So... The government itself has bought Kiwibank off its current trio of state-related owners (NZ Post, NZ Super Fund and the ACC) in a transaction that valued Kiwibank at $2.1 billion. This paper shuffling exercise will not change the overall value of the Crown's balance sheet. At best, the deal seems to be only a holding exercise triggered by NZ Super’s desire to bring foreign expertise (and foreign capital!) into the bank’s ownership model. The acquisition will now ensure that Kiwibank remains entirely Kiwi--owned. Great. In itself though, this deal won’t do anything to improve Kiwibank’s ability to make inroads into the excessive profits that the four Aussie-owned banks continue to extract from New Zealanders, and continue to send offshore.

To recap: a KPMG study earlier this year found that the four Aussie owned major banks (BNZ, ASB, ANZ and Westpac) collectively account for 85% of the banking market in this country. In the March quarter alone they reaped a total of $1.74 billion in profits from their operations. (In the calendar year 2021, they amassed $5.49 billion in profits, once you add the BNZ annual profits to these reports.) Given how dominant the foreign-owned banks continue to be, and given the size of the profits they’re funnelling offshore year in year out… Is Finance Minister Grant Robertson willing to take any significant steps to alter the balance of power? Apparently not. There is no sign so far that the government has plans to pump significant amounts of fresh capital into Kiwibank to enable it to become a more credible rival for the Aussie banks. NZ Super at least, saw a need for that fresh capital, even though its solution was to seek it from offshore. Therefore, the government’s seeming lack of interest in stumping up the cash suggests that it aims to keep Kiwibank on starvation rations.

Equally, the government does not appear to have any appetite for regulating the banking sector in order to create a climate of more genuine competition. Nor does it seem to have any interest in extracting a windfall tax on the current profits heading offshore. The banking status quo is set to continue.

However futilely, one has to ask – if quarterly profits of $1.74 billion do not count as excessive profit-taking, what on earth would? What makes supermarket profiteering intolerable such that the government feels impelled to respond, while the playing field in banking raises no similar concerns? Robertson claims that Kiwibank has been playing a useful role as a restraint on the four major banks. (Not much of a restraint, obviously.)If that was true though, then surely that would be a compelling argument for the government to pump a lot more capital into Kiwibank. That would enable it to be a far more effective disrupter of the banking sector’s cosy arrangements, and thus help to retain even more banking profits within this country.

Unless and until that fresh injection of government capital happens, Kiwibank’s potential will remain stunted. It will continue to provide a service – alongside other NZ-owned banking operations – for those people with a moral objection to banking with the Australians. Yet because it is being starved of capital, Kiwibank can offer only an illusion of competition rather than pose a genuine existential challenge to the Aussie-owned giants.

Lacking capital also means that Kiwibank cannot offer the full range of banking services that would – for instance – enable it to bid for the contracts to meet the government’s own banking needs. (The government itself banks with Westpac.) Surely though, even a few of the state’s banking requirements – credit cards? - could be selectively spun off into Kiwibank, even if only as a token sign of support. There’s quite a lot of tokenism swirling around this faux nationalisation gambit.

Footnote One: That said, Kiwibank is better than nothing. Thanks are still due to the late Jim Anderton for creating a Kiwi-owned bank in the face of widespread opposition, even from within the Labour Party, which has never believed in its potential. Clearly, this country hasn’t recovered the autonomy it lost as a result of the 1980s reforms. According to the KPMG survey, Kiwibank and the four other New Zealand-owned banks account for only a puny 9% of the lending operations in this country.

Footnote Two: Justifiably, there’s been a lot of public anger directed at the supermarket duopoly for its excessive pricing. The public outcry about the cost of living has forced a response from the government, although that’s been ineffectual to date. The relatively recent rise in interest rates may re-focus public anger back on the banks, which have never been widely loved. As Consumer NZ recently noted:

….Our Consumer Sentiment Tracker data shows mortgage repayments rank the highest in financial concerns. Our banking survey also showed that almost three quarters (73%) of New Zealanders think banks are charging too much and only half (52%) think they can be trusted.

Moreover, as the Consumer NZ also noted, market share isn’t a product of good customer service. “Two Kiwi-owned banks came top for customer service (The Co-operative Bank at 86% and TSB at 78%), while the big banks scored between 54% and 64%.”) In sum, the apparent government complacency about the banking status quo seems to be entirely misplaced. Since taxpayers now own Kiwibank, surely an allegedly centre-left government should be willing to weaponize it on behalf of New Zealand customers, and to staunch the flow of profits streaming offshore?

Otherwise, there doesn’t seem to be much point in nationalising an asset, if the plan is to still deny it the capital it requires to fully perform the role that it was created to play.

Banking on it…

And here’s 21 Savage with an alternative way of weaponizing the banking experience:

And from an earlier era, here’s Hezekiah Jenkins with how bad things can get when rents go up, costs rise and banks chose not to be part of the solution:

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