Heartland posts 56pc profit rise
New bank Heartland New Zealand is looking at several possible purchases in its growth strategy.
Formed in 2011 from the merger of several lenders, including the former Marac Finance, Heartland yesterday posted a 56 per cent jump in net profit to $16.7 million for the half year to December 31 2013. Its share price rose 1 cent to 91c after the news.
The bank said the higher profit was largely due to lower funding costs and some product-mix changes and was in line with expectations.
The bank will pay a fully taxed dividend of 2.5c a share on April 4 to shareholders on the share register at 5pm on March 12. Earnings a share were 4.5c for the half year.
Heartland had established a team of four to implement "strategic growth".
It expected growing the loan book would remain challenging, with increased competition in the business and rural sectors.
Last week it announced the acquisition of a home equity release mortgage business in Australia and New Zealand from Seniors Money International (SMI), for $87m, partly funded by a $20m capital raising.
The owners of SMI are being issued shares in Heartland as part payment and will hold a 9 per cent stake when the purchase is settled. They will be the second largest shareholder behind South Island businessman Greg Tomlinson, who owns 9.8 per cent.
Managing director Geoff Greenslade said the $87m price was probably at the top end of its acquisitions.
"We are looking at a number of things and we will continue to be active after this acquisition," he said, "but I'm not in a position to give any more details at this stage."
The bank said yesterday it continued to exit lending it considered high risk or that overlapped with the big banks, and replace it with lending with higher returns. Its strategy is to find niches and new products where it can be a market leader.
The bank said 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.
The business loans division's loan book grew by $9m to $558.1m in the half year. The rural loan book fell $40m to $416m as the bank reduced 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.