Bureaucrats see long-term value in Crown investing NZ$100 mln in Kiwibank

Government officials believe an equity injection by the state of up to NZ$100 million in Kiwibank would provide long-term value for the Crown, Radio New Zealand has reported, and chairman Jim Bolger expects funding talks with the Government to be concluded by year's end.

Citing official papers seen by Radio NZ, economics correspondent Nigel Stirling reported the advice was made by the Crown Company Monitoring Advisory Unit to Minister of Finance Bill English and State Owned Enterprises Minister Simon Power.

Stirling said the papers document meetings between the then chief executive of Kiwibank's parent NZ Post John Allen and chairman Jim Bolger in January last year with Power.

"NZ Post at these meetings signaled an intention to request NZ$100 million primarily to fund the expansion of Kiwibank," Stirling said.

The subsequent official advice wasn't that the Government should invest, only that NZ Post-Kiwibank would provide "long-term value" for the Crown if it was to invest.

The meetings were preliminary to NZ Post lodging  a 10-year business plan for Kiwibank with the Government, Stirling added.

"We’re not sure if they asked for that amount. Bolger wouldn’t confirm (to Radio NZ) whether they’d asked for that."

Announcing his impending departure in May, Kiwibank CEO Sam Knowles said NZ Post was seeking less than NZ$100 million for Kiwibank from the Government. A business plan for the next decade had been put to the Government which envisaged Kiwibank growing its balance sheet by between NZ$2 billion and NZ$3 billion annually. The plan envisages growing Kiwibank into a full service bank including expanding in the business market.

Knowles said Kiwibank didn't require large amounts of capital to continue growing, but the Government would have to continue reinvesting its dividends. Kiwibank, which launched in February 2002, has never paid a dividend.

Meanwhile, Stirling said Bolger had also highlighted possible other ways for Kiwibank to raise money other than asking for it from the Government directly. This included issuing debt securities such as Kiwibank's May issue of NZ$150 million worth of preference shares to bolster tier one capital and enable Kiwibank to increase its lending. The bank also sold property – seven branches – last year raising NZ$45 million.

Bolger said discussions with the Government about how Kiwibank's growth plans would be funded were ongoing.

"He expects to have a conclusion, an answer from the Government, before he steps down as chairman at the end of this year," Stirling said.

Bolger will be replaced by former Labour finance minister Michael Cullen.

 

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