Kiwibank a natural fit for sharemarket listing, says Treasury

Publicly listing on the NZX is “the natural progression” for KiwiBank in its mission to become a maverick disrupter, according to the Treasury.
The recommendation was made in a heavily redacted Treasury report to Finance Minister Nicola Willis on ways in which the Crown-owned bank could become more of a competitor in the banking space.
Willis requested the advice after the draft version of the Commerce Commission’s market study into personal banking services was released earlier this year, which found  Kiwibank had the greatest potential to be a “maverick disruptor” in the short to medium term.
The document, received under the Official Information Act, laid out the Treasury’s view on how best to capitalise Kiwibank, which would be done through Crown funding (either in part or in totality) or sourcing new capital from third parties.
Treasury said supplying the bulk or all of Kiwibank’s capital needs would lift core government debt and could displace other Crown-funded priority policies.
Sourcing capital from outside government would share the risk and earnings of a larger Kiwibank with those other parties.
This could be done through private investment – potentially to a Crown investment entity like the NZ Super Fund – or through a stock market listing, likely on the NZX.
The bank would still be fully consolidated into the Crown’s financial statements if it maintained a controlling stake (51 percent or above).
Treasury appeared to be in favour of a stock market listing.
“For a bank which has New Zealand ownership as its point of difference, the natural progression for Kiwibank in raising capital in the medium term is through an initial public offering.”
Treasury said a public listing would offer broader ownership more directly than private capital raising and would remove some of the challenges that arise for illiquid investments, including a higher return on investment required by investors, greater involvement in governance and more complicated exit provisions.
It isn’t clear how much could actually be raised by floating Kiwibank on the NZX.
The government’s 2022 deal to buy minority stakes in Kiwibank’s parent company back from NZ Post, ACC and the NZ Super Fund valued it at $2.1 billion.
Assuming the same valuation, Kiwibank’s raise would bring it just over $1 billion, making it less capitalised than the big four Australian banks.
The finance minister’s office said Willis wouldn’t have anything new to say until she had received further advice from Treasury, pointing Newsroom to a statement released at the time of the commission’s final banking report in August.
“I have asked Treasury to engage with Kiwibank’s parent company Kiwi Group Capital on options for raising new capital, including from KiwiSaver funds, New Zealand investment funds and investment from everyday New Zealanders,” she said at the time.
She said proposals would be taken to Cabinet no later than December.
Willis has previously been reported as saying the Government would not seek to list Kiwibank without a referendum.
Prime Minister Christopher Luxon also ruled this out ahead of the election last year – though coalition partner Act campaigned on listing 49 percent of Kiwibank as a part of its alternative budget.
Asked about Treasury’s “natural progression” comment, NZX chief executive Mark Peterson said it would welcome the Government looking to New Zealand’s public markets to raise capital. 
“A partial listing of Kiwibank in the medium term would be a well-received addition to the New Zealand market and there would be a strong appetite from local investors.
“What a partial listing such as Kiwibank on the New Zealand market would do is help reach the broadest range of investors, efficiently price capital, reduce capital expenditure commitments post listing and ease pressure on the Government balance sheet.”
The exchange has engaged with Commerce Minister Andrew Bayly on capital market regulation reform and settings to facilitate growth in public markets.
Devon Funds head of retail Greg Smith said New Zealand investors were often patriotic and would be keen to buy into the likes of Kiwibank – particularly if it was hunting down growth.
“It would be a great boost for the New Zealand stock market, we’ve seen a lot of companies that’ve either gone to private equity or listed over in Australia to seek expansion capital