NZ First wants to buy BNZ from its Aussie parent, and merge it with Kiwibank to create 'a National Bank of New Zealand', says Winston Peters

NZ First leader Winston Peters is proposing the Government "buys back" BNZ from the National Australia Bank (NAB), and merges it with Kiwibank, creating a “National Bank of New Zealand to keep the major Australian banks honest and to keep New Zealand banking profits in NZ."

In a speech in West Auckland on Sunday, Peters said this was a campaign policy announcement, ahead of the November 7 election.

He said a “National Bank of New Zealand” wouldn't be a government department, rather it'd be a fully commercial bank with a Crown shareholder, run on new management structure to be detailed in election campaign announcements.

Peters said a buying the BNZ wouldn't be funded from the Government's operating budget, rather via "a blended funding stack" including;

·A New Zealand Sovereign Banking Bond issuance, marketed to domestic retail and KiwiSaver investors as a direct economic-sovereignty instrument.

·Long-dated Crown debt at current sovereign rates. BNZ currently generates more than $1.5 billion in annual cash earnings – comfortably servicing the debt and returning a surplus to the Crown.

·A limited tranche of the NZ Future Fund and ACC investment, structured as a commercial equity at arm’s length and a market rate of return.

·Retention of Kiwibank’s existing capital base.

"The buy-back is self-financing in expectation. The fiscal impact is a one-off balance-sheet expansion, not an ongoing cost. This is not nationalisation – this is taking back our country," Peters said.

NAB bought BNZ in late 1992 in a deal valued at NZ$1.48 billion with key sellers being 57.3% shareholder the Government, and 27% holder Fay, Richwhite. This followed a tumultuous period for the bank, detailed in this Reserve Bank paper here.

In 2013 interest.co.nz reported Sydney-based Deutsche Bank analysts valued BNZ at A$6.219 billion in a sum of the parts valuation.

"New Zealand First will be proposing a buy-back of the Bank of New Zealand from National Australia Bank," Peters said.

"It will be merged with Kiwibank to form the 'National Bank of New Zealand (NBNZ)' – a fully Crown owned, commercially run, systemically significant domestic bank with the scale to genuinely compete with ANZ, ASB and Westpac.  After all, when National sold BNZ to NAB in November 1992, it then had six of every 10 New Zealand banking customers."  

"This is a buy-back to put a New Zealand owned competitor on the field at the scale required to change the behaviour of the foreign-owned banks," said Peters.

"This will create real competitive pressure on the Australian owned banks – a domestically owned strategic lender capable of supporting agriculture, infrastructure, and Small to Medium Enterprises growth on long-horizon terms."

"Kiwibank, the only domestically owned bank of any scale, currently holds just under 8 percent of the mortgage market," Peters added.

Peters said Crown-owned commercial banks "are normal in serious economies" such as Singapore, Norway, Germany, Canada and France.

"New Zealand is the outlier – and we are going to change that."

The speech didn't say whether the Australian Securities Exchange listed NAB could be expected to be a willing seller.

Here's more from Peters' speech;

New Zealand will be buying back the BNZ bank.

Four Australian owned banks control around 85 percent of the system. They lend our deposits back to us at margins that are materially higher than those earned by their parent groups in Australia. Billions of dollars of profits a year that flow across the Tasman.

New Zealand First will be proposing a buy-back of the Bank of New Zealand from National Australia Bank.

It will be merged with Kiwibank to form the “National Bank of New Zealand (NBNZ)” – a fully Crown owned, commercially run, systemically significant domestic bank with the scale to genuinely compete with ANZ, ASB and Westpac.  After all, when National sold BNZ to NAB in November 1992, it then had six of every ten New Zealand banking customers.  

This is a buy-back to put a New Zealand owned competitor on the field at the scale required to change the behaviour of the foreign-owned banks.

This will create real competitive pressure on the Australian owned banks – a domestically owned strategic lender capable of supporting agriculture, infrastructure, and Small to Medium Enterprises growth on long-horizon terms.

Kiwibank, the only domestically owned bank of any scale, currently holds just under 8 percent of the mortgage market.

The ‘Commerce Commission 2024 Personal Banking’ market study, showed a structurally uncompetitive market in which the major banks face no sustained pressure to compete on price, no realistic threat of new entry at scale, and no domestic ownership accountability.

Kiwibank was created in 2002 precisely to provide a domestic challenger. But after two decades it remains a marginal player.

Successive governments have starved it of the capital it would need to be a genuine system-shaping competitor.

The “National Bank of New Zealand” would not be a government department. It would be a fully commercial bank with a Crown shareholder, but run on new management structure which we will outline in upcoming campaign announcements.  

The “National Bank of New Zealand” would exist to keep the major Australian banks honest and to keep New Zealand banking profits in New Zealand.

Crown-owned commercial banks operating at scale are not radical. They are normal in serious economies – Singapore, Norway, Germany, Canada, France, all have large-scale state-owned banks that have serious stakes in the market.

New Zealand is the outlier – and we are going to change that.

New Zealand built BNZ. Labour and National sold it. Now we are going to buy it back. 

Every dollar of profit it makes will stay in this country, working for New Zealanders. 

That is what economic sovereignty looks like. That is what real conservatism looks like. That is what real Nationalism looks like.

And that’s what ‘added-value’ looks like for our country.