Kina Bank aims to raise equity

Kina Bank aims to raise an equity of K224 million. The bank invites eligible shareholders to buy additional shares in the business. Business reporter CLARISSA MOI talks to Kina Bank chief executive officer GREG PAWSON

KINA Bank has planned a raising of equity and has invited eligible shareholders to buy additional shares in the business.
The bank plans to raise around A$91 million (K224mil) from the equity raising.
Proceeds will be used to expand the capital base of the bank, enabling it to further pursue growth opportunities in the small and medium enterprise (SME) sector, and fund additional strategic projects which would enhance Kina’s digital leadership in the country.
Business reporter CLARISSA MOI spoke to Kina Bank chief executive officer GREG PAWSON on this equity raising and the bank’s plans following the raising.

Q: Could you give us an overview of Kina Bank’s recent announcement on capital raising?
Pawson: The last time Kina did a capital raising was in May 2015 when we did the independent public offer (IPO) to buy Maybank and we haven’t done a capital raising since then.
We acquired ANZ’s retail, SME and commercial business which was settled last September.
We didn’t do a capital raising at that time.
That was actually one of the attractive thing about the acquisition that we did not get to raise any capital equity at all.
Now that we have settled that down, almost 12 months beyond that, we got the business into a nice operating rhythm in accordance to our 2025 business strategic plan.
We’ve got quite a big investment in digital capability, we’ve got an aspiration to be the leading digital bank in PNG.
We’ve got quite a number of programmes and projects lined up that we want to be able to continue to fund and many of those are exciting and will bring many new technologies to the PNG banking sector, that’s one reason that we are raising capital.
The other is that we want to be able to lend more at a higher level.
So currently, the prudential standard with the regulator, Central Bank, which says that no more than 20 per cent of your capital base can be lent to any one client, which is generally a business, commercial or corporate client or an aggregate of customers connected to the one client.
So what we want to do is double that.
Currently, for us, that’s about K50 million and we want to raise that up to about K100mil.
This means we could be more effective in competing in the commercial and corporate sectors of PNG and now that we are the second biggest retail bank, we feel raising some additional capital, about A$90mil (K217.128mil) in this first round will enable us to compete more effectively in those sectors of the market which will be a good thing in PNG, opening up competition in those sectors.
We want to be more competitive in lending particularly for large SMEs, commercial and corporate type customers, and this equity raising will just give us a more robust and solid capital base to be able to do that.
It also means that we will be well in advance with our prudential or regulatory requirements such as capital adequacy and leverage.
It just makes us a much stronger bank, it’s not that we are weak at the moment, we are well positioned but we wanted to push a bit harder particularly into those commercial and corporate sectors of the market.

Q: What is the current capital base for Kina Bank?
Our capital base is about close to A$300 million (K723.76mil). That’s out capital market base, and then there’s market capitalisation based on the performance of that share price which at the moment is about the same.
But it’ll lift our capital adequacy ratio to an excess of 20 per cent to put us in a really strong position which is good.

Q: Kina Bank’s vision is to be the leading digital bank. Could you give us an update on some of the programmes and products under this?
We’ve got several key programmes that are underway at the moment.
Some of these are very innovative for PNG, some of them are technologies that are tried and tested offshore, unavailable here in PNG but our intention is to bring them to PNG.
The main two or three that we are focused on at the moment is that we recently announced our new internet payment gateway in partnership with a local firm called NiuPay and that’s currently in pilot with the Lands Department and we’re planning to roll that out to our SMEs and commercial customers in the coming weeks once we see that the pilot has been successful so that gives merchants the ability to accept payments online for goods and services. That’s something we done in a relatively short space of time.
We’re doing a lot of work with our point-of-sale (POS) network at the moment.
So we arguably have the best performing POS terminals in the market in terms of reliability and speed and the next phase of that is called integrated POS.
We want to continue to be at the forefront of the new technologies that are coming to support POS and the next phase of that will be starting to integrate the POS terminals with the merchant software.
We are looking at a number of other things largely at payments to help facilitate e-commerce, more electronic payments for both personal and business customers in PNG and we’re working very closely with some of the government departments around moving some of their services to e-commerce platforms as well and being able to accept some of the payments online.
So a lot of the programmes are geared around e-commerce and electronic payments, and the game falls back to digital banking.
Not just for customers but also with the new organisation, a lot of our internal systems and processes are digitalised or electronic which just makes us a more efficient and productive organisation at the end of the day and it enables us to free up people to focus on more value added activities.

Q: A year on with the ANZ acquisition, could you give us an update of where Kina Bank is at now?
I think we are in a good position.
We had our first half year results announced recently and that was part why we’ve decided to do a capital raising off the back of that.
It was a good result and we are on track.
Our net profit after tax was about 24 per cent up on the same period last year and that’s obviously a reflection of having a bigger business with the ANZ arm which is now done and dusted.
One thing that we’re immensely proud of is that we didn’t lose any customers during that phase of acquiring ANZ, in other words we didn’t lose any ANZ customers.
And that was deliberate on our part.
We wanted to make the acquisition as seamless as possible. It was such a complex programme that took 18 months to complete but it worked.
We did have some hiccups along the way but about 90 per cent of our customers were happy with the transition.
We’re still building some of our business and corporate online capability.
It has gone better and even off the back of that, we have on-boarded about 6,000 new customers this year alone in addition to that.
So, hopefully, it’s a reflection of how well we did with the ANZ acquisition and also our brand campaign which we launched in May with our three brand ambassadors which we’re proud of.

Q: Apart from the effects of the Covid-19 on the economy and the people this year, business activities and investor confidence were affected due to the delay in some of the major resource projects. What are your views on this going forward as we are in the second half of the year?
One of the issues for us with respect to the major resource projects is it doesn’t install a great deal of confidence from foreign investors in PNG. I absolutely support the government’s approach.
I think it’s about finding the right balance between what’s right for the resource companies versus what’s right for the sovereign. And I think the Government’s learnt some lessons from past experience and we understand their position but it doesn’t look good offshore when these projects are delayed and we do acknowledge the Government’s commitment in getting those up and running and approved as soon as possible.
It will enable PNG in some respects to defy this global issue at the moment with the pandemic and recession that many countries are going into.
It has been forecast that there will be a contraction here in PNG’s gross domestic product (GDP) by about one and half per cent which is not good but certainly announcing and getting some of those projects up and running will be a good thing to the economy.

Q: What are your views on the issue of foreign exchange reserves in the country?
With the temporary shutdown of Ok Tedi gold and copper mine which was reopened recently, Newcrest being out of action due to annual maintenance programme, and with Porgera gold mine shutdown as well just puts further pressure on foreign currency reserves.
The Central Bank’s reserves remain reasonably robust and certainly supporting the market with (market) interventions which is being good in the order book.
So we still have to schedule and prioritise customers for foreign exchange and the order books are quite active at the moment and probably pushing out a little bit.
Ok Tedi is back, hopefully if Porgera reopens, and Newcrest kicks back in, that’ll improve hopefully in the medium term.

Q: What is your focus?
During the ANZ acquisition, we spent close to K55 million in capital expenditure relating to that type of capability built and hopefully that pushes us ahead of the pack.
We are focused particularly around service sync with our desire to be the leading digital bank in PNG.
We also want to be the leading service organisation, not necessarily bank but as a brand, be known for providing good services.
Lending is our big focus so we are very liquid following the ANZ acquisition and we want to be actively lending out to SMEs and commercial customers where we can, and bolster some economic growth.
Another area that aligns with our digital capability is technology and infrastructure and just making sure we’ve got the right network and the right infrastructure to support our growth aspirations. PNG is in a reasonably good position at the moment and, yes, it’s tough like other markets but it’s still presenting us with some good opportunity for growth which we are after.