Macquarie tapped to find $NZ500m Kiwibank backer

Australia’s Macquarie Group will help the NZ government with options for Kiwibank. Picture: iStock.

Investment bank Macquarie Capital is understood to have won the Kiwibank mandate to find a backer for the New Zealand ­lender, sources say.

It comes after a beauty parade involving the top names from Wall Street to select an adviser, and is the second sale of a financial firm Macquarie has been working on in the past year, after advising Fisher Funds on its sale plans.

Sources say that some of the top Australian-based advisers at Macquarie have strong connections with the chair of its parent company, David McLean of Kiwi Group Capital, who is a former Westpac executive.

The plan to find a party able to inject $NZ500m ($454m) into the business comes ahead of a possible initial public offering of the government-backed lender in the ­medium term. New Zealand ­Finance Minister Nicola Willis announced the initiative in December, and it is understood that Macquarie’s appointment was ­decided in recent days.

She said the change would ­enable the New Zealand-owned banks to more vigorously compete against the big four Australian banks. The move to appoint Macquarie co-incides with an Auckland event led by a government delegation to attract further capital from Australia into New Zealand for infrastructure investment. Kiwibank was started in 2001 by the Labour government to compete with top Australian lenders.

Treasury had been directed to talk to New Zealand KiwiSaver funds, New Zealand investment institutions and New Zealand professional investor groups about a potential investment of up to $NZ500m in the bank.

“If a private placement occurs this would be an asset capitalisation, not an asset sale, as all funds raised would be for Kiwibank’s ­future business growth,” Ms Willis said. She added that in the long term, the most accessible source of additional capital for Kiwibank was likely through a public share offering. But she said Kiwibank would not be ready for a float until its current digital transformation is completed, expected in 2028.

It meant that no decision on an IPO would be made in this government term. Because the government understood that before making any investment, institutional investors will require a clear option to sell shares.

“If an (IPO) is not approved at a later date, this could take the form of having an option for investors to sell their shares back to the crown at an independently assessed fair value,” she said.

Her comments at the time of the announcement about communicating her expectations that the Reserve Bank of New Zealand place greater emphasis on banking competition across a range of its policies and actions has been followed by the announced departure this month of Reserve Bank governor Adrian Orr.

This was in the form of a revised financial policy remit and a detailed set of expectations to the Reserve Bank and included a review of minimum capital thresholds for new entrants into the banking sector.

“The Commerce Commission’s market study of the banking sector found that the sector was uncompetitive, and New Zealanders were not well-served by a highly profitable, two-tier oligopoly.”