Heritage announces strong half year results

Australia’s largest building society, Heritage, has announced a strong first half year result, reporting a before tax profit of $15.20 million, for the period ended 31 December 2008. This strong result represents a 16.3% increase over the prior period. After tax profit was $10.6 million, an increase of 16.45 %.

During this period, the Society also reported solid growth in total consolidated assets that grew to $7.07 billion for the period ending 31 December 2008, strengthening Heritage’s position as Australia’s largest building society.

Announcing the Society’s first half year results, Heritage Chairman Mr Brian Carter described the results and the Society’s overall performance for the period as very satisfactory given the prevailing economic conditions.

Mr Carter highlighted that the Society has continued to respond to the external market factors including the significant decreases in interest rates which have flowed on from the changes in the Reserve Bank of Australia’s (RBA) cash rate.

“The Society has restricted its lending volumes due to the increased cost of wholesale funds but also to maintain the capital adequacy and liquidity ratios at levels which will ensure that the Society is well positioned when economic conditions improve. Loan approvals for the period were $497 million,” Mr Carter said.

“Notwithstanding the difficult credit conditions, the Society has put in place additional securitisation warehouse arrangements to provide the capacity if and when required.

“We are also pleased to report a solid $348 million growth in retail deposits which represents growth of approximately 13%. This comes on top of an increase of similar magnitude for the full year ended 30 June 2008.

“I believe this is a reflection of our members’ view of the prudent business model that has been the foundation of the Society’s continuing strong success.

“Our success and strong set of numbers has been reinforced by the low mortgage arrears rate1 of 0.35% that the Society recorded at 31 December, 2008.”

Mr Carter questioned, “I wonder how many other lenders could match this figure?”

“In spite of the economic conditions and the higher interest rates that prevailed in early 2008 the Society continues to show the benefits of sustaining our high quality loan book.

“Heritage retains its commitment to have a strong robust organisation committed to the mutual philosophy and reinvesting the profits generated for the ongoing benefit of its members,” Mr Carter said.

Heritage CEO Mr John Minz said the Society’s strategic plan had identified the need to consolidate following three years of significant expansion in the branch network and significant growth levels and also in the present financial climate.

“The Society will continue to pursue increased diversity in our funding base with the timing of these initiatives being dictated by the appetite of the market,” said Mr Minz.

“In line with our commitment to the community, the Society has continued to expand its product portfolio launching a Community S@ver account which is expected to be a trigger for member growth.

“Concurrently, there has been ongoing investment in a range of Heritage’s systems and processes to ensure that we are meeting our members’ needs and to continue to satisfy regulatory requirements.

“In the past six months, this investment has included Anti-Money Laundering compliance systems and enhanced Customer Relationship Management Systems,” he said.

Mr Minz commented that the first six months of the 2008/09 had demanded continued attention on prudential and regulatory requirements.

"Heritage has successfully managed its business to achieve a capital adequacy ratio of 11.94% after half yearly adjustments. The Society tries to maintain this ratio around 12%" Mr Minz said.

"I would also like to highlight the strength and diversity of our funding channels which is evidenced by the 31 December, 2008 liquidity ratio of 19.27%."

Mr Minz added, "We have realised sustained growth despite the volatility in market conditions. This has resulted in Heritage achieving a solid financial position with opportunities and capacity to grow the business within a mutual framework."

"This growth will include the diversification of our income streams with a joint venture initiative soon to be announced that will extend the Society’s financial planning arrangements in conjunction with expanding our product mix to include superannuation products, a segment that we have identified as a strong growth channel that will add value to our members," he said.

"The Society will also look to proactively identify growth opportunities that align with the Society’s mutual status and that will continue to deliver benefits to our members.

"As demonstrated by the strong first half year results, the outlook for the Society remains positive."


* 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.