NZ Post

April 25th, 2012 at 2:34 pm by David Farrar

Vernon Small at Stuff reports:

has warned 2012 is crunch time, with the state-owned enterprise needing hundreds of millions of dollars in capital for subsidiary as well as flexibility to cut store numbers and halt post delivery on some days.

I’ve always wondered if Kiwibank actually delivers a return on capital greater than the cost of capital. What would be very interesting is an analysis of Kiwibank’s profits since inception, compared to the cost of capital (Treasury bond rates). Ideally such an analysis should exclude profits from the bill payment service they operate, as that was operated by NZ Post before Kiwibank was set up.

A key element would be a review of the Deed of Understanding (DOU), which stipulates NZ Post must maintain six-day-a-week delivery to most of the 1.9 million “delivery points” and operate a network of no less than 880 outlets.

I’m okay with fewer delivery days and fewer stores.

However, mail volumes are in free fall. It had forecast a drop of 5 per cent a year as the long-term trend to electronic mail bit. But in the six months to the end of December 2011 the decline had steepened to 7 per cent; the fastest ever, “which may be the new norm”, Cullen said. “The trend will not reverse and cannot be ignored.”

it is a dying business model.

But while a cut to delivery days is not imminent, the NZ Post board is keen for planning to start. A shift to deliveries every second day could be on the table over the next two to three years. Cullen said the DOU, as it stood, limited the changes that could be made.

Monday, Wednesday, Friday would be fine. If anything is needed the next day you tend to courier it.

So far the NZ Post parent has poured $550m into the bank, but as its own profitability declines that is seen as unsustainable.

Again, an analysis of returns vs cost of capital would be very interesting. If Kiwibank’s profits do not exceed the cost of capital, then the taxpayer us effectively subsidising Kiwibank customers.

“Our preference would be for the Crown to inject capital, providing we are able to satisfy them that they will get a long-term return on that capital, which we believe they will, and that it fits with the Government’s overall economic strategy.”

One source of new capital could be the proceeds from partial .

That would be ironic. I’d love to see Labour complain about that.

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83 Responses to “NZ Post”

  1. Adolf Fiinkensein (2,705 comments) says:

    At last someone is waking up to the total scam which is Kiwibank.

    “Ideally such an analysis should exclude profits from the bill payment service they operate, as that was operated by NZ Post before Kiwibank was set up.”

    Why don’t you ask for it David, under the OIA? The answer will provide good reason for this bogus institution to be sold off.

    Force Cullen to close the bloody thing or sell it. For God’s sake, don’t give them any money.

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  2. tvb (4,562 comments) says:

    This bank may not be profitable. That would be typical wouldn’t it. The people’s bank can only sustain its-self with large dollops of money from the deep pockets from the taxpayer. NZ Post is in long term decline. I almost never post letters nowadays. I use courier when I have to, but use fax/email whenever possible. I can do email from my smart-phone and emails are widely accepted now and far more convenient than typing out a letter, placing it an envelope, sending it off, waiting for a reply.

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  3. tom hunter (5,134 comments) says:

    it is a dying business model.

    As was also the case with government-owned business such as MOW, SSC, Railways and the rest in the 1970’s – and will also be the case with government-owned education, government-owned health care and government-owned pensions.

    But the failures of the latter are not yet as obvious as the Post Office. I suppose another decade of IT and bio-tech/medical-tech advances will be needed to change minds, and even then there will remain demands for endless amounts of extra money to be pumped in to keep the corpses moving forward.

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  4. WineOh (636 comments) says:

    I’d go for Tuesday Thursday Saturday for residential deliveries, Monday only delivers mail posted on the weekend anyway.
    The forever spiralling cost of postage has to be assisting this decline.

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  5. Johnboy (17,051 comments) says:

    I’m a bit more concerned that they own GMK.

    Just when they are showing a return.

    Come in Adolf? (I know you told me this before and I PooHooed you!!) :)

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  6. wrightingright (145 comments) says:

    I’m stunned the government is running a postal service, how is this a core role of the government??

    THIS should be one of the first assets it looks to sell off!!

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  7. stuarts-burgers (88 comments) says:

    Kiwibank was a vast vanity project for Jim Anderson, now he is gone maybe it is time Kiwibank went the same way.

    Instead of Jims Vanity Project the government could have looked at strengthening the over sight Credit Unions and Building Societies so that they could have played the role that is money losing operation was set up to do.

    We need need a business focus at the top of this organisation and not some academic, Lloyd Morrison would have been perfect in this role.

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  8. elscorcho (155 comments) says:

    <<<>>

    You are taking the piss right? Mail services are one of the original government services – governments have been running the mail / messenger services longer than they’ve run hospitals, schools etc.

    PS DPF – the point of Kiwibank is not to make a profit it’s to keep the money in NZ hands. Globalisation simply results, as history shows, in a decline in RELATIVE power even if in absolute terms we become “richer” (I use quote marks deliberately)

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  9. thor42 (971 comments) says:

    I’d say NZ Post is well and truly doomed.
    Surely almost *no-one* sends letters these days. I can’t remember the last time I sent a letter (apart from Christmas cards, and they’re not “letters”).
    It might be more efficient to contract out all mail services to a courier company, and they could then look at delivering mail only on alternate days (it’d be up to them, of course).
    The days of the government owning everything and running everything are gone, and thank goodness for that. Contracting-out is the way to go. Let the private sector take the risks and put in the dollars.

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  10. Daigotsu (472 comments) says:

    I think we need to ask the question that is on the minds of all right thinking kiwis

    What does noted economic analyst and intellectual Peter Freedman think? How can we possibly move on without hearing his contribution?

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  11. calendar girl (1,259 comments) says:

    It’s probably not only the bill-payment service that could artificially bolster Kiwibank’s reported performance. There are multiple opportunities to subsidise Kiwibank’s operating costs in stores that house both NZ Post and Kiwibank – staff costs, rent, maintenance, security and power to name the most obvious. All “commercially sensitive” stuff, no doubt.

    Of interest to Kiwibank watchers should be any sign of the people’s bank leading the way on “sub-prime” home mortgage lending. Its website is bullish enough to remind us of some of the banking excesses of the last destructive housing boom: “We’ll lend you up to 95%. At Kiwibank, you don’t have to have a 20% deposit to get into your first home – we’ll lend you up to 95%, just like we’ve always done.”

    Despite having no vested interest in the business of banking, I’ve always mistrusted state-owned Kiwibank’s entry into the established banking sector 10 years ago. There was at best flimsy justification – political rhetoric aside – for Government to set up Kiwibank in competition with mature private sector enterprises. It was a political stunt. If the bank now requires deep tranches of public capital to survive NZ Post’s slow death, it’s time to sell it as a going concern.

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  12. Johnboy (17,051 comments) says:

    Daigotsu!! :)

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  13. JC (951 comments) says:

    PS DPF – the point of Kiwibank is not to make a profit it’s to keep the money in NZ hands.

    It never left them..

    http://www.cis.org.au/media-information/opinion-pieces/article/3191-sending-profits-abroad-is-a-good-thing

    “Let’s say the Australian branch of a US company is very profitable. What happens to these profits?

    First, the profits might stay in Australia to expand the business of the US company, creating more jobs and extra economic activity here. Even ardent nationalists would find it hard to argue against this.

    If the parent company however decided to transfer the profits from its Australian branch to America, it would soon find out that Australian dollars are pretty useless outside Australia and change them into US dollars.

    But what happens to the Australian dollars? Since Australian dollars don’t buy anything abroad, they will return to Australia to buy Australian goods and services. Maybe a US company will use them to buy Australian minerals. Perhaps US tourists will come here to spend their holidays. Or the US might import Australian-made cars.

    In any case, Australian dollar profits transferred abroad return to Australia sooner rather than later because outside Australia, our dollars are just printed paper that will not get you a cup of coffee.”

    Our Paul Walker and Roger Kerr have written very similar pieces and the NZ Treasury often points out its a pointless argument when when we have something like 80% of GDP in debt, mostly to foreigners.

    Our own foreign direct investment in other countries is not huge ($20+ billion), but logically we should encourage other countries to confiscate it because we object on principle to filthy foreigners “taking” money out of the country.

    JC

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  14. slijmbal (1,236 comments) says:

    Kiwibank at first glance is actually bringing back close to a reasonable return on capital – crudely put 40 mill a year is a reasonable-ish return on 500 mill especially when starting up a very capital intensive business like a bank. They have been there or thereabouts and even beating it over the last couple of years. The Bill payment service they operate is probably not a great moneymaker as it is too labour intensive but as DPF says – nice to see that separated out to confirm it is not supporting the rest of the business.

    as much as I have an active dislike for what Labour did for 9 years this is one of the few things they did I agree with. The Ozzie banks in NZ run a lazy cartel in all but name, take substantially less business risks here in NZ than in OZ as they look down on NZ (they see NZ akin to Tasmania) except for the fact that they often make more money here than at home. NZ is a branch.

    on Post – the new model is likely to be something more like an electronic equivalent with much more capability driven by the fact that the vast bulk of post is business originated.

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  15. Adolf Fiinkensein (2,705 comments) says:

    slijmbal @ 4:33

    God, you talk some crap.

    “The Ozzie banks in NZ run a lazy cartel in all but name, take substantially less business risks here in NZ than in OZ as they look down on NZ (they see NZ akin to Tasmania) except for the fact that they often make more money here than at home. NZ is a branch.”

    Where’s your evidence? What lazy cartel? In what way do they take less risk?

    Ten years ago you would have seen these Aussie banks racing up the driveway of a deadbeat cocky who know less about managing cows than he did about managing money. Why? They were keen to lend more money to him.

    I suggest you go and have a chat to the people from Taranaki Savings Bank and Southland Building Society. These are private enterprise banks, operating in a competitive market, generating real profits for genuine shareholders.

    To my knowledge they both operate throughout NZ and provide a full range of services. If your ridiculous claptrap cartel conspiracy theory had any credibility, why, all the customers would by now have left ANZ, BNZ, Westpac and National.

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  16. berend (1,690 comments) says:

    DPF:NZ Post has warned 2012 is crunch time, with the state-owned enterprise needing hundreds of millions of dollars in capital for subsidiary Kiwibank as well as flexibility to cut store numbers and halt post delivery on some days.

    Well, what will John Key do? Probably the worst one can imagine, so selling parts of some state enterprises to prop up others, and overseas borrowing, some pressure on the Reserve Bank to keep interest rates low, and ramping up inflation.

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  17. Dave Mann (1,249 comments) says:

    it is a dying business model

    No…. its NOT a bloody BUSINESS. Its a public SERVICE! And as such, its a bloody sight more useful that a lot of the things that government spends our hard earned money on.

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  18. PaulL (5,453 comments) says:

    Dave Mann: it used to be a service when it was the only way remote people communicated with the world. Now, it is a business that is no longer a natural monopoly, and frankly doesn’t need to exist for many people. The world has changed. Buggy whips are no longer essential to an economy’s performance.

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  19. Leaping Jimmy (16,748 comments) says:

    There’s two questions here: viability of NZPost and KB. Since most seem to be talking about KB, here goes.

    ALL OF YOU ARE MISSING THE POINT.

    Kiwibank does not stand or fall on the viability of its business model. It stands or falls on whether people of NZ want to give away their last major trading bank overseas – and they don’t. At the mo.

    Simple as that.

    Adolf, I have been saying for years (look it up) that it’s curious the net profit of KB in it’s first few years was almost exactly what its bill payments revenue was. That’s irrelevant.

    Did you guys notice, any of you, that in the last day or so there was also a story on how the Aus owned banks had $3 billion profit last year? You think this doesn’t make any diff to the national psyche?

    One thing none of you seem to have grasped is the elementary fact that politics is not about whatever the reality is it’s about whatever the perception of the reality is and let me tell you boys and girls, that perception is, KB is a battler, it’s a stander upper for our human wights, it’s a big gween mean machine of stupendous pwopowtion against the evil international banksters.

    Any politician that suggests selling it, goes down, big time. This is why the Nats didn’t do it, in their current tranche. Fucking der. Haven’t any of you worked that out yet?

    Shame we didn’t get to talk about NZPost’s operating model because that was what the post was about, but never mind.

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  20. Johnboy (17,051 comments) says:

    Phew LJ! Why do we use Rabobank then?

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  21. slijmbal (1,236 comments) says:

    @adolf

    How do I form these opinions – well 1st I’ve worked in these banks and seen the numbers. I’ve also seen how they deal with their NZ branches.

    In terms of why isn’t everyone with TSB or similar – it’s heavily influenced by size – I looked at TSB for instance when I first came to NZ – not enough services – not enough outlets. If we add to this that once past a certain age of account holder account movement drops off precipitously – there is surprisingly little churn – it takes literally 10-20 years to create a bank as many of the account holders are acquired a long time before they are profitable. It is literally a long term business. This suggests you have little understanding of the banking business and how it works. TSB and KB need to become to a certain established size and then wait for a while for customer acquisition to kick in. It’s arguable TSB are still too small – KB can probably make it.

    In terms of evidence – look at the losses on bad debts this is a measure of risk taking – not that we want to have mega risk taking – look at the rate differentials between NZ and OZ – the difference in cost of funding vs what they lend it out at – all of these are worse in terms of the customer in NZ than in OZ. The Ozzie banks could lend out at same rate in NZ as they do in OZ in theory – doesn’t happen – historical returns of NZ subsidiaries vs the parents show better returns for the NZ branch etc etc

    It’s not a conspiracy – it’s a lazy cartel – please read properly what I write. Conspiracies are quite rare imo.

    BTW thanks for arguing the point rather than resorting to emotive terms like claptrap – shows you thought through the argument.

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  22. Leaping Jimmy (16,748 comments) says:

    Why do we use Rabobank then?

    (a) because we don’t know Rabobank is 100% owned by ASB which is 100% owned by CBA.
    (b) because at the mo we’re too fucking poor and we don’t have lots of gold and other things (at the mo). All we have is dirt and grass so all we can afford is a stupid little bank named after a flightless bird. Once the Great South Basin is “discovered” and we realise we need thousands of F-35’s to defend ourselves against the rapacious Aussie bankers, that’s when the clever strategy comes to pass. But it’s not quite there yet.

    It’s very annoying Johnboy.

    BTW, can I please apologise for being arrogant and overbearing in my previous. I realise it was rude, unnecessary and totally unacceptable, in every single way. I’ll never do it again.

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  23. berend (1,690 comments) says:

    Leaping Jimmy : that perception is, KB is a battler, it’s a stander upper for our human wights, it’s a big gween mean machine of stupendous pwopowtion against the evil international banksters.

    My perception is that this is a big sink hole, and a huge potential liability. It will be rescued obviously when it fails, somehow bankers have a hot line to politicians and do not appear to be subject to the rules of capitalism, i.e. the risk that you can fail.

    Other banks only take my money if I give it to them.

    My perception of KB is that it will take my money regardless, forced at gun point at the cost of feeding my children if necessary.

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  24. Michael (913 comments) says:

    I can’t see why we “need” Kiwibank. Where is the market failure?

    NZ Post is a dying company as it’s big hikes in stamp costs are showing. It’s biggest problem for mail delivery in New Zealand is our sparse population. Eventually it will be centralised mail collection points (like the PO Box model) for every suburb and couriers will take over delivery to door service – maybe 20 years from now.

    The Co-operative Bank is owned by everyone who has an account, as are credit unions. TSB owners are a community trust that distribute its profits to community groups. You can buy shares in all the Aussie Banks (many Kiwis have) or even buy the NZ arms back if you want – make a good offer.

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  25. krazykiwi (8,040 comments) says:

    == MEMO ==
    To:  Shanghai Pengxin
    From: NZ Government
    Subject: Sales
    ==============================
    We are having second thoughts about the farms.

    Sorry about that.

    Could we interest you in a bank instead?

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  26. swan (665 comments) says:

    “PS DPF – the point of Kiwibank is not to make a profit it’s to keep the money in NZ hands. ”

    If it doesnt make a profit, what money is it keeping in NZ’s hands? Your statement makes about as much sense as burning down a house that the bank is trying to repossess to “keep it in your hands”

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  27. burt (7,441 comments) says:

    swan

    You are right. Like all things socialist it exists to spend other peoples money. It’s absolutely not keeping money in NZ hands – it is taking money from NZ hands.

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  28. burt (7,441 comments) says:

    NZ Post has Cullen as chairman – who is really surprised that the business is rooted.

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  29. orewa1 (410 comments) says:

    Once a week will do me for mail deliveries. In fact I wouldn’t be too concerned if it stopped altogether.

    But Kiwibank should stay. I prefer to avoid the Australian based lot and keep the profits here in NZ.

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  30. davidp (3,585 comments) says:

    JC>Since Australian dollars don’t buy anything abroad, they will return to Australia to buy Australian goods and services.

    I had this exact same argument with a thick-as-shit Aussie some years ago. I pointed out that the Aussie dollars would eventually be used to purchase Aussie goods. He was worried that they wouldn’t be… that the foreigners would just hold on to them and that would be a bad thing. I replied that I’d be quite happy if foreigners sent me cars, electronic goods, and oil, and all they demanded in return were bits of printed paper that they’d keep indefinitely under a mattress. He still didn’t get it.

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  31. burt (7,441 comments) says:

    What would make a lot of sense for KiwiBank would be to completely cut the supply of tax payer capital and mandate that it raises it capital in the form of bank fees from it’s customers. Lets get honest and transparent about what this grand socialist folly is actually costing us.

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  32. burt (7,441 comments) says:

    orewa1

    I prefer to avoid the Australian based lot and keep the profits here in NZ.

    Right, so you would rather pay to have “NZ owned” on the advertising… Great… spend others peoples money… how very socialist of you.

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  33. iiq374 (167 comments) says:

    @slijmbal
    I looked at TSB for instance when I first came to NZ – not enough services – not enough outlets

    You obviously didn’t look very hard then did you – given that you can use every postshop to do your TSB banking since before KiwiBank existed; so that would be more outlets than KiwiBank…

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  34. iiq374 (167 comments) says:

    For all those that think KiwiBank is keeping the Aussie banks honest – please explain why it was Kiwibank that got slapped for overcharged break fees, while Aussie banks were all cleared?

    http://www.comcom.govt.nz/media-releases/detail/2010/mortgage-break-fees

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  35. orewa1 (410 comments) says:

    Nothing to do with the advertising. There is a balance to be struck between globalisation and independence – it is not an either/or argument – and New Zealand is dangerously close to crossing the line and surrendering any semblance of self sufficiency.

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  36. iiq374 (167 comments) says:

    Sam Knowles has frequently in his interviews stated as a “strength” of Kiwibank that over 80% of its revenue is sourced from non-banking activities (bill payments and TSB service payments). So once you strip it out it really gets quite sad;
    According to the ’10 accounts I think the bill payments were $47 mil – so the return on capital is still negative at this point…

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  37. trout (957 comments) says:

    Don’t want to prick the balloon but it should be noted that many. many Kiwi’s, NZ trusts, NZ pension funds (Kiwisaver) ,ACC etc. have shares in those dreadful Aussie banks. And after the GFC the top 6 Aussie banks were found to be in the top 10 safest Banks in the world. The NZ Govt. banks with Westpac.

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  38. iiq374 (167 comments) says:

    The most interesting thing that this article raises is the fact that if NZ Post revenues continue to drop at that predicted rate KiwiBank is stuffed as they watch their credit rating go into freefall.
    They have already had one downgrade to A- because of weakening NZPost – and the fact that KiwiBanks credit rating *is* NZ Posts credit rating. If it wasn’t they’d already be toast because they have the worst capital adequacy ratios of *every* registed NZ Bank. Even SBS and the Co-Operative bank have better comparative capital reserves but KiwiBank manages to hide behind the skirt tails of NZ Post and the Government.

    Of course we all know how well the last capita guarantee scheme worked out for the taxpayers…

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  39. slijmbal (1,236 comments) says:

    @@iiq374

    said
    @slijmbal
    I looked at TSB for instance when I first came to NZ – not enough services – not enough outlets

    You obviously didn’t look very hard then did you – given that you can use every postshop to do your TSB banking since before KiwiBank existed; so that would be more outlets than KiwiBank…

    when I arrived I went in to TSB and either they did not do that or did not tell me they did that – I believe the former – was a while ago – 20+ years

    they were also unable to get me a credit card and I had to pay a fee to take money out of the hole in the wall

    On a separate note I have made circa 60K through equity investment in Ozzie banks – combination of warrants and shares

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  40. Adolf Fiinkensein (2,705 comments) says:

    Leaping Jimmy @ 6:03

    Jimmy you should look before you do any more leaping.

    Rabobank is a 100% Dutch owned company, specialising worldwide in lending to the primary production sector and those engaged in its down line processing activities.

    It is ASB bank which is owned by CBA.

    “sigh”

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  41. iiq374 (167 comments) says:

    BTW all those here that think the Government owning a bank is a great idea – you all forgotten (or just never bothered to get educated enough to know) why BNZ got privatised?

    Ignoring the first bankruptcy and bailout in 1894 – the fact that it was that “Problems at theBNZ were kept from the public and opposition members of Parliament at least until theSunday after the election, when the RBNZ and Treasury told the just-elected National government of Jim Bolger that the BNZ was technically bankrupt”

    And that was after a further injection of NZ$640 million into the bank in order to maintain it as a going concern (add a big factor to turn 1990 dollars in 2012 dollars too people)…

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  42. iiq374 (167 comments) says:

    @slijmbal
    when I arrived I went in to TSB and either they did not do that or did not tell me they did that – I believe the former – was a while ago – 20+ years

    they were also unable to get me a credit card and I had to pay a fee to take money out of the hole in the wall

    It’s a shame when peoples memories fade enough that they spout c**p as truth.
    Correct they did not offer Credit cards that long ago – they did by the point in time KiwiBank was established
    They did not start charging fees for ATM withdrawals until 5 years ago – way after every other bank
    Believe what you like – been banking with them via the NZ Post network for longer than that – so again wrong.

    Either way the correct point of reference for this discussion would be 2002 or 10 years ago; cos KiwiBank didn’t offer too much 20 years ago by my recollection

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  43. iiq374 (167 comments) says:

    What is the main issue with TSB for most people? They do not have and have never offered mortgages at greater than 80% loan to equity. Therein is the main reason why we ended up with Jim’s edifice to stupidity – just like the US political pressures that led to the GFC situation, the left here had to pander to those darlings that ‘couldnt afford a house’.

    There is literally nothing else in the original Kiwibank mandate that wasn’t already done by TSB.

    And now that we have even more fully NZ owned Registered Banks it is a huge white elephant

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  44. burt (7,441 comments) says:

    iiq374

    You have been away for a while, good to see you back.

    The only reason we have KiwiBank is because Jolly Jim’s jobs machine got shut down and being a socialist he needed to find another way to waste massive amounts of other peoples money to bolster his popularity.

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  45. iiq374 (167 comments) says:

    Thanks Burt – been lurking via RSS feeds; but KiwiBank stupidity always guaranteed to get me commenting :D

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  46. PaulL (5,453 comments) says:

    Part of the reason we have Kiwibank is that the major banks didn’t fight it at all. Because all their least profitable customers went to Kiwibank, there to be subsidised by the long suffering taxpayer. And the major banks got to keep all the profitable people, the ones who have real money, actual mortgages, and who get anything other than the headline rates that the banks advertise. They’re laughing all the way to the….bank.

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  47. slijmbal (1,236 comments) says:

    iiq374 said

    @slijmbal
    when I arrived I went in to TSB and either they did not do that or did not tell me they did that – I believe the former – was a while ago – 20+ years

    they were also unable to get me a credit card and I had to pay a fee to take money out of the hole in the wall

    It’s a shame when peoples memories fade enough that they spout c**p as truth.
    Correct they did not offer Credit cards that long ago – they did by the point in time KiwiBank was established
    They did not start charging fees for ATM withdrawals until 5 years ago – way after every other bank
    Believe what you like – been banking with them via the NZ Post network for longer than that – so again wrong.

    Either way the correct point of reference for this discussion would be 2002 or 10 years ago; cos KiwiBank didn’t offer too much 20 years ago by my recollection”

    I was making a point about smaller banks not offering the full range of services based on an example

    I have every 3-4 years checked out the banking environment and found TSB still suffered from some issues relating to size – the NZPost queues are even worse than the normal bank queues, for instance.

    KB is looking close to being a real bank. Maybe I need to check TSB again

    On a separate note – I am right of centre but find many of the commentators here as big a bunch of w*****rs as the standard when they see a comment against the idealistic approach.

    Idealism is stupid as it’s a pre made up opinion

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  48. burt (7,441 comments) says:

    iiq374

    For all those that think KiwiBank is keeping the Aussie banks honest – please explain why it was Kiwibank that got slapped for overcharged break fees

    This simply can’t be true. KiwiBank was sold to us as a no fees bank for the people. Surely it’s not charging bank fees ???? ;-)

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  49. iiq374 (167 comments) says:

    @slijmbal
    I have every 3-4 years checked out the banking environment and found TSB still suffered from some issues relating to size – the NZPost queues are even worse than the normal bank queues, for instance.

    And you are avoiding those same queues at KiwiBank how? Now I am confused!
    By the way – I don’t bank in branches so either way it’s not an issue to me; but it does p*ss me off when I go to post something having to queue behind a bunch of people that *do* have the choice to pay bills / bank another way!!

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  50. Pauleastbay (5,035 comments) says:

    Orewa and others

    TSB must be doing something right , they have the highest NPS score for any business on New Zealand which is staggering considering they are a bank

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  51. krazykiwi (8,040 comments) says:

    PaulL 8:22 – You have distilled the issue very precisely. Anderson’s vanity provided an outlet for the marginalized’s anguish. And everyone was happy.

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  52. krazykiwi (8,040 comments) says:

    Pauleastbay – re NPS. Really? That’s amazing. I work in an industry that’s NPS obsessed. NPS is the best prodictive indicator of furture profitiability in an established industry. I want shares in TSB!

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  53. Jeff83 (747 comments) says:

    An Economic analysis of Kiwibank would be a good thing, I think it would do pretty well to be honest.

    Also its purpose was to put pressure on the Oligopoly which is the NZ banking sector dominated by a few Australian Banks. I was under the impression from observation that its introduction did bring about more competitive interest rates. However again this is something that should be researched as it is easily quantifiable (average rates paid / received vs. OBR -i.e. the spread before and after its introduction. You would need to take into account the credit crisis however in 2008 and 2011 numbers.

    If there is economic benefit, then the additional capital can be raised. If not, then no. Easy. If I was a betting man I would put money on the benefit exceeding the cost, but I would prefer a proper non stitched up economic analysis to my gut.

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  54. krazykiwi (8,040 comments) says:

    Also [kiwibank’s] purpose was to put pressure on the Oligopoly which is the NZ banking sector dominated by a few Australian Banks. 

    I thought kiwibank’s purpose was to provide a service to customers, at a cost they were prepared to pay. Just like most businesses. Except that other businesses can’t go to their founder with xenophobic explanations as to why they need for further capital.

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  55. adam2314 (361 comments) says:

    Have not used the Postal service for years..

    Not because of price.. Not because of lack of service..

    There are more convenient ways of achieving the same result..

    If a more convenient way comes up than what I am using now.. I will change at the drop of a hat..

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  56. slijmbal (1,236 comments) says:

    @jeff and krazykiwi

    Part of KBs raison d’etre was implicitly an alternative to the Ozzie banks and thus competition for the current market domination by these banks.

    Based on interviews I have had with some senior bank executives they were severely pissed at the creation of KB as they saw it directly affecting their profits. As such it is arguable that this market intervention that should not occur. This would only be justifiable if one believes that the banks operate in in oligarchy where competition is reduced. Based on their significantly different behaviour in the NZ and Ozzie markets this is exceedingly indicative of lack of competition here and this needs to be addressed. Let’s not pretend markets always work – sometimes they don’t

    The question is whether the cost to create KB has been worth the additional savings and would only be justifiable if Kb saves more than it costs.

    Frankly, appropriate regulation would have done the same job but I doubt it would have been politically and legally possible.

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  57. krazykiwi (8,040 comments) says:

    slijmbal – I disagree. KB’s raison d’etre was was to provide a platform for political significance for Anderson. Nothing more, nothing less.

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  58. adam2314 (361 comments) says:

    As for KiwiBank..

    The only way to beat the system that is now paying massive ” Bonuses “.. whilst having the world in a nose dive ..

    Take your money out and put it into the Credit Union Banks..

    Easy peasy.. Withdraw your support..

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  59. burt (7,441 comments) says:

    adam2314

    That’s about the size of it. You really have two options. Make the tax you pay work for you by using KiwiBank or make the bank a failure so it stops taking your tax money from you.

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  60. adam2314 (361 comments) says:

    No.. Take YOUR money away from the current system..

    Do not give them Term deposits.. ” 3%.. – 5%.. Give them nothing..

    See how long it takes for them to offer a higher % … Because they NEED your money..

    Then still ghive them NOTHING..

    Ok it may cost you a small amount that they offer you in interest Minus tax..

    The banking system would be sweating ..

    20 % for a credit card loan ??.. They are thieves taking advantage of the ill informed..

    No roll overs of term deposits for a month would have them on their knees ..

    Two months would break them…

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  61. burt (7,441 comments) says:

    adam2314

    For that to work ‘everyone’ ( well – most people ) would need to do that. Yes if that happened the banking system would shit itself.

    But everyone has a price and you might resist 10% interest on deposits – but slowly and surely people would return once the interest rates started to climb.

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  62. adam2314 (361 comments) says:

    Slowly and surely.. Which is time.. Banks do not have time.. They are really all in Deep Dodoo’s..

    And I mean ALL..

    Time to give those Banksters a fright..

    Just change to Credit union for all banking that you can..

    Do not give them any deposits.. They will be depositing in a very short time.. :-)))

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  63. adam2314 (361 comments) says:

    Zerohedge.. or.. The slog.. two very up to the minute sites.. read them and tremble …

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  64. JeffW (327 comments) says:

    Another source of capital is Jim Anderton’s super scheme

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  65. Keeping Stock (9,390 comments) says:

    iiq; you’re right, and you’re wrong. It was after Bolger took the reins in 1990 that he got the news that the BNZ was headed for collapse. The incoming government could not let that happen, and the rest is history.

    But once again, an outgoing Labour government left a trap for its successor; first the BNZ (kept secret), then in 2008 the Decade of Deficits and Cullen proudly declaring that the cupboard was bare for the incoming government. On both occasions Labour knew it was on the way out, so it saboutaged its successor.

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  66. Put it away (2,872 comments) says:

    Snail mail is dead, except for couriering online purchases.

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  67. iiq374 (167 comments) says:

    @krazykiwi
    Regarding TSB and NPS:
    Yes, really. Of course doesn’t help that the pandering media tends to refer to the “major banks + kiwibank” in their stories rather than including Registered Banks (which isn’t exactly that much harder).

    Also you aren’t going to be able to buy shares – wholly owned by TSB Community Trust which is why around 20% of the profits get put into community projects each year (like the art gallery in Monte Cecila park)

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  68. iiq374 (167 comments) says:

    @Keeping Stock
    Sorry – I thought that was what I said?

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  69. mister nui (1,030 comments) says:

    What is the main issue with TSB for most people?

    I changed banks recently and wanted to move to TSB, but unfortunately they don’t offer Foreign Currency Accounts – so I had to stick with one of the Ozzy banks.

    This would be a big limiting factor in TSB not getting new business, because most businesses that do a meaningful amount of overseas trade will require FCAs.

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  70. slijmbal (1,236 comments) says:

    Look how much of one’s real mail is business originated and predominantly invoice/bill/statement related at the retail level excluding advertising bumpf. Expect the new business model to replace this with electronic mail box equivalents it is already occurring in some other countries. They get various names like mail aggregators. Early days yet but if that kicks in in any volumes then expect the current drop in snail mail to accelerate.

    Also expect the Print and Mail houses to go bust.

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  71. iiq374 (167 comments) says:

    @mister nui –
    Are you sure?

    http://www.tsb.co.nz/Services/Foreign.aspx
    http://www.tsb.co.nz/PageFlipper/Books/Foreign_Currency_Accounts/Foreign_Currency_Accounts.pdf

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  72. iiq374 (167 comments) says:

    @slijmbal
    One of the funny things there is that Converga / Datam is a wholly owned subsidiary of NZPost.
    Guess who the main NZ provider of paperless invoicing and accounts payable is…

    Converga recently had to reverse its policy of making all its suppliers use paperless invoicing though….

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  73. mister nui (1,030 comments) says:

    @mister nui – Are you sure?

    Sorry, my mistake. I just checked the email response I got back from them.

    The problem is they don’t have the functionality to do online International foreign currency transfers. So if I want to pay someone in the US in USD when I’m sitting on an oil rig offshore West Africa, I can’t – It has to be a manual intervention by the bank, and based on the problems I had with the A grade muppets at Westpac missing ATO tax payments, because they didn’t make the required transactions on the required dates, I wasn’t changing banks to have the same problem.

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  74. virtualmark (1,306 comments) says:

    Look, Cullen is just setting out some simple practicalities.

    NZ Post has three major operational areas … postal services, courier, and Kiwibank.

    Postal services is a sunset business. We all know that. But it still has customers who rely on it, both customers who send and customers who receive. You can’t just switch the whole thing off tomorrow just because it’s in long-term decline. And there’s still good money to be made from sunset businesses … as long as you can trim your cost structure as fast as the revenue structure is declining. And that’s what Cullen is pointing out … Post’s commitments to the Government stop them from trimming costs and so either (a) the Government has to re-structure the commitments to allow costs to be cut or (b) the Government has to accept there will be ongoing losses.

    The courier business is successful, and has a real future.

    With Kiwibank … arguably it’s too early to say whether its going to be a success or not. My own view is that it hasn’t yet reached critical mass, and it probably won’t for at least another 10 years. The startup costs of a bank are enormous, so if the Government wants to get it to a viable size the Government will need to inject more capital, either by allowing Post to do that instead of paying a dividend or by putting money in directly. Added to that the increased capital commitments from Basel III mean the shareholder will need to inject more capital anyway. Just as the shareholders of the ANZ, Westpac, NAB and CBA are going to have to inject more capital into their banks too.

    Frankly, what Cullen wrote is all very logical and sensible.

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  75. dime (10,224 comments) says:

    Personally I’d never use kiwi bank. Who the hell wants to do their banking at a paper plus store or something equivalent

    The govt is screwed. The mob will go apeshit if they try to sell part of it.. Or all of it.

    If its close to turning a profit, a real profit, keep it. It seems to make people happy.

    And ya get to use those condescending ATMs. “get cash”. They even dispense $10 notes for all the pieces of shit.

    Off point – its sad how hardly any ATMs give out $50 notes. I guess it’s an indicator of how poor NZ actually is.

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  76. Paulus (2,715 comments) says:

    Is Kiwi Bank actually solvent in its own right – no.
    It has entirely the wrong business mix – lending to people who could not get a commercial loan elsewhere.
    Smacks of Sub Prime Mortgage which was largely responsible for the US cradit crash.
    But at least it is not compulsory for KB to give morgtages to those who in no way could pay, as was in US.
    It is allowed to be solvent only by being a subsidiary of NZ Post, which in turn is guaranteed by the Government (ie Taxpayer).

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  77. virtualmark (1,306 comments) says:

    Paulus, set aside Kiwibank being owned by the government, and just look at the generic challenges facing anyone trying to set up a new bank.

    Firstly, you have to build out the physical infrastructure … core banking system, branch network, website, all the staff. That requires a lot of capital.

    Secondly, you have to inject the capital to meet your capital adequacy requirements. That’s a lot more capital.

    Thirdly, you have to win customers. Customer acquisition costs are pretty significant. You have to invest heavily in advertising. You may have to discount to win customers. That’s a lot more capital.

    Fourthly, many of your customers will want to loan money from you. But in the early days you haven’t yet built up your depositer base. So you have to borrow a lot of money on wholesale markets to provide the money you lend.

    It takes a long time before the business grows to the point where it can support those operating costs, and provide a return on capital. These are not web startups that you can let run for 12 months and then pull the pin if its not profitable. Building a successful bank is a 20 year process.

    Too many people here seem to have an unrealistic expectation of how quickly a bank will achieve big profits.

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  78. iiq374 (167 comments) says:

    @Virtualmark – actually I’m not sure that many of us here actually do have an unrealistic expectation;
    However that’s exactly why most of us are saying that it’s stupid for the taxpayer to be fronting it, especially when there are 4 other NZ Registered Banks doing it on their own which “KiwiBank” just serves to undermine.

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  79. virtualmark (1,306 comments) says:

    iiq374,

    I’m kind of with you, in that I never thought we needed Kiwibank. Yes, the big 4 banks had been making large profits. But they’re large companies, with big amounts of capital invested, and so they need to make large profits or else their shareholders should look at shutting them down.

    But, what’s done is done and we now, collectively, own a bank. We can either close it down, sell it, or stick with it.

    Personally I think Kiwibank should be spun out of NZ Post and then floated on to the NZX in a mixed-ownership model. Use the IPO to raise the new equity it needs to fuel its growth.

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  80. iiq374 (167 comments) says:

    @virtualmark –
    From where we are I’d almost agree with you: Personally I think Kiwibank should be spun out of NZ Post and then floated on to the NZX. However politically the mixed ownership model may be required for this to even have a remote chance of happening!

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  81. Steve Wrathall (287 comments) says:

    What’s a “post office”?

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  82. All_on_Red (1,753 comments) says:

    We are not alone in having this problem

    “With big postal cuts looming, the Senate is deciding whether to stabilize the ailing U.S. Postal Service with a short-term cash infusion while delaying most decisions on closing post offices and ending Saturday mail delivery by requiring further review.

    The mail agency, teetering on the brink of bankruptcy, says it needs to begin closing thousands of low-revenue post offices and mail processing centers this year as part of a billion-dollar cost-cutting effort to become profitable again by 2015. But local communities are fretting about the economic impact and tens of thousands of layoffs, drawing the concerns of lawmakers in an election year”

    http://www.foxnews.com/us/2012/04/17/senate-seeks-ways-to-save-ailing-us-postal-service/

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  83. virtualmark (1,306 comments) says:

    The situation with NZ Post is a perfect example of why Government is a terrible owner of commercial enterprises.

    A rational capitalist owner of NZ Post would have already shut down a big part of the branch network, and moved to every-second-day deliveries. With those changes the postal system might move back into operating profitably, albeit still in long-term decline.

    But Government doesn’t want to make those changes, because of the political costs. Government would rather suffer some financial losses than face protests and negative media attention.

    This is exactly what happened in the mid-1980s with Government-owned companies like Telecom. The company was over-staffed, had terrible customer service etc. But Government wouldn’t/couldn’t make the drastic changes required to turn that around. Government just couldn’t be seen to be the owner who cut the workforce from 27,000 to 5,000.

    So they sold it. And the new owners swung the axe and unlocked a LOT of financial value.

    And then the grumblers complained that the Government sold it too cheap. No, they didn’t. They sold a fat lazy cow of a company that they were incapable of turning around.

    But Government will consistently favour keeping fat lazy cows around, rather than whipping them into shape.

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