Reflections on Kiwibank #1
May 30, 2010
It seems to Adam that there is considerable mis-information re Kiwibank out there. We do have some other institutions which are NZ owned. TSB, PSIS and SBS all come to mind.
Then there is the question of profitability.
Here is a simple chart:-
Figures are NZ$ millions
Simply put it appears that TSB is more profitable. Then if we take into account the cross-subsidisation that Kiwibank purportedly gets from NZ Post, then TSB looks even better. Furthermore, TSB pays dividends, which Kiwibank does not.
Hmmm!
Note: Adam has no deposits or accounts with either institution.
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5 Comments
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Very good post.
Send it to Blenglish and ask him to tell you how much cross subsidy Kiwibank got from NZ post.
Hickey suggested the other day in NZ Herald on 26 May:-
Furthermore, it is clear that there has been a focus on growth rather than profits and dividends. Now some will argue that there has been a ‘social dividend’ because it has caused the other banks to charge lower rates, but competition and market conditions could also have yielded the same result.
Not to mention that Kiwibank’s bond raising issues of $309 million from the Aussies are unconditionally guaranteed by NZ Post. Presumably this applies to all its other floats as well.
As Standard and Poors noted last week, it would revise the bank’s ratings if it was privatised. Now add in the annual $45 million from NZ Post for various services and what we have is not an implicit but 100% guarantee from the Govt, and a subsidy from one player that is the difference between a profit and bankruptcy. The bank effectively isn’t rated.
The bank has gone to the Govt for an addition $600 million for “growth”.. thats on top of the original $50 million on which it pays no dividend, plus an additional $75 million (IIRC) that NZ Post put in a few years ago.
This is a house of cards, take away the Govt guarantee and NZ Post subsidies and you have most of the recognised conditions for bank failure.
JC
Knowles claims only $100 million and seems to think Government should carry on investing with no dividend.
Agree JC there is a profound mis-understanding of this ‘success’
“Knowles claims only $100 million and seems to think Government should carry on investing with no dividend.”
Yeah.. $100 million “this” year..
I suppose a country is allowed to run a “vanity” bank that is propped up by the tax payer.. but thats all it is. But to be fair, its done a good job of emulating the old Post Office Savings Bank.. the difference is the old POSB knew its place and limitations.
If we really wanted to laud an iconic Kiwi bank, look no further than ANZ.
Established in 1800 under Royal Charter, it’s been serving NZ since European settlement under one name or the other and is likely to have invested more in the country and its people than any other.
Its strange that earlier NZers understood and accepted the concept and strengths of Global banking far better than their offspring.. and were the wealthier because of it.
JC