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Heartland shares rise after lender hikes dividend, lifts first-half profit 8.9%

Tuesday 23rd February 2016

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Heartland Bank shares rose to a three-week high after the NZX-listed lender hiked its interim dividend payment following an 8.9 percent lift in first-half profit, as increased auto loans and reverse mortgages bolstered its household lending division. 

Net profit rose to $25.6 million, or 5 cents per share, in the six months ended Dec. 31, from $23.5 million, or 5 cents, a year earlier, the Auckland-based lender said in a statement. Net interest income increased 8.8 percent to $71.5 million, with the bank's loan book expanding 7.6 percent to $2.93 billion. Heartland's deposits rose 22 percent to $2.17 billion as at Dec. 31 from a year earlier. 

The board declared an interim dividend of 3.5 cents per share, payable on April 5 to shareholders on the company's register at the close of trading on March 18. That's up from 3 cents a year earlier, and more than what Forsyth Barr analyst James Bascand was expecting in his forecast for the bank. 

The shares touched $1.22, the highest since Feb. 2, and were recently up 3.5 percent at $1.19. 

"Heartland expects underlying asset growth to continue for the second half of the financial year, with strong household, business, and rural volumes projected," it said. "Growth in consumer and HER (home equity release) loans is expected to be higher in the second half of the financial year." 

The bank affirmed annual guidance for net profit to be between $51 million and $55 million in the year ending June 30, and said current market conditions created greater opportunity for acquisitions. 

In December, Heartland told shareholders the bank was keen on expanding its consumer finance business with a particular focus on distribution channels or new technologies, but in the absence of any compelling options it will return capital to shareholders. 

At the time, the bank's investors voted to simplify the company's structure by amalgamating its businesses into one unit, issue up to $75 million through a tier 2 capital instrument to bring its structure into line with other lenders, and allow a capital return of as much as $100 million, which would occur in April. 

Today's result shows Heartland's household lending division, which spans auto-loans, reverse mortgages, consumer loans, and loans through the Harmoney platform, increased its book to $1.62 billion as at Dec. 31 from $1.52 billion a year earlier. The unit increased profit 13 percent to $29 million on a 15 percent rise in net operating income to $42.6 million. 

Its business banking unit's loan book grew to $824.9 million from $778.8 million a year earlier, and delivered flat profit of $13.8 million on a 5.6 percent increase in net operating income to $20.9 million. 

Heartland's rural business expanded its loan book to $504.6 million from $454.6 million, and posted a 14 percent gain in profit to $10.4 million on a 10 percent rise in net operating income to $13 million.

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