Kiwibank has been instructed by the Government to once again look at its options for long-term growth, including revisiting the possibility of partial privatisation.
By Corin Dann of RNZ
The taxpayer-owned bank had previously looked at raising $500 million in capital from local investors, but ditched that plan last year.
The new request is included in a letter of intent to Kiwibank's parent company Kiwi Group Capital (KGC) from State-Owned Enterprises Minister Simeon Brown.
"We expect KGC to undertake work on alternative growth scenarios, along with the capital required for these," Brown said.
He went on to note in the letter that KGC should now engage with Treasury about how much capital might be required for different growth scenarios.
In accompanying Cabinet paper, Brown and Finance Minister Nicola Willis signalled that while the Government wanted Kiwibank to grow into a market disrupter that can boost competition, the Government's coffers were constrained and it was unlikely to be in a position to provide extra capital.
"The Crown could continue to be the sole provider, or be one of the contributors, of additional capital," the paper said. "However, this would see Crown funding directed to Kiwibank and away from other priorities. Given the significant constraints we are facing, the Crown is not in a position to support this course of action."
The paper also noted that if Kiwibank was to grow and increase competitive pressure, it would need to know in advance that it had access to capital markets.
Last year KGC said that the easing of the Reserve Bank's capital settings, combined with Kiwibank's recent $400m Tier 2 capital raise via bonds, meant it could grow without the need for additional equity.
The Government had approved the possible partial public listing for Kiwibank to acquire new capital, but had stressed it could only proceed with an electoral mandate.
National promised no asset sales this term.
The Commerce Commission's banking study in 2024 said Kiwibank should be given a financial boost to become a maverick challenger to the big four.
Kiwibank's response
In a statement to RNZ, Kiwibank's parent company KGC stressed it had sufficient capital to fund its lending growth in the medium-term and noted that the Crown had asked it to work with Treasury on new options for raising capital in future that could boost Kiwibank's ongoing competitive potential.
"This process will consider a range of factors including investor feedback, market conditions and growth scenarios, as well as the potential amount, sources and timing of any future capital requirements" the statement said.
It went on to stress that it was early-stage work, and no decisions had been made on timeframes.
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