The strong underlying business performance across the Group reported in the first three-months of 2022 was maintained in the second quarter. This has resulted in an increased first-half 2022 Group net profit after tax of K586m, compared to K449m for the corresponding 2021 period.
After adjusting for the Additional Company Tax of K190m, the Group’s net profit reduced to K396m.
According to BSP Group CEO Robin Fleming, the Group’s underlying profit growth reflects the improved economic conditions in the region, especially in PNG and Fiji, with most countries now in a post COVID-19 recovery phase.
“Increased lending activity in PNG and Fiji and interest income from investment securities arising from improved market liquidity in PNG, were the main drivers for the overall uplift in underlying Group NPAT,” according to Fleming.
Increased fee and commission income from higher retail and merchant transactional volumes and foreign exchange income also contributed to the growth, albeit to a lesser degree.
Over the past 12 months, BSP has increased employee numbers in its Retail and Operations & Information Technology business units and added new Compliance roles, which has led to higher staff costs over the period.
Depreciation, computing, and premises costs also contributed to BSP’s expenditure levels increasing by 6.4 percent, when compared to the corresponding 2021 period.
The Income Tax (Amendment) Act 2022 was passed on 23rd March 2022, which saw the Additional Company Tax become effective on 25 March 2022.
The Additional Company Tax applies a flat K190m on any bank that has over 40 percent market share of PNG financial assets and is payable by 30 September of each year.
Fleming said in accordance with accounting standards, BSP recognised the full K190m Additional Company Tax in the first quarter, this year.
Consequently, BSP’s first-half 2022 NPAT reduced to K396m, which represents a 12 percent reduction in profit to the corresponding 2021 period.
Nevertheless, CEO Fleming stated that, “BSP Group’s key performance ratios remained positive, with cost-to-income ratio reducing slightly to 36.6 percent, excluding the Additional Company Tax, compared to 38.6 percent in the prior corresponding period.”
He added that BSP’s capital base remains strong, with total capital adequacy as at June 2022 standing at 23.0 percent, in line with the June 2021 levels and well above the minimum Bank of PNG prudential requirement of 12.0 percent.
Group Return on Equity was 10.8 percent for the half year, impacted by the Additional Company Tax.
Fleming noted that the lower interim dividend payout of 34 toea per share, when compared to the 2021 interim dividend of 39 toea per share, was because of the K190m tax.
With the support of its shareholders, BSP is pursuing a judicial review to challenge the constitutional validity of the ACT, given its material impact on shareholder returns.