Presentation to Shareholders. Robin Fleming Group CEO May 20, 2016

Transcription

1 Presentation to Shareholders Robin Fleming Group CEO May 20, 2016

2 PNG economic environment In USD m 8,000 7,000 6,000 5,000 4,000 3,000 2, % 7.7% 13.3% 9.9% 4.9% 4.3% 2.4% 2.0% 2.7% Economic Indicators E 2016F GDP growth 13.3% 9.9% 4.3% Non-mining GDP 1.2% 2.4% 3.4% Inflation (headline) 5.2% 5.1% 5.7% Deficit % of GDP 8.3% 4.9% 3.8% 1, F2017F2018F2019F Debt to GDP ratio 35.5% 34.7% 35.8% PNG GDP PNG growth rate PNG s GDP has normalised after posting strong growth at an average rate of circa 8% over the last decade. Total GDP growth is expected to be around 4.3% in The fall in commodity prices has had an impact on government revenue. The non-mineral sectors have the potential to support a more inclusive, balanced and sustainable growth. There is a mixed view on the market and the economy, with BSP noting a general view of cautious optimism among businesses. Slide 21

3 Economic activity drivers Transport 6% holesale & Retail 8% Manufacturing 7% GDP contribution by economic activity-2015 Others 16% Mining 4% Oil & Gas 18% Agriculture 23% Construction 18% Percentage contribution to GDP growth Others 0.9% 2016F Manufacturing Mining Agriculture Construction Oil & Gas 0.3% 0.3% 0.9% 0.5% 1.3% * Others include; community & social services, Finance, real estate & business services and electricity. -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% Extractive industries (Oil & Gas and Mining) have been the main driver of growth in the recent past. Primary industry improved with 23% contribution to economic activity. Oil & gas was the main % contributor to GDP in 2015 and 2016, and this is expected to moderate to 1.3% in 2016, compared to 8% in Slide 31

4 PNG economic environment - Inflation Inflation (%, quarterly) Dec'11 Dec'12 Dec'13 Dec'14 Dec' USD AUD Mar'12 Mar'13 Mar'14 Mar'15 Mar'16 Headline inflation is estimated at 6.4% in December 2015, compared to 6.6% in the previous year. Inflation is expected to moderate to around 6% in The lower economic growth and other developments are non-inflationary and Bank of PNG is expected to maintain a neutral monetary policy stance over the next six months. Slide 41

5 Group Profit Before Tax (Kina million) Kina, Millions Axis Title GPBT Slide 51

6 Group Profit After Tax (Kina million) Kina, Millions Slide 61

7 Group Profit & Loss Trends (Millions of Kina) CAGR, last 5 Years Income Net Interest Income , % Foreign Exchange Income % Fee and other Income % Total Income 1,094 1,285 1,522 1,499 1, % Expenses Operating Expenses (520) (581) (641) (554) (559) 1.4% Depreciation and SW Amort'n (53) (84) (176) (123) (115) 16.7% Loan Provisioning (25) (71) (94) (77) (90) 28.9% Non-Lending Losses (27) (15) (17) (26) (17) -8.2% Profit before tax % Tax expense (119) (138) (170) (212) (234) 14.5% Share of Profits from Assoc Profit after tax % EPS (toea) % Dividends per share (toea) % Slide 71

8 Group Total Assets (Kina billion) Kina, Billion Slide 81

9 Group Balance Sheet Trends (Millions of Kina) Assets CAGR, last 5 Years Cash & Short Term Deposits 1,501 2,134 3,476 2,988 3, % Loans & Advances 4,301 4,805 5,306 6,757 8, % Investments 4,724 4,861 5,571 4,663 4, % Fixed Assets and Intangibles % Other Assets % Total Assets 11,663 13,336 15,761 15,817 18, % Liabilities Customer Deposits 9,366 10,861 12,201 12,708 14, % Non-Lending Provisions % Other Liabilities ,798 1,092 1, % Total Liabilities 10,337 11,867 14,142 14,016 16, % Shareholder Equity 1,344 1,466 1,619 1,800 2, % Slide 91

10 Group Income Growth (K million) 1,800 K'Milion 1,600 1,400 1,200 1, , Net Interest Income Fx Income Banking Fee and Commissions Net Insurance Income 10

11 Group Expense (K Million) K Million 1, Operating Expenses Loan Provisioning Depreciation and SW Amort'n Non Lending Losses 11

12 BSP - dominant market position No of customers ( 000) PNG Fiji Solomon Islands Samoa Tonga Cook Islands Total 1, ,198 Branches BSP Rural ATM s EFTPOS 8,621 1, ,630 Agents / Rural outlets FIJI Labasa SOLOMON IS. SAMOA TONGA COOK IS. Nabowalu Nabowalu VANUA LEVU LEVU Savusavu Taveuni Taveuni Vava u Aitutaki Manuea Tavua Rakiraki Rakiraki Tavua Lautoka Korovou Ba Korovou Nadi Nadi VITI LEVU VITI LEVU Sigatoka Sigatoka Navua Navua Suva Suva Ovalau Suva Central Suva Dominion Central House Dominion Pacific House House Centre Point Centre Point Lomaloma Lomaloma Gizo Noro Munda Honiara Honiara Point Cruz Ranadi Auki Salelologa Apia Apia Vaitelei Nuku alofa Atiu Southern Islands AVARUA Rarotonga Mitiaro Mangaia Mauke Vunisea 12

13 Competitor analysis (PNG) (K millions) NPAT Return on Equity (ROE) % 31.8% 30.6% 28.1% 26.9% 32.4% 28.9% 25.3% 25.2% 27.5% % 18.2% BSP ANZ PNG Ltd Westpac PNG Ltd BSP ANZ PNG Ltd Westpac PNG Ltd 13

14 Loans-PNG (K million) Market share September ,683 3,516 6,094 KSL 3% WPAC 14% ,618 3,154 5,271 ANZ 30% BSP 53% ,635 2,968 3, ,000 KSL WPAC ANZ BSP 14

15 Deposits-PNG (K million) Market share September ,063 2,918 3,219 4,821 4,780 4,621 11,018 10,888 10,880 KSL 3% WPAC 16% ANZ 25% BSP 56% 0 5,000 10,000 KSL WPAC ANZ BSP 15

16 Profit After Tax- Fiji (FJD million) ANZ WBC BOB BSP Bred Bank HFC 16

17 Total Assets-Fiji (FJD million) ,862 1,925 2, ,670 1,280 1,458 1,407 2,443 2,200 HFC Bred Bank BSP BOB WBC ANZ ,437 1, ,100 1,600 2,100 2,600 3,100 17

18 Profit After Tax- SI (SBD million) ANZ WBC BSP 18

19 Performance- SI Return on Equity (ROE) Return on Assets (ROA) 30% 31% 5% 5% 20% 16% 13% 13% 11% 11% 11% 12% 9% 3% 2% 1% 2% 2% 3% 2% 1% 2% 0% ANZ WBC BSP 0% ANZ WBC BSP 19

20 Strategic Focus 2016/17 Westpac Acquisition: 1. BSP entered into a sale agreement in January 2015 to acquire Westpac s operations in Solomon Islands, Vanuatu, Samoa, Tonga and Cook Islands for A$125m. 2. Completed acquisition of Samoa, Tonga and Cook Islands on July 10 th, 2015 and integration with BSP has been successful 3. Acquisition of Solomon Islands operations was completed in October Currently undergoing system integration. 4. Regulatory approval for Vanuatu acquisition has been granted by the Reserve Bank of Vanuatu; acquisition plans are currently on track, with completion of transition currently anticipated to happen in July

21 Strategic Focus 2016/17 BSP Finance 1. Business Finance operations in Fiji and PNG are progressing well and are tracking to business plans, since their inception in late Financial and operational success targets have been set and pursued for continuation of loan book growth and profitability, and operational efficiency. 2. BSP Finance will follow BSP s regional expansion program by exploring opportunities to expand to other geographies that BSP Bank already exist in. 3. BSP Finance is also exploring market entry opportunities outside of the Pacific Region. 21

22 Capital Management Capital Adequacy The Capital Base of the BSP Group exceeds regulatory standards for an adequately capitalised bank 30.0% 25.0% 20.0% 15.0% 4.4% 4.9% 4.1% 4.6% 4.1% A slight drop from 24% to 23.1% in part reflecting acquisition of Westpac businesses in the South Pacific 10.0% 5.0% 0.0% 19.8% 19.4% 17.4% 19.0% 13.9% Dec-11 Dec-12 Dec-13 Dec-14 Dec-15 Tier 1 Tier 2 Minimum BPNG requirement 22

23 Return on Equity and EPS ROE marginally down to 27.9% Earnings per share continues to increase to K113.8 from K108.3 in 2014 Return on Equity 40% 35% 30% 25% 20% 15% 31.7% % 56.0 ROE EPS (toea) % 28.7% 29.0% 29.7% 27.9% % Earnings per share 10% 5% 20 0%

24 Non Performing Loans and Provisioning to Total Loans Non Performing loans increased in 2015, primarily driven by the impact from newly acquired operations in Tonga, Cook Islands, Samoa, and Solomon Islands. Provisioning also increased to 4.9% in Provision to Loans NPL 5.0% 4.6% 4.9% 4.4% 3.8% 2.1% 1.2% 1.7% 0.8% 0.6% FY2011 FY2012 FY2013 FY2014 FY

25 Q1/2016 Results 25

26 Profit & Loss (Kina million) Group profit after tax was up by 2% (+K3m) to K143.7m in Q1 16. NPAT was 10% higher than the previous corresponding period (pcp) figure of K130.5m. Total Revenue down 5% this qtr to K397m from K419m, however up 9% from pcp. The decline was attributed mainly to a drop in fees and commission income. Other areas that also declined from last qtr were Interest from liquid investments and FX income. Loan loss provisioning down 19% (K3.6m) to K15.2m from K18.8m this quarter, which reflects higher recoveries and reduced retail write-off Q1 16. Depreciation & amortisation down 21% to K23m from last qtr (K29m) from a decline in the level of software amortisation. Other Operating Expenses (less dep n and amort n) down 2% (K3m) to K156m from K159m due to cost savings in general admin costs Net Profit (After tax plus associates) Q1-15 Q2-15 Q3-15 Q4-15 Q Total Revenue 15.2 Loan loss provisioning Other Operating Expenses Depreciation Oth Op Exp and less Depn and Amortisation A'mn 26

27 Balance Sheet (Kina billion) Total Assets up 1% to K18.5b this qtr from K18.2b in Q4 15. The increase reflects increases in cash and loans and advances Net loans increased by 1% to K8.8b this qtr from K8.6b as at the end of Dec 15. Compared to the previous corresponding period of 2015, loans was up by 28% or K1.93b. Total deposits grew 1% to K14.7b from K14.6b largely attributed to growth in deposits in SI, Samoa and Tonga. Kina billions Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 Loans 8.8 Other Int Earning Assets 5.5 Deposits Total Assets 27

28 Market Share Loans Q1-15 Q2-15 Q3-15 Q4-15 Q % 45% BSP s combined loans market share remained unchanged at 40% this qtr compared to Q4 15, however it has improved by 1% compared from pcp in % 36% 36% 24% While Solomon Island market share has slightly declined this qtr, growth in other countries have neutralised the overall position. PNG Fiji Solomon Islands Cook Islands Tonga Samoa Samoa, Tonga and Cook Islands have seen improved growth in their respective loan book market share compared to the last qtr. 28

29 Market Share Deposits Q1-15 Q2-15 Q3-15 Q4-15 Q % 55% 51% 37% BSP s combined deposit market share remained unchanged at 44% compared to Q4 15. The 1% drop in Fiji s deposit market share and further 2% drop in the Cooks market share have been compensated for by the growth in other countries market share. 22% 23% Solomon Islands deposit market grew significantly to 62% from 58% in Q4 15, resulting from the combined operations of BSP and former Westpac operation, a significant growth from 39% in Q3 15. PNG Fiji Solomon Islands Cook Islands Tonga Samoa 29

30 Customers ( 000) 2,500 2,000 1,500 Q1-15 Q2-15 Q3-15 Q4-15 Q1-16 1,665 2,198 1, PNG Fiji Solomon Islands Cook Islands Tonga Samoa Total 30

31 Channels ATMs Branches, BSP Rural (PNG) Q1-15 Q2-15 Q3-15 Q4-15 Q Q1-15 Q2-15 Q3-15 Q4-15 Q

32 Financial Risk Management Capital Adequacy Provisions to Loans Tier 1 Tier 2 BPNG requirement 30.0% 25.0% 20.0% 15.0% 6.3% 7.9% 8.1% 4.1% 5.8% 5.5% 5.0% 4.5% 4.0% 3.5% 4.8% 4.9% 4.8% 4.9% 4.9% 10.0% 5.0% 19.2% 14.9% 14.8% 19.0% 19.0% 3.0% 2.5% 0.0% 2.0% 32

33 Qtr Performance Summary Revenues Q1/16 Revenue declined from the previous quarter. While interest income on loans grew, it was offset by the drop in the level of FX activities, lower interest income from other interest earning assets and lower fees and commission income. The total operating expenses dropped to K179m this quarter from K188m, hence a savings of 6%. This was largely attributed to cost savings in general admin expenses, as well as lower amortization expenses on software Cost to income ratio for the Group increased by 0.4% to 45.1% reflecting Q1 16 reduced quarterly revenue vs. Q4 15 Balance Sheet Continued stable lending market share in PNG, with stabilizing deposit market. Capital Adequacy for the Group as at March 2016 has increased from 23.1% in Dec 15 to 24.8%, well above BPNG requirement of 12%. Others - BSP Finance Ltd continues to grow it s operation in both PNG & Fiji, and exploring growth opportunities outside these countries. - New banking operations in Samoa, Tonga, Cook Islands and SI are progressing well. Regulatory approval granted by RBV, with completion of Vanuatu acquisition expected in July

34 Share Price Sub - title of Presentation K7.60 Closing price (Kina) red Share Price Volume traded (millions) green 2.5 K7.40 K7.20 K7.00 K3.506bn market Cap K K6.60 K K6.20 Mar-15 May-15 Jul-15 Sep-15 Nov-15 Jan-16 Mar BSP Annual General Meeting

35 Dividend 22.5 toea Interim 63 toea 11.4% yield (on K7.50) Payment on 24 th June, toea Full Final 35

36 Conclusion 2015 was an outstanding year with better than market performance Cost to income ratio of 44.7% reinforces a strong cost focus Capital adequacy, loan loss reserves, dividend yield and EPS all market leading BSP s expansion in the South Pacific well executed Increasing contribution from non PNG Business BSP is a significant contributor to economic growth in PNG and the Pacific 36

37 Thank You 37