Kiwibank seeks wealth solution

Kiwibank confirmed yesterday that it will buy Gareth Morgan Investments, a wealth management business with NZ$1.5 billion under management.

The bank and GMI did say what the former would pay to take over the latter, though the New Zealand Herald speculates that the price is between NZ$50 million and NZ$10 million. In a media release, Standard & Poor's said the acquisition "would have an insignificant impact on Kiwibank's capital position". The NZH first reported on the talks between the two last month.

Kiwibank said it will operate GMI as a separate business. At present, Kiwibank outsources most of its own fund management activities (for its KiwiSaver superannuation product) to AMP Capital.

But Kiwibank also draws upon this pool of savings to help fund the bank. At June 2011, NZ$2.6 billion in liabilities - equal to almost one fifth of the bank's balance sheet - was sourced from the bank's own-brand KiwiSaver savings product.

Kiwibank's annual report makes no mention of the contribution to revenue or profit of its present fund management activities.