December 9, 2024 • 4 mins
The government is looking to inject Kiwibank with $500 million in capital to "disrupt the status quo" and take on the big Australian owned banks.
Kiwibank's parent company Kiwi Group Capital along with Treasury have been instructed to talk to potential investors, which could include Kiwisaver funds.
For now an initial public offering is off the table with the government has ruling out selling off it's shares in the bank.
Massey University Banking Expert Claire Matthews isn't sure it will help the current situation.
"The government is pushing this very much as its going to make a huge difference to competition and I'm struggling to see that it really will make that much of a difference"
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Speaker 1 (00:00):
So we've got an update to the banking environment in
New Zealand. The government is looking to inject Kiwibank with
five hundred million dollars in capital to i quote disrupt
the status quote Kueibank's parent company, Kiwi Group Capital and
Treasury have been instructed to talk to potential investors, but
the government has ruled off actually selling its Quei bank
(00:21):
chares to the public and IPO massive university banking expert
Clear Matthews joins, we now have a clear.
Speaker 2 (00:28):
Marienna Andrew, so good move. It's an interesting move. It's
not it's not an unexpected move. It's where it's going
to really make a difference as something that we will
wait to see.
Speaker 1 (00:42):
Well, that's a nothing answer, and why did you cackle?
Speaker 2 (00:48):
Because the government is pushing this very much as it's
going to make a huge difference to competition, and I'm
struggling to see that it really will make that much
of it as.
Speaker 1 (00:57):
Well, because it's just an extra five hundred million dollars
on the balance sheet, which won't when you're competing with
other banks that have billions and billions and billions.
Speaker 2 (01:05):
Yeah, I mean five hundred million is obviously not a
small amount of money, but the government has indicated that
we'll enable it to do four billion dollars worth of
business leaning or ten billion dollars of home lending. And
at the moment the banks between them have got a
total of just under four hundred or around four hundred
and ninety billion dollars worth of lending. So that amount
(01:26):
of additional leanding is really quite a drop in the bucket.
And you've got a question how much of a difference
that can make to the competitive environment.
Speaker 1 (01:34):
Okay, now the left and let us talk about another
part to it. The left is squealing that this is
a part privatization, which I think is true. This is
not taxpayers money, broadening the capital base, but don't appeal
to private investors. So will this appeal to those private
investors to invest?
Speaker 2 (01:51):
You'd really have to ask the private investors. It's going
to depend on the conditions and the terms associated with
the issue of the capital. What are they going to get,
What are the options associated with that. One of the
key things is it does appear to be what they
call a put option, So the investors are going to
(02:12):
have a right to sell those shares back to the
government as a proposed IPO doesn't go ahead, So they're
talking about making an IPO whereby the public could buy shares.
I think the public would have an interest in buying
shares where that private investors would. But if they know
that they're going to be able to get rid of
them in a couple of years time, either to the
(02:32):
government or to private investors, then maybe that's attractive. But
it will depend on the terms exactly, and they may
be able to lock in some really good terms, in
which case you've got to say, is that good for
the government?
Speaker 1 (02:44):
Well, leaving out that IPO is interesting. They say it's
because of technical reasons that they haven't finished the computerization
of Kiyi Bank or something like that, so the IPO
couldn't happen until twenty twenty eight, So is that actually smart?
Was that forced by necessity? And the fact is, no
one is going to invest in some shares in five
hundred million dollars of extra capital if they can't on
(03:05):
sell at a later date at a market price and
not to a government.
Speaker 2 (03:11):
I know they might be happy to have a guarantee
that they can sell back to the government. So that
doesn't necessarily mean that they have to be able to
sell to the public. But they do want to be
able to sell because they don't want to be stuck
with them. I personally don't understand why they have to
complete the digital changeover in order to do the IPO,
but you know, maybe there's something I'm missing there. But
(03:33):
investors want to have a way out. They don't The
government might be happy to have no way out, but
for investors, they need to be able to know that
if the time comes and they want to sell the
shares for some reason, they've got to be able to
do that.
Speaker 1 (03:47):
Okay, And your opinion is our banking environment does it
need a revamp because this is a common talking point,
and yet we have many bangs, We have competition. They
are running businesses. Their margins are not excessive.
Speaker 2 (04:03):
Well that's the problem. Some people think they are excessive.
It's just that they make large amounts of money and
it sounds terrible because it sounds like they're making all
this money off New Zealanders. But in reality, they need
to make a return because if they're not making a
satisfactory return for the capital that they've got investors, they're
not going to continue to operate. And they do spend
a lot of money in New Zealand as well as
(04:25):
those operations in terms of the profits they're making, they
spend a lot of money to make that and most
of that comes into the New Zealand economy.
Speaker 1 (04:32):
Thank you so much, Claire, doctor Claire Matthews, who is
the Associate Professor Banking at Massi University. And remember these
are not Australian banks. In fact, the Australian banks have
owners as well. There's always a bigger fish, as they
said in Star Wars.
Speaker 2 (04:45):
For more from Early Edition with Ryan Bridge. Listen live
to news talks that be from five am weekdays, or
follow the podcast on iHeartRadio
So we've got an update to the banking environment in
New Zealand. The government is looking to inject Kiwibank with
five hundred million dollars in capital to i quote disrupt
the status quote Kueibank's parent company, Kiwi Group Capital and
Treasury have been instructed to talk to potential investors, but
the government has ruled off actually selling its Quei bank
(00:21):
chares to the public and IPO massive university banking expert
Clear Matthews joins, we now have a clear.
Speaker 2 (00:28):
Marienna Andrew, so good move. It's an interesting move. It's
not it's not an unexpected move. It's where it's going
to really make a difference as something that we will
wait to see.
Speaker 1 (00:42):
Well, that's a nothing answer, and why did you cackle?
Speaker 2 (00:48):
Because the government is pushing this very much as it's
going to make a huge difference to competition, and I'm
struggling to see that it really will make that much
of it as.
Speaker 1 (00:57):
Well, because it's just an extra five hundred million dollars
on the balance sheet, which won't when you're competing with
other banks that have billions and billions and billions.
Speaker 2 (01:05):
Yeah, I mean five hundred million is obviously not a
small amount of money, but the government has indicated that
we'll enable it to do four billion dollars worth of
business leaning or ten billion dollars of home lending. And
at the moment the banks between them have got a
total of just under four hundred or around four hundred
and ninety billion dollars worth of lending. So that amount
(01:26):
of additional leanding is really quite a drop in the bucket.
And you've got a question how much of a difference
that can make to the competitive environment.
Speaker 1 (01:34):
Okay, now the left and let us talk about another
part to it. The left is squealing that this is
a part privatization, which I think is true. This is
not taxpayers money, broadening the capital base, but don't appeal
to private investors. So will this appeal to those private
investors to invest?
Speaker 2 (01:51):
You'd really have to ask the private investors. It's going
to depend on the conditions and the terms associated with
the issue of the capital. What are they going to get,
What are the options associated with that. One of the
key things is it does appear to be what they
call a put option, So the investors are going to
(02:12):
have a right to sell those shares back to the
government as a proposed IPO doesn't go ahead, So they're
talking about making an IPO whereby the public could buy shares.
I think the public would have an interest in buying
shares where that private investors would. But if they know
that they're going to be able to get rid of
them in a couple of years time, either to the
(02:32):
government or to private investors, then maybe that's attractive. But
it will depend on the terms exactly, and they may
be able to lock in some really good terms, in
which case you've got to say, is that good for
the government?
Speaker 1 (02:44):
Well, leaving out that IPO is interesting. They say it's
because of technical reasons that they haven't finished the computerization
of Kiyi Bank or something like that, so the IPO
couldn't happen until twenty twenty eight, So is that actually smart?
Was that forced by necessity? And the fact is, no
one is going to invest in some shares in five
hundred million dollars of extra capital if they can't on
(03:05):
sell at a later date at a market price and
not to a government.
Speaker 2 (03:11):
I know they might be happy to have a guarantee
that they can sell back to the government. So that
doesn't necessarily mean that they have to be able to
sell to the public. But they do want to be
able to sell because they don't want to be stuck
with them. I personally don't understand why they have to
complete the digital changeover in order to do the IPO,
but you know, maybe there's something I'm missing there. But
(03:33):
investors want to have a way out. They don't The
government might be happy to have no way out, but
for investors, they need to be able to know that
if the time comes and they want to sell the
shares for some reason, they've got to be able to
do that.
Speaker 1 (03:47):
Okay, And your opinion is our banking environment does it
need a revamp because this is a common talking point,
and yet we have many bangs, We have competition. They
are running businesses. Their margins are not excessive.
Speaker 2 (04:03):
Well that's the problem. Some people think they are excessive.
It's just that they make large amounts of money and
it sounds terrible because it sounds like they're making all
this money off New Zealanders. But in reality, they need
to make a return because if they're not making a
satisfactory return for the capital that they've got investors, they're
not going to continue to operate. And they do spend
a lot of money in New Zealand as well as
(04:25):
those operations in terms of the profits they're making, they
spend a lot of money to make that and most
of that comes into the New Zealand economy.
Speaker 1 (04:32):
Thank you so much, Claire, doctor Claire Matthews, who is
the Associate Professor Banking at Massi University. And remember these
are not Australian banks. In fact, the Australian banks have
owners as well. There's always a bigger fish, as they
said in Star Wars.
Speaker 2 (04:45):
For more from Early Edition with Ryan Bridge. Listen live
to news talks that be from five am weekdays, or
follow the podcast on iHeartRadio
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