Heritage Bank has maintained a solid profit result in a six-month period in which it enjoyed a strong increase in lending volumes.
Loan approvals totalled $792.97 million for the six-month period, up 20.7% on the corresponding period in 2013. Lending growth was particularly strong towards the end of the calendar year and has continued into 2015.
Profit was down slightly, reflecting an increased investment in information technology infrastructure for Heritage as well as continued jobs growth.
The pre-tax profit was $23.174 million, down 5.5% on the $24.520 million in the same period the previous year. Profit after tax was $16.230 million, down 9.5% on the corresponding period in the previous year.
Heritage enjoyed strong endorsement from its customers in this period, with a 92.8% customer satisfaction rating as at December 2014*. This was the highest in Queensland and the only financial institution with a rating above 90%. The four major banks averaged just 82.5% in this survey.
Chairman Mr Kerry Betros said the lending growth reflected Heritage’s focus on delivering value for customers while growing the business.
"We are targeting increased loan volumes this financial year to help grow this business. After a relatively slow start, we are well and truly delivering on that goal with a 20% increase in loan volumes," Mr Betros said.
"In this period we offered a one-year fixed home loan interest rate of just 3.99%, the lowest in Heritage’s 140-year history. We also offered a Discount Variable home loan interest rate of just 4.39%, one of the lowest available in the Australian market at the time.
"Our extremely sharp pricing provides great value for customers as well as helping secure an increased share of the home loan market."
Mr Betros said the slight reduction in profit reflected an increased investment in technology and process improvements, and continued jobs growth.
"This period saw the start of a significant increase in IT infrastructure that will take place in coming years as we respond to the digital revolution in banking. We are also continuing to invest in jobs at Heritage by creating an additional 8 positions in this half-year, after adding a total of 60 new positions in the previous two financial years" Mr Betros said.
Total consolidated assets were down slightly, decreasing 2.3% from $8.519 billion to $8.322 billion in the six months to 31 December 2014.
Heritage lifted its Tier 1 capital ratio from 11.89% as at 30 June 2014 to 12.01% as at 31 December 2014. The total capital ratio decreased slightly from 13.33% to 12.07% following the redemption of the Heritage Notes in October 2014. Similarly, the liquidity ratio decreased from 22.23% to 19.31% in the same period.
CEO Mr John Minz said managing Heritage’s prudential requirements continued to be a focus.
"We are facing tougher prudential requirements post-GFC and we also need to boost our capital holdings as our lending volumes grow. Managing our capital requirement also means managing total assets.
"We must also take steps to manage our retail funding mix, reduce excess liquidity and improve our margin.
"While Term Deposit growth moderated over the period, our savings account deposits actually increased by $172 million, which is consistent with the $186 million growth recorded in the same period last year. This was a positive outcome for Heritage in terms of managing our core retail funding channels."
Mortgage Loan arrears greater than 30 days sat at just 0.41% of the total mortgage portfolio balance at 31 December 2014.
* Roy Morgan Research, Consumer Banking in Queensland, Main Financial Institution (MFI) Satisfaction, December 2014
For more information please contact: Andrew Fox, Corporate Communications Manager, 0419 714 204