Heartland first-half profit climbs 7% as Australian reverse mortgage outlook improves
By Paul McBeth
Feb. 20 (BusinessDesk) - Heartland Bank boosted first-half profit 7 percent as an expanding loan book underpinned all
lines of business and strong reverse mortgage growth in Australia whetted the bank's appetite to do more business across
the Tasman.
Net profit rose to $31.1 million, or 6 cents per share, in the six months ended Dec. 31 from $29.1 million, or 6 cents,
a year earlier, the Auckland-based company said in a statement. Net operating income rose 13 percent to $93.9 million as
net receivables gained 13 percent $3.78 billion. Heartland put the increase down to its bigger loan book, although it
said income from reverse mortgages jumped 26 percent to $18 million, with growth in Australia of 22 percent outpacing a
12 percent increase in New Zealand.
"Heartland has a successful reverse mortgage business in Australia, Heartland Seniors Finance, which continues to grow
strongly," the bank said in a statement. "Off the back of this success, Heartland is exploring opportunities to expand
its product offering in Australia, including further development of its relationship with Spotcap, an innovative lender
for small and medium-sized businesses, and launching Open for Business to serve the Australian SME market."
The bank got into the reverse mortgage business in 2014, buying Seniors Money International for $87 million, which it
said at the time would give it access to an expanding 65-plus age demographic keen on tapping the majority of their
wealth tied up in residential property.
The board declared an interim dividend of 3.5 cents per share, payable on April 3 with a March 16 record date. The
shares fell 0.5 percent to $1.93, having already fallen 6.7 percent so far this year.
Heartland has always had an eye on niche markets, eschewing the residential mortgage market dominated by the big four
Australian-owned banks, and chasing riskier, higher margin business. The lender's net interest margin slipped 1 basis
point to 4.44 percent in the six months ended Dec. 31, twice the 2.17 percent margin for the overall sector.
That riskier business saw the bank boost impairment charges 51 percent to $10.4 million in the period, which was partly
due to "an intentional adjustment to risk settings in previous years which has resulted in a gradual but expected
increase in impairment levels," it said. Operational issues with the introduction of a new banking system also affected
impairments with an increase in arrears levels, although Heartland anticipates that will reduce in the second half of
the year.
Heartland's household division, which includes consumer lending, residential mortgages, and reverse mortgages, increased
earnings 14 percent to $36.2 million on a 17 percent increase in total assets to $2.08 billion. Its business lending
unit boosted earnings 16 percent to $20.2 million on a 9.8 percent expansion of its loan book to $1.04 billion, while
the rural unit lifted profit 12 percent to $12.8 million on a 9.6 percent increase in its assets to $676.6 million.
The bank expects annual profit to be at the upper end of its previous forecast range of between $65 million and $68
million in the year ending June 30, up from $60.8 million a year earlier.
"Underlying asset growth is expected to continue, with strong household, business and rural volumes projected through
execution of Heartland's strategy, in particular, the expansion of customer reach through digital and intermediary
channels, and expansion in Australia," the bank said.
(BusinessDesk)
ends