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Govt tips in a further $225m of capital into Kiwibank

The government has decided to inject a further $225 million of capital into Kiwibank via its wholly-owned holding company Kiwi Group Capital (KGC).

Tuesday, August 1st 2023, 10:41AM 2 Comments

Chair of the latter, David McLean, says in a statement that the investment “represents the next step in the strategic portfolio reshaping actions taken by the owners of Kiwibank over the past year – namely, divesting Kiwi Wealth and Kiwi Insurance to focus on its core banking business.”

It has been obvious for quite some time that Kiwibank needed more capital. It is the least capitalised of all New Zealand's registered banks with common equity tier 1 (CET1) capital of 10.4% of risk-weighted assets at March 31. It has seven years from July 1 last year to lift that to at least 14%.

The statement didn't say what the capital injection takes Kiwibank's CET1 ratio to.

“This investment generates long-term value for shareholders and is well-aligned with KGC's strategic objective to help Kiwibank provide a competitive banking alternative for New Zealanders,” says McLean, Westpac's former chief executive and also chair of the government-owned Kiwirail.

The money is coming from the $310 million proceeds of the sale of Kiwi Wealth to Fisher Funds Management late last year. The sale of the sale of Kiwi Insurance to nib NZ for $45 million was announced in November 2021.

Kiwibank chief executive Steve Jurkovich says the new capital “represents a significant investment and expression of shareholder confidence in the largest NZ-owned bank.”

Kiwibank had a plan

Jurkovich has previously insisted that Kiwibank had a plan to increase its capital without requiring an additional investment by its shareholder – while any bank can increase its capital by retaining profits, it's a slow process.

Kiwibank reported a $98 million net profit for the six months ended Dec 31.

“This capital injection will enable Kiwibank to continue to deliver on its growth ambitions by supporting Kiwi with their home ownership aspirations and backing local businesses to thrive,” Jurkovich says.

“Kiwibank has a unique role to play in the NZ banking sector and this is another important step in strengthening our position further in the market,” he says.

In August last year, the government bought out Kiwibank's former shareholders, NZ Post, ACC and the NZ Superannuation Fund, in a deal valuing it at $2.1 billion.

The last time Kiwibank's shareholders tipped in additional capital was in 2017 when the three former shareholders put up $247 million after the Reserve Bank questioned the validity of Kiwibank's debt securities as contributing to capital – after some technical adjustments, RBNZ later reaffirmed those securities did qualify as capital.

Kiwibank, founded in May 2001, has always been capital-hungry. It is the fifth largest bank with total assets of $33.5 billion at March 31, but is still much smaller than the next largest bank, Westpac, which had $122 billion in assets at March 31.

Tags: Kiwibank

« Interest rate rises end tailwind Kiwibank's capital boost means it's no longer last »

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Comments from our readers

On 1 August 2023 at 12:52 pm valkyrie6 said:
No, no,no, Governments have no expertise or place investing in banks. the poor taxpayer ends up bailing out poorly run banks, have we forgotten the BNZ debacle.
On 1 August 2023 at 2:04 pm Amused said:
“Govt tips in a further $225m of capital into Kiwibank”

I wonder how most New Zealanders really feel about the Government having to inject yet more capital into Kiwibank so that it can keep up with the other main bank players in the market? Kiwibank has always been capital-hungry but respectfully this is because of the way it has been managed and run over the years. The attitude of management has always been they can just go back to the Government for more money if needed. The fact that the NZ taxpayer is still having to prop them up after 20+ years illustrates that the Government’s experiment owning a bank hasn’t worked. New Zealanders have not seen a significant impact on the cost of borrowing money since Kiwibank’s arrival. To say Kiwibank has a unique role to play in the NZ banking sector is false.

New Zealanders should instead be supporting a locally owned bank like The Co operative Bank which is owned by its customers and has shared with them $20 million since 2013 via rebates. As shareholders, Co-operative Bank customers can also have their say at their AGM and annual director election. This is a far cry from how Kiwibank is currently held accountable to NZ taxpayers.

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AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 7.74 7.39 7.25
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - 7.14 6.79 6.65
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
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BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.79 7.39 7.25
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 ▼7.65 ▼7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
Resimac - LVR < 80% 8.84 8.09 7.59 7.29
Lender Flt 1yr 2yr 3yr
Resimac - LVR < 90% 9.84 9.09 8.59 8.29
Resimac - Specialist Clear (Alt Doc) - - 8.99 -
Resimac - Specialist Clear (Full Doc) - - 9.49 -
SBS Bank 8.74 7.74 7.29 6.59
SBS Bank Special - 7.14 6.69 5.99
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
Lender Flt 1yr 2yr 3yr
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Westpac 8.64 ▼7.84 7.35 ▼6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - ▼7.24 6.75 ▼6.39
Median 8.64 7.19 7.27 6.65

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