The New Zealand Herald reported yesterday on speculation by unnamed sources in Auckland's finance sector that the National Australia Bank was considering spinning off its BNZ subsidiary.
There would be an initial public offering (IPO) on the New Zealand stock exchange for up to $5 billion.
The speculation has been rejected by the BNZ.
Craigs Investment Partners broker Peter McIntyre said the big four Australian banks remained "in capital raising mode" and wanted to increase their crucial tier 1 ratios (cash in hand against overall book value of loans) from 8% to 10%.
"This idea of an IPO is not new and I suspect is discussed annually in the [parent banks'] board rooms.
Profitability from the New Zealand banks is always poorer than the parents," Mr McIntyre said.
A major concern for any stand-alone new entrant in the New Zealand banking sector would be its access to international capital.
"Because of the credit crunch, the cost of capital would increase. A spun-off subsidiary would not have the same financial clout as the former parent," Mr McIntyre said.
In mid-August it was reported the combined profitability of the five major banks in New Zealand, including Kiwibank, was down 22% to $1.2 billion for the first half of 2009.
The combined full-year after-tax profits for 2008-09 for the Australian parent companies - Commonwealth Bank of Australia, ANZ, National Australia Bank and Westpac Banking Corp - was $A15.95 billion.
"The New Zealand operations of the big four banks have always been the poor cousins in the performance against the parents," Mr McIntyre said.
He said investors in any bank IPO would gain tax efficiencies from having just one set of tax imputation credits to deal with.
However, they would have to realise a New Zealand bank would be relying heavily on property.
"Because of the broader range of the Australian economy, their banks are more diversified; in business loans, property and handling large superannuation contributions," he said.
While Kiwibank is seen as successful, competitive and growing, it is at present entirely funded from its domestic retail base and does not yet have to borrow from overseas, he said.
"As with any new entrant, when Kiwibank wants growth it will have to move offshore for funding, which will be a lot more expensive," Mr McIntyre said.
Earlier this month, Craigs' research was picking the big four Australian banks were in line for after-tax profit increases of 15% to 30% during the next three years.
In 2011 alone, the group would increase profitability collectively by $A4.5 billion from provision utilisation; having funds available to cover bad loans of up to $A3 billion per bank.
