Household growth for Heartland
HEARTLAND Bank lifted its interim profit after strong growth in its New Zealand household division and in Australia, where its new reverse mortgage business grew by 22%.
The bank reported an operating profit of $43.3 million for the six months ended December and a reported profit of $31.1 million, which was up 7% on the $29.1 million for the previous corresponding period.
Earnings for the halfyear resulted in a return on equity (ROE) of 10.8%, lower than the 11.6% for the full year ended June, due to increased equity following last year’s share issues.
Earnings per share for the six months were 6c, consistent with the 2017 financial year.
Operating income for the period was $93.9 million, up from $83.1 million. An interim dividend of 3.5c per share was declared.
Heartland said in a statement its net operating income for its household division was $50.3 million, an increase of $4.8 million, or 10%. During the six months, net receivables for the division increased by $190 million to $2.1 billion.
Net operating income from the consumer division, which included motor vehicle loans, personal loans and lending through the Harmoney platform, increased $1.1 million to $31.5 million.
The strong growth in net receivables was not reflected in net operating income due to a large proportion of the new business coming from lower risk, lower margin loans, the bank said.
Motor vehicle net receivables continued to grow strongly, increasing by 15% to $886.3 million.
Reverse mortgages continued to grow in popularity for Heartland and the bank reported income from the mortgages increasing $3.7 million, or 26%, from the pcp.
Particularly strong growth was experienced in Australia during the reporting period. New receivables grew by $82.5 million, including foreign currency translation gains of $24.3 million to $598 million.
Forsyth Barr broker Suzanne Kinnaird said Heartland had about a 60% share of the Australian reverse mortgage new business in Australia.
‘‘Heartland is relaxed about proposed regulatory changes in Australia, saying they do not apply to Heartland. It noted the New Zealand Reserve Bank has recently reviewed regulations in the area of reverse mortgages.’’
While still small, Heartland was growing its Spotcap digital partnership targeting business lending and using the Harmoney platform for personal lending.
Looking ahead, Heartland said underlying asset growth was expected to continue. Strong household, business and rural growth was expected through the execution of Heartland’s strat egy, in particular the expansion of customer reach through digital and intermediary channels and expansion in Australia.
Heartland expected its reported profit for the year ending June to be at the upper end of its previously advised range of $65 million to $68 million.