Government gives Kiwibank green light to get $500 million capital injection from private sector

Kiwibank to remain at least 51% government owned. Photo / Supplied

The Government has given Kiwibank’s parent company the green light to raise up to $500 million of capital to help the bank grow.

The decision comes as Kiwi Group Holdings has advised the Government there is enough interest among large New Zealand investors to proceed with a capital raise.

Kiwi Group Holdings will now start negotiating with KiwiSaver funds, investment institutions, and professional investment groups to try to have a raise completed by June 30, 2026.

Any deals will need the approval of shareholding ministers to advance.

The terms and conditions of these deals are yet to be negotiated.

While Kiwi Group Holdings is targeting New Zealand investors, any restrictions around who these investors may be able to sell their shares to (including foreigners), should they wish to divest, are yet to be negotiated.

Restrictions around selling shares was a problem for one of Kiwibank’s previous owners, the New Zealand Super Fund.

Finance Minister Nicola Willis said investors would likely be given the option of selling their shares back to the Crown on pre-agreed terms, or selling them on the New Zealand stock exchange, should a future Government decide to float the bank on the NZX.

Willis said an initial public offering wouldn’t be done without an electoral mandate.

She said that in the foreseeable future, Kiwi Group Holdings would be at least 51% government-owned and have a majority of its directors live in New Zealand. New Zealand would also need to remain Kiwibank’s principal place of business.

The Government wants Kiwibank to grow, so it can better compete with the big four Australian-owned banks.

Willis said an additional $500m of capital could support up to $4 billion of business lending or $10b of home lending.

If the Government didn’t enable Kiwi Group Holdings to seek capital from the private sector, it would need to find the cash to inject into the bank itself.

Kiwibank chief executive Steve Jurkovich said that following the capital raise, there would be no return of capital to the Crown, and no changes for Kiwibank customers.

Floating Kiwibank on the NZX to become an election issue

National is yet to decide whether it will campaign ahead of the election on floating Kiwibank on the NZX.

However, Willis said she supported the advice she had received that listing Kiwibank, with limitations and guarantees around the Crown’s role in the bank, would be the best way forward.

While Act is completely supportive of privatisation, New Zealand First leader Winston Peters went so far as to deny Kiwibank was being privatised.

He said the party was yet to decide on the policy it would take to the election, but pointed to its history of opposing the sale of state-owned assets.

At the other end of the spectrum, Act leader David Seymour said he would welcome foreign investment in the bank.

He believed the accountability that comes with having private shareholders would push the bank to improve its performance.

Seymour called for the privatisation of other state-owned enterprises, noting Act’s 2023 alternative budget proposed listing 49% of the shares in AsureQuality, New Zealand Post, KiwiRail (and the Railways Corporation), Transpower, and Kordia.

“This would unlock capital for growth, and drive efficiency and innovation,” Seymour said.

Labour leader Chris Hipkins didn’t oppose the Government seeking private investment in Kiwi Group Holdings, but wanted Kiwibank to remain New Zealand-owned.

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.