David Tripe: Massey University Banking Expert on the potential use of private capital to bolster Kiwibank

The Government's received advice on how Kiwibank can better compete with the large Australian-owned banks.  

It's in response to the Commerce Commission market study on personal banking.  

Documents released under the Official Information Act show Treasury wants to look at exploring use of private capital, including an Initial Public Offering. 

Massey University banking expert David Tripe told Ryan Bridge there could be issues with an NZX listing or other private parties getting involved.  

He says returns aren't especially good, and that's one of the big challenges with the IPO option. 

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Episode Transcript

Speaker 1 (00:00):
Anyone want to buy shares and Kibi Bank, you may
soon get the chance. Three options are on the table
for the government to increase Kibibank's capital and increase its
competitiveness with the big banks, Increasing government debt, third party
investment and putting it on the n z X are
all options for the Finance Minister, according to advice released
over the weekend from Treasury, which one is best? David

(00:22):
Trump and Massa University's banking expertise with US Live this morning.
Good morning, good morning, right, great to have you on
the program. David tell us which one you think is best?

Speaker 2 (00:35):
Well, they all have their challenges. If the government raises
some additional funds in the market and pumps it in directly,
that's probably the most straightforward because it's it doesn't require
the involvement of anybody else to make a contribution. Did

(01:00):
the government is raising their debt funding all the time,
and it would just be sort of a part of
the debt funding they were raising. As to the the
the crown controlled organizations can involve, we did previously have
super funding the ACC investing in Kiwi Bank. They were

(01:21):
unhappy with the returns they earned and that's why last
year they managed to exit because they were happy with that,
and the similar issues apply with an index listing or
other private parties getting involved. The returns are not especially

(01:44):
good and that's one of the big challenges to floating
Gewi Bank on the as an I p O.

Speaker 1 (01:50):
Why why their return is not good when the when
the Aussie ones appear to be.

Speaker 2 (01:56):
Ah. The biggest problem is actually the matter of scale
and the cost of regulation and technology. What we actually
see is that all of the smaller banks struggle to
earn the sorts of returns being earned by the large banks,
and it's very much a consequence of the costs of

(02:23):
regulation and technology. If we go back twenty years, tsb's
costs were very much comparable with the all large Australian banks.
That has stopped being the case and the big Aussie
banks now have a big advantage in terms of cost.

Speaker 1 (02:45):
So in trying to solve the big bank profit problem,
we are looking at a whole range of regulations that
could that perversely actually make the problem worse for the
smaller banks.

Speaker 2 (02:58):
Well, we're putting additional regulations in place, is not really
going to improve anything, I don't think. On the other hand,
we don't really want to have small banks there that
are subject to less regulation because that increases the risk
of problems going wrong with them. So it's a bit
of a challenge working out how we're going to solve

(03:21):
this problem.

Speaker 1 (03:21):
David Trite, Massi University banking expert, really appreciate your time
this morning. For more from Early Edition with Ryan Bridge,
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