Heartland optimistic; expects asset growth to continue
HEARTLAND Bank expected asset growth to continue for the second half of the financial year as strong household, business and rural volumes were projected, chief executive Jeff Greenslade said yesterday.
Releasing the bank’s financial results, Mr Greenslade said Heartland had entered a new phase of capital management, having now reached a normalised state in relation to its capital position.
Heartland intended to tap the market to access capital through multiple issuances timed and sized to meet its ongoing capital requirements.
The bank posted a reported profit of $29.1 million for the six months ended December, up 13.6% on the previous corresponding period and well on track to hit the upper end of management of guidance of $57 million to $60 million for the full year.
Earnings for the half year resulted in a rate of return of 11.6%, an increase from 11.1% on the full year ended June 2016.
Earnings per share were 6c, calculated on weighted average shares.
Total receivables increased 7% in the period to $3.33 billion, slightly slower than the 10% recorded in 2015 and 9% in 2016 Craigs Investment Partners broker Chris Timms said.
‘‘The first quarter of 2017 was very strong with $131 million of receivables growth, but there appears to be some moderation in the second quarter with $90 million added.’’
While costs were up on a sequential basis, they were down 3% on the pcp. Cost income ratio was 43.3% and should be lower in the second half as the first half was seasonally higher because of greater marketing, he said.
Total operating income grew 7% to $83 million, on the back of increased receivables and lower cost of funds, contrary to the commentary seen from several major banks who were starting to face interest margin pressure, Mr Timms said.
The first half net interest margin (NIM) was 4.44% compared with 4.52% for the six months ending 30 June 2016.
The decrease was primarily been driven by customer behaviour — higher levels of early repayments for motor vehicle loans — and changes to asset mix, mainly fewer higher earning livestock loans.
Heartland expected to maintain its NIM for the remainder of 2017, he said.
Mr Greenslade said trading conditions for Heartland’s dairy customers improved during the course of the current reporting season, as farmers received increased payments from dairy companies.
Dairy customers had generally responded well to the difficult trading conditions during the past two years. Most customers managed to lower their operat ing costs and, where necessary, to consolidate their financial position.
‘‘Heartland has and will continue to bring new dairyfarming and sharemilking customers to the bank.’’
Net operating income from the household division, which included retail, consumer and reverse mortgages, was $45.5 million in the period, a 7% increase from the pcp.
Consumer division net operating income, which included motor vehicle and personal loans and lending through Harmoney, increased by 1%, or $300,000.
Net motor vehicle loans continued to grow strongly, increasing by $27.1 million, or 4%, to $794.4 million.
Mr Greenslade said Heartland remained optimistic about continued growth in the motor vehicle loan book with its comparatively lower cost of funds continuing to provide an advantage over nonbank competitors in the motor vehicle finance market.
On Monday, Heartland announced it had taken a 25% stake in Fuelled Ltd, an online small to mediumsized enterprise (SME) lending company. The equity investment of less than $1 million was provided alongside a $2 million committed debt facility, enabling Fuelled to accelerate its growth plans.
Fuelled was a New Zealand business whose simple ondemand service enabled SMEs to receive an immediate cash advance on outstanding invoices. Fuelled’s integration with Xero enabled its advanced credit assessment engine to make real time credit and financing decisions, he said.