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Bank South Pacific

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Bank South Pacific. PNGBC's capital adequacy ratio deteriorated significantly ... Bank South Pacific. Raising sufficient capital to enable us to effect a ... – PowerPoint PPT presentation

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Title: Bank South Pacific


1
Bank South Pacific
2
A D D R E S S B Y N O E L S M I T H
  • The Privatisation of PNGBC
  • The Process, the Progress
  • the Reality.

Bank South Pacific
To the Papua New Guinea Institute of
Accountants CPA Australia PNG Branch Annual
Conference
3
Bank South Pacific
4
Bank South Pacific
5
The bid criteria referred to here is inter alia-
  • Bidding party legal entity, ownership
  • Financial capacity
  • Operational capacity of the Bidder
    experience and expertise
  • Willingness to accept Government CSO policy
  • Future development plans
  • Commitment to the Governments future sales
    process.

Bank South Pacific
6
Bank South Pacific
7
Privatisation of PNGBC
It is important that the public understands that
the privatisation of PNGBC wasnt just a whim of
the Government. It was necessary for the future
stability of the banking industry in PNG, as you
will see.
Bank South Pacific
8
Capital Adequacy Ratio(CAR) PNGBC
PNGBCs capital adequacy ratio deteriorated
significantly between 1997 and 2000. Graph 1
PNGBC BSP Capital Adequacy Ratio 1996 to
2002 Forecast illustrates the deterioration in
the PNGBCs CAR over that period. In
1996, PNGBCs CAR was 14.65. By 2000, it was
0.
Bank South Pacific
9
PNGBC BSPCapital Adequacy Ratio
1996 to 2002 Forecast
Bank South Pacific
10
Major Commercial Banks - Loan Book Growth
1996 to 2001
Bank South Pacific
11
PNGBC Net Bad DebtsLoan (Provisions less
Recoveries)
1996 to 2001
Bank South Pacific
12
Operational Costs(excluding Provisioning)
1996 to 2001
Bank South Pacific
13
PNGBC - Pro Forma Balance Sheets - 1996 to 2001
Bank South Pacific
14
PNGBC - Pro Forma Balance Sheets - 1996 to 2001
Bank South Pacific
15
BSP - Pro Forma Balance Sheets - 1996 to 2001
Bank South Pacific
16
BSP - Pro Forma Balance Sheets - 1996 to 2001
Bank South Pacific
17
A balance between two issues
  • Raising sufficient capital to enable us to effect
    a competitive bid
  • and Estimating the value of the business and the
    potential returns

Bank South Pacific
18
Investors
INVESTOR
K000
Public Officers Superannuation Fund
Board Petroleum Resources Kutubu Limited National
Provident Fund Motor Vehicles Insurance
Limited PNG Teachers Savings Loans Defence
Force Retirement Benefit Board
30,000 30,000 14,950 10,075 6,500 3,250
94,775
Bank South Pacific
19
Purchase Price of PNGBC
The actual figures were- K000s Cash
82,462 Value attributable to Non Banking Assets
78,538 Purchase Price 161,000 Plus an issue of
10.7 million shares (25.3) to the Privatisation
Commission, which effectively valued PNGBC at
215.53 million Additional Loan of.. 8.8
million
Bank South Pacific
to the Privatisation Commission, to be repaid
over a period of up to 3 years from dividends
which would otherwise be payable to the
Commission.
20
Amalgamation
ADVANTAGES
DISADVANTAGES
Management only needs to focus on one entity and
can bring about change consistently through the
business. Synergistic benefits can be achieved by
rationalising certain staff, branches,
operational costs and a common IT platform. The
capital of the two companies is shared.
Compliance with capital adequacy and other
regulatory requirements would be easier. Once the
combined entity was listed the current
shareholders of BSP would have a liquid market
for their investment.
Amalgamation will require additional senior
management initiatives in order to marry the two
diverse cultures and merge the banking
operations. Directors required to satisfy
themselves that they are solvent. The
Amalgamation option would be a non-conforming
bid.
Bank South Pacific
21
The synergies to which I refer, among others
are-
A low cost deposit base allowing BSP to use a
significant drop in the average cost of funds to
lower the rates on lending products and compete
more vigorously for market share.   Already we
have been able to pass on these benefits as
they came through. We have led the way with
recent interest rate reductions on lending and
you can expect a further interest
rate announcement shortly, which will demonstrate
that BSP will not just be the largest bank, we
will continue to act as the market leader.
Bank South Pacific
22
The synergies to which I refer, among others
are-
Rationalisation of branches is a further obvious
synergy.   This will only occur where there is
dual representation.   Accordingly, there will be
no reduction in services to the people and we
have given an undertaking to the Privatisation
Commission in that regard.
Bank South Pacific
23
The synergies to which I refer, among others
are-
Reduction in staff numbers from natural attrition
will provide a cost benefit. Again, we have
given an undertaking that staff will not be
retrenched for a twelve month period and there
will be no loss of benefits and entitlements.
Bank South Pacific
24
Integration Program
Our extensive integration program is being driven
by Tony Westaway General Manager Integration
Delivery Systems a very autonomous and
crucial role in the merger process.
Bank South Pacific
25
Project Office
The integration activity is co-ordinated through
a Project Office which directs the activities of
small, rapid, interactive, integration teams.
Bank South Pacific
26
A Project Steering Committee performs the
following role-
  • Provides strategic direction
  • Defines expectations and success indicators
  • Schedules ad-hoc meetings to resolve strategic
    issues and conflicts
  • Makes timely decisions and sets priorities
  • Communicates expectations and critical
    decisions
  • Signs off on budget and scope.

Bank South Pacific
27
BSP is being supported by
  • Deloitte Touche Tohmatsu (Project Overview)
  • Datec PNG Limited (Methodology Project
    Administration)
  • Fiserv (Core Banking System) and
  • Euronet Services (Electronic Banking).

Bank South Pacific
28
Conversion through to September 2003
Concurrent with each branch conversion is
the re-badging of the branch, the issue of
new uniforms to staff and various changes down
to the use of new BSP stationery.
Bank South Pacific
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