With the possibility of a partial sale in the works, Kiwibank’s chief executive has questioned whether it’s necessary for the bank to stay 100% locally owned.
Speaking to Q+A, Steve Jurkovich said the bank needs to raise significant amounts of capital to compete more effectively with the big four Australian-owned banks.
He said opinion within the community is split on the nature of Kiwibank’s ownership.
“I think having New Zealand’s bank owned by New Zealand and working for New Zealand is critical to the offering – like you still need to be a good bank, people need to trust you,” Jurkovich said.
“But does that need to be 100% ownership? Some people have a very firm view – I’ve already had probably 100 emails where people say you shouldn’t sell any at all.”
“And then there’s a lot of people who overwhelmingly say as long as it’s controlled and working in New Zealand’s interests, why do you need 100%? And I think that’s the argument with the power companies and Air New Zealand.”
The Government has been looking at options for raising new capital for Kiwibank to allow it to exert “real competitive pressure” on the four big Australian-owned banks operating in New Zealand.
More than two decades after being founded to disrupt a cosy banking market, Kiwibank has struggled to fundamentally alter market dynamics.
Jurkovich argued the progress that has been made should be recognised.
“No bank in 25 years has ever made any ground like we have, but then when I look to the bigger competitors we’re a quarter of their size, so I take their point.”
“That’s what the Commerce Commission report was about – it still does look like four pretty cosy four big players. Why is profit bigger in New Zealand than it is in Australia? All of those sorts of points,” said Jurkovich.
The commission made several recommendations to the Government so competition in the banking sector could be improved.
Finance Minister Nicola Willis said in the wake of that report she had asked Treasury to engage with Kiwibank’s parent group, Kiwi Group Capital, to look at options for raising capital, including from KiwiSaver funds, New Zealand investment funds and investment from “everyday” New Zealanders.
“I want it to have the growth capital it needs to become a ‘maverick’ that exerts real competitive pressure on the big four.”
“I will take proposals to Cabinet no later than December this year.”
The bank’s overall market share is about 7%, though Jurkovich says there are growth areas, with Kiwibank doing about 15-17% of refinances in the last year.
He also argued Kiwibank continues to have responsibilities around their social license, rather than simply making money.
This included trying to keep bank branches open in regional New Zealand, which Jurkovich said was shown by being “a quarter of the size with double the points of contact as the biggest bank.”
“Our view is that by not trying to take every dollar off the table gives us the best chance to be sustainably successful.”
“You don’t have to try and maximise in the short term – there’s way more value in taking a long-term view.”
Q+A with Jack Tame is made with the support of New Zealand On Air
