Sunday, August 10, 2008

KiwiBank - the safest haven. Tui Ad in the making

I have been intrigued by the rumors being floated recently - mainly seeming to originate from the political left about how Kiwibank is the one safe bank at the moment; especially in this time of sub prime debt.

However putting aside the point that the only registered bank to have previously become bankrupt in New Zealand was the BNZ while it was a Labour Government controlled SOE, I decided to do a bit more digging.

And find that according to the Reserve Banks own data Kiwibank actually has the worst without exception level of capital reserves. Kiwibank only hold 7.2% of Tier 1 assets and 9.5% of Tier 2; in comparison to 14.94% and 15.58% for RaboBank and a huge 17.66% for both Tier 1 and 2 held by the TSB.

Going even further Kiwibank doesn't even have a provision for impaired assets - so despite the current marketing downturn they are providing for no losses due to -ve equity. This is comparison to the smallest provision by any other bank being the ASB at over 3% of profit; with most banks allowing for between 5 - 8%. Personally the bank I would see as most susceptible to housing loan shocks would be the one making absolutely no allowance nor financial planning for it whatsoever...

Also of curiosity has to be the 5.3% of Kiwibanks credit exposure that is across only 13 people?

So really one has to question how the least profitable, lowest profit on assets, lowest capital reserves, no provisions bank is the safe one? But when it comes to political left and KiwiBank it seems logic isn't really necessary - hence why we have the white elephant in the first place.

No comments: