Heartland Bank is sticking to existing forecasts for annual profit to rise as much as 13 per cent as credit growth and improving asset quality bolster the lender's books, but is watchful of increasingly volatile global financial markets.

Chief executive Jeff Greenslade, who's led the lender since Marac Finance was carved out of Pyne Gould Corp in 2011 and merged with the Canterbury and Southern Cross building societies, told shareholders at today's annual meeting in Auckland that the bank is still confident net profit will be between $65 million and $68m in the year ending June 30, 2018. It sees asset growth continuing in the first three months of the year, while cheaper wholesale funding has offset increased competition for retail deposits.

"The macroeconomic environment for New Zealand is favourable, but internationally, markets are prone to event-driven volatility," Greenslade said in speech notes published to the stock exchange.

"It is still necessary to be cautious and watchful in terms of exposure to global markets."


Heartland focuses on higher-margin consumer lending, such as auto-loans and reverse mortgages, and online lending channels including peer-to-peer lender Harmoney, leaving the residential mortgage market to the likes of the Australian-owned banks.

Auckland-based Heartland has been developing its digital strategy, which Greenslade today described as transacting online as opposed to what the major banks offer through internet banking, which is largely an administration tool and associated with payments.

That also opens opportunities in using data to identify risks and opportunities, and Heartland is investing in analytical tools to streamline credit decisions and improve prediction.

"Digital allows a small bank to operate with the similar scale of larger banks and to offer speed as a point of difference," Greenslade said.

Heartland is also re-examining the make-up of its 360-strong workforce to improve the level of diversity, and has set up a committee made up of staff from across the organisation to "recommend measurable objectives and oversee and assess Heartland's progress towards achieving them," Greenslade said.

The bank is reviewing its recruitment, retention and communication processes, and its broader culture.

About half of the lender's staff is female, as is the senior leadership, although the wider executive team is 30 per cent female and 70 per cent male.

In terms of ethnic diversity, Greenslade said 47 groups were identified in a voluntary survey across the business, but that there were gaps in "key areas" that need to be addressed.


"One of our priorities is to address the under-representation of Maori at Heartland when compared to New Zealand's working population," he said.

"We are taking a number of steps to ensure our workplace is welcoming and inclusive to Maori and enable us to demonstrate a greater understanding and appreciation for the Maori culture."

Chair Geoff Ricketts also discussed some of Heartland's community engagement at the meeting, outlining the activities of the Heartland Trust, which made $280,000 of charitable grants and donations to almost 20 organisations in the financial year.

That was after Ricketts pointed to Heartland's total shareholder return of 60.9 per cent in 2017, and an annual average 38.3 per cent return over the past five years.

"We believe this is an excellent outcome for our shareholders," he said.

Heartland wants to raise $59m from shareholders via a discounted rights issue which opens later this week.

The shares will be sold at $1.70 apiece, which was a 9.5 per cent discount to the theoretical ex-rights price of $1.88 at the time it was announced earlier this month. The shares fell 2 per cent to $1.93.