Heartland posts gain in quarterly profit, affirms guidance

Heartland New Zealand managing director Jeff Greenslade
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Heartland Bank reported a 21% increase in quarterly profit, reflecting growth in its loan book, and affirmed its guidance for 2017 earnings to rise as much as 11%.

Profit was $14.3 million in the three months ended September 30 from $11.8 million a year earlier. Net interest income rose to $38.8 million from $35.6 million.

Heartland affirmed the guidance for 2017 profit of $57-60 million that it gave with its 2016 results in August, which showed a 12% gain in profit as it wrote more loans and was able to benefit from cheaper funding, widening its margins.

Last month Fitch Ratings affirmed the bank's credit rating at BBB with a stable outlook, noting it had "a higher risk appetite relative to its peers" but that in the niche markets it targets, it "benefits from price-setting powers.”

The bank's interest income fell to about $67 million in the latest quarter from $68 million a year earlier while its interest expense dropped to $28 million from $32 million. The drop in interest income reflected a decline in returns from investments, while finance receivables rose to $64.8 million from $64.7 million, its accounts show.

Heartland's impaired asset expense rose to $3.9 million from $3.5 million a year earlier.

Its note on asset quality in its accounts shows loan payments at least 90 days past due but not impaired stood at $30.6 million, up from about $22 million as at June 30.

That included some $8.7 million in loans to the rural sector and $15.9 million for other corporate loans, up from $4.3 million and $12.6 million respectively at June 30.

The bank didn't immediately return calls seeking comment.

Fitch said a significant acquisition could trigger a review of Heartland's credit rating. It made an unsuccessful bid for Motor Trade Finance, which has subsequently increased its ties with Turners, and has been mooted as a bidder for Australia & New Zealand Banking Group's UDC Finance business.

Heartland's shares rose 1.3% to $1.54 and have gained 15% this year.



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3 Comments & Questions

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I'm getting tired of these angled releases, firstly the 3 monthly wasn't up 21% on previous 3 months, it was a whole year earlier. We have never had 13 week releases before, and it is all unaudited.

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That's an interesting point. It would suggest there might be an ulterior motive to demonstrate to the market there is growth...now why would they want to do that, unless they feel that a capital raising may be in the wind?

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You could be right - I'm sure UDC is still on the block and things are happening behind closed doors.

This was in FT on Oct 31 -

ANZ announced earlier this year that it would sell stakes in several regional banks, citing the increased cost of capital, with the hope of raising $3bn.

Over the past two years, the bank has cut its commercial and small-medium enterprise businesses across Asia. Mr Elliott intensified the exit from that segment of the market in March by closing what it called its emerging-corporate business in Hong Kong, Singapore, Vietnam, Indonesia and Taiwan.

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