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BSP celebrates 20 years of privatisation this month

Thursday, April 7, 2022

BSP Financial Group Limited (BSP) is commemorating its 20th anniversary of the privatisation of the former Papua New Guinea Banking Corporation and amalgamation with BSP on 9th April, 2002.

The privatisation of PNGBC was one of the many reforms initiated by the Prime Minister at the time, the Late Sir Mekere Morauta, which also included changes to the Central Bank Act, the Banks and Financial Institutions Act and the Superannuation Act.  All these were all intended to preserve the independence of the Central Bank and Superannuation Funds. It was also to allow the state owned commercial bank, PNGBC to operate without interference from government, have access to capital from private investors without being a drag on government finances and once profitable to pay regular dividends to Government as a minority shareholder from its profits.

In the lead up to privatisation, the Bank of PNG appointed the late Garth McIlwain as Administrator of PNGBC as the bank was severely undercapitalised with risk-weighted capital less then regulatory thresholds and a loan book that had been underperforming with high rates of non-performing loans. The late Ben Micah as Chairman of the Privatisation Commission, or what was to become the Independent Private Business Corporation, the predecessor of Kumul Consolidated Holdings was also a key participant in the privatisation process.

In 2002, the first year of a combined BSP led by then Managing Director Noel Smith, who has to be recognised for his important role in leading the successful bid to acquire PNGBC, BSP’s net profit after tax was K54m and total loans was K863m with a market share of 57%. At that time BSP only operated in PNG, but under the late Garth McIlwain who became Managing Director of BSP in 2003, BSP commenced its expansion across the pacific when it acquired the former National Bank of Solomon Islands in 2005. The next phase involved the purchase of Colonial Bank and Colonial Life from Commonwealth Bank of Australia in 2009, which were rebranded to BSP and which saw BSP’s operations including Life Insurance as well as banking.

This expansion continued in 2015 with the purchase of Westpac’s businesses in Cook Islands, Samoa, Solomon Islands, Tonga and Vanuatu that were all successfully integrated into BSP. The establishment of BSP Finance in 2017 initially in Fiji and  then shortly thereafter in PNG and Solomon Islands consolidated BSP as a broad financial services  group, with business lines across banking, life insurance, asset finance and capital advisory.

Today, BSP Group’s net profit after tax as announced for 2021 was K1.075bn, an increase of more than K1bn over the intervening 20 years, with BSP PNG’s profit alone being an K800m increase over that of 2002 and a 66% market share in total loans.

At the time of amalgamation in April 2002, BSP employed 1,909 staff and at the end of 2021, BSP has over 3,090 staff in PNG and a total of 4,460 staff across the group, making it one of the largest employers in PNG outside agriculture plantation sectors.

Over 360 PNGBC-BSP staff have been with the bank before and to date.  BSP Group CEO Robin Fleming in acknowledging them said 20 years on we are proud to say BSP is the first commercial bank to report profits at this level - the first also for any non- mining company in PNG to record such a level of profitability.

“Special acknowledgement goes to our 366 staff who remain employees of BSP in PNG 20 years on after the amalgamation. Indeed, we are proud of the bank’s journey over the 20 years, and the foresight of the late Sir Mekere to embark on the privatisation program in 2000”, Mr Fleming added.

The former PNGBC had 37 branches in 2002. BSP now has 44 branches and 37 sub branches in PNG and across the group; it has around 120 branches and sub branches.

Over the 20-year period, BSP has paid dividends to the State via the General Business Trust Kumul Consolidated Holdings of K1.046bn with K800m of those dividends having been paid in the last 10 years. The total value of the State’s shares in BSP via KCH has increased by almost K1bn since privatization and BSP has paid company tax in PNG of K2.5bn in the last 10 years alone.

“On every measure you can think of the privatisation of PNGBC to BSP has been an outstanding success.  From the improved profitability, increased lending - a key driver of economics to growth, to expansion of our branch network, and number of people employed,” said Mr Fleming.

The bank chief said the number of accounts with BSP stands at over 2 million accounts across the group.  “Our contribution in the last 20 years has seen higher levels of tax paid, increased dividends to shareholders, increase in value for shareholders with a higher share price.  Millions of kina in contributions was given to the community through charitable and community project work, expansion of our business lines with bank, Asset Finance, Life Insurance and Capital Advisory, including the expansion of the now iconic BSP brand regionally. BSP is a proud ambassador of PNG across the region, from Cook Islands to Vanuatu and all pacific countries in between.  It has truly been a successful journey for this home grown bank and one every one in PNG should be proud of,” Mr Fleming further added.

“BSP has been able to retain the private sector corporate governance of the old BSP with an independent board who act in the interests of all shareholders. At the same time we have been able to retain the soul of PNGBC where we understand and appreciate that we have an obligation to provide banking services to as much of the population as possible, both numerically and geographically,” explained Fleming.

BSP will continue the expansion of its branch network with a new branch at Eriku in Lae this year, a new lending centre here at 4 mile in Port Moresby, upgrades of sub branches at Telefomin as well as new branches at Dobel in Mt Hagen and others over the next 2 years.

Apart from BSP’s continued and ongoing commitment to expanding its network of branches this year, the Bank’s focus is on awareness and advocacy of digital banking which is more convenient and cost effective for its customers.

“Despite the announcement of the new Act that will see BSP; the only PNG owned bank in PNG and in the region be taxed an additional K190m every year, we continue to reduce our fees and continue to review our products and services to better suit our customers’ needs as we recognise the importance of providing our customers with suitable cost effective products and services.”

“No other bank is willing to provide products and services to the scale and coverage such as BSP’s in PNG and the Pacific region.  We have grown over the 20 year journey since privatisation and will continue to grow in serving our people 20 years on through our bank BSP,” Mr Fleming concluded.