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BSP delivers strong underlying financial result in Q1-22

Tuesday, April 26, 2022

BSP delivers strong underlying financial result in Q1-22, before expensing of the new K190m ‘Additional Company Tax’

Strong underlying business performance across the Group has resulted in an increased Q1-22 Group Net Profit After Tax, before deduction of the additional company tax, of K259m, compared to K203m for the first quarter 2021. However, the new K190m Additional Company Tax (ACT), which only applies to BSP in the banking sector, has had a significant negative impact on Q1 results, with Group profit falling to K69m after expensing the tax in full in the first quarter.

According to BSP Group CEO Robin Fleming, the pre additional company tax Q1-2022 financial results were driven by improving economic conditions and income growth, when compared to Q1-2021.

“Growth in BSP’s offshore branches and PNG Bank were the main drivers for the overall uplift in underlying Group NPAT,” according BSP Group CEO Robin Fleming.

Mr Fleming said in accordance with accounting standards BSP recognised the full K190m additional company tax in the first quarter this year, reducing Group NPAT to K69m despite our strong underlying performance.

“BSP’s share price on the PNGX finished 0.4 percent higher in the trailing 52 weeks at K12.05, with average prices of K12.21 in Mar-22. ASX prices reached an all-time high of A$6.00 after the K1.1bn profit announcement, but fell to A$5.00 in the weeks following the announcement of the additional company tax in March 2022,” said Mr. Fleming.

BSP Group CEO Robin Fleming speaking during BSP Quarter 1 Investor and Media Presentation on Monday 25th April, 2022, at the Ravalien Haus in Port Moresby.

Mr. Fleming added that 2021 dividend yields were 14.4 percent and 13.6 percent on the PNGX and ASX respectively, and that BSP paid a record dividend to its shareholders of K626.1m on 22 April 2022. BSP’s market capitalisation on the PNGX was K5.6bn and A$2.2b on the ASX at 31 March 2022.

Meanwhile, Mr Fleming stated that BSP Group’s key performance ratios remained strong, with cost-to-income ratio increasing slightly to 37.8 percent but generally in line with recent levels.

He added that capital adequacy ratio decreased to 21.3 percent due to timing of the 2021 final dividend which was declared in February this year, while prior years had the final dividends declared in May at the time of the company’s Annual General Meeting of shareholders.  Capital adequacy remains well above BPNG’s 12 percent requirement. Group Return on Equity (ROE) was 24.0 percent in Q1-2021, impacted by the ACT.

When presenting the first quarter results to investors and the media, Mr. Fleming concluded by stating that the additional company tax is unfair and inequitable, in that BSP is the only bank in

PNG that is targeted for this tax and our PNG shareholders are the hardest hit.  “It dissuades investor confidence in PNG and sets a dangerous precedent for arbitrary taxes. Super Funds estimate that BSP shareholders will lose K1.0 billion in value directly and indirectly as a result of the tax.  

“Despite the tax, BSP has and will continue to invest heavily in PNG, with its new core banking system, more ATMs and EFTPOS terminals, and additional branches in Lae and Mt Hagen, an upgrade of Maprik to a full branch and two additional hybrid sub-branches in Telefomin and Palmalmal.

BSP’s PNG branch footprint is the largest in the country, with 84 branches and sub-branches, which is significantly more than Westpac’s and Kina Bank’s combined 32 branches in total. Further, BSP branch access ranks highly when compared to other leading banks in comparable markets, with BSP branch coverage per 100,000 people being 1.56, compared to Phongsavanh Bank in Lao at 1.22, ACLEDA Bank in Lao of 1.04, First Bank of Nigeria at 0.56 and the other two retail banks in PNG at 0.32 and 0.28.

The first quarter financial results also highlighted that BSP has not increased its fees since 2014 and today forgoes in excess of K90 million per annum in fee income from our fee reductions and waivers since 2014.  In addition, BSP provides a large number of fee free services to its customers, far more so than our competitors do and BSP fees are generally much lower than those of our competitors’.”