Foodstuffs supermarket chain enters banking with St George

By NZPA

Wednesday 13th November 2002

Foodstuffs, New Zealand's largest supermarket chain, plans to set up a retail banking joint venture with Australia's St George Bank.

Foodstuffs' managing director Tony Carter and Gail Kelly, chief executive officer of St George -- Australia's fifth biggest bank -- revealed details of the venture at a press conference in Auckland today.

The yet-to-be-named partnership expects to start business early next year with phone and Internet-based banking and point-of-sale support in some of Foodstuffs' 478 stores, which include New World, Pak 'N Save, Four Square, and Write Price.

Within a year customers will be able to carry out some basic banking functions, primarily deposits and withdrawals, at the stores.

Further down the track ATMs would be set up at some Foodstuffs stores providing a range of electronic banking services, Mr Carter said.

Mortgages are also included in the business plan.

The banking market, which had been rationalised with the takeover of Trust Bank, Countrywide Bank and United, is starting to get crowded again following Kiwibank's entry this year.

The Warehouse last year began its long-awaited foray into banking when it formed a joint venture with Westpac, called The Warehouse Financial Services Ltd. It provides retail financial services through The Warehouse's chain of over 70 retail stores.

St George is likely to have been eyeing the profits made by its Australia rivals in New Zealand this year. BNZ, owned by National Australia Bank made a $516 million net profit in the September year, Westpac NZ made $614 million and ANZ made $379 million. The Lloyds TSB-owned National Bank made $250 million in the six months to June 30.

"Teaming up with New Zealand's premier supermarket retailer offers St George a low cost, low risk entry into a new market very similar to those we operate in now, and is a logical step in our organic growth strategy," Mrs Kelly said.

"The alliance has been carefully designed to leverage what we see as complementary banking and retailing skills.

"We bring our core retail banking and product development capabilities, and will access (St George's) resources where appropriate to drive cost efficiencies with the alliance.

Logically, an important target of the new bank would be the direct depositing of customers' pay, Mr Carter said.

In the early stages Foodstuffs, one of the largest advertisers in this country, would provide marketing support for the new bank through brochures and posters.

Foodstuffs' established infrastructure would mean the banking products offered by the joint venture were competitive, he said.

Details of how banking services will be provided are still being worked out. One important issue for the group is to ensure customers won't face extra queuing as a result of the banking activities, Mr Carter said. The company also needed to work out how many of the nationwide outlets in the cooperative Foodstuffs group will have banking facilities, he said.

In particular, discussions will be held with Four Square franchisees to see which of those stores will be involved.

The joint venture will be run from Wellington where it will employ about 20 people, with the possibility of some additional staffing in some stores in future, depending on customer needs.

While Mr Carter would not release customer projections for the venture, he said the number of customers the venture needed to succeed was "very modest".

Foodstuffs has been working on the proposal for three years. During that time discussions were held with some New Zealand banks, but they had worried about the impact of such a venture on their existing customer base, he said.

Other options being looked at by the joint venture are insurance and a credit card services.

St George's Mrs Kelly said her organisation and Foodstuffs were splitting the returns and costs of the new venture 50/50.

Because it was leveraging existing infrastructure, the venture was a low cost, low risk opportunity for St George, she said.

Total start up and set up costs were in "single digits in millions".

The bank was looking at a break even scenario within two to three years.

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