Hide puts pinch on Kiwibank

By PAULA OLIVER

Questions have again been raised about the appropriateness of the pieces that make up Kiwibank's revenue pie - this time in a Parliamentary select committee.

The state-owned bank's staunchest critic, Act MP Rodney Hide, yesterday put the bank's bosses in the hotseat with repeated questions about why revenue from New Zealand Post's agency services was added into the bank's accounts.

The revenue, which runs at $34.9 million a year, comes from NZ Post's bill payment services and its Red Tickets arm.

In October the Business Herald reported that one of the country's top banking analysts, Massey University senior lecturer David Tripe, had suggested that including the agency income was a good way of improving the look of Kiwibank's accounts.

Yesterday Kiwibank chief executive Sam Knowles, flanked by New Zealand Post chief executive John Allen and chairman Jim Bolger, appeared before the commerce select committee for an annual discussion about the financial performance of New Zealand Post.

Under questioning from Hide, Knowles admitted that without the extra agency income Kiwibank's losses would be worse.

The bank lost $8 million in the year to June 30, 2003. It is on track to make a profit in the 2004/05 financial year.

Knowles also conceded that the income from the agency services was not built into the bank's original business case.

"The document does comment about the value that would be added. It was envisaged. But no, it wasn't built in at that point."

Citing a leaked copy of the original business case, Hide then argued that the bank was well behind its projected earnings for the number of the customers it had.

Knowles revealed that the bank was still growing quickly, and would top 200,000 customers by Christmas.

That figure had been a target for three years' operation - and it had been going for less than two years.

Hide said that income projections for when the bank had 142,000 customers showed it would net $16.7 million in fee income.

Asked how much the bank actually got in fee income for the year, Knowles said it was "probably around $8 million or $9 million".

"So it's about half that?"

"At that point in time, its about half," Knowles said.

He defended the inclusion of agency services in the bank's revenue streams.

The bank was in an early growth phase and wouldn't get the maximum level of income from customers until they moved all of their business over, which took time.

The inclusion of agency income in Kiwibank's operations had bolstered the strength of the overall business.

That was because NZ Post had become a more attractive option for agency business because it had more people going to its branches.

Costs were also cut through integrating agency work into Kiwibank's operations.

"I would argue that the agency business has grown significantly because of the customer base of Kiwibank," Bolger said.

"We are able to be competitive in getting this business because of the total package."