Clyne: BSP wants to ‘clarify certain matters’

Robert Matau

October 2009 Issue

Bank South Pacific is yet to determine the final purchase price for Fiji’s Colonial Bank.
Speaking from Port Moresby, BSP CEO Ian Clyne told ISLANDS BUSINESS that despite the completion of due diligence, BSP still needs to “look deeper into Colonial’s operations to clarify certain matters which usually determine the final cost”.
“The next stage for us is to identify areas internally which we need clarification and then get into a discussion,” he said.
Clyne said at this stage he was not in a position to disclose any details.
The Commonwealth Bank bought the Fiji Government’s 49 percent stake in the Colonial National Bank, which it now fully owns, for $F28 million three years ago.
This would value the whole bank at about $F57 million—though the Fiji currency was recently devalued by 20 percent by the military-installed government.
Westpac and ANZ both have more extensive operations in Fiji. But Colonial, in whose name the Commonwealth continues to operate since buying the parent insurance house in Australia, has been doing business in the country since 1876.
It bought control of the ailing state-owned National Bank of Fiji (now Colonial) to extend its operations from life insurance, investment and health cover, to banking.
With 55 percent of the PNG market in their pocket, 35 branches and over half a million retail customers, BSP will be tough to beat as it is.
The Colonial purchase should cement their position in this part of the region.
Clyne said the deal also required the clearance of both central banks of Fiji (Reserve Bank of Fiji) and Papua New Guinea.
Rebranding: In the meantime, the bank is positioning itself for a takeover of the Colonial Bank and rebranding its product in time for the event.
From the dark green skins forming the backdrop of the kundu drum emblem, it has graduated to a brighter green colour to enhance its image.
“The colour change from a very conservative dark green to a bright lime green shows what we want the bank to be today and that is to be a modern and energetic bank in the Pacific,” Clyne said at the rebranding of their Fiji branches.
BSP hopes the transaction can be concluded by the end of the year.
The due diligence team was led by bank executive Kevin McArthy.
He said with a population of six million people in PNG, the bank commanded about 55 percent of the market share followed by the Australian and New Zealand banking group with 25 percent and Westpac 20 percent—making it the largest bank in the Pacific.
“We are in the Solomon Islands with seven branches and equal in size to ANZ;  we bought Habib Bank in Fiji with two branches in 2007; but clearly in Fiji we are small and that is why the Colonial transaction with 20 percent of the market in Fiji should increase our stakes in Fiji.
“We believe that with our expertise, our strength and our size, we can really expand banking in Fiji with far more larger ATM networks and EFTPOS machines. We launched SMS (Short Message Service or texting) banking in PNG, we have 25,000 SMS banking users—these are the types of products we can roll out very, very quickly here in Fiji.”
Clyne said the SMS system was a very simple one and they worked closely with the main mobile providers in PNG— Digicel and B Mobile.
“We have a very good relationship with Digicel here in Fiji and we are hopeful that sometimes in the future we can do that as it is a very simple concept,” he said.
“BSP also has its own debit cards and we try to encourage our retail customers to have a debit card.
“You can get everything using your card we have 450,000 people using the BSP Kundu card in PNG and clearly this is something we are looking at doing should we be fortunate to acquire Colonial.
On the chances of Digicel being used for SMS banking in Fiji, he said the bank has enjoyed a close relationship with Digicel throughout the Pacific and was talking to them on a regular basis.
However, he said, “For us to do that in our present form with only two branches is very difficult. But if we do secure Colonial, we would have 19 branches in Fiji—a far larger network and we would be able to do a lot more.”
The shareholders of BSP are the major superannuation funds Nasfund and Number 1 Super, the major landowner groups and the PNG Government, which still holds equity.
“However, the board members are independently appointed and so from a day to day management point of view—no group has influence in terms of decisions made at the board level,” Clyne said.
BSP posted a US$115 million operating profit before tax last year, up 16 percent from the previous year on strong business conditions in the country. Net profit for the year ending December 31, 2008, was K80 million compared to K67 million posted in 2007.
Its next targets, says Clyne, are the National Bank of Vanuatu and a Samoan bank—either the National Bank of Samoa or the Samoan Commercial Bank.