Kina Securities Boosts Capital with PNG’s First Corporate Bond, Posts 4% Profit Growth
Kina Securities lifted its half-year net profit by 4% to PGK 59.7 million, underpinned by a strong capital injection via Papua New Guinea’s inaugural listed corporate bond and a 13% higher interim dividend in local currency.
- 4% NPAT growth to PGK 59.7 million
- PGK 235 million Tier 2 bond issuance strengthens capital adequacy to 26%
- Interim dividend up 13% in PGK terms, stable in AUD
- Loan book grows 2% year-on-year despite strategic de-risking
- Digital revenue constrained by external payment system issues
Profit Growth Amid Currency and Market Headwinds
Kina Securities Limited (ASX:KSL) reported a statutory net profit after tax (NPAT) of PGK 59.7 million for the half-year ended 30 June 2026, marking a 4% increase over the previous corresponding period. This modest growth was achieved despite a weaker Papua New Guinea kina (PGK) weighing on operating costs and margin pressures from heightened foreign exchange market competition.
Net interest income rose 5% to PGK 119.3 million, driven by a 12% increase in loan interest income supported by a 2% growth in the loan book year-on-year. However, the net interest margin (NIM) slipped slightly by 10 basis points to 5.8%, reflecting declining yields on government securities and a planned increase in funding costs linked to Kina’s new corporate bond.
Capital Boost from PNG’s First Listed Corporate Bond
The standout development was Kina’s successful issuance of a PGK 235 million Tier 2 subordinated bond, the first listed corporate bond on the Papua New Guinea Exchange (PNGX). The oversubscribed bond, with a fixed 7.55% coupon over 10 years, bolstered Kina’s regulatory capital, lifting its capital adequacy ratio to a robust 26.0% from 17.4% at the end of 2025. This capital injection significantly enhances Kina’s capacity to support lending growth and execute its 2030 Strategy.
Strong capitalisation also underpinned the Board’s decision to increase the interim dividend by 13% in PGK terms to 14.2 toea per share, while maintaining the dividend at 4.5 Australian cents per share due to currency effects. The payout ratio remains a prudent 70%, comfortably within the company’s dividend policy range.
Loan Book and Asset Quality
Kina’s loan portfolio showed a 2% increase compared to June 2025, despite a 3% reduction from December 2025 reflecting deliberate balance sheet optimisation and targeted de-risking. Wholesale and retail sector lending expanded by 8%, highlighting continued demand in key market segments. The bank’s disciplined credit risk management is evident in its prudent provisioning, with coverage rising to 2.6% of gross loans.
Non-performing loans (NPLs) edged up slightly to 8.9% of gross loans, a marginal increase attributed to the smaller loan book rather than deteriorating credit quality. Kina’s adoption of IFRS 9 accounting standards, including the incorporation of suspended interest on impaired loans, has also adjusted reported NPL ratios upward compared to prior periods.
Digital Revenue Impacted by External Payment System Issues
Non-interest income, which accounts for 53% of total revenue, dipped 2% year-on-year to PGK 135.5 million. Growth in Kina’s payments acquiring business (EFTPOS, e-Commerce, ATM) was constrained by interoperability issues affecting a major PNG bank’s recently issued debit cards. This external problem is expected to be resolved by the end of 2026 through industry-wide system upgrades, though a full revenue recovery may extend into 2027.
Wealth management revenues grew 11%, supported by a 15% increase in Funds under Administration to PGK 25.1 billion and a 16% rise in Funds under Management to PGK 14.4 billion, reflecting strong client inflows and retention.
Economic and Market Outlook Supports Growth
Kina’s positive outlook is buoyed by Papua New Guinea’s improving economic fundamentals, including a recent upgrade of the sovereign credit outlook to Positive by S&P Global Ratings. Key resource projects such as the Papua LNG development are progressing towards a Final Investment Decision, expected by late 2026 or early 2027, which would underpin medium-term growth.
Monetary policy remains moderately restrictive with the Bank of PNG maintaining the Kina Facility Rate at 5.0%, helping contain inflation despite global energy price shocks. The managed crawl exchange rate regime continues to guide gradual kina depreciation, with Kina Securities well-positioned to navigate currency and inflation risks.
Looking ahead, Kina expects improved foreign exchange activity and sustained lending growth to support earnings momentum in the second half of 2026, leveraging its strengthened capital base and ongoing investments in digital transformation and risk management.
Bottom Line?
Kina’s fortified capital position and steady profit growth provide a solid platform, but resolution of payment system issues and currency volatility remain key to unlocking full earnings potential.
Questions in the middle?
- How quickly will the payments interoperability issue be resolved and what will be the impact on digital revenue recovery?
- Can Kina sustain loan growth amid ongoing portfolio optimisation and external economic pressures?
- What are the implications of Papua LNG’s FID timing on Kina’s medium-term lending and capital plans?
