Claire Matthews: Massey University Banking Expert on Kiwibank gaining approval to gain new capital

A banking expert believes new capital for Kiwibank will shift the dial but won't completely close the gap with its Australian competitors. 

Finance Minister Nicola Willis has announced the bank's parent company is being allowed to raise half a billion dollars from private investors to help it close in on the four major banks. 

Massey University banking expert Claire Matthews told Ryan Bridge Kiwibank is already making a difference, but can't see the announcement making a big enough splash.  

She says enabling it to grow will help, but the competition issue in the market is being overstated. 

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Episode Transcript

Speaker 1 (00:00):
Good news for banking competition, Well, hopefully good news for
banking competition, the government giving the green light for a
capital injection from the private sector, Cabinet approving raising half
a billion, five hundred million dollars through QYP saver funds
and investment groups with the hope of finally making the
bank competitive with the Big four of the Aussies. Claire
Matthews is Associate professor at Massi University Business School, a

(00:21):
banking expert. Clear, good morning, Marina iron. Is this going
to shift the dial in terms of its competitiveness? How
rgibargie it can be in market?

Speaker 2 (00:33):
Well, it's sitting in to make a difference. We're talking
about increasing its capital by around seventeen percent, but in
reality it's still going to be substantially smaller than the
Big four Australian banks. It's obviously going to be able
to do more lending, and if it can do a
substantial amount more lending then it can be challenging in
terms of what it offers, but it's not going to

(00:56):
take it anywhere near the size of the Big four,
So the extent of which to which it will actually
impact on competition is questionable.

Speaker 1 (01:04):
How do you get it there, do you need to
put it on the stock market, as Nicola Willis is
sort of indicated, is potentially an option.

Speaker 2 (01:12):
We're still talking a huge amount of increase in capital
that would be required in order to get it to
anywhere like the size of the Big Four, enabling it
to grow and enabling it to do more lending. Whether
it's through this capital injection or additional capital through an IPO,
that's all going to help. But as usual, we're overstating

(01:34):
the competition issue in the market in my view, because
we do have a competitive market. Queibank is making a
difference as it is. Yes, it will make a bit
more of a difference if it's able to do more.
But whether we're going to see a huge change in
terms of what's happening in the banking market, I just

(01:55):
don't see that it's going to happen.

Speaker 1 (01:57):
Is that because it's starved of capital or because we're
just a small country.

Speaker 2 (02:05):
It's probably not either of those things. It is certainly
a challenge for Keevy Bank in terms of its capital
situation because in order to do leaning it needs capital
and it can only generate so much from its normal operation.
So getting more capital as a capital injection helps. We
are a small country, but that's not actually accepting a
competition issue. We have a good number of banks that

(02:28):
they are competing. We seem to perceive that just because
they're making lots of money that that's not competitive. That's
not necessarily the case in my view, and the challenge
is that Keevy Bank is just a small bank, and
at least you've got something a similar size to the
big four, You're not really going to have a competitive

(02:49):
difference with my view.

Speaker 1 (02:51):
Interesting, Clear appreciate that, Clear Mathews as I said, professor
at mass University Business School.

Speaker 2 (02:56):
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