Govt buys back Kiwibank

The move thwarts any attempt by the NZ Super Fund to acquire all of the bank and then restructure it.

These owners took over when the previous National Government was unwilling to provide capital directly to Kiwibank. But at the time of that deal, the Government retained a right of first refusal over any subsequent sale.

The KGH purchase is valued at $2.1 billion. The Minister of Finance Grant Robertson said the money would come from previously announced borrowing.

But the fiscal impact is expected to be diminished by horizontal transfers from one Crown account to another.

In buying KGH, Robertson made clear his aim was to prevent the bank from disappearing into overseas ownership.

“While the Crown essentially owned KGH through Crown-owned entities, an ongoing shareholding in Kiwibank did not fit NZ Post’s and ACC’s long term strategic and investment plans,” he said.

“NZ Super Fund had been interested in purchasing a majority holding in KGH, but withdrew its interest as it did not align with the Government’s commitment to public and New Zealand ownership.”

The Super Fund was widely believed to be frustrated at having its hands tied in regard to its KGH holdings, since it could profit solely from Kiwibank dividends, not from asset sales.

KGH earlier sold its KiwSaver and insurance arms. It retains its mortgage company, New Zealand Home Loans.

Robertson was chipper about Kiwibank's prospects, saying it was “set up strongly for future growth.

“The new ownership structure simplifies our ability to fully support Kiwibank to meet its future potential. The transaction is subject to regulatory approval by the Reserve Bank.

“With Kiwibank staying in New Zealand hands, New Zealanders can continue to bank with a trusted, credible and competitive banking option that will remain fully locally owned.”

Kiwibank recently posted a record profit, but it was still less than one tenth of the ASB profit posted just a few days earlier.

Comments from our readers

On 22 August 2022 at 10:32 am valkyrie6 said:

Governments have not had a great track record in investing taxpayer money and this Government is no different, the government is not an investment expert and should not be gambling with New Zealanders hard earned funds especially in the banking and finance industries, they need to stick to their knitting.
They have clearly forgotten about the BNZ bailout that cost New Zealanders a small fortune.
I understand the view that’s it’s nice to have a Kiwi owned bank but to date I don’t think Kiwi bank has not had a competitive fee charging model for its customers and its commission offer to the mortgage adviser industry is the worst in the industry, (not sure who was the brain behind that one).
Kiwi owned bank? not if the headline reads “Kiwi owned bank now in liquidation and needs bailout by taxpayers”.

On 22 August 2022 at 4:07 pm w k said:

@valkyrie6: the term you used "gambling" nz hard earned funds is absolutely correct.
not forgetting the late ex-finance minister purchase of kiwirail of over $600m, only to be valued to be under $200m later.
well, there's zilch responsibility and accountability. maybe time to align ministers' pay to performance, ie. the allocation and return on taxpayers' funds.

On 23 August 2022 at 9:35 am KiwiInvestor said:

Banks who currently act as the 'middleman' between lending of funds provided by the RBNZ to the public will find themselves redundant once a state digital currency is made available. No longer will these banks be able to charge a margin on money lent out, as the RBNZ will be able to advance funds direct to the public. Effectively cutting them (the Banks) out of the transaction! Trust me, this is coming in the not so distant future. The US Fed is actively pursuing this digital USD strategy and other countries (NZ included) are watching closely.

On 23 August 2022 at 9:43 am Amused said:

As noted by valkyrie6 & w k the government are not buying Kiwibank, the New Zealand taxpayer is. It is not government dollars it is our dollars.

On 24 August 2022 at 11:09 am valkyrie6 said:

I heard Kiwi bank may now consider changing the way they lend to borrowers currently by taking a personal guarantee from the borrower.

As we all know Banks currently lend to borrowers by taking personal guarantees, taking a person guarantee from a borrower obviously makes the borrower personally liable and accountable for their borrowings, not a bad thing if you’re the one lending the money.

During the GFC US lenders were exposed to the fact that they did not require personal guarantees from borrowers and only held legal mortgages over property, hence the term “’jingle mail “’ was coined, so basically borrowers were defaulting on their mortgage payments and because no person guarantees were in place they just “’posted “’the keys to the property back to bank, hence some lenders going into receivership.

If Kiwi bank has plans to provide lending to entities like Māori Treaty land which in some cases can have hundreds even thousands of people on the ownership, without taking personal guarantees, and let’s say worst case scenario mortgages end up in default, if there is no personal accountability , how will the tax payer owned bank get their money back ? , how will the tax payer owned bank be able to sell the property to get their funds back?

Food for thought

Govt buys back Kiwibank

The Government has acquired 100% of Kiwibank’s parent company, which includes NZ Home Loans.

Monday, August 22nd 2022, 9:53AM 6 Comments

Comments from our readers

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