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Good times at Heartland

Posted on 26 March, 2015
Good times at Heartland

Heartland has delivered a strong first-half performance with core asset growth driving a net profit after tax (NPAT) of $23.5 million for the half-year ending December 31, 2014, according to its interim report. This was up by 41 per cent from the previous corresponding half-year in 2013. “It is encouraging to see the execution of our core business strategy successfully translate into increased earnings,” report chairman Geoffrey Ricketts and managing director Jeffrey Greenslade. “This strategy is to operate in niche markets where we can be the leading provider of specialist products. “We are well-positioned to deliver our objectives for this financial year to increase NPAT through asset growth and improve return on equity.” Earnings for the half-year resulted in a return on equity of 10.2 per cent – up from about nine per cent for the full-year ending June 30, 2014. “Our focus on strategic additions led to the acquisition of a 10 per cent shareholding in Harmoney, New Zealand’s only licensed peer-to-peer [P2P] lender,” they add. “Harmoney’s online P2P platform matches investors with borrowers seeking personal loans, minimising the cost of financial intermediation and passing the benefit on to the customer. P2P lending has experienced strong growth in the US and UK, and has more recently been established in Australia. “The decision by the Reserve Bank to reduce the regulatory capital requirements of Heartland Bank as from January 31, 2015, signalled a positive start to the second half of the financial year. “Heartland Bank’s regulatory capital ratios are now aligned with the other NZ banks, representing an endorsement of our progress since registration in December 2012.

Heartland’s observations on industry

“At a global level, the banking industry is paying increasing attention to the potential threat of disruptors entering the market,” say Ricketts and Greenslade. “P2P lenders are an example of using technology to drive structural changes in the industry. Although digital disruptors may not make a significant impact on NZ banks in the short term, they will force industry incumbents to reconsider business and digital strategies. “We believe we are well-positioned to take advantage of the increasing opportunities of being a smaller and more agile financial services provider. “Increased regulation also remains a key issue for banks, both globally and in New Zealand. Capital adequacy is one such area that’s likely to impact banks in NZ due to both regulatory review of capital adequacy generally and the potential for the Reserve Bank to require banks to hold greater levels of capital for particular types of lending. “The impact of increased regulation, together with the emergence of new technology, will drive mainstream banks to clearly define core market segments and align their strategy to those segments to remain competitive. “These trends create a real opportunity for Heartland enabling us to capture market share in segments mainstream banks are vacating.”

Looking to the future

Over the past four years, Heartland has consolidated its business and achieved key strategic milestones. “We are beginning the next phase of our evolution and our sights are set on growth. We are reviewing our strategic direction and long-term growth strategy, which will lay the foundation for the next three years. “We will be engaging with our stakeholders in the coming months following completion of this review.” For the current financial year, Heartland is confident it will achieve its forecast NPAT of $46m-$48m. “Strong asset growth is expected to continue for the remainder of the financial year as we continue to develop new initiatives to achieve and maintain a leading position in our core markets. “Our aim is to strengthen our position as a logical alternative for customers seeking flexible and personalised alternatives in under-serviced segments in New Zealand and Australia.”