Heartland lifts profit 9.2% on improved retail, business and rural earnings

Heartland New Zealand, which gained bank registration in December, posted a 9.2 percent gain in first-half profit on increased earnings from retail, business and rural lending and a reduction in costs.

Profit rose to $10.7 million in the six months ended December 31, from $9.8 million a year earlier, the Christchurch-based company says in a statement. Net operating income rose 15 percent to $51.8 million, while operating expenses fell 10 percent to $31.9 million.

Growth in the net operating income mainly reflected the acquisition of PGG Wrightson Finance in August 2011 and lower cost of funds, the company says.

That more than offset a wider $5.28 million loss from the non-core property businesses acquired from Marac as part of the merger that created the company. The year-earlier loss was $1.2 million. Heartland took a $4 million impairment expense against the property book, up from impairments of $1.6 million a year earlier.

Heartland shares rose 2.7 percent to 75 cents after the results, which beat brokerage First NZ Capital's forecast of $11.1 million profit. It will pay a first-half dividend of 2 cents a share on April 5 to shareholders on the register as at March 20.

Net impaired, restructured and past due loans over 90 days were $80.2 million as at December 31, down from $90.5 million a year earlier and mainly reflecting the non-core property book, which consists of $87.9 million of receivables and $55.3 million of investment properties.

The company has embarked on a review of its plan for a managed exit from non-core property over five years.

The receivables book for retail and consumer, the biggest unit of the company's core business, fell by $9 million to $945.8 million, while net operating income rose 2.3 percent to $24.1 million.

Heartland says strong motor vehicle receivables growth was offset by a shrinking residential mortgage book in the face of a competitive market. Profit rose to $17 million from $14.9 million.

Business receivables shrank by 9.7 million to $530.5 million, which it said reflected higher levels of repayments "in a low credit growth market". Business profit rose to $8.9 million from $5.5 million a year earlier.

The rural receivables book grew to $480.6 million from $478.6 million, which it says reflects low seasonal demand in livestock trading and a low credit growth environment. It expects a pickup in the second half. Rural earnings rose to $8.7 million from $5.1 million.


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Remember that the previous half year period reported had a whopping great one off tax credit of $5m plus, so the half year result this time around is actually much better than the last one.

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For a financial institution with a relatively high finance book as opposed to traditional bank mortgage lending, this is a very average result.

Kiwibank and SBS Bank would be far better options for investors to keep their money in NZ control as opposed to Australian owned Banks.

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Solid result for one of the very few under-valued stocks left on the stock market.

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