Australians tipped to split off NZ bank assets

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One of the big Australian-owned trading banks is considering splitting off its New Zealand assets and floating a new company on the NZX.

Sources say institutions in Auckland have been looking closely at documents outlining the deal and back the concept of an initial public offering (IPO) of a vehicle with a potential market capitalisation of $3 billion to $5 billion.

Speculation has centred on BNZ, owned by National Australia Bank.

That could see the arrival of a company larger than the $3.5 billion Contact Energy, one source said.

But one investment banking source downplayed the prospects of a float saying, it was just "tyre-kicking" and the talk had only arisen from some institutions talking to brokers and floating the idea, which he said was untenable.

Although Australian-owned banks including Westpac and ANZ are listed on the NZX and their shares trade here, their primary listing is on the ASX. Their headquarters are also across the Tasman.

If the bank float did go ahead, it could involve offloading a quarter to a half of the institution's New Zealand assets in the next 18 months to two years, one investor said.

He has looked closely at the concept and said yesterday he was enthusiastic about it. This was a far more substantial IPO than the much-touted Kathmandu offer yet to be announced, he said.

A float would help a bank get a potentially large amount of capital at a time when overseas funding was harder to secure and expensive.

Diane Maxwell, BNZ external relations manager, yesterday dismissed talk of the bank listing its New Zealand assets.

"There is no foundation to the speculation that the BNZ would list on the NZX," she said.

Shane Solly of Mint Asset Management would not discuss the possibility of a bank float but said good IPOs were worth considering. "We're always keen to consider new investment options," he said.

Meanwhile, Andrew Thorburn, BNZ managing director, told the Property Council conference in Auckland yesterday that banks needed to raise more capital domestically and be less reliant on overseas sources. Although banks operating in New Zealand are less leveraged than overseas, he showed how reliant we had become on overseas money.

In 1990, New Zealand had $10 billion in overseas funding, according to the Reserve Bank's financial stability report. By 2000, that had grown to $65 billion and last year it stood at $130 billion, Thorburn said.

He called for more saving and less spending.

"New Zealand has a flaw - its balance sheet. The world is our bank and we have a $130 billion overdraft. Offshore funding was not a problem while unconstrained and cheap funding was available. But are offshore investors willing or able to continue funding the $130 billion?" Thorburn asked.

The only way to create a financially stronger country was to increase savings and grow small and medium-sized businesses, he told about 230 delegates at SkyCity.