Mums and dads could supply bank's capital

By RICHARD BRADDELL

WELLINGTON - New Zealand Post is exploring the option of raising capital from New Zealand's mums and dads to finance its aspiration to set up a New Zealand-owned bank.

Although privatisations are off the Government agenda, a capital-raising to fund the bank is still possible.

This would be achieved under a hitherto unused provision in the State Owned Enterprises Act which enables SOEs to issue redeemable preference shares or equity bonds.

Because the shares are non-voting, they would satisfy any requirement that control of the new bank remain in New Zealand or with NZ Post, even if shares were issued to another bank that might be brought in as a partner in a joint venture.

NZ Post is the likely vehicle for Deputy Prime Minister Jim Anderton's Kiwi Bank.

But the fact the Alliance would like to propel NZ Post into banking appears to be coincidental, according to one source who said NZ Post had been modelling the business case for a bank for more than two years, testing it against economic value-added criteria.

NZ Post's primary aim would be to build a new business stream based on the 920,000 customers who use its outlets each week. NZ Post's yearning to re-enter banking, a business it exited when the Post Office Savings Bank was split off in 1987, has apparently been heightened by comparisons with foreign postal organisations, the vast bulk of which still operate banking arms.

That the bank would be self-funding is crucial since Finance Minister Michael Cullen's office has made it clear that the Government has no intention of injecting the necessary capital.

In July last year, NZ Post's credit rating was affirmed by Standard & Poor's but given a negative outlook following a return of capital to the Government which trebled net debt to 110 per cent of equity.

The cost of servicing higher debt is one of several factors in reduced profit for NZ Post in the past two years.

The company has also been investing in new revenue streams, in particular e-business, where it has made acquisitions or taken equity holdings in several companies.

It has also won several consulting contracts with postal organisations overseas.

The full-year profit announcement is expected this month.