BSP Financial Group Ltd. · ASX:BFL
BSP Financial — Shareholder Meeting (May 2020)
37 slides from BSP Financial's shareholder meeting presentation, May 20, 2020
Slide 1: Shareholder Presentation: 2020 Annual General Meeting
SHAREHOLDER PRESENTATION 2020 Annual General Meeting Author Robin Fleming – Group CEO
Slide 2: South Pacific market leader
South Pacific market leader We continue to grow and build scale ... in pursuit of sustainable market leadership K13.2b 119 branches and sub-branches In lending Largest network K19.3b K5.5m In deposits Sponsorships and donations K626m ~ 2.5m Dividends paid Active customer accounts K5.6b > 12m per mon
Slide 3: Portfolio growth
Portfolio growth BSP’s geographical and income diversification strategy continues to progress … with BSP Finance Lao entering our portfolio. BSP is the only majority owned PNG bank operating in both the domestic and international markets. BANKING ASSET FINANCE LIFE INSURANCE FUNDS MANAGEMENT & CORPO
Slide 4: 2019 results
2019 results Record profit + strong capital position + stable dividend 2019 2019 vs 2018 ● Profit [NPAT, Km] 890 + 5.5% ● Net assets [Kb] 24.5 + 6.2% ● Cost-to-income ratio [%] 37.7 - 323bps ● Capital adequacy ratio [%] 22.0 - 91bps ● Earnings per share [toea] 191 + 5.5% ● Dividend per share [toea]
Slide 5: Group NPAT
Group NPAT NPAT grew by K46m [5.5%] ... notwithstanding economic headwinds and uncertainties INCOME [Km] OPERATING LOAN IMPAIRMENT NPAT [Km] EXPENSE [Km] EXPENSE [Km] Flat (7.7%) + 5.5% + 20% 2,166 2,171 887 890 819 99 844 90 691 82 1,547 532 ● Interest income flat, despite ● Prudent cost management
Slide 6: NPAT by division
NPAT by division All of our divisions made a positive contribution to Group NPAT … with offshore branch profit growth approaching PNG levels in absolute terms PNG BANK [Km] OFFSHORE BRANCHES [Km] SUBSIDIARIES [Km] + K19m + K20m + 12.5% + K7m + 3.1% + 16.4% 170 668 151 648 48 41 458 67 5 2015 2018 20
Slide 7: NPAT contribution mix
NPAT contribution mix Our diversification strategy is working ... with growing offshore branch and subsidiary contributions NPAT CONTRIBUTION MIX OFFSHORE BRANCH AND SUBSIDIARY NPAT 2019 [%] CONTRIBUTION [%] 0.9% 4.9% 5.4% BSP Fiji 38% 13% 18% BSP Solomon Islands 18% 19% BSP Samoa 9% BSP Tonga 8% BS
Slide 8: Financial metrics
Financial metrics Balance sheet indicators illustrate continued growth in 2019 LOANS [Kb] TOTAL ASSETS [Kb] + 5.3% + 6.2% 12.5 13.2 23.1 24.5 8.6 18.2 CAGR = 11.3% CAGR = 7.7% 2015 2018 2019 2015 2018 2019 DEPOSITS [Kb] DEPOSIT MIX [Kb] + 6.0% 3.0 4.3 4.0 CAGR = 7.5% 18.2 19.3 14.6 11.6 13.9 15.3 CA
Slide 9: Key ratios
Key ratios BSP Group has maintained strong outcomes across all key performance ratios COST TO INCOME [%] ROE & ROA [%] (100bps) Flat 44.7 (323bps) 3.7 3.7 30.7 41.0 29.7 37.7 27.8 3.1 2015 2018 2019 2015 2018 2019 2015 2018 2019 CAPITAL ADEQUACY [%] PROVISIONS TO LOANS / NPL TO LOANS [%] (90bps) 4.9
Slide 10: Income stream trends
Income stream trends Total income was flat … given fee reduction initiatives and lower loan growth Net interest Fee/ FX Other Total KEY DRIVERS income commission income income income ● Interest income – loans, T-bills YOY: 0.8% 0.2% 4.4% (24.3%) 0.3% ● Fees & commission – Channels CAGR 4.4% 1.5% 9.0
Slide 11: Expenditure trends
Expenditure trends Prudent cost management in light of market conditions Staff Admin Premises/ Computing NLL Total costs costs equipment cost operating KEY DRIVERS costs ● Staff Costs – salaries , training, additional staff, staff rentals YOY: 2.9% (19.9%) (7.0%) (6.6%) (93.0%) (7.7%) ● Admin Costs
Slide 12: Market strength
Market strength BSP is #1 in lending in 5 countries … and #1 in deposits in 4 countries. LOANS MARKET SHARE [2019, %] DEPOSIT MARKET SHARE [2019, %] Rank Rank PNG 63% #1 PNG 62% #1 Solomon Islands 55% #1 Solomon Islands 53% #1 Tonga 40% #1 Tonga 40% #1 Cook Islands 40% #1 Cook Islands 36% #1 Samoa 3
Slide 13: Channel investment
Channel investment Continued channel investment to improve customer service levels across the BSP Group Total Branches 81 43 17 8 5 2 4 2 48 46 0 0 0 0 0 2 Sub Branches ATMs 551 320 121 33 25 13 27 12 EFTPOS 12,853 8,800 2,063 296 427 448 439 380 EFTPOS 560 358 44 53 36 10 32 27 Agent P13 2020 AGM P
Slide 14: PNG Market peer comparison
PNG Market peer comparison BSP remains PNG’s market leader TOTAL ASSETS [Kb] NPAT [Km] 671 14.8 16.0 485 CAGR = 2.0% CAGR = 8.4% 7.7 229 5.6 172 4.1 3.6 3.0 146 122 1.3 41 61 1 1 BSP ANZ Westpac Kina BSP ANZ Westpac Kina Sep-16 Sep-17 Sep-18 Sep-19 Sep-16 Sep-17 Sep-18 Sep-19 ROE [%] CAPITAL ADEQUAC
Slide 15: Channel growth trends
Channel growth trends Almost three-quarters [73%] of total transactions were via digital channels in 2019. BSP averages >10m digital transactions per month … most [64%] via mobile phones ANNUAL TRANSACTION MIX BY TRANSACTIONS PER MONTH BY CHANNEL CHANNEL [million] 10% 12% 10% 1.4 1.4 0.9 59% 71% 73%
Slide 16: Digital initiatives
Digital initiatives BSP was the first PNG bank to pioneer multichannel experiences, with ATMs, EFTPOS and debit Cards introduced in 1995 … we continue to innovate and pioneer new services to improve customer service levels 2020 1995 2010 2017 ● Development and ATM + EFTPOS + Mobile Top Up on EMV Chi
Slide 17: Growing middle class wealth
Growing middle class wealth Our home loan products, particularly the FHOS, are providing Papua New Guineans with the opportunity to grow their personal wealth and consequently greater future financial freedom and security FIRST HOME OWNERSHIP SCHEME LOAN Change 2017 2018 2019 [3 years] Accounts [No.
Slide 18: Facilitating economic growth
Facilitating economic growth BSP is a strong supporter of the PNG Government’s economic policy to grow the number and capacity of PNG’s SMEs SMART BUSINESS ACCOUNTS Change 2017 2018 2019 [3 years] Accounts [No.] 23,796 38,341 39,343 65% Balance [Km] 465.9 766.8 830.7 78% SMART BUSINESS BASIC LOAN Ch
Slide 19: Financial inclusion
Financial inclusion We are tailoring our offerings to grow financial system participation and encourage savings … particularly in low income segments ● Youth account SUMATIN ACCOUNT ● Card, mobile and internet SUMATIN ACCOUNT Banking made easier for banking access student on the go Change ● Optional
Slide 20: Social license to operate
Social license to operate BSP is a trusted brand across the South Pacific. We understand that our communities and many stakeholders rely on BSP’s activities … and we continue to meet your increasing standards COMMUNITY CUSTOMER SERVICE FAIR SHARE [Km] RETAIL BANK Expectations Exceeded One of PNG’s 8
Slide 21: BSP Group strategy focus
BSP Group strategy focus Key Board decisions made at the 2019 strategy offsite are summarised below ● Advance digital strategy, initiatives and capability ● Develop robust response plan in face of external risks ● Bed down the Lao JV and transition to BSPF operating model ● Continue examining market
Slide 22: Q1-2020 Results
HSSF Q1-2020 RESULTS
Slide 23: Q1-2020 results
Q1-2020 results BSP profit grew slightly amidst COVID 19 impact in Q1-20 ... noting the full impacts of COVID-19 on our customers did not emerge until Apr-2020 Q1-20 Q1-20 vs Q1-19 ● Profit [NPAT, Km] 217.7 + 1.8% ● Net assets [Kb] 3,279 + 6.2% ● Cost-to-income ratio [%] 40.0% + 50bps ● Capital adeq
Slide 24: Income stream trends
Income stream trends Income for Q1-20 declined by - 4.0% from the prior quarter, but grew by 1.3% year-on-year Net interest Fee/ FX Other Total KEY DRIVERS income commission income income income ● Interest income – loans, T-bills/ PQ: 1.0% (8.8%) (16.0%) (16.9%) (4.0%) I. Stock YOY: 2.9% (3.6%) (4.2
Slide 25: Expenditure trends
Expenditure trends Expenditure increased by + 7.1% over the prior quarter and + 2.1% YOY … driven by the banking system upgrade. BSP’s cost-to-income ratio remains low at 40% Staff Admin Premises/ Computing NLL Total costs costs equipment cost operating KEY DRIVERS costs ● Staff Costs – salaries , t
Slide 26: Balance sheet trends
Balance sheet trends BSP’s gross loans and advances declined by -0.9% and deposits by -4.6% in Q1-20, compared to Q4-19. Consequently, total assets declined by -3.0 % Loans and Deposits Total Total Net assets / advances Assets Liabilities SH equity KEY DRIVERS ● Total loans dropped by K124m in Q1 –
Slide 27: Recent channel activity trends
Recent channel activity trends Digital channel activity increased in Q1-20, representing over three-quarters [76%] of total transactions. We averaged almost 11m digital transactions per month in Q1-20 … a 20% increase over the prior year ANNUAL TRANSACTION MIX BY TRANSACTIONS PER MONTH BY CHANNEL CH
Slide 28: Provisions to loans [1]
Provisions to loans [1] BSP has and continues to adopt a cautious approach to provisioning BSP PNG PROVISIONING BSP FIJI PROVISIONING 5.3% 5.5% 5.4% 3.5% 3.7% 3.6% Sep-18 Sep-19 Average Dec-18 Dec-19 Average OTHER PNG BANKS PROVISIONING OTHER FIJI BANKS PROVISIONING [Combined ANZ, WBC & Kina] [Indus
Slide 29: Provisions to loans [2]
Provisions to loans [2] BSP Group’s provisioning levels remain above IFRS9 requirements PROVISIONS TO LOANS BSP Group [Provisions to loans] BSP Group [Under IFRS9] 4.9% 5.4% 5.4% 5.5% 4.8% 4.7% 4.2% 4.4% 3.5% Q1-18 Q1-19 Q1-20 Q1-18 Q1-19 Q1-20 Q1-18 Q1-19 Q1-20 4.4% 4.0% 4.5% 3.3% 3.4% 3.8% 3.2% 2.
Slide 30: Capital adequacy trends
Capital adequacy trends All of BSP’s banking operations exceed their prudential capital requirements CAPITAL ADEQUACY [%] GROUP 25.5 24.1 23.7 30.7 29.9 29.3 16.0 15.2 16.5 4.9 4.7 4.2 15.0 3.5 6.0 6.0 5.4 4.5 3.5 12.0 12.0 T2 20.6 19.4 19.6 T2 24.7 23.9 23.8 T2 11.5 11.7 13.0 T1 T1 T1 Q1-18 Q1-19 Q
Slide 31: COVID-19 customer support [1]
COVID-19 customer support [1] Loan repayment deferral packages and reduced lending rates have been employed … the latter will come at some cost to BSP [~ K55m in 2020] and we expect that BSP’s NIM’s will not be reverting to pre ILR reduction levels BSP REPAYMENT HOLIDAY SUMMARY BSP PNG – LOAN INTERE
Slide 32: COVID-19 customer support [2]
COVID-19 customer support [2] BSP is providing over 5,500 COVID-19 impacted customers with loan repayment deferrals LENDING ASSISTANCE MIX [30-Apr-2020] 5,504 K3.9b 7% 89% 93% Personal customers Commercial customers 11% Customers Loan balances P32 2020 AGM PRESENTATION
Slide 33: Shareholder Returns and Concluding Remarks
SHAREHOLDER RETURNS AND CONCLUDING REMARKS P33
Slide 34: 2019 dividend
2019 dividend BSP’s final dividend of K0.96, brings our total dividend to K1.34 FULL PLANNED PROCESSING DATES FINAL ● Ex-date: Friday, 29 May 2020 ● Record date: Friday, INTERIM K1.34 5 June 2020 + = ● Payment date: Friday, K0.96 19 June 2020 K0.38 SHAREHOLDER RETURNS SUMMARY 2017 2018 2019 Change E
Slide 35: Our profits
Our profits Strong performance enabling consistent returns to shareholders, particularly the super funds and their members … everyday Papua New Guineans SHAREHOLDER RETURNS [toea] TOP 10 SHAREHOLDERS [Apr-2020] 160 75.6% 75.5% 75.9% 75.9% Rank Name % Held 70.3% 140 ❶ Kumul Consolidated Holdings Limi
Slide 36: Share price
Share price Dividend yield of 11.2%, based on K12.00 share price … and market capitalization of K5.6b SHARE PRICE MOVEMENTS 12.50 K5.6b 1400 market Cap 12.00 12.00 1200 12.00 1,260 1,189 Share Price 11.77 11.82 1000 11.76 11.50 K12.00 11.63 11.65 967 11.53 Apr-2020 11.38 800 11.00 11.05 11.09 10.97
Slide 37: Conclusions
Conclusions ● Record Group NPAT of K890m in 2019, however growth slowed to 5.5% ● Total Assets up 6.2% and Loans up 5.6% ● Cost to income reduced to 37.7% from 41.0% in 2018 ● Capital adequacy steady at 22.0%, still well above BPNG requirement of 12% ● Loan provision increased to 4.8%, NPL up to 1.9