Government open to selling Kiwibank as it reviews why it owns various companies

The Commerce Commission says expanding Kiwibank’s access to capital is “the best near-term prospect for more robust competition” in the banking sector.

The Government has dropped further hints it isn’t opposed to diluting its 100% ownership of Kiwibank to enable it to grow.

Although Kiwibank is expanding, it needs a lot more capital to be the disruptor it was set up to be to challenge the big four Australian-owned banks.

In a routine letter of expectation to the chairman of Kiwibank’s owner, Kiwi Group Capital, shareholding ministers in April suggested they were open-minded as to how Kiwibank grew.

“We expect the board to start considering avenues to support Kiwibank’s potential growth post-[IT] transformation and closely engage with us and the Treasury on any proposals,” ministers told David McLean.

The Herald asked Minister for State Owned Enterprises Paul Goldsmith whether the Government was prepared to inject more capital into Kiwibank, or enable the bank to get capital from a third party – the private sector or a Crown entity such as the New Zealand Super Fund, for example.

Goldsmith didn’t rule anything in or out.

“The Government is prepared to consider ways to better capitalise Kiwibank to compete more effectively with the country’s four largest banks,” he said.

“I will consider proposals from the board for avenues that support future growth when they are received.”

In March, Finance Minister Nicola Willis similarly expressed her open-mindedness on the matter, after the Commerce Commission said expanding Kiwibank’s access to capital was “the best near-term prospect for more robust competition” in the banking sector.

The commission, which made the comment in a draft report on a study on banking sector competition, didn’t specify where Kiwibank should get the capital from. It will release its final report on August 20.

In the background, the Government has softened its language around its commitment to not selling state-owned assets.

It is also following Treasury’s advice to write “purpose statements” for state-owned companies, including Kiwibank, to clarify the rationale for the state owning a specific asset.

Treasury, in a February briefing released under the Official Information Act, noted the Government’s coalition agreements say it will be “results-driven”, and that “interventions that aren’t delivering results will be stopped”.

“Defining the results that the Crown is seeking to achieve through its ownership of commercial entities (and what level of ownership is required for those results) is a critical first step towards achieving this for the SOE [state-owned enterprise] portfolio,” Treasury said.

Treasury hoped getting ministers to write purpose statements would help them set expectations for entities, guide the appointment of directors, provide transparency to the public around the costs and benefits of state ownership, and ensure capital is efficiently allocated across the Crown.

Treasury suggested the Government prioritise writing purpose statements for entities that are either low-performing, or where the point of Crown ownership “is not at all clear”.

Kiwi Group Capital (which owns Kiwibank) was included in this list, alongside NZ Post, KiwiRail, NZ Railways, TVNZ, Transpower, Genesis Energy, Mercury NZ and Meridian Energy, Christchurch, Dunedin and Hawke’s Bay airports, Airways, MetService, Crown Infrastructure Partners, Quotable Value, Kordia, ECNZ, AsureQuality, Landcorp Farming and Public Trust.

Treasury stressed the point of writing purpose statements wasn’t to find reasons to sell assets.

Goldsmith said the Government had no plans to privatise state assets, but conceded a possible outcome of the purpose statement exercise could be that it decided it no longer wanted to own an asset.

“That’s always a possibility and then we’d work our way through that,” he said.

“You’ve got a kaleidoscope of options going forward, but we’ve always been clear that if we were to sell them, we would take that to an election as a commitment.”

Coming back to Kiwibank, the previous Government was adamant it had to remain state-owned.

In 2022, it bought Kiwibank’s owner, Kiwi Group Holdings, from NZ Post, the New Zealand Superannuation Fund and the Accident Compensation Corporation (ACC).

NZ Post and ACC wanted to sell out of Kiwi Group Holdings. The Super Fund was keen to buy their stakes, provided it had the option of bringing private capital and governance capabilities to the business, and potentially selling out in the future.

Finance Minister at the time, Grant Robertson, was unhappy with these terms, so the Crown paid $2.1 billion to buy Kiwi Group Holdings.

Since then Kiwibank has grown, partially thanks to a $225 million capital injection it received a year ago on the back of Kiwi Group Holdings selling Kiwi Wealth to Fisher Funds.

Last year, Kiwibank estimated that if it solely used the additional capital to increase its lending, it would be able to do so by 14%, taking the value of its net loans and advances up to $33b.

By way of context, ANZ’s net loans and advances were worth $147b at the time.

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.