Heartland lifts first-half profit, trims dividend on RBNZ restrictions

Net profit for the six months ended December rose from $39.9 million from $44.1m. Photo / Google Maps

Financial services firm Heartland Group Holdings lifted first-half net profit 10.6 per cent but declared a slightly lower interim dividend due to restrictions imposed by the Reserve Bank.

The company, which operates Heartland Bank in New Zealand and a reverse mortgage business in Australia, posted a net profit of $44.1m in the six months ended December, up from $39.9m for the previous corresponding period.

After stripping out one-off items, the underlying net profit was $43.2m, up 13.4 per cent.

Heartland declared an interim dividend of 4c per share, down from 4.5c due to RBNZ restrictions on distributions by banks in NZ but said it expects to return to a pay-out ratio in line with historic levels once those restrictions are removed.

The company issued guidance for a full-year profit of $83m to $85m, saying it expects it to come in at the upper end of that range.

Heartland shares dipped 1c to $1.88 in morning trading.

In its results presentation, the company said the first half result exceeded expectations, particularly due to a much lower than forecast impaired asset expense and continued growth in core portfolios.

However, overall growth was impacted by continued reduction in non-core portfolios and elevated repayments caused by Government and RBNZ stimulus and mortgage holidays allowing customers to divert funds to repay other debt.

"Heartland believes customer repayment activity will normalise, and impaired asset expense levels will be in line with budget for the remainder of the financial year."

Heartland's impairment expense decreased by $4.5m, or 49.7 per cent, to $4.5 million.

The company said this was due to remediation of accounts previously in arrears – largely due to repayments.

It said the financial impact of the Covid-19 pandemic on the New Zealand economy had been more subdued than forecast by major bank economists in the early months of 2020.

Net operating income increased from $118.6 to $125.3m while costs increased $6.5m to $61.1m, reflecting increased staff levels with an additional 78 people in permanent or fixed-term roles compare to the previous corresponding period.