Govt pressures Kiwibank to cough up cash
Kiwibank has bowed to Government pressure to cough up some cash, paying its first proper dividend since it was set up in 2001.
The state-owned bank has been turning a profit for the last 10 years, during which time it has squirrelled away more than $500 million to support its growth.
But in recent years the Government has repeatedly denied requests for more capital, and put pressure on the bank to start paying its own way.
Investment documents reveal Kiwibank paid a $21m dividend last month, its first proper payment other than a minor $750,000 payment last year.
The bank’s spokesman Bruce Thompson said while there was no formal dividend policy, the payment would be the first of many to come.
‘‘We’re now at the point where . . . it’s time to pay the master,’’ he said.
Thompson said the bank expected to make regular interim and fullyear payments, although that would depend on its funding requirements at the time.
Kiwibank’s earning power is increasingly supporting its parent company, New Zealand Post, which is eyeing another round of staff cuts and store closures as it struggles with falling mail volumes.
That has not escaped the notice of State-Owned Enterprises Minister Todd McClay.
In a letter to NZ Post chair Sir Michael Cullen, he called for a review of the group’s dividend, saying it should ‘‘closely link distributions to the parent from Kiwibank, which should in turn recognise its improving performance’’.
McClay also reiterated there was a ‘‘high threshold’’ for the Crown to approve any more capital injections.
Kiwibank was forced to overhaul its business plan and temper its expected growth in 2013, setting a goal to become capital selfsustaining by next year.
Thompson said reaching that would depend on the ‘‘prevailing financial circumstances’’.
The bank has turned to other avenues of funding, most recently seeking to raise $150m in a perpetual bond offer that opens next month.
Beyond having to meet regulatory capital requirements, it is also funding a massive overhaul of its core banking system, expected to be completed in 2017.
While originally estimated to cost about $100m, one consultant at the time warned the the complex IT project could blow out considerably.
In an investment statement for the bond offer, a cost blow-out was identified as a possible risk, saying such projects ‘‘may not be organised effectively or executed efficiently’’.
Thompson said it was ‘‘tracking to plan’’, with an update due at its full financial year briefing in August.
The Government has also put pressure on Kiwibank to generally lift its financial game.
McClay said in letter, he said ministers expected the group’s new business plan to drive Kiwibank’s performance ‘‘to be more in line with its major competitors’’.
Kiwibank is notable for high expenses, with a cost-to-income ratio significantly higher than its larger rivals.
Last year it confirmed 80 staff would lose their jobs in a major restructuring aimed at cutting costs.
While the lender has 860,000 customers, only about half consider it their main bank, another statistic the company is keen to turn around.
Labour leader Andrew Little said it was ‘‘crazy’’ for ministers to expect a bigger dividend from the NZ Post group, given the business was under severe pressure.
Kiwibank needed more capital for its long-term business success, he said.
The Green Party has also repeatedly called for more funding so Kiwibank can compete better with the larger Australian-owned banks.
We’re now at the point where . . . it’s time to pay the master. Bruce Thompson KiwiBank