In 1996 Trust Bank sold out to Westpac in a deal worth $1.2 billion. Photo / 123RF
OPINION:
I have a personal interest to disclose on the potential sale of Westpac.
I bank with it.
And as a customer I couldn't care less who owns it.
But as a supporter of the New Zealand economy and financial markets I'd love to see it back in local ownership.
My preferred option would be to see the government take a cornerstone stake via the Super Fund and ACC, merge it with Kiwibank and list it on the NZX.
Bob's your uncle! Partial nationalisation and partial privatisation in one bold play.
I've long been an advocate of mixed-model ownership of state assets.
Not because the government needs the cash but because they have a track record of promoting growth.
As the power company floats have shown, the taxpayer quickly ends up with a partial asset worth more than the one they previously owned outright.
Air NZ was also a great success story until the pandemic.
I'd argue its mixed-model has been a strength in the past year.
The government backed it with a $900 million loan and investors followed (shares are up 100 per off the lows of 12 months ago).
A locally owned Westpac/Kiwibank would give capital markets a boost and New Zealanders another place (other than housing) to invest their savings.
It's an ideological hurdle for the current Labour government, but one I'm ever hopeful they'll one day leap.
I don't think it's a radical idea. I'm pretty averse to radical change.
Nothing illustrates how averse to change I am better than my banking habits.
I haven't changed bank since I opened my first account as an 11-year old-in 1983.
Of course my bank has changed around me.
In 1983 I joined up with the Canterbury Savings Bank - because mum worked there.
In 1984 the CSB joined a national group of regional banks and became Trustee Bank, before rebranding to Trust Bank in 1986.
In 1996 Trust Bank sold out to Westpac in a deal worth $1.2 billion - big money at the time.
In hindsight, given the billions in profits New Zealand's debt-fueled housing boom has sent across the Tasman, it wasn't.
The sale reflected a lack of confidence this country had in its economic future through the 1980s and 1990s.
We got ourselves into trouble. We panicked and had a fire sale of assets.
Anyway, my bank became Westpac Trust and then in 2002 it rebranded and became Westpac NZ.
In all that time my banking has been easy, increasingly automated and largely unmemorable.
Studies show that I'm not that unusual in my somewhat apathetic loyalty.
Despite the billions banks spend globally on marketing to create nuanced values-based brand "stories", most customers are highly conservative.
So as for many New Zealanders, the prospect of a new owner and even a new name for the entity that manages my pay and holds my mortgage is untroubling to me.
Valued at something around $10b to $12b, Westpac NZ is no small thing to acquire.
There's a lot of debate about how serious Westpac even is about this process.
Some have suggested it's a tactic to push back against the Reserve Bank's increased regulation and higher capital requirements.
But Westpac just told the world it is prepared to sell and has and engaged bankers to see if anyone wants to buy.
That's not something you do lightly.
Whether they actually do so will depend entirely on price.
They are testing the market and they are shrewdly doing so ahead of their rival Australian banks.
Westpac has made something of a political point by only citing the Reserve Bank's increased capital requirement as the driver of plans to sell.
The cost of doing business is just one half of that equation.
The other half is that profits aren't likely to be as good as they have been.
House-price growth is reaching the limits of political tolerance. Not to mention the risk-appetite limits of the banks themselves, who are voluntarily coming into line with RBNZ lending rules.
Big banks around the world are all taking stock and retrenching back to core business.
They are making strategic decisions about what their business will look like in the next 25 years as they face a wave of tech disruption in the form of open banking - which will allow new, smaller players to cut into their dominance in retail banking.
So it is unsurprising after 25 years of ownership, Westpac would now review its New Zealand business.
There aren't too many other obvious buyers.
There have been mumourings in the past week that Bank of Queensland might be interested.
Some have suggested interest from the big Chinese banks.
Given the inconsequential size of the New Zealand market, there isn't any financial imperative for a Chinese bank to buy Westpac.
Any move would be strategic and almost certainly perceived as political.
The big commercial Chinese banks are all ultimately state-owned enterprises.
If there was a trade sale it would be subject to approval of the Overseas Investment Office, which could be very diplomatically awkward for the government.
The other prospect - perhaps the most likely one - is that Westpac simply demerges and lists Westpac NZ on the NZX, retaining the controlling stake.
That's not as exciting as a Kiwibank merger but would be a good interim solution.
If successful, it might prompt the other Aussie banks to follow.
Either way, the prospects of bringing banking back to New Zealand look brighter than they have for a long time.