Report reflects positive outlook

BANK South Pacific Group chairman Sir Kostas Constantinou says Standard and Poors in its report released last Thursday continued to affirm its “B+” long-term and “B” short-term ratings outlook on the bank.
Its long-term issuer credit rating outlook for BSP remained unchanged at “negative”.
“The re-affirmed rating reflects the bank’s strong domestic market position, extensive distribution model and significant investment in information technology and sustainable profitability,” Sir Kostas said in a statement.
According to the report, BSP’s strengths included strong domestic market position as PNG’s largest commercial bank, extensive distribution model and significant investment in information technology “that we believe is difficult to replicate”, strong profitability, stemming from the bank’s high margins, low credit costs and good cost-control.
However, the weaknesses included concentrated and higher-risk loan portfolio weighted toward commercial and corporate lending, high-risk and operating environment, vulnerability to erosion of confidence in PNG.
According to the report: “The negative outlook on BSP reflects our opinion that the bank would be unlikely to avoid increasing credit pressures stemming from both the sovereign and broader operating environment as a result of lower global energy prices should they eventuate.”
The report noted that the ratings on BSP reflected its dominant market position as the largest commercial and retail bank in PNG, “and one in which we consider the bank to have a number of structural advantages over its competitors, including an extensive distribution model and affinity with customers as PNG’s largest domestically-owned bank, which should position the bank well to defend its market share as business growth slows in the short-term in response to a slowdown in economic growth following the fall in global energy prices”.