Kiwibank is Govt’s obvious fix

Published date29 May 2023
AuthorPaul McBeth
Publication titleHawkes Bay Today
Pour money into Kiwibank so it can compete more aggressively with the Australian-owned titans that dominate the nation’s banking sector

Sure, it would cost more than the months and millions spent on a Commerce Commission market study that will pore over every bank statement and unearth various practices that could (and should) be done better.

But it will also have an immediate effect in a similar fashion to when the emergence of Kiwibank tellers across the then-nationwide network of NZ Post shops slowed the inevitable retreat of bank branches in less economically rational locations.

Those branch numbers have been purged over the past 20 years as online banking replaced physical and phone banking, but it was always harder to withdraw entirely when there was a holdout with a slightly different purpose.

Over the past decade, Kiwibank has done a sterling job of making itself part of the firmament, more than doubling its total assets to $33.37 billion at the end of December from $14.93b at the end of 2012.

That’s a faster pace than the big four, but still pales in comparison with the likes of ANZ Bank NZ’s $195.6b, up from $127.37b; Bank of New Zealand’s $130.24b, up from $72.95b; ASB Bank’s $124.48b, up from $68.5b; or Westpac NZ’s $122.36b, from $77.2b.

Butterfly effect As the bank’s architect Jim Anderton noted when welcoming its establishment board back in 2001, it only needed 100,000 customers and 5 per cent of the banking market to force the majors to lift their game.

Kiwibank has about 5.1 per cent of the $653.2b of total assets, compared with 3.7 per cent of the $395.92b at the end of 2012.

Little wonder its net interest margin of 2.5 per cent is in line with the Aussies, whereas the 1.8 per cent it ran at a decade ago was skinnier than the 2.2 per cent average of the time.

The state-owned lender is currently raising $200 million through the sale of subordinated notes which will bolster its tier 2 capital, adding to its $2.31b of total capital.

Kiwibank’s tier 1 common equity capital was $1.79b at December’s end, a ratio to risk-weighted assets of 10.4 per cent, lagging behind the big four.

The lender needs to expand that capital if it wants to boost its lending.

Herein lies the nub of unleashing the Government’s bank.

Cabinet chose not to go ahead with the NZ...

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