Kiwibank not for sale, says Bill English, so why is it being prepped for sale?

NZ Post announced it was cutting 500 jobs from within the postal service’s managers.

The NZ Post board is now looking at separating Kiwibank from its parent company.

Why would it do that? Kiwibank made a $71 million half year profit in the six months to December and is responsible for the bulk of NZ Post’s profits.

Surely NZ Post’s board would want to hold onto those profits? Especially now that Kiwibank has started to pay dividends to NZ Post?

Well, that is one argument. But Kiwibank needs more capital so it can grow and compete harder against the big Australian banks.

If Kiwibank’s balance sheet were to be separated from NZ Post it would be able to borrow money more cheaply offshore to lend in the New Zealand mortgage market.

The bank could also retain its dividends rather than paying a portion to NZ Post.

Perhaps we’re looking at it the wrong way. Maybe the real reason is that there are plans to rationalise NZ Post and taking away its artificial profit crutch from Kiwibank will force it to be self-sufficient.?

Any separation of NZ Post and Kiwibank would fuel recent speculation that Kiwbank could be partially privatised.

The Government says it is not happening. But that won’t end the speculation.

Attracting outside investors for Kiwibank would mean it could call on those investors for future capital raisings.

Of course any proposal to sell part or all of Kiwibank would be met with an outcry from opposition parties and many voters. Especially with the word Kiwi in the bank’s name.

There is another potential problem for the Government. This is not the ideal time to be selling shares in a bank.

Australian bank stocks have slipped lately because investors are concerned that the good times of recent years might be ending. Regulators are now requiring the banks to hold more capital and profit margins are shrinking.

So investors do not necessarily think that banking is the best sector to be in right now.

This just provides more evidence that Kiwibank is being separated so that NZ Post can get dealt to. Traditional mail services are drying up all over the world. Private operators are already in the market competing with NZ Post, and the business is steadily moving towards a small package and parcel delivery service.

Posties are an endangered species, but eBay, Amazon and TradeMe fuel a huge delivery industry that NZ Post needs to continue to capture if it is to survive.

 

– Tony Field, Newshub

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