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NZPO Ltd gets Government go-ahead for new bank

EMBARGOED TO 4pm, 20 February 2001 Media Statement

NZPO Ltd gets Government go-ahead for new bank

The Government has approved New Zealand Post Ltd's plan to establish a new publicly owned bank.

Announcing the decision today, Finance Minister Michael Cullen and Minister for State Owned Enterprises Mark Burton said the Government had subjected the proposal to intense scrutiny.

"NZPost board and management are confident the new bank will succeed. The Government places considerable confidence in their judgement because they have a solid track record. It will now be the responsibility of the board to oversee the establishment plan and to make the final commercial decisions on whether to proceed.

"NZPost is one of our most successful SOEs. Since its creation in 1987, it has generated around $555 million in net profits and has returned almost $510 million to the Crown in dividends.

"But its core business is under pressure from new technologies. It has averaged a return on equity of 13 percent in the last three years compared with 31 percent in the preceding three. As shareholders on behalf of the public, we are mindful that NZPost has to diversify its business mix if it is to maintain profitability.

"The banking industry in New Zealand is highly competitive but NZPost has a number of unique assets. Not only is it a New Zealand icon with a strong brand but it has an established retail network comprising around 320 Post Shops," they said.

The Government was contributing $78.2 million toward the start-up costs: a capital injection of $72.2 million and up to $6 million in foregone NZPost dividends in the current financial year.

"This investment makes good sense from a shareholder perspective as it will protect and enhance the value of New Zealand Post as a public asset.

"But this is the limit of the Crown's financial support. The new bank will have to stand or fall on its commercial merits.

"To provide any form of Government guarantee would be to distort the banking system as the banks NZPost will be competing with are not Government-guaranteed," the Ministers said.

ENDS

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