Time right for big banks to list NZ assets

We've rightly started to debate the merits of foreign ownership of land and houses but what's clear is that no other advanced economy in the world would allow almost all of its banking system to be owned overseas.

It's no fault of the Australians that they were smart enough to understand how good the long-term returns were from banking and either bought or built their banking businesses in NZ.
The big four banks in NZ, which are all Australian owned, have a combined market share of about 90 per cent and will make combined after tax profits out of NZ of more than $4.5 billion in 2015.

To put that in context, if you add up the profits of all the companies listed on the NZ Stock Exchange you get to a similar number. The big four banking oligopoly is so profitable that in NZ in 2014 they generated a pre-tax ROE (return on equity) of more than 22 per cent for their Australian shareholders. Given the banks are effectively NZ Government guaranteed, this represents an exceptionally attractive return, particularly relative to the current risk-free rate of about 3.5 per cent. The taxpayer (represented by the Government) effectively guaranteed the foreign-owned banks - interesting, isn't it?

Australia, like Singapore, takes a much more planned approach to looking after its long-term sovereign interests. For many years Australia has operated a four pillars policy which primarily prevents mergers between the big four banks, but also means it's most unlikely that the Australian government would allow foreign ownership of any of the big banks. Specifically, government approval needs to be given before any party can acquire more than 15 per cent of a large Australian financial institution. It is widely believed the Australian government would never give this approval.