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Kiwibank not profitable enough to generate capital internally to grow, CBA's Norris says

Posted in News

CBA CEO and former ASB and AirNZ CEO Ralph Norris

Commonwealth Bank of Australia Chief Executive Ralph Norris has argued Kiwibank's current capital constraints are its own fault because it had not generated enough capital internally from its own profits.

Kiwibank had essentially undercharged for too long and was now reaping the fruits of not being profitable enough, Norris told Andrew Patterson at Radio Live in New Zealand.

"The situation for any business is that if you're undepricing your products  then you're not generating enough capital to grow your busines. There's always the balance of getting your pricing right in order to make sufficient profit to generate capital within the business," Norris said in the interview pre-recorded last week in Sydney.

Kiwibank's CEO Sam Knowles is leaving Kiwibank. Earlier the government said it wanted Kiwibank to start paying a dividend, effectively stifling its growth, which has been powered by several equity injections from its parent NZ Post and by retained profits.

Norris is the former chief executive of CBA's subsidiary ASB and Air New Zealand. He has also previously been an active member of the Business Roundtable, which has favoured state asset sales.

"It's a classical situation in a lot of businesses where they over-trade," Norris said.

"They don't have enough equity and therefore they get themselves into potential difficulties because of that. I'm not saying that that's the case in terms of potential difficulties for Kiwibank," he said.

"You've got to make a reasonable level of profit to generate internal capital and that doesn't seem to have been the case with Kiwibank."

'We're New Zealanders too'

Norris acknowledged however that the entry of Kiwibank had forced the Australian-owned banks to send their customers the message that they were New Zealand banks too. ASB has promoted itself as a New Zealand bank in recent months through billboard and other advertising campaigns.

"Kiwibank introduced a more parochial effect into the market. New Zealanders looked at Kiwibank as a New Zealand institution and the other banks have had to clearly show that they are committed to the NZ market and New Zealanders," Norris said.

"Those banks mainly employ New Zealanders and make significant contributions to the New Zealand economy. It's probably refocused the banks on making sure that they get the message across that they are there for New Zealanders."

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"[Aussie Banks] are there for

"[Aussie Banks] are there for New Zealanders."

Why do I feel a "Yeah Right" moment coming on?

Testing the new registration

Testing the new registration and the edit function (!)

And putting in  alink



He wants to buy it!

He wants to buy it!



The National government will

The National government will run Kiwibank down to justify it's sale just for the sake of an ideal. Why don't they run with it and actually make it work - oh that's right - their ideals won't allow them to run with a socialist pragmatism such as a peoples bank - it miht make them seem like total incompetants when it sucks up more taxpayers money.
I say get real and grow some balls - call it the New Zealand Bank Inc, make every citizen a shareholder and a customer, pair it up with the IRD, interface it with ACC Justice Health LTSA WINZ and turn it into the biggest and most profitable totalitarian wealth adjustment instrument... oops
I imagine the dividends would be lousy

My family joined Kiwibank

My family joined Kiwibank because it was NZ owned and the rates were good. If Ralph Norris and his Business Rount Table mates get their sticky mitts on it, we'll just take our business back to the TSB with whom we still have  an account.

Hey this is the problem. Its

Hey this is the problem. Its rates are good! So why should taxpayers subsidise a state bank.

Either we all join Kiwibank (to ensure we get our share of the subsidy) or as a taxpayer we are paying for those who do.

Do people think a state bank lending to everyone is a good idea? I would hope not!

If Kiwibank shares were floated on the NZX would you buy them? Don't expect a decent dividend.

I do acknowledge the role Kiwibank has played in reducing bank margins and making mortgages cheaper - but is it worth the outlay of government capital to achieve this?

Should the capital be put into Health or Education instead? Or paying for our pensions via the Cullen fund?

a) Why listen to someone from

a) Why listen to someone from an ausie bank?

b) Who said kiwibank aint profitable?

c) Every new business requires capital, and it is often some time before they pay a dividend

With NZ Post profit falling

With NZ Post profit falling and Kiwi Bank not performing, just hope in five years time the pack of cards will not fall over and leave the Taxpayer left to bail it out. BNZ all over again won’t be a good look. 

well CBA arent underpricing

well CBA arent underpricing their products!they are good at what they do and they have branches everywhere,if you walk into a branch of CBA in queensland anyway and look lost somebody approaches you and steers you to a customer service person who deals with it one on one in an office!none of this queuing up like a beneficiary at pay for that though so if you want the best rates for deposits etc;you forget the service and go with citibank or rabo.

As one of 4m shareholders of

As one of 4m shareholders of Kiwibank, unless it can show evidence of an acceptable return, within an acceptable period, I want it sold ! We have enough social welfarism without extending it to our banks- lets be honest about what we subsidise - If some people can't afford a bank account, or a mortgage or deposit rate that keeps our banking system secure and able to help facilitate future growth within NZ, lets be open about how much its costing thr taxpayer

Really, and here Steve Keen

Really, and here Steve Keen lays out why banks with record profits are so bad.

Funny that


Dubious point of view from

Dubious point of view from Ralph.  My understanding is that Kiwibank is generating enough profit for its own capital needs - just not to meet those needs and pay a dividend to the |national Governemnt at the moment.  New entrants to a well-established market tare typically capital hungry in the early years - there is nothing new in that.  Most sensible shareholders are aware of that and allow for that in their own expectations with regard to dividends.  The rewatrds are reaped in the longer term.  Could it be that Ralph has a vested interest in seeing Kiwibank  hamstrung?

At least kiwi bank is not

At least kiwi bank is not taking the profit bank to Australia or paying 7% tax overall when making billion dollar profits. 

Mr Norris, It's OUR bank so

Mr Norris, It's OUR bank so shove OFF!

new zealand needs to embrace

new zealand needs to embrace globalisation otherwise we will be left behind

The trouble with talking

The trouble with talking about and assessing bank profits - kiwibank, CBA or otherwise - is that it can only really be done in hindsight. 

Surely the crash of 2008 has taught us the the banks are far too quick to recognise profits but don't accurately record the risks that are building up in their business models.  The profits are paid out on an ongoing basis largely to employees in the form of outsized pay packets and if the hitherto masked build up in risk bursts (as would be the case if the bottom falls out of the Aussie property as per Steve Keen) then not only are that current years profits wiped out but so are the shareholders and the govt and johnny taxpayer is forced to step in. One can only realistically conclude that the banks under provisioned for this sort of loss and hence weren't nearly as profitable as they thought.


Mr Norris is being economical

Mr Norris is being economical with the truth.

Up until the sale of National Bank all the banks in NZ except Kiwibank and TSB were Australian Banks NOT NZ banks.

Profits went off shore and NZers were exposed to having their savings taken for Australian parent clients if those Australian banks had got in trouble.

Thankfully that is not now the case so I guess they could be termed NZ banks.

Still, it depends, to my mind, on how much TAX they pay into the NZ tax coffers to qualify as "NZ" Banks. As, surely, they can only be considered  to be of NZ if they contribute i.e. pay a fair and proportionate membership fee?

Damn, I thought user

Damn, I thought user registrations would help us get rid of the tinfoil hat wearers.

I think that what Mr Norris

I think that what Mr Norris does not want to say is that this bank is on the hook of margin calls of betts gone wrong in trading. Be interesting to see a disclusure of their trades in the Aussie/Kiwi crossing... Banks trade Private equity on a regular basis in an effort to improve their income. Lending has lost importance in the modern banking sistem, the problem with that is that it opens the door to highly leveraged/risky exposure where the capital of the bank ends up following a dangerous money management  path and when the red warning lights go off it is to late to exit the trades and boom another bank goes belly up... with consecuences for the rest of the markets that we have all seen in the recent past. For some  reason the modern Banking sistem wants to keep on engaging in these operations. But because traders do not trade their own money and  because the incentives are so huge they just keep on taking risk. The US sanate tried to regulate but they where unable .

In the worst case scenario a trader looses his job while the bank looses it's capital

I'll wager that most Kiwibank

I'll wager that most Kiwibank clients (like me) see their support as a statement about privatisation of profits and socialisation of losses in the economy, and not banking.  The financial crisis has only reaffirmed this nagging  empathy for the less well off from middle-class kiwis.  Mr Norris knows that this  'sticky' (and growing) market share/support  is a serious other reason for CBA's marketing team to do a 180 since KB's inception.

Its a teeny bit dull on here

Its a teeny bit dull on here as we await  a minty 10@10.

Heres some Daily Mash on "stimulation" to cheer you up.






BRITAIN'S bankers were last night handed another £50bn in crisp notes to rub all over their naked, trembling bodies.

The Bank of England agreed to the new round of quantitative easing after bankers said the last lot had gone all soggy and had to be thrown in the bin.

Bank governor Mervyn King said: "I just print the stuff. It's none of my business what they do with it.

"My personal view is they should lend it to you so you can buy one of those big American fridge freezers with the double doors and the ice dispenser.

"But there's really not much I can do about it if they just want to keep it all in a big room where they can get naked and use it to stimulate their engorged, quivering glands."

A spokesman for the British Bankers Association said: "These £20 notes are too absorbent. After a good hard rubbing session they just fall apart in your hands.

"We need something tough and durable with a moisture resistant coating, like the Euro. Although it has to be said, many of our senior executives do still prefer to rub themselves with an Asian currency."

He added: "No doubt some people will be angry that bankers are being given free money and then using it for genital stimulation, but what's really bugging them is the fact they didn't have the foresight and intelligence to set up a major high street bank and then run it in to the ground."

Bill McKay, from the London School of Economics, said: "The Bank of England is either trying to stimulate the economy or destroy it. It's still too early to tell.

"But at least the bankers have had some really intense rubbing sessions, so it's not been a total waste of time."

opps- Russian?

opps- Russian?

In the credit crunch the

In the credit crunch the Aussie banks kept their interest rates low in Australia, but raised them in New Zealand.  They are not NZ banks, and they would happily roast kiwis over a slow fire if they thought it would help their long term profits.

" kruzmode " is right   :

" kruzmode " is right   :  any post of 1652 words ought to be expunged from the planet ! Dude , if yer still can't articulate the message in a smaller & simpler frame-work , you lose the audience's attention .


[ Bumper-Sticker Boy # 2 ]


Where's WALLY ?

Here I am Gummy Bear...sorry

Here I am Gummy Bear...sorry about the Oh but some worm stole the A

You know Parky...I think you

You know Parky...I think you have finally got it!...." ...our citizens cant be bothered to take the time to understand".....

Simple you know what politicians and bankers rely on....but not just an inclination, not to take the time to understand...also an inability to understand!

So it does not matter whether munny is controlled by the private capitalist or the will always get the rorting and thieving behaviour. The best you can hope for is a battle between the two!

Kiwibank is such a threat to

Kiwibank is such a threat to the Aussie 4 dominance. Seems ridiculous now but give it another 5 to 10 years of Kiwibanks unique KIWITHINKING and it will be.

Their fees may be low Mr Norris which may provide difficulty in capital but it doesn't find difficulty in winning customers. This has you worried it seems.

They are the world first to produce a prepaid VISA card which you can load with FIVE different currencies - world 1st. Loaded for Travel. Good kiwithinking eh My Norrie

They offer competitive rates for both Term Deposits and Mortgages. A good value bank. That's good kiwithinking eh Mr Norrie

Now here's the real kicker. They don't lend money to people very easily, their criteria is quite a bit tougher than ASB or CBA Mr Norrie. You may think you have loads of capital Mr Norrie but you are going to need it soon you know, bad debts are a bugger.

Good to see you back on the

Good to see you back on the blog Iain and thank you for posting the fascinating essay. Recommended to all.

We are paying for the sleazy land confiscations and the capture of our finances by Rothschild&co to this day.


If Kiwibank customers love

If Kiwibank customers love the bank so much..why don't they deposit their savings for less than they could get elsewhere and offer to pay more in interest on their mortgages than they would pay would wouldn't you Parky?

Why don't you explain to readers why the govt does not use Kiwibank as the govt bank...

How's that mortgage going Parky....all paid off yet?


Hey's a bit of help for you and Bolly....might lead to more stable economy if you ever get passed the ponzi turd....from parky's link no less!

"  the banks were required to hold coin to the value of one-third of their note issue, and bullion or Government securities for the remaining two-thirds; and it was laid down that their total liabilities must not of exceed three times their coin, bullion, and Government securities"

Think about it's what we need to see as a permanent feature......make sure the coin is gold Bill...not that copper/nickel crap!

Jeez Parky, that mortgage is

Jeez Parky, that mortgage is really getting to you....I almost got lost between the end of the Roman Empire and the 16th century....why the giant leap through time? the way the Chinese invented printing ok....I hope you don't do the cooking for the family cos they will be getting sick of the stew by now!

" The re- instatement of the Gold Standard would simply be changing from con job pyramid scam to con job pyramid scam."....well done are starting to does not matter whether money control is private or political...nor does it matter what is used for money...the rorts and scams and thieving would remain. In other words your public social credit concept would not lead to a better system.

Your the one screaming for Kiwibank to be the govt tell us why...and don't leave out the dirty linen...

The real (ie non-Holy) Roman

The real (ie non-Holy) Roman Empire collapsed long before that.

Right ho parky..Holy and not

Right ho parky..Holy and not the Roman Empire....but I think you will discover the Chinese were printing on an industrial scale....

 "In honour of John A Lee, in

 "In honour of John A Lee, in pursuit of the diplomatic revival of common decency and equal opportunity economics".....that pretty well sums it up......public social credit is all about socialism....and socialism is all about thieving from those who have to buy votes from the rest.

For your sake I hope that

For your sake I hope that  your truck doesn't have an ejector seat .. .. .. Nuttin' so demeaning as being launched into space by  bored and  ticked off lorry !

You are in need of some

You are in need of some serious help Parky!


commiserations to your

commiserations to your offsider in your truck....if you have one

Ian - Kiwibank doesn't have

Ian - Kiwibank doesn't have the infrastructure to service the NZ Govt's requirements, plain and simple, and well known. Maybe in years to come, but unless they can get some profitablity and warrant further capital to produce such infrastructure, they'll never win that business

Adrian - if you under price your product, don't earn acceptable return over time, you get sold. Exactly what happened to Trust Bank when the Community Trusts got frustrated with their years of substandard returns - their customers loved the low prices but the shareholder didn't. Also, remember that whilst their Australian senior management have an input, the NZ Aussie owned banks are run by Kiwis and as such as not immune to good Kiwi ideas. Norris is a Kiwi by the way as you know !

An interview with the

An interview with the president of the Bank of North Dakota who explains how it works:

and their own website,

Essentially it's Kiwibank writ small, as it were, but used in a way that is supportive of regional economic development. 

We could do the same, if we had the political will.

Why don't we?

Cheers, Les

Bank of North Dipton ! Run

Bank of North Dipton ! Run that past Wild Bill , Les , bound to ignite a gleam in his tired old eyes . Ever been to Dipton ? I did . And as small as it is , over the bridge  is Dipton West . The buses weren't running .. .. .. the only thing that was was the ruddy river .

Not enough profit

Not enough profit Ralph?

Steve Keen figures that bank profits much above 1% GDP are a sign of a dangerously unbalanced economy. As I recall the big four Aussie banks were pulling out about 3%GDP from the Kiwi economy for most of the past decade. Thats after tax of, er sorry, not into paying tax are you Ralph.

Anyway here's an exert and link, this may have been posted by someone but couldn't find it.

"The record $6 billion profit that the Commonwealth Bank is expected to announce today is a sign of an economy that has been taken over by Ponzi finance. Fundamentally, banks make money by creating debt, and the amount of debt we’ve been enticed into taking on is the sign of a sick economy rather than a healthy one. The level of private debt that is actually needed to support business and maintain home ownership at historic levels (ownership levels have fallen over recent years!) is possibly as little as one sixth the current level."

"Because of that debt level, bank profits have gone through the roof as a share of GDP. Back before we had a financial crisis—when debt levels were far lower than today—so too were bank profits as a share of GDP. A sustainable level of bank profits appears to be about 1% of GDP."

KiwiDave - you mean Kiwis

KiwiDave - you mean Kiwis will borrow less ?  I don't blame the banks, I blame us - I guess if we keep borrowing out of line with economic growth, their profits will be out of line with the normal ratios. That will apply right up until we borrow ourselves into the ground, banks take substaintial bad debt losses, and that ratio normalises - seems like a cycle to me ?

Quite right Sam. The banks

Quite right Sam.

The banks had better start thinking about downsizing their size and profit expectations.

After a fifty years of debt expanding at about double the rate of economic growth, a multi decade supercycle I guess, we've reached the end of the road. What scares me about the banks is the degree of influence they have.They'll be looking to carry on as usual and pass the bill to the taxpayer. Surprise surprise, that's just what's happened in the UK, US and (the worst example) Ireland. All done in the name of saving the depositors, pension funds etc. of course.

Good luck trying to collect a debt that can't be repaid, and of course the same poor saps that can't pay their mortgage are supposed to bale out the banks with their taxes.

That's going to work!

Not enough profit Ralph? Not

Not enough profit Ralph?

Not feeling the love from fellow Kiwi's?  (probably not liking the new adds either are you?)

When you bank with the Aussies and ask anyone that has their head office in AU - we're treated worse than the poor cousin - we'll we don't get that from OUR Kiwi Bank ...   they'll have all my business and savings ...until they sell out to foreigners!!

Ask your senior managers what its like working in NZ for an Aussie bank...  you may jus find many frustrated leaders....  while your their why are they Aussie counterparts doing the same role worth so much more for teh same work???

Dare you to respond Ralph!