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Speaker 1: So we've got an update to the banking environment in

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Speaker 1: New Zealand. The government is looking to inject Kiwibank with

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Speaker 1: five hundred million dollars in capital to i quote disrupt

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Speaker 1: the status quote Kueibank's parent company, Kiwi Group Capital and

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Speaker 1: Treasury have been instructed to talk to potential investors, but

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Speaker 1: the government has ruled off actually selling its Quei bank

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Speaker 1: chares to the public and IPO massive university banking expert

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Speaker 1: Clear Matthews joins, we now have a clear.

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Speaker 2: Marienna Andrew, so good move. It's an interesting move. It's

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Speaker 2: not it's not an unexpected move. It's where it's going

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Speaker 2: to really make a difference as something that we will

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Speaker 2: wait to see.

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Speaker 1: Well, that's a nothing answer, and why did you cackle?

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Speaker 2: Because the government is pushing this very much as it's

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Speaker 2: going to make a huge difference to competition, and I'm

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Speaker 2: struggling to see that it really will make that much

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Speaker 2: of it as.

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Speaker 1: Well, because it's just an extra five hundred million dollars

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Speaker 1: on the balance sheet, which won't when you're competing with

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Speaker 1: other banks that have billions and billions and billions.

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Speaker 2: Yeah, I mean five hundred million is obviously not a

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Speaker 2: small amount of money, but the government has indicated that

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Speaker 2: we'll enable it to do four billion dollars worth of

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Speaker 2: business leaning or ten billion dollars of home lending. And

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Speaker 2: at the moment the banks between them have got a

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Speaker 2: total of just under four hundred or around four hundred

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Speaker 2: and ninety billion dollars worth of lending. So that amount

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Speaker 2: of additional leanding is really quite a drop in the bucket.

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Speaker 2: And you've got a question how much of a difference

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Speaker 2: that can make to the competitive environment.

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Speaker 1: Okay, now the left and let us talk about another

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Speaker 1: part to it. The left is squealing that this is

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Speaker 1: a part privatization, which I think is true. This is

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Speaker 1: not taxpayers money, broadening the capital base, but don't appeal

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Speaker 1: to private investors. So will this appeal to those private

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Speaker 1: investors to invest?

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Speaker 2: You'd really have to ask the private investors. It's going

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Speaker 2: to depend on the conditions and the terms associated with

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Speaker 2: the issue of the capital. What are they going to get,

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Speaker 2: What are the options associated with that. One of the

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Speaker 2: key things is it does appear to be what they

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Speaker 2: call a put option, So the investors are going to

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Speaker 2: have a right to sell those shares back to the

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Speaker 2: government as a proposed IPO doesn't go ahead, So they're

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Speaker 2: talking about making an IPO whereby the public could buy shares.

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Speaker 2: I think the public would have an interest in buying

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Speaker 2: shares where that private investors would. But if they know

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Speaker 2: that they're going to be able to get rid of

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Speaker 2: them in a couple of years time, either to the

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Speaker 2: government or to private investors, then maybe that's attractive. But

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Speaker 2: it will depend on the terms exactly, and they may

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Speaker 2: be able to lock in some really good terms, in

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Speaker 2: which case you've got to say, is that good for

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Speaker 2: the government?

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Speaker 1: Well, leaving out that IPO is interesting. They say it's

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Speaker 1: because of technical reasons that they haven't finished the computerization

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Speaker 1: of Kiyi Bank or something like that, so the IPO

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Speaker 1: couldn't happen until twenty twenty eight, So is that actually smart?

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Speaker 1: Was that forced by necessity? And the fact is, no

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Speaker 1: one is going to invest in some shares in five

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Speaker 1: hundred million dollars of extra capital if they can't on

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Speaker 1: sell at a later date at a market price and

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Speaker 1: not to a government.

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Speaker 2: I know they might be happy to have a guarantee

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Speaker 2: that they can sell back to the government. So that

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Speaker 2: doesn't necessarily mean that they have to be able to

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Speaker 2: sell to the public. But they do want to be

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Speaker 2: able to sell because they don't want to be stuck

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Speaker 2: with them. I personally don't understand why they have to

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Speaker 2: complete the digital changeover in order to do the IPO,

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Speaker 2: but you know, maybe there's something I'm missing there. But

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Speaker 2: investors want to have a way out. They don't The

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Speaker 2: government might be happy to have no way out, but

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Speaker 2: for investors, they need to be able to know that

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Speaker 2: if the time comes and they want to sell the

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Speaker 2: shares for some reason, they've got to be able to

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Speaker 2: do that.

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Speaker 1: Okay, And your opinion is our banking environment does it

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Speaker 1: need a revamp because this is a common talking point,

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Speaker 1: and yet we have many bangs, We have competition. They

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Speaker 1: are running businesses. Their margins are not excessive.

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Speaker 2: Well that's the problem. Some people think they are excessive.

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Speaker 2: It's just that they make large amounts of money and

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Speaker 2: it sounds terrible because it sounds like they're making all

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Speaker 2: this money off New Zealanders. But in reality, they need

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Speaker 2: to make a return because if they're not making a

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Speaker 2: satisfactory return for the capital that they've got investors, they're

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Speaker 2: not going to continue to operate. And they do spend

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Speaker 2: a lot of money in New Zealand as well as

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Speaker 2: those operations in terms of the profits they're making, they

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Speaker 2: spend a lot of money to make that and most

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Speaker 2: of that comes into the New Zealand economy.

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Speaker 1: Thank you so much, Claire, doctor Claire Matthews, who is

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Speaker 1: the Associate Professor Banking at Massi University. And remember these

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Speaker 1: are not Australian banks. In fact, the Australian banks have

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Speaker 1: owners as well. There's always a bigger fish, as they

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Speaker 1: said in Star Wars.

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