The fact that two of Kiwibank’s existing shareholders, themselves New Zealand entities, wanted out immediately cast doubt on Robertson’s claim it was a win-win for the Crown.
And then the critics fired up, with one of NZ’s most formidable business leaders, Kerry McDonald, declaring that government ownership “rarely leads to success”.
ACT’s leader David Seymour said that if shareholders wanted out of Kiwibank it should have been floated on the open market, but instead the Government is making it taxpayers’ problem.
“I get that ACC and NZ Super don’t want to own it, but why is the taxpayer on the hook?”
In his announcement, Robertson sought to justify the move by pointing out the transaction ensures Kiwibank remains 100% Kiwi-owned, “a bottom line pledge that the previous National Government also made in 2016 when the current ownership arrangements were entered into.”
He went on to explain that while the Crown essentially owned KGH through Crown-owned entities, an ongoing shareholding in Kiwibank did not fit NZ Post’s and ACC’s long-term strategic and investment plans.
NZ Super Fund had been interested in purchasing a majority holding in KGH, but withdrew its interest because it did not align with the Government’s commitment to public and New Zealand ownership.
Robertson said the Government was grateful for the investment and support given to KGH from the departing shareholders over the past 20 years. Their contribution and commitment, particularly collectively since 2016, had set Kiwibank up strongly for future growth.
“The new ownership structure simplifies our ability to fully support Kiwibank to meet its future potential. The transaction is subject to regulatory approval by the Reserve Bank.
“The Government is fully committed to supporting Kiwibank to be a genuine competitor in the banking industry – ensuring the bank has access to capital to continue to grow on a commercially sustainable basis and offer a viable and competitive alternative for New Zealanders.
“This is a win-win for the Crown, Kiwibank and for New Zealanders.”
Kiwibank and NZ Home Loans would continue to operate independently and at arm’s length from the Government, Robertson said. The Crown’s ownership of KGH will be expressed through a newly incorporated Schedule 4A company, Kiwi Group Capital (KGC), with a separate board.
The transaction values KGH at $2.1 billion.
“The process of acquisition is a straightforward transfer of assets and it will not change the overall value of the Crown’s consolidated balance sheet. It does require the government to fund its contribution for the purchase, which will be done through the multi-year capital allowance. This means the cost to purchase is already part of the borrowing programme published at Budget 2022.
“I want to be clear that this will be business as usual for both Kiwibank and New Zealand Home Loans staff and customers.
“With Kiwibank staying in New Zealand hands, New Zealanders can continue to bank with a trusted, credible and competitive banking option that will remain fully locally owned. With a significant commitment from the Crown to invest in the bank’s future success, Kiwis can be assured Kiwibank has a very bright future,” Robertson said.
David Seymour noted that Finance Minister Robertson had borrowed and spent his way to New Zealand being billions of dollars in debt, then asked:
“Why does he think it is a good idea for the Government to now buy a bank?”
Kiwibank CEO Steve Jurkovich seemed happy with the government decision.
He pointed out the bank had been growing its market share in all its business lines.
“Can we have more impact. Yeah, absolutely. I think we can. There’s big room to grow”
But, Point of Order notes, Kiwibank doesn’t have the economies of scale the big Australian-owned banks operate with. Nor does it have the specialities other NZ-owned banks have pioneered – Heartland with its reverse-mortgages, for example.
And Kiwibank, like other NZ-regulated banks, needs to increase the amount of capital it holds to satisfy tough RBNZ requirements that will take full effect by 2027.
Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton