Government to inject $30m into Public Trust

The Government has agreed to make a capital injection of $30 million to bolster Public Trust's capital base, Finance Minister Bill English and Justice Minister Simon Power announced today.

The injection was approved by the Cabinet. It follows an injection of $20 million by the previous government last November.

Mr English says the cash injection is necessary in light of recent investment losses and forecasts of further losses.

"There is absolutely no risk at all to monies deposited with Public Trust's Common Fund.

"All client deposits within Public Trust's Common Fund carry a statutory Crown guarantee, and this injection is a prudent measure to safeguard public confidence."

Mr Power says Public Trust recorded a loss of $32.2 million in 2007/08 and forecasts a further loss of $44.9 million in 2008/09.

Those figures include investment losses of $21.6 million in 2007/08 and a projected investment loss of $28.9 million in 2008/09, as well as mortgage losses and provisions of $12.4 million in 2007/08 and a projection of $13.0 million for 2008/09.

"The bulk of the investment losses are unrealised current market value losses, more than half of which are expected to revert to profit at some point in future years."

Mr Power says that in February 2007, stakeholding Ministers in the previous Government approved a new business case which was to 'reshape the business' but which was forecast to make losses over the following three years.

Those changes included expanding services from a product-focused approach to one tailored to specific customers - personal, small business and corporate.

On September 10 last year, the Labour Cabinet approved a $20 million cash injection, which was paid to Public Trust on November 10 - two days after the election.

"Public Trust now forecasts it will return to profitability by 2010/11, but despite that, the board has agreed to make further changes to its strategy to help ensure that outcome.

"Those changes, which I will be monitoring very carefully, will go a long way to removing the risk from Public Trust's investment portfolio and boost the profitability of its core trustee services.

"Implementation of those changes is now under way."

Mr Power also announced that investment bankers Trevor Janes and Rodger Finlay had joined the Public Trust board on Monday this week. They replace Hon. Matt Robson and David Edwards whose terms expired on April 30.