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).

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.

Most Read

Get TMM delivered to your inbox each week

Sign Up