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$40 Million Investment Continues Kiwibank’s Growth

$40 Million Investment To Continue Kiwibank’s Strong Growth

The future for Kiwibank is for a much larger bank providing higher shareholder value than envisioned in the original business case, New Zealand Post Chief Executive John Allen said today.

“Kiwibank’s strong growth to date is ahead of even our most optimistic projections in the original business case. In just 16 months of trading Kiwibank has acquired 150,000 customers against its initial target of 165,000 over three years. Home loans are now over $500 million, well ahead of target, and retail deposits stand at over $450 million,” Mr Allen said.

"Kiwibank’s remarkable progress demonstrates that the gap in the market for a low cost, nationwide New Zealand-owned bank supported by the New Zealand Post brand and retail network is not only very real, it is significantly larger than we first anticipated.

“Banks need capital to grow. At the time of the Government’s original investment to fund the start-up of Kiwibank, we acknowledged that further capital would be required if it exceeded expectations.

"To enable continued strong growth of Kiwibank while meeting Reserve Bank capital adequacy requirements, New Zealand Post will invest an additional $40 million equity in two stages: $22 million by 30 September 2003 and $18 million by 30 September 2004.

“Kiwibank remains New Zealand Post’s most significant strategic investment. Our business plans anticipate the bank will come into profit in 2004/05 and will return profits ahead of those of our existing businesses within the next ten years.

“Kiwibank’s assets will be significantly larger over ten years than the $2.7 billion in the original business case, with a Net Present Value at least two to three times the $75 million NPV originally planned.”

Mr Allen said New Zealand Post was performing well and had a strong balance sheet.

“The underlying strength of New Zealand Post gives us the means to fund the additional investment in Kiwibank, while continuing to invest in the infrastructure of our other businesses and maintaining our existing AA- Standard & Poor’s credit rating.

“New Zealand Post expects to report a year-end profit ahead of last year’s $21.9 million and to return a healthy dividend to the Shareholder.”

The decision to invest further capital in Kiwibank was made by the New Zealand Post Board which considered a business case supporting the investment at its June meeting.

KEY FACTS:

The Government, as New Zealand Post’s shareholder, granted approval for the establishment of Kiwibank in February 2001.

Kiwibank was established with $80 million consisting of:

$72.2 million capital injection from the Government; $6 million in deferred dividends; and the remainder from New Zealand Post.

The first Kiwibank branch opened in February 2002 in Palmerston North.

The nationwide branch roll-out began in March 2002.

There are now 287 Kiwibank branches open.

Kiwibank continues to grow at 400 customers a day.

Kiwibank launched a credit card in May 2003, with the most competitive interest rate of any of the major trading banks.

Kiwibank is now signing as many home loans a month as the major trading banks.

In its first 16 months trading, Kiwibank acquired 150,000 customers, against a three-year target of 165,000 customers.

Home loans are now over $500 million, well ahead of target, and retail deposits stand at over $450 million.

Kiwibank is expected to come into profit in 2004/05.

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