My interests were raised by the announcement as one of the many reasons for the sale was to help make Kiwibank more competitive against its biggest-Australian owned peers. That had me scratching my head a little as the perception, in my mind at least, was that Kiwibank was competitive. Particularly in the main market we watch, home loans.
It turns out when you use our mortgage comparison tool and track Kiwibank's standard home loan rates against its big-bank peers the answer is it used to be competitive.
Use this link to see Kiwibank's standard two-year rate compared to ANZ, ASB and Westpac.
There is a point around the start of 2015 where Kiwibank's pricing policy changed and instead of regularly being a market leader on price, it has become a follower. Indeed the banks which tend to be market leaders these days are SBS amongst the small banks, BNZ tends to be competitive with its larger peers, and from time to time HSBC will shake the market with some enticing Specials (for high value customers only though).
Other research shows that after this change in pricing Kiwibank started to lose market share. Yet keeping and growing market share is the holy grail for all lenders in the market.
One of reasons why Kiwibank has been struggling may well be a capital issue. Property investment lending makes up a significant portion of all residential lending these days. Under new Reserve Bank regulations banks have to hold an increased level of capital for property investment loans. This could be an issue for Kiwibank.
Another issue is that it is missing out on at least a third of all home loans originated as it doesn't play seriously in the mortgage broker market. Yes it has dabbled in this space in the past but has never really got a strong proposition off the ground and into market.
Most recently BNZ and SBS have acknowledged the importance of the broker market and are now active players to help with their growth, especially in the Auckland market.
Having the NZ Super Fund and ACC as significant shareholder in Kiwibank is a good move. The organisations, particularly the Super Fund, has shown itself to be an astute investor who can pick good opportunities and help companies it invests in grow.
Putting aside the politics of last week's deal, it looks like good move to help the largest New Zealand-owned bank get back on the growth path.
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