Profit leap for Heartland NZ

Last updated 13:13 25/02/2014

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Fledgling bank Heartland New Zealand has reported a 56 per cent jump in net profit to $16.7 million for the half year.

Its share price rose 1 cent to 91c today on the news.

The bank, formed in 2011, from the amalgamation of several lenders, said the higher profit was largely due to lower cost of funding and some product-mix changes.

The rise in profit was in line with expectations.

The bank will pay a fully taxed dividend of 2.5c a share to be paid on April 4 to shareholders on the share register at 5pm on March 12. Earnings a share were 4.5c for the half year till December 31, 2013.

The bank said it had established a team to implement "strategic growth" but it expected it would remain challenging to grow the loan book, particularly with the increased competition in the business and rural sectors.

Heartland announced last week the acquisition of a home equity release mortgage business in Australia and New Zealand from Seniors Money International Ltd for $87m. It is being partly funded by a $20m capital raising.

The bank said it was continuing to "transform" its balance sheet, exiting lending it considered high risk or that overlapped with the big banks and replacing that with lending with higher returns.

It had reduced its non-core residential mortgages, property loans and some rural lending by $104.5m. But loans for motor vehicles grew $21.4m in the half year.

Net tangible assets a share were 89c, up from 85c at June 30, last year.

Its loan impairments were low. Its net impairment ratio was 2.2 per cent, down from 2.4 per cent in June last year, with half of that from the non-core property loans and assets.

The bank said the business loans division faced increasing competition. That loan book grew by $9m to $558.1m. in the half year. The rural loan book fell $40m to $416m with the bank reducing loans acquired from PGG Wrightson where they were high risk or competed with the major banks.

Almost half of Heartland's lending is to retail customers. Its residential mortgages fell by $71m, resulting in a $49.7m decrease in its retail and consumer book to $938m.

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- Fairfax Media

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