UPDATED: Heartland shares jump to record as asset growth drives first-half earnings

UPDATED: Heartland New Zealand [NZX: HNZ] shares jumped to a record after the bank formed from the merger of Marac Finance and the Southern Cross and Canterbury building societies said first-half profit would rise as much as 44 percent, reflecting growth in assets.

Profit in the six months ended Dec. 31 was in a range of $23 million to $24 million, Christchurch-based Heartland said in a statement. That's up from $16.7 million a year earlier. The company raised its full-year forecast to a range of $46 million to $48 million, from a previous estimate of $42 million to $45 million, a gain of as much as 33 percent in the year.

Heartland is a minnow compared to the nation's big four lenders, with total assets of $2.45 billion at Sept. 30, compared to an average $90 billion. It is rated BBB by Fitch, versus AA- for ANZ Bank New Zealand, ASB Bank, Bank of New Zealand and Westpac New Zealand, meaning it has relatively higher funding costs.

Niche lending markets helped the lender generate an interest margin of 4.9 percent in the June quarter, more than twice the sector average, according to KPMG. Heartland said it expects underlying asset growth to continue in the second half, driven by  business, rural and consumer volumes, while maintaining margins.

"The key question for Heartland is can they grow their lending assets," said Matthew Goodson, managing director at Salt Funds Management. "That they've attributed the upgrade to asset growth appears to have answered that question."

The shares rose 6.7 percent to $1.27 and earlier touched a record $1.30. The stock has surged 48 percent in the past 12 months, almost three times the 18 percent gain for the NZX 50 Index.

The company said it is currently considering a revaluation of its 10 percent stake in Harmoney Corp following the peer-to-peer lender 's $10 million capital raising, in which online auction site Trade Me Group acquired a 15 percent holding.

Heartland expects to release its complete first-half earnings in late February.

(BusinessDesk)