PNG’s Bank South Pacific eyes ASX listing via UBS
Papua New Guinea’s largest bank, Bank South Pacific, is heading towards a listing on the Australian Securities Exchange through investment bank UBS, with a float expected to be worth at least $1 billion.
Bankers at UBS met with fund managers in the past fortnight, testing their appetite for a dual listing of the financial operation in Australia, in addition to the Port Moresby stock exchange, where it is already listed.
The bank — one of the largest listed on the Port Moresby Exchange — has more deposits than loans because of the limited corporate field to lend to in Papua New Guinea, according to sources.
There are a number of economic headwinds in PNG — its biggest market — with inflation running at 6 or 7 per cent, while currency risk remains a factor.
Gross domestic product in PNG is shrinking due to the completion of the PNG LNG project. At the same time the weaker outlook for oil has put a question mark over other major energy projects.
Currently listed, Bank South Pacific is owned by various local institutions.
Net interest margins are 7 per cent, and the long-term compound annual growth rate is 24 per cent. The bank doubled its earnings in the past six years, posting 532 million kina ($224.9m) in net profit during the 2015 financial year, and return on equity is 29 per cent.
In 2014, its revenue was 1.67 billion kina.
BSP also has 20 per cent of its earnings from tier one capital and has the largest amount of employees, branches (there are currently 35 in six countries) and ATMs.
It has 650,000 banking customers throughout the Pacific, and in December 2014, it had assets valued at 15.8 billion kina.
Originally, BSP was derived from the National Bank of Australasia, based in Port Moresby.
As independence approached for PNG, the incoming government made known its desire that all banks in PNG be locally incorporated, rather than branches of a foreign parent.
Since its inception, Bank South Pacific has had a strategy of rapidly expanding throughout the South Pacific.
It has acquired assets from the Commonwealth Bank of Australia and Westpac
Our bank regulator, the Australian Prudential Regulation Authority, has a cross-border training program with PNG authorities.
BSP’s move comes after PNG finance house Kina Securities listed in Australia last year in a dual listing to raise $97m, with a $164m market value, in an effort to offer funding power for its Malaysian-owned Maybank acquisition and enable the sell-down of 35 per cent shareholder Fu Shan Investment. Former Suncorp banking chief David Foster was appointed to the board.
Since listing at $1 per share, the company’s share price has risen to $1.06, which was its closing price on Friday.