#1小 X SHAREHOLDER PRESENTATION FY 2018 and Q4-18 Results Group CEO - Robin Fleming BSP#2Disclaimer NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES This presentation has been prepared and issued by Bank of South Pacific Limited (the "Company"), and may not be reproduced in whole or in part, nor may any of its contents be disclosed to any other person without the prior written consent of the Company. This presentation is provided by the Company for general information purposes only, without taking into account any recipient's personal objectives, financial situation or needs. It should not form the basis of or be relied on by the recipient in considering the merits of any particular transaction and does not purport to contain all of the information that an interested party may desire. It is not an offer to buy or sell, or a solicitation to invest in or refrain from investing in, any securities or other investment product. 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FY 2018 and Q4-18 Results BSP 2#3Where BSP operates BSP is the leading financial services provider in the countries in which we operate BSP PNG Geographical Footprint KEY Branches Sub Branches ● FIJI Labsse Twen Serav Nabowalu . SOLOMON IS. # 1 Vanimo Aitape WEST SEPIK Wewak 1 EAST SEPIK MADANG 1 Porgera 1 WESTERN HIGHLANDS Banz 1 2 Madang MANUS Lorengau VITI LEVU Kavieng NEW IRELAND Suva Sua Central Lihir Bismarck Sea Tabubil ENGA Wabag HELA JIWAKA Tari Mt Hagen 1 0 0 Kiunga Mendi HIGHLANDS SOUTHERN Kundiawa Goroka Moro CHIMBU Kainantu MOROBE Lae LAE EASTERN Kikori HIGHLANDS 2 6 Bulolo WESTERN 2 Balimo Gulf of Papua GULF Kerema Daru Namatanai Rabaul Kokopo EAST NEW BRITAIN Balla Buka WEST NEW BRITAIN Kimbe Popondetta NCD NORTHERN 0 PORT MORESBY A CENTRAL FY 2018 and Q4-18 Results Solomon Sea Alotau MILNE BAY - AROB Arawa CAMBODIA Arlong Veng Stung Treng Angkor Semp Pusang Luong Kampong Cham Qudong Phnom Penh. COOK IS. Aituta Manuee " Mitiaro ABU Maule SOUTHERN ISLANDS Rarotonga Mangaia Honiara Point Cnat Rarad SAMOA Apia Salelloga # 1 Vaitelei TONGA Nuku'alofa Espirita Santos VANUATU PORT VILLA Loan market share in 5 countries Deposit market share in 5 countries POMSOX Share Price of K10.30 as at 22- Feb-19, Market cap of K4.8b BSP 3#4BSP's growing service offering BSP is the only wholly owned Papua New Guinean bank with operations across the Pacific and in South East Asia Papua New Guinea Fiji Solomon Islands Samoa Cook Islands Vanuatu Tonga Cambodia + Bank Bank Bank Bank Bank Bank Bank BSP'S TOP 10 SHAREHOLDERS Finance Finance Finance Rank Name % Held Finance 1 Kumul Consolidated Holdings 18.0% 2 Nambawan Super Ltd 12.3% 3 Petroleum Resources Kutubu Ltd 9.9% Life Life 4 National Superannuation Fund Ltd 9.7% 5 Credit Corporation (PNG) Ltd 7.1% 6 Motor Vehicles Insurance Ltd 6.7% BSP Capital KEY New business in 2017/2018 7 8 9 PNG Sustainable Development Program Ltd 6.2% Fiji National Provident fund 5.1% Teachers Savings & Loan Society Ltd 3.3% 10 Comrade Trustee Services Ltd 2.7% FY 2018 and Q4-18 Results BSP#52018 highlights The BSP Group continues to perform well with 2018 NPAT up 11.5% to K844m. Further, the 2018 result represents three [3] consecutive years of double digit profit growth. Profit (NPAT) up 11.5% to K844.1m Capital adequacy marginally lower 22.9% GROUP NPAT TREND [km] Total Income up 8.4% to K2.16bn Loan provisions down to 4.7% Total Assets up 3% to K23.0bn ROE up 30.7% Cost to Income ratio improves to 41.0% Dividend yield up 12.3% GROUP INCOME AND EXPENDITURE TRENDS CAGR = 16.6% [km] 844.1 757.0 Total income 643.5 Total expenditure [excl. tax] CAGR 531.9 1,998 2,166 1,792 1,547 11.9% 7.5% 781 868 930 970 2015 2016 2017 2018 2015 2016 2017 2018 FY 2018 and Q4-18 Results BSP 5#6Group financial KPI's BSP Group has maintained strong results across all key performance ratios COST TO INCOME ROE & ROA 29.6% 30.6% 30.7% 27.8% 44.7% 41.0% ROE ROA 42.9% 42.6% 3.1% 3.3% 3.5% 3.7% 2015 2016 2017 2018 2015 2016 2017 2018 CAPITAL ADEQUACY PROVISIONS TO LOANS / NPL TO LOANS 4.9% 4.9% 4.9% 4.7% 3.2% 4.1% 3.3% 3.1% 12% 22.9% 1.7% 1.9% 19.0% 19.8% 21.3% 19.8% 1.4% 1.3% 2015 2016 2017 2018 Tier 1 Tier 2 CB requirement FY 2018 and Q4-18 Results 2015 2016 2017 2018 Provisions to loans NPL to loans BSP 6#7Group financial KPI's Balance sheet indicators illustrate continued growth in 2018. LOANS [Kb] TOTAL ASSETS 12.5 11.2 [Kb] 22.4 23.1 10.1 20.8 18.2 8.6 CAGR = 13.5% CAGR = 8.1% - 2015 2016 2017 2018 2015 2016 2017 2018 DEPOSITS DEPOSIT MIX CAGR [Kb] 16.9 17.9 [Kb] 18.2 14.6 4.1 4.5 4.3 12.7% 3.0 CAGR = 7.8% 11.6 12.8 13.4 13.9 6.2% 2015 2016 2017 2018 2015 2016 2017 2018 Demand Deposits Term Deposits FY 2018 and Q4-18 Results BSP 7#8TOTAL ASSETS CONTRIBUTION [km] Contribution by business All countries have contributed positively to BSP's NPAT and total asset growth. NPAT CONTRIBUTION [km] 844 52 7 7 6 3 10 6 2 2 757 22,370 20 Dec 18 Profit (Km) Cook Isl Vanuatu Samoa Non Bank Business Tonga Sol Isl Fiji Bank PNG Bank Dec 17 Profit (km) FY 2018 and Q4-18 Results 107 187 167 23,050 58 57 43 41 Samoa Tonga Sol Isl Non Bank Business Fiji Bank Vanuatu PNG Bank 2017 Assets (Km) 2018 Assets (Km) Cook Isl BSP 8#9Income stream trends Total income increased by 8.4% YOY, notwithstanding more subdued economic conditions ... despite BSP reducing/removing its fees in recent years. Net interest Fee/ income FX income Other Total KEY DRIVERS commission income income YOY: 8.1% 2.7% 13.9% 24.1% 8.4% CAGR 11.6% 2.9% 11.2% 14.4% 9.9% GROUP INCOME STREAMS [km] 1,381 1,278 1,108 384 362 374 254 276 314 68 71 89 2,166 1,998 1,793 Net interest income Fee and commission FX income Other income Total income FY 2018 and Q4-18 Results 2016 2017 2018 Interest income - loans, T- bills/I. Stock Fees & commission - Channels income, lending fees, service charges FX Income Forex - Other Income¹ - Life Fiji income, operating lease Key: = CAGR compound annual growth rate [2016 to 2018] YOY = = year on year Note: 12018 other income includes one-off aircraft insurance recovery BSP 9#10Expenditure trends Total costs rose marginally [4.1%] in 2018... below the three year average of 4.8% per annum. Computing costs grew by 10%, which is in-line with our digital strategy and core banking replacement Staff costs Admin costs Premises/ equipment cost Computing NLL Total KEY DRIVERS operating costs Staff Costs salaries, YOY: 2.8% (10.9%) training, additional staff, 6.9% 10.1% 64.8% 4.1% staff rentals CAGR 6.5% (6.3%) 7.7% 23.5% 13.8% 7.4% Admin Costs marketing, GROUP EXPENDITURE Telco, VAT 887 [km] 852 Premises costs buildings, 770 382 372 337 184 123 141139 158 172 164 149 108 26 20 33 Staff costs Administration costs Premises and Computing equipment Non lending losses 2016 ■2017 2018 FY 2018 and Q4-18 Results Total operational costs depreciation, generators, electricity Computing Costs - software maintenance, licenses, data links Non Lending loss deficiencies, fraud, write- offs [one off write-offs, e.g. loss of aircraft] BSP 10#11Market strength BSP's loan and deposit portfolios are predominantly PNG domiciled. During 2018, BSP Samoa improved to #1 in both its loan and deposit market share. LOANS MARKET SHARE [2018] PNG Solomon Islands Rank DEPOSIT MARKET SHARE [2018] 61% #1 PNG 56% #1 Solomon Islands Tonga Cook Islands Samoa 42% #1 Cook Islands 39% #1 30% #1 Fiji 25% #2 Vanuatu 16% #4 Rank 61% #1 52% #1 44% #1 + Tonga 40% # #1 Samoa 30% #1 Fiji 23% T#2 Vanuatu 13% © #4 LOANS PORTFOLIO COMPOSITION DEPOSIT PORTFOLIO COMPOSITION [2018] [2018] PNG 64.2% PNG Fiji 22.3% Fiji 16.0% Solomon Islands 4.1% Solomon Islands 5.7% Tonga 2.2% Cook Islands 2.4% Tonga 2.0% Cook Islands ■ 1.6% Samoa 2.6% Vanuatu 2.3% Vanuatu 2.5% Samoa 3.3% FY 2018 and Q4-18 Results 68.8% BSP 11#12Chanel growth Continued channel investment to improve service levels across the BSP Group Branches BSP Bulalo Sub Branches }) BSP Total + 83 46 17 8 3 2 3 4 45 43 0 0 0 0 0 2 TVI BSP ATMS 529 314 118 30 22 9 23 13 EFTPOS 13,042 9,203 1,863 341 405 402 427 401 BSP Agent KATOS GENERAL STORE Agent 591 372 45 75 37 9 29 24 FY 2018 and Q4-18 Results BSP 12#13Digital initiatives BSP will continue to enhance customer experience... largely through digital investment BSP's track record BSP was the first bank in PNG to pioneer multichannel experiences across PNG when ATMs, EFTPOS and debit Cards were introduced in 1995. BSP received global recognition in 2012 for the Tablet technology, with an International Award for The Best Bank-led Mobile Money Programme. SMS Banking (PNG) Mobile Banking + GPRS EFTPOS Terminals (PNG) Wantok Moni (PNG) & Mobile Banking & Branchless Banking SI Over the years, BSP's innovative processes and technology, continues to bring leading digital banking services to the Pacific with our Group Digital Strategic Business unit established in 2018 Airline Ticket Payment Mobile App Fiji Group Digital Banking Unit Established. Mobile App OSB 1995 2009 2010 2011 2012 2013 2014 2015 2017 2018 2019 2020 ATM + EFTPOS + Debit Cards (PNG) Mobile Top Up on SMS Banking & ATMS (PNG) FY 2018 and Q4-18 Results Mobile One-Touch Computer App (PNG) Technology (PNG) EMV chip cards with "touch-and- go" (PNG) EMV chip cards with "touch-and- go" (OSBs) BSP 13#14BSP and the community.... Our corporate social responsibility ... 2018 support was over K8m in cash and kind. APEC CEO SUMMIT 2018 PAPUA NEW GUINEA Our Community Project of "Solar Light Installation", enabled BSP to deliver 45 projects to the value of K1.16m in PNG in 2018... and offshore branches to the value of K148,000 PEC APEC APEC APEC A APEC APEC HOOL KRIKET Sponsorship K1.8m NBSP WBSP ESP 37% Sport ET Yalanda Vilage 62% Conferences 87% 9% 4% Solar in Schools Health Support Disaster Relief BSP Bank of South Pacific Limited PAPUA NEW GUINEA 2018 EARTHQUAKE DISASTER RESTORATION TRUST ACCOUNTA 09/03/2018 K1000,000.00 Donations K2.7m 37% Disaster Relief 22% Health 21% Charities FY 2018 and Q4-18 Results 381 Projects delivered since 2009 K8.96m in project value from 2009 - 2018 BSP 14#15Growing PNG's middle class wealth Our home loan products, particularly the FHOS, are providing Papua New Guineans with the opportunity to grow their personal wealth and consequently greater future financial freedom / security Attractive 4.00% per annum rate over a 40 year loan term for a K400,000 loan, this reduced interest rate would save a borrower K2,300 in interest costs per month, or K27,600 per annum when compared to a standard variable rate home loan FIRST HOME OWNERSHIP SCHEME LOAN 2017 2018 Change Accounts [No.] Balance [km] 549 737 34% 161.0 225.0 40% HOUSING LOANS 2017 2018 Change Accounts [No.] Balance [km] 1,217 1,364 12% 255.9 312.4 22% Thank you BSP! BSP Home Loan helped us to purchase our first house. David Jonah First Home Buyer A range of home loan products for first home buyers and existing home owners. FY 2018 and Q4-18 Results BSP 15#16Delivering greater value to customers Zero fee increases since 2014 and forgone fee income in the order of K40.2m per annum in 2018, due to fees reduced or waived ... ... since 2014, we estimate that the cumulative annual fee income forgone will increase to just under K50m in 2019. Zero fee increases since CUMULATIVE REDUCTION 2014 2014 to 2017 forgone fee income = K35.7m 2014 to 2018 2014 to 2019 forgone fee income = forgone fee income = K40.2m K49.8m 2014 2015 2016 2017 2018 2019 2020 FY 2018 and Q4-18 Results BSP 16#17BSP Group strategic focus In 2019 BSP will focus on developing and executing its Digital Strategy and the implementation of its new Banking system. It will also be maintaining its geographic and service diversification strategy. Pacific Islands Regional Digital Strategy and PNG Banking Innovation OSB Market Strategy PNG General Insurance, and Life Insurance expansion Growth acquisitions in Pacific and Southeast Asia Region Successful implementation of Core Banking system replacement over a three [3] year timetable Continue innovation through digital strategy Monitor acquisition opportunities in the Pacific Develop capabilities in new product segments, and refresh capabilities of existing e-products Achieve ROE/ROA targets PNG General Insurance - evaluate longer term potential for general insurance and enter market through appropriate model. Life Insurance - expand BSP Life PNG's product range - Mekong Delta – progress further market entry opportunities Consolidate leadership position in existing and new Pacific markets Grow and geographically diversify BSP's network FY 2018 and Q4-18 Results BSP 17#181 Conclusions 2018 was an outstanding year with NPAT increasing by 11.5% to K844m... with improvements across virtually all financial metrics 2 ROE maintained > 30%, ROA at 3.7% is at highest level in the last five [5] years Cost-to-income ratio down to 41.4% ... its lowest level in the last five [5] years, not 3 withstanding investments in the new core banking system and digital channels [EMV, EFTPOS] 4 Capital adequacy sound, and dividend yield and EPS are all market leading 5 Immediate focus on executing our Digital Strategy and the Core Banking system implementation ... to maintain our leadership position 6 7 Increasing contribution from Non-PNG Business ... and we expect greater contributions in coming years BSP is a significant contributor to economic growth in PNG and the Pacific FY 2018 and Q4-18 Results BSP 18#19APPENDIX – Q4-18 results FY 2018 and Q4-18 Results BSP 19#20Profit and Loss [Q4-18] BSP's NPAT declined slightly by 4.5% between Q3-18 and Q4-18 ... due to retrospective system license costs, driven by accounts growth. NPAT grew by 3.4% YOY [Q4-17 vs Q4-18] Total Income Operating costs Lending Write-NPAT offs PQ 3.1% 10.7% 31.4% (4.5%) YOY 5.7% 8.0% 11.6% 3.4% BSP GROUP QUARTERLY P&L [km] 525 504 555538 554 239 221 225 216 210 Key: PQ prior quarter = YOY year on year 201 197 218 ,221 208 19 18 11 16 21 Total Income Operating expense Lending Writeoffs NPAT HIGHLIGHTS Q4-18 operating income is 3.1% higher than Q3-18 ... largely due to higher FX income and BSP Life revaluation of investments. Total cost increased by 12.1% in Q4-18 due to retrospective license expenses associated with growth in accounts and write off of PNG computer equipment reaching end of life. Cost to income ratio increased to 43.1% in Q4 due to above cost factors. Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 FY 2018 and Q4-18 Results BSP 20 20#21Balance sheet [Q4-18] Our balance sheet continues to strengthen, with increases in loans and deposits in Q4-18 of K175m and K114m respectively. Q4-18 total assets remain at K23bn Loans and Deposits advances Total Assets Total Liabilities Net assets/ SH equity HIGHLIGHTS PQ 1.4% 0.6% 0.1% (0.1%) 1.3% ΥΟΥ 12.0% 1.8% 3.0% 2.2% 9.2% Key: = BSP GROUP QUARTERLY BALANCE SHEET [Kb] 23 22 23 23 23.0 20.1 18.2 18 20 20 20 20 18 18 18 12.5 11 12 12 12 PQ prior quarter YOY = year on year 3 33 32.9 Total loans increased by K178m in Q4-18 [PNG +K37m, Fiji K88m, SI K15m, Samoa K21m, Tonga K14m and other NPC/subs +K3m] PNG SBU Loan movements - Corporate -142m, Retail +K116m Deposit growth slowed, however increased by K115m in Q4-18. PNG-K7m, Fiji -K38m, SI +K13m, Tonga +K35m, Cooks +K56m, Vanuatu +K66m and other NPC/subs -K10m FX translation in Q4 for loans was +K0.9m and Deposits -K22m Loans and Advances Deposits Total Assets Total Liabilities Net Assets/ S.H Equity Q4'17 Q1-18 Q2-18 Q3-18 Q4-18 FY 2018 and Q4-18 Results BSP 21#22Group key ratios [Q4-18] All key ratios remain positive COST TO INCOME TREND ROE [annualised] 32.5% 31.1% 32.0% 28.8% 29.2% 43.1% 42.2% 41.6% 40.6% 40.1% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 ROA [annualised] LOAN TO DEPOSIT RATIO 3.9% 3.8% 3.6% 3.6% 3.5% 62.6% 63.9% 65.4% 68.3% 68.7% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 FY 2018 and Q4-18 Results BSP 22 22#23Group key risk ratios [Q4-18] Our risk ratios remain stable and asset quality remains sound CAPITAL ADEQUACY 3.2% 4.9% 3.1% 6.9% 7.3% 12.0% 21.3% - 22.9% 20.3% 19.8% 15.8% 15.0% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 Tier 1 Tier 2 BPNG requirement PROVISIONS TO LOANS 4.9% 4.8% 4.7% 4.6% 4.7% Q4-17 Q1-18 Q2-18 Q3-18 Q4-18 FY 2018 and Q4-18 Results HIGHLIGHTS Capital adequacy ratio declined slightly to 22.9% in Q4-18 due to payment of dividend, but remaining well in excess of the 12% prudential requirement. BSP's provisions to loans ratio in Q4-18 remains relatively stable consistent with IFRS 9 models. BSP 23#24Share price Dividend yield of 12.3%, based on K10.30 share price... and market capitalization of K4.8b. 22nd FEBRUARY 2018 TO 22nd FEBRUARY 2019 K10.70 K10.20 Share Price K4.817b K9.70 K9.20 Closing price (Kina) red K8.70 K8.20 K7.70 K7.20 K6.70 K6.20 Market Cap Share Price K10.3 22nd Feb 2019 Volume traded (millions) 5.0 green 4.0 3.0 2.0 1.0 0.0 Feb-18 Jun-18 Oct-18 Feb-19 FY 2018 and Q4-18 Results BSP 24#25THANK YOU FY 2018 and Q4-18 Results BSP 25