Loud, loud and clear, Richard, can you hear me?
Sorry about that. Yes, I can. Sorry, it sounds like the issue is my end. It must have been. I'll try and reset my computer. So I've just dialed in from my phone, so sorry about that. I thought it was you, but it was me. But look, thanks very much for dialing in, everyone. We're very lucky to have Greg Pawson, our CEO of Kina, here to take us through the results presentation. Johnson Kalo is with him as well, who's also CFO. Obviously, you would have seen the Kina result. There was a little bit of reported noise because of the one-off fraud incident that was disclosed during the half.
But if you strip that out, the NPAT growth was around 7% for the half, which was on prior year, which is again very solid. Continues the strong trend of growth this company's had since listing. Company, again, paying a very good dividend. Highlight for me in the result was the continued strong growth, not only in the lending business, but the non-lending areas, the EFTPOS areas, the FX business, sort of the lower risk earnings, lower risk areas of the business continue to expand. And I think that's something that's been missed in the Kina story, is that the business is diversifying and becoming less reliant on pure lending. But that's enough from me. Greg, do you want to just give us a summary of the result, and then we can open up for Q&A? Thanks very much.
Yeah, absolutely. Thank you, Richard, and thanks for the opportunity. The pack, I think, was uploaded to the ASX. Many of you have hopefully had a chance to have a review of that. But as Richard suggested, I'll just give a quick, high-level overview of the result, touch on some of the things that Richard's already mentioned in a little bit more detail to add a bit more color. And then, Johnson, I thought it'd be interesting for him to just give a quick, relatively brief sort of macroeconomic update on what's happening here in PNG, conscious of the fact that you don't get a lot of data on that in Australia. The only time you ever hear about PNG in the media in Australia is when it's negative.
So hopefully, he can put a bit of a positive spin on the outlook. So look, as Richard suggested, a really good narrative for the first half, with the exception of the customer fraud, and I will touch on that towards the end. And a continued and consistent story of steady growth, which was what we were chasing after. And that trend, thankfully, and pleasingly, I should say, is continuing into the second half, with July and August particularly strong. The most pleasing aspect, though, for us, was the growth in revenue, which was up 17%, half-on-half, and that's the strongest revenue result that we've had, certainly since I've been with the organization. And it reflects, I think, the execution and the success of our diversification strategy, as Richard touched on.
But importantly, all six key drivers of revenue are on or above budget. Again, that's a bit of a first. Last year, many of you might know, we had some challenges with FX. We've bounced back with a vengeance this year in that space. If you look at net interest and income, investments, fee income, including digital, FX, as I touched on, and the Kina Investment and Superannuation Services and Kina Funds Management, as I indicated, all on or slightly ahead of budget. Specific call-outs, interest on loans up 16%, half-on-half, digital up 35% and FX up 71%.
And again, these results are a reflection of solid loan drawdown activity, close to PGK 400 million at the close of June, which augurs well for the second half, primarily home lending and SME, with increasingly more activity coming from our expansion of our business and commercial banking team into the key regional provincial locations, which we embarked on a few years ago, across the country. Some reconfiguring of our large exposures pulled back our net loan growth for the half. That came in at about 3%, but we're still forecasting double-digit growth for the full year. Again, current levels of activity are really good. Digital continues to go from strength to strength, and with the deployment of another 1,000 POS terminals over the second half, we're anticipating that growth run rate to continue.
Increased FX flow is a really pleasing outcome and a reflection of some hard work over the past couple of years, connecting with the export sectors, particularly resources, mining, gas, and also the agri sector, coffee, where we've had some terrific results. We onboarded over thirty multinationals in 2023, and we're also seeing increased flows from the state-owned entities, such as Ok Tedi and Kumul Petroleum. The central bank, the Bank of Papua New Guinea, has also been deliberately providing more frequent US dollar market interventions under the guise of the IMF program, and we've been a major beneficiary from that activity. As the second-largest retail bank in the country, we're getting the second highest value of market intervention. So we're expecting this trend to continue through the second half.
Again, July and August have evidenced some good results. And I guess the best outcome for us is that our focus on our less capital-intensive, non-interest revenue lines is now contributing around 50% of our total revenue, which is really pleasing. I mean, wind the clock back five years, pre the ANZ acquisition, about 90% of our revenue was coming from lending. So that's a terrific result. So excluding the extraordinary item, which we disclosed in June, relating to the customer fraud, and I'll talk a little bit about more about that shortly. OpEx was actually up higher, at 27%, and that was primarily due to higher administration and employee costs incurred in the first half, largely seasonal and similar to...
If you've been following us, similar to the trends that we've posted in past years. These front-ended costs include our employee bonus scheme, training and development expenses, ICT-related vendor and software costs, some strengthening of our core infrastructure and cybersecurity, were the major contributing factors, together with a 6% depreciation of the cross rate between the Kina and the US dollar. And most of our software licensing and IT expenses are actually occurred, incurred, I should say, in US dollars. Obviously, that had a negative impact on cost to income, underlying at 58%. That is too high, and it's slightly higher than the first half of 2023.
However, we are confident that this will normalize over the remainder of the year, with some disciplined expense management on what we can control, and a wider positive jaws, so higher growth in revenue than operating expenses, and, of course, from the business momentum that we have. We're targeting a cost to income range of 52%-54% or better for the full year, and we're taking a relatively conservative position. Obviously, we will aim to do better than that. Our NIM, our net interest margin's holding firm at 5.6%. Carving out the loan book, we had a slight improvement to the loan book at 7.2%, and we've actually just recently lifted our indicator lending rate by 25 basis points due to a deliberate tightening of monetary policy here in PNG by the central bank.
Once again, under the guise of the IMF program, and it's a, an attempt really to mop up, some of the surplus, excess domestic liquidity now that the government's raising more of its fiscal, budget funding onshore. Wholesale deposit rates have moved up slightly, but not at the expense of NIM. The upside for the remainder of this year is really on government securities and Treasury bills. Those yields have increased markedly from around 3% at the beginning of the year to around 7% for one-year bonds, and, Johnson will touch on the rationale behind that. We've got a investment portfolio of about PGK 1.2 billion, which is obviously set over a number of different tenors.
I think around 350 million of that will move into those high yield investments over the balance of this year. And as I mentioned, this is primarily due to the PNG Treasury deliberately raising more funds from the domestic market as opposed to offshore. So it really augurs well, I think, for our earnings on investments as we reset them at some of these high yields, as I just mentioned. Overall, deposits were up 8%, half-on-half, and, again, not a great deal of pricing pressure coming through. And I think, you know, we're perhaps remain the envy of the Australian banks, being still flush with liquidity, with a deposit to loan ratio of around 150%.
So the underlying NPAT impact result was up 7%, close to PGK 50 million, and statutory down 9% to PGK 42.2 million, impacted by the non-lending loss, which we disclosed in June, of PGK 7.4 million after tax. ROE at 15.6%, underlying, sorry, at 15.6%, statutory at 13.2%, and we're expecting to further improve on that over the balance of this year. Earnings per share came in at PGK 0.055, and dividend per share of PGK 0.04, which again, is consistent with previous years. A couple of important items before I hand over to Johnson, that we have disclosed, but I thought it would be good to give you an update on.
Firstly, the corporate tax rate for the banking sector was increased in 2023 from 30% to 45%. It was, at the time, positioned as a short-term budget fix, but it's rolled into 2024. At the request of the PNG government, though, and Treasury, the PNG Bankers Association, which I actually chair, we commissioned KPMG to prepare a report on the economic impact and to seek a repeal of that higher tax rate. This report's nearing completion, and it'll be socialized with key government stakeholders, including the IRC, over the next sort of four to six weeks. So I think the upside here, of course, is that the tax is certainly not gonna go up, but we would hope is more likely to come down.
Perhaps not straight away to the previous rate of 30%, but we're hoping a marked reduction from where we are at the moment. And obviously, we've done as much as we possibly can structurally to 'cause the tax only applies to the banking operations of KSL, and about 15% of our revenue is actually earned from Kina Funds Management and fund administration, which we've been able to carve out. So the actual rate is about 40%-42%, I think, that we're incurring at the moment, and there's some further work on our organizational structure that we're working on as we speak. The second item is to the recent customer fraud we announced in mid-June.
That was really disappointing, and it was really unfortunate, but I would reiterate that it was an isolated incident involving a very small group of customers. While the provision we recognized was a worst case scenario, the recovery action's actually well underway. And this comes down to insurance. We're insured for these types of events, fully insured for these types of events. Potential third party liability for the organizations that were involved, and of course, the perpetrators themselves, and we've already been able to recover around PGK 2.5 million of that. So we're well advanced with the proceedings, and the insurance claim has been lodged, and obviously anything in relations to those recoveries will be reflected in our full year results.
But it is important to note that there was no exposure to our core infrastructure, and the event was not at all cyber-related. So look, regardless of those two factors, we think our forecast guidance is solid, and we're excited about our continued prospects for the year ahead. We have some significant technology enhancements set to launch over the second half. These include DigiBanker, our retail new account onboarding app. 40% of our new accounts for the first half of this year were successfully onboarded digitally, with no human intervention whatsoever. And we're aiming to lift this to 80% over the next 12 to 18 months. We have a significant upgrade of our mobile banking app to facilitate self-service, the introduction of the Kina Digital Wallet and virtual debit card.
There's no Apple or Google Pay in PNG, so we're hoping to fill that void. A new market leading corporate online banking platform, in conjunction with our strategic partner IXL. Our Pei Beta payments platform, which is designed to reach considerably more of the market through digital touchpoints than to those customers that only bank with us. It's sort of modeled on BPAY, and we think there's quite a big market opportunity there. And XChange, another first-in-market with a white label, I should say, independent mobile app for personal remittances. And again, that's been modeled off global giants Revolut and TransferWise. We've also partnered with two quite prominent local fintechs that have been commissioned to digitize the government and local authorities, NiuPay and SNS Tech.
They build the customer experience and e-commerce interface using our payment gateway. We're really excited about that opportunity moving forward. We've already dropped that into the ICA, the Immigration department, and the Lands Department, and NiuPay have just won a tender to do the same for the Inland Revenue Commission. So on that note, before I lose my voice, I might just hand over to Johnson, just to touch on some of the macroeconomic indicators for the country at the moment.
Thank you. Sorry. Thanks, Greg. Just on the macroeconomic indicators, GDP growth projections for this year is 4.6% growth. That's in the last recent past; it's been about 2.4%, but the higher estimation for this year is due to the Porgera Mine resumption. That's the Barrick-run gold mine. On the non-resources sector GDP, which excludes the resource sector impact, this is the sector that's been driving the economy over the past three years, actually, and it's averaging about 4.5%. This year, the forecast is for about 4% again. This indicates strong demand in the retail and wholesale sector, which Kina Bank is actively lending into.
In terms of inflation, the headline inflation average is about 4.3% over the past three years. This will edge a little bit higher to 5% this year. This is consistent with PNG's historical inflation rate average, and like everywhere else, high commodity prices are impacting prices in the domestic market in PNG. In terms of the projects, you will have heard of the three large projects coming up. The Papua LNG project, which is the joint venture between ExxonMobil, Total, and Santos, was last announced to start in the first half of 2025, but now we are getting mixed messages that from the project partners, that the final investment decision is out to 2026 now.
Wafi-Golpu, which is a large gold mine, is nearing government approval and is also expected to go into FID early next year. These will be the first cabs off the rank for a line of major gas and mining projects, which would see a potential decade of unprecedented growth for the PNG economy, with FDI flows exceeding about $35 billion for those projects. The government's fiscal situation have been in a fiscal consolidation mode. The deficit, sorry, has been slowly managed by government and is actually trending in the right direction. It's 5.5% of GDP for the past three years. It's now forecast to reduce to just under 4% this year, and the government has been aiming to have a balanced budget by 2027.
As you may have heard, the Prime Minister's just survived a vote of no confidence. This all is well for stability and continued fiscal consolidation to meet the balanced budget target in 2027 . On the interest rates, which Greg mentioned briefly earlier in his commentary, the government treasury bill rates have been increasing substantially this year. The one-year treasury bill rate is up almost 100%. It's now trading at above 7%. It was formerly down at about 3% earlier on in the year, and at the end of last year.
The auction results have indicated that the bargaining power currently sits with the bidders or the investors, and we're anticipating that government may look to increasing funding, which means we may see this rate go a little bit higher as we close out the year. On the FX situation, in the short term, this has been a cause of concern for some importers, but with also the probable effects of imported inflation. However, during this period, the PNG kina has been crawling downwards. The Aussie dollar against the US has been also under the 70-cent mark. So this translates actually to a PGK-Aussie dollar cross rate of about 38 cents to the PGK Kina throughout 2024, and this has sort of been hovering around that mark. So the PGK-...
Aussie has actually remained relatively steady, because of that movement against on the cross rates against the U.S. In terms of the PGK outlook, against the U.S, though, we anticipate a slow, continued slow or crawling depreciation of about 3.5% towards the end of the year. Thanks, Greg.
Great. Thanks, Johnson. So, Richard, we'll leave it there, and happy to take any questions that the team might have.
Yeah, I've got a question, Greg. So just doing some basic math, you're talking to sort of 350 mil of bank investments within the government rolling by the end of this year, and moving from sort of 3% to 7%. That sort of calculates out at about 15 mil, or 14-15 mil pre-tax. You know, you've obviously guided to sort of low nineties result this year, but into next year, that's gonna give you almost maybe 7% natural growth before you factor in the rest of the book rolling. Is that a fair comment? Am I being too optimistic there?
Yeah, no, that's a fair comment.
Right. Okay. So that's really positive. And is there confidence, Johnson, that new. You mentioned the government looking to do more funding domestically. Is there anything to think that the rates will come off again quickly, like they did in the last couple of years? Or are you confident that the demand of government for that additional liquidity to mop it up, we'll see rates stay around that seven? How are we. Tough to always call these things.
Mm-hmm.
But any gut feels on it?
No, I think the indications are at this stage, the government does have a lot of, you know, especially with project activity coming up, that does have a lot of investments to make. And there's always the, you know, the, those fundamental sectors around education, law and order, public utilities and the like, which are always heavy budget-consuming sectors, and that's going to continue. The government always has a need for that. I think the work that's being done with the IMF at the moment is sort of guiding the government towards balancing its exposure to debt between foreign and domestic. So I think there will still be demand for domestic debt by the government.
Yeah. I would only add that the government's actually been quite vocally opposed to the currency, the cross rate currency, particularly against the U.S. dollar, or more so against the U.S. dollar depreciating, because you know, they have a reasonable amount of debt in U.S. dollars, which would obviously increase the cost of servicing that debt, and I think that's one of the reasons that they're now looking to fund more domestically. As I mentioned, the market's still a lot of excess liquidity in the country at the moment. So you know, at those sorts of rates, they're gonna have no problem raising funds, that's for sure. There's also a significant amount of development aid coming into the country at the moment.
I mean, the IMF now have a permanent office based here with about thirty staff. They used to facilitate all of that out of Washington, but they're now firmly on the ground.
Just checking if people have questions, 'cause I've got some, but I don't want to dominate the call. If you've got a question, please go ahead.
Greg, you mentioned the rollout of new digital products in the second half of the year in particular.
Mm-hmm.
I'd be interested in you talking about the competitive environment into which you're delivering those products. Is Bank South Pacific anywhere to be seen?
I would say no, not that we're aware of. I think that they have expressed some concern about... Our strategy is deliberate. We wanna be a first mover with these types of products, and we're able to partner... You know, we've got some really good strategic partners helping us, which enables us to be just a little bit more nimble and flexible. Whereas, I think BSP's strategy is more controlling their own destiny and doing all the these things themselves. They dropped in a new core banking system about twelve months ago. We believe they're still having some issues with that, so that's sort of playing into our favor at the moment. Westpac, don't... As most of you would be aware, they tried to sell their business once to us, a couple of other times.
They recently announced that they're staying. We think that decision was for geopolitical reasons, but we don't see them as an active competitor. We rarely cross paths with them, and certainly from a technology perspective, their infrastructure, I know this from my years there, is very aged, and their digital capability is relatively benign as well, in comparison to ours.
Greg, where are you seeing? Can I ask, just where are you seeing the greatest growth potential across the business? You've consistently, since IPO, delivered that 10%-20% lending growth.
Mm.
You're obviously getting bigger, which might make it a little bit more difficult. You're showing really good progress in some of your digital initiatives. Then FX has had a bumper year. You've mentioned building out relationships there and going into new areas. Is there any particular area of the business you're feeling most strongly about, or is there emerging areas that we're not considering on the growth front?
No, I think it's a combination of everything. You know, I spoke about the six kind of key drivers of revenue coming from, you know, lending, our investments portfolio. Because of the excess liquidity that we've got, we've got to park it somewhere, and we're running our exchange settlement account on the smell of an oily rag for that reason. We're seeing, you know, good growth and fee income in digital. We again expect that trend to continue. I mean, you're right, those growth rates will come off as we get more scale, but there's still a massive gap between us and BSP in terms of market share. You know, they're still hovering around 65%. We're sitting at around 17%.
We've got an aspiration to get to 25 over the next sort of 3 to 5 years, and that's just by being sensible in terms of growth. So it's more of that, and I think we've got a really strong team, particularly in business banking. We established a corporate advisory services team, again, about 18 months ago, and we're starting to reap the rewards of that. I think I mentioned, you know, we've onboarded 30 multinationals. Well, multinationals would not normally deal with a financial services institution that doesn't have an external credit rating. But we've been able to leverage the fact that Asian Development Bank are our third biggest shareholder, triple A investment grade, stronger than the, you know, the Australian commercial banks.
That's given us some really good credibility, and hence why, you know, they, they're happy to give us more of their export receipts in terms of FX flow. So I think it's more of the same. The key is just around execution and productivity. Our cost to income ratio isn't where we want it to be, and I think the adjustment for that, we're sort of at the tipping point, where we feel in our forecast, we will be growing revenue at a much stronger rate than we will be our operating expenses.
We'll still be, you know, spending in terms of CapEx, but as you know, that comes back in terms, insofar as amortization is concerned, and we have an internal trigger for that, that it can't exceed, I think it's 10-15% of our operating expenses at any one time. That enables us to spend around PGK 30-35 million a year, and we haven't done that, by the way, with even dropping some of these technology stacks in. But yeah, I mean, the future prospects for us, particularly in the provincial locations—'cause it was interesting in that half year result, we've invested in the key regional areas. We've dropped, you know, well-qualified business bankers.
Not most of those we've hired offshore from markets like Malaysia, Indonesia, the Philippines, because they're accustomed to working in emerging markets, and frankly, they're a little cheaper than bringing people in from Australia and New Zealand. A very experienced team, and I've been really pleased with the traction that they're getting in terms of building relationships and loan pipeline, because in many of those locations outside of NCD, the National Capital District, which is Port Moresby, and Lae, which is the biggest commercial center, BSP have been the only bank in town. Westpac in some of those locations, but again, they're not really doing anything. So, you know, we bought the ANZ branch network for that reason, but we hadn't really switched that element on.
I think there'll be some great growth coming from that, but it'll be a combination of lending and everything that comes with having a full banking relationship from that sort of commercial segment of the market, which is very, very big in PNG.
Just a couple of random questions, but I'll ask them anyway. You were talking about raising a Tier 2 bond to support growth.
Yeah.
Just realizing that you mentioned the risk-free rates, which are gonna benefit you, have gone up in PNG.
Mm-hmm.
Does that change the economics of you issuing your own bond versus government yields that are now more attractive?
No, not really at this point, because the main investors that we'll be targeting for the corporate bond are the superannuation funds, and they've got surplus liquidity of about PGK 2-PGK 2.5 billion at the moment. What's important for them is diversification in terms of their portfolio. So, you know, we were thinking that the bond would land at around that level, around sort of 7%-7.5%. We're just finalizing the prospectus, I should say, for that, with the Securities Commission here in PNG at the moment. We're hoping to take that to the board at the end of this month, actually, in draft for approval to move to the next stage.
But, you know, the fact that there's so much liquidity, the fact that the funds are driven by diversification, I think will play in our favor to a certain extent. There's another piece we're looking at as well around. We do have a bit of an issue, I touched on it, in terms of net loan growth in the first half. We're recalibrating some of our larger exposures at the moment. So there's a regulatory requirement here that no more than 40% of our total loan portfolio can be larger than PGK 55 million, which is where our large exposure limit is set, 'cause it's a percentage of your capital base. So the bond will help that because we can lift it slightly, but that's the real sweet spot for us.
So one of the possible opportunities there is around securitization.
Uh-huh.
Through our Kina Funds Management business, we have the ability to be able to potentially pull together a tranche of loans, sell those into the market, invest that cash, and then re-lend and fill up that sort of large exposure base. It's a great segment of the market, because it's not price sensitive at all. Yeah, there's a few things on the board at the moment we're considering.
Johnson, just on some of the big projects that are getting pushed out, what's the primary reasons for the delays? You know, when does the government start getting a bit more urgent about getting these projects moving, which are obviously beneficial for everyone?
My read is that there's a couple of reasons. One is probably on a global scale, just funding for projects in the natural resources sector is probably a little bit more difficult to negotiate now than, you know, than it was in the past, say, 10, 15 years ago. So there's that squeeze on. And in terms of the government, the government has also sort of changed its approach a little bit to now trying to also participate in projects via equity. So the negotiations for those are also probably becoming a little complex and a little bit more involved for all the parties involved. So that's probably the reason why they're sort of starting to extend the dates a little bit.
You know, the intention or the stated intention is that, you know, over the next, at least the next ten years, we will have these three projects started and already in train. You know, I think we're all still positive about those prospects.
Just seeing if people have got any more questions for Greg and Johnson. I'll just cover one more. You've always come... you've mentioned costs, you mentioned front-ending costs. You've always come home with a wet sail, but the delta this year is quite big to come, and you've reaffirmed guidance. So not saying you can't get there, but maybe just address the people on the call why it's a bigger delta this year than maybe in prior years. Obviously, we understand FX headwinds from the U.S., but was there more one-off costs in the first half than previously?
Well, in the first half, we... Or let's say in the second half of last year, all through last year, we've been working on a strategy to for engagement and productivity enhancement in our workforce. So we put in, or we funded and invested in some initiatives to really improve the training and the engagement activities for our people. So that's contributed a little bit to that. We also did have early on in the year, we did have a security incident in Port Moresby, which you'll recall was, well, that was all over the news and social media, and we did have to take on some unbudgeted costs in terms of security for people and assets over the few days or week that issue existed.
We've also, you know, in preparation for our internal digitalization initiatives, we've from an accounting and a finance point of view, we've taken steps to clean up a lot of legacy items in our books, and that contributed a little bit around about 2-3 million PGK worth of costs in just provisioning for or writing off legacy issues in our general ledger. And so those are things that we had planned to do over the course of this year, and unfortunately, we also ran into the difficulties with the fraud incident. So, you know, preparing ourselves for the years to come in terms of being ready for digitalization still takes investment.
That's the reason why, you know, we, well, we did blow out a little bit in our cost-to-income ratio for the first year, for the second half, or the first half. But we're very, very committed to getting into that mid-fifties to the low fifties percentage range. You know, it's not only gonna be a cost effort, albeit it will be very strong. We'll, you know, be absolutely very, very selective about our second half costs and commitments, but, you know, there'll be a strong push also on the revenue side to get that jaws out to the right, back to that extent that we were enjoying earlier on.
Just on that, Johnson and Greg, I'm interested in your comments in relation to the reconfiguration of loans, which resulted in some suppression of the loan growth in the first half to 3%. Could you just share some insights with us in relation to that, and also the confidence that you have in the return of loan growth to double digits in the second half?
Yeah, it was a timing issue, really. So we had a recalibration of some large exposures. We need to manage it quite delicately. We can't go over that 40% threshold, and we've been banging up against that for some time. But we had the opportunity to onboard some better risk-graded commercial clients that we classified as large exposures and exit those lower risk-grade customers. There's obviously a provisioning advantage in doing that, which in this instance was quite material. So that happened in the first half. But the customers that we were exiting left before the new ones came on board, which occurred post 30 June.
Which is why, in terms of, you know, momentum with our pipeline and certainly drawdown activity over July and August, yeah, we're forecasting growth somewhere around where we landed last year, which was in the double digit territory. Had that recalibration not occurred, the result would have been probably in the order of sort of 9%, 8-9% growth.
Thank you. That's, that's very clear. Thank you.
Just a couple on the bits and pieces. So you sound like you're pretty confident on recoveries from your insurance for the cyber claim. Do you think that will be likely completed before the end of this financial year? I.e., do you think we'll be reversing the one-off hit we've taken to earnings and potentially, you know, reversing that, so you're into profit, that one-off hit? And there obviously the government's making you do a bit of work, Greg, as chairman of the Bankers Association, getting that report together. Are you optimistic you'll get an outcome, a favorable outcome, potentially?
Or, you know, maybe not tack straight back to where it was, but given the work you've done, their willingness to listen, do you think there's potential for a more favorable outcome than the status quo there?
Yeah, I'll start with that one. So, look, I would hope so. And the advantage, obviously, of lobbying this as an association, draws in the other commercial banks, ANZ, Westpac, BSP, and that's working very well. And then two new organizations have just been granted commercial banking licenses, not really competitors. One was formerly a building society for teachers. It's very, very small, and the other one is Credit Corporation. Again, they don't have a banking business at the moment. They've got an asset finance portfolio, which is about a third of what they do. The other third is BSP Shares, which is where they make most of their money off the dividends, and the other third is commercial, residential, commercial property.
Mm.
So that's a bit of a confusing business model. But so yeah, I think that's looking okay. And we were actually prompted by the Prime Minister and the Treasurer, and we think IMF have got two or three consultants working with the PNG Treasury at the moment. And hence, the unintended consequences of overtaxing one sector of the market, particularly the financial services sector, which the entire economy is dependent on. So that seems to be resonating now. Timing-wise, we need to get this in before the 2025 budget submissions, and that occurs mid to late October. Hence, we'll be pretty busy with stakeholder meetings from now through until then. You never know which way that's gonna go.
The only thing, as I've said, in my spiel, is that we're very confident it's not gonna go up. It'll likely come down, but I don't think it'll go back to 30% overnight. I think possibly in a staggered way. In relation to the fraud, so, it's not cyber, so nothing to do with cyber. It related to an independent API that we built outside of the national payment system here in PNG, with MiBank, who we have a strategic ownership in. We own 15% of them, and it was a transfer of funds through via that API, from Kina to MiBank, where the fraud occurred and wasn't detected for some period of time. Insurance claim is in... we can't say the timing around that.
We're hoping, obviously, it will be a favorable response, but whether it's all completed by the end of this year, that would be nice, or not, we're not quite sure at this point in time. And then the other recovery action is ongoing. I mentioned we've recovered, I think, about PGK 2.5 million from the perpetrators and assets that the perpetrators had acquired. And then there's an investigation that we've commissioned EY to do around third party liability for those vendors that were involved in helping put together that particular piece of API technology. So hard to say, but, you know, we've taken the worst case scenario in terms of the provision.
We've gained a little bit back from that, but it would be nice to gain as much as we possibly can by the end of the year through the recovery proceedings we've got underway. And obviously, the management team have been given a pretty stern message to drive that, recover that through revenue growth as well.
That might be a good way to leave it. Is there any final questions for Greg and Johnson? Thanks very much, Greg. We also appreciate that macro view. That was excellent, 'cause it is difficult to get data. But, you know, obviously, you know, I think the major takeaway for me from this meeting is the second half is always for Kina, coming home with a wet sail. And then there's the benefit of the rising interest rate environment on government bonds in PNG, which will also be supportive of earnings. So, thanks very much, Greg. We appreciate your time, and yours, Johnson, and looking forward to chatting to you again soon.
Absolutely. Thank you. Thanks, Richard, thanks, Dave.
Thank you very much.