during the
tenure of the loan unrelated to establishment of the loan facility. Revenue is recognised when services promised under
the contract are rendered and performance obligations are satisfied.
The lease liability is re-measured when there is a change in future lease payments arising from a change in an index or rate,
if there is a change in the Group’s estimate of the amount expected to be payable under a residual value guarantee, or if the
Group changes its assessment of whether it will exercise a purchase, extension or termination option.
• digital banking fees – The Group increases the services it provides through digital access solutions giving customers
convenient ways to do transactions. The services include online banking, utility top ups, cashless transactions using
payment platforms and card transactions.
1.10 Leases
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease
if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration.
A right-of-use asset and a corresponding lease liability is recognised with respect to all lease arrangements in which it is
the lessee, except for short-term leases (defined as leases with a lease term of 12 months or less) and leases of low value
assets (such as tablets and personal computers, small items of office furniture and telephones). For these leases, the Group
recognises the lease payments as an operating expense on a straight-line basis over the term of the lease unless another
systematic basis is more representative of the time pattern in which economic benefits from the leased assets are consumed.
When the lease liability is re-measured in this way, a corresponding adjustment is made to the carrying amount of the right-of-
use asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
Short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for all short-term leases that have a lease term
of 12 months or less. The Group recognises the lease payments associated with these leases as an expense on a straight-line
basis over the lease term.
1.11 Taxation
The income tax expense or credit for the period is the tax payable on the current period’s taxable income based on the
applicable income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences
and to unused tax losses.
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Annual Report 2021 78
1. Summary of significant accounting policies (continued)
1.11 Taxation (continued)
The current income tax charge is calculated on the basis of the tax laws enacted or substantively enacted at the end of the
reporting period in the country where the Company and its subsidiaries operate and generate taxable income. Management
periodically evaluates positions taken in tax returns with respect to situations in which applicable tax regulation is subject to
interpretation. It establishes provisions where appropriate on the basis of amounts expected to be paid to the tax authority.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases
of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred tax liabilities
are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it
arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit and loss. Deferred income tax is determined using tax rate (and law)
that have been enacted or substantially enacted by the end of the reporting period and are expected to apply when the
related deferred income tax asset is realised or the deferred income tax liability is settled.
The deferred tax liability in relation to investment property that is measured at fair value is determined assuming the property
will be recovered entirely through sale.
Deferred tax assets are recognised only if it is probable that future taxable amounts will be available to utilise those
temporary differences and losses.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets and liabilities
and when the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities
are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the
asset and settle the liability simultaneously.
Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other
comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly
in equity, respectively.
1.12 Business combinations
The acquisition method of accounting is used to account for all business combinations, regardless of whether equity
instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises
the following:
• fair values of the assets transferred;
• liabilities incurred to the former owners of the acquired business;
• equity interests issued by the Group;
• fair value of any asset or liability resulting from a contingent consideration arrangement; and
• fair value of any pre-existing equity interest in the subsidiary.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited
exceptions, measured initially at their fair values at the acquisition date. The group recognises any non-controlling interest in
the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest’s proportionate
share of the acquired entity’s net identifiable assets. Acquisition-related costs are expensed as incurred.
The excess of the following is considered as goodwill:
• consideration transferred;
• amount of any non-controlling interest in the acquired entity; and
• acquisition date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable
assets acquired if those amounts are less than the fair value of the net identifiable assets of the subsidiary acquired, the
difference is recognised directly in profit or loss as a bargain purchase.
Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their
present value as at the date of exchange. The discount rate used is the entity’s incremental borrowing rate, being the rate at
which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.
Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are
subsequently re-measured to fair value with changes in fair value recognised in profit or loss.
If the business combination is achieved in stages, the acquisition date carrying value of the acquirer’s previously held equity
interest in the acquire is re-measured to fair value at the acquisition date. Any gains or losses arising from such
re-measurement are recognised in profit or loss.
1.13 Cash and cash equivalents
For the purpose of presentation in the statement of cash flows, cash and cash equivalents includes cash on hand, deposits
held at call with financial institutions, other short-term, highly liquid investments with original maturities of three months or
less from date of acquisition that are readily convertible to known amounts of cash and which are subject to an insignificant
risk of changes in value, and bank overdrafts.
1.14 Financial instruments
Financial assets and financial liabilities are recognised in the Group’s statement of financial position when the Group
becomes a party to the contractual provisions of the instrument.
Recognised financial assets and financial liabilities are initially measured at fair value. Transaction costs that are directly
attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and
financial liabilities at FVTPL) are added to or deducted from the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial
liabilities at FVTPL are recognised immediately in profit or loss.
Financial assets
All financial assets are recognised and de-recognised on a trade date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the financial asset within the timeframe established by the market concerned, and are
initially measured at fair value, plus transaction costs, except for those financial assets classified as at FVTPL.
Transaction costs directly attributable to the acquisition of financial assets classified as at FVTPL are recognised immediately
in profit or loss.
All recognised financial assets that are within the scope of IFRS 9 are required to be subsequently measured at amortised
cost or fair value on the basis of the entity’s business model for managing the financial assets and the contractual cash flow
characteristics of the financial assets.
Specifically:
• debt instruments that are held within a business model whose objective is to collect the contractual cash flows, and
that have contractual cash flows that are solely payments of principal and interest on the principal amount outstanding
(SPPI), are subsequently measured at amortised cost
• debt instruments that are held within a business model whose objective is both to collect the contractual cash flows
and to sell the debt instruments, and that have contractual cash flows that are SPPI, are subsequently measured at fair
value through other comprehensive income (FVTOCI)
• all other debt instruments (e.g. debt instruments managed on a fair value basis, or held for sale) and equity investments
are subsequently measured at FVTPL.
Debt instruments at amortised cost or at FVTOCI
The Group assesses the classification and measurement of a financial asset based on the contractual cash flow characteristics
of the asset and the Group’s business model for managing the asset. The Group classifies and measures at amortised cost
or at FVTOCI, assets where contractual terms give rise to cash flows that are solely payments of principal and interest on the
principal outstanding (SPPI).
For the purpose of SPPI test, principal is the fair value of the financial asset at initial recognition. That principal amount may
change over the life of the financial asset (e.g. if there are repayments of principal). Interest consists of consideration for the
time value of money, for the credit risk associated with the principal amount outstanding during a particular period of time
and for other basic lending risks and costs, as well as a profit margin. The SPPI assessment is made in the currency in which
the financial asset is denominated.
An assessment of business models for managing financial assets is fundamental to the classification of a financial asset.
The Group determines the business models at a level that reflects how groups of financial assets are managed together to
achieve a particular business objective. The Group’s business model does not depend on management’s intentions for an
individual instrument, therefore the business model assessment is performed at a higher level of aggregation rather than on
an instrument-by-instrument basis.
At initial recognition of a financial asset, the Group determines whether newly recognised financial assets are part of an
existing business model or whether they reflect the commencement of a new business model. The Group reassess its business
models each reporting period to determine whether the business models have changed since the preceding period.
79
Annual Report 2021 80
1. Summary of significant accounting policies (continued)
1.14 Financial instruments (continued)
Financial assets at FVTPL
Financial assets at FVTPL are:
• assets with contractual cash flows that are not SPPI; or/and
The Group considers the following as constituting an event of default:
• the borrower is past due more than a specified number of days depending upon the type of loan arrangement on any
material credit obligation to the Group; or
• assets that are held in a business model other than held to collect contractual cash flows or held to collect and sell; or
• the borrower is unlikely to pay its credit obligations to the Group in full.
• assets designated at FVTPL using the fair value option.
These assets are measured at fair value, with any gains/losses arising on re-measurement recognised in profit or loss.
Reclassification
If the business model under which the Group holds financial assets changes, the financial assets affected are reclassified.
The classification and measurement requirements related to the new category apply prospectively from the first day of the
first reporting period following the change in business model that results in reclassifying the Group’s financial assets. During
the current financial year there was no change in the business model under which the Group holds financial assets and
therefore no reclassifications were made. Changes in contractual cash flows are considered under the accounting policy on
Modification and de-recognition of financial assets described below.
Impairment
The Group measures and recognises loss allowances for ECLs on the following financial instruments that are not measured
at FVTPL:
• loans and advances
• investment in government inscribed stocks
• other financial assets
• loan commitments issued; and
• financial guarantee contracts issued.
ECLs are required to be measured through a loss allowance at an amount equal to:
• 12-month ECL, i.e. lifetime ECL that result from those default events on the financial instrument that are possible within
12 months after the reporting date, (referred to as Stage 1); or
• full lifetime ECL, i.e. lifetime ECL that result from all possible default events over the life of the financial instrument,
(referred to as Stage 2 and Stage 3).
A loss allowance for full lifetime ECL is required for a financial instrument if the credit risk on that financial instrument has
increased significantly since initial recognition. For all other financial instruments, ECLs are measured at an amount equal
to the 12-month ECL. More details on the determination of a significant increase in credit risk and determination of ECL are
provided in note 3.
Significant increase in credit risk
The Group monitors all financial assets, issued loan commitments and financial guarantee contracts that are subject to the
impairment requirements to assess whether there has been a significant increase in credit risk since initial recognition. If
there has been a significant increase in credit risk the Group will measure the loss allowance based on lifetime rather than
12-month ECL.
The Group’s accounting policy is not to use the practical expedient that financial assets with ‘low’ credit risk at the reporting
date are deemed not to have had a significant increase in credit risk. As a result, the Group monitors all financial assets, issued
loan commitments and financial guarantee contracts that are subject to impairment for significant increase in credit risk.
In assessing whether the credit risk on a financial instrument has increased significantly since initial recognition, the Group
compares the risk of a default occurring on the financial instrument at the reporting date with the risk of a default occurring
that was anticipated when the financial instrument was first recognised. In making this assessment, the Group
considers both quantitative and qualitative information that is reasonable and supportable. Irrespective of the outcome
of the this assessment, the Group presumes that the credit risk on a financial asset has increased significantly since initial
recognition when contractual payments are more than 30 days past due, unless the Group has reasonable and supportable
information that demonstrates otherwise.
Definition of default
The definition of default is used in measuring the amount of ECL and in the determination of whether the loss allowance
is based on 12-month or lifetime ECL, as default is a component of the probability of default (PD) which affects both the
measurement of ECLs and the identification of a significant increase in credit risk (see note 3).
Irrespective of the above analysis, the Group considers that default has occurred when a financial asset is more than 90 days
past due unless the Group has reasonable and supportable information to demonstrate that a more lagging default criterion
is more appropriate.
Credit impaired financial assets
A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the recovery of the financial
asset have occurred. Credit-impaired financial assets are referred to as Stage 3 assets. Evidence of credit-impairment
includes observable data about the following events:
• significant financial difficulty of the borrower or issuer
• a breach of contract such as a default or past due event
• the lender of the borrower, for economic or contractual reasons relating to the borrower’s financial difficulty, having
granted to the borrower a concession that the lender would not otherwise consider
• the disappearance of an active market for a security because of financial difficulties
• the purchase of a financial asset at a deep discount that reflects the incurred credit losses; or
• the facility is overdue by more than specified number of days.
The Group assesses whether debt instruments that are financial assets measured at amortised cost are credit-impaired at
each reporting date. To assess if sovereign and corporate debt instruments are credit impaired, the Group considers factors
such as bond yields, credit ratings and the ability of the borrower to raise funding.
A loan is considered credit-impaired when a concession is granted to the borrower due to a deterioration in the borrower’s
financial condition, unless there is evidence that as a result of granting the concession the risk of not receiving the contractual
cash flows has reduced significantly and there are no other indicators of impairment. For financial assets where concessions
are contemplated but not granted the asset is deemed credit impaired when there is observable evidence of credit-
impairment including meeting the definition of default.
Write-off
Loans and debt securities are written off when the Group has no reasonable expectations of recovering the financial asset
(either in its entirety or a portion of it). This is the case when the Group determines that the borrower does not have assets
or sources of income that could generate sufficient cash flows to repay the amounts subject to the write-off. A write-off
constitutes a de-recognition event. The Group may apply enforcement activities to financial assets written off. Recoveries
resulting from the Group’s enforcement activities will result in impairment gains.
Presentation of allowance for ECL in the statement of financial position
Loss allowances for ECL are presented in the statement of financial position as follows:
• for financial assets measured at amortised cost: as a deduction from the gross carrying amount of the assets
• for loan commitments and financial guarantee contracts: as a provision; and
• where a financial instrument includes both a drawn and an undrawn component, and the Group cannot identify the
ECL on the loan commitment component separately from those on the drawn component: the Group presents a
combined loss allowance for both components. The combined amount is presented as a deduction from the gross
carrying amount of the drawn component. Any excess of the loss allowance over the gross amount of the drawn
component is presented as a provision.
Financial liabilities
A financial liability is a contractual obligation to deliver cash or another financial asset or to exchange financial assets or
financial liabilities with another entity under conditions that are potentially unfavourable to the Group or a contract that will
or may be settled in the Group’s own equity instruments and is a non-derivative contract for which the Group is or may be
obliged to deliver a variable number of its own equity instruments, or a derivative contract over own equity that will or may
be settled other than by the exchange of a fixed amount of cash (or another financial asset) for a fixed number of the Group’s
own equity instruments.
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Annual Report 2021 82
1. Summary of significant accounting policies (continued)
1.14 Financial instruments (continued)
Financial liabilities are classified as ‘other financial liabilities’ as the Group does not have any financial liabilities that are
classified or designated as at FVTPL.
Other financial liabilities
Other financial liabilities, including deposits and borrowings, are initially measured at fair value, net of transaction costs.
Other financial liabilities are subsequently measured at amortised cost using the effective interest method.
The effective interest method is a method of calculating the amortised cost of a financial liability and of allocating interest
expense over the relevant period. The EIR is the rate that exactly discounts estimated future cash payments through the
expected life of the financial liability, or, where appropriate, a shorter period, to the net carrying amount on initial recognition.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only when, the Group’s obligations are discharged, cancelled or have
expired. The difference between the carrying amount of the financial liability derecognised and the consideration paid and
payable is recognised in profit or loss.
When the Group exchanges with the existing lender one debt instrument into another one with substantially different
terms, such exchange is accounted for as an extinguishment of the original financial liability and the recognition of a new
financial liability. Similarly, the Group accounts for substantial modification of terms of an existing liability or part of it as an
extinguishment of the original financial liability and the recognition of a new liability.
Financial guarantee contracts
A financial guarantee contract is a contract that requires 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.
Financial guarantee contracts issued by a group entity are initially measured at their fair values and, if not designated as at
FVTPL and not arising from a transfer of a financial asset, are subsequently measured at the higher of:
• the amount of the loss allowance determined in accordance with IFRS 9; and
• the amount initially recognised less, where appropriate, cumulative amount of income recognised in accordance with
the Group’s revenue recognition policies.
Financial guarantee contracts not designated at FVTPL are presented as provisions on the consolidated statement of
financial position and the remeasurement is presented in other revenue.
The Group has not designated any financial guarantee contracts as at FVTPL.
1.15 Property, plant and equipment
Property, plant and equipment is stated at historical cost less accumulated depreciation. Depreciation is calculated on the
basis of straight line to write-off the cost of such assets to their residual values over their estimated lives as follows:
Furniture and fittings
Building improvements
Motor vehicles
Office equipment
11.25% to 15%
10%
30%
15% to 30%
The assets’ residual values and useful lives are reviewed, and adjusted, if appropriate at each balance date. Gains and losses
on disposal (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. Repairs and maintenance costs are charged to statement of
comprehensive income, when the expenditure is incurred.
1.16 Intangible assets and other non-financial assets
Goodwill
Goodwill is measured as described in note 38 Goodwill having an indefinite useful life is not amortized but it is tested for
impairment annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is
carried at cost less accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount
of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing.
The allocation is made to those cash-generating units or groups of cash-generating units that are expected to benefit from
the business combination in which the goodwill arose. The units or groups of units are identified at the lowest level at which
goodwill is monitored for internal management purposes, being the operating segments.
Other non-financial assets
Other assets are tested for impairment whenever events or changes in circumstances indicate that the carrying amount
may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its
recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs of disposal and value in use. For
the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from other assets or groups of assets cash-generating units (CGU).
Non-financial assets other than goodwill that suffered impairment are reviewed for possible reversal of the impairment at the
end of each reporting period.
Customer deposits relationship / intangible
A customer deposit relationship asset was recognised with the acquisition of Maybank (PNG) Limited in 2015. Also, the
acquisition of Australian and New Zealand (ANZ) Bank’s retail, commercial and SME banking businesses in PNG on 23
September 2019 gave rise to the recognition of core customer deposit intangible (note 20), representing the value, or
avoided cost, of having a deposit base from consumer and business transaction accounts, savings accounts, term deposits
and other money market accounts that provide a cheaper source of funding than alternative sources of funding. Customer
deposit relationship is amortized using the straight-line method over a period of five years and three years on the Maybank
and ANZ acquisition respectively, and is stated at cost less accumulated amortization and impairment. Customer deposit
relationship is also assessed for any indication of impairment at each reporting date and whenever there is an indicator that
these maybe impaired.
Software
Costs associated with maintaining computer software programs are recognized as an expense as incurred. Costs that are
directly associated with identifiable and unique software products controlled by the Group that will probably generate
economic benefits exceeding costs beyond one year are recognised as intangible assets. Direct costs include staff costs of
the software development team and an appropriate portion of relevant overheads. Expenditure which enhances or extends
the performance of computer software programs beyond their original specifications is recognised as a capital improvement
and added to the original cost of the software. Computer software development costs recognised as assets are amortised
using the straight-line method over their useful lives, not exceeding a period of five years.
1.17 Provisions
Provisions are recognised when the Group has a present legal or constructive obligation as a result of past events, it is
probable that outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable
estimate of the amount of the obligations can be made.
1.18 Employee benefits
Short-term obligations
Provision is made for benefits accruing to employees in respect of annual leave and other short term obligations when it is
probable that settlement will be required and they are capable of being measured reliably.
Provisions made in respect of employee benefits expected to be settled within twelve months, are measured at their nominal
values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of employee
benefits which are not expected to be settled within twelve months are measured as the present value of the estimated
future cash outflows to be made by the Group in respect of services provided by employees up to reporting date.
The contributions in relation to employees of the Group who contribute to defined contribution pension plans are charged
to the statement of comprehensive income in the year to which they relate.
Share-based payments
Senior executive employees are entitled to participate in a share ownership incentive scheme. The fair value of share rights
provided to senior executive employees as share-based payments is recognised as an expense with a corresponding
increase in equity. The fair value is measured at grant date and is recognised over the period the services are received being
the expected vesting period at the end of which the senior executive employees would become entitled to exercise their
share rights. The fair value of the share based payments is based on the market price of the shares at grant date and market
vesting conditions upon which the rights were granted. Non-market vesting conditions are taken into account by adjusting
the number of rights which will eventually vest.
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Annual Report 2021 84
1. Summary of significant accounting policies (continued)
1.18 Employee benefits (continued)
Cash bonus
The Group recognizes a liability and an expense for bonuses based on a formula that takes into consideration the profit
attributable to the Company’s shareholders after certain adjustments. The Group recognizes a provision where contractually
obliged or where there is a past practice that has created a constructive obligation.
1.19 Share capital and other equity accounts
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Dividends
Dividends on ordinary shares are recognised in equity in the period in which they are declared by the Company’s directors.
Reserves
Capital reserve comprises accumulated gains on historic asset revaluation. Share-based payment reserve comprises the fair
value of unvested performance rights as at the reporting date.
1.20 Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit attributable to owners of the company, excluding any costs of
servicing equity other than ordinary shares by the weighted average number of ordinary shares outstanding during the
financial year (note 27(b)).
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account
the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares, and the
weighted average number of additional ordinary shares that would have been outstanding assuming the conversion of all
dilutive potential ordinary shares.
1.21 Fiduciary activities
The Group provides custodian, trustee, corporate administration, investment management and advisory services to third
parties, which involve the Group making allocation and purchase and sale decisions in relation to a wide range of financial
instruments. Those assets that are held in a fiduciary capacity are not included in these consolidated financial statements.
Details of such investments held under trust may be found in note 30.
2. Critical accounting estimates and judgments
In the application of the Group’s accounting policies, which are described in note 1, the directors are required to make
judgements that have a significant impact on the amounts recognised and to make estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ
from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting
estimates are recognised in the period in which the estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and future periods.
The areas involving significant estimates or judgments are:
• Significant increase in credit risk – note 3
• Estimated allowance for loans and advances to customers – note 16 and 3(b)
• Estimated goodwill impairment – note 38
• Estimated useful life of intangible asset – note 20
• Estimation of the fair value of performance right grants and the number of grants expected to vest – note 27(c).
3. Financial risk management
By its nature the Group’s activities are principally related to the use of financial instruments. 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. The Group seeks to increase these margins by consolidating short-term funds
and lending for longer periods at higher rates whilst maintaining sufficient liquidity to meet all claims that might fall due.
The Group raises its interest margins by obtaining above-average margins, net of provisions, through lending to commercial
and retail borrowers with a range of credit standing.
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 foreign currency market. The Board places trading
limits on the level of exposure that can be taken in relation to both overnight and intra-day market positions.
Risk in the Group is managed by a system of delegated limits. These limits set the maximum level of risks 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 then to the respective operational managers.
a. Market risk
Market risk is the risk that movements in market factors, such as foreign exchange rates, interest rates, credit spreads and
equity prices, will reduce the Group’s income or the value of its portfolios.
The group is exposed to the following type of market risks:
i. Foreign exchange risk;
ii. Interest rate risk; and
iii. Equity price risk.
(i) Foreign exchange risk
The Group undertakes transactions denominated in foreign currencies from time to time and resulting from these activities,
exposures in foreign currencies arise. Though there are no specific hedging activities to mitigate any currency risk, this
exposure is monitored by management on an ongoing basis.
Exposure
The Group’s exposure to foreign currency risk at the end of the reporting period, expressed in PGK, was as follows:
PGK ‘000
USD
AUD
SGD
GBP
EUR
NZD
JPY
Others
31 December 2021
Cash balance
Due from other banks
31 December 2020
Cash balance
Due from /(to) other banks
264
92,485
92,749
303
62,546
62,849
71
212
283
32
203
235
193
1,739
1,932
630
532
1,162
206
215
421
77
2,266
2,343
288
90,405
90,693
492
3,926
4,418
95
1,820
1,915
42
665
707
199
517
716
660
541
1,201
233
-
233
86
(265)
(179)
There were no material liabilities denominated in foreign currency.
Sensitivity
As shown in the table above, the Group is primarily exposed to changes in US/PGK exchange rates. The sensitivity of profit or
loss to changes in the exchange rates arises mainly from US dollar denominated financial instruments.
USD/PGK – exchange rate – increase 10% (2020:10%)
USD/PGK – exchange rate – decrease 10% (2020:10%)
Impact on statement of comprehensive income in
2021
2020
PGK’000
PGK’000
(8,408)
10,276
(8,219)
10,045
85
Annual Report 2021 86
3. Financial risk management (continued)
a. Market Risk (continued)
(ii) Interest rate risk
Interest rate risk in the statements of financial position arises from the potential for a change in interest rate to have an
adverse effect on the earnings in the current 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 statements of financial
position. Sensitivity to interest rates arises from mismatches in re-pricing dates, cash flows and other characteristics of the
assets and their corresponding liability funding.
b. Credit risk
Credit risk is the risk that a customer or counterparty will default on its contractual obligations resulting in financial loss to
the Group. The Group’s main income generating activity is lending to customers and therefore credit risk is a principal risk.
Credit risk mainly arises from loans and advances to customers and other banks (including related commitments to lend
such as loan or credit card facilities) and investments in debt securities. The Group considers all elements of credit risk
exposure such as counterparty default risk, geographical risk and sector risk for risk management purposes.
These mismatches are actively managed by the Assets and Liabilities Committee (ALCO), which meets regularly to review the
effects of fluctuations in the prevailing levels of market interest rates of the financial position and cash flows of the Group.
(i) Credit risk management
The Group’s credit committee is responsible for managing the Group’s credit risk by:
The following table risks summarises the Group’s exposure to interest rate risks:
Year ended 31 December 2021
• Identifying, assessing and measuring credit risk across the Group, from an individual instrument to a portfolio level.
• Ensuring that the Group has appropriate credit risk practices, including an effective system of internal control, to
consistently determine adequate allowances in accordance with the Group’s stated policies and procedures, IFRS and
relevant supervisory guidance.
Assets
Cash and due from banks
Central bank bills
Loans and advances to customers
Investments in government inscribed stocks
Liability
Due to customers
Assets
Cash and due from banks
Central bank bills
Loans and advances to customers
Investments in government inscribed stocks
Liability
Due to customers
Carrying amount
Average Interest rate (% p.a.)
PGK ‘000
408,334
795,362
1,950,447
112,107
3,036,921
0.03%
5.86%
8.40%
11.48%
0.91%
Year ended 31 December 2020
Carrying amount
Average Interest rate (% p.a.)
PGK ‘000
335,147
647,874
1,614,731
114,519
2,560,715
0.03%
6.27%
9.45%
12.11%
1.03%
Sensitivity
Given the profile of assets and liabilities at 31 December 2021 and prevailing interest rates, a 100 basis points increase/
decrease in market rates in relation to lending will result in a maximum possibility of PGK2,293,292 (2020: PGK1,407,752)
decrease/increase in net interest income at a Group level.
(iii) Equity price risk
The Group is exposed to equity securities price risk due to the majority of the investments in listed equity securities through profit
or loss. To manage its price risks arising from financials assets at fair value through profit or loss, the Group diversifies its portfolio.
Diversification of portfolio is done in accordance with the limits set by the Group. The Group’s financial assets at fair value through
profit or loss are publicly traded on the Port Moresby Stock Exchange (PNGX) and the Australian Stock Exchange (ASX).
Sensitivity
The sensitivity analysis below has been determined based on the exposure to equity price risks at the end of the reporting
period. If equity prices had been 5% higher/lower, net profit for the year ended 31 December 2021 and net assets as of
balance date would have been affected by K582,621 (2020: K534,112). The Group’s sensitivity to equity prices has changed
relative to asset balance from the prior year.
• Creating credit policies to protect the Group against the identified risks including the requirements to obtain collateral
from borrowers, to perform robust ongoing credit assessment of borrowers and to continually monitor exposures
against internal risk limits.
• Limiting concentrations of exposure by type of asset, counterparties, industry, credit rating, geographic location etc.
• Establishing a robust control framework regarding the authorisation structure for the approval and renewal of credit
facilities.
• Developing and maintaining the Group’s risk grading to categorise exposures according to the degree of risk of
default. Risk grades are subject to regular reviews.
• Developing and maintaining the Group’s processes for measuring ECL including monitoring of credit risk,
incorporation of forward- looking information and the method used to measure ECL.
• Ensuring that the Group has policies and procedures in place to appropriately maintain and validate models used to
assess and measure ECL.
• Establishing a sound credit risk accounting assessment and measurement process that provides it with a strong basis
for common systems, tools and data to assess credit risk and to account for ECL. Providing advice, guidance and
specialist skills to business units to promote best practice throughout the Group in the management of credit risk.
• The internal audit function performs regular audits making sure that the established controls and procedures are
adequately designed and implemented.
(ii) Significant increase in credit risk
As explained in note 1 the Group monitors all financial assets that are subject to impairment requirements to assess whether
there has been a significant increase in credit risk since initial recognition. If there has been a significant increase in credit risk
the Group will measure the loss allowance based on lifetime rather than 12-month ECL.
(iii) Incorporation of forward-looking information
The Group uses forward-looking information that is available without undue cost or effort in its assessment of significant
increase of credit risk as well as in its measurement of ECL. The Group’s credit risk management function uses external
and internal information to generate a ‘base case’ scenario of future forecast of relevant economic variables along with
a representative range of other possible forecast scenarios. The external information used includes economic data and
forecasts published by governmental bodies and monetary authorities.
The Group applies probabilities to the forecast scenarios identified. The base case scenario is the single most-likely
outcome and consists of information used by the Group for strategic planning and budgeting. The Group has identified
and documented key drivers of credit risk and credit losses for each portfolio of financial instruments and, using a statistical
analysis of historical data, has estimated relationships between macro-economic variables and credit risk and credit losses.
(iv) Measurement of ECL
The key inputs used for measuring ECL are (1) Probability of default (PD), (2) Loss given default (LGD) and (3) Exposure at
default (EAD). These figures are generally derived from internally developed statistical models and other historical data and
they are adjusted to reflect probability-weighted forward-looking information.
PD is an estimate of the likelihood of default over a given time horizon. It is estimated as at a point in time. The calculation is
based on rating models, and assessed using rating tools tailored to the various categories of counterparties and exposures.
These models are based on market data (where available), as well as internal data comprising both quantitative and
qualitative factors.
Equity prices – increase 5% (2020: 5%)
Equity prices – decrease 5% (2020: 5%)
87
Impact on statement of comprehensive income in
LGD is an estimate of the loss arising on default. It is based on the difference between the contractual cash flows due and
those that the lender would expect to receive, taking into account cash flows from any collateral.
2021
2020
PGK’000
PGK’000
583
(583)
534
(534)
EAD is an estimate of the exposure at a future default date, taking into account expected changes in the exposure after
the reporting date, including repayments of principal and interest, and expected drawdowns on committed facilities. The
Group’s modelling approach for EAD reflects expected changes in the balance outstanding over the lifetime of the loan
exposure that are permitted by the current contractual terms, such as amortisation profiles, early repayment or overpayment,
changes in utilisation of undrawn commitments and credit mitigation actions taken before default.
Annual Report 2021 88
3. Financial risk management (continued)
b. Credit risk (continued)
(v) Groupings based on shared risks characteristics
In determining the ECL, the financial instruments are grouped on the basis of shared risk characteristics, such as instrument
type, credit risk grade, collateral type, the value of collateral relative to financial asset (loan-to-value (LTV) ratios) etc. The
groupings are reviewed on a regular basis to ensure that each group is comprised of homogenous exposures.
(vi) Credit quality
The Group monitors credit risk per class of financial instrument. The table below outlines the classes identified, as well as the
financial statement line item and the note that provides an analysis of the items included in the financial statement line for
each class of financial instrument:
Class of financial instrument
Financial statement line
Cash and due from banks at amortised cost
Cash and due from banks
Treasury and central bank bills at amortised cost
Regulatory deposits at amortised cost
Loans and advances to customers at amortised cost
Investments in government inscribed stocks at amortised cost
Bank guarantees
Other financial assets
Central bank bills
Regulatory deposits
Loans and advances to customers
Investments in government inscribed stocks
Contingent liabilities
Other assets
Note
Note 12
Note 13
Note 14
Note 16
Note 17
Note 33
Note 21
An analysis of the Group’s credit risk concentrations per class of financial asset is provided in the following tables. Unless
specifically indicated, for financial assets, the amounts in the table represent gross carrying amounts. For documentary letters
of credit and bank guarantee, the amounts in the table represent the amounts committed or guaranteed, respectively.
Cash and due from banks at amortised cost
Concentration by sector
Cash on hand
With central bank (exchange settlement account)
With other banks
Total
Concentration by region
Papua New Guinea
Offshore*
Total
Consolidated
31 December 2021
31 December 2020
PGK‘000
PGK‘000
115,451
123,895
168,988
408,334
243,502
164,832
408,334
118,811
112,024
104,312
335,147
237,539
97,608
335,147
*bank accounts maintained in Australia, New Zealand, Great Britain, Singapore, Malaysia, Philippines, Japan, India and Turkey
Cash and due from banks at amortised cost
Concentration by sector
Cash on hand
With central bank (exchange settlement account)
With other banks
Total
Concentration by region
Papua New Guinea
Offshore*
Total
Parent
31 December 2021
31 December 2020
PGK‘000
PGK‘000
115,451
123,895
126,956
366,302
273,241
93,061
366,302
118,811
112,024
130,779
361,614
273,279
88,335
361,614
*bank accounts maintained in Australia, New Zealand, Great Britain, Singapore, Malaysia, Philippines, Japan, India and Turkey
Treasury and central bank bills at amortised cost
Concentration by sector
With central banks
Total
Concentration by region
Papua New Guinea
Total
Treasury and central bank bills at amortised cost
Concentration by sector
With central banks
Total
Concentration by region
Papua New Guinea
Total
Regulatory deposits at amortised cost
Concentration by sector
With central banks
Total
Concentration by region
Papua New Guinea
Total
Consolidated
31 December 2021
31 December 2020
PGK‘000
795,362
795,362
795,362
795,362
PGK‘000
647,874
647,874
647,874
647,874
Parent
31 December 2021
31 December 2020
PGK‘000
795,362
795,362
795,362
795,362
PGK‘000
647,874
647,874
647,874
647,874
Consolidated
31 December 2021
31 December 2020
PGK‘000
212,874
212,874
212,874
212,874
PGK‘000
185,711
185,711
185,711
185,711
89
Annual Report 2021 90
3. Financial risk management (continued)
b. Credit risk (continued)
Regulatory deposits at amortised cost
Concentration by sector
With central banks
Total
Concentration by region
Papua New Guinea
Total
Loans and advances to customers at amortised cost
Concentration by sector
Individuals:
Mortgages
Unsecured lending
Corporate entities:
Agriculture, Forestry & Fishing
Mining
Manufacturing
Electrical, Gas & Water
Building & Construction
Wholesale & Retail
Hotels & Restaurants
Transport & Storage
Financial Intermediation
Real Estate/Renting/Business Services
Equipment Hire
Other Business
Personal Banking
Total
Concentration by region
Papua New Guinea
Total
Parent
31 December 2021
31 December 2020
PGK‘000
212,874
212,874
212,874
212,874
PGK‘000
185,711
185,711
185,711
185,711
Consolidated
31 December 2021
31 December 2020
PGK‘000
PGK‘000
547,260
30,158
16,159
14,859
15,937
7,272
93,107
597,854
93,877
10,218
-
336,717
27,900
191,543
5,685
1,988,547
1,988,547
1,988,547
481,492
33,436
13,763
14,528
16,786
7,459
105,606
379,893
104,928
12,635
14,329
329,776
23,038
109,838
2,569
1,650,076
1,650,076
1,650,076
Loans and advances to customers at amortised cost
Concentration by sector
Individuals:
Mortgages
Unsecured lending
Corporate entities:
Agriculture, Forestry & Fishing
Mining
Manufacturing
Electrical, Gas & Water
Building & Construction
Wholesale & Retail
Hotels & Restaurants
Transport & Storage
Financial Intermediation
Real Estate/Renting/Business Services
Equipment Hire
Other Business
Personal Banking
Total
Concentration by region
Papua New Guinea
Total
Parent
31 December 2021
31 December 2020
PGK‘000
PGK‘000
547,260
30,158
16,159
14,859
15,937
7,272
93,107
597,854
93,877
10,218
-
336,717
27,900
185,016
5,685
1,982,019
1,982,019
1,982,019
481,492
33,436
13,763
14,528
16,786
7,459
105,606
379,893
104,928
12,635
14,329
329,776
23,038
104,576
2,569
1,644,814
1,644,814
1,644,814
Investments in government inscribed stocks at amortised cost
PGK‘000
PGK‘000
Consolidated
31 December 2021
31 December 2020
Concentration by sector
Sovereign
Total
Concentration by region
Papua New Guinea
Total
113,746
113,746
113,746
113,746
116,193
116,193
116,193
116,193
Parent
31 December 2021
31 December 2020
Investments in government inscribed stocks at amortised cost
PGK‘000
PGK‘000
Concentration by sector
Sovereign
Total
Concentration by region
Papua New Guinea
Total
113,746
113,746
113,746
113,746
116,193
116,193
116,193
116,193
91
Annual Report 2021 92
3. Financial risk management (continued)
b. Credit risk (continued)
Bank guarantees
Concentration by sector
Corporate entities:
Agriculture, Forestry & Fishing
Mining
Wholesale & Retail
Building and Construction
Transport & Storage
Electrical, Gas & Water
Other Business
Total
Concentration by region
Papua New Guinea
Total
Bank guarantees
Concentration by sector
Corporate entities:
Agriculture, Forestry & Fishing
Mining
Wholesale & Retail
Building and Construction
Transport & Storage
Electrical, Gas & Water
Other Business
Total
Concentration by region
Papua New Guinea
Total
Consolidated
31 December 2021
31 December 2020
PGK‘000
PGK‘000
An analysis of the Group’s credit risk exposure per class of financial asset and “stage” without taking into account the
effects of any collateral or other credit enhancements is provided in the following table. Unless specifically indicated, for
financial assets, the amounts in the table represent gross carrying amounts. For loan commitments and financial guarantee
contracts, the amounts in the table represent the amounts committed or guaranteed, respectively.
18,199
-
13,210
9,857
129
-
5,433
46,829
46,829
46,829
26,285
22,003
13,300
20,106
4,510
1,470
1,030
88,704
88,704
88,704
Parent
31 December 2021
31 December 2020
PGK‘000
PGK‘000
18,199
-
13,210
9,857
129
-
5,433
46,829
46,829
46,829
26,285
22,003
13,300
20,106
4,510
1,470
1,030
88,704
88,704
88,704
Consolidated
31 December 2021
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
Cash and due from banks
Treasury and central bank bills
Regulatory deposits
Loans and advances
Investment in government
inscribed stocks
Other financial assets
Bank guarantees
Total gross carrying amount
Loss allowance
Net carrying amount
PGK‘000
408,334
795,362
212,874
1,749,548
113,746
49,937
46,829
3,376,630
(25,680)
3,350,950
PGK‘000
-
-
-
152,442
PGK‘000
-
-
-
71,667
POCI
Total
PGK‘000
-
-
-
14,890
PGK‘000
408,334
795,362
212,874
1,988,547
-
-
-
113,746
-
-
152,442
(10,447)
141,995
-
-
71,667
(7,602)
64,065
-
-
14,890
-
49,937
46,829
3,615,629
(43,729)
14,890
3,571,900
Consolidated
31 December 2020
Cash and due from banks
Treasury and central bank bills
Regulatory deposits
Loans and advances
Investment in government
inscribed stocks
Other financial assets
Bank guarantees
Total gross carrying amount
Loss allowance
Net carrying amount
Stage 1
12-month ECL
PGK‘000
335,147
647,874
185,711
1,417,091
Stage 2
Lifetime ECL
PGK‘000
-
-
-
184,262
Stage 3
Lifetime ECL
PGK‘000
-
-
-
29,673
POCI
Total
PGK‘000
-
-
-
19,050
PGK‘000
335,147
647,874
185,711
1,650,076
116,193
-
-
-
116,193
149,851
88,704
2,940,571
(17,770)
2,922,801
-
-
184,262
(19,777)
164,485
-
-
29,673
(3,510)
26,163
-
-
19,050
-
149,851
88,704
3,173,556
(41,057)
19,050
3,132,499
The amount of bank guarantees disclosed above represent notional amounts guaranteed being the maximum exposure to
credit risk.
93
Annual Report 2021 94
3. Financial risk management (continued)
b. Credit risk (continued)
Parent
31 December 2021
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
PGK‘000
366,302
795,362
212,874
1,745,860
113,746
46,383
46,829
3,327,356
(25,680)
3,301,676
PGK‘000
-
-
-
151,457
PGK‘000
-
-
-
69,812
PGK‘000
-
-
-
14,890
PGK‘000
366,302
795,362
212,874
1,982,019
-
-
-
113,746
-
-
151,457
(10,443)
141,014
-
-
69,812
(7,252)
62,560
-
-
14,890
-
46,383
46,829
3,563,515
(43,375)
14,890
3,520,140
Parent
31 December 2020
Stage 1
12-month ECL
PGK‘000
361,614
647,874
185,711
1,414,258
Stage 2
Lifetime ECL
PGK‘000
-
-
-
183,885
Stage 3
Lifetime ECL
PGK‘000
-
-
-
27,621
POCI
Total
PGK‘000
-
-
-
19,050
PGK‘000
361,614
647,874
185,711
1,644,814
116,193
-
-
-
116,193
149,242
88,704
2,963,596
(17,770)
2,945,826
-
-
183,885
(19,718)
164,167
-
-
27,621
(3,069)
24,552
-
-
19,050
-
149,242
88,704
3,194,152
(40,557)
19,050
3,153,595
Cash and due from banks
Treasury and central bank bills
Regulatory deposits
Loans and advances
Investment in government
inscribed stocks
Other financial assets
Bank guarantees
Total gross carrying amount
Loss allowance
Net carrying amount
Cash and due from banks
Treasury and central bank bills
Regulatory deposits
Loans and advances
Investment in government
inscribed stocks
Other financial assets
Bank guarantees
Total gross carrying amount
Loss allowance
Net carrying amount
This table summarises the loss allowance as of the year end by class of exposure/asset.
Loss allowance by classes
Loans and advances to customers at amortised cost
Investments in government inscribed stocks at amortised cost
Other financial assets
Total
Consolidated
31 December 2021
31 December 2020
PGK‘000
38,100
1,639
3,990
43,729
PGK‘000
35,345
1,674
4,038
41,057
Loss allowance by classes
Loans and advances to customers at amortised cost
Investments in government inscribed stocks at amortised cost
Other financial assets
Total
Parent
31 December 2021
31 December 2020
PGK‘000
37,746
1,639
3,990
43,375
PGK‘000
34,845
1,674
4,038
40,557
Other financial assets comprise of miscellaneous receivables from individuals on which lifetime ECL has been recognised.
No ECL has been recognised on other classes of financial assets either due to negligible probability of default or the assets
being fully collateralised by high quality liquid assets.
The table below summarises the movement in ECL during the year by class of financial assets:
Consolidated
Loss allowance by classes
Loans and advances to customers
at amortised cost
Investments in government
inscribed stocks at amortised cost
Other financial assets
Total
Balance at 01
January 2021
Additional ECL
recognised
Write-offs
Bad debt
Recoveries
Balance at 31
December 2021
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
35,345
6,555
(5,550)
1,750
38,100
1,674
4,038
41,057
9
-
6,564
(44)
(48)
(5,642)
-
-
1,750
1,639
3,990
43,729
Consolidated
Balance at 01
January 2020
Additional ECL
recognised
Write-offs
Bad debt
Recoveries
Provision
derecognised
in respect of
sales of loan
book
Balance at 31
December
2020
PGK‘000
PGK‘000
PGK‘000
PG K‘000
PGK‘000
PGK‘000
20,525
20,832
(7,096)
1,943
(859)
35,345
489
1,185
4,038
25,052
-
22,017
-
-
(7,096)
-
-
1,943
-
1,674
-
(859)
4,038
41,057
Loss allowance by
classes
Loans and advances to
customers at amortised
cost
Investments in
government inscribed
stocks at amortised cost
Other financial assets
Total
95
Annual Report 2021 96
3. Financial risk management (continued)
b. Credit risk (continued)
Parent
Loss allowance by classes
Loans and advances to customers
at amortised cost
Investments in government
inscribed stocks at amortised cost
Other financial assets
Total
Balance at 01
January 2021
Additional ECL
recognised
Write-offs
Bad debt
Recoveries
Balance at 31
December 2021
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
34,845
6,701
(5,550)
1,750
37,746
1,674
4,038
40,557
9
-
6,710
(44)
(48)
(5,642)
-
-
1,750
1,639
3,990
43,375
Parent
Balance at
01 January
2020
Amalgamation
adjustment
Additional
ECL
recognised
Write-offs
Bad debt
Recoveries
Provision
derecognised
in respect of
sales of loan
book
Balance at 31
December
2020
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
20,029
11,828
(7,096)
1,943
(859)
34,845
1,674
-
101
101
3,937
34,640
-
11,828
-
-
(7,096)
-
-
-
1,943
-
(859)
1,674
4,038
40,557
Loss allowance by
classes
Loans and advances
to customers at
amortised cost
Investments in
government
inscribed stocks at
amortised cost
Other financial assets
Total
-
-
Consolidated
31 December 2021
Loss allowance – Loans and
advances to customers at
amortised cost
Loss allowance as at 01 January
Changes in the loss allowance
- Transfer to stage 1
- Transfer to stage 2
- Transfer to stage 3
- Write-offs
New financial assets originated or
purchased
Financial assets that have been
derecognised
Loss allowance as at 31
December
Loss allowance – Loans and
advances to customers at
amortised cost
Loss allowance as at 01 January
Changes in the loss allowance
- Transfer to stage 1
- Transfer to stage 2
- Transfer to stage 3
- Write-offs
New financial assets originated or
purchased
Financial assets that have been
derecognised
Loss allowance as at 31
December
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
PGK‘000
12,058
PGK‘000
19,777
PGK‘000
3,510
637
(3,436)
(209)
-
22,052
(616)
3,453
(4,240)
(4,703)
8,751
(21)
(17)
4,449
(766)
3,547
PGK‘000
-
-
-
-
-
-
PGK‘000
35,345
-
-
-
(5,469)
34,350
(11,119)
(11,895)
(3,112)
-
(26,126)
19,983
10,527
7,590
-
38,100
Consolidated
31 December 2020
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
PGK‘000
12,102
PGK‘000
6,698
PGK‘000
1,725
84
(811)
(6)
-
4,716
(4,027)
(84)
812
(404)
(4,406)
17,972
(811)
12,058
19,777
-
(1)
410
(747)
2,245
(122)
3,510
PGK‘000
-
-
-
-
-
-
-
PGK‘000
20,525
-
-
-
(5,153)
24,933
(4,960)
-
35,345
97
Annual Report 2021 98
3. Financial risk management (continued)
b. Credit risk (continued)
Loss allowance – Loans and
advances to customers at
amortised cost
Loss allowance as at 01 January
Changes in the loss allowance
- Transfer to stage 1
- Transfer to stage 2
- Transfer to stage 3
- Write-offs
New financial assets originated or
purchased
Financial assets that have been
derecognised
Loss allowance as at 31
December
Loss allowance – Loans and
advances to customers at
amortised cost
Loss allowance as at 01 January
Changes in the loss allowance
- Transfer to stage 1
- Transfer to stage 2
- Transfer to stage 3
- Write-offs
New financial assets originated or
purchased
Financial assets that have been
derecognised
Loss allowance as at 31
December
Parent
31 December 2021
Consolidated
31 December 2021
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
Loans and advances to
customers at amortised cost
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
PGK‘000
12,058
PGK‘000
19,718
PGK‘000
3,069
637
(3,436)
(209)
-
22,054
(616)
3,453
(4,224)
(4,704)
8,751
(21)
(17)
4,433
(766)
3,451
PGK‘000
-
-
-
-
-
-
PGK‘000
34,845
-
-
-
(5,470)
34,256
(11,119)
(11,853)
(2,913)
-
(25,885)
19,985
10,525
7,236
-
37,746
Parent
31 December 2020
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
PGK‘000
12,102
PGK‘000
6,648
PGK‘000
1,483
PGK‘000
-
PGK‘000
20,233
84
(811)
(6)
-
(84)
812
(404)
(4,406)
-
(1)
410
(747)
4,716
17,963
2,046
(4,027)
(811)
(122)
12,058
19,718
3,069
-
-
-
-
-
-
-
-
-
-
(5,153)
24,725
(4,960)
34,845
Gross carrying amount as at
01 January
Changes in the gross carrying amount
- Transfer to stage 1
- Transfer to stage 2
- Transfer to stage 3
- Write-offs
New financial assets originated or
purchased
Financial assets that have been
derecognised
Gross carrying amount as at
31 December
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
1,417,091
184,262
29,673
19,050
1,650,076
39,492
(70,073)
(6,279)
-
646,922
(39,106)
70,901
(34,912)
(4,704)
22,163
(277,604)
(46,163)
(386)
(828)
41,191
(766)
5,009
(2,226)
-
-
-
-
-
-
-
(5,470)
912
675,006
(5,072)
(331,065)
1,749,549
152,441
71,667
14,890
1,988,547
Consolidated
31 December 2020
Loans and advances to
customers at amortised cost
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
Gross carrying amount as at
01 January
Changes in the gross carrying amount
- Transfer to stage 1
- Transfer to stage 2
- Transfer to stage 3
- Write-offs
New financial assets originated or
purchased
Financial assets that have been
derecognised
Gross carrying amount as at
31 December
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
1,324,738
73,818
7,894
15,508
1,421,958
8,602
(114,785)
(5,728)
-
536,918
(8,363)
115,628
(12,964)
(4,406)
36,610
(239)
(843)
18,692
(747)
5,357
-
-
-
-
-
-
-
(5,153)
6,718
585,603
(332,654)
(16,061)
(441)
(3,176)
(352,332)
1,417,091
184,262
29,673
19,050
1,650,076
99
Annual Report 2021 100
3. Financial risk management (continued)
b. Credit risk (continued)
Parent
31 December 2021
Loans and advances to
customers at amortised cost
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
1,414,258
183,885
27,621
19,050
1,644,814
Gross carrying amount as at
01 January
Changes in the gross carrying amount
- Transfer to stage 1
- Transfer to stage 2
- Transfer to stage 3
- Write-offs
New financial assets originated or
purchased
Financial assets that have been
derecognised
Gross carrying amount as at
31 December
39,492
(70,073)
(6,204)
-
643,231
(39,106)
70,901
(34,756)
(4,704)
21,181
(274,846)
(45,942)
(386)
(828)
40,960
(766)
4,464
(1,253)
-
-
-
-
-
-
-
(5,470)
912
669,788
Loans and advances to customers
0-29 days
30-59 days
60-89 days
90-180 days
More than 181 days
Total
Gross carrying amount
PGK ‘000
1,724,250
54,053
32,057
61,209
110,449
1,982,018
Collateral held as security and other credit enhancements.
Parent
Year ended 2021
Year ended 2020
Loss allowance Gross carrying amount
PGK ‘000
1,384,515
53,153
47,834
59,968
99,344
1,644,814
PGK ’000
17,082
5,127
2,288
4,857
8,392
37,746
Loss allowance
PGK ‘000
14,427
799
1,673
9,163
8,783
34,845
The Group holds collateral or other credit enhancements to mitigate credit risk associated with financial assets. The main
types of collateral and the types of assets these are associated with are listed in the table below.
(5,072)
(327,113)
Exposure type
1,745,858
151,459
69,812
14,890
1,982,019
Parent
31 December 2020
Mortgage lending
Personal lending
Corporate lending
Investment securities
Lease receivables
Bank guarantee and documentary letters of credit
Type of collateral held
Mortgage over residential property
Mortgage over residential property / bill of sale
Mortgage over commercial property
Sovereign guarantee
Charge over property and equipment
Charge over cash deposit
Loans and advances to
customers at amortised cost
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
Gross carrying amount as at
01 January
Changes in the gross carrying amount
- Transfer to stage 1
- Transfer to stage 2
- Transfer to stage 3
- Write-offs
New financial assets originated or
purchased
Financial assets that have been
derecognised
Gross carrying amount as at
31 December
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
1,319,158
72,883
7,438
15,508
1,414,987
8,602
(114,785)
(5,573)
-
534,092
(8,363)
115,628
(12,767)
(4,406)
36,234
(327,236)
(15,324)
(239)
(843)
18,340
(747)
4,777
(1,105)
-
-
-
-
-
-
-
(5,153)
6,718
581,821
(3,176)
(346,841)
1,414,258
183,885
27,621
19,050
1,644,814
Investments in government inscribed stock
In relation to investment in government inscribed stocks which continue to be classified as Stage 1, there have been no
significant movements in the carrying amount during the year except due to derecognition.
The table below provides an analysis of the gross carrying amount of loans and advances to customers by past due status.
Consolidated
Year ended 2021
Year ended 2020
Gross carrying amount
PGK ‘000
1,727,938
54,961
32,132
61,225
112,292
1,988,547
Loss allowance Gross carrying amount
PGK ‘000
1,387,203
53,222
47,868
60,345
101,438
1,650,076
PGK ’000
17,082
5,127
2,288
4,861
8,742
38,100
Loss allowance
PGK ‘000
14,427
799
1,673
9,222
9,224
35,345
Loans and advances to customers
0-29 days
30-59 days
60-89 days
90-180 days
More than 181 days
Total
101
In addition to the collateral included in the table above, the Group holds other types of collateral and credit enhancements,
such as second charges, floating charges and guarantees for which specific values are not generally available.
Mortgage lending
The Group holds mainly residential properties as collateral for the mortgage loans it grants to customers. In some cases it
does hold cash as collateral. It monitors its exposure to retail mortgage lending using a Loan To Discounted Value (LTDV)
ratio. At origination, the Group lends based on a discounted collateral value which is calculated at 80% of the market value
at that time. This becomes the Value definition for the LTDV. The Group then lends up to 100% of this Value. The following
table reflects the exposure by ranges based on this methodology. The Group believes that this methodology provides
further risk reduction in case of changes in market value. For credit-impaired loans the value of collateral is based on the
most recent valuations.
Mortgage lending
LTDV ratio
Less than 50%
51-75%
75-90%
90-100%
More than 100%
Fully cash covered
Total
Consolidated
Year ended 2021
Year ended 2020
Gross carrying amount
PGK ‘000
Gross carrying amount
PGK ‘000
67,153
79,259
47,391
185,421
168,040
-
547,264
60,938
68,368
43,021
174,952
133,892
253
481,424
Annual Report 2021 102
3. Financial risk management (continued)
b. Credit risk (continued)
Mortgage lending
LTDV ratio
Less than 50%
51-75%
75-90%
90-100%
More than 100%
Fully cash covered
Total
Credit impaired – Mortgage lending
LTDV ratio
Less than 50%
51-75%
75-90%
90-100%
More than 100%
Total
Credit impaired – Mortgage lending
LTDV ratio
Less than 50%
51-75%
75-90%
90-100%
More than 100%
Total
Parent
Year ended 2021
Year ended 2020
Gross carrying amount
PGK ‘000
Gross carrying amount
PGK ‘000
67,153
79,259
47,391
185,421
168,040
-
547,264
Consolidated
60,938
68,368
43,021
174,952
133,892
253
481,424
Year ended 2021
Year ended 2020
Gross carrying amount
PGK ‘000
Gross carrying amount
PGK ‘000
3,502
7,161
1,077
3,182
9,314
24,236
Parent
2,427
7,310
2,362
3,307
7,150
22,556
The collateral value is updated when the facility is classified as stage 3 or at least every 2 years. The Group monitors the
collateral value on an ongoing basis and in event of any indicator which may result in significant decline will require the fresh
valuation to be performed. As at 31 December 2021, the portfolio of secured personal lending is entirely secured by
eligible collateral.
For unsecured loans, the Group takes a higher level of return to reflect the credit risk. However, credit risk standards are
maintained to ensure a reasonable standard of debt servicing is proven.
Corporate lending
The most relevant indicator of corporate customers’ creditworthiness is an analysis of their financial performance and
their liquidity, leverage, management effectiveness and growth ratios. In addition, the Group also requires collaterals and
guarantees to secure the corporate loans. Similar to personal lending, collaterals are required to be valued by independent
firm of valuers before the facility is approved. Approved facility limit is equal to or less than the assessed value of the
collateral discounted by 10-50% to allow for sufficient buffer should there be any adverse movement in the value due to
change in macroeconomic indicators. Collateral values are updated at least every 2 years if there are any changes to the loan
facilities or if the facility is classified as stage 3 loan. The Group monitors the collateral value on an ongoing basis and in event
of any indicator which may result in significant decline will require the fresh valuation to be performed. As at 31 December
2021, the portfolio of the corporate lending is fully collateralized by eligible collateral.
Investment securities
The Group holds investment in government inscribed stocks measured at amortised cost with a carrying amount of
PGK 112,107,469 (2020: PGK 114,519,320) which are collateralized by sovereign guarantee.
Bank guarantee and documentary letters of credit
Bank guarantees and documentary letters of credit are fully collateralized by charge over the cash deposits.
Credit risk disclosures in the financial statements of the parent.
The credit risk disclosures included above relate only to the consolidated financial statements of the Group. Corresponding
disclosures for the parent company have not been presented in these financial statements as the parent company does not
have any material financial instruments other than intercompany lending amounting to K1m (31 December 2020: K1m).
Details of the intercompany lending are disclosed in note 29 to the financial statements.
Year ended 2021
Year ended 2020
c) Liquidity risk
Gross carrying amount
PGK ‘000
Gross carrying amount
PGK ‘000
3,502
7,161
1,077
3,182
9,314
24,236
2,427
7,310
2,362
3,307
7,150
22,556
Personal lending
The Group’s personal lending portfolio consists of secured and unsecured loans as follows:
Secured
Unsecured
Total
Consolidated
Year ended 2021
Year ended 2020
PGK ‘000
PGK ‘000
547,260
30,158
577,418
481,492
33,436
514,928
Liquidity risk is the risk of being unable to meet financial obligations as they fall due. The Group’s liquidity and funding
risks are governed by a policy framework which is approved by the Board of Directors. Liquidity and funding positions
and associated risks are overseen by the ALCO. The following outlines the Group’s approach to liquidity and funding risk
management focusing on conditions brought on by the current global economic environment:
• ensuring the liquidity management framework is compatible with local regulatory requirements
• daily liquidity reporting and scenario analysis to quantify the Group’s positions
• targeting commercial and corporate customers’ liability compositions
• intense monitoring of detail daily reports to alert management and directors of abnormalities
• arranging back up facilities to protect against adverse funding conditions and to support day-to-day operations
The Group is monitoring its liquidity contingency plans, lending requirements and guidelines which include:
• the monitoring of issue severity/stress levels with high level diligence
• early warning signals indicative of an approaching issue and a mechanism to monitor and report these against signals
• action plans and courses of action to account for early warning signals as noted above
• management reporting at a higher level
• maintenance of contractual obligations in regards to deposits
• assigned responsibilities for internal and external written communications
For secured loans, the Group requires formal valuation of collateral to be performed prior to approval of the loan facility. The
valuation is conducted by the external firm of valuers independent of the Group who are required to meet certain minimum
standards as per the Group’s policy. Collateral value determined by the valuer is further discounted by 20-30% before
determining the facility limit. The discounted value of the collateral must exceed the facility limit by at least 12.5% to allow for
sufficient buffer should there be any adverse movement in value due change in macroeconomic indicators.
Maturities of financial assets and liabilities
The table below presents a maturity analysis of Group’s financial liabilities including issues financial guarantee contracts and
corresponding analysis of financial assets held to manage the inherent liquidity risk using undiscounted contractual cash
flows associated with those assets and liabilities.
103
Annual Report 2021 104
3. Financial risk management (continued)
b. Liquidity risk (continued)
Consolidated
1 to 5 years Over 5 years
31 December 2021
Cash and due from banks
Central bank bills
Regulatory deposits
Total financial assets
Due to other banks
Due to customers
Other liabilities
Total financial liabilities
Issued financial guarantee
contracts
Issued loan commitments
Total
31 December 2020
Cash and due from banks
Central bank bills
Regulatory deposits
Total financial assets
Due to other banks
Due to customers
Other liabilities
Up to 1
month
PGK‘000
408,334
95,000
212,874
716,209
4,701
2,451,325
72,311
2,528,337
1 to 3
months
PGK‘000
-
65,000
-
65,000
-
335,136
-
335,136
4 to 12
months
PGK‘000
-
670,000
-
670,000
-
250,131
-
250,131
PGK‘000
-
-
-
-
-
11,725
-
11,725
450
7,696
24,591
14,092
160,667
161,117
7,252
14,948
704
25,295
-
14,092
335,147
65,000
185,711
585,858
5,385
2,026,766
57,228
-
35,000
-
35,000
-
286,671
-
-
575,000
-
575,000
-
282,025
-
282,025
-
-
-
-
-
20,189
-
20,189
Total financial liabilities
2,089,379
286,671
Issued financial guarantee
contracts
Issued loan commitments
Total
250
32,339
49,861
6,254
177,528
177,778
27,396
59,735
-
-
49,861
6,254
Total
contract
value
PGK‘000
408,334
830,000
212,874
1,451,209
Total
carrying
value
PGK‘000
408,334
795,362
212,874
1,416,507
4,701
3,048,317
72,311
3,125,329
4,701
3,036,921
72,311
3,113,933
46,829
168,623
215,452
N/A
N/A
N/A
335,147
675,000
185,711
335,147
647,874
185,711
1,195,858
1,168,732
5,385
2,615,651
57,228
5,385
2,560,715
57,228
2,678,264
2,623,328
88,704
204,924
293,628
N/A
N/A
N/A
PGK‘000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Parent
1 to 5 years Over 5 years
31 December 2021
Cash and due from banks
Central bank bills
Regulatory deposits
Due from subsidiaries
Total financial assets
Due to other banks
Due to customers
Other liabilities
Due to subsidiaries
Total financial liabilities
31 December 2020
Cash and due from banks
Central bank bills
Regulatory deposits
Due from subsidiaries
Total financial assets
Up to 1
month
PGK‘000
366,302
95,000
212,874
65,518
739,695
4,701
2,493,857
71,326
9,612
2,579,496
1 to 3
months
PGK‘000
-
65,000
-
-
65,000
4 to 12
months
PGK‘000
-
670,000
-
-
670,000
PGK‘000
-
-
-
-
-
-
335,136
-
250,131
-
11,725
-
-
-
-
-
-
335,136
250,131
11,725
361,614
65,000
185,711
1,387
613,712
-
35,000
-
-
-
575,000
-
-
35,000
575,000
Due to other banks
Due to customers
Other liabilities
Due to subsidiaries
5,385
2,065,525
56,197
8,988
-
286,671
-
-
-
282,025
-
-
Total financial liabilities
2,136,095
286,671
282,025
-
-
-
-
-
-
20,189
-
-
20,189
Total
contract
value
PGK‘000
366,302
830,000
212,874
65,518
1,474,695
4,701
3,090,849
71,326
9,612
3,176,488
Total
carrying
value
PGK‘000
366,302
795,362
212,874
65,518
1,440,057
4,701
3,079,454
71,326
9,612
3,165,093
361,614
675,000
185,711
1,387
361,614
647,874
185,711
1,387
1,223,712
1,196,586
5,385
2,654,410
56,197
8,988
5,385
2,599,474
56,197
8,988
2,724,980
2,670,044
PGK‘000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The liquidity gap in ‘up to 1 month bucket’ is due to assumption that current and saving deposits amounting to PGK1,667m
(31 December 2020: PGK1,330m) included within ‘due to customers’ mature within one month since these are on demand
and do not have any fixed or determinable maturity.
105
Annual Report 2021 106
4. Capital adequacy
Kina Securities Limited (“KSL”) as the consolidated Company is required to comply with prudential standard PS1/2003
`Capital Adequacy` issued by the Bank of Papua New Guinea (“BPNG”). BPNG is the Government authority responsible for
the prudential supervision of Banks and financial institution in Papua New Guinea. The prudential guidelines issued by BPNG
follow the prudential guidelines set by the Bank of International Settlements under the terms of the Basel Accord (Basel 1).
KSL calculates and reports its capital adequacy in respect of the bank.
Prudential Standard PS1/2003 `Capital Adequacy’ is intended to ensure KSL maintains a level of capital which:
Is adequate to protect the interest of depositors and creditors,
Is commensurate with risk profile and activities of KSL, and
1.
2.
3. Provide public confidence in KSL as a financial institution and the overall banking system
PS1/2003 `Capital Adequacy` prescribes ranges of capital ratios to measure whether KSL is under, adequately, or well
capitalised and also prescribes a leverage ratio. The minimum capital adequacy ratios prescribed under PS1/2003 `Capital
Adequacy` are:
1. Tier 1 risk based ratio of 8%,
2. Total risk-based capital of 12%, and
3. Leverage capital of 6%.
As at 31 December 2021, KSL’s capital ratios were in compliance with the BPNG Minimum capital adequacy requirements
as follows:
Risk weighted assets
Capital : tier 1
Capital : tier 2
Capital : tier 1 and tier 2
Capital adequacy ratios
Tier 1 capital
Total capital ratio
Leverage capital ratio
2021
2020
PGK ‘000
PGK ‘000
1,900,018
340,265
94,560
434,825
1,670,142
370,986
58,344
429,330
18.3%
22.9%
9.2%
22.2%
25.4%
11.2%
The measure of capital used for the purpose of prudential supervision is referred to as base capital. Total base capital varies
from the capital shown the on statements of financial position and is made up of tier 1 (core) and tier 2 (supplementary)
capital, after deducting the value of investments in other banks and financial institutions. Tier 1 capital is obtained
by deducting intangible assets including deferred tax assets from equity capital and audited retained earnings (or
accumulated losses). Tier 2 capital cannot exceed the amount of tier 1 capital, and can include subordinated loan capital,
specified assets revaluation reserves, un-audited profits (or losses) and a small percentage of general loan provisions.
The Leverage Capital is calculated as Tier 1 Capital (less inter-group loans) divided by Total Assets. Risk-weighted assets are
derived from on-statements of financial positions assets. On-statements of financial position assets are weighted for credit
risk by applying weightings (0, 20, 50 and 100 percent) according to risk classification criteria set by the BPNG, for example
cash and money market instruments have a zero risk weighting which means that no capital is required to support the
holding of these assets.
5. Net interest income
Interest income
Cash and short-term funds
Investment in government inscribed stocks
Loans and advances to customers
Interest expense
Banks and customers
Net interest income
6. Net fee and commission income
Fees and commission income
Investment and portfolio management
Fund administration
Shares brokerage
Loans fees and bank commissions
Digital banking fees
ATM and other transaction fees
Fee and commission expenses
Net fee and commission income
7. Dividend income
Dividend income from investments
Financial assets at fair value through profit or loss
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
44,243
13,013
149,679
206,935
44,937
8,990
145,760
199,687
(29,623)
(29,623)
177,312
(29,964)
(29,964)
169,723
44,150
13,013
149,679
206,842
(29,533)
(29,533)
177,309
17,259
5,471
66,446
89,176
(13,719)
(13,719)
75,457
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
9,628
21,161
1,667
21,950
23,550
11,435
89,391
(55)
89,336
9,279
19,669
1,197
24,469
14,267
7,471
76,352
(134)
76,218
-
-
1,199
21,950
23,550
11,760
58,459
(69)
58,390
-
-
690
9,360
3,725
7,185
20,960
(122)
20,838
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
562
562
136
136
50
50
-
-
107
Annual Report 2021 108
8. Other income
Profits from disposal of property and equipment
Realised gains/losses
Support fees from subsidiaries (note 29)
Office space recharge (note 29)
Management fees (note 29)
Gain on sale of Esiloan portfolio
Intercompany charges
Other
9. Other operating expenses
Staff costs
Acquisition costs relating to business combination
Administrative expenses
Depreciation and amortization
Operating lease
Software maintenance and support charges
Auditor’s remuneration (note 37)
Other
Break-up of staff costs:
Salaries, wages and other benefits
Superannuation costs
Cost of employee share based incentive plan
Total staff costs
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
105
297
-
-
-
-
-
301
703
221
4,004
-
-
-
3,025
-
3,718
10,968
105
(70)
1,890
1,529
378
-
-
285
4,117
221
952
1,751
1,699
350
3,025
16,536
563
25,097
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
75,607
30
56,350
36,398
5,325
4,910
1,590
13,918
194,127
67,360
4,055
4,192
75,607
75,186
-
48,900
35,065
3,353
3,562
1,248
15,556
182,870
68,233
3,944
3,009
75,186
70,658
30
53,582
36,398
5,289
4,831
1,452
13,885
186,127
62,622
3,844
4,192
70,658
35,067
-
19,006
18,653
511
1,741
1,144
7,187
83,309
29,990
1,879
3,198
35,067
10. Income taxes
The prima facie income tax expense on pre-tax accounting profit from operations reconciles to the income tax expense in
the financial statements as follows:
Profit before tax
Prima facie tax at 30% (2020: 30%)
Tax effect of:
Permanent differences
Prior year adjustment
Income tax expense
Represented by:
Current tax
Deferred taxes
Income tax expense
11. Deferred taxes
a. Net deferred tax assets where there is a right to offset:
Allowance for losses
Employee benefit provision
Lease liability
Depreciation and amortisation
Others
Net deferred tax asset
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
106,016
31,805
109,906
32,972
5,569
(2,168)
35,206
35,712
(506)
35,206
(2,834)
3,794
33,932
39,923
(5,991)
33,932
86,157
25,847
5,935
(2,148)
29,634
30,153
(519)
29,634
54,693
16,408
(1,929)
2,747
17,226
23,243
(6,017)
17,226
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
16,167
3,272
14,655
34,094
(16,500)
(606)
(17,106)
16,988
16,158
3,526
14,202
33,886
(17,388)
(16)
(17,404)
16,482
16,060
2,941
14,655
33,656
(16,500)
(682)
(17,182)
16,474
15,978
3,179
14,202
33,359
(17,388)
(15)
(17,403)
15,956
As at 31 December 2021, the Group had 685 (2020: 691) employees and 4 (2020: 2) consultants. The Parent had 633
(2020:626) employees and 4 (2020: 2) consultants.
109
Annual Report 2021 110
11. Deferred taxes (continued)
b. The movement on deferred tax account is as follows:
15. Financial assets at fair value through profit or loss
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
Balance at beginning of year
Statement of comprehensive income credit/(charge)
Balance at end of year
16,482
506
16,988
10,491
5,991
16,482
15,956
518
16,474
3,226
12,730
15,956
Equity securities
- Listed
- Unlisted
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
5,036
6,616
11,652
4,680
6,002
10,682
183
6,588
6,771
177
5,974
6,151
Represented by:
Deferred tax assets (note 11(a))
Deferred tax liabilities (note 11(a))
34,094
(17,106)
16,988
33,886
(17,404)
16,482
33,656
(17,182)
16,474
33,359
(17,403)
15,596
12. Cash and due from banks
Cash on hand
Exchange settlement accounts
Due from other banks
13. Central bank bills
Central bank and treasury bills
Less than 90 days
Over 90 days
Unearned discount
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
115,451
123,895
168,988
408,334
118,811
112,024
104,312
335,147
115,451
123,895
126,956
366,302
118,811
112,024
130,779
361,614
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
160,000
670,000
(34,638)
795,362
65,000
610,000
(27,126)
647,874
160,000
670,000
(34,638)
795,362
65,000
610,000
(27,126)
647,874
Central bank bills are debt securities issued by the Bank of Papua New Guinea (BPNG). Central bank bills amounting to
PGK160m (2020: PGK65m) with a maturity term of one to three months from the date of purchase are classified as cash and
cash equivalents (note 28). Central bank bills are measured at amortized cost.
14. Regulatory deposits
Regulatory deposit of the Group as at 31 December 2021 amounted to PGK 212,874,480 (2020: PGK 185,711,050). This
represents mandatory balance required to be maintained in a non-interest bearing account with the Central Bank -
Bank of Papua New Guinea. Regulatory deposits are measured at amortized cost. Regulatory deposit of the parent as
at 31 December 2021 amounted to PGK 212,874,480 (2020: PGK 185,711,050).
Overdrafts
Property mortgage
Asset financing
Insurance premium funding
Business and other loans
The movement in financial assets at fair value through profit or loss is reconciled as follows:
Balance at beginning of year
Gains from changes in fair value
Additions
Balance at end of year
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
10,682
817
153
11,652
7,635
2,510
537
10,682
6,151
467
153
6,771
339
2,666
3,146
6,151
The fair value of the listed equities is based on quoted market prices at the end of the reporting period. The quoted market
price used is the current market prices. These financial instruments are categorized as level 1 within the fair value hierarchy.
Unlisted equities are categorized within level 3 of the fair value hierarchy.
16. Loans and advances to customers
Loans to individuals
Loans to corporate entities
Gross loans and advances to customers
Expected credit losses
Details of gross loans and advances to customers are as follows:
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
577,417
1,411,130
1,988,547
(38,100)
1,950,447
514,928
1,135,148
1,650,076
(35,345)
1,614,731
577,417
1,404,602
1,982,019
(37,746)
1,944,273
514,928
1,129,886
1,644,814
(34,845)
1,609,969
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
78,489
547,260
30,293
-
1,332,503
1,988,547
83,611
481,424
17,653
1,949
1,065,439
1,650,076
78,489
547,260
30,293
-
1,325,977
1,982,019
83,611
481,424
17,653
1,949
1,060,177
1,644,814
111
Annual Report 2021 112
18. Investments in subsidiaries
Kina Funds Management Limited (KFM)
Kina Investment and Superannuation Services Limited (KISS)
Kina Wealth Management Limited (KWML)
Kina Nominees Limited (KNL)**
Kina Securities (Fiji) PTE Limited
Total Investment at cost
Provision for impairment
Balance as at 31 December
2021
%
100
100
100
100
100
Shareholdings*
2020
2021
2020
% Amount (PGK) Amount (PGK)
100
100
100
100
-
2
2
2
500,002
197
500,205
(251,677)
248,528
2
2
2
500,002
-
500,008
(251,677)
248,331
*All the subsidiaries are incorporated in Papua New Guinea and in Fiji. The results of the operations of above subsidiaries have
been consolidated in the Group’s financial statements.
** Impairment loss on investment in subsidiary amounted to PGK nil for the year ended 31 December 2021 (2020: PGK nil).
16. Loans and advances to customers (continued)
Movements in expected credit losses are as follows:
Balance at beginning of year
Provision derecognised in respect of sales of loan book
Impairment losses during the year
Loans written off
Bad debt recoveries
Amalgamation adjustment
Balance at end of year
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
35,345
-
6,555
(5,550)
1,750
-
38,100
20,525
(859)
20,833
(7,096)
1,943
-
35,345
34,845
-
6,701
(5,550)
1,750
-
37,746
-
(859)
11,828
(7,096)
1,943
29,029
34,845
In the prior year, the Group divested the Esiloan portfolio to Nationwide Microbank Limited (MiBank) for an amount of
PGK34.2m. The transaction was in line with the strategic partnership announced between Kina and MiBank in August 2019
to provide greater financial inclusion and provision of micro-finance to customers. The gain on sale of Esiloan portfolio
amounted to K3.0m recognised under other income.
17. Investments in government inscribed stocks
Government inscribed stocks principal balance
Unamortised premium
Unamortised discount
Accrued interest
Gross investments in government inscribed stocks
Expected credit losses
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
115,000
170
(4,048)
2,624
113,746
(1,639)
112,107
118,000
301
(4,777)
2,669
116,193
(1,674)
114,519
115,000
170
(4,048)
2,624
113,746
(1,639)
112,107
118,000
301
(4,777)
2,669
116,193
(1,674)
114,519
The movement in investments in government inscribed stocks is as follows:
Balance at beginning of year
Additions / (maturities)
Amortized discount/(premium)
Accrued interest
Write back / (addition) of expected credit losses
Amalgamation adjustment
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
114,519
(3,000)
598
(45)
35
-
112,107
34,003
85,000
(4,906)
1,607
(1,185)
-
114,519
114,519
(3,000)
598
(45)
35
-
112,107
-
85,000
(4,906)
1,607
(1,185)
34,003
114,519
Investments in government inscribed stocks are measured at amortized cost. Included within the balance is an amount of
PGK nil (31 December 2020: PGK nil) which has been pledged with a third party against repurchase agreement transaction.
113
Annual Report 2021 114
19. Property plant and equipment
Consolidated
Furniture &
Fittings
Building
improvements
Motor
Vehicles
Office
Equipment
Land &
Building
Work in
Progress
Right-of-use
assets
Total
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000 PGK ‘000
Cost
Balance 31
December
2019
Additions
Disposals
Balance 31
December
2020
Additions
Transfer in
(out)
Disposals
Balance 31
December
2021
Accumulated
depreciation
Balance 31
December
2019
Charge during
the year
Disposals
Balance 31
December
2020
Charge during
the year
Disposals
Balance 31
December
2021
Book value
Balance 31
December
2021
Balance 31
December
2020
4,810
17,685
5,785
37,979
2,129
-
62,799
131,187
-
-
893
-
1,168
(1,326)
5,055
-
-
-
1,074
-
1,976
(1,272)
10,166
(2,598)
4,810
18,578
5,627
43,034
2,129
1,074
63,503
138,755
-
-
-
4,214
-
-
164
-
(951)
8,158
72
-
-
-
-
1,229
12,060
25,825
(72)
-
-
-
(4,056)
(5,007)
4,810
22,792
4,840
51,264
2,129
2,231
71,507
159,573
(1,402)
(3,398)
(3,714)
(15,897)
(1,087)
(2,314)
(1,083)
(4,821)
-
-
1,283
-
(2,489)
(5,712)
(3,514)
(20,718)
(667)
-
(2,300)
(1,159)
(5,262)
-
908
-
(3,156)
(8,012)
(3,765)
(25,980)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(9,854)
(34,265)
(11,228)
(20,533)
1,034
2,317
(20,048)
(52,481)
(11,187)
(20,575)
3,042
3,950
(28,193)
(69,106)
1,654
14,780
1,075
25,284
2,129
2,231
43,314
90,467
2,321
12,866
2,114
22,316
2,129
1,074
44,454
86,274
Parent
Furniture &
Fittings
Building
improvements
Motor
Vehicles
Office
Equipment
Land &
Building
Work in
Progress
Right-of-use
assets
Total
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000 PGK ‘000
Cost
Balance 31
December
2019
Amalgamation
adjustment
Additions
Disposals
Balance 31
December
2020
Additions
Transfer in
(out)
Disposals
Balance 31
December
2021
Balance 31
December
2019
Amalgamation
adjustment
Charge during
the year
Disposals
Balance 31
December
2020
Charge during
the year
Disposals
Balance 31
December
2021
Book value
Balance 31
December
2021
Balance 31
December
2020
688
3,671
3,654
11,909
2,129
4,122
14,014
2,131
26,070
-
-
893
-
1,168
(1,326)
5,055
-
-
-
-
-
-
14,108
36,159
48,691
95,028
1,074
-
1,976
(1,272)
10,166
(2,598)
4,810
18,578
5,627
43,034
2,129
1,074
63,503
138,755
-
-
-
4,214
-
-
164
-
(951)
8,158
72
-
-
-
-
1,229
12,060
25,825
(72)
-
-
-
(4,056)
(5,007)
4,810
22,792
4,840
51,264
2,129
2,231
71,507
159,573
(566)
(753)
(2,310)
(10,490)
(1,480)
(3,815)
(1,642)
(7,914)
(443)
-
(1,144)
-
(844)
1,283
(2,314)
-
(2,489)
(5,712)
(3,513)
(20,718)
(667)
-
(2,300)
(1,159)
(5,262)
-
908
-
(3,156)
(8,012)
(3,765)
(25,980)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(5,396)
(19,515)
(9,240)
(24,091)
(6,447)
(11,192)
1,034
2,317
(20,049)
(52,481)
(11,559)
(20,947)
3,414
4,322
(28,194)
(69,106)
1,654
14,780
1,076
25,284
2,129
2,231
43,313
90,467
2,321
12,866
2,114
22,316
2,129
1,074
43,454
86,274
115
Annual Report 2021 116
Parent
Software
Customer deposit relationship/intangible Work in Progress
Total
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
20. Intangible assets
The acquisition of Australian and New Zealand (ANZ) Bank’s retail, commercial and SME banking businesses in PNG
on 23 September 2019 gave rise to the recognition of core customer deposit intangible.
The intangible assets were estimated to have a useful life of five years and three years respectively based on the license
term of software and expected length of customer deposit relationship and core deposit intangible. Customer deposit
relationship and core deposit intangible has a remaining useful life of one year respectively.
Consolidated
Software
Customer deposit relationship/intangible
Work in Progress
Total
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
Cost
Balance 31 December 2019
Additions
Transfer in (out)
Balance 31 December 2020
Additions
Transfer in (out)
37,521
5,058
206
42,785
1,154
15,136
22,468
-
-
22,468
-
-
Balance 31 December 2021
59,075
22,468
1,502
9,676
(206)
10,972
13,512
(15,136)
9,348
61,491
14,734
-
76,225
14,666
-
90,891
-
-
-
-
-
(12,244)
(14,532)
(26,776)
(15,452)
(42,228)
(4,884)
(6,821)
(11,705)
(6,229)
(17,934)
Accumulated depreciation
Balance 31 December 2019
Charge during the year
Balance 31 December 2020
Charge during the year
Balance 31 December 2021
Book value
Balance 31 December 2021
Balance 31 December 2020
(7,360)
(7,711)
(15,071)
(9,223)
(24,294)
34,781
27,714
Cost
Balance 31 December 2019
Amalgamation adjustment
Additions
Transfer in (out)
Balance 31 December 2020
Additions
Transfer in (out)
Balance 31 December 2021
Accumulated depreciation
Balance 31 December 2019
Amalgamation adjustment
Charge during the year
Disposals
Balance 31 December 2020
Charge during the year
Disposals
Balance 31 December 2021
Book value
Balance 31 December 2021
Balance 31 December 2020
8,353
29,168
5,058
206
42,785
1,154
15,136
59,075
(2,877)
(7,959)
(4,235)
-
(15,071)
(9,223)
-
(24,294)
34,781
27,714
4,534
10,763
9,348
10,972
48,663
49,449
21. Other assets
Prepayments
Security deposits and bonds
Other debtors
Less: Expected credit losses
Movement of expected credit loss on other assets is as follows:
Balances at beginning of year
Amalgamation adjustment
Write-off
Balance at end of year
-
22,468
-
-
22,468
-
-
22,468
-
(8,479)
(3,226)
-
(11,705)
(6,229)
-
(17,934)
1,056
446
9,377
(206)
10,673
13,512
(15,136)
9,049
-
-
-
-
-
-
-
-
9,409
52,082
14,435
-
75,926
14,666
-
90,592
(2,877)
(16,438)
(7,461)
-
(26,776)
(15,452)
-
(42,228)
4,534
10,763
9,049
10,673
48,364
49,150
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
5,684
5,545
38,708
49,937
(3,990)
45,947
4,038
-
(48)
(3,990)
1,550
5,435
142,866
149,851
(4,038)
145,813
4,038
-
-
4,038
5,673
5,497
35,213
46,383
(3,990)
42,393
4,038
-
(48)
(3,990)
1,512
5,387
142,343
149,242
(4,038)
145,204
101
3,937
-
4,038
117
Annual Report 2021 118
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
2,356,300
680,621
3,036,921
1,925,006
635,709
2,560,715
2,398,833
680,621
3,079,454
1,963,765
635,709
2,599,474
2021
Represented by:
Short term provisions
Long term provisions
Total employee provision
Consolidated
Parent
8,655
2,251
10,906
7,900
1,902
9,802
Consolidated
2020
Provision for Annual Leave
Provision for Long Service Leave
Provision for Salaries
Provision for Bonus
Total
Parent
Provision for Annual Leave
Provision for Long Service Leave
Provision for Salaries
Provision for Bonus
Total
2020
Represented by:
Short term provisions
Long term provisions
Total employee provision
Opening
balance
PGK ‘000
Additions
Payments
PGK ‘000
PGK ‘000
Closing
balance
PGK ‘000
3,156
2,065
67
3,780
9,068
3,706
619
49,508
5,116
58,949
(2,164)
(590)
(49,537)
(4,188)
4,698
2,094
38
4,708
(56,479)
11,538
2020
Opening
balance
PGK ‘000
Additions
Payments
PGK ‘000
PGK ‘000
Closing
balance
PGK ‘000
1,607
635
71
2,107
4,420
3,387
503
45,599
4,955
54,444
(628)
580
(45,633)
(2,590)
4,366
1,718
37
4,472
(48,271)
10,593
Consolidated
Parent
9,445
2,093
3,785
6,808
11,538
10,593
22. Due to customers
Corporate customers
Retail customers
23. Current income tax (assets) liabilities
Balance at beginning of year
Paid during the year
Current provision
Amalgamation adjustment
Prior year under provision
Balance at end of year
Net current income tax (assets) liabilities is represented by:
Current income tax asset
Current income tax liability
24. Employee provisions
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
4,883
(28,918)
37,862
-
(2,160)
11,666
3,696
(36,195)
39,923
-
(2,541)
4,883
3,761
(22,419)
32,300
-
(2,148)
11,494
(317)
(32,394)
23,243
13,448
(219)
3,761
(31)
11,697
11,666
(83)
4,966
4,883
-
11,494
11,494
-
3,761
3,761
Consolidated
2021
Provision for Annual Leave
Provision for Long Service Leave
Provision for Salaries
Provision for Bonus
Total
Parent
Provision for Annual Leave
Provision for Long Service Leave
Provision for Salaries
Provision for Bonus
Total
Opening
balance
PGK ‘000
Additions
Payments
PGK ‘000
PGK ‘000
Closing
balance
PGK ‘000
4,698
2,093
37
4,709
2,351
511
48,539
7,110
(2,743)
(353)
(48,576)
(7,470)
4,306
2,251
-
4,349
11,538
58,511
(59,142)
10,906
2021
Opening
balance
PGK ‘000
Additions
Payments
PGK ‘000
PGK ‘000
Closing
balance
PGK ‘000
4,366
1,719
37
4,470
2,165
533
44,807
6,644
(2,587)
(350)
(44,844)
(7,158)
10,593
54,149
(54,940)
3,944
1,902
-
3,956
9,802
119
Annual Report 2021 120
25. Lease liabilities
Details of associated lease liabilities recognised in respect of the right of use assets are presented below:
26. Other liabilities
Consolidated
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at 31 December
Lease liabilities included in statement of financial position at 31 December
Current
Non-current
Amounts recognised in statement of comprehensive income
Interest on lease liabilities
Expense relating to short-term leases
Amounts recognised in statement of cash flows
Total cash outflow for leases
31 Dec
31 Dec
2021
2020
PGK’000
PGK’000
14,365
34,327
10,430
59,122
11,724
31,434
16,161
59,319
14,408
34,442
48,851
3,752
7,061
10,813
11,834
35,508
47,342
3,841
6,552
10,393
20,130
19,986
Total cashflows for leases is recorded under Cash payments to employees and suppliers in the statement of cash flows.
Parent
Maturity analysis – contractual undiscounted cash flows
Less than one year
One to five years
More than five years
Total undiscounted lease liabilities at 31 December
Lease liabilities included in statement of financial position at 31 December
Current
Non-current
Amounts recognised in statement of comprehensive income
Interest on lease liabilities
Expense relating to short-term leases
Amounts recognised in statement of cash flows
Total cash outflow for leases
31 Dec
31 Dec
2021
2020
PGK’000
PGK’000
14,365
34,327
10,430
59,122
11,724
31,434
16,161
59,319
14,408
34,442
48,851
3,752
7,061
10,813
11,834
35,508
47,342
3,841
6,552
10,393
20,130
19,986
Accruals
Unclaimed money and stale cheques
Bank cheques
Accounts payable
Unearned commission income
Lease incentive payable
Advance payments
Other liabilities
Balance at end of year
Consolidated
Parent
2021
PGK ‘000
13,971
13,380
7,943
2,324
1,309
4,083
31,528
21,421
95,959
2020
PGK ‘000
14,497
9,028
20,044
6,271
1,676
4,783
22,902
13,370
92,571
2021
PGK ‘000
13,877
13,380
7,943
2,267
1,309
4,083
31,528
20,530
94,917
2020
PGK ‘000
13,894
9,028
20,044
6,223
1,676
4,783
22,902
12,943
91,493
27. Issued and paid ordinary shares
a. Movement
The Company does not have authorized capital and ordinary shares have no par value. The table below provides movement
in share capital.
In September 2020, the group conducted a Non-Renounceable Rights Issue (ANREO) to further strengthen the capital base
and regulatory ratios. Based on this, a total of 112,190,731 additional shares were issued resulting in an increase in
share capital of PGK 217.7 million.
Balances as at 31 December 2019
Share issued during the year
Balance as at 31 December 2020
Share issued during the year
Balance as at 31 December 2021
b. Earnings per share
Number of shares
Number of shares
Share capital
PGK ‘000
174,745
112,191
286,936
-
286,936
PGK ‘000
176,970
217,723
394,693
-
394,693
Basic earnings per ordinary share is calculated by dividing the net profit attributable to shareholders by the weighted
average number of ordinary shares on issue during the year. The group has no significant dilutive potential ordinary shares.
Consequently, basic earnings per ordinary share equals diluted earnings per share.
Net profit attributable to shareholders – PGK’000
Weighted average number of ordinary shares basic earnings
Weighted average number of ordinary shares diluted earnings
Basic earnings per share (in toea)
Diluted earnings per share (in toea)
c. Share-based payment reserve
Consolidated
2021
70,813
286,936
290,339
24.68
24.39
2020
75,974
203,941
205,024
37.25
37.06
Kina operates both a Short Term Incentive (STI) and Long Term Incentive (LTI) plan. The purpose of these Plans is to
assist in the reward, retention and motivation of key management personnel and align the interests of management and
shareholders. The plans are commensurate with those adopted by major banks in Australia and the Pacific and is managed
by an independent Plan manager. The operation of both the STI and LTI plans are explained in the next page:
Total cashflows for leases is recorded under Cash payments to employees and suppliers in the statement of cash flows.
121
Annual Report 2021 122
27. Issued and paid ordinary shares (continued)
Short term incentive plan (STI Plan)
The STI plan provides participants with an opportunity to earn an incentive calculated as a percentage of their salary each
year, conditional upon them achieving specified performance targets. Under the plan 65% of any award granted is paid as a
cash bonus, with the remaining 35% awarded as a grant of performance rights to shares. The granted performance rights are
restricted from exercise and subject to the Company’s clawback policy and subject to the rules of the Plan.
The following STI plan arrangements were in place during the year ended 31 December 2021:
Date of grant
Number of share rights granted
Market value at grant date
Vesting date
Vesting conditions
1 April 2021
1 April 2020
871,109
AUD 717,185
1 April 2023
Continued Service
403,180
AUD 576,547
1 April 2022
Continued Service
Brought forward from previous year
Expense arising from share incentive plans
Rights vested
Rights forfeited or lapsed
Total
The fair value at grant date of share rights awarded under the incentive schemes is recognised as an expense over t
he expected vesting period with a corresponding increase in the share based payments reserve in equity.
The movement in the Share-Based Premium Reserve is as below:
28. Statements of cash flows
a) For the purposes of the statements of cash flow, cash and cash equivalents comprises the following:
Date of grant
1 April 2021
1 April 2020
1 April 2019
b) Movement in investment securities is as follows:
Consolidated
2021
PGK’000
2,774
4,192
(3,379)
-
3,587
2020
PGK’000
2,063
3,008
(2,297)
-
2,774
Consolidated
Parent
2021
2020
2021
2020
PGK ‘000
408,334
160,000
568,334
PGK ‘000
335,147
65,000
400,147
PGK ‘000
336,302
160,000
526,302
PGK ‘000
361,614
65,000
426,614
Consolidated
2021
PGK’000
635,362
160,000
112,107
11,652
919,121
2020
PGK’000
582,874
65,000
114,519
10,682
773,075
Movement
PGK’000
52,488
95,000
(2,412)
970
146,046
Cash and due from banks (note 12)
Central bank bills (note 13)
Central bank bills (note 13)
Central bank bills & other eligible bills (less than 3 months)
Government inscribed stocks (note 17)
Financial assets at FVTPL
Total
c) Reconciliation of net profit after tax for the year to net cash flows from operating activities is presented below:
Net profit after tax
Profit from disposal of property and equipment
Depreciation and amortization (note 19 and 20)
(Premium)/discount amortisation (note 17)
Share-based payment expense
Net (losses)/gains from changes in fair values of financial assets (note 15)
Increase in income tax payable
Decrease in deferred income tax (note 11b)
Other one-off expenses (note 31)
Foreign translation loss/(gain) on Nostro bank account
Changes in net assets and liabilities:
Increase in assets
Increase in liabilities
Net cash inflow/(outflow) from operating activities
Consolidated
Parent
2021
PGK ‘000
70,810
(105)
36,398
598
813
(817)
6,783
(506)
8,407
4,184
2020
PGK ‘000
75,974
(221)
35,065
(4,906)
711
2,510
1,186
(5,991)
-
-
2021
PGK ‘000
56,523
(105)
36,398
598
813
(467)
7,733
(519)
8,407
98
2020
PGK ‘000
37,467
(221)
18,653
(4,906)
711
2,666
4,077
(12,730)
-
-
(347,913)
468,370
247,022
(226,709)
49,509
(72,872)
(407,413)
472,021
174,087
(233,347)
73,070
(114,560)
Long term incentive plan (LTI plan)
The LTI plan provides participants with an opportunity to receive an equity interest in Kina through the granting of
performance rights. LTI plan participants may be offered performance rights that may be subject to vesting conditions as set
out by the Board. The selection of participants is at the discretion of the Board.
A performance right is a contractual right to receive one ordinary share in Kina, subject to performance and vesting
conditions being met. Each vested performance right represents a right to one ordinary share. If the participant leaves
Kina any unvested Performance Rights will be forfeited (unless the Board determines otherwise).
The following LTI plan arrangements were in place during the year ended 31 December 2021:
Number of share rights granted
Market value at grant date
Fair value at grant date
Vesting date
Vesting conditions
1,399,664
AUD 1,152,341
AUD 811,805
1 April 2024
Continued Service
50% Target TSR
50% target EPS growth
617,987
AUD 883,722
AUD 349,163
1 April 2023
Continued Service
50% target TSR
50% target EPS growth
1,069,800
AUD 970,523
AUD 543,493
1 April 2022
Continued Service
50% target TSR
50% target EPS growth
The estimated fair value of share rights issued on 1 April 2021 under the LTI plan was AUD 0.58, compared to the grant date
market value per share of AUD 0.8233. Fair value is generally estimated using a Monte Carlo simulation model taking into
account the share price at grant date, the vesting period, share price volatility, risk-free interest rate and market
performance conditions.
Retention incentive
The retention plan is a once off award of performance rights to assist in the retention of key eligible participants.
No retention rights were granted during the year.
Movement in outstanding share rights
Outstanding rights at beginning of year
New rights granted
Rights vested and shares issued/purchased
Rights forfeited or lapsed
Outstanding rights at end of year
Consolidated
2021
Number
3,661,485
2,270,773
(1,767,278)
-
4,164,980
2020
Number
3,586,169
1,021,167
(945,851)
-
3,661,485
123
Annual Report 2021 124
29. Related party transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence
over the other party in making financial or operational decisions. The Group is controlled by Kina Securities Limited (“KSL”)
incorporated in Papua New Guinea, which owns 100% of the ordinary shares of its subsidiaries, unless otherwise stated.
A number of banking transactions are entered into with related parties in the normal course of business. These include loans,
deposits and foreign currency transactions. These transactions were carried out on normal commercial terms and at normal
market rates. The volumes of related party transactions, outstanding balances at 31 December 2021, and related expenses
and income for the year ended are as follows:
a) Directors and management transactions
From time to time during the year, Directors and Senior Management of the Parent and subsidiaries had deposits in the
Group on normal terms and conditions. Brokerage rates for buying and selling shares for the Senior Management and staff
are discounted.
A listing of the members of the Board of Directors is shown in the Annual Report. In 2021, the total remuneration of the
Directors was PGK3,965,065 (2020: PGK3,219,047).
Key management personnel (KMP) of the group includes directors and the executive general managers (EGMs)
during the year.
The table below shows the Group specified EGM remuneration in aggregate (in PGK’000).
No of KMP
Salary
Bonus
Super
Super
Equity options
Equity options
Other benefits
Other benefits
Total
2021
2020
11*
10
8,305
7,650
3,707
2,093
-
-
813
711
2,083
2,084
14,908
12,538
*2 resigned as of 12 November 2021, 1 position replaced as of 22 November 2021
b) Subsidiary transactions and balances
The Company maintains an intercompany account with subsidiary undertakings, which are interest bearing at the rate of
KSL cost of funds plus 12.50 (2020: 12.50) basis points, unsecured and with no fixed term of repayment. Details as follows:
Transactions
Balance outstanding
Income
2021
PGK’000
784
3,254
-
-
-
4,038
Expenses
2021
PGK’000
-
150
-
-
-
150
Income
2020
PGK’000
860
2,869
-
-
-
3,729
Expenses
2020
PGK’000
-
170
-
-
-
170
2021
PGK’000
62,349
-
224
64
-
62,637
Due from
2020
PGK’000
1,323
-
-
64
-
1,387
2021
PGK’000
-
(9,612)
-
-
-
(9,612)
Due to
2020
PGK’000
-
(8,880)
(108)
-
-
(8,988)
KFM
KISS
KWM
KNL
KSL Fiji
30. Investments under trust
The Group acts as trustee holding or placing of assets on behalf of superannuation funds and individuals. As the Group acts
in a fiduciary capacity, these assets are not assets of the Group and, therefore, are not included in its statements of financial
position. The Group is also engaged in investing client monies. A corresponding liability in respect of these monies is also
excluded from the statements of financial position. Investments under trust at year end are:
Clients funds held for shares trading
Consolidated
Parent
2021
PGK’000
4,200
4,200
2020
PGK’000
2,202
2,202
2021
PGK’000
4,200
4,200
2020
PGK’000
2,138
2,138
31. Other one-off expenses
In September 2021, the PNG Independent Consumer and Competition Commission (ICCC) did not approve the acquisition of
the Pacific business from Westpac. In accordance with the requirements of IFRS, the Group has expensed relevant associated
costs to the Statement of Comprehensive Income. A total of PGK 27.7m, comprising costs incurred directly by Kina (PGK 8.4m)
and the costs incurred by Westpac (PGK 19.3m), has been charged to the Statement of Comprehensive Income.
32. Refund of deposit from Westpac
As part of the supposed purchase price, the Group made an advance payment of PGK 111m (AUD 42m) to Westpac in 2020
and it refunded PGK 84.6m (AUD 32m) to Kina and retained PGK 26.4m (AUD 10m) as a cost reimbursement.
33. Segmented reporting
The segment information provided to the Chief Executive Officer for the reportable segments for the year ended 31
December 2021 is as follows:
Banking & Finance
Wealth Management
Total
PGK ‘000
PGK ‘000
PGK ‘000
Interest income
Interest expense
Foreign exchange income
Fee and commission income
Other revenue
Total external income
Other operating expenses
Provision for impairment
Depreciation and amortisation
Total external expenses
Profit before inter-segment revenue and expenses
Inter-segment income
Inter-segment expense
Profit before tax
Income tax expense
Profit after tax
Total assets
Total assets include:
206,932
(29,623)
66,316
58,389
837
302,851
(177,428)
(6,665)
(36,398)
(220,491)
82,360
3,797
-
86,157
(29,634)
56,523
3,706,504
3
-
(683)
30,946
1,246
31,512
(8,002)
146
-
(7,856)
23,656
-
(3,797)
19,859
(5,572)
14,287
79,154
206,935
(29,623)
65,633
89,335
2,083
334,363
(185,430)
(6,519)
(36,398)
(228,347)
106,016
3,797
(3,797)
106,016
(35,206)
70,810
3,785,658
Additions to non-current assets
Total liabilities
(28,431)
(3,206,686)
-
(2,349)
(28,431)
(3,209,035)
Banking and finance segments includes the operations of the Kina Bank while Wealth Management includes fund
management and fund administration business.
125
Annual Report 2021 126
33. Segmented reporting (continued)
The segment information provided to the Chief Executive Officer for the reportable segments for the year ended
31 December 2020 is as follows:
Banking & Finance
Wealth Management
Total
PGK ‘000
PGK ‘000
PGK ‘000
Interest income
Interest expense
Foreign exchange income
Fee and commission income
Other revenue
Total external income
Other operating expenses
Provision for impairment
Depreciation and amortisation
Total external expenses
Profit before inter-segment revenue and expenses
Inter-segment income
Inter-segment expense
Profit before tax
Income tax expense
Profit after tax
Total assets
Total assets include:
Additions to non-current assets
Total liabilities
199,581
(29,964)
55,196
46,489
10,566
281,868
(138,450)
(21,811)
(35,065)
(195,326)
86,542
15,392
(11,800)
90,134
(28,807)
61,327
3,285,349
(22,924)
(2,719,289)
106
-
43
29,729
3,048
32,926
(9,355)
(207)
-
(9,562)
23,364
-
(3,592)
19,772
(5,125)
14,647
14,202
-
(3,228)
199,687
(29,964)
55,239
76,218
13,614
314,794
(147,805)
(22,018)
(35,065)
(204,888)
109,906
15,392
(15,392)
109,906
(33,932)
75,974
3,299,551
(22,924)
(2,722,517)
There is only one segment for the Parent entity and the information is the same as the primary statements.
34. Contingent liabilities
Litigations and claims
Contingent liabilities exist in respect of actual and potential claims and proceedings that have not been determined. An
assessment of the Group’s likely loss has been made on a case by case basis for the purposes of the financial statements and
specific provisions are made where appropriate. As at 31 December 2021, the Group is a party to some litigation before the
courts, however, management does not believe these will result in any material loss to the Group. There was no litigation
matter of a material nature that is not already provided for in the financial statements.
Other contingent liabilities
The Bank guarantees the performance of customers by issuing bank guarantees to third parties. The risk involved is
essentially the same as the credit risk involved in extending loan facilities to customers, therefore these transactions are
subject to the same credit origination, portfolio maintenance and collateral requirements applied to customers applying
for loans. As the facilities may expire without being drawn upon, the notional amount does not necessarily reflect future
cash requirements. The credit risk of these facilities may be less than the notional amount but as it cannot be accurately
determined, the credit risk has been taken as the contract notional amount.
Bank guarantee
127
2021
2020
PGK‘000
PGK‘000
46,829
46,829
88,704
88,704
35. Commitments
Capital commitments
There was a total of PGK3,822,580 relating to commitments under contracts for capital expenditure at balance sheet date
(31 December 2020: PGK4,927,290).
Loan commitments
There was a total of PGK168,623k relating loan commitment at balance sheet date (31 December 2020: PGK204,924k).
36. Fair value of financial assets and liabilities
The Group measures fair values in accordance with IFRS 13, which defines fair value as the price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The
Group also uses a fair value hierarchy that categorises into three levels the inputs to valuation techniques used to measure
fair value, which gives highest priority to quoted prices.
• Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the
measurement date. Assets and liabilities are classified as Level 1 if their value is observable in an active market.
• Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly. A Level 2 input must be observable for substantially the full term of the instrument. Level 2 inputs include quoted
prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not
active, inputs other than quoted prices that are observable for the asset or liability.
• Level 3 inputs are unobservable inputs. Assets and liabilities are classified as Level 3 if their valuation incorporates significant inputs
that are not based on observable market data.
Where possible, fair value is determined by reference to a quoted market price for the instrument valued. The group does
not hold any material financial instruments for which quoted prices are not available other than investment in unlisted shares
which are classified in Level 3 category.
The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair
value, grouped by fair value hierarchy level.
Financial instruments measured at fair value
The following tables present the Group’s and the parent’s assets and liabilities that are measured at fair value at
31 December 2021.
Consolidated
Level 1
PGK’000
Level 2
PGK’000
Level 3
PGK’000
Total
PGK’000
Investment securities measured at FVTPL
- Investment in shares – Listed
- Investment in shares – Unlisted
Total assets
5,036
-
5,036
-
6,616
6,616
5,036
6,616
11,652
-
-
-
Parent
Level 1
PGK’000
Level 2
PGK’000
Level 3
PGK’000
Total
PGK’000
Investment securities measured at FVTPL
- Investment in shares – Listed
- Investment in shares – Unlisted
Total assets
183
-
183
-
-
-
-
6,588
6,588
183
6,588
6,771
Annual Report 2021 128
36. Fair value of financial assets and liabilities (continued)
The following tables present the Group’s and the parent’s assets and liabilities that are measured at fair value at
31 December 2020.
Consolidated
Level 1
PGK’000
Level 2
PGK’000
Level 3
PGK’000
Investment securities measured at FVTPL
- Investment in shares – Listed
- Investment in shares – Unlisted
Total assets
4,680
-
4,680
-
6,002
6,002
-
-
-
Parent
Total
PGK’000
4,680
6,002
10,682
Level 1
PGK’000
Level 2
PGK’000
Level 3
PGK’000
Total
PGK’000
Investment securities measured at FVTPL
- Investment in shares – Listed
- Investment in shares – Unlisted
Total assets
177
-
177
-
-
-
-
5,974
5,974
177
5,974
6,151
Reconciliation of level 3 fair value measurements of financial assets and financial liabilities
The group holds investment in unlisted securities amounting to PGK6,616,782 (31 December 2020: PGK6,002,718) in level
3 category for which carrying amount is considered as reasonable approximation of fair value. As such no reconciliation of
level 3 financial instruments has been presented in these financial statements.
The parent holds investment in unlisted securities amounting to PGK6,588,495 (31 December 2020: PGK5,974,431) in level
3 category for which carrying amount is considered as reasonable approximation of fair value. As such no reconciliation of
level 3 financial instruments has been presented in these financial statements.
Financial instruments not measured at fair value
For the financial instruments not measured at fair value as at 31 December 2021 and 2020, there is no material difference
between the fair value and carrying value of the Group’s and the Parent’s financial assets and liabilities.
37. Auditors’ remuneration
Consolidated
Consolidated
Parent
Audit and audit related
Other services
2021
PGK‘000
1,590
-
1,590
2020
PGK‘000
909
339
1,248
2021
PGK‘000
1,452
-
1,452
2020
PGK‘000
819
325
1,144
38. Goodwill
On September 2015, the Group, through Kina Ventures Limited, a 100% owned subsidiary of Kina Securities Limited,
acquired all of the shares in Maybank (PNG) Limited and Maybank Property (PNG). Maybank (PNG) and Maybank Property
(PNG) are the PNG subsidiaries of Malaysia’s largest bank. The acquisition strengthened Kina Bank’s investment in PNG as it
is an excellent fit for its expansion program.
The goodwill arising on this acquisition was recorded at PGK92,786,000. The goodwill was attributable to Maybank (PNG)
Limited’s strong position and synergies expected to arise after the Group’s acquisition of the new subsidiary. None of the
goodwill is expected to be deductible for tax purposes.
Goodwill was tested for impairment as at 31 December 2021 and no impairment loss arose on this assessment. The goodwill
is allocated and tested at the KSL level. The recoverable amount has been determined using both the fair value and value
in use at each reporting date. Value in use refers to expected future cash flows over the next five years on a discounted cash
flow basis. The fair value is determined based on the multiples of future maintainable earnings.
The calculations of value in use includes cash flow projections covering a five-year period. Cash flows beyond the five-year
period are extrapolated using the estimated growth rate of 3.0% (31 December 2020: 3.0%). The estimated cash flows are
discounted using a discount rate of 4.4% (31 December 2020: 4.7%). The fair value calculation includes future maintainable
earnings of PGK 116.6 million (31 December 2020: PGK 128.5 million) and earnings multiple of 8 times. There is no
reasonably possible change in these key assumptions on which the CGU’s recoverable amount is based would cause its
carrying amount to exceed its recoverable amount.
39. Group reorganisation
During the prior year, the Group reorganised its legal structure so that the subsidiaries Kina Bank Limited, Kina Ventures
Limited and Kina Properties Limited (amalgamating subsidiaries) were amalgamated into Kina Securities Limited (KSL). The
amalgamation was affected at the carrying amount of net assets of the amalgamating subsidiaries immediately before the
effective date of amalgamation. The difference between the pre-amalgamation carrying amount of the net assets and the
investment in the amalgamating subsidiaries was recognised as ‘capital reserves’ in separate financial statements of KSL.
Further, the separate financial statement of KSL includes results of the amalgamating subsidiaries from the effective date of
amalgamation. The amalgamation does not have any impact on the consolidated financial statements.
40.Events after the statements of financial reporting date
Declaration of dividend
Subsequent to the financial reporting date, the directors declared a final dividend of PGK 18.5 toea (AUD 7.0 cents) per
share (PGK 53.1 million).
Impact of coronavirus (COVID-19)
The spread of Novel Coronavirus (COVID-19) continues to impact businesses globally given the duration of the pandemic,
severity of the economic downturn and the speed of economic recovery. In accordance with IAS 10 ‘Events after the
Reporting Period’. the Group considered whether events after the reporting period confirmed conditions existing before
the reporting date. Consideration was given to the macro-economic impact of lockdowns, closure of international borders
and the government support measures. The Group did not identify any subsequent events arising from the COVID-19
related developments, which would require adjustment to the amounts or disclosures in the financial statements. Further, no
other material non-adjusting subsequent events relating to COVID-19 were identified requiring disclosure in the financial
statements. Given the evolving nature of the current situation, the Group will continue to regularly review the forward-looking
assumptions and forecast economic scenarios. There has been no other transactions or events of a material and unusual
nature between the end of the reporting period and the date of the report likely, in the opinion of the Directors of the
Group, to affect significantly the operations of the Group, the results of those operations, or state of affairs of the Group
in future years.
129
Annual Report 2021 130
Shareholder Information.
Additional information required by the Australian Securities Exchange Limited Listing Rules and not disclosed elsewhere in
the Report is set out below. The information is current as of 14 March 2022.
h. 20 largest holders of quoted securities (fully paid ordinary shares)
Range
Name
Number of Shares % of Total Shares Issued
a. The distribution of holders of quoted securities (fully paid ordinary shares)
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
Securities
%
No. of holders
%
502,412
4,116,294
7,982,024
86,281,973
188,053,197
286,935,900
0.18
1.43
2.78
30.07
65.54
100.00
878
1,435
991
2,644
348
6,296
b. The distribution of holders of unquoted securities (performance rights)
Range
1 to 1,000
1,001 to 5,000
5,001 to 10,000
10,001 to 100,000
100,001 and over
Total
Securities
%
No. of holders
%
0
0
0
202,183
4,072,672
4,274,855
0
0
0
4.73
95.27
100.00
0
0
0
3
11
14
c. The distribution of holders of unquoted securities (performance rights)
13.95
22.79
15.74
41.99
5.53
100.00
0
0
0
21.43
78.57
100.00
Class of equity security
Quoted securities (fully paid ordinary shares)
Unquoted securities (performance rights)
d. Unmarketable Parcel of Shares
Securities
No. of holders
286,935,900
4,274,855
878
14
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
ASIAN DEVELOPMENT BANK
COMRADE TRUSTEE SERVICES LIMITED
CITICORP NOMINEES PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
MINERAL RESOURCES CMCA HOLDINGS LIMITED
AIRWOLF LIMITED
NATIONAL NOMINEES LIMITED
GAS RESOURCES PNGLNG PLANT LIMITED
COLUMBUS ASSET MANAGEMENT PTY LTD
GARMARAL PTY LTD
MR IVAN LU
GEAT INCORPORATED
MS MICHELLE MANSFIELD JOYCE GOLDING
MS RENEE YIN LAE GOLDING
MR STEPHEN WAYNE WILLIAM GOLDING
BNP PARIBAS NOMINEES PTY LTD
KINA ASSET MANAGEMENT NO 1 LIMITED
HITSUMA SDN BHD
PERPETUAL SHIPPING LIMITED
Total Top 20
Balance of Register
Total fully paid ordinary shares on issue
i. On-market buy-back
There is no current on-market buy-back.
48,040,178
10,751,916
7,951,328
5,800,176
5,465,652
5,312,834
2,885,390
2,710,754
2,139,037
2,030,000
1,832,615
1,825,172
1,570,500
1,363,654
1,363,654
1,363,654
1,328,314
1,272,500
1,250,000
1,250,000
107,507,328
179,428,572
286,935,900
16.74
3.75
2.77
2.02
1.90
1.85
1.01
0.94
0.75
0.71
0.64
0.64
0.55
0.48
0.48
0.48
0.46
0.44
0.44
0.44
37.47
62.53
100.00
The number of shareholders holding less than a marketable parcel of ordinary shares is 234, holding 66,496 securities.
j. Securities purchased on-market during the reporting period
e. Substantial Shareholders
Number of shares purchased
Average purchase price
Name
Number of shares
% of total shares issued
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
48,040,178
16.74
To satisfy the entitlements of holders of performance rights under
the Kina Performance Rights Plan
1,087,444
$0.99
f. Stock Exchanges
The Company’s ordinary fully paid shares are listed on the Australian Securities Exchange (ASX) and the Papua New
Guinea National Stock Exchange (PNGX).
g. Voting Rights
Each ordinary shareholder present at a general meeting (whether in person, by proxy or by representative), is entitled to
one vote on a show of hands, or on a poll, for each fully paid ordinary share held.
131
Annual Report 2021 132
Corporate Directory.
Directors
Isikeli Taureka (Chairman)
Greg Pawson (MID)
Karen Smith-Pomeroy
Dr Jane Thomason
Paul Hutchinson
Andrew Carriline
Dr Ila Temu
Company Secretary
Chetan Chopra
Share Registry
Papua New Guinea
PNG Registries Ltd
Level 4, Cuthbertson Haus
PO Box 1265,
Port Moresby Papua New Guinea
Telephone: (675) 321 6377
Facsimile: (675) 321 6379
Email: brenda.igo@linkgroup.com
Australia
Link Market Services Limited
Level 21, 10 Eagle St
Brisbane QLD 4000
Telephone: 1300 554 474 (within
Australia)
+61 1300 544 474 (outside Australia)
Auditor
Deloitte Touche Tohmatsu Ltd
Level 9 Deloitte Haus
MacGregor St
PO Box 1275, Port Moresby
National Capital District
Papua New Guinea
Telephone: +675 308 7000
Facsimile: +675 308 7001
www.deloitte.com/pg
Stock Exchange Listing
ASX Code: KSL
PNGX Code: KSL
www.kinabank.com.pg
Pictured on Front Cover:
Tamika Sisione
Registered Office
Head Office
Level 9, Kina Bank Haus Douglas St
PO Box 1141, Port Moresby
National Capital District 121
Papua New Guinea
Telephone: +675 308 3888 or
+675 308 3800
Boroko Branch
Turumu St Boroko
PO Box 1718, Boroko, 111
National Capital District
Papua New Guinea
Goroka Branch
Cnr of Fox & Elizabeth St
Ground Floor, Gouna Plaza
PO Box 767, Goroka 441
Eastern Highlands Province
Papua New Guinea
Habour City Branch
Portion 13 Section 44
Allotment 30
Off Poreporena Freeway
PO Box 1141, Port Moresby 121
National Capital District
Papua New Guinea
Hides Branch
Block 8 – HGDC Para Camp,
Tari, Hela Province
Papua New Guinea
Jacksons Branch
Jacksons International Airport
PO Box 1152, Port Moresby 121
National Capital District
Papua New Guinea
Kimbe Branch
Cnr San Remo Drive and Talasea Rd
PO Box 466, Kimbe 621
West New Britain Province
Papua New Guinea
Kina Bank Centre
Level 1, Kada Gunan Building
Habour City
PO Box 1141,
Port Moresby
National Capital District
Papua New Guinea
Kokopo Branch
Peter Torot Street, Tabubar Kokopo,
PO Box 419,
Kokopo
East New Britain Province
Papua New Guinea
Lae Market Branch
Cnr Cedarbank St and Aircorps Rd
Second St, Top Town
PO Box 674,
Lae Morobe Province
Papua New Guinea
Lae Top Town Branch
Ground Floor
Nambawan Super Haus
2nd St Top Town
PO Box 682, Lae
Morobe Province
Papua New Guinea
Lihir Branch
Block 830, Wide Rd
Londolovit
PO Box 223, Lihir
New Ireland Province
Papua New Guinea
Madang Branch
Section 20, Lot 08
Coastwatcher’s Ave
PO Box 181, Madang 511
Madang Province
Papua New Guinea
Mt Hagen Branch
Hagen Dr
PO Box 121, Mt Hagen 281
Western Highlands Province
Papua New Guinea
Port Moresby Branch
Cnr Musgrave St and Champion Parade
PO Box 143, Port Moresby 121
National Capital District
Papua New Guinea
Vision City Branch
Ground Floor
Sir John Guise Drive
PO Box 1141,
National Capital District 121
Papua New Guinea
Waigani Cameron Rd Branch
Cnr Waigani Dr and
Cameron Rd
PO Box 252, Waigani 131
National Capital District 121
Papua New Guinea
Waigani Drive Branch
Cnr Waigani and Islander Dr
PO Box 1141, Port Moresby
National Capital District 121
Papua New Guinea
Wewak Branch
Centre St
PO Box 1069, Wewak 531
East Sepik Province
Papua New Guinea
133
Annual Report 2021 134
A digital version of this report
can be accessed via
investors.kinabank.com.pg/investors