First quarter results indicate another solid year

Arthur McCutchan

AFTER POSTING AN AFTER-TAX PROFIT OF K86.651 million last year, Bank South Pacific (BSP) is expecting 2005 to be just as rewarding.

Bank South Pacific...Lae branch.

Senior manager financial planning, Johnson Kalo, says although it is still early in the year, the bank's performance in the first quarter of 2005 tentatively indicates another solid year. This gain compares favourably with the K39.981 million profit achieved in 2003.

Kalo attributes the performance to significant improvements in cost control, as well as the way the bank responded to declining interest rates.

“(These) included new fee income initiatives and a change in money market investment preferences to higher yielding long-term instruments that commenced in late 2003 and continued progressively through 2004,” he says.

BSP is based in Papua New Guinea and is listed on the Port Moresby Stock Exchange. It has 40 branches covering not only PNG but also the Solomon Islands.

Last September, it expanded its operations into Niue. “The challenges (of this) have been no different to the ones encountered and successfully addressed by BSP in its own PNG operations before the adoption of Niue into the branch network,” Kalo says.

“From its headquarters in Port Moresby, BSP has always operated in 'overseas' branches in places like Buka in Bougainville, Lorengau in Manus, and Rabaul in East New Britain province.”

BSP took over the assets and liabilities of Westpac Banking Corporation's Niue branch and in the process became the sole provider of banking services to the people of Niue.

“The transition in terms of staff has been smooth,” Kalo says.

Neither has the challenges posed by operating in a market with a different culture been as daunting as they may have expected.

“The common thread of Pacific Islands cultural heritage serves to highlight similarities more than differences.”

He says the problem of communications with such a widespread network has been addressed with the bank's use of a modern banking system providing it with the platform to provide over-the-counter banking services as well as EFTPOS and ATM services.

“EFTPOS services and ATMs are available in many businesses and trading concerns in almost all centres serviced by BSP branches,” he says.

The Integrated Computerised Banking System (ICBS) is used by banks and financial institutions in the United States as well as in the Asia Pacific region.

BSP uses it as a solution to the difficulties produced by such a diverse spread of branches, and regularly updates it to keep abreast of technological developments.

Kalo says the bank's reach in its market is quite deep and enables it to compete effectively against larger foreign-owned banks.

“BSP knows its market and its customers very well and with our extensive branch and EFTPOS network, we also have a very visible commitment to serving that market. All these things combine to make BSP a very formidable competitor in the market.”

He says the growth and longevity of BSP as a business and its regional expansion of operations is difficult. “As a commercial venture looking to maximise returns for its shareholders, BSP must continue to grow.

“If this means seeking opportunities to take the brand into the region, then options and strategies must be considered, just like any business decision,” Kalo says.

“However, this must be tampered with the knowledge that expanding into new markets is fraught with its own sets of risks and challenges, and these must be addressed carefully.”