Warehouse Bank ... almost

By RICHARD BRADDELL banking writer

The Warehouse has announced its long-expected diversification into financial services, although it will not go as far as to become a bank.

Instead, as the 49 per cent partner in a new Warehouse Financial Services joint venture with WestpacTrust, it will resell mostly rebadged WestpacTrust products including credit cards and everyday basic cover insurance.

Products and services will be sold through The Warehouse stores and by phone, using mail for completion.

The first services are expected to be available within six months and home loans, savings and investment services may be added "over the next few years."

But with its orientation away from traditional transactional and lending banking, The Warehouse move is unlikely to have an immediate impact on the core banking market, or on the new NZ Post Bank.

The Warehouse's general manager of non-retail activities, Bruce Gordon, said The Warehouse expected to extract value from the joint venture through dividends.

But in common with WestpacTrust, it would also be paid for services it provides through use of its 74 retail stores, among other things.

Mr Gordon saw no reason for the joint venture to become a fully-fledged bank as it already had the backing of WestpacTrust.

The partners had paid for their relative equities in the joint venture on the basis of their contributions of brand licences, and skills.

As well, $5 million had been invested in seed capital, which was likely to be followed by more investment as the business grew.

The Warehouse will provide brand, store locations, marketing channels and services.

WestpacTrust will provide most of the products, product management and expertise, back-end processing systems, infrastructure and risk and credit management expertise.

The joint venture will be particularly pleasing for WestpacTrust, as The Warehouse was at one point talking to ANZ as a potential partner despite the strong relationship with WestpacTrust through the jointly developed and operated The Warehouse Card.

The Warehouse Card has 200,000 users, who spend around $100 million a year.

The customers will be targeted as an initial customer base for new financial services.

The joint venture will have a separate board of directors chaired by WestpacTrust chief executive Tom Gallagher, with the eight-person board being equally split between The Warehouse and WestpacTrust representatives.