Kina Group is set to become Papua New Guinea’s fourth retail bank, when it takes over the Malaysian-owned Maybank (PNG) in late July, ahead of a possible stock market listing.

Kina Group’s Syd Yates

Kina Group will pay approximately US$117.15 million (K319 million) for Maybank (PNG) Ltd and Maybank Property Ltd, the PNG subsidiaries of Malaysia’s largest bank. The move almost doubles the Kina Group’s paper value—it had assets of K340 million in 2014.

PNG superannuation funds Comrade Trustee Services (trustee of the Defence Force Retirement Benefits Fund), Nambawan Super (for whom Kina is funds manager), and National Superannuation Fund have agreed to fund the purchase, which is subject to approval by PNG’s central bank.

PNG’s fourth-largest bank

The acquisition of Maybank PNG will see Kina Group, which already offers a wide range of financial services, become PNG’s fourth-largest bank after Bank of South Pacific, ANZ and Westpac, according to CEO Syd Yates.

‘The acquisition of Maybank PNG’s local banking business is an excellent fit as we continue to grow and invest in PNG,’ he said.

’Maybank PNG was identified as an attractive acquisition for Kina due to its established infrastructure, conservative capital structure, and client base which offers exposure to PNG’s growing middle class, small-to-medium enterprise sector and high net worth individuals.’

Lower funding costs

Yates said that a key benefit for Kina Group of a full banking licence would be the lower cost of wholesale funding.

‘A banking licence is really the missing part of the puzzle for Kina Group. We will have access to wholesale money at a lower cost and be able to pass those benefits on to our customers.

‘We see the strong growth trend continuing for banking and financial services, particularly given the sector’s exposure to multinational corporates, the growth in small-to-medium enterprises, and the country’s growing middle class,’ he said.

Additional competition in PNG’s banking sector is likely to be welcomed. Only last month, Standard and Poor’s Banking Industry Country Risk Assessment for PNG noted the small number of banks limited competition.

Expansion program

The Maybank PNG acquisition is the latest in a series of investments launched by Kina, which opened for business as funds administrator and stockbroker in 1996. In 2007, it launched Kina Asset Management Limited, PNG’s only listed investment company and also owns EsiLoa, Kina Finance and is a shareholder in the Port Moresby Stock Exchange.

Syd Yates added the Kina Group is presently considering options to fund future growth, including a possible stock exchange listing.

Maybank looks to ASEAN and China

Maybank’s Chief Executive Abdul Farid Alias.

Meanwhile in Kuala Lumpur, Maybank’s Chief Executive Abdul Farid Alias said in a statement the sale follows a decision to re-focus Maybank’s resources into ASEAN and China, where it can achieve better synergies and investment returns.

While a significant asset in PNG terms, Maybank PNG is a relatively modest part of a banking group which is the fourth-largest bank by assets in Southeast Asia.

‘Though  the  PNG  unit  has  been  operating profitably,  we understand  that  contribution  to  the  group’s  earnings  remain  insignificant,’ observed Malaysian market analyst Affin Hwang Capital Research this week. ‘Based on the announcement, there will not be any material impact on the [Maybank] group’s  net  assets  or  earnings  for  2015  following  the  sale.’