Chief Executive Officer’s Report

"Credit Corporation (PNG) Limited is fortunate to have a strong balance sheet and we are focusing our efforts on ensuring Credit Corporation is well positioned to benefit from the economic upturn which is expected in 2018."

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Chief Executive Officer’s Report

First of all, I’m delighted to have joined Credit Corporation as the new Group Chief Executive Officer in October 2016.

This may be a new job to me but I have a long association with both Credit Corporation and PNG dating back to 1986 when I was the assistant manager of Indoniu Finance Company Ltd, a start-up finance company majority owned by the French merchant banking group, Banque Indosuez. It was at that time I first met Credit Corporation’s then CEO, Garth McIlwain, and the following year their new Business Development Manager, Robert Allport, both names which many shareholders will know well.

When Rob Allport told me he was retiring after almost 29 years with Credit Corporation, and suggested I apply for the CEO role, the opportunity was simply too good to miss. I’d long admired Credit Corporation and the way it grew from a small finance company in 1978 with shareholders’ funds of around K500,000 and by the time I first arrived in PNG in early 1986 had already grown to become one of the two pre-eminent finance companies in PNG alongside Westpac’s AGC.

Now, Credit Corporation is a diversified public company with over K1.2 billion in assets, operations in four countries and interests spanning its traditional asset based finance through large scale property development and ownership as well as a substantial investment portfolio. This diversification has served the company and its shareholders well providing a natural buffer against cyclical business downturns that rarely impact all three of Credit Corporation’s areas of operation at the same time.

I doubt this has ever been more evident than the last couple of years when a combination of lower commodity prices, an El Nino event and the resultant impact on the economy, which affected Credit Corporation’s finance operations. At the same time, our property operations have been impacted by a combination of lower demand for premium residential property, following the completion of the construction phase of the PNG LNG project and an increase in new apartments constructed in Port Moresby, predominately by Chinese interests.

Despite these downturns our substantial investment in Bank of South Pacific Limited, where Credit Corporation is the fifth largest shareholder with some 7.55% of BSP’s issued shares, has enabled Credit Corporation to achieve a profit of some K99 million largely on the back of BSP dividends and an increased share price.

2017 is expected to be another very difficult year for the finance and property divisions with increased levels of impaired loans, lower overall finance receivables and higher than usual vacancy rates in our property portfolio. We are taking this opportunity to reposition our finance operations with an increased focus on collection and lending activities along with the development of new finance and insurance products. On the property side we are refurbishing properties as they become vacant to be ready to take advantage of the expected increased requirement for premium property when construction of the next LNG train is announced.

We are also actively looking at new investment opportunities on both the finance and property sides to enable us to continue to provide good returns to our shareholders.


Credit House moved into the next phase of its life in 2016 with vacant floors being updated and refurbished ready to be leased to new tenants. We are pleased to have been able to complete the refurbishment of the amenities and three floors during the year, with most of this space being leased by the end of the year.

The building delivered a net profit after tax of K12.06 million for 2016 including the increase in value of Credit House of K14.91 million. The increase in value was attributed to the quick lease up of the available space and positive leasing prospects in 2017.

We aim to complete the refurbishment of the remaining floors in 2017 and believe the building is well positioned in the market to attract good, new corporate tenants.



Era Dorina posted a loss of K9.19 million after tax including the devaluation of K19.52 million in the value of properties in 2016, which is a reflection of the continuing decline of the executive rental market, with rental rates and occupancy levels continuing to fall throughout the year. Forward outlook for the market is expected to remain under pressure in 2017 and most probably into 2018 as well.

Whilst the market conditions are challenging, Era Dorina Estate remains a unique and attractive development in the city and with the ongoing capital expenditure and new services being introduced, we expect to be able to maintain a steady performance in 2017.


Era Dorina, popular amongst executives and families.


Era Matana Stage 1 & 2 consisting of 35 apartments was completed in September 2016 and we believe it is one of the best executive apartment developments in the city. The complex has a large pool and entertainment area, and a fully equipped gymnasium with panoramic views from every apartment towards Ela Beach, Fairfax Harbour or both.

The timing of this development had been scheduled to coincide with the commencement of the Papua LNG project but unfortunately was delayed by 12 to 24 months which affected our ability to promptly lease the apartments. This delay in leasing and the existing market conditions has seen a devaluation of K22.01 million after the external valuation.


Looking forward, we believe Era Matana is a top quality development and this position will be reversed when the apartments are fully let.

Era Matana – Luxury gym overlooking Ela Beach and Fairfax Harbour.

Credit Corporation Head Office staff




The challenges of 2015 have continued into 2016 for Credit Corporation Finance Limited and unfortunately 2017 does not look to be much better. With a continuing softening of the Mining and Petroleum sectors, a severe drought in the Highlands region during 2015, resulting in a difficult year for the Finance company.

Whilst net receivables are down to K224.04 million compared to K265.44 million for 2015, provision for doubtful debts amounted to K13.69 million. The company achieved a net profit after tax of K0.83 million down from K7.49 million on the 2015 result due to increase in provisions. Non-performing assets have increased for the year which was anticipated but with the continuing difficulty of contractors to pay their commitments on time and the further weakening of the PNG economy the arrears position will be under pressure. We have a sound and adequately capitalised balance sheet with a net asset position of K103.20 million. The Capital Adequacy ratio for
2016 was recorded at 33.2%.

2017 will be a challenging year with the current level of economic activity in Papua New Guinea and a highly competitive asset finance market. However, we are confident that we can maintain our market share and continue to maximise shareholder returns.




Credit Corporation Industrial Limited was incorporated in September 2016 as the vehicle to purchase 1.167 hectaresof industrial land along Nigibata Road in Gerehu. We believe this is a prime industrial location as Nigibata Road is currently being converted to a dual-carriageway with direct connection to the new port at Motukea Island via the new Baruni Road as well as to 9 Mile and Waigani off the main Gerehu roundabout.

This purchase is in line with the company’s strategy to diversify the property portfolio and will complement the current commercial and executive residential properties we own.

Design plans are underway to develop an industrial complex of some 5,000 square metres on the site with construction expected to commence in the second half of 2017.
The company is excited to move into this space which we believe will bring a new perspective to the market, as we have done with our existing portfolio.




2016 proved to be a very successful year for our Fiji business, despite weathering the effects of Cyclone Winston which struck Fiji in February 2016. The company recorded an operating profit before tax of K14.02 million for the year, a 7.8% increase on the prior year’s result. A record net profit after tax of K11.03 million was returned for the year, a 6.3% improvement on the 2015 result.


Finance volumes reached a record high of K93.53 million for the year on the back of the continuation of the import into the Fiji market of large numbers of motor vehicles both new and second hand. Good financing opportunities also existed around those local businesses sub-contracting their services to the large infrastructure improvement programs underway in Fiji for the rehabilitation of roads, bridges, wharves and jetties.

Competition in the licensed finance industry in Fiji remains h2 with the introduction of two new players in 2015. Competition has seen finance margins contracting, however the impact in this area has been more than countered by the rising level of finance volumes being transacted.

The company remains in a h2 financial position, with total assets of K187.30 million and  shareholders’ funds of K51.69 million as at 31 December 2016. Capital adequacy stood at 28.9% at year end, comfortably in excess of the Reserve Bank of Fiji’s prudential standard of 15%. The company’s finance book remains well provisioned, with provisions adequate to cushion against any losses which may arise from unforeseen shocks.

2017 looks to be positive for the Fiji business as the Fiji economy gains further momentum and continues its recovery from the challenges of 2016.

Era Matana Stage 2.


Credit Corporation (SI) Limited reported yet another profitable year in 2016, earning an operating profit after tax of K3.72 million, 11% above year 2015. This is another h2 result and reflects the Credit Corporation position as the market leader in the finance market in the Solomon Islands. The company’s financial position continues to remain h2 with net assets of K18.09 million. Credit
Corporation (SI) Limited continues to play a very important role in the Solomon Islands economy since its inception in 2005 by delivering attractive and competitive financial services to individuals and business. It is well positioned to continue the same in the future.


2016 was a good year for our Vanuatu business, as Vanuatu gradually recovered from the effects of Cyclone Pam which caused such widespread damage in 2015. The company’s net finance book grew h2ly during the year and stood at K15.38 million as at year end, having seen a sizeable 33% increase from year end 2015.


There is no doubt PNG is going through some of the toughest economic times since independence in 1975. Credit Corporation (PNG) Limited is fortunate to have a h2 balance sheet and we are focusing our efforts on ensuring Credit Corporation is well positioned to benefit from the economic upturn which is expected in 2018.

Tor Bowen
Chief Executive Officer