The National, Thursday, June 9th 2011
BSP has spent millions of kina on its transformation programme which we hope to see some material gain.
However, I think this has become too excessive with so much money spent on it as well as the expensive advertisements.
Its overseas acquisitions have become white elephants, making losses for three consecutive years.
BSP is trying to become a household-name, but it should not forget that Westpac and ANZ have been here longer.
So this transformation with its expensive advertisements and promotions will not easily transform people’s choice and loyalty.
What I believe BSP should concentrate on is the thing called “convenience”.
Limited by transportation and other services, Papua New Guineans are still simple people with a less complex lifestyle.
Increasing the number of ATMs is the way to go as well as opening up new branches as they will make banking more convenient.
When convenience becomes the norm, an increase in service fees will be accepted without complaints.
This is in line with BSP’s strategy to increase its fees earning bases.
On the other hand, our shareholders wealth with BSP has been devaluing over the last three years now as a result of the decreasing share value.
BSP is blaming the small shareholders who hold smaller number of shares for trading shares at low prices.
Why did BSP then split the shares in 2007 at one for 10 and now reversing to 10 for one?
BSP reasoned that the 2007 spilt was done to attract many shareholders, and now blaming these shareholders for the share prices’ fluctuation.
These are signs of unintelligent decision making by the board and management.
The simple measure to expect increases in share price is to increase the earnings per share (EPS), that is, net earnings divided by total numbers of ordinary shares.
To achieve this, BSP is now on the right track by trying to reduce the denominator, which is by buying back some ordinary shares (to reduce the number of shares).
It has been reported BSP is trying to buy back shares valued at K40 million which works out to be 5,891,016 shares at today’s share price.
This number is insignificant at 1.23% of the total 478,729,518 BSP issued shares, which will not make much difference.
I suggest BSP should not declare any dividends for at least two years, and use the profits to buy back a larger number of shares to reduce the number of shares issued significantly.
Part of the profits should be invested on increasing the number of ATMs and opening new profitable branches, winning loyalty and convenience.
We should then see some increases in the bottomline on its annual net profit or the share price.
This is up to the management and the board to decide.