NZ Post is banking on its own ideas

By RICHARD BRADDELL

WELLINGTON - New Zealand Post is distancing itself from Deputy Prime Minister Jim Anderton's plan of using it as the vehicle for his People's Bank.

It says its own banking objectives are aimed at creating a commercial, self-sustaining business.

"We are very clear that we are approaching this from a commercial business development point of view; Mr Anderton is concerned with a broader perspective of social policy," said NZ Post's chief executive, Elmer Toime.

NZ Post is also to trial selling Tower managed funds products tailored specifically to post shop customers' needs.

The product branding has still to be decided, but it seems likely that some of the offerings will be sold under NZ Post's name.

Tower's general manager, Ralph Stewart, said the two businesses were complementary. "Tower's not a bank - we are in wealth creation," he said.

"Over the last nine months, we've identified some features and benefits we think will unlock the unique passive nature of the post shop environment. But until we test we're not sure."

While managed funds are commonplace in bank product ranges, both NZ Post and Tower said the project was developed in total separation from the banking proposal.

NZ Post is examining two banking models:

A fully fledged, registered bank offering cheques, credit cards, modest overdrafts and possibly mortgages.

A non-registered bank offering simple savings products.

Mr Toime said that all the "high level" analysis had indicated that a commercial return could be earned either way, but it would be another two or three months before detailed proposals, including how such a bank might be funded, would be sorted through.

Asked if Mr Anderton might end up disappointed in his hope of basing a bank on NZ Post, Mr Toime said it was possible.

"If you want to take the hypothetical outcomes, it could be that the board of NZ Post says we can't see how to make this work. Here is the detail we've gone through, here are the assumptions we've made," he said.

It was ultimately the Government's prerogative to decide what might happen, but Mr Toime said NZ Post's planning was on the assumption that no Government capital would be injected into an NZ Post bank.

Mr Toime thought it possible NZ Post could fund the banking business directly off its balance sheet, but he also left open the prospect that it might issue non-voting redeemable preference shares, as is possible under the State-Owned Enterprises Act.

While NZ Post had no pre-determined view on whether preference shares would be issued, he said it was the kind of matter that would be decided in consultation with advisers. These might include Cameron & Co, a consultancy that has advised NZ Post on its capital structure.

Factors such as the timescale of the investment had to be taken into account. "A quite important aspect would be the length of your business plan, for instance, cashflow analysis ... what criteria do you set for returns. We haven't got anywhere near that yet," said Mr Toime.

He had no idea where a figure of $60 million, sometimes cited as the cost of setting up a new NZ Post bank, had come from.

While NZ Post had been working on the banking concept for the past two years, Mr Toime said he had first thought of putting the SOE back into banking in 1998 when the just separated Post Bank was being offered for sale by the Government.

Having joined NZ Post in mid-1987 as a business planning manager, Mr Toime had realised Post Bank's move out of post shops would have a significant impact on NZ Post.

His suggestion that NZ Post should buy back Post Bank was not well received. "It would be fair to say that I was laughed out of court because everybody thought we had gone to so much trouble to separate it and we really didn't have the postal business under control.

"I thought that was fair enough, but we are a very different business today."