Heritage Bank maintains solid financial performance

3 March 2022

Heritage Bank’s half-year financial results show a continuation of strong momentum in an extremely competitive environment, highlighted by a record volume of lending and total assets hitting $12 billion for the first time, CEO Peter Lock announced today.

Loan approvals hit a record amount for a half-year period at $1.399 billion, up 22.21% on the same period the previous year. Net loan growth for the period was $113.54 million, up 88% on the corresponding period. This strong volume reflected the ongoing buoyancy in the property market across the country in the second half of 2021.

Total consolidated assets hit $12.184 million as at 31 December 2021, up 2% from the figure at 30 June. This is the first time in the bank’s 147 year history it has broken through the $12 billion milestone.

Heritage recorded a net profit of $21.20 million in the six months to 31 December 2021, 8.64% lower than the same period in the previous year, but still above budget. The pre-tax profit was $30.34 million, down 8.62% on the corresponding period.

Retail deposits in the period were $285.52 million, moderating from the abnormally high rate of deposits experienced in the height of the COVID pandemic, but still strong.

The significant growth in retail deposits during the last two years has allowed Heritage to consolidate its funding mix and position its balance sheet for future growth. Retail deposits made up 80% of total funding as at 31 December.

Mr Lock said the half-year results reflected Heritage’s strong financial position.

“We’ve enjoyed a solid half-year performance in competitive market conditions. Our profit has held up well considering the pressure on key revenue lines evident across the industry,” he said.

“Our record volume of loan approvals was an outstanding performance in the current environment, and growing our total consolidated assets beyond the $12 billion milestone reflects our strength.

“Our net interest income grew across the half-year, on the back of steady portfolio growth and a pick-up in consumer activity. Our net interest margin held steady at 1.92%, an excellent result compared to what a number of the major banks have experienced, with sustained pressure on lending yields at the same time as funding rates have started to rise off historic lows.”

Mr Lock said operating costs were slightly higher in the half-year, with a number of factors in play.

“Rising personnel costs were a major factor, with the market for quality staff highly competitive. We also took the conscious decision to invest in key member-facing roles and critical support functions such as technology and risk.

“We have also incurred a number of one-off costs in relation to our proposed merger with People’s Choice Credit Union,” he said.

Chairman Mr Kerry Betros said he was particularly proud of the quality of Heritage’s assets, and the strength of its capital holdings.

“Our 30-day mortgage arrears rate was just 0.22% at 31 December, which is at record low levels for us. That highlights the quality of our assets and the member-focussed approach we take to our mortgage holders,” Mr Betros said.

“We improved our capital position in this period, with a capital adequacy ratio of 14.75% at 31 December, including Tier 1 capital at 13.24%, which is at the highest level it has been in 10 years.

“We’ve been incrementally growing core capital over the past five years in response to the broader regulator push for higher-quality capital.

“Our liquidity ratio was 22.77% at 31 December, reflecting the amount of cash in the economy due to COVID relief packages. This high liquidity will be absorbed as we target increased levels of lending, and repay current funding arrangements.  Our liquidity levels and funding mix have us well positioned for growth.”

Mr Betros said throughout the period Heritage had maintained its focus on delivering for all members.

“As always, we are about balancing the needs of our depositors and our borrowers, and we’ve done that very successfully in this half-year period."

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