Good morning and thank you for joining us for Bank South Pacific Financial Group's 2025 half-year results briefing. My name is Mark Robinson and I'm the Group CEO, and I'm joined today by our Group CFO, Glen Skarott. We will start with an overview of BSP and our first-half performance. Glen will then walk you through the financial results before I return to outline our strategy and outlook. Turning to slide five, for those of you who are unfamiliar with BSP, this slide serves as a reminder of our value proposition. BSP is the largest bank in the South Pacific, with market-leading positions in seven countries, serving over 2 million customers. We are proudly headquartered in Port Moresby, with over 4,600 employees. We are dual-listed on the PNGX and the ASX, with a market capitalization of approximately PGK 10.7 billion, which is roughly AUD 4 billion.
We are governed by an independent, globally diverse board with deep regional and international banking experience. BSP's consistent track record of profitability is driven by strong net interest margins and disciplined capital and risk management, offering growing, attractive returns for our investors. With a robust balance sheet and a focus on serving Pacific economies, we are well-positioned for sustainable growth. Moving on to slide six, this slide provides an overview of our highlights from the first half of this year. In the first half, revenue and NPAT both grew by nearly 10%. Importantly, this growth came from across all key businesses: lending, FX, fees, and insurance. ROE remains strong at 23.6% on an annualized basis, continuing our 20-year record of returns above 20%. Our balance sheet remains well-capitalized, and we delivered an 11% increase in the interim dividend.
The group's improved operating performance, combined with a lower effective tax rate, contributed to a 9.8% increase in our net profit after tax to PGK 572 million. In the second half, our tax rate will increase as our earnings exceed a tax threshold. The capital base remains strong, with a capital adequacy ratio of 25.4%, which is more than double the Bank of Papua New Guinea's minimum requirement of 12%. BSP's first-half performance not only delivered strong operating results but also exceptional returns for our shareholders. Following continued strong operational performance during the half-year 2025, the BSP board has declared a first-half dividend of PGK 0.50 per share, an 11% increase. Turning to slide seven, the South Pacific remains a growth region driven by trade flows, infrastructure investment, and rising digital adoption. Competition is increasing, and regulatory expectations are evolving, which we welcome.
Our scale, local insight, and long-term community presence uniquely position us to capture growth while continuing to support financial inclusion across urban, rural, and remote communities. As the leading bank of the South Pacific, we embrace our social license to empower people in cities and towns, as well as in rural and remote areas, to take control of their finances. To that end, we're investing in technology to better serve our customers, as well as to deliver operating efficiencies. I've said before that a key element of our strategy is our people. To deliver on our strategic and operational objectives, we are focused on ensuring we have the right people for the job, focusing on the right tasks and using the right tools to drive efficient and impactful outcomes. Turning now to slide eight, this slide provides a relative view of BSP versus other banks in the region.
BSP is the leading financial institution in the South Pacific. Our balance sheet and earnings base are materially larger than any other bank in the region. This scale not only provides resilience in a more competitive environment but also gives us the ability to invest for the long term, supporting economic development, building financial inclusion, and delivering strong returns to shareholders. Our position as the region's leading bank also makes us a valued partner for governments, corporates, and communities as they pursue growth and development. We have invested significantly in recent years to bring modern banking services to the South Pacific, from digital platforms to upgraded branch infrastructure. Importantly, BSP is the most extensive distribution network in the region. This includes branches, ATMs, FPOS, mobile and internet banking, and our agent banking model, which extends access into rural and remote communities where few other providers can reach.
This breadth of presence underpins both our commercial strength and our social impact, reinforcing BSP's role as the South Pacific's international bank. Turning now to slide nine, our ambition is clear: to build a world-class bank in the South Pacific. Our modernizing for growth strategy is delivering impactful, practical improvements. These initiatives are scalable across the group and already delivering efficiency gains and better customer outcomes. One example of these is FX Online, which is an enhancement to the way our corporate customers have traditionally conducted their business with international markets. It saves them time and the time of our staff and branches. This feature eliminates repetitive processes, reduces manual intervention, and helps with faster turnaround times for FX orders. We will continue to expand these programs this year and look forward to updating you on further progress at the time of our full-year results. Thank you.
I will now hand over to Glen Skarott to walk you through the financials in more detail.
Thank you, Mark, and it is my pleasure to present these results to you for the first time as CFO of BSP Financial Group, particularly given the strength of our numbers for the first half and the growth we are seeing in the business. Starting on slide 11, BSP delivered a strong first-half result with both revenue and earnings growth despite continued investment in modernization. Revenue rose 9.8% to PGK 1.6 billion , underpinned by growth across all major income streams. Operating profit increased 4.7%, supported by a 20% reduction in credit expenses. This reflected our disciplined risk approach. Statutory NPAT was up 9.8% to PGK 572 million , with earnings benefiting from lower tax charges compared to the prior period. Overall, this was a balanced result combining top-line growth, effective cost management, and improved credit quality. On slide 12, we can see the key drivers of revenue growth.
Net interest income grew 3.6%, supported by lending volume growth, a modest improvement in NIM, and higher investment securities. Foreign exchange income rose 23.6%, reflecting strong flows from both resource and non-resource sectors, alongside elevated trade activity across our markets. Fees and commissions grew 14.6%, driven by higher electronic banking usage and increased customer activity. Operating expenses increased 17.6%, largely due to investment in our modernizing for growth program. Despite this, operating profits still grew nearly 5%, highlighting the diversity and scalability of our business model. Slide 13 shows our expense profile. Employment costs increased 14.5%, while technology costs have risen 28%, both reflecting investment in digital infrastructure and transformation initiatives. Administration and other costs also rose as we expanded resources to deliver on strategic programs. The cost-to-income ratio moved to 42.5%, up from 39.7% in the first half of 2024.
This remains within our guided 42% - 45% range during the modernization program. Importantly, we continue to balance cost discipline with deliberate investment to lift BSP's digital capabilities and customer experience. On slide 14, our credit quality improved further in the half. Bad and doubtful debts fell 20% to PGK 67 million . Delinquency rates normalized to 2.8% of total loans, down from 3.6% a year ago. Gross impaired assets declined nearly 12% on the prior year. These outcomes reflect prudent risk management, conservative provisioning, and a continued focus on improving the quality of our loan book. Turning to slide 15, BSP's balance sheet remains robust. Gross loans grew 2.1% year-on-year to PGK 17.6 billion, reflecting steady credit demand across the region. Total assets expanded to K38.9 billion. Deposits rose 2.4% to PGK 30.7 billion, with a stable mix between demand and term deposits.
This growth reinforces BSP's funding strength and capacity to support future lending expansion. Slide 16 shows our composition of our loan portfolio. Business loans remain the largest share, though slightly lower than the first half of last year due to subdued corporate activity. The pipeline, however, remains very strong, providing a base for future growth. Retail mortgages grew sharply, up 37% year-on-year, particularly in Fiji and other Pacific markets. Unsecured personal loans have grown modestly, supported by consumer spending and stable employment. Business overdrafts and others fell 27% as large corporates utilized excess liquidity to reduce short-term facilities. Overall, our loan book remains well-diversified and resilient. On slide 17, BSP's fundamentals remain strong. Return on equity improved to 23.6%, well above our regional peers. Return on assets was up 30 basis points to 2.9%.
Cost-to-income rose to 42.5%, consistent with our expectations of a 42% - 45% ratio during the investment cycle. Post-modernization, we would expect the cost-to-income ratio to normalize around the 42.5% mark. Capital adequacy strengthened to 25.4%, more than double the regulatory minimum of 12%. These metrics highlight BSP's ability to deliver attractive returns while maintaining a conservative balance sheet. Finally, slide 18 illustrates our shareholder returns. The board has declared an interim dividend of PGK 0.50 per share, up 11% on the first half of 2024. This continues BSP's track record of consistent, sustainable shareholder distributions. Over the past decade, BSP has delivered a total shareholder return of 371.10%, with dividends making up the majority of that value. This demonstrates our commitment to rewarding shareholders while maintaining strong capital buffers for growth. Thank you for your attention. I'll now hand the presentation back to Mark to discuss our strategy and outlook.
Thank you, Glen. Turning now to slide 20, BSP remains deeply committed to all the markets in which we operate. Right across the South Pacific, our strategy is tailored to the unique dynamics of each market, ensuring we meet local customer needs while delivering excellent group-wide standards of service, risk management, technology deployment, and talent development. Our modernizing for growth strategy is centered on six clear strategic shifts. These include revitalizing our brand, expanding financial access for underbanked communities, modernizing our processes and platforms, and strengthening our proposition for business, government, and corporate clients. Each of these shifts is underpinned by investment in people, technology, and data, the enablers of sustainable growth. We have seen strong momentum in the first half, with early initiatives already improving efficiency, reducing operating pressures, and enhancing the customer experience.
These are tangible gains: greater automation and selective centralization are lowering unit costs, while digital adoption is expanding volumes without the same growth in physical infrastructure. Together, these outcomes support improved scalability and protect our high levels of return on equity. Looking ahead, our focus remains on delivering world-class service to customers right across the Pacific. We'll continue to invest in digital products, modernize our branch network, and embed data-driven insights to better anticipate customer needs. These investments are designed not only to meet rising customer expectations but also to drive operating leverage and maintain disciplined cost-to-income performance. In short, modernizing for growth positions BSP to support the modernization of our markets, preserve strong shareholder returns, and build long-term resilience. On slide 21, I'd like to highlight our recent strong growth in our digital channels during the period.
Our monthly average digital transactions grew by 4% as customers increasingly adopt modern banking channels. Digital adoption continues to accelerate, with more customers shifting to mobile, internet, and FPOS. ATM usage is more or less flat, which is exactly the trend we wanted to see as customers embrace flexible, 24/7 banking. Earlier this year, we launched the OneTalk Wallet, a digital wallet that empowers the underbanked communities to transact securely, demonstrating our continued commitment to financial inclusion across BSP and the broader Pacific. Moving on to slide 22, I'll provide a little more color on this initiative. Earlier this year, we launched the OneTalk Wallet, a mobile-first digital wallet that empowers the underbanked communities to transact securely, demonstrating our continued commitment to financial inclusion across Papua New Guinea and the South Pacific. Since the launch, over 75,000 customers have joined OneTalk Wallet, completing more than 280,000 transactions.
This is not only advancing financial inclusion, it's also a pipeline for future BSP customers and a driver of transaction growth. We'll continue to focus on delivering reliable, high-quality service, staying close to our customers, and ensuring BSP remains the bank of choice in the region. Turning now to slide 23. In summary, BSP is delivering consistent growth, resilient returns, and disciplined execution. With 22 years of continued profitability, ROE above 20% for two decades, and a 10-year TSR of 371%, we are indeed the leading financial institution in the South Pacific. We are modernizing, investing, and growing, and remain committed to creating long-term value for our shareholders, customers, and communities. Before I close, I'd like to express my sincere thanks to our staff across the region, without whom this result would not have been possible. Thank you for your hard work, professionalism, and passion for BSP.
This concludes our results presentation for the first half of 2025. Thank you for joining us today, and thank you for your ongoing support.