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Capital-hungry Kiwibank cornerstone in NZ Post's future

Friday 1st November 2013

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Kiwibank, the country's fifth biggest lender by assets, will play a key role in the future of New Zealand Post, which today announced it will cut its workforce by as much as a fifth as it contends with an "irreversible decline" in its traditional mail service.

The Wellington-based state-owned enterprise is overhauling its structure as part of a five-year strategy which will see it cut staff numbers by between 1,500 and 2,000 over the next three years, scale back its direct ownership of outlets and reduce urban delivery to three days a week.

At the same time, NZ Post will be looking to grow Kiwibank's wealth and insurance services, which combined with the savings aims to improve annual profitability by $100 million, chairman Michael Cullen told a media briefing in Wellington.

"The changes we're making allow us flexibility in the future for quite some years to come," Cullen said.

Once in place, NZ Post will have two subgroups made up of mail and logistics under one umbrella, and financial services including Kiwibank in the other.

The bank accounted for about 80 percent of NZ Post's annual profit last year, and chief executive Brian Roche said he expects it to be between 70 percent and 75 percent in the long-term.

Cullen said NZ Post can meet the lender's capital needs over the next few years, which are primarily in meeting regulatory obligations to hold more top tier capital on its books and overhauling its business systems before funding growth. He still sees the SOE as the right owner for the bank because of the shared retail network.

Roche told the briefing "all of our planning is on the basis Kiwibank remains part of the group."

Cullen said Roche has had "informal discussions" with the New Zealand Superannuation Fund, which Cullen established, about investing in Kiwibank, which he said was a "natural investor" because of its long-term horizon meaning it didn't need regular dividend payments and because it wouldn't dilute the lender's New Zealand-owned brand.

The measures are in response to a 30 percent slump in letter volumes over the past seven years, which has seen NZ Post's traditional revenue stream slide over that period.

Cullen stressed the job cuts were early estimates and won't all be redundancies, with the SOE typically seeing annual staff turnover of about 1,000.

NZ Post has set up a separate unit to help affected staff deal with the changing environment, providing employment, budgeting and career support.

The changes would be nothing like the 1988 overhaul of NZ Post, when the then-SOE Minister Richard Prebble oversaw changes that shut down 400 post shops across the country.

"We aren't going to be doing anything of that sort," Cullen said.

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