Heartland Bank has posted a full year profit of $54.2 million, up 12% for the year to the end of June.
The bank’s ‘households’ division lifted net operating income 12% to $86.1 million as auto lending grew 9.5%, personal loans including those through the Harmoney platform jumped 55%, and reverse mortgages increased 8.2% in New Zealand and 10% in Australia.
The bank’s impairment expense rose to $13.5 million in the 2016 year from $12.1 million in 2015, largely due to the increase in motor vehicle and personal loans and an increase in the number of auto loan write-offs. It increased its provisioning for potentially bad rural loans to provide a buffer against the dairy sector, with dairy farms accounting for 7% of Heartland’s total loan book.
The unit’s loan book was $1.69 billion as at June 30.
Business banking increased net operating income 5.4% to $43 million with assets of $907 million, and its rural division boosted income 9.6% to $26.3 million on $552 million of loans.
“The increase net operating income was primarily attributable to the increase in receivables and to a reduction in the cost of funds,” the bank said in its statement to the NZX. “Heartland expects underlying asset growth to continue for the 2017 financial year, with increased household, business and rural volumes projected.”
The lender has been considering a capital return to shareholders, but says volatility in financial markets “creates greater opportunity for acquisitions”.
The company has been on the hunt for targets to accelerate its expansion. It made an unsuccessful bid for Motor Trade Finance and was mooted as a potential bidder for Australia & New Zealand Banking Group’s UDC Finance business.
Heartland expects 2017 profit to rise to between $57 million and $60 million, excluding the impact of any capital management changes.
