Heartland delays capital return so it can hunt for acquisitions

Heartland Bank [NZX: HNZ] posted a 10% gain in nine-month profit while delaying a planned return to shareholders, saying market volatility had created opportunities for acquisitions that may be a better use of its capital.

Heartland affirmed its guidance for profit of $51-55 million for the year ending June 30, up from $36 million in 2015.

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 would return capital to shareholders. The Auckland-based lender's investors voted to simplify the company's structure by amalgamating its businesses into one unit, issue up to $75 million of tier 2 capital instrument and return as much as $100 million to shareholders.

"Since last year's annual meeting, there has been considerable volatility in financial markets," chief executive Jeff Greenslade said in a statement. "Heartland believes this volatility creates greater opportunity for acquisitions and wishes to assess opportunities (if any) that arise during this period."

As a result, the company "remains focused on assessing opportunities" and won't "proceed with the regulatory capital issue and/or return of capital before June 30, 2016," he said.

Heartland has been mooted as a potential buyer for ANZ Bank New Zealand's UDC Finance business. ANZ has been considering selling the unit, which had total assets of $2.4 billion at balance date in the 2015 financial year, making it slightly smaller than Heartland, whose total assets stood at $3.39 billion at March 31.

Its disclosure statement for the nine months ended March 31 shows Heartland's net interest income rose to $108.7 million from $99.6 million a year earlier. Profit in the period rose to $39.6 million from $36 million as the lender paid more tax and recorded a 12% increase in its impaired asset expense.

Total borrowings rose to $2.8 billion from $2.68 billion, driven by a 13% gain in deposits to $2.18 billion.

Heartland shares last traded at $1.17 and have declined 9.3% in the past 12 months while the NZX 50 Index gained 21% .The stock is rated a 'buy' based on a Reuters survey.

(BusinessDesk)