A big increase in the corporate tax rate applied to Papua New Guinean banks did not prevent ASX-listed Kina Bank from delivering a higher interim profit.
The bank reported first half net earnings of PGK46.3 million – up 1.7 per cent on the interim result in 2022.
The improved bottom line was driven by a surge in fee income flowing from new digital businesses and a 6 per cent reduction in total operating costs.
The bank also expanded its loan book by 10 per cent to PGK2.4 billion, predominantly through business lending.
The company’s result was undermined by a 33 per cent slide in foreign exchange trading income to PGK21.5 million.
Key players in PNG’s banking sector are under intense pressure to widen their operational footprint outside of their home market after the government increased the corporate tax rate applied to banks from 30 per cent to 45 per cent.
If the tax rate had not changed, the improvement in Kina Bank’s net profit would have equated to almost 19 per cent.
In response to the tax hike announced by the PNG Government in 2022, Kina Bank announced a freeze on previously flagged branch openings as part of a wider cost-cutting program.
Managing director Greg Pawson attributed the higher interim profit to cost management and the benefits of recent investments in digital channels.
“The NPAT outcome for the first six months of this year reflects Kina’s continued strong focus on growing revenue while prudently maintaining expenditure,” he said.
“The business has had to respond to some trying market conditions by continuing to strengthen our organic growth strategies in lending and digital channels.”
Holders of Kina Bank’s ASX-listed scrip will receive an unfranked interim dividend of 4 cents per share.
Kina Bank also announced on Wednesday that it had appointed Stone & Chalk chairman Richard Kimber as a non-executive director.
Kimber, who also sits on the board of ING Bank Australia, will take up the Kina Bank role on 1 September.
Kina’s ASX scrip closed up 1 cent to 80 cents on Wednesday.