Kiwibank is believed to be in negotiations to purchase BNZ.

​Kiwibank might need to fork out about $12 billion if it is to buy BNZ, industry sources say.

It is believed that negotiations are under way for the Government-backed bank to buy BNZ from Australian owners NAB.

Simplicity founder Sam Stubbs said BNZ could be worth anything between $10b and $14b. Claire Matthews, a banking expert at Massey University, said total shareholders' equity September 30 was $7.933b.

"It would be usual to expect a premium over book value."

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Stubbs said it would be affordable at that level.

He said most KiwiSaver mangers would buy into the new banking company because it would probably go straight into the NZX50 with a large weighting.

NZ Super Fund put $263m into the bank in 2016 for a 25 per cent stake, and ACC $231m for 22 per cent.

It has been suggested that buying a competitor may be the only way for the bank to grow.

The bank, which has been around for almost 20 years, has less than 5 per cent of the New Zealand market.

The Australian lenders still have 86.4 per cent of total assets in the New Zealand banking sector, with Kiwibank holding a 4.1 per cent share, according to the Banking Ombudsman Scheme's latest annual report.

STUFF Treasury will report back to ministers next year on whether Kiwibank can become the Government's bank.

A Reserve Bank spokesman said there were some hurdles for any deal to get through.

"The key requirements are set out in the Reserve Bank's Significant Acquisitions policy.

"The significant acquisition policy requires that an acquiring bank notifies the Reserve Bank, or receives a non-objection from the Reserve Bank prior to undertaking any significant acquisition. Whether a notification or a non-objection is required depends on the significance of the acquisition in question.

"Significance is measured relative to the acquiring bank's balance sheet - thresholds relative to the bank's capital and to the bank's total assets apply, the threshold of notification is lower than the threshold for non-objection. This policy applies to all banks that are incorporated in New Zealand, it does not apply to banks that operate in New Zealand as a branch of an overseas incorporated bank.

"Other regulators may have other requirements."

Neither bank has commented on the rumours.

Treasury last year reported to the Finance Minister on Kiwibank's readiness to take over the Government banking contract.

A Treasury spokesman said it was still being considered.

Treasury will investigate whether Kiwibank is fit to be the Government's bank.

Australian-owned bank Westpac has been the Government's main bank since 1989 and will remain the exclusive provider of Crown transactional banking services to 35 core government agencies at least until its current contract, signed in 2015, expires in 2023.

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