Fitch: Kiwibank IPO would likely trigger credit rating downgrade

Kiwibank’s planned $500 million capital raise is not expected to affect its strong credit rating, but an initial public offering (IPO) would likely trigger a downgrade, Fitch Ratings senior director Tim Roche (pictured) said.

Fitch currently holds an AA rating with a stable outlook on Kiwibank – two notches higher than the A+ ratings on ANZ NZ, ASB, BNZ, and Westpac NZ. Roche says the higher rating reflects Kiwibank’s government ownership, which underpins its financial strength, interest.co.nz reported.

The comments follow Kiwibank’s FY25 results showing 10% lending growth to $35.8bn, even as net profit fell 5% to $191m. The bank added $2.3b in home lending and $1bn in business lending, highlighting its continued expansion despite economic headwinds.

Government backing key to current AA rating

In July, Finance Minister Nicola Willis approved Kiwibank to raise up to $500 million from New Zealand investors following the Commerce Commission’s 2024 market study into personal banking competition. The commission had recommended the government consider ways to make Kiwibank a “disruptive competitor” by improving its access to capital.

Willis said an extra $500 million in capital could support up to $4 billion in business lending or $10 billion in home lending.

“The $500 million would still see the Government have around 80% [of Kiwibank so] about 20% of the capital base would get eroded. At that point we're probably still okay at the AA,” Roche said. “The more interesting juncture is probably the potential IPO that they're talking about two or three years down the track.”

IPO “more likely to have an impact on ratings”

Willis has said that any decision to list Kiwibank on the share market would require a public mandate, with the government maintaining at least 51% ownership of parent company Kiwi Group Capital.

“That one is more likely to have an impact on ratings for Kiwibank,” Roche said. “Our standalone assessment for Kiwibank at the moment is BBB+, so there is quite a big difference between the two [AA is five notches higher]. It’s not to say we’d go all the way to BBB+. It doesn’t sound like it’ll be a complete IPO, from what they’ve said the government will hold a substantial portion of the equity still.

“At 51% it’s still technically majority, but you’d want to see how much say minorities have in the running of the business,” he said.

Fitch mindful of state-ownership risks

Roche noted the collapse of Solid Energy, a state-owned coal miner that wasn’t bailed out by the previous National-led government, caused “a lot of problems for a lot of banks.”

He said, “Ultimately, a Kiwibank IPO would result in a Fitch credit rating downgrade; all other things being equal. But to where is the question.”

Moody’s also watching Kiwibank closely

Meanwhile, Moody’s Investors Service maintains an A1 credit rating with a stable outlook on Kiwibank, interest.co.nz reported.

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