The Nation: Kiwibank CEO Steve Jurkovich

On Newshub Nation: Simon Shepherd interviews new Kiwibank CEO Steve Jurkovich

• New Kiwibank CEO Steve Jurkovich says Kiwibank's past performance issues - including a $100m computer blowout and a disagreement with the Reserve Bank over the quality of its capital - have left Kiwibank "bruised" but ready to "do better".
• He says Kiwibank will likely have less branches as it focuses on an increasingly digital future.
• Mr Yurkovich says because the bank is owned by the taxpayer "people’s expectations of Kiwibank are higher".
• Those expectations include "leading from the front" when it comes to Kiwibuild. "I wouldn’t bet against the fact that they will be expecting us to help as many first-home buyers as we can. And we’re up for that."

Simon Shepherd: Welcome back. How much do we trust our banks? The Reserve Bank is conducting an inquiry into the conduct and culture of banks here, following the Australian Royal Commission into misconduct. New Zealand is dominated by the same big four Aussie banks. Our fifth largest — Kiwibank — is owned by you, the taxpayer. It has a new CEO, Steve Jurkovich, who joins me now. Thank you for coming in, and congratulations on your appointment. Why would you, after having worked at one of the big four — ASB — want to take on the job at Kiwibank?
Steve Jurkovich: I think, at the end of the day, it’s about progress. So each of us want to be growing and got some ambitions about what we want to achieve. And so for me, I’d sort of got to a career stage where I was really thinking about what’s next. And then the opportunity came along, and the more I spoke to the shareholders, the more I spoke to the owners about what they were trying to achieve, the more excited I got. And, you know, there is one bank that’s got the scale, that’s New Zealand owned, that can make a difference. So that was an opportunity.
Well, let’s talk about that scale. I mean, the loan book is a quarter of the size of, say, ASB — it’s only got 8 per cent of the market share; it’s tiny, compared to what you’ve been dealing with.
Yeah, well, it’s the biggest of the New Zealand banks, for sure, so that’s probably the first point. The second is, actually, from nothing to 17 years later, being where they are — it’s been an amazing achievement. And there’s a million customers that have said, ‘Look, actually, we trust you and we’ll go with you.’
Okay, Kiwibank’s appointed not only yourself, who’s got experience in the big four, but also a new treasurer and a new chief economist as well. Is this part of a new strategy by Kiwibank to be more aggressive?
Oh, I think, for us, it’s about making sure we’ve got the skills and attributes that are fit for the time. I think, in terms of the treasurer, it does actually show our ambition about what we want to be and who we want to be in the future, so he’s got a lot of experience. I think, in terms of the economist, we wanted to find someone who’s got a uniquely Kiwibank voice, and I think we’ve got that in him.
When you were appointed, the board chair said, ‘customers’ clear preference is for digital interaction with us, and this is guiding the changes we are making’. What are those changes that you are going to be making?
Well, I think, for us, you know, if you think about some of the big things that are changing for banking — one, it’s going to be more open than closed, and so being an open bank, there’s a regulatory frame to that, but there’s also just a much bigger concept of every day, every part of our life, we want to interact with the different providers. And so, you know, if you look at a world that’s much more digital, much more connected, a lot of customers are saying, ‘Well, actually, just make it easier, make it seamless, make it an irresistible experience’, but there’s still a truckload of customers that want to come in and see someone or have someone come and see them.
Well, let’s talk about that, because when it was founded, it was committed to being a people-focused bank. And so does that mean keeping the branches? Keeping the presence on the ground?
I think we’ll always have a really strong footprint. Whether or not that’s the same number of footprints and the same size, I think, realistically, we’ll have to keep looking and staring into that. Banking globally, there are just less people coming in. You know, the growth of digital transactions is exponential, so footprint — absolutely, yes—
So how many branches do you have at the moment?
So there’s about 200 and—well, nearly 300 spots you can interact with Kiwibank — a lot of them between franchise and New Zealand Post.
And how many of those are you going to keep?
Well, I don’t yet. It’s a week in, so, you know, the number is probably less, but not necessarily around that they’ll look the same as they do now.
Oh, okay. Because you’re going to get some kickback from that — I mean, there’s a petition of 4000 in Dunedin when you closed— were aiming to close four New Zealand Post branches there.
Yeah.
So are you prepared for that sort of kickback?
Well, I think that sort of talks to what people feel about Kiwibank, which is they own it. And that’s one of the big attractions about joining. Does that mean that they hold us to a higher standard about where they want us in the community? Yeah, probably. For me, that’s actually a huge attraction for the role, which is, I think, people’s expectations of Kiwibank are higher. They do own us. You know, we are New Zealand’s footprint in the banking industry in a lot of ways, so, you know, we need to make sure that communities aren’t left behind. And that’s one of the great things about the shareholders with New Zealand Super, ACC and Post — you know, that community focus is right at the heart of who we are.
Okay. Let’s talk about your shareholders, though. Do they have enough capital to guarantee Kiwibank’s growth? Because there’s always been a struggle with capital.
Yeah, I think when you look at New Zealand Super and ACC in particular around why they wanted to join the group — they have a long-term view, and that’s hugely attractive, for the senior leadership team and the people that are part of the Kiwibank team, is we’ve got owners that are aligned to the long-term. They’re thinking about what’s their commitment for the next 10, 20, 30, 50 years. And to be blunt, that’s a little different to—
Well, it is. So do you have a vision? I mean, you’ve got eight per cent market share now. Do you have a vision of how much market share that Kiwibank would want in New Zealand?
Uh, no, it’s too early. But I think, from our perspective, you know, we want to be making sure that we are creating value for New Zealand over the medium term. So that means making some really decent commitments about where we’ll be and how we’ll be as a team. But, certainly, our ambition is to help more customers achieve what they want, so that does mean growing.
Are you coming in at a time where Kiwibank’s had a few issues, though? I mean, you had the $100 million I.T. project that went belly-up. It cut into your half-year profits — most recently, $20 million down. You had the spat with the Reserve Bank over the quality of your capital. How can you reassure your shareholders and the taxpayers that things are going to improve?
It’s a very fair question, isn’t it? And I think the challenge from the owners and from the taxpayer is have you got a really clear plan and vision as to how you want to achieve it. And that’s evolving — you know, we’re well advanced in terms of where we want to be technology wise. Look, there’s a huge amount of focus gone into the lessons learned. We, unfortunately, won’t be the first or last big organisation that takes on a big technology change and has its issues. I think the worst thing that we could have done is not really stare into why that happened; secondly, is to try and pretend that we can stand still. So we’re going to have to move forward, but to be honest, I think technology has changed — far less big bang, big massive projects, much more iterative, much more stuff happening, you know, in short order. So that’s the plan for us.
So has this set back Kiwibank a lot?
I think everyone has to stare into that and take ownership of it. And obviously it’s difficult for me because I wasn’t there at the time. But, certainly, a week in the conversation we’re having with people is, you know, people aren’t staring away from the fact that we need to do better. I think every organisation and every bank in New Zealand is staring into a high bar of expectations, so, you know, that’s kind of where we’re at. But, yeah, I think people are, you know, a little bruised from that. But I think that just shows the passion they have for the organisation and wanting to be the best thing they can.
You talk about expectation from the public, in particular, you know, your customers and the taxpayers. Is one of the changes that you think you may have to make is around banking culture. Now, this obviously comes off the back of what’s happening in Australia where the Royal Comission has, sort of, found allegations of bribery, misspelling insurance, charging fees to dead people. Anything like that happening here?
Nothing that I’ve seen from first-hand. I mean the one thing that’s been most encouraging for me a week in has been just how awesome the culture is and how people really want to feel like they’re doing the right thing, and coming to work at Kiwibank’s a big part of that for them. You know, I think your question’s really about trust. And for me there’s, sort of, there’s at least three elements to that – there’s this sort of prudential stuff which is, ‘Do you have enough capital; are you managing things properly?’ Secondly and most importantly is about culture, so, ‘Are you about doing the right thing?’ And the world’s changed there. I mean, you know, your question’s a very fair one; people want evidence. It’s not enough for a banking industry to say, ‘No, we’re fine here.’ You know, expectation is that you’re going to have to evidence that, and I think that’s a very fair bar. I personally think, you know, after 20-so years in New Zealand financial services for the trillions of transactions actually the problems that happen are pretty minor. Having said that, one problem is one problem to many. So you can see that in the complaints to the banking ombudsman, you can see that in organizations about how they treat complaints. So there’s a high bar, it’s a big challenge, we need to make sure that works. And then the last bit of trust is, you know, ‘I trust you to be reliable; I trust you to look after my deposits; you know, if you lend my money out I want it back.’ So, you know, it’s kind of a recipe; all those ingredients need to work. But the expectations are high.
Is there, I mean, you say there haven’t been those kinds of examples that you’ve seen which are the more extreme level in Australia. But what about the culture of this vertical integration of services in banks where I go in- I go in for a new EFTPOS card and I end up with a new insurance policy. Is that what Kiwibank does? Is that culture of upselling really acceptable?
Well, I think the question is—I think it’s a very fair situation that we might want to find out, are all your needs being met? I think it’s absolutely unacceptable that we would ever try to push a product to you that’s not what you need. So my commitment as the chief executive is there will never be a, situation where we will wanting be pushing you a product, in that sense, in your words, that doesn’t meet your needs. And so, you know, I think and feel really passionately about if you look after the customer and we have a really good conversation about what’s the real needs, whether they fulfil them with Kiwibank or not is actually a little bit academic.
Because the Reserve Bank sent out questionnaires to 15 banks, got them back from 10 to 11, Kiwibank was one of those. But one of the reasons it said that they wanted this kind of enquiry is because bank lending can be impaired by the pursuit of short-term profits.
Yeah.
So what did you say to the reserve bank?
Well, I wasn’t part of the response because I was actually between jobs. So, from my perspective, what I would have expected us to say is actually, ‘We’re going to take a long term view, as I touched on earlier with the shareholders, between, you know, all of those shareholding groups, you know, one of them’s been at the heart of the community forever, the other two have been about making sure that, you know, you’re protected against stuff that you hope doesn’t happen to you like accidents and that you’ve got a retirement that you can enjoy. And so that perspective around we’re in it for the long term and actually we’re in it for all New Zealanders I think, put that together with a culture that really cares about the customer, and hopefully we’re in good shape.
Ok. This has been a good chat, let’s talk quickly about the economy. Business confidence down, business outlook unhappy, and stalling in the housing market. Now a major part of your business is housing loans; does that pose a risk to Kiwibank?
Oh, I think it’s sort of a, I wouldn’t call it a dark cloud, but maybe a grey cloud on the horizon. For me, actually, personally, it’s pretty hard to put my finger on why the business confidence has moved. Sure, the trade stuff, geopolitical stuff is kind of influential, obviously. But actually New Zealand’s going along pretty nicely. So I would say the environment feels OK. But the metrics are that business confidence is more cautious than it’s been for a while. But there’s been times in the cycle, you know, most recently, I guess, dairy prices, where you could understand why confidence might be a bit down. But it’s harder for me to understand that. I mean, I think we are seeing a cooling in the market. You know, LVR’s and other things that were put in place were designed to that.
Well, speaking of LVR’s, do you think that they should be more relaxed now by the Reserve Bank?
Above my pay-grade to answer that one. So, I think the question is, and the Reserve Bank are open-minded about looking at that all the time, and I think that’s key. I think you have to be careful that the unintended consequences aren’t that you do stall things. But, you know, they’re smart people sitting around and thinking about that, so, you know?
OK, one last quick question before we go, you are the bank of the people; it was set up by Jim Anderton to be that. So perhaps you have more responsibility to the tax-payer and your shareholders. We’ve got Kiwibuild coming along, do you have any pressure or any inclination that that is something that Kiwibank would get involved in, and perhaps even offer discounts to people to get people into houses?
Well, I can’t answer the last bit because it’s way too early to be thinking about that. But if the expectations and the questions around, ‘Will we be active and participating in that Kiwibuild?’ yeah, we will. And is the public’s expectation that we’ll lead from the front? Yeah, I think so, probably. Early for me to tell, but, you know, I wouldn’t bet against the fact that they will be expecting us to help as many first-home buyers as we can. And we’re up for that.
Ok, Steve Jurkovich, thank you very much for your time, new CEO of Kiwibank.
Thanks very much.
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