BSP declares K396mil profit

THE Bank South Pacific Financial Group Ltd has declared a first half-year profit of K396 million – a 12 per cent decrease from K449 million for the same period last year.
This is after paying the Government’s Additional Company Tax of K190 million imposed in March.
The bank experienced strong underlying performance across the group which resulted in an actual increased first-half profit of K586 million.
However, after adjustments for the Additional Company Tax of K190 million, the net profit was reduced to K396 million.
Chief executive officer Robin Fleming said: “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 (Net Profit After Tax).
“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 retail and operations, and in its information technology business units.
“It 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 per cent, compared to the corresponding 2021 period.
“The Income Tax (Amendment) Act 2022 was passed on March 23 2022, which saw the Additional Company Tax become effective on 25 March 2022.
“The Additional Company Tax applies a flat K190 million on any bank that has over 40 per cent 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 K190 million Additional Company Tax in the first quarter this year.
“Consequently, BSP’s first-half 2022 NPAT reduced to K396 million, which represents a 12 per cent reduction in profit to the corresponding 2021 period.
“Nevertheless, BSP Group’s key performance ratios remained positive, with cost-to-income ratio reducing slightly to 36.6 per cent, excluding the Additional Company Tax, compared to 38.6 per cent in the prior corresponding period.”
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 as a consequence of the K190 million tax.
With the support of its shareholders, BSP is pursuing a judicial review to challenge the constitutional validity of the additional company tax, given its material impact on shareholder returns.