Heritage announces tenth consecutive record full year profit

Australia’s largest and most successful building society, Heritage, has announced its tenth consecutive record full year profit, reporting a before tax profit of $35.902 million, for the period ended 30 June 2009.

This strong result represents a 22.3% increase over the prior period. After tax profit was recorded as $25.504 million, an increase of 24.6%.

Announcing the Society’s full year results, Heritage Chairman Mr Brian Carter described the Society’s overall performance for the period as exceptional, particularly given the difficult economic climate.

Mr Carter reported that during this period, the Society also recorded total consolidated assets growth of 2.8% to $7.114 billion for the period ending 30 June 2009. The growth in consolidated assets complements the significant change in the balance sheet mix as securitised assets decrease.

“During the period, the Society moderated its lending volumes due to the challenges in the wholesale fundmarkets. Loan approvals for the period were $1.420 billion,” Mr Carter said.

“We are also pleased to report a solid $558 million growth in retail deposits which represents growth of approximately 20.8%. This comes on top of a similar increase for the full year ended 30 June 2008.

“The Society’s arrears rate of 0.296% would be a great result at any time, and is a particular highlight given the recessionary times in which we find ourselves. This is a strong indicator of the Society’s long-term prudent approach to operating the business.” 1

Heritage Chief Executive Officer Mr John Minz said the Society’s continuing strong performance was also reflected in the growth of its business book with solid growth in deposit balances and an increase in business banking loan approvals of 46.8%.

“Despite the difficult credit conditions, the Society continued to find innovative solutions, including becoming the first of its peers to establish an Exchange Settlement Account with the Reserve Bank of Australia (RBA).

“We have continued to diversify our product offering to members introducing a new communitys@ver account and more recently launching a financial planning and superannuation service.

“During the past financial year, the Society used its skills in Treasury operations to tap into the RBA’s Open Market Operations after the RBA altered its eligible security policies.

“Additionally, Heritage recently executed the successful placement of $400 million Government guaranteed notes into the wholesale debt markets.

“This transaction is the first time that Heritage has issued a senior debt public deal into the wholesale domestic markets, and the first government guaranteed transaction undertaken by an Australian building society since the initiative was introduced in October 2008.”

Mr Minz commented that Heritage has successfully managed its business to achieve a capital adequacy ratio of 12.46% at 30 June 2009. The Society tries to maintain this ratio around 12%.

“I would also like to highlight the strength and diversity of our funding channels which is evidenced by the 30 June 2009 liquidity ratio of 17.31%,” Mr Minz said.

“The outlook for the Society remains upbeat and positive despite the ongoing challenges posed by the economic environment and Heritage is already on track for another solid year.”

1. Percentage of mortgage loans in arrears greater than 30 days.

* Financials are unaudited

* Based on a $150,000 loan over 25 years. WARNING: This comparison rate is true only for the examples given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.