Kiwibank's growth plans gained valuable backing from the Government yesterday even as it announced full-year results showing its gains have slowed in a tougher operating environment.
Finance Minister Bill English yesterday announced the Government was to provide Kiwibank's parent, NZ Post, with a backup funding facility to be drawn onin emergencies.
English said the "uncalled capital facility" would "enable Kiwibank's continued growth" and "demonstrates the National-led Government's commitment to both NZ Post and Kiwibank".
The bank has a 10-year growth plan that would see it increase assets by up to $3 billion a year, giving it a balance sheet of up to $42 billion by the end of that period. Departing chief executive Sam Knowles said earlier this year that would require about $100 million in additional capital.
However the exact size of the facility has not been disclosed and would "be reviewed over time in line with the needs of NZ Post".
"We're confident this provision of uncalled capital, on commercial terms, will give NZ Post and Kiwibank the financial certainty they need to pursue their plans," English said.
NZ Post chief executive Brian Roche welcomed the decision as providing long-term stability to NZ Post's AA- credit rating which would enable Kiwibank to continue its "successful growth strategy".
The uncalled capital could be used only as protection against significant unforeseen external events, and was not available to fund growth activities or support deterioration of earnings in regular business.
The Labour Party welcomed the decision, as did the Greens.
Knowles said the uncalled capital support was "absolutely critical" for Kiwibank's growth plans.
"Now that's been agreed we will be going offshore and tapping into more funding sources," he said.
The company yesterday announced a 13 per cent fall in after-tax profit to $45.8 million in the year to June, while loans and advances rose 23 per cent to $10.4 billion, and retail deposits were up by 3 per cent to $6.9 billion.
Knowles said the profit decline was driven by a fall in net interest income to $133.4 million from $163.4 million a year earlier.
Overseas markets for term debt were also difficult for its competitors to tap, so the Australian-owned banks had competed strongly for the term deposit market, which was Kiwibank's main funding source. That had then driven down Kiwibank's margin on its interest.
