BSP Annual Report BSP Annual Report 2010

154 Pages·2011·7.68 MB·English

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BSP Annual Report
Bank of South Pacific Limited
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www.bsp.com.pg
The vision
- To be the leading bank
in the South Pacifi c
BSP School Kriket Programme, winner International Cricket Council Award for
Best Cricket Development Programme globally in 2010.

BSP Annual Report
Chairman’s Report 4
A Brief History of Bank South Pacifi c 8
Board of Directors 10
Chief Executive Offi cer’s Report 12
2010 Strategic Business Unit Review 16
Corporate Governance Principles 25
Historical Summary 2010 35
Overseas Branches and Subsidiaries 36
Directors’ Report and Financial Statements 40
> Directors’ Report 40
> Statement by the Directors 42
> Statement of Comprehensive Income 44
> Statement of Financial Position 45
> Statement of Changes in Shareholders’ Equity 46
> Statement of Cash Flow 47
> Accounting Policies 49
> Financial Risk Management 61
> Notes to the Financial Statements 73
Independent Audit Report 104
Shareholder Information 105
Branch Network 109
Corporate Responsibility and Marketing 113
kkeeyy ffeeaattuurreess
The key features of BSP’s strategy:
(cid:129) A focus on sales and services
(cid:129) Operational excellence
(cid:129) High performing teams
(cid:129) Profi table growth
2 BSP Annual Report 2010
BBSSPP bbaannkk llooccaattiioonnss
Banz
Kerowagi Minj Daulo
Lufa
Kwikila
CENTRAL PROVINCE
BSP - Fiji BSP - Solomon Island BSP - Niue
 BSP Bank branches
 BSP Rural branches BSP Annual Report 2010 3
cchhaaiirrmmaann’’ss
rreeppoorr tt
Kostas Constantinou, OBE, Chairman
In 2010, BSP has continued to achieve steady automation, operational risk, and management
improvements in its fi nancial results despite major information systems, will be fi nalised in 2011.
challenges presented by a year which commenced
with a signifi cant level of uncertainty as to the extent (cid:129) N et growth in customer deposits of K426 million
and impact of the general recovery from the Global to K7,186 million with market share of 51.4% in
Financial Crisis, uncertainties regarding the prospects Papua New Guinea; and total group deposits
of the PNG LNG project, and ended with signifi cantly at K7,985 million;
lower short term market interest rates.
(cid:129) L oans and advances increased by net K420
million to K3,384 million with market share of
Some of the bank’s achievements over the year were:
50.4% in Papua New Guinea; total gross loans
(cid:129) A fter tax net profi t of K283 million, an increase of the group is K4,250 million;
of 10% on the after tax net profi t of K257 million
(cid:129) O pening of the new Motukea Branch, 24th
reported in 2009;
September 2010, and the commencement of
(cid:129) D ividend payments totalling K248 million were pilot branches of BSP Rural;
made to shareholders comprising K182.4 million
(cid:129) T he introduction of ATMs in the Solomon Islands
full dividend for 2009 (at 4 toea per share) and
and additions to the Fiji ATM fl eet to strengthen
K65.6 million interim dividend for 2010 at 1.37
electronic banking service delivery channels in
toea per share;
the Pacifi c Islands;
(cid:129) N ew equity of approximately K143.6 million raised
(cid:129) C ontinued commitment to community-oriented
through IFC’s investment in BSP;
activities resulting in 77 local community projects
(cid:129) R egulatory capital ratios maintained at levels delivered by bank staff in PNG, Fiji and the
complying with the regulator’s defi nition of “well Solomon Islands, worth in excess of K920,000.
capitalised”;
The growth in assets and liabilities refl ects not
(cid:129) R eturn on equity of 27.4%, despite increased only continuing stable organic business growth
expenditure and investment in a major operational
of BSP in PNG and its Pacifi c Island operations.
transformation exercise, and increased capital
During the year, the bank raised approximately
base from the IFC’s equity investment transaction;
K143.6 million through an issue of new equity to
International Finance Corporation, with the anticipated
(cid:129) G rowing impetus of activities connected with
the implementation of the bank’s transformation partnership in technical and expertise activities already
strategy in the core PNG businesses; whilst work commencing during the year. The bank also issued
continues on various projects, progress indicates Fiji dollar denominated convertible notes in Fiji, with
that some key programmes in the areas of customer associated proceeds K22.9 million.
segmentation, product development, process
4 BSP Annual Report 2010
As mentioned in the highlights section, BSP’s capital
base remains in the “well capitalised” status as defi ned cchhaaiirrmmaann’’ss rreeppoorrtt
by the home regulator, the Bank of Papua New Guinea.
Group Capital adequacy is 23.6%, an increase from the
22.1% level as at year-end 2009, refl ecting the strong
growth in BSP total balance sheet.
(cid:129) Stable maintenance of monetary policy by Bank
of PNG with the Kina Facility Rate maintained at 7%
The maintenance of capital at suffi cient levels to
during 2010;
accommodate growth as well as to provide a cushion
(cid:129) Foreign reserves increased to US Dollars 3,047 million
against business risks in the Pacifi c is central to the long
(K7,925 million) at the end of 2010 representing
term strategy and planning of the BSP Group. The IFC
approximately 10 months import cover and 14
equity issue during 2010 is a part of this strategy, following
months non-mineral import cover;
on from the 2009 K75.5 million capital raising through an
inaugural issue of term subordinated notes in PNG.
Whilst the country’s macro-economic indicators are quite
healthy, BSP’s business environment in PNG continues
BSP continues at the forefront of the development of
to be characterised by abnormal risks in relation to general
electronic banking facilities in the Pacifi c region. In 2010,
security, an increasingly competitive labour market
BSP introduced SMS banking to the Fiji market, following
compounded by a stressed education system, high
on from the introduction of the service in PNG in 2009.
communications costs by global standards, and sub-
There are now over 100,000 users in PNG and Fiji
optimal standards of electricity supply. In recent years,
subscribed to this product. During the year
a shortage of offi ce and residential infrastructure in
23 new ATMs were installed in PNG, along
the major urban centres has developed, and this has
with GPRS EFTPOS machines in selected
led to a rapid escalation of rental costs. In 2010, the
locations. There were 11 ATMs commissioned
bank’s PNG operations was affected for four days by
in the Solomon Islands, and in Fiji, the ATM fl eet was
industrial action where one of the main items under
increased to 84, making BSP’s the largest fl eet in Fiji.
discussion was accommodation allowances. How
successfully the country deals with these and other
The PNG economy showed resilience during the global
wider social issues in the context of the potential
fi nancial crisis, and in a year where a slow global recovery
positive economic impacts of major mining and gas
commenced, credible growth has been achieved on the
projects, will be critical for business in PNG.
back of key natural resource projects reaching build
stage, or increasing production capacity, and aided by
The Solomon Islands and Fiji economies remained
recovering commodity prices.
more subdued during the year. In the Solomon
Islands the economy remains heavily reliant on timber
Key economic data in 2010 included:
and fi sh exports and in the mining sector, Allied
Gold has made a signifi cant investment, taking over
(cid:129) GDP growth estimate of 8.5%;
the operations of the Gold Ridge Mining Limited.
(cid:129) Infl ation of 7.5%;
Total Assets Net Profit after Tax
283.147
10.03 257.118
9.40
228.334
Billion 6.81 Million 191.072
a a
Kin 5.82 Kin
4.33
111.616
2006 2007 2008 2009 2010 2006 2007 2008 2009 2010
BSP Annual Report 2010 5
The RAMSI assistance programme continues to In February 2011, Noreo Beangke stepped down as
be benefi cial to the economy. Fiji’s sugar industry Chairman of Bank of South Pacifi c Limited after 18 years
still requires major capital rejuvenation and faces of dedicated service. During the term of Mr Beangke’s
continued diffi culty following the discontinuation of the leadership, BSP has grown rapidly, especially with the
EEC market support. Its tourism industry however shows acquisition and merger of PNGBC in 2002, and of the
signs of a return to normality, with visitor numbers and former Colonial Group in Fiji in 2009. My fellow Board
hotel bookings increasing in 2010, following the 2009 members and I join the staff and executive of BSP in
fl ooding and cyclones which adversely affected tourist expressing our sincere gratitude for his chairmanship
numbers and the associated infl ows from this sector. of BSP over the years, and his contribution generally to
Nevertheless business confi dence remains positive, PNG business in that time. Mr Beangke continues as a
the liquidity position has improved, and BSP’s growth non-executive Director of BSP.
expectations are sound.
To all shareholders and my fellow Board members – I
The major equity investment by IFC in BSP is a very acknowledge with thanks your ongoing support. I look
strong endorsement of the group’s underlying strategy forward to reporting another year of achievement by
and unique trading position in the Pacifi c, and its very BSP in 2011.
real capability to be a major institution in the fi nancial
systems and emerging Pacifi c nation markets.
I thank all staff and the executive who have taken on the
added responsibilities of implementing and participating in
the BSP transformation programme, as well as maintaining
their duties to ensure the bank and group’s usual business Kostas Constantinou, OBE
is carried on smoothly. The commitment and dedication Chairman
shown throughout 2010 is to be commended, and has
enabled the bank to achieve solid results under challenging
circumstances. With their continued support the bank
will be well placed to cultivate opportunities in the future.
BSP CEO Ian Clyne with Bill Leane at the launch of BSP School Kriket Programme 2011, Port Moresby March 2011
6 BSP Annual Report 2010
Sport for life
Abigail Tere-Apisah, PNG Tennis Champion on US circuit
BBSSPP AAnnnnuuaall RReeppoorrtt 22001100 77