(19 August 2015 – New Zealand) Heartland New Zealand Ltd’ net profit after tax (NPAT) is up 34 percent to NZ$48.2 million (A$43.0 million) for the full year ended 30 June 2015.
Earnings for the Current Reporting Period equate to a return on average equity (ROE) of 10.4 percent for the full year compared to 9.0 percent a year earlier.
Balance sheet Heartland’s total assets increased by NZ$342.4 million during the Current Reporting Period with net finance receivables increasing from NZ$2.6 billion at 30 June 2014 to NZ$2.9 billion at 30 June 2015.
Heartland said in a statement there was strong growth in the Business and Rural divisions, increasing by NZ$122.7 million and NZ$77.5 million respectively.
Continued performance in the Consumer division, with the motor vehicle book increasing by NZ$90.5 million.
There was an increase in the Reverse Mortgage book of NZ$20.7 million, including NZ$18.1 million resulting from foreign exchange movements.
Non-core residential mortgage book and property assets continued to reduce, by NZ$43.3 million and NZ$13.8 million respectively.
The results showed an increase in cash and cash equivalents and investments from NZ$276.2 million at 30 June 2014 to NZ$366.4 million at 30 June 2015.
A NZ$300.8 million increase in borrowings reflecting the requirement to fund asset growth.
Net Operating Income (NOI) was NZ$144.7 million, up from NZ$122.2 million year-on-year.
Heartland Bank currently has a total regulatory capital ratio of 12.9 percent.
Excluding any change in capital structure, Heartland Bank’s total regulatory capital ratio is expected to reduce over the next financial year but remain above 12.5 percent.
The Bank intends to issue a Tier 2 capital instrument this financial year as part of its capital management strategy, subject to market conditions remaining favourable.
It is expected that Heartland Bank’s Tier 1 capital ratio would not fall below 10.5 percent after any issue.
An issue of Tier 2 capital could (in the absence of any other use) allow Heartland to return capital by way of a share buy-back which would have a positive impact on ROE and EPS.
A share buy-back would also be attractive if Heartland shares continue to trade below the Board’s view of their intrinsic value.
During the current reporting period, Heartland acquired an approximate 10 percent shareholding in Harmoney, having invested NZ$3.5 million to date.
Harmoney is the first peer-to-peer lender to be licenced in New Zealand, operating a lending model that challenges those being offered by traditional banks.
This model is complementary to Heartland’s strategy of occupying leading positions in niche markets through specialist products which are different to those operated by mainstream banks.
Based on subsequent placements of Harmoney shares and on the performance of Harmoney to date, Heartland has revalued its investment in Harmoney up by NZ$1.0 million.
As at 30 June 2015, Heartland Bank had also lent approximately NZ$32.8 million through the Harmoney platform.