Heritage Bank posts increased half-year profit

Heritage Bank today announced a strong pre-tax profit of $21.05 million for the six month period to December 2011, an increase of 5.4% over the same period the previous year.

The after-tax profit of $14.74 million was also up 1.9% on the same period last year.

Chairman Mr Brian Carter said the results came despite extremely tight market conditions and at a time when Heritage had taken important steps to position itself for future growth.

"Heritage Bank continues to develop as a modern financial institution and we have made significant evolutionary changes in the last six months that will position us better for ongoing success," Mr Carter said.

"Our name change to Heritage Bank in December last year was an important milestone. It better reflects our role and will improve our cut-through in the market place.

"Late last year we also announced the expansion of our mortgage broking network throughout Australia, making us a truly national player in the mortgage market and providing geographic diversification. With plans also developed to open two new branches Queensland in 2012, the last six month period has been one of key strategic achievements."

Loan approvals for the half-year were $568.94 million, down 29.4% from the $806.41 million for the same period the previous year. Retail deposits grew $205.32 million in the six-month period, compared to $183.40 million in the same period in 2010. Consolidated assets grew 0.42% to $8.078 billion compared to 30 June 2011.

"Our loan approval levels reflect the overall contraction of the mortgage market, as well as strong competition in this sector. Our solid profit performance in this environment demonstrates the excellent financial management that is a hallmark of Heritage," Mr Carter said.

In January, ratings agency Moody's confirmed Heritage's rating of A3/P-2 with a Stable outlook, despite the decision by Standard & Poor's in December to lower its rating for Heritage.

"That rating downgrade was inexplicable to me, and to many others in the industry, particularly as Moody's reaffirmed our strong rating just a few weeks later," Mr Carter said.

CEO Mr John Minz said Heritage delivered another notable achievement in December with its highest-ever customer satisfaction rating in the monthly Roy Morgan Roy Research Consumer Finance Survey.

Heritage's satisfaction rating of 97.1%* is not only its best since the surveys began in 1996, it gives Heritage the highest satisfaction rating of any bank in Australia.

"Heritage's promise to our customers is to put People first, and our best-ever customer satisfaction rating in December clearly shows that we are delivering on that promise," Mr Minz said.

"Not only are we Australia's largest customer-owned bank, but we have the most satisfied customers in the country."

Mr Minz said Heritage's People first philosophy was reflected in its approach to interest rates.

"In recent times there has been a scramble from many other ADIs to increase their variable home loan rates, independent of any RBA increase," he said.

"Heritage has resisted that move and kept our rates the same. However we will keep monitoring our margins, as well as what's happening in the marketplace, and may need to adjust our rates in future. As always, we will be guided by the best long-term interests of Heritage and our members.'

Heritage's capital adequacy ratio of 12.99% and liquidity ratio of 19.09% remain well above regulatory requirements.

The capital ratio was down slightly compared to the same period last year.

"This reflects a number of factors, including the redemption of a $35 million term subordinated debt transaction and the fact that we are still waiting on a final capital adequacy ratio standard from the Australian Prudential Regulation Authority (APRA)," Mr Minz said.

"Once APRA does release the standard and we know the requirements, we intend investigating options to issue a qualifying instrument."

Loan arrears greater than 30 days increased slightly but still represent only 0.53% of the total mortgage portfolio balance. This increase came off an extremely low base and the result is still the envy of most other banking institutions.

* Home loan comparison rate based on a $150,000 loan over 25 years.  Fixed loan comparison rate applies only for loans with an LVR of 80% or less and a loan amount of $150,000 to $249,999.  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.

Interest rates are on a per annum basis. Rates are correct as stated and subject to change without notice. Rates shown are for new loans and do not apply to switches or internal refinances.

Home Advantage Variable rates include discounts shown from the Standard Variable rate. Home Advantage Living Equity rates include discounts from the Living Equity rate. Discounts are based on total lending in the package. Discount Variable LVR rates are for new lending and include discounts from the Discount Variable Loan Rate.  Discounts are not available in conjunction with any other interest rate discount or special offer. All fixed rates are fixed for the period stated and revert to the variable rate applying at expiration of the fixed term. To approved applicants only. Conditions, criteria and fees apply.

Loan to Value Ratio (LVR) is the loan amount divided by the value of your security property (determined by Heritage Bank at assessment), multiplied by 100. Owner Occupied loans have a maximum LVR of 95%, Investment loans have a maximum LVR of 80% and Living Equity has a maximum LVR of 80%. Heritage is not accepting any new investment applications until further notice.

This advice has been prepared without taking into account your objectives, financial situation or needs. Because of this you should, before acting on this information, consider its appropriateness having regard to your objectives, financial situation or needs.

Generate a personalised Key Fact Sheet based on your loan amount, term and repayments. This tool is provided to help you compare home loans from Heritage with other financial institutions.