Kiwibank estimates proceeds from the sale of Kiwi Wealth could enable it to increase its lending by up to $4 billion.
Kiwibank’s parent, Kiwi Group Capital, on Tuesday announced it injected $225 million of capital into the bank.
The money came from the $310m sale of Kiwi Wealth to Fisher Funds last year.
Kiwibank chief executive Steve Jurkovich said the capital would enable the state-owned bank to “continue to deliver on its growth ambitions”. These ambitions include upgrading its IT systems.
However, if Kiwibank were to solely use the additional capital to increase its lending to individuals and businesses, it would be able to do so by 14 per cent, taking the value of its net loans and advances up to $33b.
To put this in perspective, the net loans and advances of the country’s biggest bank – ANZ – are worth $147b. Meanwhile, TSB’s are worth $7b.
Jurkovich said the capital injection was another important step in strengthening the bank’s position in the market.
It’s well-known Kiwibank needs more capital to grow to more effectively be the “disrupter” it was set up to be.
This was made clear in various Treasury briefings and Cabinet papers prepared ahead of the Government in August last year announcing it would buy Kiwibank from Kiwi Group Holdings (which was owned by the New Zealand Superannuation Fund, NZ Post, and the Accident Compensation Corporation).
In February last year, when Kiwi Group Holdings was considering selling Kiwi Wealth, Finance Minister Grant Robertson wrote to the NZ Post chair to say shareholding ministers expected proceeds from a potential sale to be used to capitalise Kiwibank.
“In coming years, Kiwibank appears likely to need access to additional capital if it is to significantly increase its presence in the sector while also meeting the Reserve Bank of New Zealand’s rising capital adequacy requirements for registered banks,” Robertson said.
“[We] expect that the proceeds from any potential Kiwi Wealth sale would be retained by KGH to be used for capital considerations.”
Nonetheless, Jurkovich said Kiwi Group Capital’s decision to inject capital into Kiwibank was an “expression of shareholder confidence in the largest New Zealand-owned bank”.
Kiwi Group Capital was established in November 2022 as a holding company to acquire and oversee the Crown’s investment in Kiwibank and New Zealand Home Loans. It amalgamated with Kiwi Group Holdings in March this year.
The transaction meant Kiwi Group Capital subscribed to an additional $225m of common equity share capital issued by Kiwibank.
The Government hasn’t suggested it has immediate plans to inject more capital into Kiwibank.
Announcing its decision to get the Commerce Commission to do a market study of competition in the banking sector, Robertson in June said one of the reasons the Government bought Kiwibank outright was to help it “continue” being a disrupter.
“Sometimes it’s played that role, sometimes it hasn’t. But there is scope there,” he said.
Jenée Tibshraeny is the Herald’s Wellington Business Editor, based in the Parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.