BSP Financial: celebrates 20 years of privatization this month

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

PNGBC’s privatization was one of 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 Pensions Act. All of these were all intended to preserve the independence of the Central Bank and Pension Funds. It would also allow the state-owned commercial bank, PNGBC, to operate without government interference, access capital from private investors without being a drain on government finances, and, once profitable, pay regular dividends to the government as a minority shareholder. of your earnings.

In the run-up to privatization, the Bank of PNG appointed the late Garth McIlwain as Trustee of PNGBC as the bank was severely undercapitalized with risk-weighted capital below regulatory thresholds and a loan portfolio that had underperformed. with high delinquency rates. loans The late Ben Micah as chairman of the Privatization Commission, or what would become the Independent Private Trading Corporation, the predecessor of Kumul Consolidated Holdings, was also a key participant in the privatization process.

In 2002, the first year of a combined BSP led by then Managing Director Noel Smith, who must be recognized for his important role in leading the successful bid to acquire PNGBC, BSP’s net profit after tax was K54 million. and total loans were K863 million with a market share of 57%. At the time, BSP only operated in PNG, but under the direction of the late Garth McIlwain, who became BSP’s Managing Director in 2003, BSP began its expansion into the Pacific when it acquired the former Solomon Islands National Bank in 2005. The next phase involved Commonwealth Bank of Australia’s purchase of Colonial Bank and Colonial Life in 2009, which were rebranded as BSP and which saw BSP’s operations include life insurance and banking.

This expansion continued in 2015 with the purchase of Westpac’s businesses in the Cook Islands, Samoa, Solomon Islands, Tonga and Vanuatu, which were successfully integrated into BSP. The establishment of BSP Finance in 2017 initially in Fiji and soon after in PNG and the Solomon Islands established BSP as a broad financial services group, with business lines in banking, life insurance, asset finance and capital advice.

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

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

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

“A special shout out to our 366 staff who remain employed by BSP in PNG 20 years after the merger. Indeed, we are proud of the bank’s journey over the 20 years and the late Sir Mekere’s foresight in embarking on the privatization programme. . in 2000,” 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 about 120 branches and sub-branches.

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

“In every measure you can imagine, the privatization of PNGBC to BSP has been an outstanding success. From improving profitability, increasing lending, a key economic driver for growth, to expanding our network of branches and the number of people employed. Mr. Fleming said.

The head of the bank said that the number of accounts with BSP exceeds 2 million accounts in the entire group. “Our contribution over the last 20 years has seen higher levels of taxes paid, higher shareholder dividends, increased shareholder value with a higher share price. Millions of kina in contributions were given to the community through of charities and community projects, expansion of our business lines with banking, asset finance, life insurance and capital advice, including the expansion of the now iconic BSP brand regionally. BSP is a proud PNG ambassador to the entire region, from the Cook Islands to Vanuatu and every Pacific country in between. It truly has been a successful journey for this local bank and one that everyone in PNG should be proud of,” added Fleming.

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

BSP will continue to expand its branch network with a new branch at Eriku in Lae this year, a new loan center here at 4 mile in Port Moresby, secondary branch upgrades at Telefomin, as well as new branches at Dobel in Mt Hagen and others for the next 2 years.

In addition to BSP’s continuing and ongoing commitment to expanding its branch network this year, the bank’s focus is on raising awareness and promoting digital banking, which is more convenient and profitable for its customers.

“Despite the announcement of the new law that will see BSP, the only PNG-owned bank in PNG and the region, be taxed an additional K190m each year, we continue to reduce our fees and continue to review our products and services to bring them in line better to our customers’ needs, as we recognize the importance of providing our customers with suitable and profitable products and services”.

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

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