Government underwrites Kiwibank expansion

Photo / Richard Robinson

The Government has underwritten Kiwibank's growth plans by providing its parent NZ Post with a backup funding facility it can draw on in emergencies.

Finance Minister Bill English said the "uncalled capital facility" to NZ Post would "enable Kiwibank's continued growth" and "demonstrates the National-led Government's commitment to both NZ Post and Kiwibank".

The bank has a ten 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 and chief executive Sam Knowles earlier this year said that would require about $100 million in additional capital.

However the exact size of the facility announced today has not been disclosed and would be "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 New Zealand Post's AA- credit rating which would enable Kiwibank to continue its "successful growth strategy".

Roche said the uncalled capital could only be utilised 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 which established Kiwibank when in power in 2002 also welcomed the "obvious" decision but said it should have been made earlier.

"Today's decision to back the NZ Post board after dithering for months is welcome, but ironically it also exposes just how much the Government is struggling to fill its own policy vacuum," said Labour finance spokesman David Cunliffe.