Public listing for Kiwibank is off the table before the election, but alternative capital-raising options are being explored, Finance Minister says

Finance Minister Nicola Willis says the Government would not list Kiwibank on the stock exchange without first asking voters, but other options are on the table during this term. 

The National Party has signaled it wants to bring fresh capital into Kiwibank to help it scale up its operations and is willing to “explore all the options” for commercial investment.

This could include listing 49% of the bank on the New Zealand stock exchange, as was done with Meridian Energy and some other state owned companies under the previous National-led government, but not without voter approval. 

“We would certainly want to seek a mandate electorally, if there was any question of an initial public offering. But in the first instance, there may be options for bringing external capital into Kiwibank, which don't involve any sale whatsoever of the Crown's assets,” Willis said.

One of these options may be to sell Kiwibank to a Crown investment entity such as the NZ Super Fund, which offered to buy the bank in 2021. 

The bid was conditional on NZ Super Fund being allowed to bring in private sector capital and possibly sell the asset in the future — terms which the Labour Government did not accept.  

Grant Robertson instead bought the bank from NZ Post, ACC, and Super Fund for $2.1 billion, effectively swapping where the cash and the asset sat on the Crown’s overall balance sheet. 

Willis said she hadn’t spoken with ACC or the Super Fund about the possibility of reversing that transaction but had talked with some KiwiSaver fund managers “in passing”.

“KiwiSaver funds want to be able to invest more here, they're looking for enduring assets in which to invest, and I have had some of them express to me they would like to help Kiwibank get bigger,” she told reporters. 

It may be possible to do this by selling debt to fund managers, rather than shares. For example, Westpac NZ listed $600 million of bonds on the NZX in 2022 to help meet its own capital requirements. 

But what local investors really want is for Kiwibank to become a publicly traded company, something which was ruled out by Christopher Luxon in the run-up to the last election.

He told RNZ the Government had found the right model and he wasn’t interested in further sales. But debt has risen since then, making it harder to invest in state assets.

Net core Crown debt was 42% of GDP in May, up from 19.5% prior to the pandemic, and the Coalition has set a target of bringing it below 40% while still investing in infrastructure.

Asset sales and private capital are now a more attractive proposition than when Crown debt and wholesale interest rates were both ultra-low prior to the pandemic.

Other parties 

Barbara Edmonds, the Labour Party’s finance spokesperson, said she was open to considering capital raise proposals, provided Kiwibank was still owned by New Zealanders.

“For me, Kiwibank needs to stay in Kiwi hands. As to where the Government will fall on that, I'll make a considered response once I see what they are actually going to do,” she said.

“It needs to be a disruptor. It’s quite clear the Commerce Commission said [capital] was one reason why it wasn’t as disruptive as it should be. So, I think we need to have a look at what the government's plans are.”

Otherwise, Labour would look at fiscal forecasts prior to the 2026 election and make “a considered decision” about whether to provide it with public or private capital.

National would also need to convince its coalition partners to support the policy, which was not negotiated as part of the governing agreements.

The Act Party campaigned on listing 49% of Kiwibank, and so would be willing to support the plan, but New Zealand First opposed the sale of state-owned assets.

However, its manifesto also promised to upgrade locally-owned banks' capabilities so they could better compete with international banks. NZ First declined to comment for this story.

Bigger isn’t better

While fund managers are eager to invest in a profitable industry, banking academics are skeptical that raising capital for Kiwibank would have much impact on sector competition.

Claire Matthews, an associate professor at Massey University, said the state-owned bank had a similar operating model to the Australian-owned banks — just making it bigger wouldn’t make it any different.

She said there were already four different New Zealand-owned banks which consumers could shift to if they were truly concerned about ownership and perceived unfair rates.

Martien Lubberink, an associate professor at Victoria University, said there would need to be a plan for Kiwibank to do something other than offer vanilla mortgages at the market price. 

It already received a $225 million capital injection last year, but it hasn’t grown its number of loans significantly or launched any innovative products. 

Besides, selling 49% of Kiwibank would likely only raise roughly $1 billion. Not enough to take on the big four banks, each of which has between $10 billion and $17 billion in total regulatory capital. 

Even with an extra billion dollars, Kiwibank would still be less than half the size of the next largest. Pushing it to be a disruptor could pose a risk to the financial stability, he said.