Kina Investor Pres NEW 110319 3/11/2019 · Accordingly, the Kina Group makes no representation or warranty, express or implied, as to the a ccuracy, timeliness, completeness, merchantability,

11 March 2019

Page 1

ASX Market Announcements Office POMSoX Market Announcements Office ASX Limited Port Moresby Stock Exchange Limited 20 Bridge Street P.O Box 1531, Port Moresby SYDNEY NSW 2000 National Capital District, Papua New Guinea Dear Sir/Madam Amended FY2018 Results Investor Presentation Please find attached an amended FY2018 Results Investor Presentation correcting two minor errors in the version lodged on Friday, 8 March 2019, namely:

1. The last bullet point on page 3 incorrectly stated “Final dividend AUD 5.5c per share or PGK 13.4 Toea.” This has been corrected to read ““Final dividend AUD 5.0c per share or PGK 12.1 toea”, to be consistent with the Appendix 3A.1 lodged on 27 February 2019; and

2. In the graph on page 8 titled “Dividends per Share”, the last two columns on the right hand side have been amended from “5.5” and “13” to “5” and “12”.

Yours faithfully,

Chetan Chopra Chief Financial Officer and Company Secretary

Important notice and disclaimer

2

You must read this notice before reading or making any use of this document or any information contained in this document. By accepting this document, you agree to the following terms and conditions, including any modifications to them.Confidentiality: This Presentation and the information contained in this Presentation are provided to the recipient (the "Recipient") on a confidential basis for the sole purpose of discussions between the Recipient and representatives of the Kina Group. This Presentation may not be disclosed to any third party or used for any other purpose without the express written permission of the Kina Group.Disclaimer of liability: All information contained in this Presentation has been compiled by the Kina Group from sources believed by it to be accurate and reliable. The information in this Presentation was prepared as of its date, and remains subject to change without notice. The Recipient acknowledges that to the maximum extent permitted by law: (1) any and all liability in respect of the information contained in this Presentation is expressly excluded, including any liability arising from fault or negligence on the part of any person, for any direct, indirect, consequential or contingent loss or damage suffered by any person arising from the use of the information or otherwise arising in connection with it; (2) no responsibility is accepted by the Kina Group for this Presentation, any of the information, any omission from this document or any action taken by the Recipient or any other person on the basis of the information; and (3) the Kina Group is not liable to compensate or reimburse the Recipient for any liabilities, costs or expenses incurred in reviewing, investigating or analysing this document or taking any other action in relation to the Kina Group or any prospective transaction.Not an invitation, advertisement or offer of securities: This Presentation is not, and should not be considered as, an invitation, advice or recommendation to apply for securities and does not contain any application form for securities. This Presentation does not constitute an advertisement for an offer to sell or the solicitation of an offer to buy securities. This Presentation is not a disclosure document (as defined in the Australian Corporations Act) or a prospectus (as defined in the Papua New Guinea Securities Act). The provision of this Presentation is not a representation to you or any other person that an offer of securities will be made. Any offer of securities or prospective transaction would be undertaken solely on the basis of a prospectus or other disclosure document prepared in accordance with the applicable securities laws and regulations. Not financial product advice: The information contained in this Presentation is not, and should not be considered as, financial product advice, investment advice, legal advice, tax advice or other advice. The information does not take into account any Recipient's individual objectives, taxation position, financial situation or needs. Before acting on the information in this Presentation, Recipients should consider the appropriateness of it having regard to their particular circumstances and, if appropriate, seek professional advice, including tax advice.No representations or warranties: None of the information set out in this Presentation or otherwise provided to a Recipient in connection with this Presentation has been independently verified. Accordingly, the Kina Group makes no representation or warranty, express or implied, as to the accuracy, timeliness, completeness, merchantability, or fitness for any particular purpose of any such information. In respect of all information provided, the Recipient will rely entirely upon its own assessment, independent analysis and advice in relation to the business, assets and financial position and affairs of Kina Securities Limited.Forecasts: This Presentation may contain various plans, costs projections, estimates, forecasts and other forward looking statements ("Forecasts") which involve subjective judgments. Past performance is not a guarantee of future performance or future returns and a loss of original capital may occur. Fluctuations in exchange rates could have an adverse effect on the value or price of, or income derived from, certain investments. No representation, warranty or guarantee, whether express or implied, is made or given by the Kina Group as to the accuracy, completeness, likelihood of achievement or reasonableness of any Forecast.Conflicts: The Kina Group, its Directors, officers, employees or agents may own shares in Kina Securities Limited. By accepting this Presentation, you acknowledge and agree that none of the Kina Group, its Directors, officers, employees or agents are responsible to you in a fiduciary capacity nor is your access to the Presentation or the information evidence of any fiduciary relationship between you, another Recipient or the Kina Group, its Directors, officers, employees or agents individually or at all.

Financial Results

3

• Revenue PGK 162m, up 45% from 2017

• Net Interest Income grew by 21%

• NPAT PGK 48.1, up 109% on 2017

• Return on Equity up from 8.9% to 18.3%

• Earnings per Share up 109% to PGK 29.3 toea

• Final Dividend AUD 5.0 cents per share or PGK 12.1 toea

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Oval

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Oval

Cost Management

4

• Reduction in cost to income ratio from 58% to 54% achieved largely

through higher revenue growth and strong cost containment in H218.

• Tight management of discretionary expenses

• Capex and Integration Capex budget tightly controlled and Board risk

appetite for no more than 10% of total costs in amortization

• Forecast stable, working through potential synergies with ANZ

• Productivity – front to back office ratio moving to 70/30 as opposed to

40/60 today

Business Growth

5

• FX income restored and grew 373% to PGK 34.2m

• Customer numbers up by 25% to 20,625

• Deposits grew by 29% to PGK 1.31b

• Loans and Advances to customers grew by 20% to PGK 851.7m

• Funds under Management grew by PGK 600m to PGK 7.5b

• Funds under Administration grew to PGK 11.7b

Risk Management

6

• Capital adequacy maintained at 28.9%

• Sound loan book – compliant with IFRS9 – total provision 2.1% of GLA

• Arrears 2.2% & Loan Impairment expense 0.58% of GLA

• Strategic partnership proposed for provision of Microfinance

• NIM (annualized) 7.6%

• New lending Kina Bank Facility Rate (KBFR) to enable quick response to competitive actions and market liquidity

Strategic Milestones

7

• Announced transformational acquisition of ANZ PNG’s retail, SME and Commercial businesses

• Successfully onboarding of NASFUND funds administration –total members 750,000

• Resolution of escrow shareholding – FU Shan Investments (Hong Kong) Ltd ceased to be a substantial shareholder (34.94%) in June 2018

• Strengthened correspondent banking arrangements

• Significant ICT digital enhancements and capability build

• Won the Most Innovation Financial Services Company Award for 2018 by PNG Institute of Company Directors

47 43 42

38 33

27

13 9 10 10 9 9

20 14

5 2 8

13 18

22 18

14 14 18

Dec18 (HY) Jun18 (HY) Dec17 (HY) Jun17 (HY) Dec16 (HY) Jun16 (HY)

Interest on Loans Interest on Investments

Foreign Exchange Income Others

Strong Growth

8

4 4

2

4 4 5

10 10

5

10 10

12

Jun16 (HY)Dec16 (HY) Jun17 (HY)Dec17 (HY) Jun18 (HY)Dec18 (HY)

Dividends per share (A cents) Dividend per share (PGK toea)

Dividends per ShareEarnings per share

NPAT (PGK’m)Revenue (PGK’m)

20.5 20.5

3.0

20.0 20.6

27.5

Jun16 (HY) Dec16(HY)



13 13

2

12 13

17

5 5

1

5 5 7

Jun16 (HY) Dec16 (HY) Jun17 (HY) Dec17 (HY) Jun18 (HY) Dec18 (HY)

Earnings per share (PNG Toea) Earnings per share (A cents)

mackeph

Oval

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Oval

Improved Productivity

9

FX income

48.3% 46.7%

67.8%

54.9% 58.2%50.2%

Jun16(HY)

Dec16(HY)

Jun17(HY)

Dec17(HY)

Jun18(HY)

Dec18(HY)

NIM

Return on equityCost to income16.2% 15.9%

8.0% 8.9%

16.1%18.3%


K34

m

K34

m K39

m

K42

m

K46

m8.3%

7.3%

7.6%8.1%

7.6%

Dec16 (FY) Jun17 (HY) Dec17 (FY) Jun18 (HY) Dec18 (HY)

Net interest income Net interest margin (%)

13

8

2

5

14

20




PG

K'm

Overdraft10%

Term Loans65%

Investment Property

Loan

Asset Financing2%

Housing Loan16%

Esi

Overdraft

Term Loans69%

Investment Property Loan3%

Asset Financing3%

Housing Loan15%

Esi loan

Balance sheet in good shape

10

Deposits 18 (K1316m)Deposits 17 (K1019m)

Loans 18 (K852m)Loans 17 (K732m)

On Call41%

1 month11%2 months

9%

3 months5%

6 months22%

12 months9%

24 months3%

On Call58%

1 month8%

2 months7%

3 months5%

6 months15%

12 months7%

24 months0%

Capital management

11

30% 30%28% 28% 29% 29%

12% 12% 12% 12% 12% 12%

Jun16 (HY) Dec16 (FY) Jun17 (HY) Dec17 (FY) Jun18 (HY) Dec18 (FY)

Capital Adequacy: T1 + T2 BPNG minimum total risk based capital

13%14%

16% 16%17%

14%

6% 6% 6% 6% 6% 6%

Jun16 (HY) Dec16 (FY) Jun17 (HY) Dec17 (FY) Jun18 (HY) Dec18 (FY)

Leverage Ratio BPNG minimum leverage ratio

Capital adequacy Leverage ratio

Asset quality maintained with growth

12

Structure of loan book

0.6%

5.4%

2.3%

1.8%

1.3%

3.0%

0.5%

5.7%

4.9%

0.5%

0.3%

1.9%

0.2%

4.2%

2.7%

1.1%

0.4%

1.8%

0.4%

3.3%

1.8%

1.4%

0.2%

1.8%

0.5%

2.1%

0.2%

1.0%

0.8%

2.4%

0.6%

2.2%

0.1%

0.6%

1.4%

2.1%

Loan impairment expense Non-performing loans andloans in arrears

- 60 day arrears - 90 day arrears - Gross non-performingloans (> 180 days)

Total provision

Jun16 HY Dec16 HY Jun17 HY Dec17 HY Jun18 HY Dec18 HY

16 21 12

- - 4 15

3 4 - - 1

31

50

73

154 147

155

4

81 84

27

6 5 -6

15

133

182

249

- 2 1

36 40

22

200 208

247

Dec-16 Dec-17 Dec-18

Agriculture, Forestry & Fishing Min ing Manufacturing Electrical, Gas & Water

Building and Construction Wholesale & Retail Hotel & Restaurants Transport & Storage

Financial Intermediation Real Estate/Renting/Business Services Equipment Hire Other Business

Personal Banking

Concentration risk well managed

13

New growth with digital strategy

14

Customer Number Growth

1234013346

15101

17271

18442

20,625


Market share gains

15

Market share percentage – Lending (PGK’m)

437

605

685

732

786

852

3.5%

4.7%

5.5%5.8% 6.0%

6.4%

Jun 16 (HY) Dec 16 (FY) Jun 17 (HY) Dec 17 (FY) Jun 18 (HY) Dec 18 (FY)

Total System lending {Source BPNG}Kina Loan BookKina Lending Market Share

634

959

965

1,01

9

1,09

8

1,31

6

3.0%

4.4% 4.5%4.8%

5.3%

6.5%

Jun 16 (HY) Dec 16 (FY) Jun 17 (HY) Dec 17 (FY) Jun 18 (HY) Dec 18 (FY)

Total system deposit {Source BPNG}Kina Deposit BookKina Deposit Market Share

Market share percentage – Deposits (PGK’m)

286

562585

602

661 650

0 0

6093 103

251

323

372

302 298316

396

25 24 18 21 18 19


Fixed Term Cash Management Accounts Current Accounts Savings Accounts

Rebalancing deposits to low cost funds (PGK’m)

16

Wealth management – stable performance

17

Funds under Administration (PGK’b)Member numbers in ‘000s

5.14 5.61

6.22

10.51 11.38 11.72

166 170 177

708 717 750




Total Members

5.83 6.26 6.60

6.97 7.14 7.46


Funds under Management (PGK’b)

PNG Update - Economy

18

• Challenging year due to the tight supply of foreign exchange and lower economic activity – FX markets will normalise

• Successful issue of PNG’s first sovereign bond raising US$500million

• Exchange rate forecast will be flat and stable

• Stable Growth in 2019 – World Bank forecast at 5% –Kina estimates 3%

• Key large resource projects progressing – PNGLNG, Papua LNG, Wafi Golpu, Coral Sea submarine cable –projects estimated at USD 20b investment

• Strong and stable government since 2017 delivering a clear, focused public agenda

PNG Update – APEC 2018

19

• Successful event had a positive impact

• Several billion dollar partnerships announced including:

- Trilateral partnership between Australia, USA and Japan for infrastructure development across the Indo-Pacific region

- US$1.7bn partnership between Australia, USA, Japan and New Zealand to bring power to 70% of the population by 2030

- Signed an MOU with Total for Papua LNG project, estimated to cost $13bn

- PNG-USA-Australia joint agreement on development of the Manus Island naval base

2019 Priorities: a transformational year ahead

20

• Overall ANZ Integration Program is progressing well and on target for 30 Sep 2019

• Formal Regulatory approval from BPNG now to hand

• Significant internal digital transformation automating systems and processes

• Implementation of new payments switch completed Feb, 2019. POS and ATM network UAT commenced

• Key Priorities are Technology Build; Operations build out; and Change Management

• IFC and ADB providing specialist technical and project assistance

• Announced partnerships with Visa and China Union Pay accelerating ambition to accept all domestic and international cards

• Objective to achieve a seamless staff and customer experience

Continue to build momentum against organic growth plan

21

• New personal banking division – focus on new customer growth and conversion to lead bank

• Targeting home lending for high growth in 2019

• Forecasting above 20% growth for business lending

• Expanding Treasury, FX and Corporate Cash team

• Innovation for FUM and FUA – potential capital markets, and development/ growth of mass affluent customer segment

• More advisory based business model for Business Banking as partners aligned to wealth –cross sell into full banking customer

• New pricing methodology being deployed to protect NIM

• Commencing early transition of some ANZ PNG functions pre-settlement.

Kina Investor Pres NEW 110319 3/11/2019 · Accordingly, the Kina Group makes no representation or warranty, express or implied, as to the a ccuracy, timeliness, completeness, merchantability,

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