Wednesday 19th September 2018
|Text too small?|
Heartland Bank's Australian reverse mortgage business is constrained by Reserve Bank prudential rules and that's why it needs to be carved out into a separate entity, says chair Geoff Ricketts.
The lender's board wants shareholders to vote in favour of a restructuring to split the New Zealand bank and the Australian unit into separate entities, operating under a group umbrella company. Ricketts told shareholders at today's annual meeting the new division would give the Australian unit a chance to flourish with access to deeper funding pools across the Tasman.
As it stands, Reserve Bank rules prevent the reverse mortgage unit from exceeding more than a third of the group's total assets and restrict the group's wholesale funding lines to 20 percent of assets.
"The restructure will remove constraints on the growth and funding capabilities of the group’s business currently arising from Reserve Bank regulation," Ricketts said. "Heartland is of the view that it is in the group’s and shareholders' best interests to fund the Australian activities outside the New Zealand bank, so that the Australian business can continue to grow using its current funding sources."
If shareholders approve the deal and it's ratified by the High Court, Heartland Bank will become a wholly-owned subsidiary of a new listed entity called Heartland Group Holdings, which will hold the Australian businesses separately from the bank.
The move would unpick an amalgamation three years ago when Heartland deemed the separate units were overly complicated and required a separate board for the licensed bank.
Provided shareholders agree, Heartland will seek a foreign exempt listing on the ASX, which Ricketts said will provide sources of new capital to fund future growth opportunities.
Chief executive Jeff Greenslade told shareholders the company still only focuses on markets where it has either the best product or the only product in the market. That's why it quit lending to big business where competition from the larger banks was more intense, and was also behind its pursuit of livestock finance customers over larger rural lending.
Greenslade said the Australian reverse mortgage business remained a significant opportunity after growing 31 percent in the 2018 financial year and name-checked a recent Australian Securities & Investments Commission report stating the reverse mortgage products can help Australians achieve a better quality of life in retirement.
"In the 2019 financial year, we expect underlying asset growth to continue, particularly in reverse mortgages, motor vehicle and small business lending," he said. "The changes we are voting on today give us ability to grow in Australia but give flexibility with regard to our business in New Zealand and demonstrate that we are not an ordinary bank."
The shares rose 0.6 percent ot $1.68, having slumped 20 percent so far this year.
No comments yet
MARKET CLOSE: NZ shares mixed; Restaurant Brands soars on takeover talk
Legislate capital gains tax before election or risk 'mischief', Cullen says
NZ dollar falls vs Aussie on lower jobless rate across the Tasman
Imported coal needed to keep the lights on in NZ
Metlifecare considering buyback to lift share price
Comvita says new strategy should lift annual sales, earnings
Big end of town to advise PM on high-level economic issues
NZ Steel purchase heads off risk of consolidated customer, First NZ says
Judge rejects call for immediate stop to Rod Duke's helipad
Sky TV chair holds succession plan until Fellet's CEO slot filled