Heartland says it benefits from operating in parts of the economy that are sheltered from current headwinds. Photo: 123RF
Financial services company Heartland Group's reported a modest lift in its half-year profit as lending increased, bad debts fell, and its Australian business expanded.
Key numbers (for the six months ended 31 December 2022 vs year ago)
- Net profit $48.7m vs $47.5m
- Net income $141.7m vs $130.7m
- Expenses $63.4m vs $57.3m
- Net interest margin 3.97 pct vs 4.30 pct
- Interim dividend unchanged at 5.5cps
The company, which specialises in online consumer and business finance and reverse mortgages, said it had done well in the face of high inflation, rising interest rates, and pressured household budgets on both sides of the Tasman.
"Overall credit quality remains good, benefiting from Heartland's continued move towards higher quality and lower risk assets," the company said in a statement.
It said it expected more of the same challenges for the rest of the year, but it was benefiting from being in parts of the economy with some degree of insulation from current headwinds, such as lending for livestock, vehicle finance, and reverse mortgages.
"As such, the majority of Heartland's portfolios experienced strong growth despite a number of economic uncertainties and challenges."
The net profit was affected by $6 million of one off items involving former accounting costs, costs incurred acquiring Australian livestock financier StockCo, and a writedown in the value of its holding in Harmoney.
Heartland's lending rose 10 percent to $6.5 billion over the period, with deposits rising 13 percent to $4.08b, while its move to do less risky lending saw its bad and doubtful debt cost shrink.
However, rising interest rates, a move to less risky lending, competition, and a decision not to pass on the full impact of higher rates saw its margins shrink.
Income was boosted by the contribution of StockCo, while it is completing the purchase of Australia's Challenger Bank, which will give it access to a deposit taking licence and areas for expansion.
"Heartland's vision is to create a sustainable and profitable digital bank serving sectors of the Australian market which Heartland considers are under-serviced by major banks, including older Australians, rural Australia, and small businesses."
Heartland forecast full year earnings before one-offs of between $109m and $114m.