A study of the New Zealand banking system by the large accounting firm, KPMG, has shown that Kiwibank, the new government-owned bank in New Zealand, had attracted customers with higher incomes than anticipated, and may therefore have higher profitability than previously forecast.Kiwibank began with $A63 million in startup capital from the NZ Government, and is owned by and operated from NZ Post premises.
The new bank has around 150 new branches, and expects to have 250 by the end of July.
The rollout of new branches, which was due to have been completed by mid-year, has been delayed by NZ Post franchisees, who objected to the low ($NZ0.53) transaction fees initially offered.
ViabilityKiwibank Chief executive, Sam Knowles, said the bank was attracting 500 new customers a day. However, it will eventually need to have over 100,000 customers to be viable.
A powerful attraction of the new bank is patriotism.
With all of the country's other main banks now foreign-owned, New Zealanders have rallied to the bank. One new customer said, "Kiwibank is therefore Kiwis, and the other thing is all profits remain in the country."
While former National Party leader, Jim Bolger, is Kiwibank chairman, the bank has been subject to a constant campaign by the free market party, Act, which has denounced the use of public funds to establish the bank, and its use of New Zealand Post premises.
Kiwibank will be the David in an industry of Goliaths. WestpacTrust, NZ's biggest bank is Australian-owned, has $37 billion in total assets, and 1.3 million customers.
Dr Mark Colgate, senior marketing lecturer at the University of Auckland Business School, has pointed out that Kiwibank needs three types of customers:
- people with mortgages,
- those with credit cards, and
- those whose main accounts are held with the bank.
The KPMG study suggests that it is securing a significant number of these people.
The KPMG study predicts that Kiwibank would make particular inroads into the ANZ Bank, as its customer profile is similar to that of the ANZ Bank, and ANZ had lost ground to other banks over the past year due to lack of customer satisfaction.
Other factors assisting the new bank include Kiwibank's decision not to charge application fees for home loans and providing free transactional banking to customers with a home loan.
Other banks have lowered some fees since Kiwibank's discount rates were announced early this year.
According to the Consumers' Institute of New Zealand, Kiwibank's introductory floating, one-year, three-year and five-year fixed home loan rates are about 0.5 per cent lower than those of the major banks, and it also offers loans up to 95 per cent of valuation, in contrast to 90 per cent offered by most other banks.
Most observers consider that although the new bank has made a promising start, it is still too early to pronounce it a success.
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