Islands Business - Business: BSP ACQUIRES SOLOMONS’ NBSI

Bank sale sparks law change

Evan Wasuka
Beginning this month, PNG’s Bank of South Pacific will begin operations in neighbouring Solomons after it acquired the country’s only locally owned bank—the National Bank of Solomons Islands (NBSI).

Gordon Darcy Lilo... wants trust law changed.

A last minute hurdle to the sale was overcome with NBSI’s trustees reaching a compromise with the government to handover their interests to a corporate trust and fund a law change to Solomon Islands trust laws.

As part of the takeover, local workers in the bank are expected to receive a handsome payouts with the buyout of their shares, while the National Provident Fund (NPF) will sell its shares for a profit and reinvest it back into the new entity.

The deal, says NPF deputy chairman Adrian Wickham, is NPF’s biggest investment at S$60 million, followed by its S$40 million takeover of Shell Pacific operations in the Solomons in a matter of months.

“It’s a historic occasion—we look forward to reaping dividends, much better than the National Bank of the Solomon Islands,” Wickham told the local One News TV.

NBSI joins Bank of Niue and Fiji’s Habib Bank as BSP’s latest acquisitions as the bank pushes into the Pacific.

NBSI in its 2006 financial year earned an after tax profit of just over S$13 million although no dividends were paid out to its owners.

But the takeover which has been heavily anticipated by NBSI’s shareholders has not been all plain sailing with the deal coming close to being scuttled by Solomons’ Finance Minister, Gordon Darcy Lilo, over what could only be described as his lack of trust of NBSI’s trustees.

With the sale all ready to go, Lilo pulled a stunner by refusing to sign off on the National Provident Fund’s 49 percent shares.

He demanded that the NBSI trustees, three lawyers for the Honiara firm SolLaw, retire their interests in the company at the point of sale. The three trustees, who each control 17 percent of the bank’s shareholdings, had been given their interests in the bank when Bank of Hawaii withdrew its operations from the country in 2002 and divested its interests, into three trusts—employers trust, a health and welfare trust and an education trust.

“I can’t tell you the value of the trusts because they haven’t been audited, but the trustees have to go,” said Lilo.

“It’s been more than five years but the trusts have not been used for national interest,” he said.

“There are still a lot of questions in the minds of ordinary Solomon Islanders on how those three individuals got those trusts.

“There is a lot of dissatisfaction with how the trusts have been handled.”

And after days of brinksmanship—and a third attempt by shareholders to get the minister’s approval—Lilo finally gave his signature to the deal with the trustees agreeing to work according to a memorandum of understanding based on the finance minister’s terms.

This includes the trustees pulling out completely from the bank by July 31, 2008 and handing over the administration of the trusts to a corporate trust.

“It is time for them to handover those trusts to the people of the Solomon Islands. I do not want the National Provident Fund going to buy shares in the Bank of South Pacific with health and education of this country represented by two individual trustees.”

In the meantime, new legislation will be enacted that will prevent individuals from holding trusts created with the purpose of national interest.

Lilo says the new law will ensure only corporations can handle those types of trusts with mechanisms in place to promote transparency and accountability.

The trusts will be audited and properly reported to the people of the Solomon Islands, says Lilo.

Wickham says the entry of BSP into the Solomon Islands market will make NBSI more competitive against ANZ and Westpac banks.