NZ Post board okay bank

By RICHARD BRADDELL

New Zealand Post's people's bank could become a reality later next year after the board yesterday recommended it to shareholding ministers.

The board said the bank would open for business in February 2002, although Government sources indicated there was no reason why it could not happen earlier.

The Government is likely to support the proposal given that it will give NZ Post a new avenue for expansion and will solidify the Coalition by satisfying Deputy Prime Minister Jim Anderton's own desire for the idea.

NZ Post chairman, Ross Armstrong, said the bank was not without risk since it was a start-up. But the business case had been rigorously tested and there was sufficient flexibility to respond to adverse circumstances and still create value.

NZ Post has been advised by Wellington firm Cameron and Associates. On a worst-case scenario, it found it would take three-and-half years to make a profit.

Although the Cameron report has been with Mr Anderton for 10 days, Finance Minister Michael Cullen has not yet seen it.

But Dr Cullen's probable insistence that it be put to independent review by an Australian consultant is thought unlikely to delay a business start next year.

Although the cost of setting the bank up has been put at around $80 million, sources suggest the cost will be much lower.

But they also expect the numbers who switch to the new bank to be much lower than indications of 40 per cent.

Bank customer churn is normally around 8 per cent.

NZ Post's hope is that the bank will appeal to New Zealanders' desire for local ownership, helping it to capture a big chunk of that 8 per cent.

A source said the Cameron report demonstrated that the bank would be a valuable asset on NZ Post's balance sheet from day one.