Sam Stubbs: Simplicity co-founder on the Government's new moves to boost competition in the banking sector

The Government's beefing up Kiwibank - at the request of the Commerce Commission.

Its report on banking has found the sector isn't competitive enough, and offered up 14 recommendations.

Simplicity co-founder Sam Stubbs says the banks would be foolish to ignore Government warnings.

He says the Prime Minister's telling the banks - the game is up.

"Remember, the only person that can seriously do damage to the big banks in New Zealand is the Government, because they've got regulation powers."

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Episode Transcript

Speaker 1 (00:00):
The Cabinet has agreed to make key Bank more competitive.

(00:02):
Thy're beefing it up with a five hundred million dollar
capital injection. Queybank parent company QWI Group Capital and Treasury
have been instructed to talk to potential investors. These could
include Kiwi saver funds. They could in include pension funds,
et cetera, but the government has ruled out selling off
its ki Bank shares. The Finance Minister Nicola Willis is
with me after six for now. Sam Stubbs is the

(00:24):
founder of Simplicity, the key We Saver Fund. Sam, Good Evening,
Good Evening, does this well? First of all, your reaction
to the announcement.

Speaker 2 (00:34):
Oh look, I think it's a very sensible first step
towards getting Qwbank to be the bank it could be,
which is basically as big as the Aussie banks and
really bringing you serious competitions to the market. So first
of all, what they need to do is raise I
think five hundred million sounds round about the right amount
of money, and they need to inject that is new
money into Kiwibank to make it stronger. Clevee has other

(00:57):
things to spend its money on, so it'll come to
people like.

Speaker 1 (01:01):
US and US for that money, will you invest?

Speaker 2 (01:05):
I think we're highly likely to if the price is right.
I mean, we'll take it very seriously because if you
think about the banking industry, it is a profitable industry.
Banks are good investments long term. This would be you
would be getting an opportunity to get in early, as
it were, and then you know you you would normally
assume after this that the ultimately would be listed on

(01:26):
the stock exchange and mum and dad Kiwy investors would
get that chance as well. I do like the fact
that they're effectively restricting it to New Zealand investors so
that the kiwibank stays Kiwi. That makes perfect sense. And
there's plenty of money in the market now, Ryan to
do this, you know, keep you serving funds alone have
got around about one hundred and twenty billion dollars.

Speaker 1 (01:45):
Is the five hundred million dollars floating around in the
air to fund it?

Speaker 2 (01:50):
Oh? Look, I would have thought easily. I mean, if
you add up one hundred and twenty billion from Kiwi saver,
if you add up acc, if you take NZC but
that's about another one hundred and twenty hundred and twenty
billion dollars and you've got EWI, you've got other institutional investors.
So if the price is right, I would have thought
it would be relatively easy to raise five hundred million dollars.
I mean, you know, these things take time. You've got
to go through a process. But this should be a

(02:13):
good investment at the right price.

Speaker 1 (02:15):
Will you, And the way you're talking makes me think basically,
you guys will get that. Those who can, who are
allowed to come early, will get a deal, and those
have to wait till the stock exchange listing will will
pay more.

Speaker 2 (02:27):
I'll not necessarily, no, I think. I mean, if it went,
if it went to a stock exchange listing, what we
call an IPO, typically everyone who invests there it gets
a good deal. You saw that with the power companies
when they listed. So but that'll be years off. Ryan, Basically,
basically it will take years for KWI SAB for qv
bank to beef up. It does take time. You've got
to absorb that money, You've got to make new loans,

(02:49):
all that sort of stuff takes time. But this is
a really important and I think pretty significant first step is.

Speaker 1 (02:54):
Your reading of it. When Nikola Willis says to the
big banks. Watch out. There'll be more to come unless
you play ball. Is your reading of it that she
means O listed on the stock extra. That's the next
sort of step if you don't buck up your ideas. Boys.

Speaker 2 (03:09):
Yeah, look, I read that slightly differently. I read that
there's Look, there were fourteen recommendations. You're now on formal
notice that you've got to take these things seriously, make
them happen. This is is emphatical warning as I've ever
seen from from any politician to the big banks that
unless you shape up, they will be trouble. And I
think I mean the bank the big banks would be
false to to to you know, ignore this. This is

(03:31):
this is the Prime Minister and the Minister of Findings
standing up saying okay, games up. Now here are the recommendations.
You've got to make them happen. Remember, the only the
only person who can seriously do damage to the big
banks in New Zealand is the government because they've got
they've got regulation powers. So I think this is a
this is a really really formal warning to them that
you've got to allow competition in New Zealand because the

(03:55):
Commics Commission Commas Commission very emphatically said that the banks
were weren't allowing petition.

Speaker 1 (04:00):
Then Sam stubs Simplicity for more from Hither Duplicity Allen Drive.
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