Heartland Bank still wants to buy UDC from ANZ

Heartland New Zealand chief executive Jeff Greenslade

Related audio: Heartland's head of banking, Chris Flood, on the bank's strategies (August 2016)

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Heartland Bank has told investors it remains interested in buying asset finance company UDC from ANZ Bank, describing it as an "ideal fit."

In his speech at the company's annual general meeting in Christchurch, chief executive Jeff Greenslade said he believed the acquisition would "complement our strategy and would provide a number of synergies."

UDC is one of New Zealand's largest and oldest finance companies, with widespread reports in April that ANZ was considering a sale. Mr Greenslade said market sentiment suggested a decision on UDC's future is "imminent."

Net profit after tax for the three months to the end of September was $14.3 million, up 21% on the same period a year earlier. Management remains confident of achieving the net profit after tax target of $57 to $60 million for full-year 2017.

Investors were also told that a more competitive funding market was emerging, with increased competition for deposits due to demand for credit outstripping available savings. Mr Greenslade also noted that the banking industry was moving off historically low levels of impairments, and "it is still necessary to be cautious and watchful in terms of exposure to global markets."

Over the next three months, Heartland intends to offer residential mortgages, deposits and lending on livestock online.

It increasingly intends to use its website to target millenials, people in their late teens to early thirties as well as people over the age of 55, who Heartland say are the fastest growing demographic in social media use.

Shares in Heartland Bank fell 0.65% or one cent to $1.52. They've risen 15.9% since the start of the year.

(BusinessDesk)


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The UDC brand is trusted by many private investors, some of whom are probably quite unsophisticated and vulnerable. What will be done, in the event control of UDC passes to operators from a different sector of the finance industry, to protect the interests of those investors?

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Well, they should be notified of the credit downgrade. There is no way UDC will remain A- under Heartland (BBB). UDC are currently three notches below ANZ... following the same rationale a BB rating for UDC under Heartland.... that's sub-investment grade.... if I was an investor I would be asking for a lot more in yield. You would like to think Heartland have factored in a much higher cost of funds for UDC in weighing up its profitability.

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OK... so the rating reflects ANZ considering selling UDC. But with Heartland at BBB the rating will not be higher than that

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Uh-Ohh! I can see UDC becoming the commercial equivalent of an 'Ezy Cash Loans' or an Instant Finance. An increase in the number of impaired loans being offset by usurious interest rates.

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Would be an interesting transaction for ComCom to opine on. Probably the biggest two players in the asset finance market.

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