The New Zealand Superannuation Fund (NZ Super) and Accident Compensation Corporation (ACC) are set to acquire 45% of Kiwi Group Holdings – which owns Kiwibank – from a struggling NZ Post.
The two Government entities have now applied to the Reserve Bank for clearance of the deal which has a provisional price of $495 million, according to a BusinessDesk update. Kiwi Group owns Kiwibank and its associated business, such as Kiwi Wealth Management and Kiwi Insurance. The indicative value of Kiwi Group is $1.1 million, but the final price is yet to be determined.
NZ Post is struggling financially due to a decline in its mail business, leaving it unable to pump any further funds into Kiwibank. NZ Post has injected around $400 million into Kiwibank since its launch 14 years ago, funded by debt.
Provided the Reserve Bank gives the deal the green light, NZ Post will be able to repay its debt, pay a special dividend to the Government and focus on the parcel side of its business. In turn, Kiwibank would receive beefed-up resources.
The sale will allow Kiwibank to tap into capital, investment and expertise for its expansion, while also allowing NZ Super Fund and ACC to gain a significant stake in a “large and well-performing unlisted New Zealand business,” NZ Post chief executive Brian Roche says in a statement.
This deal has been five months in the making, with New Zealand Post announcing in April that it was seeking to divest 45% of its shares in Kiwi Group Holdings.
Kiwi Group Holdings posts multi-million dollar profits
Kiwi Group Holdings has taken a slight dip financially, reporting a 0.8% decrease in profits for the year-ending 30 June, compared with the previous year, according to a 26 August update. However, Kiwi Group has still reported a sizeable profit of $131 million, with the bulk of the earnings ($124 million) coming from the Kiwibank Banking group.
The result reflects a challenging environment for banks, with global uncertainty and increased funding costs for banks, as well as having to operate within a very competitive market, group chief executive Paul Brock says in the update.
In the past year, Kiwibank has been steadily increasing its business:
- Increasing lending and advances to customers by 7% from $15.6 billion to $16.7 billion.
- Reducing impairment losses on loans and advances by 15% to $11 million.
Kiwibank now has more than 1 million customers, 419,000 of which use Kiwibank as their main financial institution. Kiwi Wealth, New Zealand Home Loans and Kiwi Insurance have all also grown. In particular, Kiwi Wealth, which manages $3.9 billion in customer funds, and over 158,000 KiwiSaver accounts.
Kiwibank three-time term deposit winner
Following the 11 August OCR cut from 2.25% to 2%, Kiwibank positioned itself competitively in the home loan space; the only bank to pass on the full rate to borrowers.
However, Kiwibank has also been fiercely competitive with term deposits, receiving Canstar’s 2016 award for Bank of the Year in Term Deposits for the third year in a row. Canstar’s awards were announced prior to the latest OCR announcement.
Kiwibank won the award for a number of reasons, including the ability to move your term deposit to another institution after the maturity date, without having to pay a penalty.
In addition, you can withdraw up to 20% of your principal at any time during the term with no penalty. However, you will receive a 0.02% pre-payment penalty if you withdraw more than 20%.
At the time of writing, Kiwibank is offering a 3.5% per year return for a six-month term deposit, provided you invest a minimum of $10,000. Kiwibank is also offering a home loan two-year fixed rate of 4.19%, provided you have a minimum 20% equity.