State-owned Kiwibank is about to take a bigger bite of the country's home loan market with the purchase of a majority stake in the country's biggest non-bank home loan lender.
Kiwibank has agreed to buy a 51 per cent stake in the New Zealand Home Loan Company.
Kiwibank chief executive
Sam Knowles said the final price has yet to be determined, but is likely to be about $8 million.
The sale is expected to take place in June.
The purchase has been approved by the boards of Kiwibank and its owner New Zealand Post. New Zealand Post will have to pump additional capital into Kiwibank to fund the purchase.
Mr Knowles said the purchase would help Kiwibank build its share in the competitive home loan market, but NZHL would operate as a separate trading entity.
NZHL's chief executive John Erkkila will continue to manage the company, while Neil Richardson will continue as chairman.
Kiwibank will be represented on NZHL's board.
Mr Knowles said that there would be no changes to existing loans, but NZHL would now look to Kiwibank as its funding source.
NZHL has been operating in the home loan market for 10 years and has about $1.7 billion of home loans on its books.
It operates through a franchise model and has 30 independently owned branches throughout the country.
Media have been tipping the sale of NZHL, but ASB Bank had been seen as the most likely buyer.
The New Zealand home loan sector is a mega-competitive environment, with the big four banks engaging in an on-again, off-again mortgage price war since late 2004.
But Kiwbank has been plugging away at the market, and in the six months to December 31 reported a 35 per cent rise in its home loans, from $1.50 billion to $2.03 billion.
When announcing the company's $5.4 million net profit for the December half year, Mr Knowles said Kiwibank intended to "behave like a big bank, and grow like a big bank".
At the time Kiwibank had mroe than 400,000 customers and expected to hit the half million mark by the end of the year.
- NZPA
