CEO says it is vital that the bank keeps growing
The owners of Kiwibank have signed off on a business plan which will see another year of above-market lending growth, despite the plan putting pressures on its available capital.
Kiwibank CEO Steve Jurkovich confirmed that the bank’s shareholders had approved the plan, though he acknowledged that they are aware of “some uncertainty” around what’s going to happen with the Reserve Bank’s capital proposals.
Kiwibank recently announced its financial results for the year ended 30 June 2019, where it recorded $2.1 billion in consumer lending growth - primarily in the mortgage space - along with a $2.1 billion rise in consumer deposits. Jurkovich says it is vital that Kiwibank continues to grow if it is to provide strong competition to the Australian-owned banks.
“If we want to make a difference and be a credible alternative, then we’ve got to keep growing,” he stated. “The whole industry knows it’s facing more demand for capital. A key question will be what instruments will be allowed.”
Kiwibank recently submitted on the Reserve Bank’s capital proposals, arguing in favour of allowing banks to use hybrid securities - a type of security with elements of both debt and equity - though Jurkovich admits that the Reserve Bank generally leans towards non-hybrid instruments.
“There does seem to be a preference for non-hybrid capital instruments,” Jurkovich said. “We believe there are a whole lot of reasons why that should be reconsidered.”
In its submission to the Reserve Bank, Kiwibank said that locally-owned banks would have a tough time issuing capital in line with the Reserve Bank’s proposals.
“New Zealand-owned banks would find it difficult to issue hybrid capital in the form proposed by the Reserve Bank,” the submission said.
“This is not the case for Australian-owned banks, who can utilise intra-group structures to issue eligible hybrid instruments. Kiwibank is therefore not supportive of the Reserve Bank’s objectives to increase capital where hybrid capital cannot be utilised to meet a similar proportion of Time 1 capital requirements as is currently allowed.”
