Innovation.
Vision.
Annual Report 2022
ARBN 606 168 594
Rt. Hon. Sir Rabbie
Namaliu
GLC KMCG PC
1947 - 2023
In memoriam
We’re saddened to report the loss of
six valued and beloved employees and
a former board director and Chairman
during 2022 and at the start of 2023.
We thank all our people for the extraordinary effort
that they have made to help their families rebuild
their lives. Our support and sympathies are extended
to the families of the late Madeline Gabiobu, Rai Gia,
Jennifer Goma, Dessie Buka, Andrew Soro Mongagi
and Brolin Kipma.
We also mourn with the people of East New Britain
and Papua New Guinea for the loss of Rt Hon. Sir
Rabbie Langanai Namaliu GCL KCMG PC. Following
his distinguished political career, the late Sir Rabbie
served as a non-executive board member and
eventually as Chairman for Kina Securities from
2000 to 2017. We are extremely grateful to have
had the privilege of his leadership and guidance.
He performed his duties with great energy and the
utmost professionalism. His achievements include
leading the renewal of the Board and Management
Team and guiding Kina Bank’s growth and sustainable
performance during his tenure as Chairman.
Madeline Gabiobu
Rai Gia
Jennifer Goma
Dessie Buka
Andrew Soro Mongagi
Brolin Kipma
“Blessed are they that mourn: for
they shall be comforted.”
Matthew 5:4
Financial Snapshot
Statutory NPAT
PGK 116.5 million
Deposits
PGK 3,879 million
Up 65%*
Up 28%
Revenue
PGK 366.5 million
Net Loan & Advances
PGK 2,159 million
Up 10%
Up 11%
Customers
207,946
Up 19%
Return on Equity (ROE)
FY22
FY21
12.3%
19.6%
Capital Adequacy
FY22
FY21
22.5%
23.3%
15.3%
Market Share
Lending
12.9^
Market Share
Deposits
*impact of 45% increase in DTA, hence decrease in ITE
Contents.
01 About
04 Board
Our Values
About Kina
02 Message
Chairman’s Message
Managing Director and Chief
Executive Officer Messages
03 Segments
Our Segments
Strategic Overview
5
8
11
13
16
17
Board of Directors
23
05 Executives
Senior Executive Team
27
06 Remuneration
Report
1 Introduction & overview to shareholders
33
2 Kina’s Key Management Personal (KMP)
33
3 Executive remuneration
4 Non-executive director arrangements
5 Related party transactions
6 Directors’ interest in shares
34
44
45
45
3
07 Corporate
Governance
09 Shareholder
Shareholder Information
140
Corporate Governance
48
08 Directors’
Report
10 Corporate
Directory
Directors’ Report
66
Corporate Directory
142
Directors’ Declaration
Independent Auditors’ Report
Statements of Comprehensive Income
Statements of Financial Position
Statements of Changes in Equity
Statements of Cash Flows
Notes to the Financial Statements
69
70
75
76
77
78
79
4
We believe
in the power
of together.
We believe that bigger goals are possible
when everyone is aligned.
We believe that smarter banking products
become better with clever technology.
We believe that ideas come to life more easily
when you work together.
And, we believe that hard work and ambition
are a sure path to home ownership.
Thinking together is a fundamental part of
how we make our values manifest.
We’re committed to 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.
We’re also about building a better future
for PNG. A better future for hard working
Papua New Guineans and the businesses
– large and small – that are critical to our
countries progress. Because at its heart, our
nation’s progress is our own progress and
that’s wonderful news for our shareholders.
That’s what we mean by ‘together it’s possible’.
5
Potential.
Realised.
7
01 About Kina Securities Limited.
Kina Securities Limited and its related entities (KSL,
Kina Securities Limited has two key divisions.
Kina, the Kina Group, the Group, or the Company)
Kina Bank and Kina Wealth.
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
Kina Bank delivers home, business and corporate
loans, everyday banking transactions, credit cards,
merchant and payment facilities and banking services
to smaller institutions.
loans, investments to mortgages, financial advice
Kina Wealth encompasses Kina Investment and
and investment management. We are committed to
Superannuation Services, Kina Funds Management
delivering exceptional service and this is what sets
and Kina Nominees servicing funds administration,
us apart in the market. Since our inception, we have
wealth advice, stockbroking, funds management and
grown to reach over 650,000 people, administering
nominee custodial services.
880,000 superannuation accounts for beneficiaries
and having a total asset base of PGK 4.7 billion.
Kina’s Corporate Governance Statement is available
on the Company’s website:
investors.kinabank.com.pg/Investors/?page=corporate-
governance
Kina Funds Management Ltd
Kina
Securities
Limited.
Kina Nominees Ltd
Kina Investment and
Superannuation Services Ltd
Kina Wealth Management Ltd
8
.
)
t
h
g
i
r
(
a
k
e
r
u
a
T
)
i
l
e
K
(
i
l
e
k
i
s
I
n
a
m
r
i
a
h
C
d
n
a
)
t
f
e
l
(
n
o
s
w
a
P
y
r
o
g
e
r
G
O
E
C
/
r
o
t
c
e
r
i
i
D
g
n
g
a
n
a
M
9
10
02
Chairman’s Message.
I am immensely proud of our people, who work hard on delivering on our purpose.
We continue to provide competitive products and services to help improve the prosperity
of our customers and our communities that we serve.
Dear Shareholders,
earnings back to the owners of our business when
I am pleased to introduce Kina’s Annual Report for
growth is achieved.
the financial year ended 31 December 2022 (2022).
Our total capital adequacy is 22.5% and this
2022 was a year of two halves. In the first half of the
year, the national election slowed private sector
demand as business and customers awaited the
results. Post-election saw the private sector recover
well and spending accelerating to support resources
growth. In the second half, the economy recovered
positions us well for future organic growth. In 2022,
we managed our capital adequacy well in response
to market conditions. Our prudent approach to
managing capital has positioned us well for further
growth opportunities in digital and the distribution
network over 2023.
well and grew by 4.6% in 2022 driven by the
We are currently at the halfway mark on our
resources sector, in particular income from mining
2025 strategy. I am proud of what we‘ve achieved
activities, which grew by 13.5%.
For the Kina Group, the underlying net profit after
tax increased by 10% to PGK 106.1 million (2021 PGK
96.2 million) underpinned by solid revenue growth in
core banking products and digital services.
The strong results demonstrate Kina’s ability to
so far given the global pandemic and difficult
economic conditions over this time. We have
delivered market-leading digital products that make
our customers’ lives easier. Our team members
are engaged, and gender diversity is a benchmark
amongst ASX listed companies.
execute on its revenue diversification strategy with
Kina is the challenger brand in a market where
50% of income now derived from non-interest-
the leading bank has 65% market share. People in
bearing products. Our foreign exchange (FX)
PNG are looking for an alternative Bank and this is
volumes increased by 19%, however the revenue
reflected in our customer growth of 22% over the
was reduced by 8% due to lower margin currency
past three years.
transactions. Our Funds Administration business
continued to record growth in revenue, consistent
with increased funds under management.
Pleasingly, our ROE was 17.9% and is now restored
to the level it was prior to the 2020 capital raising,
demonstrating our ability to deliver quality returns.
Looking ahead, the Board will steer a prudent course
for growth opportunities while safeguarding our
strong balance sheet. The growth agenda must be
value accretive for all our stakeholders supported by
our purpose to deliver prosperity to the communities,
which we serve. Other priorities in 2023 include
The bank’s financial strength allowed us to grow our
utilising our digital capabilities alongside the diverse
footings by 1% while investing to create a simpler
range of experience and skills of our people.
and better banking experience for our customers.
I’m optimistic about the next two years in PNG and
Looking back at the three years since we set out our
what this means for Kina. Strong economic growth
strategy, there is a strong track record of success.
of 4% is predicted with approval for two key mining
The Board is supportive of our strategy: building
projects likely to be progressed in 2023 and several
on the progress we have made; diversifying our
LNG projects over the next 4-5 years will inject
revenues to generate sustainable growth and returns
much needed economic growth in regional areas.
through the economic cycle.
Kina’s commercial lending hub expansion to five
We paid a dividend of PGK 18.5 toea (AUD 7.0 cents)
per share (K53.1m) in April 2022 in relation to the
regional areas will provide these growing communities
with a customer centric Banking alternative.
profit for the half year ended 31 December 2021. In
The Board would like to thank all our staff at Kina.
September 2022, we paid a dividend of PGK 10.3
The Board commends all our people for their
toea (AUD 4.1 cents) per share (K29.6m) in relation to
adaptability, passion and for bringing to life Kina’s
the profit for the half year ended 30 June 2022.
vision of becoming the most dynamic, forward-
This demonstrates the Board’s commitment to return
thinking financial services company in the Pan Pacific.
e
g
a
s
s
e
M
s
’
n
a
m
r
i
a
h
C
–
e
g
a
s
s
e
M
11
We have an extremely skilled leadership team, and
the Board is pleased with the progress that has been
made over the three years and have confidence that
Greg and his capable team will continue to deliver
value to all our stakeholders.
I would like to thank my Board of Directors
for their ongoing support and solid leadership.
Their excellent knowledge, diligence, and
assistance in creating a strong, customer-focused
organisation is paving the road for innovation and,
in turn, improving the future of PNG.
Finally, I have had the honour of serving as Chair
of Kina for the past five years. In that time, we have
grown to become PNG’s second largest Bank
employing over 600 people and have reached
nearly 650,000* customers. Kina is a business
with significant potential for growth. The Board is
confident that the 2025 strategy will support all of our
stakeholders through challenges and opportunities
in years to come. I’d like to thank our shareholders for
their consistent support and commitment to Kina.
As we head into the next phase of our strategy the
value, we create for all communities confirms that
‘together it’s possible’.
Isikeli Taureka
Chairman
14 April 2022
*combined Kina and Mibank
12
Managing Director and Chief
Executive Officer’s Message.
We have reached the halfway point in our 2025 strategy. We have achieved significant
growth in our balance sheet, customers and developed capable people. 2023 will be
the year that our growth aspiration will expand into different sectors, while we drive the
sustainability agenda in PNG and continue to deliver value for all our stakeholders.
Steady, consistent and focused represents the Kina
This demonstrates the progress we have made
experience in 2022. Despite a challenging start to
against our strategic pillars. Detailed information
the year with a long-drawn-out election process
about our progress can be found on page 19.
impacting domestic business confidence, Kina was
able to navigate through these constraints and deliver
strong organic growth on our core banking products,
execute on our digital solutions and focus on growth
in targeted segments. Another material headwind
for Kina is the announcement of the tax increase to
corporate banks, creating negative investor sentiment.
I would like to emphasise the growth momentum Kina
has built over the past 3 years, and we will continue
to deliver value to our shareholders despite this tax
impediment.
We launched several innovative products, new
segments and partnerships in 2022. It’s a credit to
the outstanding work of all our staff at Kina with
their commitment to execute first in market digital
products such as WhatsApp Banking, Xero Feeds
for our SME customers and our payment gateway
platform. Our Private Bank and Corporate advisory
services were launched providing a much-needed
alternative in the market. And finally, our agile
approach to partnerships remains strong with growth
in MiBank customers and a newly co-located branch
In 2022, the Kina Group moved towards our 2025
and other digital innovations has established Kina as
strategic Bank to Market Marker model with digital
the bank of choice for financial services.
revenues up 88%. Our digital footprint expansion
with strategically aligned partners has enabled
improved customer experiences and diversified
revenue streams. Overall, revenue grew by 10%
in a challenging market impacted by low business
confidence in the first half of the year. Income grew
to PGK 366 million (2021: PGK 334 million) with an
increase in interest income of 8% and strong results
in fees and commissions, up 30% reflecting growth in
our digital channel fees. The digital channel growth
In March 2023, we implemented a realigned structure
that reflects our growth agenda and evolution of the
2025 strategy. We welcomed Rayeleene Elston as
Executive General Manager of Lending to the team.
Rayeleene brings over 30 years of experience in
Business Banking and Retail lending. We have further
enhanced our investment in our people, focusing
on building leadership and execution capability with
consistent KPI’s across the Group.
continues to beat exceed our expectations due to
In FY22, we implemented our Environmental, Social
high customer demands for greater accessibility and
and Governance (ESG) strategy. Embedded in the
digital services for SME’s.
Despite the headwinds of the first half, loan growth of
11% was achieved over the year. Total system growth
in PNG was lower in 2022 at 5% compared to 2021,
further demonstrating Kina’s solid performance and
moving our Lending marketing share to 16% from
15% in 2021. On the deposit side, growth of 27.7%
Kina Group strategy is our Sustainable communities
pillar, and the inaugural Sustainability report outlines
our aspirations to be a leader in Sustainability
throughout PNG, focusing on Inclusion, Transparency
and protecting our Environment. You can read our
inaugural Sustainability Report at investors.kinabank.
com.pg/Investors/?page=Reports-and-Presentations.
was achieved due to a solid performance in low-cost
At Kina our focus remains on building on the strong
transaction accounts with customer acquisition up
momentum across our business to deliver on our
19%. Our Net Interest Margin (NIM) was 6%, within
strategic initiatives. I remain positive on the outlook
the target range of 6% and 8%. We were at the lower
for Kina in 2023. We are evolving our capabilities.
end of the range due to strong corporate deposit
Underpinned by the strong foundations of our
growth and targeted corporate lending.
strategy, we are investing in our technology and
e
g
a
s
s
e
M
s
’
O
E
C
d
n
a
r
o
t
c
e
r
i
i
D
g
n
g
a
n
a
M
–
e
g
a
s
s
e
M
13
people so we can serve our customers in new ways
that make their lives easier. A good example of this
is our Electronic “Know your customer” identification
(E-KYC) program which is a game changer in PNG.
E-KYC will enable new customers to be 100%
onboarded online with no need to visit a branch.
We have proved our ability to deliver sustainable
growth against a backdrop of economic uncertainty
and challenging policy constraints. Our ambitious
plans to expand Business Banking, develop an
expertise in Agri business and create a customer
obsessed workforce will define our success in 2023.
We take a balanced approach to our investment
profile. Our aim is to diligently manage costs
while maintaining our growth aspiration through a
measured approach to risk management. We know
achieving this balance will underpin our strategy and
in turn, the value we create for our stakeholders.
I would like to thank our staff for all their hard work,
resilience and passion in helping our customers and
to our shareholders thank you for the support and
confidence in Kina. I’m certain we are moving in the
right direction to fulfilling our vision of being the
most dynamic, progressive and accessible financial
services organisation in the Pan Pacific region.
Greg Pawson
Managing Director and
Chief Executive Officer
14 April 2022
14
Invest.
Return.
15
03
Our Segments.
SME Lending growth
increased by 25%
Underlying NPAT
growth of 10%
Personal account
openings up 28%
Retail customer
growth of 15%
Digital channel
growth of 88%
Home loan
growth of 19%
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 2022, the focus was
on delivering results in the Customer acquisition,
Corporate and Home lending, SME and Digital.
Kina Wealth
Funds administration efficiency is the key
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
Growing Digital revenues
under management, securing revenues in excess of
During the year, we delivered on our objective of
PGK 30 million.
digital expansion with Digital channel growth up
Funds under administration business has
88% year on year. This is a result of a consolidated
delivered key strategic projects in 2022. A focus
effort to expand our EFTPOS fleet supported by our
on operational disciplines has led to an increase
terminal of choice strategy. Currently, our market
in Service Level performance supporting revenue
share in EFTPOS terminals is 25%.
growth. Alongside efficiency improvements, the
Our investment in improving online functionality,
“Single View” platform was launched for two of the
website enhancements and ATM fleet has also
major super funds. Single View allows a Kina Bank
contributed to this result.
customer to upload their Super account to their
Kina Bank app enabling customers to view their
Growing savings accounts and customers
Super Balances.
It was pleasing to see a 28% growth in our low-cost
savings account during 2022. This growth contributed
to strong customer acquisition in both Consumer, up
19%, and Commercial customers, up 17%.
Growing the Loan Book by 11%
The business loan book grew by 9% over the
year – a milestone achievement to exceed PGK 2
billion in lending. Heading into 2023, we expect
further growth in our Commercial loan book with
the onboarding of 10 new Business Advisors in key
strategic regional locations.
The Home loan book also saw very positive
growth of 19% with competitive offers, segmented
offerings with Kina Private Bank and our Prime
customer market.
16
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.
2020-21
Your trusted bank
+ Traditional banking
+ Digital banking
2022-24
Your trusted financial
services partner
+ Traditional banking
+ Digital banking
+ Investment Banking Bank Services
+ Partnership Platform
Retail
Commercial
Ecosystem Services
Corporate
SME
Corporate
Commercial
Superannuation Partners
Superannuation Partners
Banking Partners
Banking Partners
InfrastructurePartner
API enabled
Sell, service, grow, digitise
• Grow banking market share
• Digitise core business
• Digital customer solutions
• Test and learn partnerships and innovative
business models
Digital Partners
Partnering to create and capture value
(B2B, B2C)
• Maturing technology and infrastructure
• Maturing partnerships capability
• Targeted acquisitions
• Selectively scale new business models
17
2025
Your trusted partner in the
Pan Pacific Region
+ Pan Pacific diversified investment bank
Markets
Kina Bank Modules and Partners
Digital Partners
InfrastructurePartner
API enabled
Convene a marketplace of assets, capabilities and
services (B2B, B2C)
• Geographical reach; digital-only bank
• Bank as a service – B2B
• Customer and partnership marketplace
• Diversified investment bank
18
Strategic Pillars.
Growth & Prosperity
Resilience
Service Excellence
Growth & Prosperity
Resilience
Over the past three years, growth in our core
Kina has simplified its corporate structure over
products and digital channel has been accelerated.
the past two years and the completion of a
With our Digital first strategy, core digital channels,
Non-Renounceable Rights Issue back in 2020 further
merchant payments, mobile banking and Visa fees
strengthened the capital base. The total regulatory
contribute to the impressive growth over the past few
capital adequacy of 22.5% remains well above the
years, growing revenues by 10%. The transition to the
(regulatory) minimum of 12%.
Bank to Market Marker model has enhanced growth
in non-core digital segments. Partnerships with
companies such as Pei Beta (bill payments), Pronto
(integrated Point of Sale capability), YuTru (digital
Identification) and Xero (Integrated Xero Bank feed
for SME’s) have confirmed that these adjunct services
provide customer and shareholder value.
Partnering to create value is now seeing these
services contribute to non-interest income revenue.
Alongside our strong balance sheet, our Reimagining
Risk program of work was launched with a focus
on renewed governance processes and an
establishment of a target risk maturity for 2025.
This included the development of our Strategic
Intelligence capability, enabling Kina Group to
identify strategic disruption risks and emerging
growth opportunities. Other enhancements to
our risk maturity include the development of risk
Our website and online banking portals at
appetite statements that appropriately align with the
kinabank.com.pg were significantly upgraded
strategic goals while protecting the Bank’s assets
over the course of the year to global standards
and improved risk modelling techniques to predict
with improved navigation, graphics, calculators,
external factors on credit default.
and provision of online account opening and loan
origination, and new private bank and corporate
advisory tabs.
Technology serves as the foundation for Kina’s
business strategy, which focuses on enhancing
the customer experience. Over the past two years,
Our Bank as a Service model is also expanding our
we’ve made significant investment in our current
15% strategic investment in MiBank, establishing
technology, modernising the core banking platform,
a strong platform for Kina to expand into more
the development of API middleware and the ability
communities creating shared value throughout PNG.
to automate manual processes. We remain alert and
In July 2022, we launched our first Co-branded
dedicated to cyber security and the ability to manage
Branch with MiBank enabling Kina Bank customers
security controls. Cyberattacks pose a constant
to utilise a MiBank branch. Another addition to
risk to our operations, both in relation to our own
our service offering in 2022 was the launch of our
digital platforms and indirectly to our supply chain.
Business Advisory model, incorporating Lending,
Further investment in software costs to strengthen
Business Partners and Digital teams to offer a “all
infrastructure are expected to continue over the
of business” banking relationship from SME to
medium term.
commercial segments. We have experienced early
success with this model onboarding the largest
retailer in PNG and several significant Commercial
customers who appreciate the high-quality service,
advice and dedicated investment in technology.
Our aspiration to increase our market share to 25%
across PNG is in sight. Market share growth in
Lending has increased by 3% in three years and in
deposits by 2%, In 2023, we are further expanding
our Business Banking footprint, with ten new Business
Advisors and five new commercial lending hubs in
regional PNG. Having experienced growth as a
strong challenger brand in Home lending, we believe
Kina will offer SME’s and Commercial sector a Banking
alternative that will support growth throughout PNG.
Service Excellence
Customer obsession was the key theme in 2022
for our people at Kina. Our focus on listening to
our customers and implementing change saw
several key digital programs come to life to reduce
our customers’ pain points. The “Insight to action”
approach was supported by our first in-branch
customer satisfaction surveys in the last quarter of
the year. As at 31 December 2022, we have received
over 12,000 surveys and a Customer Satisfaction
rating of 86%. This a pleasing result and as we
expected the main customer pain point is waiting
times in Branch queues. Incorporating this feedback
with our insights to action program has accelerated
s
r
a
l
l
i
P
c
i
g
e
t
a
r
t
S
–
s
t
n
e
m
g
e
S
19
Dynamic People
Sustainability
our digitalisation program to enhance our customer
Kina remains the most gender diverse Bank in PNG.
service experience.
In 2022, the digitalisation program of work was
extensive. To address the relevant pain points, we
launched What’s App banking, a well-used digital
platform in PNG that allows greater access to financial
services throughout PNG. We are in the final stages of
our E-KYC program for superannuation customers to
Gender balance has been 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.
be onboarded digitally with no need to visit a branch.
Sustainability
Over the past year and half, we have embarked on a
full review of our Environmental, Social and
Governance (ESG) frameworks to formulate a
Sustainability strategy that aligns with our purpose, to
build prosperity for the communities that we serve.
This rigorous assessment of Kina’s capabilities in ESG
against the external frameworks of the UN
Sustainable Development Goals (SGD) and the Task
Force on Climate Related Financial Disclosure (TCFD)
alongside a thorough stakeholder materiality
assessment supports our sustainability pillars. The
materiality assessment included 65 interviews with
staff, shareholders, customers and community groups
as well as a review of 460 complaints and over
10,000 Customer surveys.
This work led to the creation of Kina’s sustainability
pillars, which are embedded across our five key
strategic goals, Growth, Resilience, Service
Excellence and Sustainable Communities. We have
sharply refined our activities to focus on our three
sustainability pillars, Inclusion, Transparency and
our Environment. This report will highlight how we
will executive against these pillars and what we will
measure to help deliver on our purpose.
For further information please see the Kina
sustainability report investors.kinabank.com.pg/
Investors/?page=asx-announcements.
This is a game changer in PNG and will materially shift
the market share dynamics over the medium term.
For our SME and Commercial customers
improvements in our Telegraphic transfer online
module provided greater efficiency, the launch
of the XERO Bank feed, improvements in our
Corporate Online Banking resulting in an increase in
online transaction of 12%. We now have nearly 40%
of our customers actively using our online platforms
for their banking needs.
Dynamic People
Our people are at the centre of our business.
Their passion and drive help our customers with their
financial security and prosperity. Investing in
capability is critical to the success of our strategy and
through our leadership programs will help create the
performance we are seeking. In 2022, we placed 80
leaders and emerging talent through Kina’s
leadership program. Our Senior Management cohort
is the future of Kina and focusing on transformational
leadership, diversity and inclusion will build a pipeline
of Leaders that will amplify our five values.
In conjunction with key leadership skills, commercial
acumen is another capability that will set Kina apart
from other Banks in PNG. Customers are looking for
knowledgeable staff who provide transparent and
clear information on our financial products.
We launched the Financial Champions program in
2022 and have trained over 30 staff. This program
will see our Financial Champions deliver financial
literacy education to our staff and then to our
customers. Supporting delivery on our purpose to
constantly improve the prosperity of communities
we serve.
Our career pathways program was piloted in 2022.
The Funds Administration team were the first group
to experience the program, which provides a
clear competency framework and a pathway for
career advancement. This highly successful pilot will
be delivered in 2023.
20
s
n
a
o
L
e
m
o
H
-
k
n
a
B
a
n
K
i
21
22
04
Board of Directors.
Isikeli (Keli) Taureka
Non-exective Chairman
Chair of the Disclosure Committee
Gregory Pawson
Managing Director/CEO
Mr Isikeli Taureka was appointed as a Director of Kina
Mr Greg Pawson was appointed Managing Director
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
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, Southeast Asia and the Pacific.
supporting PNG LNG projects. Previously, he held the
Before his appointment, Greg was Regional Head of
position of Managing Director of Kumul Consolidated
South Asia Pacific for the Westpac Group and held
Holdings which is the trustee and shareholder for the
senior executive roles in retail banking, corporate
Government of PNG in major state-owned entities
financial services, financial planning, and funds
including Air Niugini, Water PNG, PNG Power Limited,
management. His extensive banking experience
Kumul Telikom Holdings, Ports PNG, Post PNG and
includes more than 16 years at Westpac where he
Motor Vehicles Insurance Limited.
had accountability for Westpac’s Country/Institutional,
Isikeli previously held several 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.
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
He holds a Bachelor of Economics degree from
responsible for 1,500 employees.
the University of Papua New Guinea and is a
graduate member of the Australian Institute of
Company Directors.
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.
s
r
o
t
c
e
r
i
D
f
o
d
r
a
o
B
k
n
a
B
a
n
K
–
d
r
a
o
B
i
23
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 2016.
Karen is an experienced non-executive director, with
involvement across numerous 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 several industry sectors, including energy, property
and agribusiness.
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
Karen is currently a non-executive director of
Bank and Bank of New Zealand.
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.
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 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.
24
Dr Jane Thomason
Non-Executive Director
Chair of the Remuneration and Nomination Committee
Dr Ila Temu
Non-Executive Director
Member of the Remuneration and Nomination Committee
Dr Ila Temu was appointed as a Director of Kina on
Dr Jane Thomason was appointed as a Director of
14 December 2020.
Kina on 27 April 2018.
Ila was previously Country Manager for Barrick
An entrepreneur and innovator, Jane has worked in
(Niugini) Limited (BNL), a role he held for some time
international development implementation in the Asia
until his retirement in September 2022. Dr Temu has
Pacific region for 30 years. Her international career
held various senior roles with Placer Dome Niugini
has included work for governments and donors
since 2000 including General Manager Government
including the Asian Development Bank, WHO, World
Relations, Director Corporate Affairs and Country
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
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.
and Frontier Technology Association, Chair, Kasei
Ila has also held a number of board directorships/
Holdings Blockchain Securities), Aquis Stock
memberships in PNG including the Employees
Exchange, London, and is on the Editorial Board of
Federation of PNG and Bank of South Pacific where
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
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.
Top 50 Global Thought Leaders and Influencers on
He is currently a Director of Kina Petroleum Ltd,
Blockchain and Sustainability.
Director of Kumul Petroleum Holdings Ltd, and a
Council Member of the Divine Word University.
s
r
o
t
c
e
r
i
D
f
o
d
r
a
o
B
k
n
a
B
a
n
K
–
d
r
a
o
B
i
25
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 several 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 several senior legal and
operational roles.
Andrew holds bachelor’s degrees in law and
commerce from UNSW and is a graduate member of
the Australian Institute of Company Directors.
26
05
Senior Executive Team.
Lesieli Taviri
Chief Operation Officer, Country Head and Acting Chief
Information Officer
Lesieli joined Kina Bank in 2020 as Executive General
as Trustee Director on the Board of Nambawan Super
Manager for Banking distribution and operations.
for 6 years succeeding into the Deputy Chair role and
In her role as Chief Operating Officer, she is
leading the Transformation Board Committee.
responsible for running the operations of the Business,
People and Culture teams and Payments functions.
Lesieli holds a Bachelor of Science, Computer
Science from the Papua New Guinea University of
Prior to joining Kina Bank, Lesieli was the CEO of
Technology, she also holds a Master of Business
Origin Energy, and she is one of PNG’s most highly
Administration from the Torrens University of
regarded executive leaders. She has held a number
Australia. She is also a graduate member of the
of high-profile board roles including Founding Chair
Australia and PNG Institute of Company Directors.
of the Business Coalition for Women. She has served
Rayeleene Elston
Executive General Manager Business Banking
Rayeleene joined Kina in February 2023 as Executive
leading the Queensland central region Business
General Manager for Business Banking and Prime.
Banking team that covered, Commercial, Corporate,
In her role, she is responsible for the distribution of
SME and Agribusiness. Her previous role was General
retail and business lending.
Manager for Community Branches at Heritage.
Prior to joining Kina Bank, Rayeleene had a 30-year
Rayeleene brings a deep knowledge of Business and
career in Banking in Australia. Her career began
Corporate Banking across a multiple products, credit
in Retail Banking and she spent over 20 years as
and customer experience. She will be leading a key
an Executive across Business Banking at National
strategic project to Business Banking expansion into
Australia Bank (NAB). Her last role at NAB was
regional PNG over the next three years.
Johnson Kalo
Chief Financial Officer and Company Secretary
Johnson Kalo was appointed acting Chief Financial
Director of the Port Moresby Stock Exchange (PNGX).
Officer and Company Secretary in September 2022.
He is a fellow of the Financial Services Institute of
He previously held the role of Chief Information
Australasia and an associate member of Certified
Officer. Johnson has substantial industry experience
Practising Accountants PNG. He holds a Bachelor of
in Papua New Guinea having previously held the
Arts in Commerce from the University of Papua New
positions of Deputy Chief Executive Officer and Chief
Guinea and a Post Graduate Diploma in Applied
Financial Officer for BSP.
Financial Investment from the Financial Services
His previous roles also include independent Director
of the Board of Credit Corporation and Executive
Institute of Australasia
m
a
e
T
e
v
i
t
u
c
e
x
E
r
o
n
e
S
–
i
s
e
v
i
t
u
c
e
x
E
27
Deepak Gupta
Executive General Manager Wealth
Deepak Gupta is Executive General Manager Business
financial services including successful development of
Partners and Wealth and is responsible for Wealth
New Zealand’s first institutional private equity fund for
management and Corporate banking at Kina. He has
retail investors.
held a variety of senior positions with Westpac, AMP
and domestic New Zealand institutions.
Deepak holds a Bachelor of Commerce and
Administration from Victoria University, New Zealand,
In addition, Deepak has strong governance
and an MBA from Massey University, New Zealand.
experience having held non-executive director
He has a Certificate of Investment Analysis from the
roles on the boards of NZX and ASX-listed companies.
University of Otago, New Zealand and is a Fellow of
He brings substantial experience and a track record of
the Institute of Finance Professionals New Zealand.
success and innovation across various areas in
Karen Mathers
Chief Risk Officer
Karen is Group Chief Risk Officer and is responsible
well versed in the multidisciplined divisions
for overseeing Kina’s strategy for holistic risk
in Banking. With her unique skillset (accounting, law
management and compliance. This includes best
and risk management), she has had responsibilities
practice governance and regulatory management
that had oversight of all financial operations of the
complying with the standards of the various
companies in a multitude of industries in Australia,
supervisory authorities.
Europe, Asia and the Pacific.
Karen has enjoyed a career in finance spanning over
Karen is degree qualified as an accountant with
25 years. She has held executive positions at ANZ
post-graduate qualifications in commercial law and
Banking Group (Australia, and overseas) as Chief
forensic accounting.
Finance, Chief Operating and Chief Risk Officer and is
Asi Nauna
Chief of Staff
Asi joined Kina Bank in 2018 to assist with the
Prior to joining Kina Bank, Asi was ANZ’s Associate
acquisition of ANZ’s Retail, SME and Commercial
Director, Institutional Banking.
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,
Asi was appointed Chief of Staff in March 2023 and
establishing herself as a dynamic and successful
is responsible for developing and delivering key
leader with a track record of delivering exceptional
strategic business priorities, the Environment, Social
results.
and Governance Strategy and Real estate divisions.
She previously held the role of EGM Lending.
28
Judith Ugava-Taunao
Executive General Manager Banking
Judith Ugava-Taunao joined Kina in June 2021 as
For 18 years, Judith has built a career that spans
Chief of Staff. She was appointed Executive General
across international borders and sectors. She has
Manager Banking in March 2023. She is responsible
worked in international development, organisational
for running the national branch network and a
transformation, and human resource development
seamless banking experience to personal and small
and leadership.
business customers. In her role, Judith 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, 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.
Ivan Vidovich
Chief Transformation Officer
Ivan joined Kina Bank in 2019. In the role of Chief
strategy, customer experience, innovation and multi-
Transformation Officer Ivan is responsible for Group
country integration and transformation programs.
Strategy and Planning, People and Culture, Digital
Channels, Innovation, Design, Product and Marketing.
He brings significant experience in people and
culture transformational change and is a strong
Ivan has 20 years senior leadership experience in
advocate of diversity and inclusion in the workplace.
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,
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
Nathan holds a Bachelor of Business from the
and Financial Markets. Prior to joining Kina, he spent
Queensland University of Technology. He has also
15 years at ANZ Bank where his last role was Head
completed the AFMA Dealer Accreditation Program
of Global Markets PNG and Balance Sheet Manager
and the PNG Institute of Directors Program.
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.
m
a
e
T
e
v
i
t
u
c
e
x
E
r
o
n
e
S
–
i
s
e
v
i
t
u
c
e
x
E
29
30
Focus.
Energy.
31
06 Remuneration Report.
1 Introduction and overview to shareholders
2 Kina’s Key Management Personal (KMP)
3 Executive remuneration
4 Non-executive director arrangements
5 Related party transactions
6 Directors’ interest in shares
32
1. Introduction and overview to shareholders
The Remuneration Report is focused on providing information to Kina Securities Limited shareholders about the Company’s
remuneration framework which is designed to support the delivery of targeted operating financial and non-financial results.
Although Kina is not required to have the Remuneration Report audited and prepared in accordance with section 300A of the Australian
Corporations Act 2001 (Cth), the level of disclosure meets the requirements of an Australian-incorporated company.
During the year, Kina reviewed its incentive plans to ensure that they align with market best practice and continue to attract, motivate and
retain high calibre management and employees. As part of this review, it was determined that for all key management personnel except
the CEO, the deferred component of Short Term Incentives (STIs) would be removed, and the total STI would be payable in cash.
The Board will continue to evaluate the structure, eligibility, granting and vesting of fixed and variable remuneration arrangements for the
company, including exercising provisions that exist to defer the payment of STIs.
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 2022 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 2022*
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 Chopra1
Deepak Gupta
Karen Mathers2
Samantha Miller3
Johnson Kalo4
Ivan Vidovich
Nathan Wingti
Lesieli Taviri
Asi Nauna
Position held during the financial year ended 31 December 2022*
MD&CEO
Chief Financial Officer (CFO) and Company Secretary
Executive General Manager, Business Partners and Wealth
Chief Risk Officer
General Manager Corporate Affairs and Investor Relations
Chief Information Officer
Chief Transformation Officer
Head of Treasury
Executive General Manager, Banking
Executive General Manager, Lending
Judith Ugava-Taunao
Chief of Staff
* The term as KMP was for the full year unless otherwise indicated.
1 resigned 3 September 2022
2 appointed 1 January 2022
3 appointed 14 March 2022
4 appointed Acting CFO and Company Secretary 1 September 2022
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
33
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 positions
(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.
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.
34
3. Executive remuneration (continued)
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. The Board
maintains complete discretion to award equity rights to employees, including the determination of vesting conditions and
whether the equity rights vest and/or are awarded.
• 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.
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
35
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
Fixed Remuneration (FR)
Total fixed remuneration comprises base salary, other non-cash benefits and includes
superannuation.
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 group and individual key performance indicators (KPIs) which may
consist of financial and, if applicable non-financial performance measures
For all participants, except the MD&CEO, the incentive earned will be paid 100% in cash.
– MD&CEO 65% in cash and 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. For the MD&CEO,
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.
Retention Awards are no longer applicable or awarded in the ordinary course of
Kina’s business.
The Senior Executive Team members may receive their fixed remuneration 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.
36
3. Executive remuneration (continued)
STI Award
Structure of LTI Award
Features
Eligibility
STI Award components
Performance measures
Calculation of STI Performance Rights
Vesting of STI Performance Rights
Description
The MD&CEO and Senior Executive Team are eligible to participate in the STI Award
(STI Participants).
Cash bonus: 100% of the STI Participant’s STI Award, except for MD&CEO with
65% of STI Award.
STI Performance Rights: 35% of MD&CEO’s STI Award.
Individual KPIs specific to each STI Participant are agreed at the start of each year. These KPIs
consist of both financial and non-financial performance measures.
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 2022:
Minimum (85% of budget)
Threshold (85% – 100% budget): 50%
Target (Budget 100%) 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.
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).
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 2019
FY ended 31 December 2020
FY ended 31 December 2021
FY ended 31 December 2022
Date granted
01/04/2020
01/04/2021
01/04/2022
01/04/2023
Vesting date
01/04/2022
01/04/2023
01/04/2024
01/04/2025
Forfeiture of STI Performance Rights
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.
Payments and grants
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.
Target STI and maximum STI that can
be awarded
MD&CEO
CFO
Target
100% of base salary
40% of base salary
Maximum
150% of base salary
50% of base salary
Other Senior Executives
30% of base salary
45% of base salary
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
37
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
Features
Eligibility
LTI components
Performance measures
Calculation of LTI Performance Rights
Vesting and exercise of LTI Performance Rights
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
Vesting outcome
Nil
50% vesting
Pro rata between 50% to 100%
75% and above
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% to 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.
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).
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
Performance Period
Measures
Vesting date (subject to
performance testing)
2019
01/04/2020
01/04/2020 to 31/03/2023
EPS assessment compound till FY 2022 – 50%
Relative TSR assessment compounded to FY 2022 – 50%
01/04/2023
2020
01/04/2021
01/04/2021 to 31/03/2024
EPS assessment compound till FY 2023 – 50%
Relative TSR assessment compounded to FY 2023 – 50%
01/04/2024
2021
01/04/2022
01/04/2022 to 31/03/2025
EPS assessment compound till FY 2024 – 50%
Relative TSR assessment compounded to FY 2024 – 50%
01/04/2025
2022
01/04/2023
01/04/2023 to 31/03/2026
EPS assessment compound till FY 2025 – 50%
Relative TSR assessment compounded to FY 2025 – 50%
01/04/2026
38
3. Executive remuneration (continued)
Forfeiture of LTI Performance Rights
Unvested LTI Performance Rights may be forfeited:
• 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)
Lapse of LTI Performance Rights
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.
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
39
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 Chopra1*
Ivan Vidovich
Deepak Gupta
Johnson Kalo
Nathan Wingti
Asi Nauna
Lesieli Taviri
Karen Mathers
Judith Ugava-Taunao
Samantha Miller2*
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
Cash salary/fees/short-term
compensated absences $
Non-monetary benefits $
Total $
603,508
591,300
276,923
400,000
385,577
375,000
360,577
350,000
323,360
309,680
338,129
290,325
240,654
226,454
323,599
310,488
400,000
-
222,310
124,195
288,462
-
189,407
206,709
135,727
126,431
16,356
61,748
142,140
174,977
31,655
22,602
117,585
112,468
26,814
15,924
115,923
20,713
15,546
-
24,418
8,839
14,575
-
792,914
798,009
412,650
526,431
401,933
436,748
502,717
524,977
355,015
332,282
455,714
402,793
267,468
242,378
439,522
331,201
415,546
-
246,728
133,033
303,036
-
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.
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
Nathan Wingti
Ivan Vidovich
* pro-rata based on start dates
1 resigned 3 September 2022
2 appointed 14 March 2022
Current Balance
865,373
352,720
244,708
51,127
26,923
40
3. Executive remuneration (continued)
Performance Rights holdings
The table below sets out the current holdings of Performance Rights (PR) by KMP.
First Name
Last Name
Award
Year
Grant Date
Vesting
date
Value of
PR granted
(AUD)
VWAP
period
VWAP $
applied
PR 3
1/12/2022
Gregory
Pawson
Chetan
Chopra
Michael
Van
Dorssen
Deepak
Gupta
Nathan
Wingti
Gavin
Heard
Ivan
Vidovich
Adam
Downie
Asi
Nauna
Johnson
Kalo
Lesieli
Taviri
Judith
Ugava-
Taunao
STI
STI
LTI
LTI
LTI
STI
STI
LTI
LTI
LTI
STI
LTI
LTI
STI
STI
LTI
LTI
LTI
STI
STI
LTI
LTI
LTI
STI
LTI
LTI
STI
STI
LTI
LTI
LTI
STI
STI
LTI
LTI
STI
STI
LTI
LTI
STI
STI
LTI
LTI
STI
LTI
2020
2021
2019
2020
2021
2020
2021
2019
2020
2021
2020
2019
2020
2020
2021
2019
2020
2021
2020
2021
2019
2020
2021
2020
2019
2020
2020
2021
2020
2021
01/04/2021
01/04/2022
19/05/2020
01/04/2021
01/04/2022
01/04/2021
01/04/2022
01/04/2020
01/04/2021
01/04/2022
01/04/2023
01/04/2024
01/04/2023
01/04/2024
01/04/2025
01/04/2023
01/04/2024
01/04/2023
01/04/2024
01/04/2025
01/04/2021
01/04/2020
01/04/2021
01/04/2023
01/04/2023
01/04/2024
01/04/2021
01/04/2022
01/04/2020
01/04/2021
01/04/2022
01/04/2021
01/04/2022
01/04/2020
01/04/2021
01/04/2022
01/04/2023
01/04/2024
01/04/2023
01/04/2024
01/04/2025
01/04/2023
01/04/2024
01/04/2023
01/04/2024
01/04/2025
01/04/2021
01/04/2020
01/04/2021
01/04/2023
01/04/2023
01/04/2024
288,189
277,825
294,722
274,466
264,595
105,225
101,801
160,000
148,009
143,194
48,566
120,000
111,006
48,566
46,985
105,000
97,131
93,971
56,660
54,816
48,000
83,255
80,546
25,902
66,000
61,053
01/04/2021
01/04/2022
01/04/2021
01/04/2022
01/04/2023
01/04/2024
01/04/2024
01/04/2025
64,754
62,648
138,758
134,244
31/12/2021
31/12/2022
31/12/2019
31/12/2021
31/12/2022
31/12/2021
31/12/2022
31/12/2019
31/12/2021
31/12/2022
31/12/2021
31/12/2019
31/12/2021
31/12/2021
31/12/2022
31/12/2019
31/12/2021
31/12/2022
31/12/2021
31/12/2022
31/12/2019
31/12/2021
31/12/2022
31/12/2021
31/12/2019
31/12/2021
31/12/2021
31/12/2022
31/12/2021
31/12/2022
0.8233
0.7756
1.4300
0.8233
0.7756
0.8233
0.7756
1.4300
0.8233
0.7756
0.8233
1.4300
0.8233
0.8233
0.7756
1.4300
0.8233
0.7756
0.8233
0.7756
1.4300
0.8233
0.7756
0.8233
1.4300
0.8233
0.8233
0.7756
0.8233
0.7756
2019
01/04/2020
01/04/2023
90,000
31/12/2019
1.4300
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2020
2021
2021
2021
01/04/2021
01/04/2022
01/04/2021
01/04/2022
01/04/2021
01/04/2022
01/04/2021
01/04/2022
01/04/2021
01/04/2022
01/04/2021
01/04/2022
01/04/2023
01/04/2024
01/04/2024
01/04/2025
01/04/2023
01/04/2024
01/04/2024
01/04/2025
01/04/2023
01/04/2024
01/04/2024
01/04/2025
01/04/2022
01/04/2022
01/04/2024
01/04/2025
24,282
23,493
61,053
59,067
38,852
37,589
88,805
85,916
16,189
37,589
88,805
85,916
15,662
59,067
31/12/2021
31/12/2022
31/12/2021
31/12/2022
31/12/2021
31/12/2022
31/12/2021
31/12/2022
31/12/2021
31/12/2022
31/12/2021
31/12/2022
31/12/2022
31/12/2022
0.8233
0.7756
0.8233
0.7756
0.8233
0.7756
0.8233
0.7756
0.8233
0.7756
0.8233
0.7756
0.7756
0.7756
350,041
358,207
206,099
333,373
341,149
127,809
131,255
111,888
179,775
184,623
58,989
83,916
134,831
58,989
60,579
73,427
117,978
121,159
68,820
70,676
33,566
101,124
103,850
31,461
46,154
74,157
78,652
80,773
168,539
173,084
62,937
29,494
30,290
74,157
76,157
47,191
48,464
107,865
110,774
19,663
48,464
107,865
110,774
20,193
76,157
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
41
Subsequent to, and in relation to, the year ended 31 December 2022 (FY2022 Awards), the Board approved the following STI and LTI
Awards for eligible participants. The STI Performance Rights and LTI Performance Rights components of the FY2022 STI and LTI Awards for
the MD&CEO are subject to shareholder approval at the 2023 AGM to be held on 9 June 2023.
First
Name
Last Name Award
Year
Grant Date
Vesting date
Value of PR
granted (AUD)
VWAP
period
VWAP $
applied
PR 3
1/12/2022
Gregory
Pawson
Johnson Kalo
Deepak Gupta
Nathan Wingti
Ivan
Vidovich
Lesieli
Taviri
Asi
Nauna
Judith
Ugava-
Taunao
STI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
LTI
2022
2022
01/04/2023
01/04/2023
01/04/2025
01/04/2026
262,500
250,000
31/12/2022
31/12/2022
2022
01/04/2023
01/04/2025
81,600
31/12/2022
2022
01/04/2023
01/04/2025
95,000
31/12/2022
2022
01/04/2023
01/04/2025
90,000
31/12/2022
2022
01/04/2023
01/04/2025
135,000
31/12/2022
2022
01/04/2023
01/04/2025
115,600
31/12/2022
2022
01/04/2023
01/04/2025
60,000
31/12/2022
2022
01/04/2023
01/04/2025
56,000
31/12/2022
0.7756
0.7756
0.7756
0.7756
0.7756
0.7756
0.7756
0.7756
0.7756
338,448
322,331
105,209
122,486
116,039
174,059
149,046
77,359
72,202
Karen
Mathers
LTI
2022
01/04/2023
01/04/2025
105,000
31/12/2022
0.7756
135,379
Employment agreements
KMP employment contracts
• All Senior Executive Team members’ employment contracts are over a period of three years with a notice period of three months.
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.
42
3. Executive remuneration (continued)
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, were as follows:
In PGK
1,820,000 - 1,830,000
1,530,000 - 1,540,000
1,030,000 - 1,040,000
970,000 - 980,000
910,000 - 920,000
900,000 - 910,000
870,000 - 880,000
800,000 - 810,000
790,000 - 800,000
770,000 - 780,000
750,000 - 760,000
740,000 - 750,000
720,000 - 730,000
710,000 - 720,000
640,000 - 650,000
600,000 - 610,000
580,000 - 590,000
570,000 - 580,000
550,000 - 560,000
530,000 - 540,000
510,000 - 520,000
500,000 - 510,000
490,000 - 500,000
480,000 - 490,000
470,000 - 480,000
450,000 - 460,000
440,000 - 450,000
2022
1*
-
-
2
1
-
2
1
1
1
-
-
1
-
-
2
2
-
1
1
1
1
-
1
1
1
-
2021
In PGK
2022
2021
-
1*
2
-
-
1
-
1
-
1
1
1
-
1
1
1
2
1
1
-
2
1
1
-
1
1
1
420,000 - 430,000
400,000 - 410,000
390,000 - 400,000
380,000 - 390,000
360,000 - 370,000
350,000 - 360,000
330,000 - 340,000
320,000 - 330,000
310,000 - 320,000
300,000 - 310,000
280,000 - 290,000
270,000 - 280,000
250,000 - 260,000
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.
-
1
-
-
1
1
1
1
2
2
2
-
1
1
1
4
4
5
2
11
10
10
6
9
16
16
1
-
1
1
-
-
2
2
1
1
1
1
2
3
1
1
4
7
5
8
9
6
11
6
16
21
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
43
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.
Remuneration components
Kina’s Board and Committee fee structure as at 31 December 2022 was:
Board fees
Board
Board
Committee fees
Audit and Risk Committee
Remuneration and
Nomination Committee
Disclosure Committee
Fee pool
Chairman
Non-executive director/committee member
$180,000 (excluding superannuation entitlements)
$90,000 (excluding any superannuation entitlements)
Committee Chair: $22,500 (excluding any
superannuation entitlements)
Members: $11,250 (excluding any superannuation
entitlements)
Committee Chair: $22,500 (excluding any
superannuation entitlements)
Members: $11,250 (excluding any superannuation
entitlements)
No additional fees are paid
No additional fees are paid
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 2022, 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 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.
44
Director
Year
Short-term benefits
Post-employment benefits
Fees $
Non-monetary benefits $
Superannuation contributions $
Isikeli Taureka
Andrew Carriline
Paul Hutchinson
Karen Smith-Pomeroy
Ila Temu
Jane Thomason
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
2022
2021
180,000
180,000
112,500
112,500
101,250
101,250
131,310
131,310
101,250
98,769
112,500
112,500
Variable remuneration
Special remuneration
-
-
-
-
-
-
-
-
-
-
-
-
15,110
15,120
7,560
7,560
7,560
7,560
-
-
9,012
5,415
-
-
Total
$
195,110
195,120
120,060
120,060
108,810
108,810
131,310
131,310
110,262
104,184
112,500
112,500
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 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, t
he Directors have the following interests in the 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
t
r
o
p
e
R
n
o
i
t
a
r
e
n
u
m
e
R
45
Number of Shares
Shareholding as at the date of this Remuneration Report (%)
65,000
865,373
125,000
80,299
90,000
35,000
-
0.02%
0.30%
0.04%
0.03%
0.03%
0.01%
0.00%
46
Future.
Proof.
47
07
Corporate Governance Statement.
Introduction
Kina Securities Limited and its related entities (Kina,
the Kina Group, the Group, or the Company) places
great emphasis on the continued development of a
The Board considers and applies the ASX
Principles and Recommendations, considering the
circumstances of Kina. Unless otherwise noted, the
strong corporate governance, risk management and
Company has followed during the reporting period,
compliance culture. In an emerging marketplace,
all of the best practice recommendations set out in
Kina seeks to be innovative as well as provide a safe
the ASX Principles and Recommendations. Where
and secure environment for its customers and clients,
Kina’s practices depart from a Recommendation,
this Statement identifies the area of divergence and
reasons for it, or any alternative practices adopted
by Kina.
Governance framework
The core of Kina’s corporate governance framework
is the Company’s Constitution and the Charters
and Policies (Governance Documents), which are
referenced in this Statement, and copies of which are
available on the Company’s website at:
investors.kinabank.com.pg/
Investors/?page=corporate-governance.
The Governance Documents are reviewed regularly
by the Board to ensure they comply with any updated
laws or regulations, that they meet high governance
standards and that they remain relevant to the Group
and its operations.
which in turn brings value to shareholders.
The Board of Directors of Kina Securities Limited
(the Board) is responsible for the overall corporate
governance of the Kina Group, including adopting
appropriate policies and procedures designed to
ensure that Kina is properly managed to protect and
enhance shareholder interests.
The Board monitors the operational and financial
position and performance of Kina and oversees
its business strategy, including approving the
Company’s strategic goals and considering and
approving business plans, key governance, risk and
operational policies and the annual budget.
Kina has a well-developed corporate governance
framework and practices, for the operation and
management of Kina, which incorporates resilient
internal controls, risk management processes and
governance policies and practices. The Board
monitors adherence to this framework which
enables the Group to comply with relevant laws,
regulations and standards set down by the Bank
of Papua New Guinea (BPNG), the Australian
Securities Exchange (ASX), PNG’s National Stock
Exchange (PNGX), the PNG Companies Act 1997
(Companies Act), PNG Securities Act, Capital
Markets Act 2015, and the Australian Corporations
Act 2001 (Cth) (Corporations Act).
This Corporate Governance Statement (Statement)
sets out the key features of Kina’s current corporate
governance framework and reports against the
ASX Corporate Governance Council’s Corporate
Governance Principles and Recommendations
(4th Edition) (ASX Principles and Recommendations).
The Statement is current as at 21 April 2023 and has
been Board approved.
48
Principle 1: Lay solid foundations for management and oversight
A listed entity should clearly delineate the respective roles and responsibilities of its board and management and regularly review
their performance.
Board of Directors
The Role of the Board
The Board is committed to maximising performance, generating shareholder value and financial returns, and sustaining the growth
and success of Kina. In conducting Kina’s business in accordance with these objectives, the Board seeks to ensure that Kina is properly
managed to protect and enhance shareholders’ interests, and that Kina, its directors, officers and employees operate in a well
governed environment.
The Board has adopted a Board Charter. The Board Charter sets out, amongst other things, the:
• role and responsibilities of the Board, including those matters specifically reserved to the Board;
• role and responsibilities of the Managing Director and Chief Executive Officer (MD&CEO), who is primarily responsible for the
day-to-day management of Kina;
• procedures for management of potential and actual conflicts of interest; and
• guidance on Board performance evaluation, ethical standards and taking independent professional advice.
Board Responsibilities
The Board’s first responsibility is to govern the Company in the interest of its shareholders; to protect and grow the value of its
stakeholders’ interests. The Board Charter establishes that the primary goal of the Board is to add value to the Company by:
• ensuring the long-term viability and sustainability of the Company;
• protecting the interests of shareholders by exercising effective control over the Company;
• providing strategic direction and leadership;
• bringing independent and informed judgment to bear on material decisions of the Company;
• setting the standards of behaviour and ethical values for the Company;
• establishing strong internal control and compliance systems;
• monitoring the effectiveness of the Company’s overall risk management and control framework; and
• accounting to shareholders for the overall performance of the Company.
t
n
e
m
e
t
a
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
49
Under the terms of its Charter, the Board will:
• approve the Company’s strategy, business plans and policy;
• establish the risk appetite within which management will implement the strategic direction;
• monitor the implementation of strategic plans against pre-determined performance indicators;
• identify key business risks and ensure measures are taken to mitigate those risks;
• ensure that effective internal control systems are in place to safeguard the Company’s assets;
• establish and monitor terms of reference and procedures of all Board Committees;
• ensure compliance with all relevant laws, regulations and standards;
• approve the external auditor’s fees;
• approve and monitor the progress of material capital investment decisions, including new products and services;
• appoint the MD&CEO, set executive remuneration and establish performance objectives;
• appoint the Company Secretary;
• review the compensation of directors and recommend changes to the non-executive directors’ fee pool to shareholders;
• ensure succession plans are in place for all key positions in the Company;
• adopt a comprehensive suite of prudential and administrative policies;
• verify independently that the prudential and administrative policies are operating effectively;
• maintain effective and timely communications with shareholders;
• ensure the annual financial statements of the Company and other published reports and announcements are prepared according to the
relevant standard;
• resolve that the financial statements and other published reports and announcements (where relevant) accurately represent the financial
position of the Company;
• approve the annual report including the financial statements, dividend proposals and notices to shareholders for consideration at the
Annual General Meeting; and
• assess applications for new and increased loan exposures where the amount or nature of the lending requires referral to the Board as set
out in the Group’s Credit Risk Management Framework and the Delegated Lending Authority Framework.
Delegations to Management
Day-to-day management and operations of the Company are delegated to Management. The MD&CEO has the authority to exercise all
necessary powers, discretions and delegations authorised from time to time by the Board.
The Board has delegated to the MD&CEO responsibility for the following matters:
• selecting the senior management team;
• setting the terms and conditions of employment within Remuneration Policy parameters;
• evaluating the performance of management;
• implementing the strategic direction established by the Board;
• drafting the annual budget in consultation with the Audit and Risk Committee;
• managing the Group’s day-to-day operations on time and within budget;
• maintaining effective internal risk controls; and
• managing the daily operations of the business in accordance with social, ethical and environmental policies set by the Board.
The MD&CEO’s responsibilities are set out in the Board Charter. The MD&CEO is supported by the Group Executives, all of whom are listed on
the Company’s website at: investors.kinabank.com.pg/Investors/?page=board-management.
The Board Charter, Charters of each Board Committee, and the Constitution are available on the Company’s website at: investors.kinabank.com.
pg/Investors/?page=corporate-governance.
50
Director Appointment
As required by BPNG’s Prudential Standards (Standards), Kina undertakes ‘Fit and Proper’ testing for candidates who will hold
‘Responsible Person’ positions on initial appointment, which includes directors and the Senior Executive Team.
This rigorous testing, in accordance with the Standards, is also carried out on an annual basis for all Responsible Persons including
thorough background checks. When directors are proposed for election, or re-election at General Meetings of shareholders, the Notice
of Meeting provides the following information about a candidate standing for election or re-election:
• biographical details;
• details of other directorships held by the candidate;
• a statement as to the independence of the candidate;
• details of any adverse information revealed as part of the checks performed about the director;
• details of any interest, position association or relationship that might impact on the ability of the director to be independent;
• the term of office currently served by the director; and
• a statement by the Board as to whether it supports the election or re-election of the candidate.
Prior to appointing a director, the Remuneration and Nomination Committee undertakes appropriate background checks on their
qualifications, experience, education, character, bankruptcy history and criminal record.
Prior to appointment, candidates are required to provide the Chairman with details of other commitments and an indication of time
involved, and to acknowledge that they will have adequate time to fulfil his or her responsibilities as a non-executive director of Kina.
Written Agreements with Directors and Senior Executives
Each non-executive director is provided with a Letter of Appointment, which sets out:
• the term of appointment;
• the time commitment envisaged, including any expectations regarding involvement with Committee work and any other special
duties attaching to the position;
• remuneration, including superannuation entitlements;
• the requirement to disclose the director’s interests and any matters which may affect the director’s independence;
• the requirement to comply with key corporate policies, including Kina’s Code of Ethics and Business Conduct and its Securities
Trading Policy;
• the Company’s policy on when directors may seek independent professional advice at the expense of the Company
(which generally should be whenever directors, especially non-executive directors, judge such advice necessary for them to
discharge their responsibilities as directors);
• the circumstances in which the director’s office becomes vacant;
• indemnity and insurance arrangements;
• ongoing rights of access to corporate information; and
• ongoing confidentiality obligations.
The MD&CEO and each Senior Executive Team member are also provided with a Letter of Appointment which sets out the information
above (to the extent applicable), as well as:
• a description of their position, duties and responsibilities;
• the person or body to whom they report;
• the circumstances in which their service may be terminated (with or without notice);
• any entitlements on termination; and
• any circumstances in which their remuneration may be clawed back.
t
n
e
m
e
t
a
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
51
Company Secretary
The Company Secretary is accountable directly to the Board, through the Chairman, on all matters to do with the proper functioning of
the Board.
Mr. Johnson Kalo was appointed acting Company Secretary and Chief Financial Officer on 1 September 2022. Mr. Kalo holds a Bachelor
of Arts in Commerce from University of Papua New Guinea and a Post Grad Diploma in Applied Financial Investment from FINSIA.
Mr Kalo is a member of Certified Practising Accountants PNG. The acting appointment was made permanent on 1 April 2023
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, and disclose in relation to each reporting period: (a) the measurable objectives set for that period to achieve
gender diversity; (b) the entity’s progress towards achieving those objectives; and (c) the respective proportions of men and women on the
Board, in senior executive positions and across the whole workforce (including how the entity has defined “senior executive” for these purposes).
The numbers of females within Kina’s workforce as at 31 December 2022 and 31 December 2021, including the Board and Senior Executive
Team is set out below:
Board
Senior Executive Team
Team Leaders
Other employees
Total employees
31 December 2022
31 December 2021
Females
Males
Total
Females
Males
Total
2
5
64
292
363
5
4
46
230
285
7
9
110
522
648
2
4
40
344
390
5
5
34
257
301
7
9
74
601
691
52
The Senior Executive Team are those individuals who report directly to the MD&CEO. Team Leaders are those individuals who have been
appointed as Supervisors and Managers.
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 employees. 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 to feed babies.
In 2022, 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.
The management has incorporated and launched FSVU on the common learning platform to allow for an extended participation by the
entire Kina employees.
The ratio of women to men at Kina is 56% female to 44% male (2021: 56% to 44%).
The Group will continue to promote awareness and understanding of workplace diversity principles and develop policies to help
employees balance work, family and cultural responsibilities while at the same time removing barriers to career development.
The Remuneration and Nomination Committee reviews and oversees the implementation of the Diversity Policy and will regularly
consider the need to set specific gender diversity objectives.
Performance Evaluation
In accordance with the Standards, and as set out in the Board Charter, the performance of the Board, the directors and its Committees
are assessed each year. The Board undertook a performance evaluation during 2022 in the form of a self-assessment survey. As in
prior years, the Board undertook an internal skills analysis during the year. The findings were used to further refine the ongoing Board
succession and renewal plan. The Board will continue to review individual, Committee and collective Board performance and ensure that
composition,skills and experience of the directors is appropriate.
Performance evaluations, overseen by the Chairman and the Chair of the Remuneration and Nomination Committee in the case of the
MD&CEO, and the Remuneration and Nomination Committee in the case of the Senior Executive Team, are carried out on an annual
basis and were completed in 2022
t
n
e
m
e
t
a
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
53
Principle 2: Structure the board to be effective and add value
The board of a listed entity should be of an appropriate size and collectively have the skills, commitment and knowledge of the entity and the
industry in which it operates, to enable it to discharge its duties effectively and to add value
Board Composition
The Board currently comprises six non-executive directors (NEDs) and one executive director. The Company’s Constitution provides for a
minimum of three and a maximum of ten directors. The Board members have a diverse range of skills and experience which ensure they
are able to add value to the Board’s decisions, contribute effectively and act in the best interests of its shareholders. The Company’s current
executive director is Mr. Gregory Pawson, the MD&CEO of the Company.
Board Committees
The Board has the power to establish and delegate powers to Committees that are formed to facilitate effective decision-making.
The Board, however, ultimately has full accountability for matters delegated by it to those Committees.
The Board has established an Audit and Risk Committee, a Remuneration and Nomination Committee and a Disclosure Committee.
Each Committee has a separate Charter which sets out, in detail, the membership and powers of the Committee including its roles
and responsibilities.
The Charters are reviewed at least annually, and copies are available on the Company’s website at: investors.kinabank.com.pg/
Investors/?page=corporate-governance.
Other Committees may be established by the Board as and when required. Membership of Board Committees is based on the needs of Kina,
relevant legislative and other requirements and the skills and experience of individual directors.
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.
The objective of the Audit and Risk Committee is to assist the Board in the performance of its statutory and prudential duties and obligations
and to satisfy itself that the Company:
• has effective policies and practices in place for the management and reporting of its financial information and results in compliance with
relevant statutory and regulatory frameworks;
• has in place effective financial and other operational controls which assure the accuracy of financial information produced and reported;
• commissions and appropriately considers well researched advice on financial, taxation, insurance and other matters; and
• has in place an effective risk management framework, covering both financial and non-financial risks and that Kina’s operations fall within
the Board-approved risk appetite and tolerances; and undertakes a regular and objective review of the effectiveness of Kina’s overall
enterprise risk management framework.
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. In accordance with the Standards,
the Chair of the Board must not be a member of any Board Committee.
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; and
• all members to have a sound understanding of the concept of risk and the principles of managing risk.
The Audit and Risk Committee met eight times during the year ended 31 December 2022.
54
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;
• 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
• fairly and responsibly rewards Group Executives having regard to the performance of the Group, the performance of the Group
Executives and the general external pay environment.
In its function as a Nominations 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 and continuing development;
• 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. The Remuneration and Nomination
Committee may obtain information from, and consult with, Management and external advisers, as it considers appropriate. The
Committee met seven times during the year ended 31 December 2022.
Disclosure Committee
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; and
• providing assurance to the Board that all potentially market sensitive information has been considered for compliance with the
Company’s continuous disclosure obligations.
The duties and responsibilities of the Disclosure Committee include to:
• assess whether information concerning the Company should be disclosed to the market;
• determine the substance of the market disclosure and when it must be made;
• where necessary, review market disclosures for accuracy and completeness and approve or recommend to the Board for approval;
• determine whether a trading halt or voluntary suspension of trading is required;
• respond to any request from ASX or PNGX to disclose market sensitive information to correct or prevent a false market;
• ensure that breaches of BPNG’s Standards are communicated, where appropriate, to BPNG or other regulators in compliance with
the relevant listing rules and/or continuous disclosure requirements; and
• oversee the Disclosure Officer’s administration of the Continuous Disclosure Policy.
The Disclosure Committee has the power to:
• determine whether information should be disclosed to the market or any public forum; and
• authorise the disclosure of any information to the market or any public forum.
The Disclosure Committee has absolute right of access to any information held by the Kina Group. The Disclosure Committee shall
comprise at least three members appointed by the Board. Members shall include the Chairman of the Board, the MD&CEO and the Chair
of the Audit and Risk Committee. The Committee Chair shall be appointed by the Chair of the Board. The Committee met twice during
the year ended 31 December 2022.
t
n
e
m
e
t
a
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
55
Membership of and attendance at Board and Committee meetings
Membership of the Committees during the reporting period, the number of Board and Committee meetings held and the attendance at those
meetings are set out in the table below. All directors are invited to and regularly attend all Committee meetings.
Director
Board Meetings
Audit & Risk
Committee Meetings
Remuneration &
Nomination Committee
meetings
Disclosure Committee
Meetings
Isikeli Taureka
Gregory Pawson
Andrew Carriline
Paul Hutchinson
Karen Smith-Pomeroy
Ila Temu
Jane Thomason
A
8
8
82
B
8
8
8
A
82
8
8
8
8
8
8
B
8
8
8
8
8
71
8
A
7
7
7
72
B
7
7
6
7
A
22
2
2
2
B
2
2
2
2
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
56
Board Skills Matrix
The Board seeks to have an appropriate mix of skills, experience, expertise and diversity to enable it to discharge its responsibilities and
add value to the Company.
As of 21 April 2023, the directors collectively contribute the following key skills and experience:
Skills and experience
Explanation
Extent present
among directors
Banking and/or financial
services experience
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
83%
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
74%
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
66%
sustainability frameworks and related practices.
Financial acumen
performance for a business of significant size, including ability to assess the
86%
Good understanding of financial statements and drivers of financial
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
77%
and processes.
International experience
borders, and exposure to a range of political, cultural, regulatory and
71%
Senior leadership experience involving responsibility for operations across
business environments in that position.
Skills gained whilst performing at a senior executive level for a
Leadership and
commercial acumen
considerable length of time. Includes delivering superior results, running
complex businesses, leading complex projects and issues, and leading
workplace culture.
Experience at a senior executive level in people matters including building
People, culture and
workforce capability, workplace cultures, management development,
conduct
succession and setting a remuneration framework that attracts and retains a
high calibre of executives, and promotion of diversity and inclusion.
Risk and compliance
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.
Stakeholder engagement
Demonstrated ability to build and maintain key relationships with industry,
government or regulators.
97%
86%
74%
91%
Strategy
direction. Experience in driving growth and transformation, executing
86%
Experience in leading, developing, setting and executing strategic
against a clear strategy.
Technology and digital
including adaptation to digital change and innovation, with knowledge of
66%
Experience in businesses of a significant size with major technology focus,
developments in Decentralised Finance (DeFi).
t
n
e
m
e
t
a
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
57
Composition of the Board and details of directors
The Kina Board currently comprises seven directors, one of whom is Gregory Pawson, the MD&CEO. The remaining six directors are considered
by the Board to be independent non-executive directors, comprising Isikeli Taureka (Chairman of the Board), Karen Smith-Pomeroy (Chair, Audit
and Risk Committee), Jane Thomason (Chair, Remuneration and Nomination Committee), Andrew Carriline, Paul Hutchinson and Ila Temu.
The Board considers that each of the non-executive directors are ‘independent’ of the Company. Throughout the year, the Board therefore had a
majority of independent non-executive directors.
Directors’ Details
Name
Isikeli Taureka
19 April 2016
Karen Smith-Pomeroy
12 September 2016
Gregory Pawson
Jane Thomason
Andrew Carriline
Paul Hutchinson
Ila Temu
1 January 2018
27 April 2018
16 August 2018
16 August 2018
14 December 2020
Appointment date
Length of service
Non-executive
Independent
6 years, 0 months
6 years, 7 months
5 years, 4 months
5 years, 0 months
4 years, 8 months
3 years, 8 months
2 year, 4 months
Yes
Yes
No
Yes
Yes
Yes
Yes
Yes
Yes
No
Yes
Yes
Yes
Yes
The Board considers an independent director to be 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.
At least annually, the Board reviews the independence of each director in light of their interests disclosed to the Board at each Board meeting
and considers examples of interests, positions, associations and relationships that might cause doubts about the independence of a director
including if the director:
• is, or has been, employed in an executive capacity by the entity or any of its child entities and there has not been a period of at least three
years between ceasing such employment and serving on the Board;
• receives performance-based remuneration (including options or performance rights) from, or participates in an employee incentive
scheme of, the entity;
• is, or has been within the last three years, in a material business relationship (e.g. as a supplier, professional adviser, consultant or
customer) with the entity or any of its child entities, or is an officer of, or otherwise associated with, someone with such a relationship;
• is, represents, or has been within the last three years an officer or employee of, or professional adviser to, a substantial shareholder of the
Company’s securities;
• has close personal ties with any person who falls within any of the categories described above; or
• has been a director of the entity for such a period that their independence from management and substantial shareholders may have
been compromised.
The Board considers that each of the non-executive directors brings objective and independent judgment to Board deliberations and makes a
valuable contribution to Kina through the skills and experience they bring to the Board and their understanding of Kina’s business.
58
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 MD&CEO may not be exercised by the same individual.
Director induction and education
Kina’s induction program is designed to provide all new directors with a comprehensive view of the business. As part of the induction,
new directors are given a detailed overview of Kina’s operations, copies of governance and internal policies and procedures and
instruction on the roles and responsibilities of the Board, its Committees and Senior Management.
The electronic Board portal utilised by the Board provides directors access to relevant Governance Documents, educational information,
Board and Committee papers and provides a secure means of communication between directors and Senior Management. There is a
strong emphasis on continued education and directors are expected to keep themselves updated on changes and trends within the
business, in the financial sector, market environment and any changes and trends in the economic, political, social, global, environmental
and legal climate generally.
Consistent with guidance on best-practice, all directors seek to complete a minimum of 20 hours during the year in ongoing professional
development. Directors are encouraged to attend recognised courses, seminars and conferences and internal education sessions are
scheduled at Board meetings throughout the year.
Principle 3: Instil a culture of acting lawfully, ethically and responsibly
A listed entity should instill and continually reinforce a culture across the organisation of acting lawfully, ethically and responsibly.
Kina Group Purpose Statement
Kina’s purpose is ‘to constantly improve the prosperity of the people, communities, and markets that we serve’.
Kina Group Vision Statement
Our Vision is ‘to be the most dynamic, progressive and accessible financial services organisation in the Pan Pacific region’.
This Vision is supported by our Strategic Priorities:
• Growth and 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: digital from the inside and out, simple processes, great customer service, always first when it matters;
• Dynamic People: we love people, our culture is everything, our people are well trained, adaptable and care; and
• Sustainable Communities: we are in the business of doing good, building trust, and creating long-term value for all our stakeholders.
Kina’s Culture
Our People are here to make a difference, not just for their day job. They are passionate about empowering customers to
effect life change.
Kina’s culture is underpinned by our Group Values, FIRTH:
Fairness
Imagingation
Reflection
Togetherness
Honesty
Since the introduction of the FIRTH values, Kina has seen an increase in employee participation in FIRTH value moments which has
helped them gain renewed perspective in our values and how they can be applied through the business. Our Learning Managements
System was updated to include self-assessment and leader assessment of employee contribution to our Values and defined behaviours
Kina has articulated its Group Vision Statement, its Defining Purpose and its Culture in its Board Charter, a copy of which is available on
the Company’s website at investors.kinabank.com.pg/Investors/?page=corporate- governance.
t
n
e
m
e
t
a
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
59
Acting Ethically and Responsibly
The Board is committed to ensuring that Kina maintains the highest standards of integrity, honesty and fairness in its dealings with all
stakeholders, and that Kina complies with all legal and other obligations.
Kina’s Code of Ethics and Business Conduct (Code) applies to all directors, employees of Kina and its subsidiaries (including subcontractors
and consultants). The Code sets out certain minimum standards of conduct that Kina expects of its employees and directors including integrity,
diligence, impartiality, equality and fairness. The Code sets out how employees and directors are to conduct themselves in order to meet these
minimum standards. It is a requirement for all directors and officers to acknowledge the Code annually.
Whistleblower Policy
The Board has adopted a Protected Disclosure (Whistle-Blower) Policy. The Board wishes to promote an organisational culture that values open,
transparent, ethical, legal, compliant behaviour and does not tolerate behaviour that departs from the high standards expected of Kina directors
and employees.
This Policy is intended to reinforce that culture and to provide a safe, secure, confidential means whereby persons with concerns over any
breaches including any unlawful conduct, misconduct, malpractices, violation of any legal or regulatory provisions that has, or may have
occurred, can report it without fear of reprisal, discrimination or harassment of any kind. It is expected that the protected disclosures will be made
in confidence and in the knowledge that it will be properly investigated and escalated to the appropriate level for it to be properly addressed.
Anti-Bribery and Corruption Policy
The Board has adopted an Anti-Bribery and Corruption Policy. The purpose of the Policy is to provide clarity of expectations, which helps to
reinforce and strengthen the understanding of our responsibilities as well as those with whom we engage and also provide guidance in dealing
with incidents or suspected incidents of bribery and corruption, should they occur.
The Policy complements Kina’s other related policies, in particular, the Code of Ethics and Business Conduct, Conflicts of Interests Policy, and
the Gift and Entertainment Policy. The Policy harmonises with Kina’s Core Values that emphasise principles of fairness, imagination, reflection,
togetherness and honesty in our relationships and business dealings with both our internal and external stakeholders.
Principle 4: Safeguard the integrity of corporate reports
A listed entity should have appropriate processes to verify the integrity of its corporate reports.
Audit and Risk Committee
Details of the Audit and Risk Committee are set out on page 54 above.
Written Declarations
When the Board considers the statutory half-year and annual financial statements, the Board obtains a declaration1, from the MD&CEO and CFO
concerning the integrity of the financial statements and assurance as to the effective operation of the risk management and internal compliance
and control systems.
Kina’s financial reports for the half-year ended 30 June and the full year ended 31 December are respectively reviewed and audited by Deloitte,
the Company’s external auditor.
1 (equivalent to the declaration required by section 295A of the Corporations Act and the statements required by Recommendation 4.2 of the Principles and Recommendations)
60
Principle 5: Make timely and balanced disclosure
A listed entity should make timely and balanced disclosure of all matters concerning it that a reasonable person would expect to have a
material effect on the price or value of its securities.
Timely and Balanced disclosure
Kina is committed to observing its disclosure obligations under the ASX Listing Rules, the PNGX Listing Rules, the (PNG) Companies Act,
the Corporations Act, Capital Markets Act 2015, and the PNG Securities Act. The Board has adopted a Continuous Disclosure Policy and
a Shareholder Communications Policy that implement Kina’s commitment to providing timely, complete and accurate disclosure
of information.
The Continuous Disclosure Policy sets out the roles and responsibilities of officers and employees in complying with Kina’s continuous
disclosure obligations and nominates those individuals who are responsible for determining whether or not information is required to be
disclosed.
Shareholder Communications
The Shareholder Communications Policy promotes effective communication with shareholders and seeks to ensure that shareholders
have equal and timely access to material information concerning Kina. The Policy sets out the investor relations program, a key tenet of
which is to encourage effective shareholder participation.
In accordance with the Shareholder Communications Policy, Shareholders are encouraged to attend General Meetings of shareholders
and shareholder information sessions and to submit written questions prior to those meetings. If they are unable to attend General
Meetings of shareholders, shareholders are encouraged to vote by proxy or other means included in the Notice of Meeting.
Kina’s website kinabank.com.pg contains information regarding the Company, the Board and Senior Executive Team, corporate
governance, media coverage, ASX and PNGX Announcements, investor presentations and reports.
Kina’s Investor Relations Program includes a number of scheduled and ad hoc interactions with institutional investors, private investors,
sell-side and buy-side analysts and the financial media. At a minimum, so as to ensure that shareholders and other stakeholders have a
full understanding of Kina’s performance and strategies, Kina will convene analyst briefings twice a year on Kina’s financial performance
and objectives, following release of the half- year and full year financial results.
Shareholders may receive and send information electronically to and from both Kina and Kina’s Share Registry. Other methods of
communication are also available to shareholders and other stakeholders, including telephone and mail. Kina may consider the use of
other reliable technologies as they become widely available.
Each director automatically receives a copy of each ASX and PNGX Announcement directly from the ASX Market Announcements
Platform as soon as it has been released by ASX and PNGX.
In accordance with Kina’s Continuous Disclosure Policy and Shareholder Communications Policy, any presentation to a new and
substantive investor or analyst presentation, is released on the ASX Market Announcements Platform ahead of the presentation.
t
n
e
m
e
t
a
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
61
Principle 6: Respect the right of security holders
A listed entity should provide its security holders with appropriate information and facilities to allow them to exercise their rights as security
holders effectively.
Kina values engagement with its shareholders, providing an understanding to the market of the Company’s business, performance
and governance. The Company uses the following procedures for engaging with its shareholders:
• Periodic Reporting: The Company produces financial statements for its shareholders and other interested parties twice per
year and allows shareholders to receive these documents by mail or access them electronically (investors.kinabank.com.pg/
Investors/?page=Reports-and-Presentations).
• Annual General Meeting: Shareholders are encouraged to attend the Annual General Meeting each year and are provided with an
explanatory memorandum on the resolutions proposed through the Notice of Meeting. If unavailable to attend, shareholders are
encouraged to appoint a proxy to vote/attend on their behalf. The Company requires its external auditor to attend each Annual General
Meeting and be available to answer questions from shareholders about the conduct of the audit and the preparation and contents of the
auditor’s report.
• Website: The Kina website provides information on the Company’s products and services as well as information useful to shareholders
and market participants (kinabank.com.pg). In particular:
− the Investor section (investors.kinabank.com.pg/investors); and
− Corporate Governance section (investors.kinabank.com.pg/Investors/?page=corporate-governance) directs shareholders to
information likely to be of greatest interest to them.
• Investor Relations: On its website at investors.kinabank.com.pg/Investors/?page=asx-announcements, the Company posts prompt
and relevant communications for shareholders and the market generally to access, such as ASX and PNGX Announcements and
financial results. Investors and shareholders can also contact the Company or its share registry, Link Market Services, directly by email or
by mail and can in turn choose to receive communications electronically at investors.kinabank.com.pg/Investors/?page=my-shareholding.
The Notice of Meeting for any general or annual meetings of Kina shareholders includes the statement that in accordance with Article 55.3 of
the Constitution, the Chairman intends to demand a poll on each of the resolutions proposed at the Meeting.
62
Principle 7: Recognise and manage risk
A listed entity should establish a sound risk management framework and periodically review the effectiveness of that framework.
Audit and Risk Committee
Details of the Audit and Risk Committee are set out on page 54 above.
Risk Management and Internal Controls
Risk is managed structurally through clearly defined risk management policies specific to certain parts of the business. These are
interlinked and feed into a Group Risk Management Framework, which is overseen by the Audit and Risk Committee. The Board has
approved and regularly reviews and updates the Group’s Risk Appetite Statement and tolerance limits, as part of the Group Risk
Management Framework, to ensure that all major areas of risk and risk management systems are appropriately monitored and
accurately documented.
Kina has a dedicated Group Chief Risk Officer (CRO) who is responsible for the Governance, Risk and Compliance attributes of
the businesses. The CRO reports to the MD&CEO and the Chair of the Audit and Risk Committee to ensure all material risks remain
well managed.
The Audit and Risk Committee is supported by a number of approved risk management committees, including the Credit Committee,
Asset and Liability Committee, Operational Risk and Compliance Committee and Executive Committee. The management committees
have been established to nurture a strong and robust risk culture within the Group through the application of the three lines of defence
risk model, and the implementation of key policies and frameworks.
Communication and education throughout the Group on the three lines of defence model emphasises each individual’s role in the
management of risk. During 2022, the Group’s Risk Management Framework, including underlying policies, was reviewed by the Audit
and Risk Committee and, where relevant, by the Board.
A dedicated Compliance department is in place to ensure that Kina personnel are aware of the Group’s prudential and legislative
obligations and that these are maintained at all times. Risk within the Group is managed according to the appropriate risk parameters
whilst promoting compliance of the limits set in the Board Approved Risk Appetite Statement. People risk is monitored including via an
Occupational Health, Safety and Wellbeing regime, which is designed to maintain the safety of Kina’s Employees and Customers.
The Group’s risk management activities comply with all relevant regulation including that of the BPNG Standards, relevant legislation and
the Investment Promotion Authority (IPA), and the ASX and PNGX Listing Rules.
Kina also employs skilled credit managers who understand the PNG economic environment to ensure that the growing loan portfolio is
maintained within an acceptable level of risk and within Kina’s Board-approved risk appetite. All lending proposals are considered based
on credit policy and within the risk appetite of the Group. Debt servicing assessment criteria is maintained to ensure Kina understands its
level of credit risk while managing its impairment exposure.
Kina’s risk management framework and internal control functions incorporate an Internal Audit function, which reports directly to the
Audit and Risk Committee.
The Internal Audit function continues to be co-sourced with external providers, which brings the benefit of enhancing Kina personnel’s
existing knowledge and expertise. The Internal Audit function provides independent and objective assurance to the Board, via the Audit
and Risk Committee. The annual Internal Audit Plan is formulated using a risk- based approach. Progress against the Internal Audit Plan is
reported to the Committee on a quarterly basis.
The internal audit function determines an independent assessment of the effectiveness of Kina’s Risk Management and internal control
environment which is utilised in continual improvement measures of Kina’s business processes.
Kina is exposed to the economic conditions of PNG through its normal course of business in lending monies to commercial businesses
operating in PNG. Kina does not believe it currently has any material exposure to environmental or social (ESG) sustainability risks and the
Company is currently working to develop further our ESG framework and processes.
t
n
e
m
e
t
a
t
S
e
c
n
a
n
r
e
v
o
G
e
t
a
r
o
p
r
o
C
63
Principle 8: Remunerate fairly and responsibly
A listed entity should pay director remuneration sufficient to attract and retain high quality directors and design its executive remuneration to
attract, retain and motivate high quality senior executives and to align their interests with the creation of value for security holders and with the
entity’s values and risk appetite.
Remuneration and Nomination Committee
Details of the Remuneration and Nomination Committee are set out on page 55 above.
Remuneration
Kina is committed to a fair and responsible system of remuneration throughout the Group. Members of Senior Management are remunerated in
a way that aims to attract and retain an appropriate level of talent and reflects their performance in relation to the delivery of corporate strategy
and operational performance.
Remuneration for non-executive directors is set using advice from independent consultants and considers the level of fees paid to non-executive
directors of similar corporations and the responsibilities and work/time requirements of the non-executive directors.
The Remuneration Report and further details about the remuneration policy of Kina are set out in the 2022 Annual Report.
Dealings in Company Securities
The Board has adopted a Securities Trading Policy that applies to Kina’s equity-based remuneration scheme and explains the conduct that is
prohibited under the PNG Securities Act, Capital Markets Act, and the Corporations Act.
The Securities Trading Policy:
• provides for certain Trading Windows when ‘Relevant Persons’ may trade provided the appropriate process has been adhered to;
• prohibits any Relevant Person from entering into a hedge transaction involving unvested equity held pursuant to an Employee,
Senior Management or Director Equity Plan operated by Kina;
• prohibits any Relevant Person from entering into a hedge transaction involving unvested equity held pursuant to an Employee, Senior
Management or Director Equity Plan operated by Kina;
• sets out the prohibitions against insider trading and prescribes certain requirements for dealing in Kina securities; and
• prohibits Relevant Persons from trading in Kina securities while in possession of material non-public information, which is information a
reasonable person would expect to have a material effect on the price or value of Kina securities.
Principle 9: Additional Recommendations
Kina is registered in Papua New Guinea and is in the same time zone as Eastern Australia. All meetings of Kina’s Board and its Committees are
held at a reasonable time and in accordance with the COVID protocols implemented by the PNG Government.
64
Effort.
Reward.
08 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 2022.
Principal activities
Dividends
The principal continuing activities of the Company
The Company paid a dividend of PGK 18.5 toea
and its Subsidiaries during the year were the
(AUD 7.0 cents) per share (K53.1m) in April 2022
provision of commercial banking and financial
in relation to the profit for the half year ended 31
services (including asset financing, provision
December 2021. In September 2022, the Company
of commercial and personal loans, money
also paid dividend of PGK 10.3 toea (AUD 4.1 cents)
market operations and corporate advice), fund
per share (K29.6m) in relation to the profit for the half
administration, investment management services and
year ended 30 June 2022.
share brokerage.
The directors consider there are no unusual or other
After balance sheet date events
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
Subsequent to balance sheet date, the directors
declared a final dividend of PGK 16.1 toea (AUD
6.5 cents) per share (K46.2m) on underlying NPAT
declared for the second half of financial year 2022.
See also note 39 for other subsequent events.
The net profit attributable to equity holders for the
year for the Group was K116.5 million compared with
K70.8 million in 2021.
Donations
The profit includes the following items:
During the year the Group made donations totalling
K124,996 (2021: K401,718)
• Net interest income of K181.2 million, compared
with K177.3 million in the prior year to 31
December 2021.
Auditor’s fees
Fees paid to the auditor during the year for
professional services are shown in note 37 to
the accounts. The external auditor is Deloitte Touche
Tohmatsu Ltd.
• Net fee and commission income of K116.2
million compared with K89.3 million in the
prior year.
• Operating income before impairment losses and
other operating income of K366.5 million, up
from K334.4 million in the prior year.
• Expected credit losses on financial instruments
at amortised cost of K4.8 million, compared with
K6.5 million in the prior year.
• Other operating expenses of K213.3 million,
compared with K194.1 million in the prior period.
66
Remuneration of employees
During the year, the number of employees or former employees (not being directors of the Company), receiving remuneration in excess
of K100,000 per annum from the Group stated in bands of K10,000 was as follows:
In PGK
1,820,001 - 1,830,000
1,530,001 - 1,540,000
1,030,001 - 1,040,000
970,001 - 980,000
910,001 - 920,000
900,001 - 910,000
870,001 - 880,000
800,001 - 810,000
790,001 - 800,000
770,001 - 780,000
750,001 - 760,000
740,001 - 750,000
720,001 - 730,000
710,001 - 720,000
660,001 - 670,000
640,001 - 650,000
600,001 - 610,000
580,001 - 590,000
570,001 - 580,000
550,001 - 560,000
530,001 - 540,000
510,001 - 520,000
500,001 - 510,000
490,001 - 500,000
480,001 - 490,000
470,001 - 480,000
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
350,001 - 360,000
330,001 - 340,000
320,001 - 330,000
310,001 - 320,000
300,001 - 310,000
280,001 - 290,000
270,001 - 280,000
250,001 - 260,000
230,001 - 240,000
220,001 - 230,000
210,001 - 220,000
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
67
2022
2021
In PGK
2022
2021
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
4
4
5
2
11
10
10
6
9
16
16
1
4
7
5
8
9
6
11
6
16
21
* Increase in fixed base salary and impact of foreign exchange conversion.
1*
-
-
2
1
-
2
1
1
1
-
-
1
-
-
-
2
2
-
1
1
1
1
-
1
1
1
-
-
1
-
-
1
1
1
1
2
2
2
-
1
-
1
1
-
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
2
-
3
1
Directors’ remuneration
Directors’ fees paid during the year was as follows:
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
*increase in fixed base salary and impact of foreign exchange conversion.
2022
2021
PGK’000
PGK’000
455
333
285
257
285
258
451
360
309
278
306
274
1,873
1,978
1,817*
452
2,269
4,142
1,533*
454
1,987
3,965
Signed at Port Moresby on behalf of the board on
30 March 2023.
Mr Isikeli Taureka
Director and Chairman
Mr Greg Pawson
Managing Director and Chief Executive Officer
68
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 2022
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 2023
Mr Greg Pawson
Managing Director and Chief Executive Officer
Port Moresby, 30 March 2023
n
o
i
t
a
r
a
l
c
e
D
’
s
r
o
t
c
e
r
i
D
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
69
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 AAuuddiittoorrss’’ 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
2022, the consolidated income statement, 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 2022 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 Auditors’ 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
EExxppeecctteedd ccrreeddiitt lloossss oonn llooaannss aanndd aaddvvaanncceess
As at 31 December 2022, the Group has
recognised a loss allowance for Expected Credit
Losses (ECL) amounting to K42.50m on loans and
advances held at amortised cost in accordance
with IFRS 9 Financial Instruments (IFRS 9) as
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 controls over:
Liability limited by a scheme approved under Professional Standards Legislation.
Member of Deloitte Asia Pacific Limited and the Deloitte organisation.
70
KKeeyy AAuuddiitt MMaatttteerr
disclosed in Note 3(b).
requirements
IFRS 9’s
Loans and advances subject
impairment
the
commercial lending portfolio, residential lending
loan
portfolio, personal
commitments.
loan portfolio and
to
include
Significant management
judgement was
necessary in determining the loss allowance,
including:
•
•
The application of the requirements of IFRS
9 as reflected in the Group’s ECL model,
particularly in light of the current economic
environment;
Identification of exposures with a significant
movement in credit quality to determine
whether 12-month or lifetime expected
credit loss should be recognised; and
• Assumptions used in the ECL model such as
determination of significant
in
credit risk, definition of default, probability
of default, loss given default and forward-
looking macroeconomic factors as disclosed
in Note 3(b).
increase
IImmppaaiirrmmeenntt ooff nnoonn--ccuurrrreenntt aasssseettss
ggooooddwwiillll
iinncclluuddiinngg
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt
MMaatttteerr
•
•
The accuracy of data input into the system used for
determining the past due status and approval of credit
facilities; and
The ongoing monitoring and identification of loans
displaying indicators of impairment and whether they
are migrating on a 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
loss
allowance for ECL. Our procedures included, but were not
limited to:
in determining the
• Assessing whether
the ECL model adequately
addresses the requirements of the IFRS 9;
• Assessing, on a sample basis, the individual exposures
to determine if they are classified into appropriate
default stages and aging categories for the purpose of
determining the loss allowance for ECL;
• Assessing the reasonableness of the assumptions
driving Probabilities of Default (PD), Loss Given Default
(LGD) and Exposure at Default (EAD); and
• Assessing the adequacy of management overlays to the
modelled loss allowance for ECL by recalculating the
coverage provided by the loss allowance (including
overlays) to the loan book, taking into account recent
history, performance and de-risking of the relevant
portfolios.
We also assessed the appropriateness of the disclosures in
Note 3(b) and Note 16 to the consolidated financial
statements.
In conjunction with our valuation specialists, our
procedures included, but were not limited to:
As at 31 December 2022 the Group has
recognised goodwill amounting to K92.7m,
arising from the acquisitions of Maybank (PNG)
Limited and Maybank Property (PNG) Limited as
disclosed in Note 38.
•
Evaluating the appropriateness of management’s key
controls over the impairment assessment process,
including the identification of potential indicators of
impairment such as the carrying value exceeding the
market capitalisation;
In accordance with IAS 36 Impairment of Assets,
Cash Generating Units (CGUs) including goodwill
are required to be tested for impairment at least
annually.
• Assessing the reasonableness of cash flow projections
and growth rates against external economic and
financial data and the Group’s own historical
performance;
requires
impairment
significant
The
test
judgement due to assumptions required
in
preparing a discounted cash flow model (value in
use). These assumptions include:
t
r
o
p
e
R
s
’
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
71
KKeeyy AAuuddiitt MMaatttteerr
HHooww tthhee ssccooppee ooff oouurr aauuddiitt rreessppoonnddeedd ttoo tthhee KKeeyy AAuuddiitt
MMaatttteerr
•
Forecasting future cash flows for the CGU
into accounting regulatory and
taking
macroeconomic factors;
• Comparing historical performance against prior years’
forecasts to assess management’s
budgets and
historical forecasting accuracy;
• Discount rates; and
•
Terminal value growth rates.
IInnffoorrmmaattiioonn tteecchhnnoollooggyy
IT systems for processing
The Group’s business 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 and
is considered a key audit matter.
• Assessing the key assumptions and methodology used
by management in the impairment model, in particular
the discount rate and the terminal growth rate; and
•
Testing the mathematical accuracy of the impairment
model.
We also assessed the appropriateness of the disclosures in
Note 38 to the consolidated financial statements.
In conjunction with our IT specialists, our procedures
included but were not limited to:
• 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 auditors’ report, and the annual report (but does not include the
consolidated financial statements and our auditors’ 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 auditors’ 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.
72
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.
Auditors’ 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 auditors’ 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 auditors’ 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 auditors’ 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.
t
r
o
p
e
R
s
’
r
o
t
i
d
u
A
t
n
e
d
n
e
p
e
d
n
I
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
73
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.
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 auditors’ 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
2022..
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 auditors’ report are Benjamin Lee and David
Rodgers.
DELOITTE TOUCHE TOHMATSU
DELOITTE TOUCHE TOHMATSU
Benjamin Lee
Partner
Chartered Accountants
Registered under Accountants Act 1996
David Rodgers
Partner
Chartered Accountants
Registered Company Auditor in Australia
Port Moresby 30 March 2023
Brisbane 30 March 2023
74
Statements of Comprehensive Income.
For the year ended 31 December 2022
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
Note
Consolidated
Parent
2022
2021
2022
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
224,600
(43,389)
181,211
116,324
(110)
116,214
60,339
469
3,610
4,657
206,935
(29,623)
177,312
89,391
(55)
89,336
223,949
(42,991)
180,958
82,908
(110)
82,798
206,842
(29,533)
177,309
58,459
(69)
58,390
65,632
61,843
66,316
562
817
703
74
3,737
9,190
50
467
4,117
366,500
334,362
338,600
306,649
(4,825)
(6,519)
(4,160)
(6,665)
(213,257)
(194,127)
(203,322)
(186,127)
-
148,418
(31,930)
(27,700)
106,016
(35,206)
-
131,118
(26,704)
(27,700)
86,157
(29,634)
5
5
6
6
7
15
8
3b
9
31
10
Net profit for the year attributable to the equity holders of the
Company
116,488
70,810
104,414
56,523
Other comprehensive income
-
-
-
-
Total comprehensive income for the year attributable to the equity
holders of the Company
116,488
70,810
104,414
56,523
Earnings per share – basic (toea)
Earnings per share – diluted (toea)
27 b
27 b
2022
40.60
40.35
2021
24.68
24.39
The notes on pages 16 to 79 are an integral part of these consolidated financial statements.
e
m
o
c
n
I
e
v
i
s
n
e
h
e
r
p
m
o
C
f
o
s
t
n
e
m
e
t
a
t
S
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
75
Statements of Financial Position.
As at 31 December 2022
Assets
Cash and cash equivalents
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
Note
Consolidated
Parent
2022
2021
2022
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
433,488
1,215,763
383,083
15,262
2,158,921
152,650
-
952
32,094
-
82,839
92,786
32,493
79,669
408,334
795,362
212,874
11,652
1,950,447
112,107
-
31
16,988
-
90,467
92,786
48,663
45,947
397,376
1,215,763
383,083
10,508
366,302
795,362
212,874
6,771
2,154,963
1,944,273
152,650
38,113
-
31,246
248
82,839
92,786
32,493
76,847
112,107
65,518
-
16,474
248
90,467
92,786
48,364
42,393
4,680,000
3,785,658
4,668,915
3,793,939
2,060
4,701
2,060
4,701
3,878,835
3,036,921
3,896,958
3,079,454
5,148
-
14,111
41,713
126,803
4,068,670
11,697
-
10,906
48,851
95,959
5,130
30,507
12,717
41,713
122,088
11,493
9,612
9,802
48,851
94,917
3,209,035
4,111,173
3,258,830
12
13
14
15
16
17
29
23
11
18
19
38
20
21
22
23
29
24
25
26
Net assets
611,330
576,623
557,742
535,109
Shareholders’ equity
Issued and fully paid ordinary shares
Share-based payment reserve
Retained earnings
27 a
27 c
394,693
4,504
212,133
394,693
3,587
178,343
394,693
4,504
158,545
394,693
3,587
136,829
Total equity
611,330
576,623
557,742
535,109
These financial statements have been approved for issue by the Board of Directors and signed on its behalf by:
Mr Isikeli Taureka
Director and Chairman
Mr Greg Pawson
Managing Director and Chief Executive Officer
The notes on pages 16 to 79 are an integral part of these consolidated financial statements.
76
Statements of Changes in Equity.
For the year ended 31 December 2022
Consolidated
Attributable to the equity holders of the Group
Balance as at 31 December 2020
Profit for the year
Employee share scheme – vested rights
Employee share scheme – value of employee services
Dividend paid
Share
Capital
PGK ‘000
394,693
-
-
-
-
Balance as at 31 December 2021
394,693
Profit for the year
Employee share scheme – vested rights
Employee share scheme – value of employee services
Dividend paid
-
-
-
-
Balance as at 31 December 2022
394,693
Share-Based
Payment
Reserve
Retained
Earnings
PGK ‘000
PGK ‘000
2,774
-
(3,476)
4,289
-
3,587
-
(1,360)
2,277
-
4,504
179,567
70,810
-
-
(72,034)
178,343
116,488
-
-
(82,698)
212,133
Total
PGK ‘000
577,034
70,810
(3,476)
4,289
(72,034)
576,623
116,488
(1,360)
2,277
(82,698)
611,330
Parent
Attributable to the equity holders of the Parent
Balance as at 31 December 2020
Profit for the year
Employee share scheme – vested rights
Employee share scheme – value of employee services
Dividend paid
Share
Capital
PGK ‘000
394,693
-
-
-
-
Balance as at 31 December 2021
394,693
Profit for the year
Employee share scheme – vested rights
Employee share scheme – value of employee services
Dividend paid
-
-
-
-
Balance as at 31 December 2022
394,693
Share-Based
Payment
Reserve
Retained
Earnings
PGK ‘000
PGK ‘000
2,774
-
(3,476)
4,289
-
3,587
-
(1,360)
2,277
-
4,504
152,340
56,523
-
-
(72,034)
136,829
104,414
-
-
(82,698)
158,545
Total
PGK ‘000
549,807
56,523
(3,476)
4,289
(72,034)
535,109
104,414
(1,360)
2,277
(82,698)
557,742
y
t
i
u
q
E
n
i
s
e
g
n
a
h
C
f
o
s
t
n
e
m
e
t
a
t
S
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
77
Statements of Cash Flows.
For the year ended 31 December 2022
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
Consolidated
Parent
2022
2021
2022
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
215,812
(29,974)
60,339
469
118,472
(110)
6,177
935
-
206,779
(33,943)
65,632
562
87,978
(55)
1,415
1,750
-
215,162
(29,576)
61,843
74
206,686
(33,853)
66,316
50
82,839
58,459
(110)
6,565
935
-
(69)
2,588
1,750
1,890
Cash payments to employees and suppliers
(171,979)
(179,188)
(112,229)
(239,076)
Income tax paid
(54,436)
(28,918)
(47,838)
(22,419)
Cash flows from operating profits before changes in operating
assets and liabilities
Changes in operating assets and liabilities:
145,705
122,012
177,665
42,322
- net (increase)/ decrease in regulatory deposits
(170,208)
(27,163)
(170,208)
(27,163)
- net increase in loans and advances to customers
(210,776)
(336,052)
(210,776)
(336,053)
- 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
(35,491)
828,498
(2,640)
23,245
14,904
(36,208)
17,850
476,206
804,090
479,979
(684)
(2,201)
(2,640)
19,276
(684)
(2,164)
Net cash inflow/(outflow) from operating activities
28c
578,333
247,022
581,199
174,087
Cash flows from investing activities
Purchase of property, equipment and software
(14,005)
(28,431)
(14,005)
(28,431)
Proceeds from sale of property and equipment
306
148
306
148
Net movement in investment securities
28b
(452,937)
(50,494)
(452,937)
(50,144)
Other one-off expenses
Refund of deposit from Westpac
31
32
-
-
(8,407)
84,567
-
-
(8,407)
84,567
Net cash inflow/(outflow) generated from/(used in) investing
activities
(466,636)
(2,617)
(466,636)
(2,267)
Cash flows from financing activities
Dividend paid
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
28a
(82,698)
(72,034)
(82,698)
(72,034)
(82,698)
(72,034)
(82,698)
(72,034)
28,999
(3,845)
408,334
433,488
172,371
(4,184)
240,147
408,334
31,865
(791)
366,302
397,376
99,786
(98)
266,614
366,302
78
Notes to the Financial Statements.
For the year ended 31 December 2022
1. Summary of significant accounting policies
General information
1.1
The Company and its subsidiaries are incorporated in Papua New Guinea. The Group’s business activities include 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 2021, 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.
The directors have, at the time of approving the financial statements, a reasonable expectation that the Group have adequate resources
to continue in operational existence for the foreseeable future. Thus, they continue to adopt the going concern basis of accounting in
preparing the financial statements.
Basis of preparation
1.2
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 2022 were authorized for issue by the Board of
Directors on 30 March 2023.
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.
Amendments to IFRSs that are mandatorily effective for the current reporting period
1.3
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:
• impact of the initial application of Interest Rate Benchmark Reform
• impact of the initial application of COVID-19-Related Rent Concessions—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 determined that there is no material impact arising as a result
of initial application of Interest Rate Benchmark Reform.
Impact of the initial application of COVID-19-Related Rent Concessions—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.
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
79
1. Summary of significant accounting policies
Amendments to IFRSs that are mandatorily effective for the current reporting period (continued)
1.3
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.
New and revised IFRS standards in issue but not yet effective
1.4
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 2021 amendments to IFRS 17)
Insurance Contracts
Amendments to IFRS 10 and IAS 28
Sale or Contribution of Assets between an Investor and its Associate or Joint
Venture
Amendments to IAS 1
Amendments to IFRS 3
Amendments to IAS 16
Amendments to IAS 37
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
Annual Improvements to IFRS Standards 2018- 2021 Cycle
Amendments to IFRS 1 First-time Adoption of International Financial Reporting
Standards, IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41 Agriculture
Amendments to IAS 1 and IFRS Practice Statement 2
Disclosure of Accounting Policies
Amendments to IAS 8
Amendments to IAS 12
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.
Basis of consolidation
1.5
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.
80
1. Summary of significant accounting policies (continued)
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.
Segment reporting
1.6
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 –
Banking & Finance and Wealth Management.
Foreign currency translation
1.7
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.
Interest income and interest expense
1.8
Interest income and expense for all financial instruments except for 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.
Fee and commission income
1.9
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.
• 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.
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
81
• 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.
• 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.
Leases
1.10
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.
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
• 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.
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.
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.
82
1. Summary of significant accounting policies (continued)
Taxation
1.11
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.
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 realized 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 utilize 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 realize 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 (a) over (b) is considered as goodwill:
(a) sum of 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; and
(b) the fair value of the net identifiable assets acquired.
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.
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
83
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 and deposits held at call with
financial institutions which are subject to an insignificant risk of changes in value, and bank overdrafts.
In the statement of financial position, cash and bank balances comprise cash (i.e. cash on hand and demand deposits) and cash equivalents.
Cash equivalents are short-term (generally with original maturity of three months or less), highly liquid investments that are readily convertible to
a known amount of cash and which are subject to an insignificant risk of changes in value. Cash equivalents are held for the purpose of meeting
short-term cash commitments rather for investment or other purposes.
For the purposes of the statement of cash flows, cash and cash equivalents consist of cash and cash equivalents as defined above.
Financial instruments
1.14
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.
84
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
• assets that are held in a business model other than held to collect contractual cash flows or held to collect and sell; or
• 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 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).
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
85
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
• the borrower is unlikely to pay its credit obligations to the Group in full.
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.
Derecognition of financial assets
The Group derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the
financial asset and substantially all the risks and rewards of ownership of the asset to another entity. If the Group neither transfers nor retains
substantially all the risks and rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest
in the asset and an associated liability for amounts it may have to pay. If the Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise the financial asset and also recognises a collateralised borrowing for the
proceeds received. On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and
the sum of the consideration received and receivable is recognised in profit or loss.
86
1. Summary of significant accounting policies (continued)
1.14 Financial instruments (continued)
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.
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.
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 re-measurement is presented in other revenue.
The Group has not designated any financial guarantee contracts as at FVTPL.
Property, plant and equipment
1.15
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
11.25% to 15%
Building improvements
Motor vehicles
10%
30%
Office equipment
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.
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
87
Intangible assets and other non-financial assets
1.16
Goodwill
Goodwill is measured as described in note 38 Goodwill having an indefinite useful life is not amortised 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
A customer deposit relationship asset was recognized 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 amortised 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 recognized 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 recognized as a capital improvement and added to the original cost of the software. Computer software development costs
recognized as assets are amortised using the straight-line method over their useful lives, not exceeding a period of five years.
Provisions
1.17
Provisions are recognized 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.
Employee benefits
1.18
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 recognized 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.
88
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.
Share capital and other equity accounts Share capital
1.19
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 recognized 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.
Earnings per share Basic earnings per share
1.20
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.
Fiduciary activities
1.21
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).
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
89
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 to the 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:
USD
AUD
SGD
GBP
EUR
NZD
JPY
Others
PGK ‘000
31-Dec-22
Cash balance
257
40
Due from other banks
62,043
47,743
31-Dec-21
Cash balance
62,300
47,783
264
303
Due from other banks
92,485
62,546
92,749
62,849
There were no material liabilities denominated in foreign currency.
2
407
409
71
212
283
70
331
401
32
203
235
152
1,285
1,437
193
1,739
1,932
566
920
1,486
630
532
1,162
179
302
481
206
215
421
29
2,070
2,099
77
2,266
2,343
90
3. Financial risk management (continued)
a) Market risk (continued)
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% (2021:10%)
USD/PGK – exchange rate – decrease 10% (2021:10%)
(ii) Interest rate risk
Impact on statement of comprehensive income in
2022
PGK ‘000
(176)
(215)
2021
PGK ‘000
(8,408)
10,276
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 components 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.
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.
The following table risks summarises the Group’s exposure to interest rate risks:
Assets
Cash and cash equivalents
Central bank bills
Loans and advances to customers
Investments in Government Inscribed Stocks
Liability
Due to customers
Assets
Cash and cash equivalents
Central bank bills
Loans and advances to customers
Investments in Government Inscribed Stocks
Liability
Due to customers
Sensitivity
Year ended 31 December 2022
Carrying amount
Average Interest rate (% p.a.)
PGK ‘000
433,488
1,215,763
2,158,921
152,650
3,878,835
0.00%
5.38%
7.66%
9.93%
1.15%
Year ended 31 December 2021
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%
Given the profile of assets and liabilities at 31 December 2022 and prevailing interest rates, a 200 basis points increase/decrease in
market rates in relation to lending will result in a maximum possibility of K1,639,739. (2021: K4,586,584) 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 listed shares traded on stock exchange. 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).
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
91
3. Financial risk management (continued)
a) Market risk (continued)
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 2022 and net assets as of balance date would have been affected
by K763,103 (2021: K582,621).
Equity prices – increase 5% (2021:5%)
Equity prices – decrease 5% (2021:5%)
b) Credit risk
Impact on statement of comprehensive income in
2022
PGK ‘000
763
(763)
2021
PGK ‘000
583
(583)
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.
(i) Credit risk management
The Group’s credit committee is responsible for managing the Group’s credit risk by:
• 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.
• Identifying, assessing and measuring credit risk across the Group, from an individual instrument to a portfolio level.
• 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.
92
3. Financial risk management (continued)
b) Credit risk (continued)
(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.
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.
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.
(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 cash equivalents at amortised cost
Cash and cash equivalents
Treasury and central bank bills at amortised cost
Central bank bills
Regulatory deposits at amortised cost
Regulatory deposits
Loans and advances to customers at amortised cost
Loans and advances to customers
Investments in Government Inscribed Stocks at amortised cost
Investments in Government Inscribed Stocks
Bank guarantees
Other financial assets
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 cash equivalents at amortised cost
PGK ‘000
PGK‘ 000
31 December 2022
31 December 2021
Consolidated
Concentration by sector
Cash on hand
With central bank (exchange settlement account)
With other banks
Total
Concentration by region
Papua New Guinea
Offshore*
Total
*bank accounts maintained in Australia, New Zealand, Great Britain, Singapore, Malaysia, Philippines, Japan, India and Turkey
151,370
160,392
121,726
433,488
319,423
114,065
433,488
115,451
123,895
168,988
408,334
243,502
164,832
408,334
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
93
3. Financial risk management (continued)
b) Credit risk (continued)
Cash and cash equivalents at amortised cost
PGK ‘000
PGK ‘000
31 December 2022
31 December 2021
Parent
Concentration by sector
Cash on hand
With central bank (exchange settlement account)
With other banks
Total
Concentration by region
Papua New Guinea
Offshore*
Total
151,370
160,392
85,614
397,376
328,423
68,953
397,376
115,451
123,895
126,956
366,302
273,241
93,061
366,302
*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 2022
31 December 2021
PGK ‘000
PGK ‘000
1,215,763
1,215,763
1,215,763
1,215,763
795,362
795,362
795,362
795,362
Parent
31 December 2022
31 December 2021
PGK ‘000
1,215,763
1,215,763
1,215,763
1,215,763
PGK ‘000
795,362
795,362
795,362
795,362
Consolidated
31 December 2022
31 December 2021
PGK ‘000
PGK ‘000
383,038
383,038
383,038
383,038
212,874
212,874
212,874
212,874
94
3. Financial risk management (continued)
b) Credit risk (continued)
Regulatory deposits at amortised cost
PGK ‘000
PGK ‘000
31 December 2022
31 December 2021
Parent
Concentration by sector
With central banks
Total
Concentration by region
Papua New Guinea
Total
383,038
383,038
383,038
383,038
212,874
212,874
212,874
212,874
Consolidated
Loans and advances to customers at amortised cost
PGK ‘000
PGK ‘000
31 December 2022
31 December 2021
553,845
59,467
3,874
16,233
18,806
6,684
171,237
694,077
79,030
23,214
837
316,094
43,623
211,309
3,088
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
2,201,418
1,988,547
2,201,418
2,201,418
1,988,547
1,988,547
Concentration by sector
Individuals:
– Mortgages
– Unsecured lending
– Corporate entities:
– Agriculture, Forestry & Fishing
– Mining
– Manufacturing
– Electrical, Gas & Water
– Building and Construction
– Wholesale & Retail
– Hotel & Restaurants
– Transport & Storage
– Financial Intermediation
– Real Estate/Renting/Business Services
– Equipment Hire
– Other Business
– Personal Banking
Total
Concentration by region
Papua New Guinea
Total
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
95
3. Financial risk management (continued)
b) Credit risk (continued)
Loans and advances to customers at amortised cost
PGK ‘000
PGK ‘000
31 December 2022
31 December 2021
Parent
Concentration by sector
Individuals:
– Mortgages
– Unsecured lending
– Corporate entities:
– Agriculture, Forestry & Fishing
– Mining
– Manufacturing
– Electrical, Gas & Water
– Building and Construction
– Wholesale & Retail
– Hotel & Restaurants
– Transport & Storage
– Financial Intermediation
– Real Estate/Renting/Business Services
– Equipment Hire
– Other Business
– Personal Banking
Total
Concentration by region
Papua New Guinea
Total
553,845
59,467
3,874
16,233
18,806
6,684
171,237
694,077
79,030
23,214
837
316,094
43,623
206,333
3,088
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
2,196,442
1,982,019
2,196,442
2,196,442
1,982,019
1,982,019
Consolidated
Investments in Government Inscribed Stocks at amortised cost
PGK ‘000
PGK ‘000
31 December 2022
31 December 2021
Concentration by sector
Sovereign
Total
Concentration by region
Papua New Guinea
Total
154,881
154,881
154,881
154,881
113,746
113,746
113,746
113,746
96
3. Financial risk management (continued)
b) Credit risk (continued)
Investments in Government Inscribed Stocks at amortised cost
PGK ‘000
PGK ‘000
31 December 2022
31 December 2021
Parent
Concentration by sector
Sovereign
Total
Concentration by region
Papua New Guinea
Total
Bank guarantees
Concentration by sector
Corporate entities:
– Agriculture, Forestry & Fishing
– Wholesale & Retail
– Building and Construction
– Transport & Storage
– Other Business
Total
Concentration by region
Papua New Guinea
Total
Bank guarantees
Concentration by sector
Corporate entities:
– Agriculture, Forestry & Fishing
– Wholesale & Retail
– Building and Construction
– Transport & Storage
– Other Business
Total
Concentration by region
Papua New Guinea
Total
154,881
154,881
154,881
154,881
113,746
113,746
113,746
113,746
Consolidated
31 December 2022
31 December 2021
PGK ‘000
PGK ‘000
4,616
3,800
11,812
2,426
3,090
25,744
25,744
25,744
18,199
13,210
9,857
129
5,433
46,829
46,829
46,829
Parent
31 December 2022
31 December 2021
PGK ‘000
PGK ‘000
4,616
3,800
11,812
2,426
3,090
25,744
25,744
25,744
18,199
13,210
9,857
129
5,433
46,829
46,829
46,829
The amount of bank guarantees disclosed above represent notional amount guaranteed being the maximum exposure to credit risk
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
97
3. Financial risk management (continued)
b) Credit risk (continued)
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.
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
Consolidated
31 December 2022
Cash and cash equivalents
Treasury and central bank
bills
Regulatory deposits
Loans and advances
Investments in Government
Inscribed Stocks
Other financial assets
Bank guarantees
Total gross carrying amount
Loss allowance
Net carrying amount
PGK ‘000
433,488
1,215,997
383,083
1,899,383
154,881
83,659
25,744
4,196,235
(23,681)
4,172,554
PGK ‘000
PGK ‘000
PGK ‘000
-
-
-
-
-
-
-
-
-
110,370
178,079
13,586
-
-
-
110,370
(5,458)
104,912
-
-
-
178,079
(19,579)
158,500
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
Cash and cash equivalents
Treasury and central bank
bills
Regulatory deposits
Loans and advances
Investments 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
PGK ‘000
PGK ‘000
-
-
-
-
-
-
-
-
-
152,442
71,667
14,890
-
-
-
152,442
(10,447)
141,995
-
-
-
71,667
(7,602)
64,065
13,586
4,498,270
-
(48,718)
13,586
4,449,552
Consolidated
31 December 2021
PGK ‘000
433,488
1,215,997
383,083
2,201,418
154,881
83,659
25,744
PGK ‘000
408,334
795,362
212,874
1,988,547
113,746
49,937
46,829
-
-
-
-
-
-
14,890
3,615,629
-
(43,729)
14,890
3,571,900
98
3. Financial risk management (continued)
b) Credit risk (continued)
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
Parent
31 December 2022
POCI
Total
Cash and cash equivalents
Treasury and central bank
bills
Regulatory deposits
Loans and advances
Investments in Government
Inscribed Stocks
Other financial assets
Bank guarantees
PGK ‘000
397,376
1,215,997
383,038
1,895,673
154,881
80,901
25,744
Total gross carrying amount
4,153,610
Loss allowance
Net carrying amount
(23,682)
4,129,928
PGK ‘000
PGK ‘000
PGK ‘000
-
-
-
-
-
-
-
-
-
PGK ‘000
397,376
1,215,997
383,038
110,248
176,935
13,586
2,196,442
-
-
-
110,248
(5,456)
104,792
-
-
-
176,935
(18,562)
158,373
-
-
-
154,881
80,901
25,744
13,586
4,454,379
-
(47,700)
13,586
4,406,679
Parent
31 December 2021
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
POCI
Total
Cash and cash equivalents
Treasury and central bank
bills
Regulatory deposits
Loans and advances
Investments in Government
Inscribed Stocks
Other financial assets
Bank guarantees
PGK ‘000
366,302
795,362
212,874
1,745,860
113,746
46,383
46,829
Total gross carrying amount
3,327,356
Loss allowance
Net carrying amount
(25,680)
3,301,676
PGK ‘000
PGK ‘000
PGK ‘000
-
-
-
-
-
-
-
-
-
PGK ‘000
366,302
795,362
212,874
151,457
69,812
14,890
1,982,019
-
-
-
151,457
(10,443)
141,014
-
-
-
69,812
(7,252)
62,560
-
-
-
113,746
46,383
46,829
14,890
3,563,515
-
(43,375)
14,890
3,520,140
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
99
3. Financial risk management (continued)
b) Credit risk (continued)
This table summarises the loss allowance as of the year end by class of exposure/asset.
31 December 2022
31 December 2021
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
PGK ‘000
42,497
2,231
3,990
48,718
PGK ‘000
38,100
1,639
3,990
43,729
Parent
31 December 2022
31 December 2021
Loss allowance by classes
Loans and advances to customers at amortised cost
Investments in Government Inscribed Stocks at amortised cost
Other financial assets
Total
PGK ‘000
41,479
2,231
3,990
47,700
PGK ‘000
37,746
1,639
3,990
43,375
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 collateralized by high
quality liquid assets.
100
3. Financial risk management (continued)
b) Credit risk (continued)
Table below summarises the movement in ECL during the year by class of financial assets:
Balance at 01
January 2022
Additional ECL
recognised
Write- offs
Bad debt
Recoveries
Balance at 31
December 2022
Consolidated
Loss allowance by classes
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
Loans and advances to customers
at amortised cost
Investments in Government
Inscribed Stocks at amortised cost
Other financial assets
Total
38,100
1,639
3,990
43,729
4,323
592
-
4,916
(857)
931
42,497
-
-
-
-
2,231
3,990
(857)
931
48,718
Balance at 01
January 2021
Additional ECL
recognised
Write- offs
Bad debt
Recoveries
Balance at 31
December 2021
Consolidated
Loss allowance by classes
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
Loans and advances to customers
at amortised cost
Investments in Government
Inscribed Stocks at amortised cost
Other financial assets
Total
35,345
6,555
(5,550)
1,750
38,100
1,674
4,038
41,057
9
-
(44)
(48)
-
-
1,639
3,990
6,564
(5,642)
1,750
43,729
Balance at 01
January 2022
Additional ECL
recognised
Write- offs
Bad debt
Recoveries
Balance at 31
December 2022
Loss allowance by classes
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
Loans and advances to customers
at amortised cost
Investments in Government
Inscribed Stocks at amortised cost
Other financial assets
Total
37,746
1,639
3,990
43,375
3,659
592
-
4,251
(857)
931
41,479
-
-
-
-
2,231
3,990
(857)
931
47,700
Parent
Balance at 01
January 2021
Additional ECL
recognised
Write- offs
Bad debt
Recoveries
Balance at 31
December 2021
Loss allowance by classes
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
Loans and advances to customers
at amortised cost
Investments in Government
Inscribed Stocks at amortised cost
Other financial assets
Total
34,845
6,701
(5,550)
1,750
37,746
1,674
4,038
40,557
9
-
(44)
(48)
-
-
1,639
3,990
6,710
(5,642)
1,750
43,375
Parent
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
101
3. Financial risk management (continued)
b) Credit risk (continued)
Loss allowance – 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
Consolidated
31 December 2022
Loss allowance as at 01 January
19,983
10,527
7,590
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
2,677
(1,190)
(2,701)
-
12,263
(2,619)
1,234
(6,120)
-
3,886
(58)
(44)
8,821
(857)
9,889
(13,572)
(1,450)
(5,762)
17,460
5,458
19,579
-
-
-
-
-
-
-
-
38,100
-
-
-
(857)
26,038
(20,784)
42,497
Consolidated
31 December 2021
Loss allowance – 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
Loss allowance as at 01 January
12,058
19,777
3,510
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
637
(3,436)
(209)
-
22,052
(616)
3,453
(4,240)
(4,703)
8,751
(21)
(17)
4,449
(766)
3,547
(11,119)
(11,895)
(3,112)
19,983
10,527
7,590
-
-
-
-
-
-
-
-
35,345
-
-
-
(5,469)
34,350
(26,126)
38,100
102
3. Financial risk management (continued)
b) Credit risk (continued)
Loss allowance – 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
Parent
31 December 2022
Loss allowance as at 01 January
19,985
10,525
7,236
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
2,677
(1,190)
(2,701)
-
12,263
(13,572)
(2,619)
1,234
(6,120)
-
3,886
(58)
(44)
8,821
(857)
8,871
(1,450)
(5,408)
17,462
5,456
18,561
Loss allowance – Loans and
advances to customers at
amortised cost
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
-
-
-
-
-
-
-
-
37,746
-
-
-
(857)
25,020
(20,430)
41,479
Parent
31 December 2021
POCI
Total
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
Loss allowance as at 01 January
12,058
19,718
3,069
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
637
(3,436)
(209)
-
22,054
(11,119)
(616)
3,453
(4,224)
(4,704)
8,751
(21)
(17)
4,433
(766)
3,451
(11,853)
(2,913)
19,985
10,525
7,236
-
-
-
-
-
-
-
-
34,845
-
-
-
(5,470)
34,256
(25,885)
37,746
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
103
3. Financial risk management (continued)
b) Credit risk (continued)
Loans and advances to customers at
amortised cost
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
Consolidated
31 December 2022
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
1,749,549
152,441
71,667
14,890
1,988,547
41,924
(70,988)
(44,382)
-
(39,095)
72,997
(64,450)
-
(2,829)
(2,009)
108,832
(857)
581,710
8,615
17,725
-
-
-
-
-
-
-
-
(857)
608,050
(358,430)
(20,138)
(14,450)
(1,304)
(394,322)
1,899,383
110,370
178,079
13,586
2,201,418
Loans and advances to customers at
amortised cost
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
Consolidated
31 December 2021
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
1,417,091
184,262
29,673
19,050
1,650,076
39,492
(70,073)
(6,279)
-
(39,106)
70,901
(34,912)
(4,704)
646,922
22,163
(386)
(828)
41,191
(766)
5,009
-
-
-
-
-
-
-
(5,470)
912
675,006
(277,604)
(46,163)
(2,226)
(5,072)
(331,065)
1,749,549
152,441
71,667
14,890
1,988,547
104
3. Financial risk management (continued)
b) Credit risk (continued)
Loans and advances to customers at
amortised cost
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
Parent
31 December 2022
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
1,745,858
151,459
69,812
14,890
1,982,019
41,924
(70,988)
(44,382)
-
(39,095)
72,997
(64,450)
-
(2,829)
(2,009)
108,832
(857)
578,000
8,492
17,068
-
-
-
-
-
-
-
-
(857)
603,560
(354,739)
(19,155)
(13,082)
(1,304)
(388,280)
1,895,673
110,248
176,935
13,586
2,196,442
Loans and advances to customers at
amortised cost
Stage 1
12-month ECL
Stage 2
Lifetime ECL
Stage 3
Lifetime ECL
Parent
31 December 2021
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
1,414,258
183,885
27,621
19,050
1,644,814
39,492
(70,073)
(6,204)
-
(39,106)
70,901
(34,756)
(4,704)
643,231
21,181
(386)
(828)
40,960
(766)
4,464
-
-
-
-
-
-
-
(5,470)
912
669,788
(274,846)
(45,942)
(1,253)
(5,072)
(327,113)
1,745,858
151,459
69,812
14,890
1,982,019
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
105
3. Financial risk management (continued)
b) Credit risk (continued)
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.
Year ended 2022
Consolidated
Year ended 2021
Gross carrying amount
Loss allowance
Gross carrying amount
Loss allowance
Loans and advances to customers
0-29 days
30-59 days
60-89 days
90-180 days
More than 181 days
Total
PGK ‘000
1,899,939
64,459
46,028
41,223
149,769
2,201,418
PGK ’000
17,460
3,284
2,173
4,299
15,281
42,497
PGK ‘000
1,727,938
54,961
32,132
61,225
112,292
1,988,547
PGK ‘000
17,082
5,127
2,288
4,861
8,742
38,100
Parent
Gross carrying amount
Loss allowance
Gross carrying amount
Loss allowance
Year ended 2022
Year ended 2021
Loans and advances to customers
0-29 days
30-59 days
60-89 days
90-180 days
More than 181 days
Total
PGK ‘000
1,896,229
64,401
45,964
41,112
148,736
2,196,442
PGK ’000
17,460
3,284
2,173
4,271
14,291
41,479
PGK ‘000
1,724,250
54,053
32,057
61,209
110,449
1,982,018
PGK ‘000
17,082
5,127
2,288
4,857
8,392
37,746
Collateral held as security and other credit enhancements
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.
Exposure type
Mortgage lending
Personal lending
Corporate lending
Investment securities
Lease receivables
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
Bank guarantee and documentary letters of credit
Charge over cash deposit
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.
106
3. Financial risk management (continued)
b) Credit risk (continued)
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%
Total
Mortgage lending
LTDV ratio
Less than 50%
51-75%
75-90%
90-100%
More than 100%
Fully cash covered
Total
Year ended 2022
Consolidated
Year ended 2021
Gross carrying amount
Gross carrying amount
PGK ‘000
PGK ‘000
67,922
73,712
58,677
148,867
204,667
553,845
67,153
79,259
47,391
185,421
168,040
547,264
Parent
Year ended 2022
Year ended 2021
Gross carrying amount
Gross carrying amount
PGK ‘000
PGK ‘000
67,922
73,712
58,677
148,867
204,667
-
553,845
67,153
79,259
47,391
185,421
168,040
-
547,264
Credit impaired – Mortgage lending
PGK ‘000
PGK ‘000
Year ended 2022
Consolidated
Year ended 2021
Gross carrying amount
Gross carrying amount
LTDV ratio
Less than 50%
51-75%
75-90%
90-100%
More than 100%
Total
9,501
14,806
9,082
6,829
31,602
71,820
3,502
7,161
1,077
3,182
9,314
24,236
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
107
3. Financial risk management (continued)
b) Credit risk (continued)
Credit impaired – Mortgage lending
PGK ‘000
PGK ‘000
Year ended 2022
Year ended 2021
Gross carrying amount
Gross carrying amount
Parent
LTDV ratio
Less than 50%
51-75%
75-90%
90-100%
More than 100%
Total
Personal lending
9,501
14,806
9,082
6,829
31,602
71,820
3,502
7,161
1,077
3,182
9,314
24,236
The Group’s personal lending portfolio consists of secured and unsecured loans as follows:
Secured
Unsecured
Total
Year ended 2022
Year ended 2021
Consolidated and Parent
PGK ‘000
553,845
59,467
613,312
PGK ‘000
547,260
30,158
577,418
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.
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 2022, 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 2022, the portfolio of the
corporate lending is fully collateralized by eligible collateral.
Investment securities
The Group holds Investments in Government Inscribed Stocks measured at amortised cost with a carrying amount of K152,649,962 (2021:
K112,107,469) 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.
108
3. Financial risk management (continued)
c) Liquidity risk
c) Liquidity risk
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, and
• 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, and
• assigned responsibilities for internal and external written communications
Maturities of financial assets and liabilities
The table below presents a maturity analysis of the 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.
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
109
3. Financial risk management (continued)
c) Liquidity risk
Up to 1
month
1 to 3
months
4 to 12
months
1 to
5 years
Over 5
years
Total contract
value
Total carrying
value
31 December 2022
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
Consolidated
-
-
-
-
-
5,114
-
5,114
-
-
-
-
-
Cash and cash
equivalents
433,479
-
-
Central bank bills
74,900
193,340
975,290
Regulatory deposits
383,083
-
-
Total financial assets
891,462
193,340
975,290
Due to other banks
2,060
-
-
Due to customers
2,782,132
396,063
714,868
92,225
-
-
2,876,417
396,063
714,868
Other liabilities
Total financial
liabilities
Issued financial
guarantee contracts
Issued loan
commitments
Total
31 December 2021
Cash and cash
equivalents
761
3,607
140
302
14,853
9,990
159
-
4,368
442
15,012
9,990
408,334
-
-
Central bank bills
95,000
65,000
670,000
Regulatory deposits
Total financial assets
212,874
716,209
-
-
65,000
670,000
Due to other banks
4,701
-
-
Due to customers
2,451,325
335,136
250,131
11,725
Other liabilities
Total financial
liabilities
Issued financial
guarantee contracts
Issued loan
commitments
Total
72,311
-
-
-
2,528,337
335,136
250,131
11,725
450
7,696
24,591
14,092
160,667
7,252
704
-
161,117
14,948
25,295
14,092
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
433,479
433,479
1,243,530
1,199,368
383,083
383,083
2,060,092
2,015,930
2,060
2,060
3,898,177
3,878,835
92,225
92,225
3,992,462
3,973,120
25,744
4,069
29,812
N/A
N/A
N/A
408,334
408,334
830,000
212,874
795,362
212,874
1,451,209
1,416,570
4,701
4,701
3,048,317
3,036,921
72,311
72,311
3,125,329
3,113,933
46,829
168,623
215,452
N/A
N/A
N/A
110
3. Financial risk management (continued)
c) Liquidity risk
Up to 1
month
1 to 3
months
4 to 12
months
1 to
5 years
Over 5
years
Parent
Total
carrying
value
Total
contract
value
31 December 2022
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
PGK‘000
Cash and cash
equivalents
397,367
-
-
Central bank bills
74,900
193,340
975,290
Regulatory deposits
383,083
Due from subsidiaries
35,760
-
-
-
-
Total financial assets
891,110
193,340
975,290
Due to other banks
2,060
-
-
-
-
-
-
-
-
Due to customers
2,800,256
396,063
714,868
5,114
87,658
30,507
-
-
-
-
-
-
2,920,481
396,063
714,868
5,114
Other liabilities
Due to subsidiaries
Total financial
liabilities
31 December 2021
Cash and cash
equivalents
366,302
-
-
Central bank bills
95,000
65,000
670,000
Regulatory deposits
212,874
Due from subsidiaries
65,518
-
-
-
-
Total financial assets
739,695
65,000
670,000
Due to other banks
4,701
-
-
-
-
-
-
-
-
Due to customers
2,493,857
335,136
250,131
11,725
Other liabilities
Due to subsidiaries
Total financial
liabilities
71,326
9,612
-
-
-
-
-
-
2,579,496
335,136
250,131
11,725
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
397,367
397,367
1,243,530
1,199,368
383,083
383,083
35,760
35,760
2,059,740
2,015,578
2,060
2,060
3,916,301
3,896,958
87,658
30,507
87,658
30,507
4,036,526
4,017,183
366,302
366,302
830,000
795,362
212,874
212,874
65,518
65,518
1,474,695
1,440,057
4,701
4,701
3,090,849
3,079,454
71,326
9,612
71,326
9,612
3,176,488
3,165,093
The liquidity gap in ‘up to 1 month bucket’ is due to assumption that current and saving deposits amounting to K2,127m (31 December
2021: K1,667m) included within ‘due to customers’ mature within one month since these are on demand and do not have any fixed or
determinable maturity.
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
111
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 institutions 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:
(i) Is adequate to protect the interest of depositors and creditors,
(ii) Is commensurate with risk profile and activities of KSL, and
(iii) 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:
(i) Tier 1 risk based ratio of 8%,
(ii) Total risk-based capital of 12%,and
(iii) Leverage capital of 6%.
As at 31 December 2022, 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
2022
PGK ‘000
2,080,590
326,605
142,496
469,101
15.7%
22.5%
7.5%
2021
PGK ‘000
1,900,018
340,265
94,560
434,825
18.3%
22.9%
9.2%
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 in the 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.
112
5. Net interest income
Interest income
Cash and short-term funds
Investments 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
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
113
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
54,747
13,143
156,710
224,600
(43,389)
(43,389)
181,211
44,243
13,013
149,679
206,935
(29,623)
(29,623)
177,312
54,096
13,143
156,710
223,949
(42,991)
(42,991)
180,958
Consolidated
2022
2021
2022
44,150
13,013
149,679
206,842
(29,533)
(29,533)
177,309
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
10,019
22,225
2,093
30,083
44,268
7,636
116,324
9,628
21,161
1,667
21,950
23,550
11,435
89,391
-
-
1,512
30,083
44,268
7,045
82,908
-
-
1,199
21,950
23,550
11,760
58,459
(110)
(55)
(110)
(69)
116,214
89,336
82,798
58,390
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
469
469
562
562
74
74
50
50
8. Other income
Profits from disposal of property and equipment
Unrealised gains/losses
Support fees from subsidiaries (note 29)
Office space recharge (note 29)
Management fees (note 29)
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 36)
Other
Break-up of staff costs:
Salaries, wages and other benefits
Superannuation costs
Cost of employee share based incentive plan
Total staff costs
Consolidated
2022
2021
2022
PGK ‘000
PGK ‘000
PGK ‘000
249
2,638
-
-
-
1,770
4,657
105
297
-
-
-
301
703
249
3,064
3,657
-
470
1,750
9,190
Consolidated
2022
2021
2022
PGK ‘000
PGK ‘000
PGK ‘000
85,778
75,607
80,388
-
58,904
38,203
4,978
6,556
1,921
16,917
213,257
79,510
3,991
2,277
85,778
30
56,350
36,398
5,325
4,910
1,590
13,918
194,127
67,360
4,055
4,192
75,607
-
55,820
38,203
4,857
5,634
1,707
16,713
203,322
74,339
3,772
2,277
80,388
Parent
2021
PGK ‘000
105
(70)
1,890
1,529
378
285
4,117
Parent
2021
PGK ‘000
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
As at 31 December 2022, the Group had 664 (2021: 685) employees and 3 (2021: 4) consultants. The Parent had 615 (2021: 633) employees
and 3 (2021: 4) consultants.
114
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% (2021: 30%)
Tax effect of:
Permanent differences
Prior year adjustment
Impact of increase in tax rate on deferred taxes
Income tax expense
Represented by:
Current tax
Deferred taxes
Income tax expense
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
148,418
44,525
(1,937)
(243)
(10,415)
31,930
46,971
(15,041)
31,930
106,016
31,805
131,118
39,336
5,569
(2,168)
(1,986)
(231)
-
(10,415)
86,157
25,847
5,935
(2,148)
-
35,206
26,704
29,634
35,712
(506)
35,206
41,476
(14,772)
26,704
30,153
(519)
29,634
In December 2022, during the PNG Government’s announcement of 2023 national budget, an increase in the corporate income tax rate
from 30% to 45% on commercial banks was announced and is effective 1 January 2023. Deferred taxes arise from temporary differences
are actually measured on the expected tax rate at which those underlying temporary differences will reverse in the future. Therefore, if the
tax rate is expected to increase in the subsequent reporting period then the differed taxes would need to be measured using that higher
tax rate that is expected to apply in the future when those underlying temporary differences reverse. The Group’s deferred tax assets and
liabilities have therefore been measured at the revised tax rate of 45% in line with accounting standards. This has resulted in an increase
in net deferred tax asset of PGK 10.4m and a tax credit of PGK 10.4m included in the statutory net profit after tax.
11. Deferred taxes
a) Net deferred tax assets where there is a right to offset:
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
26,130
8,168
18,771
53,068
(20,597)
(377)
(20,974)
32,094
16,167
3,272
14,655
34,094
(16,500)
(606)
(17,106)
16,988
25,824
7,750
18,771
52,345
(20,597)
(501)
(21,098)
31,246
16,060
2,941
14,655
33,656
(16,500)
(682)
(17,182)
16,474
Allowance for losses
Employee benefit provision
Lease liability
Depreciation and amortisation
Others
Net deferred tax asset
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
115
b) The movement on deferred tax account is as follows:
Balance at beginning of year
Statement of comprehensive income credit/(charge)
Balance at end of year
Represented by:
Deferred tax assets (note 11(a))
Deferred tax liabilities (note 11(a))
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
16,988
15,106
32,094
53,068
(20,974)
32,094
16,482
506
16,988
34,094
(17,106)
16,988
16,474
14,772
31,246
52,345
(21,098)
31,246
15,956
518
16,474
33,656
(17,182)
16,474
116
12. Cash and cash equivalents
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
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
151,370
160,392
121,726
433,488
115,451
123,895
168,988
408,334
151,370
160,392
85,614
397,376
Consolidated
2022
2021
2022
115,451
123,895
126,956
366,302
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
268,240
975,290
(27,767)
1,215,763
160,000
670,000
(34,638)
795,362
268,240
975,290
(27,767)
1,215,763
160,000
670,000
(34,638)
795,362
Central bank bills are debt securities issued by the Bank of Papua New Guinea (BPNG) and are measured at amortised cost.
14. Regulatory deposits
Regulatory deposit of the Group as at 31 December 2022 amounted to K383,083,700 (2021: K212,874,480). 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 amortised cost. Regulatory deposit of the parent as at 31 December 2022 amounted to K383,083,700
(2021: K212,874,480).
15. Financial assets at fair value through profit or loss
Equity securities
– Listed
– Unlisted
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
4,910
*10,352
15,262
5,036
6,616
11,652
184
*10,324
10,508
183
6,588
6,771
*The increase was attributable to the increase in value of MiBank investment
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
117
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
2021
PGK ‘000
10,682
817
153
11,652
2022
PGK ‘000
11,652
3,610
-
15,262
2022
Parent
2021
PGK ‘000
PGK ‘000
6,771
3,737
-
10,508
6,151
467
153
6,771
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:
Overdrafts
Property mortgage
Asset financing
Business and other loans
Consolidated
2021
PGK ‘000
577,417
1,411,130
1,988,547
(38,100)
2022
PGK ‘000
613,312
1,588,106
2,201,418
(42,497)
2022
PGK ‘000
613,312
1,583,130
2,196,442
(41,479)
Parent
2021
PGK ‘000
577,417
1,404,602
1,982,019
(37,746)
2,158,921
1,950,447
2,154,963
1,944,273
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
80,108
627,468
71,792
1,422,050
2,201,418
78,489
547,260
30,293
1,332,503
1,988,547
80,108
627,468
71,792
1,417,074
2,196,442
78,489
547,260
30,293
1,325,977
1,982,019
118
16. Loans and advances to customers (continued)
Movements in expected credit losses are as follows:
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
Balance at beginning of year
Impairment losses during the year
Loans written off
Bad debt recoveries
Balance at end of year
38,100
4,323
(857)
931
42,497
35,345
6,555
(5,550)
1,750
38,100
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
2021
PGK ‘000
115,000
170
(4,048)
2,624
113,746
(1,639)
112,107
2022
PGK ‘000
155,000
333
(3,318)
2,866
154,881
(2,231)
152,650
37,746
3,659
(857)
931
41,479
2022
PGK ‘000
155,000
333
(3,318)
2,866
154,881
(2,231)
152,650
The movement in Investments in Government Inscribed Stocks is as follows:
Consolidated
2022
2021
2022
34,845
6,701
(5,550)
1,750
37,746
Parent
2021
PGK ‘000
115,000
170
(4,048)
2,624
113,746
(1,639)
112,107
Parent
2021
Balance at beginning of year
Additions / (maturities)
Amortised discount/(premium)
Accrued interest
Write back / (addition) of expected credit losses
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
112,107
40,000
893
242
(593)
114,519
(3,000)
598
(45)
35
112,107
40,000
893
242
(593)
114,519
(3,000)
598
(45)
35
152,650
112,107
152,650
112,107
Investments in Government Inscribed Stocks are measured at amortised cost. Included within the balance is an amount of K nil
(31 December 2021: K nil) which has been pledged with a third party against repurchase agreement transaction.
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
119
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
Consolidated
2022
2021
2022
Parent
2021
%
100
100
100
100
100
%
100
100
100
100
100
Amount (K)
Amount (K)
2
2
2
2
2
2
500,002
500,002
197
197
500,205
500,205
(251,677)
(251,677)
248,528
248,528
*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.
120
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
4,810
18,578
5,627
43,034
2,129
1,074
63,503
138,755
-
-
-
4,214
-
-
164
-
(951)
8,119
72
-
-
-
-
1,268
12,060
25,825
(72)
-
-
-
(4,056)
(5,007)
4,810
22,792
4,840
51,225
2,129
2,270
71,507
159,573
4
-
-
1,044
2,132
538
-
-
(1,132)
7,748
-
(79)
-
-
-
1,297
(2,132)
3925
14,556
-
-
-
(11,259)
(12,470)
4,814
25,968
4,246
58,894
2,129
1,435
64,173
161,659
(2,489)
(5,712)
(3,514)
(20,718)
(667)
(2,300)
(1,159)
(5,262)
Disposals
-
-
908
-
Balance 31
December 2021
Charge during
the year
(3,156)
(8,012)
(3,765)
(25,980)
(594)
(2,653)
(746)
(5,932)
Disposals
-
-
1,132
35
(3,750)
(10,665)
(3,379)
(31,877)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(20,048)
(52,481)
(11,187)
(20,575)
3,042
3,950
(28,193)
(69,106)
(12,144)
(22,069)
11,188
12,355
(29,149)
(78,820)
1,064
15,303
867
27,017
2,129
1,435
35,024
82,839
1,654
14,780
1,075
25,245
2,129
2,270
43,314
90,467
Cost
Balance 31
December 2020
Additions
Transfer in (out)
Disposals
Balance 31
December 2021
Additions
Transfer in (out)
Disposals
Balance 31
December 2022
Accumulated
depreciation
Balance 31
December 2020
Charge during
the year
Balance 31
December 2022
Book value
Balance 31
December 2022
Balance 31
December 2021
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
121
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
4,810
18,578
5,627
43,034
2,129
-
-
-
4,214
-
-
164
-
(951)
8,119
72
-
-
-
-
1,074
1,268
(72)
-
63,503
138,755
12,060
25,825
-
-
(4,056)
(5,007)
4,810
22,792
4,840
51,225
2,129
2,270
71,507
159,573
4
-
-
1,044
2,132
538
-
-
(1,132)
7,748
-
(79)
-
-
-
1,297
(2,132)
3925
14,556
-
-
-
(11,259)
(12,470)
4,814
25,968
4,246
58,894
2,129
1,435
64,173
161,659
(2,489)
(5,712)
(3,513)
(20,718)
(667)
(2,300)
(1,159)
(5,262)
Disposals
-
-
908
-
Balance 31
December 2021
Charge during
the year
(3,156)
(8,012)
(3,764)
(25,980)
(594)
(2,653)
(746)
(5,932)
Disposals
-
-
1,132
35
(3,750)
(10,665)
(3,378)
(31,877)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(20,049)
(52,481)
(11,187)
(20,575)
3,042
3,950
(28,194)
(69,106)
(12,144)
(22,069)
11,188
12,355
(29,150)
(78,820)
Parent
Cost
Balance 31
December 2020
Additions
Transfer in (out)
Disposals
Balance 31
December 2021
Additions
Transfer in (out)
Disposals
Balance 31
December 2022
Accumulated
depreciation
Balance 31
December 2020
Charge during
the year
Balance 31
December 2022
Book value
Balance 31
December 2022
Balance 31
December 2021
1,064
15,303
868
27,017
2,129
1,435
35,024
82,839
1,654
14,780
1,076
25,245
2,129
2,270
43,314
90,467
122
20. Intangible assets
Consolidated
Cost
Balance 31 December
2020
Additions
Transfer in (out)
Balance 31 December
2021
Additions
Transfer in (out)
Disposals
Balance 31 December
2022
Accumulated
depreciation
Balance 31 December
2020
Charge during the year
Disposals
Balance 31 December
2021
Charge during the year
Disposals
Balance 31 December
2022
Book value
Balance 31 December
2022
Balance 31 December
2021
Software
PGK ‘000
42,785
1,154
15,136
59,075
1,907
1,945
-
62,927
(15,071)
(9,223)
-
(24,294)
(11,614)
-
(35,908)
27,019
34,781
Customer deposit
relationship / intangible
Work in Progress
Total
PGK ‘000
PGK ‘000
PGK ‘000
22,468
-
-
22,468
-
-
-
22,468
(11,705)
(6,229)
-
(17,934)
(4,533)
-
(22,468)
-
4,534
10,972
13,512
(15,136)
9,348
1,546
(1,945)
(3,475)
5,474
-
-
-
-
-
-
-
5,474
9,348
76,225
14,666
-
90,891
3,453
-
(3,475)
90,869
(26,776)
(15,452)
-
(42,228)
(16,147)
-
(58,376)
32,493
48,663
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
123
Parent
Cost
Balance 31 December
2020
Additions
Transfer in (out)
Balance 31 December
2021
Additions
Transfer in (out)
Disposals
Balance 31 December
2022
Accumulated
depreciation
Balance 31 December
2020
Charge during the year
Disposals
Balance 31 December
2021
Charge during the year
Disposals
Balance 31 December
2022
Book value
Balance 31 December
2022
Balance 31 December
2021
Software
PGK ‘000
42,785
1,154
15,136
59,075
1,907
1,945
-
62,927
(15,071)
(9,223)
-
(24,294)
(11,614)
-
(35,908)
27,019
34,781
Customer deposit
relationship
Work in Progress
Total
PGK ‘000
PGK ‘000
PGK ‘000
22,468
-
-
22,468
-
-
-
22,468
(11,705)
(6,229)
-
(17,934)
(4,534)
-
(22,468)
-
4,534
10,673
13,512
(15,136)
9,049
1,546
(1,945)
(3,176)
5,474
-
-
-
-
-
-
-
5,474
9,049
75,926
14,666
-
90,592
3,453
-
(3,176)
90,869
(26,776)
(15,452)
-
(42,228)
(16,148)
-
(58,376)
32,493
48,364
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 was
fully amortised in 2022.
124
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
Write-off
Balance at end of year
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
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
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
5,631
9,127
68,901
83,659
(3,990)
79,669
(3,990)
-
(3,990)
5,684
5,545
38,708
49,937
(3,990)
45,947
4,038
(48)
(3,990)
5,615
9,079
66,143
80,837
(3,990)
76,847
(3,990)
-
(3,990)
Consolidated
2022
2021
2022
5,673
5,497
35,213
46,383
(3,990)
42,393
4,038
(48)
(3,990)
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
3,072,938
2,356,300
3,091061
2,398,833
805,897
680,621
805,897
680,621
3,878,835
3,036,921
3,896,958
3,079,454
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
11,666
(54,505)
47,279
(244)
4,196
(952)
5,148
4,196
4,883
(28,918)
37,862
(2,160)
11,666
(31)
11,697
11,666
11,494
(47,840)
41,706
(230)
5,130
-
5,130
5,130
3,761
(22,419)
32,300
(2,148)
11,494
-
11,494
11,494
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
125
24. Employee provisions
Consolidated
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
Represented by:
Short term provisions
Long term provisions
Total employee provision
Consolidated
Provision for Annual Leave
Provision for Long Service Leave
Provision for Salaries
Provision for Bonus
Total
Opening
balance
Additions
Payments
2022
Closing
balance
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
4,306
2,251
-
4,349
10,906
4,933
2,623
55,406
7,313
70,275
(4,576)
(129)
(55,405)
(6,960)
(67,070)
Opening
balance
Additions
Payments
4,663
4,745
1
4,702
14,111
2022
Closing
balance
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
3,944
1,902
-
3,956
9,802
4,712
2,424
51,538
6,875
65,549
(4,314)
(129)
(51,537)
(6,654)
(62,634)
Consolidated
9,366
4,745
14,111
4,342
4,197
1
4,177
12,717
2022
Parent
8,520
4,197
12,717
2021
Opening
balance
Additions
Payments
Closing balance
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
4,698
2,093
37
4,709
11,538
2,351
511
48,539
7,110
58,511
(2,743)
(353)
(48,576)
(7,470)
(59,142)
4,306
2,251
-
4,349
10,906
126
24.Employee provisions (continued)
Parent
Provision for Annual Leave
Provision for Long Service Leave
Provision for Salaries
Provision for Bonus
Total
Represented by:
Short term provisions
Long term provisions
Total employee provision
25. Lease Liabilities
Opening
balance
Additions
Payments
2021
Closing
balance
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
4,366
1,719
37
4,470
10,593
2,165
533
44,807
6,644
54,149
(2,587)
(350)
(44,844)
(7,158)
(54,940)
3,944
1,902
-
3,956
9,802
2021
Consolidated
Parent
8,655
2,251
10,906
7,900
1,902
9,802
Details of associated lease liabilities recognised in respect of the right of use assets are presented below:
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
31 December 2022 31 December 2021
PGK ‘000
PGK ‘000
11,732
32,289
5,364
49,385
11,872
29,841
41,713
3,522
8,024
11,546
14,365
34,327
10,430
59,122
14,408
34,442
48,851
3,752
7,061
10,813
Amounts recognised in statement of cash flows
Total cash outflow for leases
20,746
20,130
Total cashflows for leases is recorded under Cash payments to employees and suppliers in the statement of cash flows
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
127
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
31 December 2022
31 December 2021
PGK ‘000
PGK ‘000
11,732
32,289
5,364
49,385
11,872
29,841
41,713
3,522
7,777
11,299
14,365
34,327
10,430
59,122
14,408
34,442
48,851
3,752
7,061
10,813
Amounts recognised in statement of cash flows
Total cash outflow for leases
20,746
20,130
Total cashflows for leases is recorded under Cash payments to employees and suppliers in the statement of cash flows
26. Other liabilities
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
2022
PGK ‘000
27,344
17,663
10,420
6,493
521
3,442
30,301
30,619
126,803
Consolidated
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
13,971
13,380
7,943
2,324
1,309
4,083
31,528
21,421
95,959
26,994
17,663
10,420
6,347
521
3,442
30,301
26,399
122,087
13,877
13,380
7,943
2,267
1,309
4,083
31,528
20,530
94,917
128
27. Issued and paid ordinary shares
a) Movement
The Company does not have authorised capital and ordinary shares have no par value.
The table below provides the annual balances in share capital.
Balance as at 31 December 2020
Share issued during the year
Balance as at 31 December 2021
Share issued during the year
Balance as at 31 December 2022
b) Earnings per share
Number of shares
Share captial
‘000
286,936
-
286,936
-
286,936
PGK ‘000
394,693
-
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
2022
116,488
286,936
288,695
40.60
40.35
Consolidated
2021
70,813
286,936
290,339
24.68
24.39
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 below:
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 2022
Date of grant
Number of share rights granted
Market value at grant date
Vesting date
Vesting conditions
1 April 2022
1 April 2021
849,901
871,109
AUD 658,408
AUD 717,185
1 April 2024
1 April 2023
Continued service
Continued service
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
129
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 2022
Date of grant
1 April 2022
1 April 2021
Number of share rights granted
1,297,727
1,399,664
AUD 1,006,516
AUD 1,152,341
AUD 629,398
1 April 2025
AUD 811,805
1 April 2024
Continued service
Continued service
Continued service
50% target TSR
50% target TSR
50% target TSR
50% target EPS growth
50% target EPS growth
50% target EPS growth
1 April 2020
617,987
AUD 883,722
AUD 349,163
1 April 2023
Market value at grant date
Fair value at grant date
Vesting date
Vesting conditions
The estimated fair value of share rights issued on 1 April 2022 under the LTI plan was AUD 0.49, compared to the grant date market value per
share of AUD 0.7756. 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
Outstanding rights at end of year
2022
Number
4,164,980
2,146,628
(1,276,220)
5,035,388
Consolidated
2021
Number
3,661,485
2,270,773
(1,767,278)
4,164,980
The fair value at grant date of share rights awarded under the incentive schemes is recognized as an expense over the 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:
Brought forward from previous year
Expense arising from share incentive plans
Rights vested
Rights forfeited or lapsed
Total
2022
PGK ‘000
3,587
2,277
(1,360)
-
4,504
Consolidated
2021
PGK ‘000
2,774
4,192
(3,379)
-
3,587
130
28. Statements of cash flows
a) For the purposes of the statements of cash flow, cash and cash equivalents comprises the following:
Cash and cash equivalents (note 12)
b) Movement in investment securities is as follows:
Central bank bills
Government Inscribed Stocks
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
433,488
433,488
408,334
408,334
397,376
397,376
366,302
366,302
2022
PGK ‘000
1,181,124
152,769
1,333,893
Consolidated
Parent
2021
PGK ‘000
767,594
113,362
880,956
Movement
PGK ‘000
413,530
39,407
452,937
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 amortization (note 17)
Share-based payment expense
Net (losses)/gains from changes in fair values of financial assets
(note 15)
Increase/(decrease) 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 generated from operating activities
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
116,488
(249)
38,203
893
917
(3,610)
(7,469)
(15,106)
-
3,845
70,810
(105)
36,398
598
813
(817)
6,783
(506)
8,407
4,184
104,414
(249)
38,203
893
917
(3,737)
(6,363)
(14,772)
-
791
56,523
(105)
36,398
598
813
(467)
7,733
(519)
8,407
98
(416,120)
(347,913)
(369,739)
(407,413)
860,541
578,333
468,370
247,022
830,841
581,199
472,021
174,087
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
131
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 2022, 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 2022, the total remuneration of the Directors was
K4,142,855 (2021: K3,965,065).
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 K’000).
No of KMP
11*
11**
2022
2021
Salary
9,597
8,305
Bonus
Super
Equity Options
Other benefits
3,433
3,707
-
-
917
813
1,720
2,083
Total
15,667
14,908
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 (2021: 12.50) basis points, unsecured and with no fixed term of repayment. Details as follows:
Transactions
Balance outstanding
Income
Expenses
Income
Expenses
Due from
2022
2022
2021
2021
2022
2021
2022
Due to
2021
PGK’000
PGK’000
PGK’000
PGK’000
PGK’000
PGK’000
PGK’000
PGK’000
1,151
2,286
-
-
-
-
221
-
-
-
784
3,254
-
-
-
-
150
-
-
-
35,340
62,349
-
-
-
356
64
-
-
224
64
-
(30,507)
(9,612)
-
-
-
-
-
-
3,437
221
4,038
150
35,760
62,637
(30,507)
(9,612)
KFM
KISS
KWM
KNL
KSL Fiji
* 1 resigned as of 3 September 2022
* *2 resigned as of 12 November 2021, 1 position replaced as of 22 November 2021
132
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:
Consolidated
2022
2021
2022
Parent
2021
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
12,963
12,963
4,200
4,200
4,200
4,200
4,200
4,200
Clients funds held for shares trading
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 in 2021. No further transactions
were performed in the current reporting period.
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
133
33. Segment reporting
The segment information provided to the management for the reportable segments for the year ended 31 December 2022 is as follows:
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
Banking & Finance
Wealth Management
PGK‘000
224,348
(43,389)
61,843
82,799
8,876
334,477
(165,120)
(4,160)
(38,203)
(207,483)
126,994
4,127
-
131,121
(26,705)
104,416
4,624,312
14,084
(4,062,544)
PGK‘000
252
-
(1,504)
33,415
(140)
32,023
(9,934)
(665)
-
(10,599)
21,424
-
(4,127)
17,297
(5,225)
12,072
55,688
-
(6,126)
Total
PGK‘000
224,600
(43,389)
60,339
116,214
8,736
366,500
(175,054)
(4,825)
(38,203)
(218,082)
148,418
4,127
(4,127)
148,418
(31,930)
116,488
4,680,000
14,084
(4,068,670)
Banking and finance segments include the operations of Kina Bank while Wealth Management includes fund management and fund
administration business.
134
33. Segment reporting (continued)
The segment information provided to the management for the reportable segments for the year ended 31 December 2021 is as follows:
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
Banking & Finance
Wealth Management
PGK‘000
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
(28,431)
(3,206,686)
PGK‘000
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
-
(2,349)
Total
PGK‘000
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
(28,431)
(3,209,035)
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 2022, 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
2022
PGK ‘000
25,744
25,744
Consolidated
2021
PGK ‘000
46,829
46,829
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
135
35. Commitments
Capital commitments
There was a total of K2,793,486 relating to commitments under contracts for capital expenditure at balance sheet date (31 December 2021:
K3,822,580).
Loan commitments
There was a total of K229.8m relating loan commitment at balance sheet date (31 December 2021: K168.6m).
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 2022.
Investment securities measured at FVTPL
- Investment in shares – Listed
- Investment in shares – Unlisted
Total assets
Investment securities measured at FVTPL
- Investment in shares – Listed
- Investment in shares – Unlisted
Total assets
Level 1
Level 2
Level 3
Total
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
Consolidated
4,910
-
4,910
-
-
-
-
10,352
10,352
Level 1
Level 2
Level 3
4,910
10,352
15,262
Parent
Total
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
184
-
184
-
-
-
-
10,323
10,323
184
10,323
10,508
136
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 2021.
Assets
Investment securities measured at FVTPL
- Investment in shares – Listed
- Investment in shares – Unlisted
Total assets
Level 1
Level 2
Level 3
Total
PGK ‘000
PGK ‘000
PGK ‘000
PGK ‘000
Consolidated
5,036
-
5,036
-
-
-
-
6,616
6,616
Level 1
Level 2
Level 3
5,036
6,616
11,652
Parent
Total
Assets
PGK ‘000
PGK ‘000
PGK ‘000
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
Reconciliation of level 3 fair value measurements of financial assets and financial liabilities
The group holds investment in unlisted securities amounting to K10,351,782 (31 December 2021: K6,616,782) in level 3 category.
During the year, there were additions or disposals in these securities. The increase is entirely attributable to gain arising on revaluation of
these investments.
The parent holds investment in unlisted securities amounting to K10,323,495 (31 December 2021: K6,588,495) in level 3 category.
During the year, there were additions or disposals in these securities. The increase is entirely attributable to gain arising on revaluation of
these investments.
Financial instruments not measured at fair value
For the financial instruments not measured at fair value as at 31 December 2022 and 2021, 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
Audit and audit related
Other services
Audit and audit related
Other services
s
t
n
e
m
e
t
a
t
S
l
i
a
i
c
n
a
n
F
e
h
t
o
t
s
e
t
o
N
–
t
r
o
p
e
R
’
s
r
o
t
c
e
r
i
D
137
2022
PGK ‘000
1,919
-
1,919
2022
PGK ‘000
1,707
-
1,707
Consolidated
2021
PGK ‘000
1,590
-
1,590
Parent
2021
PGK ‘000
1,452
-
1,452
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 K92.8 million. 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.
For the purpose of impairment test, goodwill is allocated to the Group’s banking business as an independent cash generating unit (CGU).
The banking CGU including goodwill was tested for impairment as at 31 December 2022 by comparing the CGU’s carrying amount
with its recoverable amount and no impairment loss was recognised.
The recoverable amount is determined based on a value-in-use calculation which uses post-tax cash flow projections based on financial
budgets approved by the directors discounted by a cost of equity of 16% applicable to banking business. Given a banking business is
generally valued on equity basis, the use of post-tax cash flows and discount rate is considered more appropriate. The projected cash
flows cover a period of 5 years beyond which they are extrapolated using an estimated growth rate of 3%. The key approved budgets
the cashflow models are derived from assume an average growth rate in net profit after tax (NPAT) over the forecast period of 6.3%.
Sensitivity analysis
Under above assumptions, the estimated recoverable amount of the CGU exceeds its carrying amount by K128 million. As disclosed
in note 10, during the year the corporate income tax has been increased from 30% to 45% applicable to banking institutions and
effective 1 January 2023. The Group has assumed the new tax rate in the forecast cash flows which has resulted in significant impact on
the forecasts. Had the tax rate been 30%, the recoverable amount would have exceeded the carrying amount by K386m.
The Group has conducted an analysis of sensitivity of the impairment test to changes in the key assumptions used to determine the
recoverable amount assuming a corporate income tax rate of 45%. The directors believe that the following represent reasonably
possible changes in the key assumptions on which the recoverable amount of the banking CGU is based would result in the carrying
amount to exceed its recoverable amount:
• If all other assumptions remain the same, should the discount rate be increased to 19%, the carrying value will exceed the
recoverable amount by K12 million.
• If all other assumptions remain the same, should the average NPAT growth rate be reduced to 3.3%, the carrying value will
exceed the recoverable amount by K13 million.
39. 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 16.1 toea (AUD 6.5 cents) per share (K46.2m).
138
Plan.
Prosper.
09 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 31 March 2023.
(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
305,562
3,416,523
6,777,085
78,249,357
198,187,373
286,935,900
0.11
1.19
2.36
27.27
69.07
100
510
1,169
847
2,359
316
5,202
(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
-
-
-
269,162
4,876,101
5,145,263
-
-
-
5.23
94.77
100.00
-
-
-
4
10
14
%
9.81
22.48
16.29
45.36
6.08
100
%
-
-
-
28.57
71.43
100.00
(c) Number of holders for each class of equity securities on issue
Class of equity security
Securities
No. of holders
Quoted securities (fully paid ordinary shares)
Unquoted securities (performance rights)
286,935,900
5,145,263
878
14
(d) Unmarketable Parcel of Shares
The number of shareholders holding less than a marketable parcel of ordinary shares is 281,
holding 95,290 securities.
(e) Substantial Shareholders
Name
Number of shares % of total shares issued
HSBC Custody Nominees (Australia) Limited
49,858,927
17.38
(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).
140
(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.
(h) 20 largest holders of quoted securities (fully paid ordinary shares)
Rank
Name
Number of shares % of total shares issued
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
49,858,927
17.38
Comrade Trustee Services Limited (DFRBF A/C)
Mineral Resources CMCA Holdings Limited
National Nominees Limited
Citicorp Nominees Pty Limited
BNP Paribas Nominees Pty Ltd (DRP)
BNP Paribas Nominees Pty Ltd (IB AU NOMS RETAILCLIENT DRP)
Kykuit Pty Ltd
Airwolf Limited
Sky Finance Limited
Perpetual Shipping Limited
Gas Resources PNG LNG Plant Limited
Garmaral Pty Ltd
Mr Ivan Lu
Mr Robert Rockefeller
Kina Asset Management No 1 Limited
J P Morgan Nominees Australia Pty Limited
Columbus Asset Management Pty Ltd (YATES INVESTMENT A/C)
GEAT Incorporated (GEAT-PRESERVATION FUND A/C)
Capital Nominees Limited
Total Top 20
Balance of Register
Total fully paid ordinary shares on issue
7,951,328
5,312,834
5,295,526
4,611,845
4,492,145
3,996,884
3,650,006
2,885,390
2,656,642
2,500,000
2,139,037
2,032,615
2,025,172
2,025,000
2,000,000
1,818,221
1,800,000
1,570,500
1,383,872
2.77
1.85
1.85
1.61
1.57
1.39
1.27
1.01
0.93
0.87
0.75
0.71
0.71
0.71
0.70
0.63
0.63
0.55
0.48
110,005,944
176,929,956
286,935,900
38.34
61.66
100.00
(i) On-market buy-back
There is no current on-market buy-back.
(j) Securities purchased on-market during the reporting period
To satisfy the entitlements of holders of performance rights under the
Kina Performance Rights Plan
621,442
$0.86
Number of shares purchased Average purchase price
n
o
i
t
a
m
r
o
f
n
I
l
r
e
d
o
h
e
r
a
h
S
141
10 Corporate
Directory.
Alotau Branch
Chascorp Haus,
Section 10, Allotment 9,
Office 6, Ground Floor, Alotau
PO Box 723, Alotau Milne Bay Province
Directors
Isikeli Taureka (Chairman)
Greg Pawson (CEO)
Karen Smith-Pomeroy
Dr Jane Thomason
Paul Hutchinson
Andrew Carriline
Dr Ila Temu
Company Secretary
Johnson Kalo
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
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
Papua New Guinea
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
142
A digital version of this report
can be accessed via
investors.kinabank.com.pg/investors