New bank to play niche role
New Zealand has a new bank, Heartland, but it will not go head to head with the big four banks on home mortgages.
Heartland formed in January 2011, from the merger of Marac Finance with two building societies, and set out to secure a banking licence.
It is New Zealand's 22nd bank and has assets of $2.35 billion, making it about the same size as SBS Bank, formerly the Southland Building Society.
The Reserve Bank announced yesterday it had granted it banking registration.
Heartland intends to be a niche player, focusing on lending to small to medium businesses, rural business and households.
Its business is already spread through New Zealand and a good portion is in Canterbury.
Heartland chairman Bruce Irvine said the company was delighted.
Chief executive Jeff Greenslade said while other banks were heavily focused on household mortgages, Heartland was looking to grow lending to the productive sector of "hardworking New Zealanders, small businesses and farmers".
"So you won't see us charging out trying to take on the major banks with say residential mortgages or transactional banking.
"Those things are price-driven and they reward scale so we will leave that to them and focus on things we can do better, such as livestock financing and plant and equipment financing."
In the new year Heartland was looking at developing other lending products such as those for funding children's education and healthcare. Heartland already has almost $2b in loans, nearly half of that for home loans and car purchases, business loans of $540 million and rural loans of $479m at June 30.
The company had had to demonstrate to the Reserve Bank its financial strength, strong systems and processes and good governance to gain registration. Greenslade said the two years it took was not unusual.
He did not see Heartland as a successor to Pyne Gould Corporation, the parent of Marac Finance, the biggest lender in the group that formed Heartland.
He said PGC was first and foremost a rural services company which had some diverse assets including a finance business.
"To say that we are a successor to PGC I think is a complete stretch and is incorrect. What Heartland is and had to be was a fresh start. It wouldn't have happened if it was a PGC offshoot."
After the collapse of the New Zealand finance company sector, the Reserve Bank introduced tougher rules, and the merging companies believed they had better prospects if they united.
Heartland shares closed 2c higher at 69c yesterday. Its share price is now 42 per cent ahead of the end of 2011.
New Heartland shareholder Max Smith, who bought his shares only a month ago, said the registration was "a good sign".
"My view on the matter is that it's excellent news," said Smith, a member of the New Zealand Shareholders' Association.
After the formation of Heartland, PGC distributed its shares in the firm to PGC's shareholders in May 2011.
Shareholder Reese Hart said Heartland's banking licence was good news.
However, he still had lost money on Heartland and PGC shares. He bought shares in PGC for 40c a share in late 2009 when PGC was raising capital to rescue Marac.
He received shares in Heartland in late 2011 when PGC distributed its shares to individual PGC shareholders.
The combined value of the Heartland shares and the PGC shares were still not worth what he had paid for them.
Another shareholder who has lost about $100,000 in Heartland and PGC shares feels let down by the directors of the companies and said other shareholders felt the same.
He did not want his name in the newspaper.
Sharebroker Hamilton Hindin Greene director Grant Williamson said the banking registration was good news.
"I think what it will do is add a lot of confidence for investors and for customers of Heartland."
He was surprised the Heartland shares only rose 2c to 69c and had expected something like a 7c to 10c rise.
But the shares had been rising for a while and securing the banking licence had probably been already priced in, he said.
Formed in January 2011.
Merger of Marac Finance with CBS Canterbury and Southern Cross Building Society.
August 2011 Heartland bought PGG Wrightson Finance.
Total assets $2.35 billion at June 30 2012.
Bank registration gained in December 2012.
3040 business accounts, $540m of loans. 1784 rural accounts, $479m of loans.
44,700 consumer-retail accounts, $955m of loans.