(Bloomberg) -- New Zealand lender Kiwibank could grow significantly and achieve the government’s ambitions of disrupting the banking market with NZ$500 million ($310 million) of new capital, Chief Executive Officer Steve Jurkovich said.
“In my mind NZ$500 million gives you a really good runway, allows you to have five years or so of really good growth,” he told Radio New Zealand Thursday in Wellington. “I really believe that we could double our size in five years with that sort of support.”
Government-owned Kiwibank is a relatively small player in a market dominated by four Australian-owned lenders who have been accused of operating as an oligopoly at the expense of customers. Finance Minister Nicola Willis has said she wants to explore options to raise new capital for Kiwibank from pension and investment funds and “everyday New Zealanders” so that it can take on its bigger rivals.
Jurkovich said a range of options exist for adding capital. These include an injection directly from the government, government-owned investors such as the New Zealand Superannuation Fund, or from outside investors who could be foreign.
He said the investment could be a staged process, with the possibility of the government selling down its stake in a mixed-ownership model as the second phase.
“Certainly a first step where someone joins the register and invests capital seems logical,” he said. “We’ve already seen from the minister that if there was to be a partial listing or something along those lines that the government would seek a mandate at an election and that seems logical as well.”
Foreign investors could potentially bring experience from other markets, or capability and technology insight that will be necessary as Kiwibank expands, he said.
If Kiwibank wants to grow its market share and provide genuine competition to the existing big four, then shareholders may have to take a longer-term view and accept lesser returns, Jurkovich said.
“You just need to agree that you don’t have to have market leading returns,” he said. “If you accept that you will take maybe 2% less return but back yourself to grow, and accept that while there are good growth opportunities you’re not going to ask for a dividend, then I think you can make real gains in market share.”
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