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

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

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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Testing the new registration and the edit function (!)

And putting in  alink



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.

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

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.


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

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

" 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 about the Oh but some worm stole the A

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!

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 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 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...

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 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  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 serious help Parky!


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

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 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 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."

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!

Days to the General Election: 26
See Party Policies here. Party Lists here.