Source: Radio New Zealand
RNZ / Marika Khabazi
- State-owned Kiwibank’s $500m capital raise won’t go ahead
- Its parent Kiwi Group Capital cited recent RBNZ capital settings and $400m raise
- KGC engaged with leading investors
Kiwibank has scrapped a plan to raise extra capital from local investors to strengthen its finances.
The state-owned bank had been working with potential investors to raise up to $500 million in new equity capital to compete better with the big four Australian-owned banks.
In a statement on Friday, Kiwibank’s parent company, Kiwi Group Capital (KGC), said recently announced easing of the Reserve Bank’s capital settings, combined with Kiwibank’s recent $400m Tier 2 capital raise via bonds, meant it could grow without the need for additional equity.
“While prospective investor feedback has been positive on Kiwibank’s performance and strategy, it appeared unlikely by the time of the Reserve Bank’s announcement that terms would be able to be agreed with prospective investors that would meet KGC’s objectives for the transaction,” it said in a statement.
“Kiwibank is in a strong position to continue growing and challenging the larger banks.”
KGC would not reveal the structure of the proposed raise and the price of the offer, and it would not reveal investor feedback.
It said it engaged with a number of leading institutional investors, KiwiSaver funds and professional investment groups, including Māori institutions.
“When KGC started the process, it was unclear whether the Reserve Bank would review its capital settings,” it said. “KGC acted prudently to ensure Kiwibank could maintain its above market growth under the previous rules.
“The changes announced during the process, combined with the successful Tier 2 capital raise, mean Kiwibank remains well funded to maintain its abovemarket growth trajectory.”
Throughout the process, the government remained committed to retaining a minimum 51 percent stake and said no share market listing would occur without an electoral mandate.
Maverick challenger
The Commerce Commission banking study said Kiwibank should be given a financial boost to become a maverick challenger to the big four.
When the proposal was first floated, the extra funds were said to be enough for Kiwibank to chase billions of dollars worth of extra business and home lending, and over the past year or so it has been expanding at a faster rate than the others.
But some observers suggested $500 million was not enough to break the grip of the big four banks and may have led to Kiwibank chasing riskier business that others did not want.
Victoria University associate professor of finance Martien Lubberink previously said the amount might sound large, but it was small in banking terms, and he was dubious about the impact it would have on banking competition.
He said investors would have needed to see a plan before committing to an investment, a point which was echoed by the head of KiwiSaver provider Simplicity, Sam Stubbs, who said Kiwibank needed billions not just millions.
– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
