Andrew Body: Financial Markets Expert on the efforts to make Kiwibank a disruptor in the banking sector

An investment banker says the most sensible thing for Kiwibank to do is join the banking oligopoly. 

A Commerce Commission report on banking found the sector isn't competitive enough, as it's being dominated by the big four Australian players.  

The Government's announced its intentions to find investors to deliver Kiwibank up to $500 million dollars to drive competition. 

Financial markets expert Andrew Body told Heather du Plessis-Allan he doesn't think it'll become a disruptor. 

He says that Kiwibank has been around for 23-odd years, and hasn’t been a maverick in that time. 

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Episode Transcript

Speaker 1 (00:00):
So the government's given a little more detail about the
grand plan for Kiwi Bank. It will be part privatized.
Only Kiwis and Kiwi Saver Funds will be able to
invest and invest up to a value of five hundred
million dollars. Investment banker and financial markets expert Andrew Body
has with been our Handrew, Hi, would you put money.

Speaker 2 (00:16):
In only if I can buy the shares of blowing Ta.
Kiwi Bank isn't earning its cost of capital, which is
about eleven or twelve percent. It looks like it's return
is much lower than that, so you really have to
be buying blowing Ta, which is obviously going to highlight

(00:38):
the value destruction that's occurred there.

Speaker 1 (00:41):
Is it smart to limited just to locals.

Speaker 2 (00:46):
Well, my view as you always want to get the
lowest cost of capital and that that's going to be
from overseas. I mean, I think the proposal really highlights
the intersection of bank profitability, competition and regulation in New Zealand.
The king Banks being around for twenty three odd years,

(01:08):
it's not able to have been an averick in that
in that time, and in fact, the most sensible thing
for q Bank is to try to join the banking oligopoly,
and that's what that's what investors will want it to do.
Is they focused on return.

Speaker 1 (01:29):
You're making it sound like you don't believe it's actually
going to be a disruptor and create competition.

Speaker 2 (01:34):
No, I don't. I think it won't do any harm.
But it's not the panacea. You know, what is the
real problem here, which the Commerce Commissions study really highlighted,
is regulatory overreach by the Reserve Bank, NB and FMA.

(01:55):
A lot of bank regulation just doesn't meet an objective
cost benefit analysis. Capital ratios, risk weights, lending classes, bank
outsourcing rules, triple CFA AML. They've all increased bank concentration,
increased bank costs, prevented entry into the market and courage
to exit, reduce flexibility, etc.

Speaker 1 (02:16):
What do you make of having to wait until it
does its digital transformation in twenty twenty eight.

Speaker 2 (02:24):
Look, I don't have a view about that, but I mean,
I guess it just pushes out any impact, you know,
raising new capital might have for Q Bank's increase lending
in the market.

Speaker 1 (02:35):
Yeah, Andrew, thanks very much for talking us through it.
Andrew Body, Investment bank and Financial markets expert for more
from

Speaker 2 (02:41):
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