PAPUA New Guinea’s largest financial institution, Bank of South Pacific, is setting up a network to rival that of ANZ and Westpac in the Pacific Islands region, its chief executive Ian Clyne says.
Its present bid for Commonwealth Bank of Australia’s Fiji assets marks an intensification of that drive.
Mr Clyne said its next targets would be National Bank of Vanuatu and a Samoan bank, either National Bank of Samoa or Samoan Commercial Bank.
No figure has yet been formally placed on BSP’s bid, but CBA bought the Fiji government’s 49 per cent stake in Colonial National Bank, which it now fully owns, for $F28 million three years ago.
This would value the whole bank at about $32m — although the Fiji dollar was recently devalued by 20 per cent by the military-installed government.
Westpac and ANZ both have more extensive operations in Fiji. But Colonial, in whose name CBA continues to operate there since buying the parent insurance house in Australia, has been doing business in the country since 1876.
It bought control of the ailing state-owned National Bank of Fiji to extend its operations from life insurance, investment and health cover, to banking.
Now CBA seems likely to exit the country, whose economic future appears rocky.
But the government — whose relations with Canberra are extraordinarily frosty — is relieved that the net result is set to be greater diversity within the industry, bringing in a PNG operator to replace an Australian firm.
BSP has persisted with its bid in the face of growing difficulties for the finance sector, with the Fiji government — which last week sacked and replaced the board of the national provident fund, the country’s biggest investor — imposing increasing conditions on commercial banks via its central bank.
The banks have been told to cut their interest rate spreads to 4 per cent or below by the end of the year, and to increase lending to small business. Foreign exchange controls have also been introduced.
BSP was originally owned by National Bank of Australia, and was taken over 16 years ago by a PNG-based consortium led by Credit Corp, alongside the Roman Catholic archdiocese of Port Moresby. Credit Corp has since established a Fiji operation.
Noreo Beangke, a former PNG finance secretary, led the original buyout and has remained chairman ever since. BSP has become the biggest bank in PNG, with about a third of the market, earning a net profit in 2008 of $107m, assets of $3.2 billion and 530,000 retail customers.
Mr Beangke stresses that BSP’s growth strategy is “a regional strategy”. The bank may be starting to reach growth limits at home in PNG, but is eager to become “a more active participant” in the Exxon-Mobil-led $15 billion new liquefied natural gas project likely to begin construction there next year — another reason it isseeking to increase its capitalisation.
In 2004, BSP bought Westpac’s operation in tiny but remittance-rich Niue, where it is the only commercial bank.
In 2006, it bought the small Habib Bank in Fiji.
In 2007, it bought National Bank of Solomon Islands.
Mr Clyne says the offer for CBA’s business in Fiji is subject to due diligence. But if it does go ahead — as appears most likely — “BSP will have a Pacific network to match our competitors, ANZ and Westpac”.
The bank has recently closed an issue in which it aimed to raise $94m of 10-year bonds, but it has not yet revealed whether it reached its target.
- The Australian
if only we could get rid of our coup mentality once and for all, we’ll be more advanced than papua new guinea in all facets of an economy … although they would still beat us with having access to rich natural resources, particularly minerals ….
there should be some long term plan to educate citizens right from primary school stages as to the disastrous effects of coups, that everyone should be subject to the law at all times even when you are disadvantaged by it, that people should have basic respect for every other person, etc …
this might contribute to removing that coup mentality ….