Faith unshaken as bank rolls on

By VERNON SMALL deputy political editor

New Zealand Post has lodged an application for a banking licence and claims its plans have not suffered from recent attacks by Act MP Rodney Hide.

Bank interim chief executive Sam Knowles yesterday confirmed that an application had been lodged with the Reserve Bank two weeks ago and that NZ Post was on track to launch its "Kiwi Bank" in February.

He expected a decision before the end of the year.

Reserve Bank spokesman Paul Jackman would not comment on the application.

Meanwhile, outgoing NZ Post chief executive Elmar Toime has hit back at critics of the bank.

He said they had not dented the enthusiasm of prospective customers and he had seen nothing to shake his faith in the bank proposal.

"The research from likely customers is holding up very, very positively. People who understand the sense of it, have thought about it, are staying with it."

Mr Toime said that when critics claimed the bank was "a dog of a business", "a barmy idea" or "a dopey idea" someone had to stand back and analyse it.

"From whose perspective is this dopey? Is the NZ Post management team dopey? Why is this organisation unable to put a business case together, assess its risks and make an evaluation about it and have those risks assessed by outside parties?"

He said the caution of Government officials about the bank was a natural part of the risk assessment process.

"In risk management you only look at the downside. That is why the language of officials is 'what could go wrong?'. That is their job; that is fair enough."

But all those approached to be one of the bank's three independent directors had said it was a sensible business idea.

"There has been nothing at all to dint our confidence in our ability to deliver a small retail bank."

Whether there should be Government-owned trading companies or state-owned enterprises was a political question NZ Post could not answer, Mr Toime said.

Launching a bank was not the result of political pressure, but a natural diversification strategy for NZ Post as mail volumes had declined.

When he joined NZ Post he had suggested buying back PostBank, which had been sold to ANZ Bank.

A banking arm had been suggested first in June 1997, and in 1998 an external group of bankers found there was a case for one. In early 1999 work started on a proposal.

"The development of the business case was uniquely our idea. It coincided with political interest. I don't deny that."

The biggest threat to NZ Post's value had been the deregulation of the standard-letter market in April 1998 under the previous Government, he said.

Mr Knowles said planning for the bank was on track and set-up costs were within 5 per cent of budget.

The first branches would open in February or March and about 300 would follow by May.

A 50-strong management team had been set up and the board would be appointed soon.

The proposed bank had been accepted as a customer of the interbank cheque-clearing house and it was negotiating a deal for ATM and Eftpos services. It was yet to decide if it would have its own ATMs.

Mr Knowles said the bank was aiming for 165,000 customers after three years, although 100,000 would still enable it to be profitable- defined as making an 11.7 per cent return on capital.

That would represent 5 per cent of banking customers.

NZ Post would start approaching customers in the next few weeks to set up a database of those wanting to switch to the new bank.

Mr Toime said business banking was "not in our sphere of desire" but nothing could be ruled out long term.

Mr Knowles said he expected the bank to be a small operator on the market, representing only 1 to 2 per cent of banking profits, currently running at $1.7 billion a year.

It would focus on a no-frills image stressing its longer opening hours, including weekends, lower fees and New Zealand ownership.

About 20 home loan advisers would service 10 to 15 outlets each.