Kina Securities : Annual Reports 2021Opens in new window

Nancy Moka, had a long and successful career in Banking in PNG, starting in 1999 in Mt Hagen and became part of the Kina team in 2019. She was a valued member of the Banking operations division. Apart from work Nancy was a Board Member of Links of Hope PNG helping children with HIV AIDS and women released from prison to settle back into their communities. Late Nancy passed away on Wednesday 31st March 2021, in Port Moresby after being sick for some time.

Hetahu Lohia was the Head of Support Services and joined Kina Bank in 2018, he was known throughout as a true gentlemen.

Solomon Kabaru joined Kina Bank in 2009 as a graduate. He was a highly regarded member of the Finance and Technology team and his last role was Chief Data Officer. The late Solo made immense contributions in the use of technology for Kina Bank, functionality we use today in our APP and online can be attributed to the late Solo. He will be greatly missed.

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In memoriam

Key Highlights.

Contents.

About Kina 5

Chairman's Message 7

Managing Director and

Chief Executive Officer's Review 11

Our Segments 15

Strategic Overview 17

Total Societal Impact 21

Board of Directors 25

Senior Executive Team 35

Remuneration Report 41

Corporate Governance 55

Directors' Report 61

Directors' Declaration 64

Independent Auditor's Report 65

Statements of Comprehensive Income 71

Statements of Financial Position 72

Statements of Changes in Equity 73

Statements of Cash Flows 74

Notes to the Financial Statements 75

Shareholder Information 131

Corporate Directory 133

Annual Report 2021

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Rogu Gabiobu 3

We're committed to the core promise of constantly improving the prosperity of the people, communities and markets we serve. We strive to be the bank that represents change - consistently challenging the status quo, not just by creating more choices, but by creating better choices.

But this purpose goes beyond creating a better banking experience. On many levels, it's also about building a better future for PNG, its people and the businesses - large and small - that are critical to the country's progress. Because at its heart, PNG's progress is our progress, with our past, present and futures intertwined as one common thread.

Together, we're rolling up our sleeves and shaping the future of PNG, with a focus on making it better every day.

That's what we mean by 'together it's possible'.

About Kina.

Our Values.

FairnessImagination

Our Strategy.

Strategic Pillars

Reflection

Honesty

Togetherness

Prosperity for our communities is Kina's DNA. Serving our communities, supporting the growth of Papua New Guinea and continually developing innovative customer-led solutions is at the core of our organisation.

Kina Securities Limited and its related entities (KSL, Kina, the Kina Group, the Group, or the Company) was established in 1985 as a diversified financial services company offering banking products, funds administration and wealth advice across Papua New Guinea (PNG).

Annual Report 2021

Kina offers customers end-to-end financial solutions from savings accounts to business loans, investments to mortgages, financial advice and investment management.

We are committed to delivering exceptional service and this is what sets us apart in the market.

Since our inception, we have grown to reaching over 650,000 people, administering 850,000 superannuation accounts for beneficiaries and have a total asset base of PGK 3.8 billion.

Kina Securities Limited has two key divisions. Kina Bank and Kina Wealth.

Kina Bank delivers home, business and corporate loans, everyday banking transactions, credit cards, merchant and payment facilities and banking services to smaller institutions.

Kina Wealth encompasses Kina Investment and Superannuation Services, Kina Funds Management and Kina Nominees servicing funds administration, wealth advice, stockbroking, funds management and nominee custodial services.

Kina's Corporate Governance Statement is available on the Company's website: investors.kinabank.com.pg/Investors/?page=corporate-governance

Growth & Prosperity

Multiple business lines providing customers with a full range of services, strong organic growth, value added services, and synergistic acquisitions.

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Chairman's Message.

Mi hamamas tru lo gutpela na strongpela wok yumi mekim lo luksave lo halivim ol sindaun na welbing blo ol pipol, ol kastoma na komuniti. Wanbel I stap wantaim yupela.

I am proud of the resilience and significant progress we have made in delivering our purpose of continually improving the prosperity of our people, our customers and our communities.

Dear Shareholders,

I am pleased to introduce Kina's Annual Report for the financial year ended 31 December 2021 (2021).

Kina Group is a resilient company. Established in 1985, Kina listed in 2015 in both Papua New Guinea (PNG) and Australia. In the years since, we have come through both challenging and profitable times. Kina's results in 2021 demonstrate the ongoing strength of the continued successful execution of our organic growth strategy that we have been implementing since 2019. Well executed by our Managing Director and Chief Executive Officer Greg Pawson and his leadership team, the success of the Kina Bank business model has contributed to our growth agenda and our desire to continually improve the prosperity of the communities we serve.

Strong results in 2021

The underlining net profit after tax has increased by 27%.

Our footings have grown to just over PGK 5 billion. Our foreign exchange (FX) income grew by 17% and we have been averaging return on equity (ROE) of above 16%.

Our Funds Administration business continued to record growth in revenue, consistent with increased funds under management. Earnings per share coming in at 24.68 toea per share, compared with 37.25 toea last year, reflect that the economies we are operating in are beginning to recover from the impacts of COVID-19.

As customers across the globe adapt to the impacts of COVID-19, a reassessment of the provisions we took in 2020 meant a slight adjustment to our provisions held and this combined with strong revenue and growing FX revenue across all markets led to a solid financial performance in 2021.

• 1 In TSi sector

• 2 As at 1 February 2022

Final dividend 2021 and capital position

In September 2021, the Company paid a dividend of PGK 8.25 toea (AUD 3.0 cents) per share in relation to the profit for the half year ended 30 June 2021. Subsequent to the balance sheet date, the directors have declared a final dividend of PGK 18.5 toea (AUD 7.0 cents) per share on underlying NPAT for the second half of 2021, making it a cumulative dividend for the full year at PGK 26.75 toea, that converts to AUD 10.0 cents. This demonstrates the Board's commitment to repatriate earnings back to the owners of our business when growth is achieved.

The simplified corporate structure and rights issue carried out in 2021 has enabled Kina's balance sheet to grow. Our total capital adequacy is 23% and this positions us well for future organic growth. In 2021, we managed our capital adequacy well in response to market conditions and we will maintain a close eye on this in 2022/23. Our shareholders would expect nothing less from a publicly listed bank.

Strategic execution continues

Publicly listed as a bank in PNG and Australia, Kina has the energy and spirit of innovation, coupled with the desire to provide customers with more choice and to deliver more value for shareholders.

During 2021, the Board, Greg and his leadership team continued to deliver on our strategic priorities to drive the growth of the business. We are now in the third year of our five-year refreshed strategic plan and our initiatives will focus on growing organically in the segments of corporate, small-to-medium sized businesses (SMEs) and home lending while we monitor opportunities in the Pan Pacific region.

Our strategy is a key contribution to our overall business objectives, however, both our organic and inorganic strategies were tested during 2021. The announcement of the separation from the proposed Westpac PNG and Westpac Fiji acquisition in September 2021 gave the Board an opportunity to review and refresh our strategic initiatives. While the proposed acquisition ultimately did not materialise due to competition concerns at a regulatory level, the Board's view is that opportunities remain. The program of work that supported this proposed acquisition has now placed Kina in a strong position to expand our product and service offerings with improvements in risk management, ICT, and digital platforms.

Growing the Kina Bank of the future

Expansion, therefore, continues to be a key focus and we will drive our growth strategy with investments when the business case is strong. We are not chasing growth for the sake of growing. Instead, we are looking for organic opportunities that make a meaningful proposition to our business and profitability, and ultimately contribute to our communities. The Board will navigate a sensible course between investigating any suitable business opportunities that arise and investing for the future while protecting our strong balance sheet in the here and now.

Priorities for 2022 and beyond include to deepen both our shareholder base and profitability, while managing market risk effectively as we continue to grow the business. We are actively expanding our shareholder base and further investing in people, local businesses and the overall contribution we make to PNG's economy.

A subdued economy in PNG

Kina enjoys the support of the local market. The economy in PNG is one of the strongest in the Pan Pacific region, although economic growth at 5.4% was somewhat subdued in 2021. Real gross domestic product (GDP) increased by 5% from -3% in 2020 to 2% in 2021. Several key mining projects were put on hold and key resources such as coffee, vanilla and sugar experienced a slowdown due to COVID impacts. Despite this backdrop, growth in our targeted segments of corporate lending and FX products supported the strong underlying growth, demonstrating Kina's expertise in the corporate market here.

Adding value for all Kina stakeholders

Kina's goals and those of its stakeholders can only be achieved through effective and successful relationships with all our stakeholders - our shareholders, customers, people, suppliers and our communities. The Board takes its governance role most seriously on our investors' behalf. As we actively seek to expand our investor base, Kina's future success will depend on attracting the best investors who share a common goodwill to our cause.

Pursuing a value creation strategy entails innovation and agility. In a rapidly evolving technological world, the development of digital assets, adding channels and value-adding products is imperative to maintain a footing in this market. The use of digital technology in PNG continues to increase rapidly, and Kina is at the forefront of this adoption as a bank with the spirit of innovation.

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Annual Report 2021

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