Lending surges 40% for challenger bank

A non-major lender has posted a record half-year profit driven by a strong lift in lending over the six months to 31 December 2016.

Heritage Bank this week posted a pre-tax profit for the six months to December 2016 of $29.92 million, up 18.1 per cent on the corresponding period the previous year. Profit after tax was $20.89 million, an increase of 17.3 per cent.

Loan approvals for the last six months of 2016 totalled $1.13 billion, an increase of 39.4 per cent on the $810.50 million achieved in the same period in 2015. As a result, Heritage’s total loan portfolio grew by $299 million, to reach $7.362 billion.

Retail deposits grew by $537.76 million in this period, up 385 per cent on the $110.89 million in the same period the previous year.

Heritage Bank chief executive Peter Lock said the group’s strong performance had come despite systemic constraints on the mutual sector that the federal government now had the blueprint to overcome.

“Mutual institutions like Heritage give customers great value but we’re not competing on a level playing field with the big banks,” Mr Lock said

“The Senate inquiry into co-operatives, mutuals and member-owned firms delivered a report in March last year outlining how to improve our competitiveness. The blueprint to fix the systemic barriers is there – all the federal government has to do is implement those reforms and give us a fairer chance to deliver better banking services to customers.”

Mr Lock said even with these barriers, Heritage had maintained the strong growth momentum that had been generated at the end of 2015/16, and was delivering on its strategic goal to grow the business.

“Our results are very strong, and reflect our success in achieving the strategic goal of expanding our business. It’s extremely pleasing that we have had such strong growth in our lending volumes, given the competitiveness of the marketplace.”

He added that the strong lending growth has come both through the Heritage branch network in Queensland and through the third-party channel.

“We will continue pursuing growth around the country as we set out to more firmly entrench the Heritage brand as an important player in Australia’s home loan market,” Mr Lock said.

The improved profit result was aided by proceeds from the sale of Heritage’s financial planning business to Bridges Financial Services in December, but underlying profit remained ahead of the same period the previous year.

Mr Lock said the profit result reflected both the flow-through from the growing loan portfolio and also Heritage’s success in attracting retail deposits.

“Heritage offers extremely competitive term deposit rates, as we do with home loans as well, and our ability to attract retail deposits has had a positive impact on our margins. Growing our business helps us to continue our ongoing investment in improving the customer experience, particularly in enhancing our digital capabilities.”

Loan portfolio growth helped lift total consolidated assets by 4.5 per cent over the period to $8.82 billion.

Heritage chairman Kerry Betros said Heritage had a clear strategy that was driving the business forward.

“We are focused on growing our lending volumes and our presence nationally, on the basis of delivering a great customer experience every time. We must make the banking experience simpler and give people better access to the modern banking channels that they expect.

“We are placing a high priority on improving our digital banking capabilities, while retaining the people first culture and personal service that our customers value so highly.”

The bank’s mortgage loan arrears greater than 30 days sat at 0.42 per cent of the total mortgage portfolio balance.

[Related: Heritage makes two senior executive appointments]

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