Kiwibank’s scale remains central to competition concerns
New Zealand First leader Winston Peters has proposed buying back Bank of New Zealand from National Australia Bank, placing Australian-owned banks at the centre of a renewed debate over competition, ownership and profitability in New Zealand banking.
The proposal, announced during a campaign event in West Auckland ahead of New Zealand’s November 7 election, would merge BNZ with Kiwibank to create a state-owned lender called the “National Bank of New Zealand”.
Peters said four Australian-owned banks control about 85% of New Zealand’s banking system and generate billions of dollars in profits that flow across the Tasman.
“They lend our deposits back to us at margins that are materially higher than those earned by their parent groups in Australia,” Peters said.
Competition debate returns
The proposal follows years of scrutiny over competition in New Zealand banking, including multiple government reviews and the Commerce Commission’s 2024 personal banking market study.
Peters cited the commission’s findings, saying the market lacked sustained pricing pressure, realistic large-scale new entrants and domestic ownership accountability.
Industry commentaries said the proposal had reopened debate around banking market concentration after several inquiries into competition. The group pointed to the Commerce Commission’s description of New Zealand banking as a “stable oligopoly” with sustained profitability and limited innovation.
New Zealand does not currently have a licensed internet-only challenger bank, contrasting the market with Nordic countries such as Denmark, where regulators supported digital banking entrants and open banking frameworks.
The discussion also returns attention to the scale of Kiwibank within the mortgage market. Peters said Kiwibank currently holds “just under 8% of the mortgage market”.
“Kiwibank was created in 2002 precisely to provide a domestic challenger. But after two decades it remains a marginal player,” Peters said.
Analysts and market commentators have previously argued Kiwibank’s growth has been constrained by capital availability.
Acquisition cost questioned
While Peters described the proposal as an investment rather than a cost, estimates over the acquisition price vary widely.
Speaking to local media, Peters suggested BNZ could potentially be acquired for “something above $7.5 billion”.
That estimate has been challenged by banking and finance commentators. Massey Business School professor Claire Matthews told local media BNZ’s book value was about NZ$13.7 billion and said a negotiated sale would likely require a premium above book value.
Matthews also said any acquisition would require either a willing seller or direct government intervention. She said a negotiated transaction would depend on NAB agreeing to sell the business.
Finance Minister Nicola Willis described the proposal as “extremely reckless”, saying substantial borrowing or tax increases would be required to finance the purchase.
Former finance minister Ruth Richardson also criticised the proposal, referencing earlier Crown intervention in BNZ before the bank’s sale to NAB in 1992.
Banking history revisited
BNZ has twice required major government support during banking crises in New Zealand history, according to a Reserve Bank of New Zealand historical review.
The Reserve Bank paper said the first intervention occurred in the 1890s following a rural land boom and banking crisis, while the second followed financial deregulation and a commercial property collapse in the late 1980s.
The paper noted the government recapitalised BNZ in 1989 and again in 1990 before the bank was sold to NAB in 1992 for NZ$1.48 billion.
Reserve Bank records also showed BNZ announced a NZ$648 million loss in 1989, prompting a recapitalisation backed by the government and private investors.
Peters said the original sale of BNZ removed a domestically owned banking competitor from the market.
“When National sold BNZ to NAB in November 1992, it then had six of every 10 New Zealand banking customers,” he said.
Peters said the proposed acquisition would not be funded through the government’s operating budget.
Instead, he outlined what he described as “a blended funding stack”, including a New Zealand Sovereign Banking Bond marketed to retail and KiwiSaver investors, long-dated Crown debt, investment from the NZ Future Fund and ACC on commercial terms, and Kiwibank’s existing capital base.
According to Peters, BNZ generates more than NZ$1.5 billion in annual cash earnings.
“The buy-back is self-financing in expectation. The fiscal impact is a one-off balance-sheet expansion, not an ongoing cost. This is not nationalisation – this is taking back our country,” Peters said.
