K190m ‘super tax’ slashes BSP’s net profit to K69m

News that matter in Papua New Guinea

K190m ‘super tax’ slashes BSP’s net profit to K69m

PORT MORESBY: The Bank South Pacific Financial Group (BSP) has declared an after tax net profit of only K69 million for the first quarter of this year.

Its profit was slashed by K190 million, from K259 million after deducting the Government new “super tax” levy or additional tax that was approved by Parliament in November.

BSP chief executive officer Robin Fleming said it was “by far” the highest tax rate in the region and one of the highest global rates.

BSP shares on the ASX had also been impacted significantly.

The National reported the details of BSP’s 2022 first quarter report:

BSP pays K190mil extra tax

April 26, 2022The NationalMain Stories

By SHIRLEY MAULUDU
THE Bank South Pacific Financial Group Limited (BSP) has declared a substantially lower net profit of K69 million (from K259 million) due to a controversial levy imposed by the Government.
It will pay K190 million from the K259 million to the Government as additional company tax.
Group chief executive officer Robin Fleming said the profit had been reduced to K69 million because of the Government’s additional company tax.
The additional company tax approved last November, added to BSP’s existing corporate tax, represent an effective tax rate of 45 per cent levied on the bank.
Fleming said it was “by far the highest tax rate in the region and one of the highest global rates”.
“The Government has singled out BSP while other commercial banks do not contribute to this revenue-raising measure,” he said.
The K190 million tax deduction overshadowed an otherwise good performance by the bank – a K259 million profit compared to K203 million in the first quarter last year – resulting from a growth in income and lower loan impairment expenses.
“Income growth and lower loan impairment expense, resulted in an increase in group net profit after tax to K259 million,” he said.
“In accordance with accounting standards, BSP recognised the full K190 million (deduction) in first quarter of 2022, reducing the group’s net profit to K69 million despite our strong underlying performance,” Fleming said.
“It has to be taken up in full in January of each year and is not (paid out) until September, an expense against BSP.”
The only other company imposed additional tax is Digicel.
Fleming said the implications of the additional tax included:

• THE creation of an unstable and inequitable tax regime in the country which would discourage long-term investment in the country; and,
• THE establishment of a precedent whereby any business that outperformed its peers would be subjected to arbitrary taxes.

The superfunds representing workers in the public and private sectors and are BSP’s shareholders, estimate that the tax’s impact on them is around K1 billion.
Nambawan Super Ltd chief investment officer David Kitchnoge said: “Congratulations (BSP) for the performance in first quarter.
“Obviously we are very disappointed with the additional company tax that has reduced profit to K69 million.
“That’s a tax on shareholders so we expect to see that flow through dividend announcements.”
Meanwhile, other results during the quarter include:

• MARKET capitalisation of K5.6 billion;
• TOTAL assets of K32.2 billion; and,
• MORE than 16 million digital transactions per month.

BSP shares on ASX impacted

April 26, 2022The NationalBusiness

By SHIRLEY MAULUDU
THE BSP shares on Australian Securities Exchange (ASX) has shown indication of being negatively impacted by Government’s introduced additional company tax, according to the bank.
Group chief executive officer Robin Fleming said the tax was introduced and passed by Parliament as a levy last November as part of the Income Tax Act for 2022. The tax was subsequently certified on Feb 7 for gazettal.
In presenting the bank’s first quarter report for 2022 financial year, Fleming told a conference yesterday that BSP’s share price on PNGX finished 0.4 per cent higher in the trailing 52 weeks at K12.05, with average prices of K12.21 last month.
He said the ASX price reached an all-time high of AU$6 (about K14.94) after the K1.1 billion profit announcement, but fell after new tax’s confirmation.
“Dividend yields were 14.4 per cent and 13.6 per cent on the PNGX and ASX respectively.
“Large reductions in ASX share price, coincided with the new tax being advanced through the PNG legislative process.
“Larger shareholder gains following the announcement of BSP’s record K1.1 billion profit, were diminished in the sell-off following confirmation of the new tax by Parliament,” Fleming said.
“If we look at the ASX price, it’s around AU$4.95 (about K12.47). It’s been affected in terms of the reduction in share price.
“We need to understand that the share price won’t increase as much as it should have because of the company tax. We reported the first quarter report of K259 million, we should have seen the share price increase.
“But all the shareholders and investors are going to focus on the K69 million because of the company tax.
“So the share price might not go down much more but certainly, it will not increase,” Fleming told The National yesterday.
Meanwhile, Fleming explained that the tax on BSP was originally payable in three installments, but has since been changed to a single payment on Sept 30, 2022.

Bank will not reintroduce forgone fees despite levy

April 26, 2022The NationalBusiness

Robin Fleming

BANK South Pacific (BSP) Financial Group Ltd has forgone about K91 million in fees and charges but will not reinstitute them despite the added tax burden, chief executive officer Robin Fleming says.
Fleming said BSP had not increased any fees since 2014.
“BSP continues to review its fees and charges and has not increased a single fee in PNG since 2014. In total, the estimate of accumulative fees, every year since 2014, is K91 million,” he said yesterday during the presentation of the company’s first quarter report 2022.
When asked whether BSP would consider bringing back some fees to cater for the K190 million in taxes that the bank would be paying the Government, Fleming said: “We’ve made a strong commitment from day one, we are not going to increase fees.
“So we have actually put K91 million back into the hands of our customers. Even though that has not always been recognised. We are not going to increase fees and charges to recover the banking tax (additional company tax). We are not going to penalise customers on something that is outside of their control.”
Meanwhile, it was also highlighted in the report that BSP’s cost in computing has increased, as BSP continued to invest in internet technology delivery which were almost offset by lower costs in other categories.