CBA loses patience with Fiji 26 June 2009 4:29PM Sophia Rodrigues Commonwealth Bank looks set to be the first Australian financial institution to exit from Fiji after a 20 per cent currency devaluation and some harsh lending regulations made business difficult in the military-regulated country.CBA announced yesterday it was in talks with Papua New Guinea's Bank of South Pacific to sell its banking and insurance businesses in Fiji.In a statement, Commonwealth Bank said BSP has made an indicative non-binding offer and is about to commence due diligence.Just over three years back, CBA had increased its stake in Colonial National Bank to 100 per cent by buying the government's 49 per cent stake in the bank for 28 million Fijian dollars.CBA's presence in Fiji is, however, smaller than that of ANZ and Westpac.In April, the Reserve Bank of Fiji devalued the Fiji dollar by 20 per cent and asked banks to revert their weighted average lending rate to the level as at December 31, 2008. Banks were given up to December 2009 to reduce the interest rate spread to four per cent or below, and were also directed to increase lending to small businesses.The Reserve Bank also introduced exchange control measures to prevent its foreign-exchange reserves from dwindling further.Approximately 0.11 per cent of CBA's net profit came from its Fiji business in the year ended June 2008. ANZ and Westpac have a much bigger presence in Fiji with ANZ's total assets at 1.52 billion Fiji dollars, and Westpac at 1.08 billion Fiji dollars, compared with CBA's 741 million Fiji dollars.BSP is PNG's largest retail and commercial bank with 35 branches in the country and overseas. It has been operating in Fiji since December 2006 when it opened its first branch and added another branch in 2008.BSP didn't sound enthusiastic about its business in Fiji when it launched the first-ever bond sale in PNG earlier this month. "Economic conditions and a lack of liquidity in the market appear likely to inhibit strong growth in BSP's loan portfolio," the bank said.The bank had said it would issue up to 200 million kina of 10-year bonds. The issue was due to close on June 5, 2009 but the bank couldn't be reached for details on the final amount it raised.It isn't known if the fund raising was aimed at making an acquisition, with the bank indicating it will act to further strengthen its capital base and provide longer term liabilities to improve its capacity to hold long-term assets.BSP is slowly consolidating banking business in the south Pacific. In April 2007 BSP acquired National Bank of Solomon Islands, itself a victim of the weakened economic conditions that followed civil unrest in 2000.