Heartland targeting on agri, car lending wins rating upgrade by S&P

Jeff Greenslade, Heartland New Zealand Managing Director
Heartland New Zealand 12-month price history (NZX.com)

Heartland Bank [NZX: HNZ], which trades on the NZX as Heartland New Zealand , had its credit rating upgraded a notch by Standard & Poor's after the rating agency was impressed by the bank's decision to focus lending in certain markets.

S&P raised the Christchurch-based lender's long-term issuer credit rating to BBB from BBB-, while retaining a negative outlook based on New Zealand's exposure to economic imbalances, it said in a statement yesterday. Heartland's stronger business position and transition towards niche markets led to the upgrade, credit analyst Nico DeLange said.

"In our view, the improvement in Heartland's business position is evidenced by the deepening of the bank's position in specialist target market segments such as vehicle asset finance, invoice financing, livestock financing, and reverse mortgage loans, and the progress made by Heartland to exit its non-core property portfolio as well as the gradual decline in Heartland's residential mortgages lending portfolio (also a non-core lending area for the bank), where levels of contestability is significantly higher," DeLange said.

Heartland, formed from the merger of the Canterbury and Southern Cross building societies and Marac Finance, bought a reverse mortgage business from Seniors Money International for $87 million earlier this year, and at its February first-half report said it was looking for new acquisitions to accelerate growth.

The bank was one of eight lenders put on a negative outlook by S&P last year after the rating agency became nervous about New Zealand's widening current account deficit and heating property market.

Heartland's shares rose 1.2 percent yesterday, and have gained 2.4 percent this year. The stock is rated an average 'buy' according to three analyst recommendations compiled by Reuters, with a median target price of 96 cents.

(BusinessDesk)

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