Kiwibank's capital boost means it's no longer last

The new capital from the $310 million proceeds of selling Kiwi Wealth takes Kiwibank's tier 1 common equity (CET1) ratio to about 11.65% compared with 10.4% at March 31, although it will be providing more precise figures when it reports its annual results later this month, Jurkovich told TMMO.

That means Westpac, with a CET1 ratio of 11.1% at March 31, is now the least well capitalised bank in the country.

Before the new capital was announced, Jurkovich has said his bank had a plan to increase capital without requiring a further contribution from its shareholder, which is ultimately the government.

Under Reserve Bank rules, Kiwibank has seven years from July 1 last year to get its CET1 ratio to at least 14% and no bank is likely to be comfortable sitting at the minimum.

“I was always wanting to put Kiwibank's best foot forward as to why we're a good investment,” Jurkovich says.

“The very essence of Kiwibank is to have an impact in the NZ market and to do that, we need to have stability of capital,” he says.

The bank's “good consistent performance” has meant it has “earned the right to more support” in Jurkovich's view – it reported a $98 million net profit for the six months ended Dec 31.

He agreed that although his team did have a plan to meet RBNZ requirements on time through retaining profits, “that is quite a long grind.”

Jurkovich suggests “our bigger competitors,” the big four Australian-owned banks, have been stepping back from the market and the capital injection means Kiwibank will be better able to fill any gaps they leave.

“Kiwibank has always done best in times when it's been hard,” he says.

It's certainly true that Kiwibank dramatically increased home lending during the GFC when the largest bank, ANZ Bank New Zealand, all but shut up shop.

More recently during the covid crisis, Kiwibank lent more than twice as much to businesses in calendar 2021 than ANZ did.

Jurkovich says Kiwibank has a five-year rolling capital plan for reaching RBNZ's requirements, but that “I'm hopeful if we show good growth, we will get further support in the future.”

Certainly, the remainder of the proceeds from Kiwi Wealth's sale, and the $45 million from selling Kiwi Insurance last year, remains with the parent, Kiwi Group Capital – it also owns broking business NZ Home Loans.