The future of TSB now sits with a judge. Justice Andru Isac reserved his decision on Thursday after a day of argument in the High Court at Wellington over whether the ten trustees of the Toi Foundation should be stopped from voting on the $620 million sale of the bank to Heartland Group Holdings. A judgment is expected in the coming week, and until it lands one of the country’s few remaining New Zealand owned banks is in limbo.
The deal was announced in June. Heartland would buy every TSB share from the Toi Foundation in a package made up of $250 million of ordinary equity, $56 million of subordinated debt and a $264 million vendor loan, alongside a $50 million cash dividend paid out of TSB before completion. Heartland Bank and TSB would then merge to form TSB Heartland Bank, a lender with roughly $15 billion of assets. The foundation would go from owning all of TSB to holding about 17.5 per cent of Heartland Group, with one nominee on the Heartland board and two existing TSB directors on the merged bank’s board.
What makes this different from an ordinary bank takeover is who owns the seller. The Toi Foundation, formerly the TSB Community Trust, exists to put money back into Taranaki, and has done so for more than 35 years through grants to community groups, schools, marae and environmental projects. Its income comes from TSB dividends. TSB reported a net profit of $45.4 million for the year to the end of March 2026, up from $41.1 million. Only part of that flows to the foundation each year.
The foundation’s case for selling is that a minority stake in a bigger bank would pay it more. Its average dividend from TSB over the past five to ten years has been in the order of $10 million a year. It has told the community that the total return it would expect from the Heartland investment, counting the cash consideration, would be in the order of $30 million.
The Taranaki Community Accountability Society, an incorporated society formed to fight the sale, does not accept that the region has been given a fair chance to respond. Its lawyer Daniel Grove told the court the community lacked adequate information and described the foundation’s published material as “misleading”, “one-sided” and “inaccurate”. He said the bank belonged to the region, telling the court “this is something for the community” and warning that “once it’s gone, it’s gone”. None of those allegations has been tested or upheld. The society is seeking an interim injunction to freeze the trustees’ vote until the substantive claim is heard.
Counsel for the Toi Foundation, Justin Smith KC, rejected the claim of bias, telling the court the suggestion the presentation was one-sided “does not have any real foundation”. He also argued the foundation has no beneficiaries in the legal sense, which would narrow who is entitled to bring a review of the trustees at all, and that opposition from the community was not a matter the trustees were required to weigh in the way the society says. That argument about standing may end up mattering more than the merits.
The vote itself is not a simple majority. Selling the TSB shares requires a resolution signed by at least three quarters of the trustees, which means eight of the ten. Trustees were expected to make the call before the end of August, and the foundation had signalled it would move to regulatory filings and shareholder notices around the same time.
The consultation has already been through one false start. The first 28 day feedback round drew 1,203 submissions but was restarted in July after the foundation found it had begun the count a day early, closing the window on 30 June instead of 1 July. A fresh notice was published on 14 July and the second round ran the full statutory period.
Heartland, for its part, arrived at the hearing in far better shape than it was in a year ago. The Auckland based lender reported a net profit after tax of $93.2 million for the year to 30 June 2026, up from $38.8 million, beating its own guidance of at least $85 million. Underlying profit was $90.4 million and return on equity recovered to 7.3 per cent. Reverse mortgage receivables grew 16.8 per cent in New Zealand and 19.7 per cent in Australia, and rural lending grew 10.8 per cent.
Chief executive Andrew Dixson said the timetable has not slipped. “At this stage, we remain on target for a 1 December completion,” he said, adding that Heartland remains “confident in the proposed merger, its strategic rationale and the benefits that we expect to be delivered from it”. On the Taranaki backlash, he said the company recognises “the importance of TSB to Taranaki’s local identity” and intends to preserve it through the principles set out for the merger. Heartland shareholders are due to vote on the transaction at a special meeting on 30 September.
Then there is the complication nobody in the courtroom controls. David McLean, who chairs Kiwibank’s parent Kiwi Group Capital, has said publicly he would like to talk to the Toi Foundation about a Kiwibank and TSB tie up. He said Kiwi Group Capital believes in “building a stronger New Zealand-owned banking alternative” and wants to explore “what we could do together, but that would be at their discretion and following the outcome of the current process between TSB and Heartland”.
Dixson was unbothered in public. “I mean, TSB is a great bank, so I’m not surprised there’s interest, though I’m not clear what is meant by a tie-up,” he said.
Kiwibank has its own reasons to look outward. Its annual profit fell 9 per cent to $174 million from $191 million, with operating income up 3 per cent but expenses up 6 per cent and net interest margin down 15 basis points to 2.10 per cent. Chief executive Steve Jurkovich has been cautious about buying growth, noting that the history of mergers globally has proved that approach is quite tricky, and pointing to organic growth instead. Finance Minister Nicola Willis has said the Government would consider a strong commercial proposal from Kiwi Group Capital for a merger or acquisition.
So Taranaki is watching a decision it does not get to make. If the injunction is refused, the trustees can vote within days and the sale moves towards regulatory approval and a December handover. If it is granted, the vote stops while the substantive case is argued, the December date becomes hard to hold, and a rival suitor gets time it did not previously have. Either way, a bank that opened in New Plymouth in 1850 as the New Plymouth Savings Bank is now a question for a judge rather than a region.
What do you think? Should a community trust be able to sell the bank that funds it without the community’s agreement, or is a bigger dividend the better outcome for Taranaki? Leave a comment below.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job π
Leave a Reply