Q2-2019 Investor Presentation - PNGX · Neither the delivery or supply of this presentation (or any part thereof) nor the provision of information referred to herein or provided in

Q2-2019 Investor Presentation Group CEO – Robin Fleming

BSP Classification: Internal Use Only

NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES

This presentation has been prepared and issued by Bank of South Pacific Limited (the “Company”), and may not be reproduced in whole or in part, nor may any of its contents be disclosed to any other person without the prior written consent of the Company.

This presentation is provided by the Company for general information purposes only, without taking into account any recipient’s personal objectives, financial situation or needs. It should not form the basis of or be relied on by the recipient in considering the merits of any particular transaction and does not purport to contain all of the information that an interested party may desire. It is not an offer to buy or sell, or a solicitation to invest in or refrain from investing in, any securities or other investment product. This presentation has not been filed, lodged, registered, reviewed or approved by any regulatory authority in any jurisdiction and recipients of this presentation should keep themselves informed of, and comply with and observe, all applicable legal and regulatory requirements. The distribution of this presentation in certain jurisdictions may be restricted by law and, accordingly, recipients of this presentation represent that they are able to receive this presentation without contravention of any unfulfilled registration requirements or other legal restrictions in the jurisdiction in which they reside or conduct business. Nothing in this presentation constitutes investment, legal, tax, accounting or other advice. The recipient should consider its own financial situation, objectives and needs, and conduct its own independent investigation and assessments of the contents of this presentation, including obtaining investment, legal, tax, accounting and other advice as it considers necessary or appropriate. Any costs incurred by recipients in making such investigations and assessments, etc. are not the responsibility of the Company or any of its advisers, directors, employees or agents.

Provision of this presentation is not a representation to any recipient or any other person that the shares or business of the Company or any of its subsidiaries will be sold. The Company may at any time negotiate with one or more interested parties and enter into a definitive agreement without prior notice to any or all interested parties. The Company also reserves the right to terminate, at any time, further participation in the investigation and proposed process by any party, to modify any of the rules or procedures set forth herein or any other procedures without prior notice or assigning any reason therefore or to terminate the process contemplated hereby. The Company reserves the right to take any action, whether in or out of the ordinary course of business, which the Company in its sole discretion deems necessary or prudent in the conduct of its business or the process contemplated by this presentation.

This presentation has been prepared on the basis of publicly available information and/or selected information and does not purport to be all-inclusive or to contain all of the information that may be relevant to the presentation. Neither the delivery or supply of this presentation (or any part thereof) nor the provision of information referred to herein or provided in connection with the evaluation of the Company by interested parties shall, under any circumstances, (a) constitute a representation or give rise to any implication, that there has been no change in the affairs, business or financial position of the Company or any of its subsidiaries, associated companies or affiliates or in the information herein since the date hereof or the date on which this presentation has been provided or delivered or (b) provide a basis of any credit or other evaluations and should not be considered as a recommendation by the Company that any recipient of the presentation or such other document or information contemplated herein should proceed with a further investigation of the Company or enter into any transaction with the Company or any person in relation to the Company. Neither the Company nor any other person are under any obligation to update or correct this presentation.

The Company and its related bodies corporate and other affiliates, and their respective officers, employees, advisors, representatives, consultants and agents (“Relevant Parties”) make no representation or warranty, expressed or implied, as to, and no reliance should be placed on, the fairness, accuracy, completeness, timeliness or reliability of the contents of this presentation or any other written or oral communication transmitted or made available to any interested party, whether as to the past or future. To the maximum extent permitted by law, none of the Relevant Parties accept any liability (including, without limitation, any liability arising from fault of negligence on the part of any of them) for any loss whatsoever arising from the use of this presentation or its contents or otherwise arising in connection with it or as a result of any omission, inadequacy or inaccuracy herein. Only those representations and warranties that are provided in a definitive agreement when, and if, it is executed, and subject to such limitations as may be provided in such agreement shall have any legal effect. This presentation may contain forward-looking statements, forecasts, estimates and projections (“Forward Statements”). No independent third party has reviewed the reasonableness of any such statements or assumptions. None of the Relevant Parties represents or warrants that such Forward Statements will be achieved or will prove to be correct. Actual future results and operations are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the control of the Company, and could vary materially from the Forward Statements. Similarly, no representation or warranty is made that the assumptions on which the Forward Statements are based may be reasonable. No audit, review or verification has been undertaken by an independent third party of the assumptions, data, historical results, calculations and forecasts presented. In receiving this presentation, each recipient acknowledges that it shall not deal or cause or procure any person to purchase, acquire, dispose of or deal in any securities of the Company in breach of any laws and regulations relating to insider dealing, market abuse or securities in general of Singapore and elsewhere.

The recipient acknowledges that no person is intended to act or be responsible as a fiduciary to the recipient, its management, stockholders, creditors or any other person. By accepting and providing this presentation, the recipient expressly disclaims any fiduciary relationship with any person and agrees that the recipient is responsible for making its own independent judgements with respect to any transaction and any other matters regarding this presentation.

The Company is not authorised under the Banking Act 1959 (Cth) (the "Banking Act") and is not supervised by the Australian Prudential Regulation Authority. The Company's products are not covered by the depositor protection provisions in section 13A of the Banking Act and will not be covered by the financial claims scheme under Division 2AA of the Banking Act.

Disclaimer

2 Q2-2019 INVESTOR PRESENTATION


Where BSP operates

3

Loan market

share in 5

countries

# 1

Deposit market

share in 5

countries

# 1

POMSOX Share Price of

K11.27 as at 31-Jul-19, Market

cap of K5.27b

BSP is the leading financial services provider in the countries in which we operate

Q2-2019 INVESTOR PRESENTATION


BSP’s growing service offering

4

Aligned to BSP’s geographical and income diversification strategy, BSP has expanded its product / service offering into both existing and new markets.

Cambodia Tonga

Bank

Vanuatu

Bank

Cook Islands

Bank

Samoa Solomon Islands

Bank

Finance

Bank

Fiji

Finance

Bank

Papua New Guinea

Life Life

Finance

Finance Bank

BSP Capital

KEY

New operations in 2017/2018


BSP'S TOP 10 SHAREHOLDERS

Rank Name % Held

1 Kumul Consolidated Holdings Limited 18.0%

2 Nambawan Super Limited 12.3%

3 Petroleum Resources Kutubu Limited 9.9%

4 NASFUND 9.7%

5 Credit Corporation (PNG) Limited 7.1%

6 Motor Vehicle Insurance Limited 6.7%

7 Fiji National Provident Fund 6.5%

8 PNG Sustainable Development Program Ltd 6.3%

9 Teachers Savings and Loan Society 3.3%

10 Comrade Trustee Services 2.7%


Highlights for first half of 2019 [YTD June]

5

BSP continues its strong performance. However, income growth is slowing due to the prevailing business and economic environments.

GROUP NPAT TREND [Km]

Profit (NPAT) up 4.0% to

K434.9m

Total Income up 0.5% to

K1.071b

Capital adequacy marginally lower

20.9%

Loan provisions steady

4.7%

Total Assets up 1.4% to

K23.4bn

Cost to Income ratio improves to

38.5% ROE up

30.8%

Dividend yield up

12.4%


757.0

844.1

418.3 434.9

2017 2018 YTD June 18 YTD June 19


Highlights for first half of 2019 [YTD June]

6

Our key ratios are trending favourably … a clear picture of our corporate health.

COST TO INCOME TREND ROE AND ROA TRENDS

PROVISIONS AND NPL TO LOANS CAPITAL ADEQUACY


21.3% 19.8% 15.8% 14.7%

3.2% 3.1% 6.9% 6.2%

12.0%

2017 2018 YTD Jun-18 YTD Jun-19

Tier 2

Tier 1

BPNG Req.

4.9% 4.8% 4.7%

1.3% 1.8% 2.0%

2017 2018 YTD June 19

PROV

NPL

30.6% 30.7% 30.3%

3.5% 3.7% 3.7%

2017 2018 YTD June 19

ROE

ROA

42.6%

39.0% 38.5%

2017 2018 YTD June 19


Group key performance indicator trends

7

BSP’s loans continue to grow [+8.4%] despite economic challenges. However, deposits declined slightly [-1.3%] year-on-year, given tighter market liquidity in PNG and Fiji.

NET LOAN TRENDS [Km]

TOTAL ASSETS TRENDS [Kb]

DEPOSIT TRENDS [Kb]

DEPOSIT MIX TRENDS [Kb]


22.31

22.99 22.96 23.39

2017 2018 Jun-18 Jun-19

17.90

18.27

18.44

18.20

2017 2018 Jun-18 Jun-19

13.44 13.94 14.33 13.72

4.46 4.32 4.11 4.47

2017 2018 Jun-18 Jun-19

Term

Demand

11.21

12.56 12.07

13.07

2017 2018 Jun-18 Jun-19


Branches

Total

84 46 17 8 3 2 4 4

48 46 0 0 0 0 0 2

538 318 120 31 24 9 23 13

12,481 8,457 1,992 350 415 427 438 402

556 359 44 54 38 8 28 25

Branches

Sub Branches

ATMs

EFTPOS

Agent

EFTPOS

Channel growth

Continued channel investment to improve service levels across the BSP Group



Market strength

LOANS MARKET SHARE DEPOSIT MARKET SHARE

LOANS PORTFOLIO COMPOSITION DEPOSIT PORTFOLIO COMPOSITION

Rank

#1

#1

#1

#1

#1

#2

#4

Rank

#1

#1

#1

#1

#1

#2

#4

62%

57%

42%

39%

30%

26%

16%

PNG

Solomon Islands

Tonga

Cook Islands

Samoa

Fiji

Vanuatu

61%

52%

44%

38%

32%

25%

14%

PNG

Solomon Islands

Cook Islands

Tonga

Samoa

Fiji

Vanuatu

69.5% 24.1%

4.5%

2.3%

1.7%

2.3%

3.6%

PNG

Fiji

Solomon Islands

Tonga

Cook Islands

Vanuatu

Samoa

66.7% 17.5%

5.7% 2.7% 1.9% 3.0% 2.4%

PNG

Fiji

Solomon Islands

Cook Islands

Tonga

Samoa

Vanuatu

BSP maintains its strong market position across the Pacific … noting, its loan and deposit portfolios are predominantly PNG domiciled.


BSP Classification: Internal Use Only 10 Q2-2019 INVESTOR PRESENTATION

Q2-2019 results


Key: PQ = prior quarter YOY = year-on-year

BSP GROUP QUARTERLY P&L [Km]

Profit and Loss [Q2-19]

BSP’s NPAT increased by 3.6% in Q2-19, due to a small income increase and reduction in operating costs. BSP’s year-on-year [Q2-18 vs Q2-19] NPAT increased slightly by 0.1%

HIGHLIGHTS

● Q2-19 operating income is 2.4% higher than in Q1-19, due to FX income growth [driven by PNG, with Jun-19 experiencing high turnover].

● Total operating expenses are 0.4% lower in Q2-19, due to lower non-lending losses in Q2-19 mainly for PNG.

● Lending write offs are 26.8% higher in Q2 due to PNG retail write offs (teachers UPL)

Total Income Operating costs

Lending Write-offs

NPAT

PQ 2.4% (0.4%) 26.8% 3.6%

YOY (2.9%) (8.5%) 109.0% 0.1%

11

555

225

11

221

538

216

16

218

554

239

21

208

526

208

18

214

539

206

23

222

Total Income Operating expense Lending Writeoffs NPAT

Q2-18 Q3-18 Q4-18 Q1-19 Q2-19



Balance sheet [Q2-19]

Loans and advances increased by 1.9%, while deposits rose slightly by 0.8% in Q2-19. Total assets have increased by 1.6% to K23.4b.

Loans and advances

Deposits Total Assets

Total Liabilities

Net assets / SH equity

PQ 1.9% 0.8% 1.6% 3.1% (8.1%)

YOY 8.3% (1.5%) 1.8% 0.9% 8.6%

Key: PQ = prior quarter YOY = year on year

BSP GROUP QUARTERLY BALANCE SHEET [Kb]

HIGHLIGHTS

● Total loans increased by K238m in Q2-19 (PNG +K189m, Fiji K29m, SI –K0.90m, Samoa K11m, Tonga –K2.9m, Vanuatu K8.5m, Cook Is –K0.6m and other OSB/subs +K6m)

● Deposits increased overall by K138m in Q2-19. PNG +K2.6m, Fiji +K161m, SI -K59m, Samoa +K3.9m, Tonga +K4.1m, Cooks +K44m, Vanuatu –K3.7m and other OSB/subs –K15m

● FX translation in Q2-19 for loans was +K2.96m and Deposits –K1.04m

12

12

18

23 20

3

12

18

23

20

3

13

18

23 20

3

13

18

23 20

3.1

13.1

18.2 23.4 20.5

2.8

Loans andAdvances

Deposits Total Assets Total Liabilities Net Assets/ S.HEquity

Q2-18 Q3-18 Q4-18 Q1-19 Q2-19



Group key ratios [Q2-19]

All key ratios remain positive

COST TO INCOME TREND ROE [annualised]

ROA [annualised] LOAN TO DEPOSIT RATIO

13

40.6% 40.1% 43.1%

39.5% 38.5%

Q2-18 Q3-18 Q4-18 Q1-19 Q2-19

Cost to income Ratio

3.9% 3.8% 3.6% 3.7% 3.8%

Q2-18 Q3-18 Q4-18 Q1-19 Q2-19

ROA

32.5% 32.0% 29.2% 29.8% 30.8%

Q2-18 Q3-18 Q4-18 Q1-19 Q2-19

ROE


65.4% 68.3% 68.7% 69.5% 71.9%

Q2-18 Q3-18 Q4-18 Q1-19 Q2-19

Series2


Group key risk ratios [Q2-19]

Our risk ratios remain stable and asset quality remains sound

CAPITAL ADEQUACY

PROVISIONS TO LOANS

20.9%

HIGHLIGHTS

● Capital adequacy ratio decreased slightly to 20.9% in Q2-19 following payment of final dividend. Remaining well in excess of the 12% prudential requirement.

● BSP’s provisions to loans ratio in Q2-19 remains relatively stable, consistent with IFRS 9 models.

14

15.8% 15.0% 19.8% 19.4% 14.8%

6.9% 7.3% 3.1% 4.7%

6.2%

Q2-18 Q3-18 Q4-18 Q1-19 Q2-19

Tier 1 Tier 2 BPNG requirement


4.7% 4.6% 4.8% 4.6% 4.7%

Q2-18 Q3-18 Q4-18 Q1-19 Q2-19


Channels [Q2-2019]

15

Mobile banking is our leading channel, with branches representing only 7% of total transactions in Q2-2019 … given continued focus to reduce customers cash dependency [in-line with our digital strategy] with ongoing investment in EFTPOS, internet and mobile banking.

QUARTERLY CHANNEL TRENDS [Q2-2019]

20% 18% 16% 17% 15%

21% 20% 20% 18% 18%

35% 42% 43% 45% 48%

1% 1% 1% 1% 1% 9% 8% 7% 8% 7%

4% 4% 4% 4% 3% 9% 8% 9% 7% 7%

Q2-18 Q3-18 Q4-18 Q1-19 Q2-19

Network Branch

Rural Branch

Tablet

Kundupei

Internet Banking

Mobile

EFTPOS

ATM



2 49

1,030

15 62

1,004

217

44 35 78

21 15

100

290

9.96

10.08 10.09 10.14

10.25 10.26 10.26 10.26 10.31

10.37

10.58

10.97 11.06 11.09

0

200

400

600

800

1,000

1,200

9.20

9.40

9.60

9.80

10.00

10.20

10.40

10.60

10.80

11.00

11.20

Jun-18 Jul-18 Aug-18 Sep-18 Oct-18 Nov-18 Dec-18 Jan-19 Feb-19 Mar-19 Apr-19 May-19 Jun-19 Jul-19

Volume shares traded per month ['000] Monthly average share price [K]

Share price

Dividend yield of 12.3%, based on closing 31-Jul-19 K11.27 share price … and market capitalisation of K5.27b.

16

Share Price K9.48

28 Apr’17

1-Jun 2018 to 31-Jul 2019


Share Price K11.27

31-Jul-19

K5.27b Market Cap


2019 interim dividend

17

5.6% interim dividend increase to 38 toea.

2019 Interim

K0.38 Vs = PLANNED PROCESSING DATES

● Ex-date: 02-Oct-19

● Record date: 09-Oct-19

● Payment date: 18-Oct-19


2018 Interim

K0.36

YoY ∆

5.6%

BSP Classification: Internal Use Only 18 Q2-2019 INVESTOR PRESENTATION

Thank You

Documents

Q2-2019 Investor Presentation - PNGX · Neither the delivery or supply of this presentation (or any part thereof) nor the provision of information referred to herein or provided in