Retailer may pip Post to banking

By KARYN SCHERER

The Government's hopes of launching a People's Bank could be gazumped by The Warehouse, which is close to announcing its own plans to introduce financial services.

Three months after it revealed it had abandoned its plans for a joint venture with one of the Big Five banks, the country's biggest retailer is understood to be well down the track with another partner.

Their plan is likely to bring banking services to Warehouse stores next year.

The move comes as the Government is preparing to consider New Zealand Post's proposal for a People's Bank involving New Zealand Post outlets.

On Friday, chairman Ross Armstrong confirmed that the board of NZ Post was recommending to the Government that it go ahead with the Alliance's proposal for a People's Bank.

NZ Post says the business case for the bank has been rigorously tested.

The state-owned enterprise has noted more than 700,000 customers use its network each week. But it is likely to be competing against The Warehouse, which has similar numbers of customers passing through its stores each day.

Opponents of the Alliance proposal have been quick to seize on the worst-case scenario outlined in a report by advisers Cameron & Associates.

This is believed to estimate the "Kiwi Bank" could take more than three years to make a profit.

The Cameron report is also believed to suggest that earlier research which showed 40 per cent of people would consider switching to the new bank might be too optimistic.

The Government is expected to decide on the proposal early next year.

NZ Post said last week that the new bank was not likely to open for business until February 2002.

But Finance Minister Michael Cullen would prefer to see it opened much earlier, in line with the Alliance's hopes of a mid-year launch.

In September, The Warehouse revealed it had written-off $1.6 million of costs after abandoning its plans for a joint venture with one of the Big Five banks.

It is widely believed to have talked with the ANZ and WestpacTrust about its plans.

Managing director Stephen Tindall said at the time that the retailer had decided to go back to square one after becoming concerned it was not going to be able to provide "a big enough bargain."

Chief operating officer Greg Muir, who is due to take over from Mr Tindall as managing director from the end of January, said the company expected to announce its latest plans in the first few months of next year.

Mr Muir admitted it had found the project more complicated than it first expected, but confirmed it planned to offer "some of the products and services you normally get inside a bank."

"We still think there's a really good opportunity there but it's critical to get the partnership established properly."

The Warehouse is not the only retailer considering branching out into banking.

Farmers, which already has one of the country's largest consumer finance businesses, moved this year into mortgage broking.

Progressive Enterprises, which runs the Foodtown, Countdown and 3Guys chains, is also considering banking services. Managing director Ted Van Arkel said the company was keen to ensure customers saw supermarkets as one-stop shops.

With the rapid development of electronic banking, it was logical that customers might want to pay their bills while paying for their groceries, he said.

"Why should people not pay their telephone accounts or Mercury Energy accounts at the checkouts? We are certainly looking at those sort of objectives as well."