Q2 2026 Kina Securities Ltd Earnings Call
Speaker #2: Thank you for standing by, and welcome to the Kina Securities Ltd (KSL) Half Year Results ending 30 June 2026. All participants are on listen-only mode.
Operator: Thank you for standing by and welcome to the Kina Securities Limited KSL H1 results ending 30 June 2026. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Ivan Vidovich, Managing Director and Chief Executive Officer. Please go ahead.
Operator: Thank you for standing by and welcome to the Kina Securities Limited KSL H1 results ending 30 June 2026. All participants are in listen-only mode. There will be a presentation followed by a question and answer session. If you would like to ask a question, you will need to press the star key followed by the number one on your telephone keypad. I would now like to hand the conference over to Mr. Ivan Vidovich, Managing Director and Chief Executive Officer. Please go ahead.
Speaker #2: There will be a presentation, followed by a question-and-answer session. If you would like to ask a question, you will need to press the star key, followed by the number 1 on your telephone keypad.
Speaker #2: I would now like to hand the conference over to Mr. Revan Vidovic, Managing Director and Chief Executive Officer. Please go ahead.
Speaker #3: Thank you. Good morning, everyone, and thank you for dialing in to today's briefing on Kina Securities Ltd Half Year Results for the six months to June 30, 2026.
Ivan Vidovich: Thank you. Good morning, everyone, and thank you for dialing in to today's briefing on Kina Securities Limited H1 results to the six months to 30 June 2026. My name is Ivan Vidovich, CEO and Managing Director of Kina Securities Limited. Before we begin, I will draw your attention to the disclaimer on slide 2, which notes that this presentation contains forward-looking statements and is not financial product advice.
Ivan Vidovich: Thank you. Good morning, everyone, and thank you for dialing in to today's briefing on Kina Securities Limited H1 results to the six months to 30 June 2026. My name is Ivan Vidovich, CEO and Managing Director of Kina Securities Limited. Before we begin, I will draw your attention to the disclaimer on slide 2, which notes that this presentation contains forward-looking statements and is not financial product advice.
Speaker #3: My name is Ivan Vidovic, CEO and Managing Director of Kina Securities Ltd. Before we begin, I'll draw your attention to the disclaimer on slide 2, which notes that this presentation contains forward-looking statements and is not financial product advice.
Speaker #3: I'd encourage you to read it in full, alongside today's ASX and PGX announcements. I'm joined today by our Chief Financial Officer, Taiwo Fawawi, who will take you through our financial performance in more detail shortly.
Ivan Vidovich: I would encourage you to read it in full alongside today's ASX and PNGX announcement. I am joined today by our Chief Financial Officer, Taiwo Faloye, who will take you through our financial performance in more detail shortly. Taiwo joined Kina as CFO earlier this year, bringing deep experience in finance, capital management, and governance from international banking markets. This is his first H1 results briefing with us, and we will both be available for questions at the end. Turning to slide 4.
Ivan Vidovich: I would encourage you to read it in full alongside today's ASX and PNGX announcement. I am joined today by our Chief Financial Officer, Taiwo Faloye, who will take you through our financial performance in more detail shortly. Taiwo joined Kina as CFO earlier this year, bringing deep experience in finance, capital management, and governance from international banking markets. This is his first H1 results briefing with us, and we will both be available for questions at the end. Turning to slide 4.
Speaker #3: Taiwo joined Kina as CFO earlier this year, bringing deep experience in finance, capital management, and governance from international banking markets. This is his first half-year results briefing with us, and we'll both be available for questions at the end.
Speaker #3: Turning to slide 4, before we move on to our results, I want to briefly set the economic scene, as it's relevant to how we'd like you to interpret this half and the catalyst for Kina Securities' economic growth.
Ivan Vidovich: Before turning to our results, I want to briefly set the economic scene because it is relevant to how we would like you to read this half and the catalysts for PNG's economic growth. The standout development during the period was progress on Papua LNG. The state-led development forum opened in July, and project capital costs have been cut from around $18 billion to roughly $14 billion, materially improving the project's commercial viability. Final investment decision, or FID, remains targeted for Q4 of this year, with 15 December set by the Minister for Petroleum as the current deadline. While there remains the potential for this to be extended to around April 2027, this would still be comfortably ahead of the 2027 national election.
Ivan Vidovich: Before turning to our results, I want to briefly set the economic scene because it is relevant to how we would like you to read this half and the catalysts for PNG's economic growth. The standout development during the period was progress on Papua LNG. The state-led development forum opened in July, and project capital costs have been cut from around $18 billion to roughly $14 billion, materially improving the project's commercial viability. Final investment decision, or FID, remains targeted for Q4 of this year, with 15 December set by the Minister for Petroleum as the current deadline. While there remains the potential for this to be extended to around April 2027, this would still be comfortably ahead of the 2027 national election.
Speaker #3: The standout development during the period was progress on Papua LNG. The state-led development forum opened in July, and project capital costs have been cut from around $18 billion to roughly $14 billion, materially improving the project's commercial viability.
Speaker #3: Final investment decision, or FID, remains targeted for the fourth quarter of this year, with December 15 set by the Minister for Petroleum as the current deadline.
Speaker #3: While there remains the potential for this to be extended to around April 2027, this would still be comfortably ahead of the 2027 national election.
Speaker #3: We continue to see FID as the single biggest trigger point for a step change in P&G's medium-term growth trajectory, and we're watching it very closely.
Ivan Vidovich: We continue to see FID as the single biggest trigger point for a step change in PNG's medium-term growth trajectory, and we are watching it very closely. On the domestic front, government has moved to cushion the economy from imported inflation with a PGK 1 billion fuel stabilization package holding pump prices at March levels. Around PGK 630 million has been disbursed by mid-year. The Bank of Papua New Guinea has revised its 2026 CPI forecast up to 4.3%, and we are watching El Niño-related dry conditions as a downside risk to mining export volumes at Ok Tedi and Porgera heading into the Q4. On currency, the crawl-like arrangement for the kina remains the nominal anchor, with further gradual managed appreciation expected against the US dollar and the PGK/AUD cross continuing to track AUD/USD movements. On the currency, we are watching for signs of a turning point in the crawl.
Ivan Vidovich: We continue to see FID as the single biggest trigger point for a step change in PNG's medium-term growth trajectory, and we are watching it very closely. On the domestic front, government has moved to cushion the economy from imported inflation with a PGK 1 billion fuel stabilization package holding pump prices at March levels. Around PGK 630 million has been disbursed by mid-year. The Bank of Papua New Guinea has revised its 2026 CPI forecast up to 4.3%, and we are watching El Niño-related dry conditions as a downside risk to mining export volumes at Ok Tedi and Porgera heading into the Q4. On currency, the crawl-like arrangement for the kina remains the nominal anchor, with further gradual managed appreciation expected against the US dollar and the PGK/AUD cross continuing to track AUD/USD movements. On the currency, we are watching for signs of a turning point in the crawl.
Speaker #3: On the domestic front, the government has moved to cushion the economy from imported inflation with a 1 billion Kina fuel stabilization package, holding pump prices at March levels.
Speaker #3: Around 630 million Kina has been disbursed by mid-year. The Bank of Papua New Guinea has revised its 2026 CPI forecast up to 4.3%, and we're watching El Niño-related dry conditions as a downside risk to mining export volumes at Ok Tedi and Porgera heading into the fourth quarter.
Speaker #3: On currency, the crawl-like arrangement for the Kina remains the nominal anchor, with further gradual managed depreciation expected against the US dollar, and the PGK/AUD cross continuing to track AUD/USD movements.
Speaker #3: On the currency, we're watching for signs of a turning point in the crawl. The Bank of PNG Monetary Policy Committee settings have held steady through 2026, with the next review due in September.
Ivan Vidovich: The Bank of PNG Monetary Policy Committee settings have held steady through 2026, with the next review due in September. Beyond the near term, we expect the combination of Papua LNG-related investment inflows and a more balanced trade position to be the catalyst for a shift in the kina's trajectory. With that backdrop, let's turn to our results for the H1 on slide 6. Firstly, I would like to be upfront. These results show weaker growth than what we have delivered in recent halves. That said, they also show the resilience of our business. Statutory NPAT grew 4% to PGK 59.7 million, revenue grew 2% to PGK 254.8 million, and earnings per share grew 1% to 20.3 toea.
Ivan Vidovich: The Bank of PNG Monetary Policy Committee settings have held steady through 2026, with the next review due in September. Beyond the near term, we expect the combination of Papua LNG-related investment inflows and a more balanced trade position to be the catalyst for a shift in the kina's trajectory. With that backdrop, let's turn to our results for the H1 on slide 6. Firstly, I would like to be upfront. These results show weaker growth than what we have delivered in recent halves. That said, they also show the resilience of our business. Statutory NPAT grew 4% to PGK 59.7 million, revenue grew 2% to PGK 254.8 million, and earnings per share grew 1% to 20.3 toea.
Speaker #3: And beyond the near term, we'd expect the combination of Papua LNG-related investment inflows and a more balanced trade position to be the catalyst for a shift in the Kina's trajectory.
Speaker #3: With that backdrop, let's turn to our results for the first half. On slide 6, firstly, I'd like to be upfront: these results show weaker growth than what we've delivered in recent halves.
Speaker #3: That said, they also show the resilience of our business. Statutory NPAT grew 4% to 59.7 million kina, revenue grew 2% to 254.8 million kina, and earnings per share grew 1% to 20.3 toea.
Speaker #3: Net interest margin eased 10 basis points to 5.8%. Return on equity was 16.6%, 50 basis points lower, and a lower cost of credit risk at 0.2%, down 10 basis points, which speaks to the quality of our book.
Ivan Vidovich: Net interest margin eased 10 basis points to 5.8%, return on equity was 16.6%, 50 basis points lower, and a lower cost of credit risk at 0.2%, down 10 basis points, which speaks to the quality of our book. Against that, our capital position has strengthened materially with capital adequacy up 870 basis points to 26%, and the board has increased the interim dividend 13% in kina terms to 14.2 toea, holding flat in Australian dollar terms at AUD 4.5 cents. I will come back to why growth was softer this half, and also why we remain confident in the outlook.
Ivan Vidovich: Net interest margin eased 10 basis points to 5.8%, return on equity was 16.6%, 50 basis points lower, and a lower cost of credit risk at 0.2%, down 10 basis points, which speaks to the quality of our book. Against that, our capital position has strengthened materially with capital adequacy up 870 basis points to 26%, and the board has increased the interim dividend 13% in kina terms to 14.2 toea, holding flat in Australian dollar terms at AUD 4.5 cents. I will come back to why growth was softer this half, and also why we remain confident in the outlook.
Speaker #3: Against that, our capital position has strengthened materially, with capital adequacy up 870 basis points to 26%, and the board has increased the interim dividend 13% in Kina terms to 14.2 toea, holding flat in Australian dollar terms at 4.5 cents.
Speaker #3: I'll come back to why growth was softer this half and also why we remain confident in the outlook. But I want to also note that this result is consistent with the guidance update we provided to the market in July, and that the factors behind it are a combination of headwinds we've previously advised to the market—factors external to Kina Bank or deliberate decisions we made in the interests of the quality of our balance sheet.
Ivan Vidovich: I want to also note that this result is consistent with the guidance update we provided to the market in July, and that the factors behind it are a combination of headwinds we previously advised to the market, factors external to Kina Bank, or deliberate decisions we made in the interests of the quality of our balance sheet. On market share, we held our lending market share steady at 16.9% year on year. Our deposit market share declined to 10.9%, which reflects a deliberate decision to run off higher cost fixed deposits and cash management account balances as we optimize our funding costs and our margins. That's a choice we have made, not a competitive loss. Separately, industry-wide deposit growth over the period was largely driven by increased government deposits, which is unrelated to KSL's strategy or performance.
Ivan Vidovich: I want to also note that this result is consistent with the guidance update we provided to the market in July, and that the factors behind it are a combination of headwinds we previously advised to the market, factors external to Kina Bank, or deliberate decisions we made in the interests of the quality of our balance sheet. On market share, we held our lending market share steady at 16.9% year on year. Our deposit market share declined to 10.9%, which reflects a deliberate decision to run off higher cost fixed deposits and cash management account balances as we optimize our funding costs and our margins. That's a choice we have made, not a competitive loss. Separately, industry-wide deposit growth over the period was largely driven by increased government deposits, which is unrelated to KSL's strategy or performance.
Speaker #3: On market share, we held our lending market share steady at 16.9% year on year. Our deposit market share declined to 10.9%, which reflects a deliberate decision to run off higher-cost fixed deposits and cash management account balances as we optimize our funding mix.
Speaker #3: How our funding costs and our margins—that's a choice we've made, not a competitive loss. Separately, industry-wide deposit growth over the period was largely driven by increased government deposits, which is unrelated to KSL's strategy or performance.
Speaker #3: On shareholder returns, our one-year total shareholder return was 10%, and over three and five years, 117% and 72%, respectively. The interim dividend is up 13% in Kina terms, the third consecutive half of PGK dividend growth, and though the AUD equivalent has held flat at 4.5 cents, this reflects the impact of the Kina depreciation against the Australian dollar.
Ivan Vidovich: On shareholder returns, our one-year total shareholder return was 10%, and over three and five years, 117% and 72%, respectively. The interim dividend is up 13% in kina terms, the third consecutive half of PGK dividend growth. The AUD equivalent has held flat at 4.5 cents, reflecting the impact of the kina depreciation against the Australian dollar. I will now hand over to Taiwo, who will take you through the detail behind these numbers across the next couple of slides. Thanks, Taiwo.
Ivan Vidovich: On shareholder returns, our one-year total shareholder return was 10%, and over three and five years, 117% and 72%, respectively. The interim dividend is up 13% in kina terms, the third consecutive half of PGK dividend growth. The AUD equivalent has held flat at 4.5 cents, reflecting the impact of the kina depreciation against the Australian dollar. I will now hand over to Taiwo, who will take you through the detail behind these numbers across the next couple of slides. Thanks, Taiwo.
Speaker #3: I'll now hand over to Taiwo, who will take you through the details behind these numbers across the next couple of slides. Thank you, Taiwo.
Speaker #2: Thank you, Yvonne. Good morning, everyone. Turning to slide 9, our Q2 revenue drivers this half were increasing common goals, which was up 12%, and wealth income, up 11%.
Taiwo Faloye: Thank you, Ivan. Good morning, everyone. Turning to slide 9, our key revenue drivers this half were interest income on loans, which was up 12%, and wealth income up 11%. Digital income and underlying foreign exchange income were broadly stable year on year. I will walk you through each of these over the next few slides. On slide 10, our loan book grew by 2% against prior corresponding period. That modest growth reflects a deliberate choice. We optimized the balance sheets during the half, including the targeted exit of some banking exposures, where we assessed the risk return loans are at our threshold. Excluding those strategic actions, underlying growth in the loan book would have been 7% against prior corresponding period. We remain confident in the strength of our lending pipeline heading into the H2.
Taiwo Fowowe: Thank you, Ivan. Good morning, everyone. Turning to slide 9, our key revenue drivers this half were interest income on loans, which was up 12%, and wealth income up 11%. Digital income and underlying foreign exchange income were broadly stable year on year. I will walk you through each of these over the next few slides. On slide 10, our loan book grew by 2% against prior corresponding period. That modest growth reflects a deliberate choice. We optimized the balance sheets during the half, including the targeted exit of some banking exposures, where we assessed the risk return loans are at our threshold. Excluding those strategic actions, underlying growth in the loan book would have been 7% against prior corresponding period. We remain confident in the strength of our lending pipeline heading into the H2.
Speaker #2: Digital income and underlying foreign exchange income were broadly stable year-on-year. I'll walk you through each of these over the next few slides.
Speaker #2: On slide 10, our loan book grew by 2% against the prior corresponding period. That modest growth reflects a deliberate choice: we optimized the balance sheet during the half, including a targeted exit of some debt exposures.
Speaker #2: Where we assessed the risk-return loan that met our threshold, and through those strategic actions, underlying growth in the loan book would have been 7% against the prior corresponding period.
Speaker #2: We remained confident in the strength of our lending pipeline heading into the second half. On slide 11, net interest margin eased nominally by 10 basis points to 5.8%, compared to June, which was 5.9%.
Taiwo Faloye: On slide 11, net interest margin is nominally by 10 basis points to 5.8% compared to June 2025. Our investment spread compressed to 4.4%, reflecting declining yields on government securities, in line with what we forecast at the 2025 full year results announcement. Our loan spread improved slightly to 6.5%. The net interest income gain was partially offset by a planned increase in our cost of funds associated with a new corporate bond, which I will come back to when we discuss capital. On slide 12, foreign exchange revenue was PGK 48.3 million, down 5% on the H1 2025. That includes a one-off PGK 2.4 million FX loss on the 2025 final dividend payment made in April this year. Adjusting for this one-off loss, FX revenue would have been flat year on year.
Taiwo Fowowe: On slide 11, net interest margin is nominally by 10 basis points to 5.8% compared to June 2025. Our investment spread compressed to 4.4%, reflecting declining yields on government securities, in line with what we forecast at the 2025 full year results announcement. Our loan spread improved slightly to 6.5%. The net interest income gain was partially offset by a planned increase in our cost of funds associated with a new corporate bond, which I will come back to when we discuss capital. On slide 12, foreign exchange revenue was PGK 48.3 million, down 5% on the H1 2025. That includes a one-off PGK 2.4 million FX loss on the 2025 final dividend payment made in April this year. Adjusting for this one-off loss, FX revenue would have been flat year on year.
Speaker #2: Our investment spread compressed to 4.4%, reflecting declining use on government securities, to align with what we forecast at the 2025 full-year results announcement. Our loan spread improved slightly to 6.5%.
Speaker #2: The net interest income gain was passively offset by a planned increase in our cost of funds, associated with a new corporate bond, which I'll come back to when we discuss capital.
Speaker #2: On slide 12, foreign exchange revenue was 48.3 million Kina, down 5% on the fourth half of 2025. That includes a one-off 2.4 million Kina FX loss on the 2025 final dividend payment made in April this year.
Speaker #2: Adjusting for this one-off loss, FX revenue would have been flat year on year. Though FX revenue was flat, the underlying FX activity actually improved, with increased interbank market activity driving higher volumes that largely offset margin compression.
Taiwo Faloye: FX revenue was flat, the underlying FX activity actually improved, with increase in interbank market activity driving higher volumes that largely offset margin compression. We had previously advised the market to expect this. We see improved FX condition for revenue growth in the H2 of the year. Digital revenue growth was constrained due to an issue entirely outside our control, but we have been very active in managing this. An interoperability problem which affected a major PNG bank's newly issued debit cards disrupted our payment acquiring business across EFTPOS, e-commerce, and ATMs. This was an industry-wide issue rather than one specific to Kina Bank. We are working closely with stakeholders in the market on planned system upgrades and expect the issue to be resolved before end of H2.
Taiwo Fowowe: FX revenue was flat, the underlying FX activity actually improved, with increase in interbank market activity driving higher volumes that largely offset margin compression. We had previously advised the market to expect this. We see improved FX condition for revenue growth in the H2 of the year. Digital revenue growth was constrained due to an issue entirely outside our control, but we have been very active in managing this. An interoperability problem which affected a major PNG bank's newly issued debit cards disrupted our payment acquiring business across EFTPOS, e-commerce, and ATMs. This was an industry-wide issue rather than one specific to Kina Bank. We are working closely with stakeholders in the market on planned system upgrades and expect the issue to be resolved before end of H2.
Speaker #2: We had previously advised the market to expense it. We see improved FX conditions for revenue growth in the second half of the year. Digital revenue growth was constrained due to an issue entirely outside our control, but we have been very active in managing this.
Speaker #2: An interoperability problem, which affected a major P&G bank's newly issued debit cards, disrupted our payments business across FPOS, e-commerce, and ATMs. This was an industry-wide issue rather than one specific to Kina Bank.
Speaker #2: We are working closely with stakeholders in the market on planned system upgrades, and expect the issue to be resolved before the end of the second half.
Speaker #2: In relation to this matter, Kina has taken a strong leadership position in engaging with relevant regulatory authorities, while actively advocating for developments that promote greater competition and customer choice as the market expands and as more properly new unions enter the formal banking system.
Taiwo Faloye: In relation to this matter, Kina has taken a strong leadership position in engaging with relevant regulatory authorities while actively advocating for developments that promote greater competition, customer choice as the market expands, and as more Papua New Guineans enter the formal banking system. On slide 13, our wealth business remains a bright spot. Funds under administration grew 15% to PGK 25.1 billion, driven by continued growth in superannuation membership. We also saw strong growth in funds under management, which rose 16% to PGK 14.4 billion. Turning to costs on slide 14, operating costs rose 7% to PGK 159.6 million. For more context, around 30% of our cost base is exposed to the kina depreciation against the USD and the Australian dollar. The effect of that, combined with inflation and continued investment in organizational capabilities, including our digitalization program, drove the modest increase. Headcount remained stable.
Taiwo Fowowe: In relation to this matter, Kina has taken a strong leadership position in engaging with relevant regulatory authorities while actively advocating for developments that promote greater competition, customer choice as the market expands, and as more Papua New Guineans enter the formal banking system. On slide 13, our wealth business remains a bright spot. Funds under administration grew 15% to PGK 25.1 billion, driven by continued growth in superannuation membership. We also saw strong growth in funds under management, which rose 16% to PGK 14.4 billion. Turning to costs on slide 14, operating costs rose 7% to PGK 159.6 million. For more context, around 30% of our cost base is exposed to the kina depreciation against the USD and the Australian dollar. The effect of that, combined with inflation and continued investment in organizational capabilities, including our digitalization program, drove the modest increase. Headcount remained stable.
Speaker #2: On slide 13, our wealth business remains a bright spot. Funds under administration grew 15% to K25.1 billion, driven by continued growth in superannuation membership.
Speaker #2: We also saw strong growth in funds under management, which rose 16% to K14.4 billion. Turning to costs on slide 14, operating costs rose 7% to K159.6 million.
Speaker #2: For more context, around 30% of our cost base is closely tied to the Kina depreciation against the US and Australian dollars. The effect of that, combined with inflation and continued investment in organizational capabilities—including our digitization program—drove the modest increase.
Speaker #2: Headcount remained stable. The rights and staff costs reflect a 4% global CPI adjustment and the FX translation impact on AUD-denominated salaries. This half, the cost-to-income ratio rose to 62.6%.
Taiwo Faloye: The rise in staff costs reflects a 4% local CPI adjustment and the FX translation impact on AUD-denominated salaries. This H1, cost-to-income ratio rose to 62.6%. Improving this ratio through efficiency, digitalization, and organic growth remains a clear medium-term objective for the group. We have made good early progress in initiative execution during the H1 of our 2030 strategy, which Ivan will provide an update on shortly. On asset quality, which is on slide 15, provision coverage strengthened to 2.6% of gross loans, up from 2.1% a year ago. This is a prudent position. I want to spend some time on this to explain a technical point because the headline ratio has moved, and I don't want it to be misread. Following our application of IFRS 9 methodology of suspended interest on credit-impaired loans from December 2025, our NPL reporting now includes suspended interest balances.
Taiwo Fowowe: The rise in staff costs reflects a 4% local CPI adjustment and the FX translation impact on AUD-denominated salaries. This H1, cost-to-income ratio rose to 62.6%. Improving this ratio through efficiency, digitalization, and organic growth remains a clear medium-term objective for the group. We have made good early progress in initiative execution during the H1 of our 2030 strategy, which Ivan will provide an update on shortly. On asset quality, which is on slide 15, provision coverage strengthened to 2.6% of gross loans, up from 2.1% a year ago. This is a prudent position. I want to spend some time on this to explain a technical point because the headline ratio has moved, and I don't want it to be misread. Following our application of IFRS 9 methodology of suspended interest on credit-impaired loans from December 2025, our NPL reporting now includes suspended interest balances.
Speaker #2: Improving this ratio through efficiency, digitization, and organic growth remains a clear medium-term objective for the group. We have made good early progress in initiative execution during the first half of our 2030 strategy, which Yvonne will provide an update on shortly.
Speaker #2: On asset quality, which is on slide 15, provision coverage strengthened to 2.6% of gross loans, up from 2.1% a year ago. This is a prudent position.
Speaker #2: I want to spend some time on this to explain a technical point, because a headline ratio has moved, and I don't want it to be misread.
Speaker #2: Following our application of the IFRS 9 methodology for suspended interest on credit and FED loans from December 2025, our NPL reporting now includes suspended interest balances.
Speaker #2: On a comparable basis, this lifts the December 2025 NPL ratio from 7.7%, as previously reported, to 8.7%. And on the same basis, the June 2026 ratio is 8.9%.
Taiwo Faloye: On a comparable basis, this lifts the December 2025 NPL ratio from 7.7% earlier reported to 8.7%. On the same basis, the June 2026 ratio is 8.9%. That 0.2% marginal increase between June 2026 and December 2025 is not due to a deterioration in the underlying credit quality, but explained by a 3% reduction in the loan book, which I mentioned a moment ago. In other words, this is a denominator effect. Actually, the NPL balances in dollar terms reduced slightly over the H1. Finally, on slide 16, capital adequacy ratio increased to 26%, up from 17.4% at December 2025. Following the successful issuance of our PGK 235 million Tier 2 bond, which is Papua New Guinea's first listed corporate bond. This is a material strength in capital position and give us real capacity to support future lending and as growth opportunities emerge.
Taiwo Fowowe: On a comparable basis, this lifts the December 2025 NPL ratio from 7.7% earlier reported to 8.7%. On the same basis, the June 2026 ratio is 8.9%. That 0.2% marginal increase between June 2026 and December 2025 is not due to a deterioration in the underlying credit quality, but explained by a 3% reduction in the loan book, which I mentioned a moment ago. In other words, this is a denominator effect. Actually, the NPL balances in dollar terms reduced slightly over the H1. Finally, on slide 16, capital adequacy ratio increased to 26%, up from 17.4% at December 2025. Following the successful issuance of our PGK 235 million Tier 2 bond, which is Papua New Guinea's first listed corporate bond. This is a material strength in capital position and give us real capacity to support future lending and as growth opportunities emerge.
Speaker #2: That 0.2% marginal increase between June 2026 and December 2025 is not due to a deterioration in the underlying credit quality, but is explained by a 3% reduction in the loan book, which I mentioned a moment ago.
Speaker #2: In other words, this is a denominator effect. Actually, the NPL balances in dollar terms reduced slightly over the half. Finally, on slide 16, capital adequacy ratio increased to 26%, up from 17.4% at December 2025.
Speaker #2: Following the successful issuance of our 235 million Kina Tier 2 bond, which is Papua New Guinea's first listed corporate bond, this is a material capital position and gives us real capacity to support future lending and growth opportunities as they emerge.
Speaker #2: I'll now pass back to Yvonne to take you through our strategy and outtakes.
Taiwo Faloye: I'll now pass back to Ivan to take you through our strategy and outlook.
Taiwo Fowowe: I'll now pass back to Ivan to take you through our strategy and outlook.
Speaker #1: Thank you, Tarwai. Turning to slide 18, I want to reconnect this half's results with our strategy. Our purpose remains creating brighter futures, and our vision is to be the most trusted financial services partner for the people, communities, and markets that we serve.
Ivan Vidovich: Thank you, Taiwo. Turning to slide 18, I want to reconnect this half's results with our strategy. Our purpose remains creating brighter futures, and our vision is to be the most trusted financial services partner for the people, communities, and markets that we serve. That is underpinned by our six strategic priorities, customer first, empowered team, operational excellence, growth through innovation, serving communities, and governance for growth, and by our change values, which continue to shape how our team members work together to serve our customers. On to slide 19. Execution remains on track. This half, we successfully issued and oversubscribed our PGK 235 million bond. We launched Pei Beta, our digital wallet, which expands financial inclusion and payments capability, and we introduced a new corporate online banking platform to strengthen our business banking proposition.
Ivan Vidovich: Thank you, Taiwo. Turning to slide 18, I want to reconnect this half's results with our strategy. Our purpose remains creating brighter futures, and our vision is to be the most trusted financial services partner for the people, communities, and markets that we serve. That is underpinned by our six strategic priorities, customer first, empowered team, operational excellence, growth through innovation, serving communities, and governance for growth, and by our change values, which continue to shape how our team members work together to serve our customers. On to slide 19. Execution remains on track. This half, we successfully issued and oversubscribed our PGK 235 million bond. We launched Pei Beta, our digital wallet, which expands financial inclusion and payments capability, and we introduced a new corporate online banking platform to strengthen our business banking proposition.
Speaker #1: That's underpinned by our six strategic priorities: Customer First, Empowered Team, Operational Excellence, Growth Through Innovation, Serving Communities, and Governance for Growth. And by our change values, which continue to shape how our team members work together to serve our customers.
Speaker #1: Onto slide 19. Execution remains on track. This half, we successfully issued and oversubscribed our $235 million bond. We launched Pay Better, our digital wallet, which expands financial inclusion and payments capability, and we introduced a new corporate online banking platform to strengthen our business banking proposition.
Speaker #1: We've continued to invest in risk leadership and digitization capability, and our culture transformation program, including the rollout of our change values across the organization.
Ivan Vidovich: We have continued to invest in risk, leadership, and digitization capability, and our culture transformation program, including the rollout of our change values across the organization. We continue to pursue organic growth alongside the evaluation of selective value-accretive inorganic opportunities. Despite the challenges we are facing into in 2026, we continue to make strong progress against our strategic agenda and remain firmly focused on delivering our key milestones, as demonstrated by our H1 achievements. Slide 20 speaks to our community commitment through our Strongim Komuniti grant program, which is fully governed and delivered by our own team members. We have supported school infrastructure, solar power, and water tank installations across provinces, including the Western Highlands, Jiwaka, East Sepik, Southern Highlands, Milne Bay, Simbu, Central, and Eastern Highlands.
Ivan Vidovich: We have continued to invest in risk, leadership, and digitization capability, and our culture transformation program, including the rollout of our change values across the organization. We continue to pursue organic growth alongside the evaluation of selective value-accretive inorganic opportunities. Despite the challenges we are facing into in 2026, we continue to make strong progress against our strategic agenda and remain firmly focused on delivering our key milestones, as demonstrated by our H1 achievements. Slide 20 speaks to our community commitment through our Strongim Komuniti grant program, which is fully governed and delivered by our own team members. We have supported school infrastructure, solar power, and water tank installations across provinces, including the Western Highlands, Jiwaka, East Sepik, Southern Highlands, Milne Bay, Simbu, Central, and Eastern Highlands.
Speaker #1: We continue to pursue organic growth alongside the evaluation of selective, value-accretive inorganic opportunities. Despite the challenges we're facing in 2026, we continue to make strong progress against our strategic agenda.
Speaker #1: And remain firmly focused on delivering our key milestones, as demonstrated by our first half achievements. Slide 20 speaks to our community commitment. Through our strong in-community grant program, which is fully governed and delivered by our own team members, we've supported school infrastructure, solar power, and water tank installations across provinces, including the West of Highlands, Jiwaka, East Sepik, Southern Highlands, Milne Bay, Simbu, Central, and Eastern Highlands. We've also renewed our partnership with the Kokoda Track Foundation and support the delivery of their Archer Leaders mentoring program and their distance education program.
Ivan Vidovich: We have also renewed our partnership with the Kokoda Track Foundation and support the delivery of their Archer Leadership Development Program and their distance education program. We also partner with RISE PNG, which supports young women to build skills and confidence and prepare for their future. Turning to our outlook on slide 21, let me be clear about how I would like you to take this half. Our earnings growth was softer than we would like, but every material driver behind that softness was linked to one of three things. Firstly, the headwinds we told the market to expect back in our 2025 results. Secondly, an external issue with a major PNG bank's debit card interoperability, which has affected our payments acquiring growth. And thirdly, a deliberate risk-based decision was made to optimize our loan book and funding mix. None of these matters changes our confidence in our strategy.
Ivan Vidovich: We have also renewed our partnership with the Kokoda Track Foundation and support the delivery of their Archer Leadership Development Program and their distance education program. We also partner with RISE PNG, which supports young women to build skills and confidence and prepare for their future. Turning to our outlook on slide 21, let me be clear about how I would like you to take this half. Our earnings growth was softer than we would like, but every material driver behind that softness was linked to one of three things. Firstly, the headwinds we told the market to expect back in our 2025 results. Secondly, an external issue with a major PNG bank's debit card interoperability, which has affected our payments acquiring growth. And thirdly, a deliberate risk-based decision was made to optimize our loan book and funding mix. None of these matters changes our confidence in our strategy.
Speaker #1: We also partner with RISE P&G, which supports young women to build skills and confidence, and prepare for their future. Turning to our outlook on slide 21, let me be clear about how I'd like you to take this half.
Speaker #1: Our earnings growth was softer than we'd like, but every material driver behind that softness was linked to one of three things. Firstly, the headwinds we told the market to expect back in our Q2 2025 results.
Speaker #1: Secondly, an external issue with a major P&G bank's debit card interoperability has affected our payments acquiring growth. And thirdly, a deliberate, risk-based decision was made to optimize our loan book and funding mix.
Speaker #1: None of these matters changes our confidence in our strategy. We enter the second half with positive momentum. We expect the card interoperability issue to be resolved by year-end, supporting a recovery in transaction-related revenue.
Ivan Vidovich: We enter the H2 with positive momentum. We expect the card interoperability issue to be resolved by year end, supporting a recovery in transaction-related revenue. The competitive changes in the payments acquiring market resulting from these issues may mean that a full revenue recovery extends into 2027. In the H2, we expect stronger FX activity and loan growth, underpinned by improving market conditions and a solid pipeline. And with a materially strengthened balance sheet and capital position following the bond issuance, we have real capacity to support growth. Longer term, the PNG growth story remains intact, and the Papua LNG final investment decision remains a key trigger point when watching for a further step up in the medium-term outlook. Finally, we remain confident in our ability to deliver long-term value for our shareholders and customers and the communities that we serve.
Ivan Vidovich: We enter the H2 with positive momentum. We expect the card interoperability issue to be resolved by year end, supporting a recovery in transaction-related revenue. The competitive changes in the payments acquiring market resulting from these issues may mean that a full revenue recovery extends into 2027. In the H2, we expect stronger FX activity and loan growth, underpinned by improving market conditions and a solid pipeline. And with a materially strengthened balance sheet and capital position following the bond issuance, we have real capacity to support growth. Longer term, the PNG growth story remains intact, and the Papua LNG final investment decision remains a key trigger point when watching for a further step up in the medium-term outlook. Finally, we remain confident in our ability to deliver long-term value for our shareholders and customers and the communities that we serve.
Speaker #1: The competitive changes in the payments acquiring market resulting from these issues may mean that a full revenue recovery extends into 2027. In the second half, we expect stronger FX activity and loan growth, underpinned by improving market conditions and a solid pipeline.
Speaker #1: And with a materially strengthened balance sheet and capital position following the bond issuance, we have real capacity to support growth. Longer term, the P&G growth story remains intact.
Speaker #1: And the Papua LNG final investment decision remains a key trigger point we're watching for a further step up in the medium-term outlook. Finally, we remain confident in our ability to deliver long-term value for our shareholders, our customers, and the communities that we serve.
Speaker #1: We've also included a set of appendices covering our Board of Directors' deposit tenure, loan portfolio by industry, and deposits by product, for reference. Before we move to questions, I want to thank our team across Kina Bank for their continued hard work, our Board for its guidance, and our shareholders for your ongoing support and patience through what has been a more challenging half.
Ivan Vidovich: We have also included a set of appendices covering our board of directors, deposit tenure, loan portfolio by industry, and deposits by product for your reference. Before we move to questions, I want to thank our team across Kina Bank for their continued hard work, our board for its guidance, and our shareholders for your ongoing support and patience through what has been a more challenging half. Taiwo and I are now happy to take questions, and I will pass back to Darcy, our moderator. Thank you.
Ivan Vidovich: We have also included a set of appendices covering our board of directors, deposit tenure, loan portfolio by industry, and deposits by product for your reference. Before we move to questions, I want to thank our team across Kina Bank for their continued hard work, our board for its guidance, and our shareholders for your ongoing support and patience through what has been a more challenging half. Taiwo and I are now happy to take questions, and I will pass back to Darcy, our moderator. Thank you.
Speaker #1: Taiwo and I are now happy to take questions, and I'll pass back to Darcy, our moderator. Thank you.
Speaker #2: Thank you. If you would like to ask a question, please press star one on your telephone to have your name announced. If you would like to cancel your request, please press star two.
Ivan Vidovich: Thank you. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Once again, if you would like to ask a question, please press star one on your telephone and wait for your name to be announced. There are no questions at this time. Oh, pardon me. We have a question here from Mr. David Fraser. Please stand by. Thank you. David, your line is now live. Pardon me, David. Please go ahead.
Operator: Thank you. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you would like to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Once again, if you would like to ask a question, please press star one on your telephone and wait for your name to be announced. There are no questions at this time. Oh, pardon me. We have a question here from Mr. David Fraser. Please stand by. Thank you. David, your line is now live. Pardon me, David. Please go ahead.
Speaker #2: If you are on a speakerphone, please pick up the handset to ask your question. Once again, if you'd like to ask a question, please press star one on your telephone, or if you want your name to be announced.
Speaker #2: There are no questions at this time. Oh, pardon me, we have a question here from Mr. David Fraser. Please stand by. Thank you. David, your line is now live.
Speaker #2: Pardon me, David. Please go ahead.
David Fraser: Ivan, can you hear me okay?
David Fraser: Ivan, can you hear me okay?
Speaker #3: Ivan, can you hear me okay?
Speaker #1: We can, Dave.
Ivan Vidovich: We can, Dave.
Ivan Vidovich: We can, Dave.
Speaker #3: Okay, cheers. Could you give us a wee bit of an update on the card interrupted-ability issue? I guess, how it's going to be fixed, and if you have any recourse to the perpetrator of this problem.
David Fraser: Okay, cheers. Could you give us a wee bit of an update on the card interoperability issue? I guess how it's going to be fixed and if you have any recourse to the perpetuator of this problem.
David Fraser: Okay, cheers. Could you give us a wee bit of an update on the card interoperability issue? I guess how it's going to be fixed and if you have any recourse to the perpetuator of this problem.
Speaker #1: Okay. Yeah, thanks for your question, Dave. So, we did mention this in the market announcement in July as one of the factors that would impact our earnings for the half and the year.
Ivan Vidovich: Okay. Yeah, thanks for your question, Dave. We did mention this in the market announcement in July as being one of the factors that will impact our earnings for the half and the year.
Ivan Vidovich: Okay. Yeah, thanks for your question, Dave. We did mention this in the market announcement in July as being one of the factors that will impact our earnings for the half and the year.
Ivan Vidovich: The brief summary of the matter is that a major PNG bank with a dominant market share, moved away from old-fashioned magstripe cards, as indeed all banks in PNG have, and issued debit cards that were proprietary EMV chip cards, as opposed to cards like Visa, Mastercard, or UnionPay, which other banks issue in the market, including Kina. This means that the cardholders of that bank cannot transact on any other bank's payment acquiring network, only their own bank's, and that's obviously created an impact on our payments acquiring revenues. Our actions, Dave, on this matter have been across a variety of focused actions, which has really been regulatory, both from the competition perspective, through also the financial services regulator as well. We have also pursued independent advice around our options regarding this matter, which we currently hold.
Ivan Vidovich: The brief summary of the matter is that a major PNG bank with a dominant market share, moved away from old-fashioned magstripe cards, as indeed all banks in PNG have, and issued debit cards that were proprietary EMV chip cards, as opposed to cards like Visa, Mastercard, or UnionPay, which other banks issue in the market, including Kina. This means that the cardholders of that bank cannot transact on any other bank's payment acquiring network, only their own bank's, and that's obviously created an impact on our payments acquiring revenues. Our actions, Dave, on this matter have been across a variety of focused actions, which has really been regulatory, both from the competition perspective, through also the financial services regulator as well. We have also pursued independent advice around our options regarding this matter, which we currently hold.
Speaker #1: The brief summary of the matter is that a major P&G bank with a dominant market share moved away from old-fashioned managed block cards. As you see, all banks in P&G have and issue debit cards that work on proprietary EMV chip cards, as opposed to cards like Visa, Mastercard, or UPI, which other banks issue in the market, including Kina.
Speaker #1: This means that the cardholders of that bank cannot transact on any other bank's payment acquiring network, only their own bank's, and that's obviously created an impact on our payments acquiring revenues.
Speaker #1: Our actions, Dave, on this matter have been across a variety of focused actions, which has really been regulatory, both from the competition perspective through also the financial services regulator. As well as that, we have also pursued independent advice around our options regarding this matter, which we currently hold.
Speaker #1: I suppose, Dave, the main focus for the bank at the moment has been to work with the regulator and the banking industry to encourage and support a technology solution which allows those same cards to become interoperable across the local payments system.
Ivan Vidovich: I suppose, Dave, the main focus for the bank at the moment has been to work with the regulator and the banking industry to encourage and support a technology solution which allows those same cards to become interoperable across the local payments system. We believe that tech change will be achieved by the end of the year, and certainly that's where our focus is at the moment. That does also mean that participating banks, including Kina, also have to make some changes to our tech systems so we can interact with that payments card data. At this stage, we believe that will be solved by the end of the year. In terms of the other part of your question, which was about recourse, yes, we have sought independent advice on this matter, but we're holding on to that position for now. Thank you.
Ivan Vidovich: I suppose, Dave, the main focus for the bank at the moment has been to work with the regulator and the banking industry to encourage and support a technology solution which allows those same cards to become interoperable across the local payments system. We believe that tech change will be achieved by the end of the year, and certainly that's where our focus is at the moment. That does also mean that participating banks, including Kina, also have to make some changes to our tech systems so we can interact with that payments card data. At this stage, we believe that will be solved by the end of the year. In terms of the other part of your question, which was about recourse, yes, we have sought independent advice on this matter, but we're holding on to that position for now. Thank you.
Speaker #1: We believe that tech change will be achieved by the end of the year, and certainly, that's where our focus is at the moment.
Speaker #1: That does also mean that participating banks, including Kina, also have to make some changes to our tech systems, so we can interact with that payments card data.
Speaker #1: So, at this stage, we believe that will be solved by the end of the year. In terms of the other part of your question, which was about recourse: yes, we have sought independent advice on this matter, but we're holding onto that position for now.
Speaker #1: Thank you.
Speaker #3: Okay. Speaker one, business loans look like they've dropped off a wee bit, first time in a while. And just delving into the accounts, it looks like there's quite a big drop-off in building and construction.
David Fraser: Okay. Second one, business loans look like they have dropped off a wee bit, first time in a while. Just delving into the accounts, it looks like there is quite a big drop-off in building and construction. Was there anything specific that happened there or why do you think that happened?
David Fraser: Okay. Second one, business loans look like they have dropped off a wee bit, first time in a while. Just delving into the accounts, it looks like there is quite a big drop-off in building and construction. Was there anything specific that happened there or why do you think that happened?
Speaker #3: Was there anything specific that happened there, or why do you think that happened?
Speaker #1: Yeah, Dave, so across the book, as mentioned, we have selectively reduced less than a handful of exposures—some of them large—which was really a risk-based decision. This has resulted in the reduction of the loan book, as mentioned.
Ivan Vidovich: Yeah, David Fraser. Across the book, as mentioned, we have selectively reduced less than a handful of exposures. Some of it large, which was a risk-based decision, which has resulted in the reduction of the loan book, as mentioned. I wouldn't read too much into the construction and building one, because that can be a factor of projects coming to completion, for example. Nothing has changed in terms of our strategy and our appetite.
Ivan Vidovich: Yeah, David Fraser. Across the book, as mentioned, we have selectively reduced less than a handful of exposures. Some of it large, which was a risk-based decision, which has resulted in the reduction of the loan book, as mentioned. I wouldn't read too much into the construction and building one, because that can be a factor of projects coming to completion, for example. Nothing has changed in terms of our strategy and our appetite.
Speaker #1: I wouldn't read too much into the construction and building one, because that can be a factor of projects coming to completion, for example. So nothing has changed in terms of our strategy and our appetite.
Speaker #3: Yeah, you're managing your risk across your loan, but also, I think you mentioned in the announcement that you dropped off on your effective funding position, and that was basically a removal reflecting a decision to reduce higher-cost funding sources.
David Fraser: Managing your risk across your loan book, but also your, I think you mentioned in the announcement that you have dropped off on your effective funding position, and that was basically a removal of reflecting a decision to reduce higher cost funding sources. Is that correct?</seg <seg id="3">That's correct. Yeah. Some of the larger wholesale deposits and cash management account balances as well, that came with higher rates. We have made some adjustments as they have run off. But again, as mentioned, that's not a competitive loss, that's a direct decision that we have made. The total change in the market share mix that we have noted in the slide is principally driven by movements in government deposits, which is very much related to KSL or our strategy.
David Fraser: Managing your risk across your loan book, but also your, I think you mentioned in the announcement that you have dropped off on your effective funding position, and that was basically a removal of reflecting a decision to reduce higher cost funding sources. Is that correct?</seg <seg id="3">That's correct. Yeah. Some of the larger wholesale deposits and cash management account balances as well, that came with higher rates. We have made some adjustments as they have run off. But again, as mentioned, that's not a competitive loss, that's a direct decision that we have made. The total change in the market share mix that we have noted in the slide is principally driven by movements in government deposits, which is very much related to KSL or our strategy.
Speaker #3: Is that correct?
Speaker #1: That's correct. Yeah. So, some of the larger wholesale deposits and cash management account balances as well, that came with higher rates, we've made some adjustments as they've run off.
Ivan Vidovich: That is correct. So, some of the larger wholesale deposits and cash management account balances as well, that came with higher rates. We have made some adjustments as they have run off. But again, as mentioned, that is not a competitive loss, that is a direct decision that we have made. And the total change in the market share mix that we have noted in the slide is principally driven by movements in government deposits, which is very much related to KSL or our strategy.
Ivan Vidovich: That is correct. So, some of the larger wholesale deposits and cash management account balances as well, that came with higher rates. We have made some adjustments as they have run off. But again, as mentioned, that is not a competitive loss, that is a direct decision that we have made. And the total change in the market share mix that we have noted in the slide is principally driven by movements in government deposits, which is very much related to KSL or our strategy.
Speaker #1: But again, as mentioned, that's not a competitive loss. That's a direct decision that we've made, and the total change in the market share mix that we've noted in the slides is principally driven by movements in government deposits, which is very much unrelated to KSL or our strategy.
Speaker #3: Yeah. And last one from me, Paul—I'll let someone else jump back in. Obviously, the potential of Papua LNG to come on board with Ratio 5D and then obviously start construction would have a material impact on the FX markets.
David Fraser: Yep. Last one from me, Paul, I will let someone else jump back in. Obviously, the potential of Papua LNG to come on board, reach FID, and then obviously start construction, would have a material impact on the FX markets. What is the Bank of PNG's view on how they manage the crawl? Will we potentially see, I guess, an inflating of the PGK against the USD slash. I guess the second part of the question is, I think previous LNG projects, we saw a huge amount of FX coming into the country while the construction of the plant was carried out.
David Fraser: Yep. Last one from me, Paul, I will let someone else jump back in. Obviously, the potential of Papua LNG to come on board, reach FID, and then obviously start construction, would have a material impact on the FX markets. What is the Bank of PNG's view on how they manage the crawl? Will we potentially see, I guess, an inflating of the PGK against the USD slash. I guess the second part of the question is, I think previous LNG projects, we saw a huge amount of FX coming into the country while the construction of the plant was carried out.
Speaker #3: What's the Bank of PNG's view on how they manage the kina, and will we potentially see, I guess, an appreciation of the PNG kina against the US dollar? And I guess the second part of the question is: I think with previous LNG projects, we saw a huge amount of FX coming into the country while the construction of the plant was carried out.
Speaker #3: And then, because of the financial obstruction, you actually didn't see any more FX coming back into the country for a while because of, I guess, high-interest loans, etc., going back to being cleared before you actually got income coming back into the country.
David Fraser: Because of the financial structuring, you actually did not see any more FX coming back into the country for a while because of its, I guess, high interest loans, et cetera, going back to being cleared before you actually got income coming back to the country. What is the risk that Papua LNG has the same sort of structure, and what post-construction we see FX just going back to the owners of the company?
David Fraser: Because of the financial structuring, you actually did not see any more FX coming back into the country for a while because of its, I guess, high interest loans, et cetera, going back to being cleared before you actually got income coming back to the country. What is the risk that Papua LNG has the same sort of structure, and what post-construction we see FX just going back to the owners of the company?
Speaker #3: What's the risk that Pepe LNG has the same sort of structure, in that post-construction we see FX just going back to the owners of the country?
Speaker #3: Of the company.
Speaker #1: Thanks, Dave. Yeah, so a couple of points I suppose you've raised in your question there. I'll try to address all of them. We see Papua LNG as the first of many resources projects.
Ivan Vidovich: Thanks, Dave. Yeah. A couple of points, I suppose, you have raised in your question there. I will try to address all of them. We see Papua LNG as the first of many resources projects. So the investment inflows we see as continuing over a 10 to 15-year period. Obviously, as we are seeing with Papua LNG, the timing of FID does move around a bit owing to the requirements of stakeholder negotiation and consultations. But the forward-looking pipeline over 10 plus years is actually very healthy. In the past, what we have seen through other resources and economic cycles in PNG, absolutely, the inflows post FID during the construction phases are significant and go a long way to establishing a more balanced import and export flow.
Ivan Vidovich: Thanks, Dave. Yeah. A couple of points, I suppose, you have raised in your question there. I will try to address all of them. We see Papua LNG as the first of many resources projects. So the investment inflows we see as continuing over a 10 to 15-year period. Obviously, as we are seeing with Papua LNG, the timing of FID does move around a bit owing to the requirements of stakeholder negotiation and consultations. But the forward-looking pipeline over 10 plus years is actually very healthy. In the past, what we have seen through other resources and economic cycles in PNG, absolutely, the inflows post FID during the construction phases are significant and go a long way to establishing a more balanced import and export flow.
Speaker #1: So the investment inflows we see as continuing over a 10- to 15-year period. Obviously, as we're seeing with PUP work and LNG, the timing of FID does move around a bit, owing to the requirements of stakeholder negotiation and consultations.
Speaker #1: But before we look at the pipeline over 10-plus years, it's actually very healthy. In the past, what we've seen through other resources-led economic cycles in PNG, absolutely, the inflows post-FID during the construction phases are significant.
Speaker #1: And go a long way to establishing a more balanced import and export flow. The government is looking at things like a national sovereign wealth fund, and other ways to ensure that the economy remains balanced over the medium to longer term, beyond those initial inflows.
Ivan Vidovich: The government is looking at things like a national Sovereign Wealth Fund and other ways to ensure that the economy remains balanced over the medium to longer term beyond those initial inflows. I think if you also look at the maturity of the economy and FX flows, aside from those economic cycles, the market actually continues to mature as well. In terms of your question about the crawl, we are certainly watching. It is managed by the Bank of Papua New Guinea Monetary Policy Committee who last met in May. They are meeting again in the coming months in September. We are obviously watching that closely for any sign whether the Monetary Policy Committee votes to slow down the crawl, because, as some of their recent meeting notes would suggest, they are mindful of imported inflationary pressures within the local market as well, that continuing to manage that crawl creates.
Ivan Vidovich: The government is looking at things like a national Sovereign Wealth Fund and other ways to ensure that the economy remains balanced over the medium to longer term beyond those initial inflows. I think if you also look at the maturity of the economy and FX flows, aside from those economic cycles, the market actually continues to mature as well. In terms of your question about the crawl, we are certainly watching. It is managed by the Bank of Papua New Guinea Monetary Policy Committee who last met in May. They are meeting again in the coming months in September. We are obviously watching that closely for any sign whether the Monetary Policy Committee votes to slow down the crawl, because, as some of their recent meeting notes would suggest, they are mindful of imported inflationary pressures within the local market as well, that continuing to manage that crawl creates.
Speaker #1: I think if you also look at the maturity of the economy and FX flows, aside from those economic cycles, the market actually continues to mature as well.
Speaker #1: In terms of your question about the crawl, we're certainly watching it. It is managed by the Bank of Papua New Guinea Monetary Policy Committee, who last met in May.
Speaker #1: They're meeting again in the coming month, in September. We're obviously watching that closely for any sign of whether the Monetary Policy Committee votes to slow down the crawl, because as some of their recent meeting notes would suggest, they are mindful of imported inflationary pressures within the local market as well.
Speaker #1: That continuing to manage that crawl creates, but previous cycles have shown that resource inflows and the balancing of the import-export market continue to be the key signals that might shift the turnaround in the PGK.
Ivan Vidovich: Previous cycles have shown that resources inflows and the balancing of the import-export market continues to be the key signal that might shift a turnaround in the PGK. Thanks, Dave.
Ivan Vidovich: Previous cycles have shown that resources inflows and the balancing of the import-export market continues to be the key signal that might shift a turnaround in the PGK. Thanks, Dave.
Speaker #1: Thanks, Dave.
Speaker #3: Yeah, thank you very much.
David Fraser: Great. Thank you very much.
David Fraser: Great. Thank you very much.
Speaker #2: Thank you once again. If you would like to ask a question, please press star one on your telephone, and your name will be announced.
David Fraser: Thank you. Once again, if you would like to ask a question, please press star one on your telephone with your name to be announced. Your next question comes from Richard Coles from Morgans. Please go ahead.
Operator: Thank you. Once again, if you would like to ask a question, please press star one on your telephone with your name to be announced. Your next question comes from Richard Coles from Morgans. Please go ahead.
Speaker #2: Your next question comes from Richard Coles from Morgans. Please go ahead.
Speaker #3: Oh, thanks, guys. Just confirming that you're reaffirming your guidance that you gave out in July, with your update in that period on the impacts of the technology issues.
Richard Coles: Thanks, guys. Just confirming that you are reaffirming your guidance that you gave out in July with your update in that period on the impacts of the technology issues. You are reconfirming guidance? I just couldn't see it stated in your packaging there.
Richard Coles: Thanks, guys. Just confirming that you are reaffirming your guidance that you gave out in July with your update in that period on the impacts of the technology issues. You are reconfirming guidance? I just couldn't see it stated in your packaging there.
Speaker #3: You are reconfirming guidance. I just couldn't see it stated in your pack, anyway.
Speaker #1: Correct. We are.
Ivan Vidovich: Correct. We are.
Ivan Vidovich: Correct. We are.
Speaker #3: Yeah. Okay. So and just can you give us a little bit more detail on the loan de-risking? Just sort of where are you trimming and sort of why if I just sort of just get a bit more clarity on that in my head?
Richard Coles: Yep. Okay. Can you give us a little bit more detail on the loan de-risking? Just where are you trimming and why, if I just get a bit more clarity on that in my head. Thanks.
Richard Coles: Yep. Okay. Can you give us a little bit more detail on the loan de-risking? Just where are you trimming and why, if I just get a bit more clarity on that in my head. Thanks.
Speaker #3: Thanks.
Speaker #1: Yeah, thanks, Richard. We'll probably be careful not to give too much information that might point to an individual customer or customers. So forgive me for being somewhat generic, Richard.
Ivan Vidovich: Yeah. Thanks, Richard. We will probably be careful not to give too much information that might point to an individual customer or customers, so forgive me for being somewhat generic, Richard.
Ivan Vidovich: Yeah. Thanks, Richard. We will probably be careful not to give too much information that might point to an individual customer or customers, so forgive me for being somewhat generic, Richard.
Speaker #1: But we actively make risk-based decisions on a loan-by-loan basis. Where we saw that, for example, the trading activity or some of the future signs, as we conduct things like our annual reviews, fall outside our risk appetite.
Richard Coles: Yeah.
Richard Coles: Yeah.
Ivan Vidovich: We active risk-based decision on a loan-by-loan basis, where we saw that, for example, the trading activity or some of the future signs as we conduct things like our annual reviews, fall outside our risk appetite, and where there is the opportunity for another institution to refinance that loan, that is certainly something that we have helped to facilitate, keeping our customer needs in mind as well. We do not see any sort of broader issue across our loan book that would cause any concern. That was just a small cluster of loans, which we have actively managed through the H1 of this year.
Ivan Vidovich: We active risk-based decision on a loan-by-loan basis, where we saw that, for example, the trading activity or some of the future signs as we conduct things like our annual reviews, fall outside our risk appetite, and where there is the opportunity for another institution to refinance that loan, that is certainly something that we have helped to facilitate, keeping our customer needs in mind as well. We do not see any sort of broader issue across our loan book that would cause any concern. That was just a small cluster of loans, which we have actively managed through the H1 of this year.
Speaker #1: And where there's the opportunity for another institution to refinance that loan, that's certainly something that we've helped to facilitate, keeping our customer needs in line as well.
Speaker #1: I don’t think we see any sort of broader issue across our loan book that would cause any concern. That was just a small cluster of loans, which we’ve actively managed through the first half of this year.
Speaker #3: Is it done? Is there more to come in the second half?
Richard Coles: Is that done? Is there more to come in the H2?
Richard Coles: Is that done? Is there more to come in the H2?
Speaker #1: No, look, we'll continue to review all our loans, particularly our large exposures, throughout our annual review processes and our internal governance. Mechanisms like our creditor committees and so on.
Ivan Vidovich: No, look, we will continue to review all our loans, particularly our large exposures, throughout our annual review processes, and our internal governance mechanisms like our credit committees and so on. We are not working on anything, or we do not see anything at the moment that would cause that to continue. But obviously, we maintain broader awareness of the quality of the loan book.
Ivan Vidovich: No, look, we will continue to review all our loans, particularly our large exposures, throughout our annual review processes, and our internal governance mechanisms like our credit committees and so on. We are not working on anything, or we do not see anything at the moment that would cause that to continue. But obviously, we maintain broader awareness of the quality of the loan book.
Speaker #1: We're not working on anything, or we don't see anything at the moment that would cause that to continue. But obviously, we maintain broader awareness of the quality of the loan book.
Speaker #3: Yeah. Thanks very much, guys.
Richard Coles: Thanks very much, guys.
Richard Coles: Thanks very much, guys.
Speaker #1: Thank you.
Ivan Vidovich: Thank you.
Ivan Vidovich: Thank you.
Ivan Vidovich: There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: There are no further questions at this time. That does conclude our conference for today. Thank you for participating. You may now disconnect.
