Papua New Guinea’s National Banking Corporation received its commercial banking licence at the end of 2024. In this exclusive interview with Business Advantage PNG, CEO Paul Thornton outlines its plans to build its capital base and grow in an increasingly competitive banking market.

The National Banking Corporation’s headquarters in Port Moresby. Credit: NBC

BAPNG: What’s the underpinning idea behind the National Banking Corporation?

Paul Thornton (PT): We want to be a commercial bank that provides services across all the different market segments.

From the Bank of Papua New Guinea’s perspective, they were looking at creating competition and thereby strengthening the financial sector and financial system in PNG. PNG is still considerably under-banked.

“We’ve got 10 branches currently. We’re looking in the next two-to-three years to increase that to over 30 branches.”

We’re a little bit different to the other new entrants. CreditBank PNG is taking a different approach. I think it’ll work well for them. We probably won’t tread on their toes and vice versa. TISA Bank is probably a little bit more similar to what we’re doing.

Paul Thornton. Credit: NBC

The basis of our operation was the People’s Micro Bank. That’s provided some challenges and some opportunities. On the challenge side, we’re trying to get systems, people and processes aligned. On the plus side, they already had operations out in the regional areas – eight branches in total plus our two in the capital. It has given us a bit of a base, and now we’ve got to build on that.

BAPNG: Banking is a capital-intensive business. The NBC has already raised capital from investors this year. What is your plan to raise further capital?

PT: Building our balance sheet is something that we’re focused on. We’ve done phase one of a private equity placement; we raised about K100 million from that. We’ll finish off phase two soon. We expect to generate another K100 million. That then gives us a capital base that we can start to use to grow the business.

There’s been a range of investors, all Papua New Guinean citizens or Papua New Guinean-owned companies. I think that the attraction has been they can see where the growth potential is. They have got in on the ground floor.

We don’t have any super funds invested yet, and the reason for that is that we don’t have a track record. We are looking to do an Initial Public Offering (IPO), probably in quarter one of 2027. At that stage, their appetite might change.

At the moment, the government’s majority shareholding is through Kumul Consolidated Holdings’ subsidiary, the National Development Bank.

It was one of the conditions of our banking licence that the government dilute its ownership. After the IPO, we’ll probably see the government stake at around 20 per cent.

Based on the phase one capital raising, the company is about 48 per cent in the hands of new investors. At the end of phase two, we expect that government ownership will fall to around 35 to 38 per cent.

BAPNG: What are your plans for next year as far as getting the bank more established in the market?

PT: From a customer base perspective, we’ll be trying to build across the different segments. We have an interest in both individuals and SMEs [small and medium enterprises] but we’ll also be looking at commercial lending, corporate lending, asset finance and that kind of thing.

From the point of view of personal banking, we’ll be aiming to build up transaction volumes. We’ve got over 100,000 accounts at the moment. It’s not a bad base to start with. One of the targets is to have a million customers by 2030. I think that’s quite an achievable thing.

We do have to expand our footprint as well. We’ve got 10 branches currently. We’re looking in the next two-to-three years to increase that to over 30 branches.

Electronic banking will also be an important channel for us but we’re still of the view that you must have a physical branch presence as well. It’s still a cash economy; it’s going to be for the foreseeable future.

One of our advantages is having deep local knowledge. Currently, we’ve got about 260 plus very talented and experienced people, drawn from various organisations, including People’s Micro Bank, Westpac, Kina Bank, ANZ, and BSP.

We’ll leverage their experience. Staff are attracted to work with us because they see an opportunity to build a PNG bank with a PNG flavour.

BAPNG: There’s been public discussion recently regarding the rights and wrongs of the government supporting the NBC by depositing government funds with the new bank. What’s the real story?

PT: The government wants to support us. One way of supporting us is to have government funds lodged with the NBC. But the reality is we can’t accept all the government deposits because we don’t have the capital capacity to do it.

The government might have K10 billion in funds with other banks. We’re not going to get K10 billion. We’ll get a portion of it and, from a government perspective, that’s probably good business anyway because they’re spreading their risk.

BAPNG: How do you see yourself competing against the other banks?

PT: We’ll have to be competitive but I think you can still do that without doing it at a loss. For me, interest rates and bank fees have been pretty high.

If you can improve that either by taking services a bit closer to people and not having them stand in the queue for a couple of hours, then their overall transaction costs reduce. If I’m providing a better service that way, then people are going to come to me.