Heritage Bank has published its half-year results for the 2021 financial year (1HFY21), reporting a decrease in its loan portfolio growth compared with previous periods.
The subdued level of growth was attributed to higher than budgeted repayment rates, driven by low interest rates and the effects of the coronavirus pandemic stimulus payments, according to Heritage Bank.
The net loan growth of $59.6 million at 31 December 2020 was $189.2 million above budget expectations, but 40 per cent lower than for the same period last year, the bank said.
Funded loans in the 1HFY21 period had increased by 14.68 per cent to $1.064 billion.
As at 31 December 2020, total loans under management had increased by $60 million from 30 June 2020 to $8.702 billion.
In the six months to 30 June 2020, the loan portfolio had increased by $71 million from $8.571 billion to $8.642 billion, while in the six months to 31 December 2019, the portfolio had increased by $100 million from $8.4712 billion to $8.571 billion.
The bank originated $595 million in loans through the broker channel in the half year, which represents a 26 per cent rise on the corresponding period in the previous year.
Commenting on the contribution by the broker channel, Heritage Bank chairman Kerry Betros said: “In the six months to 31 December 2020, broker-originated loans made up 60 per cent of our total home lending.
“That was up from 56 per cent in the prior corresponding period.”
“We’ve introduced improvements in our home loan assessment process efficiencies, which has driven an improved broker experience and faster turnaround times, even in periods of peak volumes.
“The broker channel is vitally important to Heritage Bank and will continue to be so in the future. While we have a branch network in Queensland and two branches in Sydney, we rely on our broker partners to generate home loan business across the country.”
In its retail deposits segment, Heritage bank has broken through the $11 billion milestone for the first time in its total consolidated asset figure as at 31 December 2020.
Heritage Bank has recorded a $1.105 billion increase in retail deposits in the six months to 30 December 2020, representing a 210 per cent increase on the $357 million growth achieved in the same period in 2019.
This has led to Heritage recording a total consolidated asset figure of $11.354 billion as at the end of December 2020.
Meanwhile, the non-major bank has recorded an after-tax profit of $23.20 million, 2.64 per cent lower than the same period the previous year.
Commenting on the overall results, Heritage Bank CEO Peter Lock said: “We’re extremely happy that our results have defied the expectation we had when we set our budgets for the year that COVID-19 would severely impact the economy.
“COVID has still had an effect, but not as much as we anticipated.
“It’s pleasing that our profit and our lending have held up well, given the circumstances and the disruptions we encountered. It’s even more pleasing that we have attracted such strong growth in retail deposits. The emergency measures that the federal government put in place to combat COVID has seen plenty of cash flood into the economy.”
As travel restrictions continue and uncertainty lingers in the wake of the COVID-19 crisis, Mr Lock said that borrowers are paying down loans at a faster rate than normal, while customers are choosing to save rather than spend.
“With such strong deposits, we are in an excellent position to be more aggressive in targeting loan growth through the remainder of the year,” Mr Lock said.
“We are already offering sharper rates to accelerate acquisition, with reductions to many of our variable home loan rates announced earlier this month.”
Mr Betros said the bank’s mortgage arrears rate was sitting at 0.31 per cent at 31 December 2020, compared with the 0.40 per cent recorded at 30 June 2020.
“Thankfully, COVID has not had the impact on our credit performance that we feared might be the case. In our budget for this financial year, we made a significant provision for an increase in loan arrears,” he said.
“More than 95 per cent of our members who took up hardship assistance in early 2020 were able to return to normal repayment arrangements after the initial six-month period ended.
“That’s a great outcome for our members and for Heritage as a whole.”
Malavika Santhebennur is the features editor on the mortgages titles at Momentum Media.
Before joining the team in 2019, Malavika held roles with Money Management and Benchmark Media. She has been writing about financial services for the past six years.