In 2000, the Initial vote on Kiwibank in the Labour-Alliance government was 16 votes against from Labour, and four votes in favour from the Alliance.

I was there when this was reversed, and in 2001 the four insurgent Alliance Ministers – Jim Anderton, Sandra Lee, Laila Harre and Matt Robson- received our foundation Kiwibank cards in Jim’s office.

New Zealand once again had a popular publicly owned bank to aid its development and counter the strangling grip of the privately owned foreign banks.

Finance Minister Hon. Michael Cullen said, begrudgingly, that the bank, operating from New Zealand Post premises, would get an $ 80 million loan , but not one cent more. Helen Clark continued her opposition by announcing she would remain an Australian Big 4 customer.

Kiwibank had been a long journey.

So, why had Alliance members campaigned so long and hard for this goal?

Jim Anderton had spelt out the reason in 1988 as the Lange Labour government continued its crash sale of public assets by putting the Bank of New Zealand with its 20 percent share of the banking sector on the auction block. In a 1988 parliamentary speech that led to his expulsion from the Labour caucus Jim Anderton said:

“The sale of State Owned Enterprises transfers ownership, control, wealth and resources from the public sector to the private sector…Once it is sold the policy options available…are almost certainly removed…Even after the worst stock market crash in New Zealand’s history…the Bank of New Zealand made an operating profit of $182 million in the 1987-88 financial year… (it) is virtually a perpetual asset…(and) commands 20 percent of the current financial system.”

As a highly capitalised bank the BNZ, meeting its huge taxation and dividends obligations to the government and with its long history in the development of New Zealand as an arm of government, the BNZ limited the destructive side of  private banks and kept profits and investment capacity in New Zealand.

Within a short time, an expanding  Kiwibank kept local branches open, and rapidly attracted customers. It paid back the initial government capital within 3 years. It now has over one million customers, including over 40,000 businesses.

Michael Cullen, resiling from his initial hostility, was to praise Kiwibank in his autobiography as follows:

“But Kiwibank proved its real worth to New Zealand in the early stages of the global financial crisis. The Australian  banks withdrew substantially from the New Zealand mortgage Market. Kiwibank stepped  into the breach. Despite its very small size compared with the Aussies, it was for a year or two the largest provider of new mortgages…since Kiwibank was set up, the Australian banks have emphasised their New Zealand character…”

Michael Cullen, the former Finance Minister then warned, and Minister Willis would do well to heed,  about the true character of the private banks:

“…when the crunch comes , one should never be fooled  about where their primary accountability will lie.”

In his 1988 speech to Parliament, opposing his own public asset selling Labour Party,  Jim Anderton also outlined the vision which in 2002 was to underpin both the  Kiwibank and  a newly minted  ministry of economic and regional development, of the public bank playing an essential role in national economic development:

“…if it were decided to run an active regional development policy the geographical spread of the branches of the Bank of New Zealand makes the bank the only Government agency with the detailed knowledge required to act of the Government… of providing long-term development funds for viable projects in all the regions…sale of such an extensive economic power…may lead to the operation of the bank for purely financial commercial reasons…small borrowers , and even Governments, suffer when dominant banks  are run for short term financial reasons and profits.”

All of these advantages are now at risk as the government , using the excuse of the need to raise capital for the bank to take on the Big 4, sets out to gift an essential economic tool to the private sector.

The New Zealand Herald revealed the government’s intentions on 25 July:

“In a routine letter of expectation sent to Kiwibank’s board chairman David McLean in April, shareholding ministers suggested they were open-minded as to how Kiwibank grew… ( Minister of State Owned Enterprises ) Goldsmith said the Government had no plans to privatise state assets, but conceded a possible outcome of the purpose statement exercise could  be that it decided it no longer wanted to own an asset.”

Renationalisation Pledge

Warning bells should ring for Labour and the Greens. Labour members and voters triumphed over the initial opposition to Kiwibank of Helen Clark and Michael Cullen to Kiwibank. The Green Party has pledged to oppose asset sales. As Alliance MPs, Green Party founders Jeanette Fitzsimons and Rod Donald campaigned for Kiwibank . Labour and the Greens must form a united front in defence of Kiwibank.  A pledge to re-nationalise and expand through government financing ,there are multiple financing methods available , will deter the circling sharks which include the Australian bank competitors.

Governments of all stripes throughout the world recognise the crucial developmental role of a large state bank as an essential tool for long term investment and development. Labour and the Greens can unite to build on the vision of Jim Anderton and ensure that New Zealand is not, once again, deprived of its state-owned bank by a short-sighted government acting in the narrow interests of the private sector and not in the best interests of New Zealand.

EDITOR’S NOTE: Matt Robson and others are calling on the New Zealand Government to abandon any plans to privatise Kiwibank and to commit to keeping it in public ownership.

You can sign the petition here.

To sell, or not to sell – that is the question various governments have asked since Kiwibank was established in 2002. Now it’s the turn of the current National-led coalition to examine the bank’s state ownership.

Ministers have asked Kiwibank’s board to explore avenues for the bank’s expansion, potentially including private sector or Crown entity investment.

This comes just two years after the previous Labour government spent NZ$2.1 billion to secure complete ownership of Kiwibank, and is part of the coalition’s drive for productivity, growth and public sector efficiency.

The latest attempt to help the bank prosper while staying fully New Zealand-owned should also be seen in the context of the recent Commerce Commission draft report on banking services, which identifies Kiwibank as a market disruptor.

If properly capitalised, the report says, Kiwibank should make New Zealand banking more competitive. Supporters of partial privatisation or publicly listing a proportion of Kiwibank shares agree. They also argue it would boost the stock market and funnel profits back to New Zealanders.

The government has not proposed anything specific yet. But any plans to part-privatise Kiwibank so soon after the state effectively bailed it out deserve close scrutiny. Such a move could well do more harm than good, for four main reasons.

1. Banking concentration is normal

New Zealand’s historical banking concentration and the market domination of four large Australian-owned banks is not going to change any time soon.

But a concentrated banking sector is not at all bad, or even abnormal, and occurs in many countries. Three banks in the Netherlands, for example, currently own 84% of total banking assets. The smallest, ABN AMRO, is larger than all of New Zealand’s banks combined.

Despite this, the Dutch are less vocal about lack of competition and associated high profit margins. There is an acceptance, especially among European Union bank regulators, that the alternative of more small banks is not a panacea.

Small banks in EU countries such as Spain and the Netherlands have failed more often than large ones. Moreover, innovation in banking and finance comes mainly from large banks.

2. Capital investment and growth

The notion that more capital will foster growth puts the cart before the horse. As fans of TV investment shows Shark Tank or Dragons’ Den will know, only firms with a compelling value proposition attract funding.

Kiwibank’s track record leaves something to be desired. For example, the press release accompanying its 2023 results listed the introduction of Apple Pay as an important highlight. Other banks began offering this service in 2016.

Furthermore, at 7.5%, the bank’s return on equity is the lowest of the largest six banks. And its core capital ratio has not increased since 2018, making it harder to meet increasing Reserve Bank capital requirements.

After a minor capital injection of $225 million last year, Kiwibank chief executive Steve Jurkovich said the bank’s loan book could significantly increase. According to the Reserve Bank’s financial strength dashboard, however, the value of Kiwibank’s net loans and advances grew by 2.7% and 1.8% respectively in the quarters ending December 2023 and March 2024.

That was not significantly different from growth in previous quarters going back to 2018, which averaged 2.3%. In other words, Kiwibank’s own experience shows flaws in the capital-before-growth narrative.

3. Foreign ownership by stealth

In an ideal world – with deep and liquid capital markets, and a large, growing and productive economy – having a 100% Kiwi-owned contender bank would work.

In reality, New Zealand lacks these features. In fact, Kiwibank’s ownership restrictions – which preclude floating or selling shares directly – have seen previous owners surrender their holdings to the government.

Part-privatisation would therefore require shares to be sold at a deep discount. And, as the sale of Kiwi Wealth to Fisher Funds in 2022 suggests, this may ultimately be financed by foreign private equity.

This could be achieved by way of a leveraged buyout, where a foreign private equity firm lends large sums of money to, say, a KiwiSaver fund to buy shares. Technically, the KiwiSaver fund would be the 100% New Zealand-owned firm holding the Kiwibank shares. But that ownership would be largely in name only.

The New Zealand owner would pay hefty interest expenses to the private equity firm. And it’s likely the private equity firm would want to tear Kiwibank apart to cut costs and improve efficiency.

By comparison, perhaps the current arrangement – four dominant banks owned by parent banks in a geographically and culturally close country – is not that bad.

4. Unintended consequences

Finally, there is the problem of reputation and moral hazard. Investors would be sceptical if Kiwibank were to be partly privatised, as history shows its ownership seems to depend on the government of the day.

Given that uncertainty, investors might only buy shares sold at a deep discount, or if the shares offered a high return – the kind private equity firms require.

In turn, this could prompt the bank to engage in excessive risk taking, which creates the kind of disruption no one wants. Buyers may also want a guarantee they can put the shares back to the government if the bank fails to perform well.

Rather than rush to part-privatise, Kiwibank should focus on strengthening its capital base, improving performance, and establishing a clear track record of growth and innovation.

Only then should any change in ownership be considered. The path to a more competitive banking sector in New Zealand requires patience, strategic planning and a realistic assessment of market conditions, not hasty structural changes.

Martien Lubberink does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.

– ref. Owner beware: 4 reasons why selling part of Kiwibank could do more harm than good – https://theconversation.com/owner-beware-4-reasons-why-selling-part-of-kiwibank-could-do-more-harm-than-good-235885

Political Roundup: Will the Govt act on mega bank profits and reform the banking sector?

The corporate retail banks are making mega profits on the back of Government policies and indirect subsidies of recent years. As a result, there are calls from across almost the whole political spectrum for greater regulation of the banking sector, including windfall taxes. But will outrage turn into action?

Prime Minister Jacinda Ardern led the charge against the banks this week, warning the likes of ANZ – which announced recently that its profits were up 20 per cent to a record $2.3b – that they are at risk of losing their “social license” to operate here. The Prime Minister sounded tough, but she was also quick to admit that she has no intention of taking any action or changing the rules. The Finance Minister Grant Robertson was also fast to rule out any reforms or further investigations.

Critics have said that Ardern’s plea for the banks to have “self-reflection” is wishful thinking in the extreme. The Green Party’s finance spokesperson Julie Ann Genter put forward this analogy: “Expecting banks… to put people ahead of profit would be a bit like putting the fox in charge of the hen house.”

National, too, is pressuring the Government to act, with spokesperson Nicola Willis saying a full investigation needs to be launched into the banking sector, including whether government monetary policy had contributed to the mega profits.

Why won’t the Government act?

Claire Matthews, a banking expert at Massey University, has accused Ardern of grandstanding on the issue, suggesting that if Labour really thought the mega profits were a problem, they would be doing something about it. She suggests today that Ardern is just being an opportunist populist and electioneering: “People like to hate the banks so it’s quite an easy win for the Government.”

Looking at the lack of substance from Ardern on banking, one leftwing blogger wrote yesterday on Labour’s banking policy: “this is why Labour deserves to end up in opposition after the next election: they’re all noise and no policy. They’re offering us literally nothing, just the same tired, unjust status quo.”

Sam Stubbs, Chief Executive of KiwiSaver provider Simplicity, is reported today as saying: “The PM talks about the social license to operate. There seems to be quite a bit of hui but not much doey from the Government on bank reform.”

Stubbs is rather scathing about the dissonance between Ardern’s bank-bashing and her own governance of the banking sector: “These are nice sound bites but so far what the Government has done is slap the banking industry with a wet bus ticket all through the pre-Covid profit period when it was huge, all through the Australian banking inquiry. They then provided them with a massive amount of free money during Covid.”

The Government has handed the banks the mega profits

Stubbs’ critique of government subsidies of the banks is important. He says: “They have received a tremendous amount of tax-payer-funded support. How do they reward us? By making record profits when everyone else is doing it hard.”

Business journalist Bernard Hickey also argues that the big banks have essentially been subsidised by the taxpayer in recent years. Today he writes that “The big four banks got massive help to grow their lending & profits from the Govt in 2020, 2021 & 2022. They get their licenses to print money from the public.” He argues that mega bank profits have been made because of the Government’s “$55b of money printing, abandonment of LVR controls and $16.4b of subsidised lending by the Reserve Bank to banks through the Funding for Lending scheme”.

Hickey also explains that the banks have benefitted from a government guarantee of their sector: “the banks benefit from an implied and unfunded Government guarantee to protect them, especially now the Government is building a deposit guarantee scheme and especially after the Government’s actions during the Global Financial Crisis, when the Government created retail and wholesale deposit guarantees in 2008/09.”

Quite simply, banks have always been keen to privatise the profits from their role in the economy, but then socialise any losses – by getting the state to bail them out and to guarantee their operations.

New Zealand Herald business editor Liam Dann makes some similar arguments today: “Billions of dollars were pumped into the economy by Government and the Reserve Bank to save businesses and jobs and avoid a crisis. A side effect of the stimulus was a property and savings boom through 2020 and 2021. That’s now had the galling result that a sizeable chunk of that cash looks set to line the pockets of Aussie bank shareholders.” And he adds, “When things actually go wrong, taxpayers have to bail them out.”

Leftwing political commentator Gordon Campbell also points to Government policy as behind the mega bank profits: “The banks have reaped the rewards of the government’s successful efforts (e.g. the wage subsidy scheme) to keep the economy relatively buoyant during the pandemic. Not only did those government schemes and capital injections save the banks from suffering the bad debts and mortgage defaults that they’d expected. In addition, the Aussie-owned banks are also now in line to reap further profits from the Reserve Bank’s current efforts to curb the inflation that those initial Covid interventions inadvertently helped to generate. For months, the banks have been able to crank up their lending rates. They’ve also increased their profit margins. In sum, Covid has been something of a joy ride for the banks.”

All of this means that the banks are likely to have a combined profit total of $10b this year. Analysts point out that a 14 per cent rate of return is extremely high for banking, which is a low-risk activity normally expected to make more like half of that rate. Unusually, banks are making much greater profits and return on investments than the average NZX50 Index companies.

As Bernard Hickey points out, the local bank operations in New Zealand are “now more profitable than their parents and almost all their peers in other developed economies”. And according to Victoria University of Wellington’s banking analyst Martien Lubberink, the previous year’s profit announcements showed that the four big banks were making a profit of about $1,200 per New Zealander.

Actions the Government can take on banking

Four different reform areas are currently being proposed by analysts.

The first is a special tax on the current mega bank profits. A “windfall tax” has been proposed for some time, especially by those on the political left. The Greens took up this idea last month, pushing for a one-off tax on companies in super-profitable sectors such as supermarkets, electricity and banking.

Bernard Hickey advocates that Labour adopts the same tax used by the Australian government on banks, arguing today that this “would generate extra tax revenues of $2.6b a year, which would be enough to either pay for a tax cut or extra social spending, or to return the Budget to surplus sooner.” He says that the tax could be a levy of 0.06 per cent on the banks’ loans of $447b.

A second action would be to increase competition in the banking sector. At the moment the lack of competition in New Zealand means that mortgage rates are higher than they should be. Australians get a much better deal from their banks, because a more competitive market has been fostered there. Here, the four big banks are allowed to make a killing without any great attempts to make the playing field level and competitive.

One way to do this would be to invest significantly in the state-owned Kiwibank, which is currently far too small to compete properly. Some critics say that the Government is failing to properly fund the bank which means that it can’t properly compete with the Big Four Australian banks. It simply doesn’t have the assets and economies of scale to make any difference.

Sam Stubbs has argued today that the Government should scale up Kiwibank significantly: “Now the Government owns it yes it can recapitalise it. It would be profitable and the Government would still make money and you would get a serious competitor.”

Similarly, Liam Dann argues today that the best way to scale up Kiwibank would be “with mixed-model ownership in the style of the power companies – something this Government will never allow.” Dann suggests Kiwibank could be doubled in size.

The third action would be a full independent inquiry into the banking sector, as took place in Australia recently. Banking expert Claire Matthews, suggests that the Commerce Commission could also undertake a market study, as they did with the supermarkets and the building sectors. She argues that we simply don’t know how the banks currently operate and what problems there might be with the market and its regulation.

A fourth action would be to open up the banking sector by creating “open banking”, whereby customers can more freely shift between banks. This has occurred in plenty of other countries, and Labour has been accused of being far too slow to act on this.

For example, Stubbs is scathing on the lack of reform in this area: “Why aren’t they doing what everybody else has already done? They talk about open banking – they could have bought it in three or four years ago. We are still waiting for that. They could bring in number portability – we know what that has done for phones – they haven’t done that.” He suggests that the banks have successfully lobbied Labour to delay such reforms.

Liam Dann also comments on this today, explaining that “new blockchain-based tech that allows consumers to control all their banking data and switch providers more easily. In fact, New Zealand is dragging the chain on this initiative which has been adopted in the UK and opens the market to all sorts of new players to offer retail-facing banking services.”

Today, Newshub is reporting Government sources saying that “a mega shakeup” in terms of open banking is soon to be announced. While neither Labour nor the banks are commenting publicly, it’s reported that “Behind the scenes there’s now a scurry to get this out quickly to capitalise on the public outrage over the massive bank profits.”

The banking problem is going to get bigger

Although the Government seems more inclined to try and embarrass the banks into action rather than take a more interventionist or reforming approach, it won’t be enough. In fact, the political situation could get more embarrassing for the Government over the next year.

With rising interest rates bank profits are just going to get bigger. But at the same time, for homeowners these rising interest rates – together with mortgage holders going into negative equity with falling property prices – may result in defaults on mortgage payments. Banks may then have to increase their foreclosures. That’s going to reduce their social license to operate even further.

Banks would be wise to convince the public and politicians that they are “ethical capitalists”. If they can’t or won’t do that, then pressure will mount on the Labour Government to regulate. Government pleas to the banks to be kinder are unlikely to be enough to convince the public.

Increasingly voters are aware that Labour’s monetary policies of recent years led to increased super profits for the rich – including a transfer of about $1 trillion to asset owners. A reckoning might therefore be coming, and politicians will increasingly have to show which side they stand on: with the banks and the super-wealthy, or with the public.

Further reading on bank profits
Amelia Wade (Newshub): Revealed: Major shake-up to banking on its way
Tamsyn Parker (Herald): Super profits: Are banks making too much money? (paywalled)
Luke Malpass (Stuff): Jacinda Ardern bashing the banks won’t distract the public from real-world inflation
Liam Dann (Herald): The Prime Minister is right, the banks have made too much money (paywalled)
Gordon Campbell: On bank profits, and the US midterms
Sam Stubbs (Stuff): How much is too much? Just look at the banks
William Hewett (Newshub): National Party leader Christopher Luxon ‘uncomfortable’ with large profits banks are making
William Hewett (Newshub): Expert defends banks after Prime Minister Jacinda Ardern questions large profits
No Right Turn: All noise and no policy
Jamie Ensor (Newshub): No plan for study into banking profits, Grant Robertson says, despite Prime Minister Jacinda Ardern’s criticism
1News: Bank profits soar as Govt lobbied to introduce windfall tax
Tess McClure (Guardian): Jacinda Ardern says banks ‘wrong’ to take huge profits as cost of living crisis deepens
Rob Stock (Stuff): Bank of New Zealand increases annual profit by 7% to $1.4 billion
Gareth Vaughan (Interest): BNZ CEO predicts ‘more New Zealanders are going to find it tough’ as bank posts record profit
RNZ: BNZ posts record annual $1.4 billion profit

Other items of interest and importance today

RESERVE BANK
Bernard Hickey (Interest): Reserve Bank independence just ended
Peter Dunne: Labour’s meddling and National’s attacks pose serious threats to the independence of the Reserve Bank
Tom Pullar-Strecker (Stuff): Could Adrian Orr govern the Reserve Bank under a hostile National government?
Bridie Witton (Stuff): Why the Opposition is upset about the reappointment of the Reserve Bank governor Adrian Orr
Bridie Witton (Stuff): Why Adrian Orr’s RBNZ Governorship could be shortlived under a National and ACT government
Thomas Coughlan (Herald): Reserve Bank Governor Adrian Orr’s fate will be decided by election (paywalled)
Richard Harman: Luxon changes mind on Orr (paywalled)
Michael Reddell: Reappointing Orr
Molly Swift (Newshub): Economist Brad Olsen says National raises ‘legitimate concerns’ over reappointment of Reserve Bank Governor Adrian Orr without review
RNZ: Reserve Bank governor’s job: New govt needs right to make choice – Luxon
Russell Palmer (RNZ): National ‘shocked’ by reappointment of Reserve Bank Governor Adrian Orr
Ireland Hendry-Tennent (Newshub): National, ACT lambast Government over Adrian Orr’s reappointment as Reserve Bank Governor
Bernard Hickey (Interest): Opposition leader and potential Finance Minister say they’re ‘shocked and appalled’ Orr was reappointed Governor
Susan Edmunds and Bridie Witton (Stuff): National ‘shocked’ by Adrian Orr’s reappointment to head of Reserve Bank
Adam Pearse (Herald): National Party ‘appalled’ Reserve Bank Governor Adrian Orr given another five-year term
Jenny Ruth (BusinessDesk): Mixed reaction to Adrian Orr reappointment (paywalled)
David Hargreaves (Interest): Adrian Orr reappointed RBNZ Governor for five years

ECONOMY, BUSINESS, EMPLOYMENT
Adan Pearse (Herald): Cost of living burden pushes Govt into fuel sector changes
RNZ: Commerce Commission given power to set fairer petrol, diesel prices
Interest: Commerce Commission to get the power to step in and set ‘fair’ fuel prices
Geraden Cann (Stuff): ‘60% of the way to wage-price spiral and hyperinflation Armageddon,’ economist says
Pattrick Smellie (BusinessDesk): High inflation to persist for two years, says Reserve Bank (paywalled)
David Hargreaves (Interest): Up and away: RBNZ’s own survey shows inflation expectations shooting up again
Thomas Coughlan (Herald): Christopher Luxon on the fence about reviving Bridges-era tax indexation
RNZ: Productivity Commission to examine supply chain issues
Adam Stephenson (Herald): Fast-food workers deserve Fair Pay Agreements (paywalled)
Anna Whyte (Stuff): Is the pay freeze nearly over? Early public service pay offer revealed
RNZ: University staff rally at Parliament over proposed cuts

PARLIAMENT
Graham Adams (The Platform): Ardern enters the tragi-comic phase of her tenure
Glenn McConnell (Stuff): Efeso Collins considers standing for Parliament – but for which party?
Jenna Lynch (Newshub): Newshub-Reid Research poll: What New Zealanders really think of Jacinda Ardern, Christopher Luxon revealed
William Hewett (Newshub): National Party leader Christopher Luxon defends reputation after Newshub poll found Kiwis view him as ‘smarmy’, ‘inexperienced’
Brigitte Morten (NBR): Labour changes focus to election prep mode (paywalled)
Michael Neilson (Herald): Labour, National compromise on Māori electoral roll options bill in ‘rare occasion’
Newshub: Dame Jenny Shipley ‘thrilled’ Parliament now more women than men
Jamie Ensor (Newshub): Government exploring changes to proposed electoral legislation to ensure cross-party support
Joseph Los’e (Herald): David Seymour says he is not playing dog whistle or apartheid style politics – and he’s not a useless Māori
Rachel Sadler (Newshub): David Seymour denounces critics who call him a ‘useless Māori’, racist
Martyn Bradbury (Daily Blog): How the Left wins 2023 Election – Jacinda’s electorate coffee dates to maximise MMP dynamics
Kirsty Frame (RNZ): More ‘humane’ sitting hours for parliament needed, Labour and National MPs say
Nikki Mandow (Newsroom): ‘Nobody’s cracked it’ – Govt struggles to fix poor procurement

LOCAL GOVERNMENT
Georgina Campbell (Herald): Greens and Labour clean up in Wellington mayor’s committee appointments
Max Frethey (Local Democracy Reporting): Nelson mayor Nick Smith ‘disappointed’ with local government review
Steven Walton (Press): Christchurch deputy mayor Pauline Cotter keeps seat after recount confirms slim victory
Tim Murphy (Newsroom): Wayne’s first fix – a budget emergency
Verity Johnson (Stuff): We don’t need Wayne Brown to be another Office Rambo

THREE WATERS
Thomas Cramner: Three Waters and He Puapua
James Perry (Te Ao – Māori News): ‘We won’t have a say’ – iwi water representative on Wayne Brown’s counter-proposal
Bernard Orsman (Herald): ‘Outrageous’: Taxpayers foot $2.1m bill for controversial Three Waters Auckland HQ (paywalled)

ENVIRONMENT
Hamish Cardwell (RNZ): Climate Change Minister says COP ‘nightmare’ decision-making process needs to change
Marc Daalder (Newsroom): NZ promises cash for climate damage – is it enough?
Michael Neilson (Herald): COP27 climate change conference: New Zealand announces loss and damage funds of $20 million
Hamish Cardwell (RNZ): COP27: New Zealand offers $20m to developing countries for climate change damage
Olivia Wannan (Stuff): New Zealand becomes third country to offer cash to climate-hit countries
Ian Llewellyn (BusinessDesk): James Shaw heads to COP27 with a $20m promise (paywalled)
Hamish Cardwell (RNZ): Jacinda Ardern skips COP27, says commitment to climate change won’t be questioned
Richard Prebble (Herald): Jacinda Ardern misses a powerful opportunity with COP27 no-show (paywalled)
Injy Johnstone (Newsroom): Number 8 wire thinking for a Net Zero NZ
Felix Watson (RNZ): Climate change tops agenda of New Zealand insurance companies
1News: Govt’s emissions trading scheme ‘vilifies farmers’ – Luxon
Tess McClure (Guardian): Serious concerns raised in NZ about environmental impact of major productions including Amazon’s Rings of Power
Benn Bathgate (Stuff): High Court shuts down hut burning across Te Urewera

HOUSING
Damien Venuto (Herald): The Front Page: Who’s to blame for Rotorua emergency housing crisis?
Miriam Bell (Stuff): Wellington house price slide the biggest in 20 years
RNZ: Double-digit house market declines in main centres, new figures show
1News: Average house values falling by double-digit percentages

HEALTH
RNZ: Health Minister responds to mental health woes at North Shore ED
John Donne Potter ((The Conversation): With a COVID ‘variant soup’ looming, New Zealand urgently needs another round of vaccine boosters
RNZ: Government says no plans at this stage for annual Covid-19 booster for most people
Stefan Dimitrof (Te Ao – Māori News) Petition launched to halt defunding of child cancer medicines
Muriwai Hei (Te Ao – Māori News): Drug Foundation CEO on overdoses: ‘We are failing Māori’

IMMIGRATION, REFUGEES
Katie Todd (RNZ): Ukrainian arrivals say government support lacking in battle to begin new lives
Gill Bonnett (RNZ): Govt looks at Treaty interest in immigration policy
Gill Bonnett (RNZ): In residence limbo: Doctors, split families wait for news from Immigration NZ

FOREIGN AFFAIRS
Thomas Manch (Stuff): Government backs away from autonomous sanctions regime
Sam Sachdeva (Newsroom): How the US midterms will affect NZ
Gabrielle Armstrong-Scott (Stuff): Five reasons Kiwis should care about the US midterm elections

OTHER
Phil Pennington (RNZ): Officials fear anti-government sentiment could impact next census
Oliver Hartwich (Herald): Rebuilding Better: Once world-class, NZ’s education system is now a disaster. How do we fix it?
Gavin Ellis: Alarm bells must bring out disinformation fire fighters
Lloyd Burr (Today FM): Jenna Lynch, Mani Dunlop are two of the most impartial journalists I know
Thomas Manch (Stuff): Anti-money laundering regime to be tweaked after sweeping review
Riley Kennedy (BusinessDesk): No quick fix to ease anti-money laundering burden (paywalled)
Emma Hatton (Newsroom): Privacy case throws up liability questions for social media groups
Pokere Paewai (RNZ): Taonga stolen during Crown invasion of Maungapōhatu returned
Ashleigh McCaull (RNZ): New study suggests Māori settlers arrived in Aotearoa as early as 13th century

Evening Report looks into the separation of Kiwibank from New Zealand Post, and considers the impact on the public’s access to banking services in their communities. Kiwibank. What’s going on?

Kiwibank and New Zealand Post are in the process of separating the two businesses. This means that both Kiwibank and New Zealand Post are looking at their network models, going forward.

Kiwibank’s decision means that they are looking at having two different types of branches.

One type will be Kiwibank owned and will concentrate on purely banking services. The other type of Kiwibank outlet will be a Transactional Plus model for franchise branches.

This new model will affect the availability of services at the franchise branches which incorporate New Zealand Post.

There will be a reduction in services regarding opening and closing accounts. Foreign currency services will also be affected.  Though it is understood that many franchise branches may still be able to continue providing these particular services.

Kiwibank Closures

Kiwibank launched in 2002 and by the end of that year had 211 branches situated throughout New Zealand. It was the brainchild of the late Jim Anderton, who advanced the idea that New Zealanders needed a bank of their own, a bank that operated on Kiwi values and as an alternative to dominant foreign owned and controlled banks. Kiwibank’s business model was pitched while Jim Anderton was the leader of the Alliance Party and deputy prime minister in the Labour-Alliance coalition government (1999-2002).

Kiwibank was able to open so many locations due to Kiwibank’s banking services being partnered with New Zealand Post. It was a clever move that ensured Kiwibank had a presence and branch all over the country.

But now, New Zealand Post and Kiwibank are in the process of separating out their services. This process will lead to a reduction of the number of actual physical branches.

As at October 18, 2019 there were 208 total physical points of presence for Kiwibank (number excludes ATMs).

This number is broken down into:

• 42 standalone Kiwibank branches (financial service only)
• 33 co-located shared service branches
• 115 co-located franchises
• 18 Kiwibank agents (transaction only).

In the period October 1, 2018 to September 30, 2019: 24 Kiwibank outlets that were shared with NZ Post were transitioned  to standalone Kiwibank branches in the same location. Kiwibank also relocated in five areas – Tauranga, Henderson, Queenstown, Ashburton, and Porirua. Kiwibank also withdrew from 18 shared premises.

According to Kiwibank, where they have made the decision to withdraw, there are other branches in close proximity (no more than 15km away).

Kiwibank states: “We are also part of the NZBA coordinated Regional Hubs pilot and will provide shared banking services with five other banks in four regional locations including Martinborough, Opunake, Stoke and Twizel.”

In the next 12 months, Kiwibank has confirmed withdrawal dates for six locations. Also, Kiwibank is relocating in two areas, Westgate/North West and Newmarket, and opening a new Kiwibank standalone branch in Sylvia Park. Kiwibank also intends to transition five other shared Kiwibank and NZ Post shops to standalone Kiwibank branches which will stay in the same location.

Kiwibank has also confirmed it’s working through additional closure plans and communicating its intentions for further closures over the next 24 months.

Kiwibank defends its decision to close branches by pointing out that it is committed to retaining a presence in the regions and investing in standalone branches in places such as Westport, Whitianga and Tokoroa.  For customers in urban areas where Kiwibank has withdrawn services other banking options are suggested.

In correspondence with Evening Report, Kiwibank states: “Branch numbers will continue to change as our separation from NZ Post plays out. For every city where we consolidate there is a regional town celebrating our investment in their community.”

It adds: “As you can see these changes are complex and the numbers constantly changing. Driving our strategy is feedback from Kiwibank customers who are telling us they want an environment better suited to more in-depth financial conversations. This means a focus on financial services and consideration to how we best meet customer demands and stay relevant for our customers in to the future.”

The Banking Environment – Physical banking services in New Zealand (as at October 2019)

Although it is the fifth largest bank in New Zealand, Kiwibank still has the largest retail footprint in New Zealand.

According to the 2018 KPMG Report on banking, Kiwibank is the only bank with more than 200 physical points of location.  Australia New Zealand bank (ANZ) had 179 branches in 2018 while Westpac had 161 locations throughout New Zealand.  All the major banks had a reduction in physical locations for banking according to the KPMG survey.

Kiwibank’s suggested solutions to reduced services

Senior citizens challenged by the modern internet world and the potential closure of their Kiwibank are being offered the support of a “Kiwibank Angel” and a hearty cuppa tea. This is designed to help people who remain unfamiliar with internet banking, to learn, or be assisted to complete their banking tasks.

Kiwibank also intends to tackle growing customer dissatisfaction with the withdrawal of physical banking services by partnering with Digital Inclusion Alliance Aotearoa. This is an Alliance that delivers ‘Stepping UP’ Digital Banking courses in libraries and community centres across the country. This course is open to anyone, not just Kiwibank customers.

Other ways Kiwibank intends to mitigate grumpy customers that feel ‘Jim’s bank’ is being messed with is by supporting Digital Inclusion Alliance Aotearoa’s DORA (Digital on Road Access) – a portable bus unit that travels around Aotearoa offering online banking training in retirement villages, near Marae and in other community locations.

At some Kiwibank branches there are a number of services provided such as providing identification through the Real Me service.  But how many branches provide these services, and can new owner operator franchise outlets choose not to provide these and other services?

Kiwibank responds: “As at today we have 87 locations which provide RealMe identity services. Locations of the outlets offering RealMe is determined by geographic spread for the service rather than by operator choice. To date we have only included the service in eight of our standalone Kiwibank branches due to geographic coverage requirements.”

But is this good enough?

At present the banking jury is out on whether Kiwibank’s solutions will work in transitioning, and appeasing, discontented customers who want face-to-face customer service.

Kiwibank states: “Like other industries banking is being disrupted. The preferences of our customers are changing, and we must evolve to stay relevant.

“Although it is the fifth largest bank in New Zealand Kiwibank still has the largest retail footprint and we’re proud of that.

“We have committed to retaining a presence in the regions, investing in standalone branches in places such as Westport, Whitianga and Tokoroa. Where we have withdrawn services, it is in urban areas where there are other options nearby.

“We’re putting a lot of effort into education and support for our customers, especially those challenged by a changing world,” Kiwibank states.

Kiwibank’s board of directors are appointed by shareholders of Kiwi Group Holdings Limited (ACC, NZ Post and NZ Super Fund) in accordance with the Shareholders’ Agreement and requirements of the Reserve Bank. The shareholders are the New Zealand Government, currently represented by various ministers in the Labour-led Government.

EDITOR’S NOTE: Evening Report is continuing its investigation into whether Kiwibank will retain the elements of its original purpose and presence. We are seeking a response from the Government and have Official Information Act requests lodged with appropriate ministers. To be continued…