John Key's conservative government momentarily put KiwiBank in the cross-hairs, spruiking the possibility that it will be privatised. Now this from the industry bible Banking Day:
Kiwibank loses chief
27 May 2010 6:50am
Kiwibank chief executive Sam Knowles yesterday announced his resignation from the bank he helped to establish eight years ago but left one wondering if it was a coincidence that the announcement came close on the heels of talk of privatisation of the only New Zealand-owned bank.
Political critics of the National government were quick to speculate that the timing couldn’t have been a coincidence. One would tend to agree, given how passionate Knowles seems about Kiwibank being NZ-owned, just as its key political promoter Jim Anderton thinks.
“As long as Kiwibank is Kiwi-controlled, it has a Kiwi head office, Kiwibank will prosper,” Knowles said in a television interview, though he also added that it doesn’t worry him whether Kiwibank is part or fully Kiwi-owned.
Last week, Finance Minister Bill English had suggested Kiwibank could be sold off to “mum and dad” investors. Kiwibank is growing fast and needs a lot of capital, which the government does not have, English is reported to have said.
The comments sparked a lot of criticism, prompting Prime Minister John Key to step up to the task of damage control.
Critics said the bank would fail, but it survived and grew, providing a basic portfolio of deposit and loan products and continuing to irritate its larger, Australian-owned competitors (and who regard the bank as subsidised by the New Zealand government).
Years ahead, Knowles believes he will see Kiwibank still successful, moving in to the wider market and, more importantly, “a real force to keep the Aussies honest.”
Kiwibank was the brainchild of Jim Anderton, who was keen to break the private sector stranglehold on the banking sector. In the early 1990s not only did the country not have a single bank or major financial institution, but many parts of the country did not have banking services altogether.
A minority Labour government opted to establish the bank (funded through New Zealand Post) as part its arrangement with Anderton's breakaway party. The government persuaded Jim Bolger, a former National prime minister, to serve as chair of the bank's board.
In February 2002, the bank opened for business in Palmerston North, and four weeks later it launched the nationwide rollout. One year later it had signed 100,000 customers and now has 700,000 customers, 800 staff and operates in more than 300 PostShops.
The bank posted strong growth in the last two years, with total assets nearly doubling to NZ$12.02 billon in December 2009, from NZ$6.28 billion two years earlier.
A report of the Parliamentary inquiry into banking last year had found the advent of Kiwibank stimulated additional competition and put pressure on the “big four” banks. Knowles had described the role of Kiwibank as being that of a “challenger bank” facing “comfortable established incumbents.”
A number of submissions had suggested the government increase the capital in Kiwibank to encourage greater competition on interest rate margins.
The bank now seeks to grow further and Knowles says it has recently submitted to the shareholders a business case for expansion for the next 10 years, which he is hoping will be approved. Knowles adds the foundation is now built for someone else to lead for the next 10 years.
The expansion plan requires lots of additional capital, which likely prompted Bill English to make the comment about raising capital from the market.
From Knowles’ point of view “Keeping New Zealand control of Kiwibank is part of the values of Kiwibank. Personally I believe New Zealand control is important.”
