NZ Post eyes Kiwibank capital expansion

Bernard Hickey
New Zealand Post has detailed its long-term strategy for Kiwibank, including expansion plans to make it the dominant part of the group with the help of fresh capital injections from the government, either directly or through its sovereign wealth fund.

NZ Post chairman Michael Cullen announced a five-year strategic plan for the group on Friday, including the likely reduction of up to 2000 jobs, or a fifth of its workforce, as it reduces its six-day-a-week daily mail delivery to three days a week.

The state-owned mail, parcel delivery and banking group said it expected Kiwibank to generate 70-75 per cent of the group's net profit within five years, but would need extra capital within two to three years to continue expansion.

Cullen told a news conference that Kiwibank's major growth constraint was capital. It is revamping its computer systems and also needs extra capital to grow lending.

NZ Post also aimed to get out of owning 139 post offices, turning them over to others to run as agencies, but Kiwibank would expand to have 50 of its own "stores".

Currently, Kiwibank services are offered in tandem with postal services in post offices, and it has only one sole dedicated branch.

"We can cope for the next couple of years," Cullen said, adding that NZ Post was in discussions with the Government about how to fund its needed capital injections.

Prime Minister John Key said last month that one option for the Government was to use funds raised in a program of partial privatisation of energy companies to inject capital into Kiwibank. He has said a Kiwibank privatisation or float is unlikely.

Cullen also said a float was not on the agenda as it would damage Kiwibank's brand, which is based on its being totally publicly and locally owned.

He said NZ Post chief executive Brian Roche had had initial informal discussions with the New Zealand Superannuation Fund, which is the New Zealand government's sovereign wealth fund.

Meanwhile, Labour Opposition leader David Cunliffe announced on Saturday that a Labour-led government would launch a state-owned insurance company called KiwiAssure that would follow the Kiwibank model. Kiwibank was launched in 2002 by the then Labour government as a way to increase competition with the mostly Australian-owned banking sector.

"Subject to a business case, KiwiAssure will be a sister company of Kiwibank and will evolve out of the existing Kiwi Insurance Limited. It will offer home, contents and vehicle insurance, along with cover for small business plant and equipment," Cunliffe told the Labour Party's annual conference in Christchurch.

"With 90 per cent of the insurance sector owned by overseas interests, a Labour government will ensure Kiwis can choose to keep profits from this crucial industry in New Zealand," Cunliffe said.

New Zealand's insurance sector is dominated by Australia's Suncorp Group, which owns Vero and half of AA Insurance, and by IAG, which owns State, AMI and NZI.

Fellow Opposition party NZ First announced last month that it also favoured the creation of a state-owned insurer.