Bank eyes separate motor loans company
Heartland is considering making its motor finance business a separate wholly-owned subsidiary as it seeks to optimise value across the group.
Shareholders were told at the company’s annual meeting the board and management have yet to reach any conclusions about such a proposal but are looking into the matter.
Jeff Greenslade, chief executive officer, says: “The possibility of structuring the bank’s motor business as a separate entity under the bank may assist in highlighting any intrinsic value which may not be reflected in current bank-based benchmarking.
“This may also provide flexibility and efficiency in terms of access to, and cost of, capital.”
He also told the meeting in Auckland on November 30 the coronavirus pandemic had overshadowed the last financial year and continues to present challenges.
“The resilience of the economy has defied expectations and the same is true of our customer base,” notes Greenslade, pictured.
“While this crisis has not been as bad as initially feared, we remain prepared for the possibility of any deterioration.
“An economic overlay of $9.6 million has been taken and remains available should it be needed. This is an added buffer on existing general provisions which together amounts to $62.7m of provisions to cover any losses that may arise from whatever cause.”
Heartland expects strong growth to continue across the business and predicts net profit after tax (NPAT) for the 2021 financial year will be between $83m and $85m.
Greenslade told the meeting NPAT for the four months to the end of October was $29.9m.
He also says digitalisation is “at the core of everything we do” with the bank setting a goal of making its products and services accessible on smartphones.
New digital platforms have been created in the past year for many of its services, including motor loans, and these feature facial recognition and electronic document signature innovations.
Shareholders heard there will be increased investment over the coming year to expand Heartland’s digital capability.
Geoffrey Ricketts, chairman, highlighted the bank’s finance receivables grew 4.9 per cent to $4.6 billion in FY2020 and its priorities “are to continue supporting our customers and ensuring the health and wellbeing of our employees”.
“Fortunately, we entered into the Covid-19 lockdown in a strong financial position and I am pleased to report that Heartland achieved a net profit after tax of $72m million for the financial year ended June 30, 2020,” he explains.
“The board is confident in Heartland’s ability to continue achieving strong growth and profitability, while continuing to support our customers through any future Covid-19 related uncertainties.”
Heartland announced a final dividend of 2.5 cents per share, taking the total FY2020 dividend to seven cents – down from 10 cents per share the previous year.
