Hello everyone, and Welcome to BSP Financial Group's 2024 Full-Year Results Briefing. My name is Mark Robinson, and I'm the Group CEO of BSP. In this briefing, I'll provide a business update and an overview of the results. Our Acting Group CFO, Maryann Lameko-Vaai, will discuss our financial results in more detail. Following Maryann's presentation, I'll return to provide an outlook and summary. Maryann and I will also address questions from investors, which we received late last week. Before I commence the update, I would like to offer a brief outline of our history for those joining one of our investor presentations for the first time. Our bank was established in 1957 in Port Moresby as a branch of NAB, which was later renamed BSP upon its sale. In 2001, BSP acquired the state-owned Papua New Guinea Banking Corporation, formerly CBA, to create the largest bank in Papua New Guinea.
Subsequent acquisitions across the South Pacific included CBA's Colonial Bank in Fiji and several Westpac businesses. We listed on the PNGX in 2003 and on the ASX in 2021, and trade under the tickers of BSP and BFL respectively, with a market cap on the ASX of approximately AUD 3.5 billion. This first slide captures BSP on one page: our purpose, vision, values, and our strategic priorities. We continue to modernize for growth, a phrase that you might hear several times during this presentation, as we better serve our customers, simplify our processes and platforms, invest in our digital and data capabilities, and attract and retain the best people to help drive the changes we need to continue to make as we pursue our vision to be the South Pacific's international bank. This also means that I travel extensively in the region from our headquarters here in Port Moresby.
For example, in September last year, I was in the Kingdom of Tonga with the BSP team as we commemorated the 50th anniversary of the Bank of Tonga, which joined the BSP Group in 2015. While in October, I attended the Commonwealth Business Forum, which was held during the Commonwealth Heads of Government Meeting in Samoa, and just last week, our board met in Papua New Guinea's second-largest city, Lae, gaining further insights into the opportunities for BSP and our customers in the Morobe region. Given our pivotal role in the South Pacific, we owe it to our communities to facilitate business and commerce and enable greater prosperity and financial inclusion across the region. This aligns with our purpose, championing prosperity for the South Pacific, and underpins our day-to-day activities as we continue to lay the foundations for growth at BSP.
While we do this, we monitor such developments as the progress of the mega projects in the extractive industries here in Papua New Guinea and the wealth building happening in urban areas across the region. As I mentioned on this slide, a key element of our modernization strategy is to attract the best talent to lead the changes we continue to make in the business. This is why in late January, I was pleased to announce the following senior appointments of these outstanding executives: Mr. Ben Wavell-Smith, formerly at ANZ, has been appointed our Group Chief Risk Officer. Mr. Jonathan Harvey, a highly experienced international human resources executive, including having had senior roles at Barclays in London and ANZ in Australia, has been appointed our Group Executive for People and Culture. And Ms.
Esther Usurup has been appointed to the newly created role of Head of People and Culture, Papua New Guinea, after senior roles with the Bougainville Government, TotalEnergies, and Origin Energy. Separately, in January, I also announced the appointment of our new CFO, Mr. Glen Skarott, formerly of the Macquarie Group, an outstanding finance executive with deep experience in leading complex transformations and with the use of data and analytics in driving decision-making. This will add enormous value to our modernization and growth agenda. As Papua New Guinea prepares to celebrate the 50th anniversary of its independence in September this year, I'm proud of BSP's clear market leadership in the South Pacific. We are the largest bank in Papua New Guinea by some margin, accounting for over 60% of lending and deposits. While in most other countries in our region, we are the largest or second-largest bank.
While our modernization program continues, I'm incredibly proud of the strong growth in our customer activity in 2024. For example, last year, our average monthly transactions in digital channels grew by 20% per annum, which is an early indicator of the success of our modernization investments. We're also investing in our ATM network, which will see us roll out 600 of the latest model ATMs across the South Pacific. This growth in volumes in our digital channels, as well as in the number of our active accounts, are good indicators of the underlying strength of our franchise and prospects for continuing to grow our revenue. Turning now to our financial results for last year, I'm pleased to report that we posted a record pre-tax profit for the Group of just under PGK 1.8 billion, up a healthy 14% from the previous year.
One highlight of this result was a strong increase in volumes and revenue right across our businesses. Expenses last year cross by PGK 218 million compared with 2023. This increase in operating expenditure was mainly driven by an increase in our investment in technology to support our strategic priorities. Wages growth associated with the recruitment of specialists to deliver on our strategy has also contributed to the increase in expenditure. Our Acting Group CFO, Maryann, will have more to say about this in a few minutes when she speaks to you about details of our financial results. Our statutory profit increased an impressive 17% in local currency terms to PGK 1 billion, boosted by strong improvements in our bad and doubtful debts, as well as the net positive impacts of several one-off items recognized in the first half of 2024.
Our full-year statutory profit was also just PGK 52 million shy of our record in 2022, which was posted before the bank tax rate in Papua New Guinea increased to 45%. In summary, our Group fundamentals remain very strong. We are a strong and resilient business, which has delivered solid results since we listed in 2003, even when we have faced significant social and economic headwinds. Furthermore, our strong results in 2024 were achieved while we made significant investments in the business as part of our modernization agenda. I also want to highlight what I consider to be one of our key competitive advantages, which is the enduring strength of our balance sheet. You will notice that our capital adequacy improved from 24.4% to 26.2%, while our leverage ratio increased from 9.6% to 10.8%. These ratios continue to comfortably exceed the minimum regulatory requirements.
I'm also pleased to highlight the improvement in total returns to our investors in 2024. Our annual dividend is up 16% versus 2023 to 1.66 Kina , again representing a payout ratio of approximately 75% of our statutory profit, while our shares, which trade on the PNGX, closed near their record highs on the 31st of December at 19.9 Kina On this positive note, I'll now hand over to Maryann to run through our 2024 financials in more detail.
Thank you very much, Mark, and welcome to everyone on the webcast. Looking firstly to slide 13, we're very pleased to report that our 2024 statutory profit was up 17% on 2023. Now, this translated to a healthy 17% increase in our earnings per share and a 16% lift in our dividends per share. And the board has declared a final dividend of 1.21 Kina for 2024, which means our annual dividend payout was 1.66 Kina which was mentioned by Mark in his earlier presentation. Now, this represents a payout ratio of 75% of statutory profit, which is in line with historic levels. In Australian dollars, the dividend increased 9% year-on-year after accounting for the currency translation impact. Now, this slide talks about our total income.
Our total income growth for the Group was 8.3%, driven primarily by PGK 120 million lift in our net interest income and PGK 103 million increase in FX income. Our fee income increased PGK 33 million for the year, while there was a fall in insurance and other income of PGK 27 million, mainly reflecting a more subdued result from our Fijian insurance operations in 2024. Now, this is a slide that we have inserted to demonstrate the resilience of the source of approximately two-thirds of our Group revenue, our net interest income, which increased from PGK 1.8 billion in 2023 to just under PGK 2 billion in 2024.
Now, pleasingly, our net interest margin also increased in 2024 to 572 basis points , reflecting the prudent management of the margin between the interest we receive on our investment in government securities and other assets and the interest we pay on deposits held by the Group on behalf of our customers. Now, this slide highlights our investment in delivering our strategic priorities that Mark referred to in his presentation. While the cost-to-income ratio increased from 37.8% in 2023 to 41.3% in 2024, when we exclude the investments in our modernization initiatives, it was relatively stable in 2024 at 38.2%. Now, the key driver of BAU operating expenses was staff costs, which lifted PGK 67 million, and this included an increase in spend on recruitment of additional specialists in technology and retail banking.
Now, the main areas of additional investment as we modernize the Group for growth, which makes up the PGK 94 million identified on this slide, are largely directed at supporting the work of specialists from within the Group and also outside our Group as we continue to implement our strategic priorities. Now, just moving to operating profit, this slide summarizes the movement in our operating profit from 2023 to 2024 before the impact of bad and doubtful debts expense, tax, and other one-offs. Now, key points to note include the increase in revenue of PGK 230 million or 8% in 2024. However, our operating expenses also increased in 2024, reflecting in part the impact of inflation and in part the impact of the modernization investments which we require to support our strategic priorities.
Now, if we were to exclude the PGK 94 million investment attributable to our modernization, our Group operating expenses cross by PGK 124 million, which is PGK 107 million less than the PGK 230 million increase in our revenue. In 2024, the overall strength of our loan book sharply improved, which resulted in a PGK 200 million release of the Group's provision for bad and doubtful debts. This increased our pre-tax profit by the same amount compared with 2023 and contributed to the significant increase in Group after-tax profit, earnings per share, as well as dividends for 2024. Now, the largest factor behind this reversal was the overall improved economic outlook in the markets in which we operate, particularly in PNG and Fiji, as well as corporate loan recoveries in PNG and lower retail loan write-offs.
Now, it is not uncommon for the Group to have reversals of our impairments provision from time to time, and we have actually reported write-backs in four of the last 10 years. Owing to the improving quality of our loan book, our delinquency rates and provisions to loans ratio also improved in 2024, while total provisions align with expected credit loss calculations. This slide highlights our loan book composition. Loans to the corporate sector in the region, in the South Pacific region, comprise about two-thirds of the Group's overall loan book. The composition of our loan book barely moved in 2024, with retail mortgages increasing slightly from 15% of our book in 2023 to 17% in 2024. Now, this growth in mortgages was largely the result of increased demand from our customers in Fiji. This slide shows the long-term growth of our gross loans and total assets since 2015.
This growth ultimately drives Group earnings and compares very favorably with most of our local and regional peers. However, growth in the balance sheet slowed in 2024 due largely to subdued lending demand in PNG and a reduction in the usage of overdraft limits. Our deposits also fell 2.5% in 2024, largely reflecting customer activity late in the year, while our deposit mix remained relatively constant between demand and term deposits. Meanwhile, behavioral maturity assessments of our deposits show low volatility and a large position held as core deposits. Now, these slides will look at our key ratios. These performance ratios highlight our business's strength. The Bank delivered a return on assets of 2.8% in 2024 and continues to deliver a return on equity over 20%, as it has done for over 20 years.
Our cost-to-income ratio increased slightly in 2024, in line with our modernization initiatives, into the low 40% range. Now, one feature of our balance sheet, which is sometimes overlooked, is that unlike most peer banks, our loans to deposits ratio was 58% in 2024, which points not only to our balance sheet strength, but in essence, our ability to grow our loan assets without the need to raise additional fund or capital. Based on share prices on 31st of December, and I know the share price is up again since then on both the PNGX and the ASX, the total return measured in Kina from holding BSP shares over 10 years is over 350%, while the one-year return was 57% in 2024.
Meanwhile, in Australia, since 2024, when BSP listed on the ASX under the ticker BFL, it has delivered a share price cumulative average growth rate of 16%, with a 22.9% increase in 2024 alone. Overall, these returns compare very favorably with those of most of our local and regional peers over the last 10 years, and on that happy note, I hand you back to Mark.
Thank you, Maryann. Before concluding, I want to acknowledge that we are not immune to the social, political, and economic environment in which we operate. Movements in commodity prices and the evolving geopolitical landscape may have a large bearing on our performance, while changes to the tax rate and the regulatory environment also have an impact on our ability to invest for our customers, invest in our business and communities, and on the returns we deliver to our investors. We also pay close attention to the factors near to home, which we can more closely control. This means we will maintain and continually seek to improve our risk management framework and our risk culture. We will maintain our strong balance sheet.
Our modernization strategy, which involves substantial investment and which constrained the growth of underlying profit in 2024, is already beginning to bear fruit, as we demonstrated with the large and consistent increase in revenue and customer accounts. Against this constantly evolving backdrop, we significantly improved the quality of our loan book in 2024, and this, along with the settlement of the additional company tax matter we negotiated with the PNG government early in the year, helped us to deliver an impressive increase in our 2024 statutory profit, earnings, and dividends per share compared with the previous year. We remain the leading provider of banking services in our region. This leading position allows BSP to continue to invest to support the growing prosperity of our customers and the communities in which we operate.
This, in turn, underpins the impressive long-term returns we continue to generate for our shareholders during geopolitical or economic changes we face from time to time. We'll always continue to support regional ambitions for prosperous economies and seek to improve outcomes for all of our stakeholders in the years to come as we build the South Pacific's International Bank. On that note, I now turn to addressing the questions we have received, including the following. We were asked for an update on the PGK 345 million three-year modernization plan that we reported last year. Maryann, I'll take this question. Our modernization agenda includes initiatives to better serve all of our customers in ways that are most convenient to them. This includes investing in our technology, data capabilities, branches, and development and training of our people.
As a recent example, we've just announced the purchase of the latest technology ATM and EFTPOS machines to be rolled out across the South Pacific, as well as our branch redesign program. With this ongoing investment in our capabilities, we expect our cost-to-income ratio to remain in the low-to-mid 40% range for the foreseeable future. We had a question regarding our NIM, or net interest margin outlook. I will hand over to Maryann to answer this question.
Thank you, Mark. You will recall that about two-thirds of our loans are extended to government and corporate entities in the South Pacific region. This makeup of our business has resulted in our NIM being in line in the mid to high 500 basis points range for a number of years. Now, we don't expect any material shifts in the portfolio composition and NIM in the near future. Our next question is on the corporate tax outlook. I will hand it back to Mark for his remarks.
Late last year, the government in Papua New Guinea revised the tax rates applicable to PNG banks. The impact on BSP is that our effective tax rate will drop steadily over the next 10 years, which is obviously positive. Our final question is regarding our capital management policy. I will hand back to Maryann for this question.
We do tend to maintain a higher capitalization ratio compared to peer banks, both in our region and especially by comparison with Australian banks. Now, this is for a variety of reasons, including that it provides a strong buffer to absorb any operating challenges that may arise. It also puts us in a strong position to look at appropriate organic and inorganic opportunities that may arise. As to our capital policy, you will see that we have consistently paid out approximately 75% of statutory profit as dividend. However, we're also aware that investors expect us to keep our capital management consistently under review, and so it's fair to assume that we do monitor capital that might be in excess to the needs of the business and take actions accordingly.
Thank you, Maryann. And this concludes our 2024 BSP Financial Group investor presentation. We hope it's been informative, and we thank you very much for joining us today.