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Speaker 1: Kiwibank has announced its five hundred million dollar capital rays

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Speaker 1: is off. The bank's been talking to investors since the

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Speaker 1: government gave it the green light to raise money to

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Speaker 1: make the bank more competitive, and that was all go.

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Speaker 1: But then earlier this week the Reserve Bank announce the

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Speaker 1: banks will need to hold less capital for a worse

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Speaker 1: case scenario. So, all of a sudden, two days later,

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Speaker 1: we find out that the five hundred million dollar capital

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Speaker 1: raise is off. So joining us now is Steve Jakovic,

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Speaker 1: who is Kiwibank's chief executive. Afternoon to you, Steve, Good afternoon,

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Speaker 1: So why have you decided you now don't need to

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Speaker 1: raise this new capital.

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Speaker 2: Well, I mean, the work that we've done over the

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Speaker 2: last twelve months or so has really been about just

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Speaker 2: making sure that we had all our options open, that

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Speaker 2: Kiwibank would never have to slow its growth and so

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Speaker 2: will There's been a lot of consultation and a lot

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Speaker 2: of work done about the capital rules. We didn't really

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Speaker 2: know how that was going to play out until literally

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Speaker 2: this week. So one of the things a bank has

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Speaker 2: to do is make sure it's got its options open,

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Speaker 2: and so one of the options that the government was

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Speaker 2: happy with was that we sought external investment, and so

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Speaker 2: we you know, you need to kick that process off,

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Speaker 2: and that's not a you know, that's not a trivial process.

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Speaker 2: It takes a bit of time. But ultimately, by the

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Speaker 2: time we got to the Reserve Bank announcements, it seemed

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Speaker 2: pretty clear that the best option was going to be

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Speaker 2: following the capital rules and that actually we were going

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Speaker 2: to have plenty of horsepower for the future.

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Speaker 1: Okay, the Reserve Bank under announced those rules two days ago,

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Speaker 1: so was so you made the decision very quickly. Was

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Speaker 1: the capital raise dead in the water before them.

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Speaker 2: No, it wasn't. It was still ongoing, but it was

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Speaker 2: it was becoming apparent that it was going to be

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Speaker 2: quite tricky. And also the closer and closer we got

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Speaker 2: to seeing what was proposed, because remember, while the final

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Speaker 2: decision was made this week months ago, it was signaled

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Speaker 2: what it was likely to be about, and so we

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Speaker 2: had a very high level of confidence that, you know,

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Speaker 2: some of the changes that were signaled were going to happen,

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Speaker 2: and so the amount of capital we have to hold

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Speaker 2: for particular assets and risk was going to drop materially. Now,

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Speaker 2: as it turned out this week it actually went down

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Speaker 2: further than we we had anticipated. We also went out

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Speaker 2: and raised four hundred million dollars worth of capital from investors,

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Speaker 2: and we were really oversubscribed at that on a good price.

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Speaker 2: And so both those factors meant that by the time

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Speaker 2: we got to today and yesterday, it was time to actually,

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Speaker 2: you know, agree that the best course of action was

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Speaker 2: to stop the offer.

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Speaker 1: So the four hundred million you did actually get, or

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Speaker 1: not actually get, but you know, got some advice that

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Speaker 1: will be taken. Did that show to you that investors working.

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Speaker 2: Yeah, well, I mean, as I can say, the four

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Speaker 2: hundred million dollar offer, I mean, we originally said that

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Speaker 2: we'd raise sort of two hundred plus what's called over subscriptions.

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Speaker 2: We end up raising four hundred at some of the

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Speaker 2: best pricing that you know, we've seen in a long time.

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Speaker 2: So that gave us confidence that you know, external professional

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Speaker 2: investors were very interested, remembering that the offer that we

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Speaker 2: had the other way, Andrew was in fact, you know,

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Speaker 2: that was selling shares, not issuing debt. And they're quite different,

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Speaker 2: all right.

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Speaker 1: Nikola Willis sold a capital raised as the answer to

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Speaker 1: the pillow fight between the big four banks. Did she

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Speaker 1: over egg that idea?

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Speaker 2: No, I don't think so. I mean, it was very

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Speaker 2: clear that the Commerce Commission, Nicola is, the Minister of

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Speaker 2: Finance and others see that the best way to try

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Speaker 2: and disrupt, you know, a billion or two billion dollars

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Speaker 2: worth of profit going across the Tasman each year is

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Speaker 2: about making sure that we've got a competitive market in

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Speaker 2: kee events the best option for that.

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Speaker 1: So earlier this week Anna Bremm, who is the new

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Speaker 1: Reserve Bank Governor, told the market, which was quite surprising

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Speaker 1: in itself, in an unscheduled announcement, that it had over

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Speaker 1: reacted with their rates in response to what the RB

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Speaker 1: felt about the future and where our rates are going

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Speaker 1: to change. What are you doing with your rates?

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Speaker 2: Yeah, so we will be signaling that, like many others,

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Speaker 2: those wholesale rates going up means that we are going

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Speaker 2: to have to push up blending rates and turn deposit rates.

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Speaker 2: So we're announced, we've announced that we're making a change

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Speaker 2: from today. So, I mean, what happened in what she

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Speaker 2: was really trying to do and I think this was

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Speaker 2: you know, this was really refreshing that she did this,

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Speaker 2: Which was the previously communicated information was that this was

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Speaker 2: the last of the cuts. What happens when people hear that,

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Speaker 2: they go, oh, that means the only way is up,

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Speaker 2: and that meant that rates rally really fast because everyone

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Speaker 2: knows there's no downside, there's only upside to the rates.

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Speaker 2: That's very unconventional to say that. And so I think

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Speaker 2: the new Reserve Bank governor coming out and saying, hey, look,

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Speaker 2: this economy is still pretty fragile. This dog could be

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Speaker 2: more cuts or maybe one just means that. The market

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Speaker 2: then has to think about hold on, is it going

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Speaker 2: to be another cut? All? The next one? Beer right?

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Speaker 1: See Jukovic Chiev, Executive of Keeping Bank. Thank you for

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Speaker 1: joining me and Merry Christmas for more from Heather Duplessy

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Speaker 1: Allen Drive.

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