Major automotive lender Heartland Group has posted net profit after tax of $44.1 million for its half year result, up $4.2m on the same period last year.
Its net operating income was up 5.6% to $125.3m for the six months to December 31.
An interim dividend of 4 cents per share will be paid on March 16, down 0.5 cents on the same period last year.
Motor finance net operating income was up $2.9m (9.6%) year-on-year to $33m.
This follows from a strong FY20 result with motor receivables continuing to increase during the next six month period, up $78.3m (13.8%) to $1.2b.
The growth was mainly from the motor dealer book via car dealerships, brokers and partnerships such as Kia Finance and Jaguar/Land Rover Financial Services.
It says investment in digital enhancements, such as a self-service online vehicle loan application, helped underpin strong performance of the motor book which resulted in a 22% increase in new business origination compared with the same period last year.
The holding structure of its motor vehicle finance business is also under review “to provide access to flexible and efficient capital”.
“No conclusions have yet been reached, however work is underway to set the foundations which would allow Heartland to separate the business to be a Group subsidiary, should it choose to do so,” it says.
Alongside motor finance, the company also has New Zealand banking, financial technology, and Australia (primarily comprising reverse mortgages) as key business areas.
Over the last six-month period, various new digital platforms were developed, including an online quoting tool for business intermediaries, online calculator for Kia Finance, integrated biometrics for motor dealers, and a broker portal for Australian reverse mortgage broker partners.
“The self-serve online application for Heartland Bank’s motor product allows New Zealanders to apply for a vehicle loan online at any time and receive a decision in minutes. Development of a similar solution for dealers is currently underway,” the company says.
During FY2020, Heartland took a COVID-19 economic overlay of $9.6m to provide a buffer against any future losses.
Despite “positive indicators and a general improvement in the economic forecast, there remains uncertainty in relation to the impact of the pandemic on the overall credit quality of Heartland’s book,” the company says.
It says while “forecasts about future economic conditions have improved, all forecasts make assumptions around important matters such as when New Zealand’s border will re-open, the nature and extent of any further lockdowns, when and how effective a vaccination programme may be, and how key markets (such as the used car and primary produce markets) may respond”.
“Until such time as there is more certainty that downside scenarios may not adversely affect Heartland’s portfolios, Heartland has decided to retain its COVID-19 overlay.”
