Whose bank is it to sell?
- Grant McLachlan
- 14 hours ago
- 12 min read
Taranaki is being asked to bless a $620 million deal that hands its last locally owned bank to a listed company — at a discount, with the seller lending the buyer the money. New Zealand has watched this story before.
In the world of Mortal Engines, giant predator cities prowl a ruined landscape on caterpillar tracks, running down smaller towns and swallowing them whole for fuel. It is a useful picture to hold in mind this month, because something close to it is being proposed in Taranaki — with one twist no scriptwriter would dare invent. The town being eaten has been asked to hand over the fuel.
On 2 June, Heartland Group Holdings announced it had signed a conditional agreement to buy all of TSB Bank for $620 million from the Toi Foundation, the Taranaki philanthropic trust that has owned the bank outright since 1988.
The two banks would then fold into a single entity, TSB Heartland Bank, the country’s seventh-largest bank with around $15 billion in assets.
The price tag sounds large. It represents just 76% of TSB’s book value — the bank is being sold for roughly a quarter less than the trust’s own books say it is worth.
Within hours, New Plymouth district councillor Gordon Brown had launched a petition to stop the sale.
The trust calls it diversification: trade a single bank for a broader portfolio and lift annual community giving from about $10 million to around $30 million.
Opponents call it something blunter — selling the family silver.
But there is a deeper question that neither press release answers.
New Zealand once had a dozen locally owned regional banks. Today it has one.
The story of how the others vanished is not ancient history; it is a near-exact template for the deal now on Taranaki’s table.
So before anyone signs, it is worth asking: have we sold this bank before?
Contents
The deal on the table
The structure matters more than the headline number.
Of the $620 million, only part is cash. The consideration breaks down into $250 million of new Heartland shares issued to Toi (giving the trust a 17.5% stake in the listed parent), a $50 million cash dividend paid out of TSB before completion, $56 million of subordinated debt, and a $264 million vendor loan that the trust itself provides to Heartland.
In plain terms, the seller is lending the buyer most of the money to complete the purchase, and taking a minority parcel of shares for the rest.
The deal is conditional.
It needs Heartland shareholder approval, clearance from regulators on both sides of the Tasman, and — critically — the outcome of a community consultation with Taranaki residents that closes at the end of June.
Heartland’s chief executive has said publicly the bank would not want to proceed “where there was negative reaction or sentiment”.
That single sentence is why the petition exists, and why the next four weeks matter.
The seller is lending the buyer most of the money to complete the purchase.
We have seen this film before
For most of the twentieth century, New Zealanders banked with regional trustee savings banks rooted in their own provinces.
In 1988 the Government restructured them. Under the Trustee Banks Restructuring Act, twelve community trusts were each gifted 100% ownership of their local bank.
The Eastern & Central Savings Bank — itself a 1972 merger of the Hawke’s Bay and Manawatu-Wairarapa banks that later absorbed Wanganui — was typical of the pattern. Most of these regional banks then amalgamated into Trust Bank New Zealand, with the community trusts holding the shares.
Then came the sale.
In 1996 the trusts sold Trust Bank New Zealand to Westpac for $1.2 billion. The combined bank traded for a few years as WestpacTrust — a name designed to reassure customers that something local survived.
It did not.
The word “Trust” was quietly phased out by 2002, and the bank became, simply, Westpac: Australian-owned, Australian-controlled, indistinguishable from the giant it had joined.
The reassuring hybrid name was a waypoint, not a destination.
Two banks refused to join the 1988 amalgamation. One was Westland. The other was the Taranaki Savings Bank — TSB.
(The Auckland Savings Bank had already split off as a commercial bank, and would soon pass into Australian hands of its own — more on that shortly.)
That refusal, led in the 1980s by then-mayor David Lean, is the only reason Taranaki still owns a bank today while every other region has to make do with grants from a trust that sold theirs.
The proposal now in front of Taranaki is, in essence, an invitation to belatedly accept the deal its predecessors had the foresight to decline.
Two banks stayed out of the deal that became Westpac. One of them was TSB.
The cautionary twin
New Zealand has already run this experiment to its conclusion, using a bank that began life as TSB's near-identical twin.
The Auckland Savings Bank was a community trustee savings bank, sprung from the same nineteenth-century savings movement and reorganised under the very same 1988 restructuring of the trustee banks that created the trust now proposing to sell TSB. Its ownership was vested in the ASB Community Trust, which held 100% of the bank — precisely the position the Toi Foundation holds today.
Then it sold.
The trust sold 75% of ASB to the Commonwealth Bank of Australia in 1989, and the final quarter in 2000; for a quarter of a century ASB has been wholly Australian-owned.
The proceeds did not vanish — they built the trust, now Foundation North, into an endowment exceeding a billion dollars and the largest community grant-maker in the country.
That is the exact outcome the Toi Foundation is promising Taranaki: trade the bank, keep the money, grow the giving. It is also the exact outcome Taranaki fears, because the other half of the ledger is just as real.
Aucklanders and Northlanders get grants; they do not get their bank.
ASB is gone, its decisions made across the Tasman, and no endowment has ever bought it back.
Auckland kept the money and lost the bank. Taranaki is being asked to make the same trade — this time knowing the ending.
There is a final detail that should give the region pause.
When ASB went looking for scale in 1994, it absorbed Westland Bank — the only other savings bank that, like TSB, had refused to join the great amalgamation.
With Westland swallowed and ASB long since Australian-owned, TSB is not simply one regional bank among many. It is the last one standing.
Selling at a discount
Start with price.
A sale at 76% of book value is a discount of roughly a quarter — on TSB’s balance sheet, somewhere in the order of $195 million below what the trust’s own accounts say the bank is worth.
New Plymouth accountant Kevin Landrigan, who has examined the numbers, describes the deal as poor value for TSB and for Taranaki, warning of job losses and a loss of community spirit in a region where more than 70% of people bank with TSB. In his words, the trustees’ view is “short term and short sighted”.
Then there is the vendor loan.
Toi is not simply being paid; it is advancing Heartland $264 million so that Heartland can afford to buy the very bank Toi is selling.
It is a fair question, and one the consultation ought to answer: if the trust has a quarter of a billion dollars to lend, why does it not simply deploy that capital to lift TSB’s returns and keep the bank?
Selling an asset below book value and then financing your own buyer is an unusual way to realise full value for a community-owned institution.
There is an irony in the mechanism itself.
A community trust exists, by statute, to hold its assets for the benefit of its region — not just for the people of today, but for the generations a perpetual trust is built to serve. Yet the deal asks Taranaki to draw the value out of the one asset that purpose was wrapped around, and to lend the buyer the means to carry it away.
The closest financial parallel is the very product that has become Heartland’s flagship: the reverse mortgage, which lets an owner release the equity in something they will not get to keep.
Strip away the corporate language and Taranaki is being offered an institutional version of the same bargain — cash now, against the value of an inheritance it is being asked to give up.
A trust built to serve the generations to come is being asked to release the equity from the very asset it exists to protect.
Diversification, or swapping one bank for another
The trust’s central argument is diversification.
Owning a single bank, it says, ties up capital and exposes the community to one industry in one country; spreading the money across a portfolio would be safer and more generous. There is real economics here — banks must hold heavy regulatory reserves, so only a fraction of profit can ever be paid out as grants.
But the argument has two holes.
First, Toi is not a single-asset trust: it already owns 66% of Fisher Funds, a major KiwiSaver and investment manager. It is already diversified well beyond banking.
Second, look at what the trust receives in exchange. The largest single piece of the consideration is a 17.5% shareholding in Heartland — another bank, listed, exposed to the same New Zealand housing and credit cycle.
Swapping 100% ownership of a local bank for a minority slice of a corporate one is a curious definition of reducing risk.
From owner to passenger
Control is the asset that never appears on a balance sheet.
Today, Toi owns every share in TSB. It can hire and fire the board, set the strategy, and veto anything it dislikes. After the deal it would hold a 17.5% minority stake and one nominee director in a company it does not control. The protection that has guarded TSB since 1988 — the trust-deed lock written into the Community Trusts Act 1999 — does not travel with the shares into a listed company. Once the bank is inside Heartland, the trust becomes a passenger.
That is precisely the point former TSB managing director Kevin Rimmington, who ran the bank for 21 years, made at the first public meetings: if the trust is unhappy with the dividend, change the directors — do not sell the bank.
Former chair Elaine Gill, who was part of the 1980s fight to keep TSB independent, told RNZ she was “absolutely devastated”.
These are not sentimental outsiders; they are the people who built and ran the institution now being sold.
The Australian undertow
Here is where the history stops being a metaphor and becomes a warning.
Heartland is listed on both the NZX and the ASX. The moment TSB’s assets sit inside a publicly traded company, the trust-deed lock is gone and there is no poison pill. Any investor — including an Australian bank or private-equity buyer — can build a stake and, with enough of them, take control.
A 17.5% holding cannot outvote a determined acquirer.
The track record of these absorptions is not encouraging.
One by one, New Zealand’s banks have been folded into the Australian majors:
In not one of those cases did consolidation deliver what was promised.
Competition did not improve; the Commerce Commission’s 2024 study found the opposite, a stable, highly profitable oligopoly with no disruptive challenger.
Customers were not handed better deals. What the regions got was fewer branches, fewer staff, and a steady flow of profits remitted across the Tasman rather than money recycled at home as local lending, sponsorship and community support.
There is no obvious reason TSB would be the exception that breaks a pattern more than three decades long.
And Heartland’s own centre of gravity is already drifting across the Tasman. In 2024 it became the first New Zealand bank to buy an Australian one, acquiring Challenger Bank and rebranding it Heartland Bank Australia, where its specialist reverse-mortgage and livestock-finance books are growing fast. The deal’s backers sell it as building a New Zealand challenger to the Australian giants who already hold around 90% of New Zealand banking assets.
The irony is hard to miss: the plan removes the one structural protection — the trust lock — that has kept TSB out of exactly that system.
The protection being removed is the very thing that has kept TSB out of Australian hands.
Bigger is not better
There is a lesson in what happened next.
Having sold PostBank to ANZ in 1989 and watched the foreign-owned majors consolidate, New Zealand found the gaps in service so large that the government had to build a new bank to fill them.
Kiwibank was established in 2001 — explicitly in response to those mergers and to complaints about the foreign-owned banks — and opened the following year inside the existing New Zealand Post branch network, the same nationwide counter that had once carried PostBank.
Kiwibank was a deliberately simple proposition: basic, locally owned retail banking, close to where people lived, with the profits staying in the country.
A generation after the roll-up, the country had to reinvent the very thing the consolidation had stripped out.
That is what the scale argument misses.
Heartland’s own existence proves there is durable demand for specialist banking the big four will not touch — reverse mortgages and livestock finance among them.
So does TSB’s. Taranaki stays with its bank in numbers no marketing budget could buy, not because it is the biggest, but because it is the opposite: simple, local, and willing to serve the customers and community groups larger banks cannot or will not.
Bigger is not automatically better.
For an ordinary customer, scale tends to mean fewer branches, longer queues and a call centre in another city.
The “scale” this merger promises is precisely the force that turned every other regional bank into a line on an Australian balance sheet.
What a community stands to lose
Mergers are sold on “synergies.”
The TSB Heartland documents project around $34 million a year in cost savings over three years — and synergy is the corporate word for removing duplication: overlapping branches, back-office roles, call-centre staff.
The Westpac precedent is the honest guide to what that looks like in practice. When WestpacTrust formed, branches that overlapped were merged and smaller ones closed. There is no reason to assume Taranaki would be spared the same arithmetic.
The intangibles are harder to price and easier to lose.
TSB is a major regional employer. It bankrolls clubs, schools and community groups, often with free or fee-exempt accounts that a return-on-equity target would put under review. And it is a daily, visible presence — the thing that made every Taranaki account-holder feel like part-owner of something. None of that survives as a 17.5% line item in an Auckland-listed company’s share register.
The case for the deal
Fairness requires stating the other side at its strongest, and it is not trivial.
TSB’s board chair Mark Darrow and the Toi trustees argue that scale is now survival: a sub-scale bank cannot keep pace with the technology spending of its rivals, and the merger would lift community giving from about $10 million to roughly $30 million a year.
Heartland, for its part, is not a failing buyer — it returned to a half-year profit of $48.8 million with widening margins.
And the historical record cuts both ways: the community trusts that sold their banks to the Australian majors did grow their endowments dramatically.
The trust that sold the Auckland Savings Bank to the Commonwealth Bank — now Foundation North — built the proceeds into an endowment exceeding a billion dollars, and the Otago trust turned $131 million into a portfolio that has since distributed hundreds of millions — far more than a single regional bank could have sustained.
But that comparison is also the rebuttal.
Those regions grew their giving by giving up their banks — and the branches closed anyway.
Taranaki is being asked to take the same financial bet while surrendering the one thing those other regions had already lost before 1996: control.
The upside is a projection; the loss of ownership is permanent.
A community is entitled to decide that a larger, more diversified grant machine is worth it. It is also entitled to decide that some assets are not for sale at any multiple of book value — and to say so before the end of June.
The verdict
Weigh it all and the conclusion is hard to avoid.
This is a good deal for Heartland, which buys a profitable bank below its book value and gains the cheap, stable deposit base a specialist lender has always lacked.
It is a gamble for the Toi Foundation, which trades a low-risk asset it controls outright for a minority stake in a riskier listed lender, on the strength of a forecast.
But for Taranaki — the community the bank is actually held in trust for — it is a bad deal.
The region surrenders control it can never buy back, accepts a price struck below book, exposes its last bank to the Australian ownership the trust lock was built to prevent, and invites the branch and job cuts that follow almost every merger.
The benefits are projected and reversible.
The losses are certain and permanent.
A trust acting as a fund manager might sign this. A trust that remembers it is the custodian of Taranaki’s last bank should not.
Taranaki is the last region in New Zealand that still owns its bank. The only question worth answering this month is whether it wants to become the last region that used to.
About the author and disclaimer
The author holds university qualifications in financial management, law, and marketing management. The author is not a practising lawyer, holds no current practising certificate, and nothing in this article is, or should be relied upon as, legal advice or the provision of legal services under the Lawyers and Conveyancers Act 2006. The author is not a licensed financial advice provider, and this article does not constitute regulated financial advice under the Financial Markets Conduct Act 2013. It is general commentary and analysis on a matter of public interest, drawn entirely from information already in the public domain and cited above, and presented in an accessible form. It is not a recommendation or an opinion intended to influence any person’s decision to acquire, hold, or dispose of any financial product, and it does not take into account any individual’s financial situation, objectives, or needs. Anyone contemplating a financial or legal decision relating to the matters discussed should obtain independent advice from a licensed financial advice provider or from a lawyer holding a current practising certificate. To the extent permitted by law, the author and publisher accept no liability for any action taken in reliance on this article.
