Shareholders have approved Papua New Guinea’s largest bank, Bank South Pacific, listing on the Australian Securities Exchange in a bid to access more capital and improve its presence in international capital markets, according to CEO, Robin Fleming.
Analysts say the float may be worth at least $US 750 million, but Fleming has told Islands Business that the bank ‘does not intend raising new equity capital on listing date”.
A special AGM approved the listing late March, including changing the name of the company to BSP Financial Group Limited, although the bank will continue trading across the region as BSP. He says companies could not be registered in Australia with the word “bank” as part of its company name unless they were regulated by the Australian Prudential Regulatory Authority (APRA), which BSP would not be as it will not operate as a bank in Australia.
“BSP may well raise equity capital at some point in the future to fund growth initiatives but there is no intention to do so immediately,” Fleming says.
“What we’re offering potential shareholders is stable dividends.
“From 2015, BSP has delivered sustainable year-on-year profit growth, while maintaining a strong capital position well above regulatory requirements.
“Given the latter BSP has had the ability to deliver stable shareholder dividends and strong yields,” he said, pointing out the three-year average is greater than 12 per cent.
“Like most businesses, BSP has also been adversely affected by COVID-19. As per our recent 2020 financial results announcement, the Group’s profit decreased by K84m (or 9.5%) to K806m in 2020.
“The global pandemic triggered significant challenges in every Pacific market and the consequential year-on-year increase in loan impairment expenses by K102m to K201m in 2020. It went up by 102.9 per cent from 2019.
“Despite that, BSP’s 2020 financial performance was stronger than the large banks listed on the ASX.”
Listing is expected later this year.
“BSP does not anticipate any material change to operations as a result of being listed on the ASX,” he said. “BSP has already adopted governance arrangements, for example, that are consistent with the requirements of the ASX.
And he doesn’t expect the listing to diminish the bank’s role in the region.
“BSP will remain a leading Pacific bank while access to new sources of capital will allow to us to invest in growth opportunities in the region as and when they arise.”
The bank has been listed on the Port Moresby stock exchange since 2003 and operates in Solomon Islands, Fiji, Cook Islands, Samoa, Tonga, Vanuatu, Cambodia and Laos.
Its shareholders include major PNG Institutions - IPBC, Nasfund, Nambawan Super, Petroleum Resources Kutubu, Credit Corporation, MVIL, PNG Teachers Savings & Loan, Comrade Trustees, and the International Finance Corporate (IFC).
It has assets (2016) worth more than K20.8 billion (US$6.4 billion), total deposits of K16.9 billion (US$5.2 billion) and market capitalisation of US$1.3 billion. BSP also has three 100% owned subsidiaries; BSP Capital Ltd - stockbroking and funds management in PNG; BSP Finance - specialist Asset Finance company in Fiji and PNG and BSP Life - specialist Life Insurance company in Fiji.
Papua New Guinea’s regional bank BSP will revisit an earlier plan to list on the Australian Stock Exchange (ASX).
In a message to shareholders last week informing them on the progress of the company, BSP Group chairman Kostas Constantinou said dual listing will be part of its strategic plan moving forward, which, after COVID-19, would likely involve expansion into Asia.
BSP is currently listed on the Port Moresby Stock Exchange (PomSox).
“As you would be aware BSP had previously pursued a dual listing on the ASX. There were various reasons as to why this did not proceed. BSP’s Board and Executive team, in conjunction with Deloitte, recently conducted a Strategy Workshop to confirm the Banks strategic intentions over the coming term. Those deliberations confirmed that when the circumstances are favourable BSP should once again pursue a dual listing,” Constantinou said.
“Unlike the previous attempt, which was primarily focused on share liquidity, a future dual listing would be used to position BSP for potential capital raisings to fund offshore growth opportunities. A dual listing in the future, accompanied by a targeted growth program in Australasia, will deliver our shareholders significant financial benefits whilst increasing the value of the bank. In summary, BSP’s well-capitalised balance sheet enables the Board to consider appropriate growth opportunities that do not pose an unacceptable risk whilst adding value to our shareholders, customers, staff and Papua New Guinea.”
BSP’s interest in ASX was widely reported in the Papua New Guinea and Australian media in 2016 but later, it revealed the plan was on hold.
“The Board of BSP is continuing its consideration of initiatives to generate greater liquidity in BSP shares. BSP has not ruled out undertaking a secondary listing on the Australian Securities Exchange (Potential Listing), but is not currently of the view that there will be a significant public offer of shares in conjunction with the Potential Listing,” Constantinou had said in a statement filed at PomSox in April 2017.
Last week, the confirmation that it would revisit the option had accompanied the result of a research it commissioned into how it fared under a number of metrics that global banks use to measure each other’s performance.
The metrics were: Return on Assets, Return on Equity, Net Interest Margin and Efficiency Ratio.
“In all four Key Performance Measures BSP, is placed in the top quartile for similar banks globally, and the Bank significantly outperforms the average and median results for its peers. These results should provide our shareholders with the confidence of knowing BSP is outperforming comparative banks and is well placed to grow from a position of operational strength,” said Constantinou.
With the drastic slowdown in the global economy due to COVID-19, Constantinou said long term thinking was now critical for survival.
“I believe long-term thinking has never been more critical than it is today. Companies and investors with a strong sense of purpose and a long-term approach will be better able to navigate the Covid-19 crisis and its aftermath. This includes taking a strategic view of our region and the role we want BSP to play in it. The economy will recover. And for those who keep their eyes not on the shaky ground at our feet, but on the horizon ahead, there will be tremendous opportunities to be had,” he said.
BSP recently announced a profit after tax of Kina381.9million (US$108.5million) for the half year ended June 2020, down from Kina434.9million (US$123m) for the same period last year.
Last week, it announced a consolidated net profit after tax of K216m (US$61.5m) for the 2020 third quarter, a 31 percent increase from Q2, 2020.
BSP has branches in Vanuatu, Tonga, Solomon Islands, Samoa, Fiji, Cook Islands and is headquartered in PNG.