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Heartland says NZ needs greater control of its finance industry

Heartland New Zealand says now is the time to have greater control of the essential finance industry.

Thursday, 15 March 2012

by Jenny Ruth

"Heartland is locally funded and not directly exposed to the volatility in offshore markets," the company said in an update for investors.

New Zealand needs a strong rural lending specialist and not enough credit capacity is dedicated to the productive sector, the company says.

Heartland had $2.4 billion in total assets at December 31 and its rural loan book, spread across 1,720 rural accounts, is $470 million with an average loan size of $266,000. Heartland bought PGG Wrightson Finance last year.

The largest part of the company's loan book is consumer lending on mortgages and car finance with loans totalling $967 million and an average loan size of $21,000. The lion's share of its funding, $1.31 billion, comes from retail term deposits, reflecting its origins. (It was created through the merger of Marac Finance and three building societies.)

Another $252.6 million of its funding comes from transactional accounts such as cheque accounts.

Heartland also lends to small businesses and that part of its book totals $519 million with an average loan size of $177,000.

Heartland said its retail deposit book is now growing again with strong new funds flow. A graph included in the update suggest its reinvestment rate has improved from below 70% late last year to about 85%.

The company said it has now achieved most of the milestones it set itself ahead of the January merger, including listing on the NZX, being included in the Top 50 Index and having its "BBB-" investment grade credit rating affirmed.

Still to be achieved are becoming a bank - the timetable of which is up to the Reserve Bank - and achieving a sustainable and acceptable return on equity (ROE).

Heartland Treasurer Craig Stephen says the company is "very much focused on delivering sustainable returns to shareholders."

ROE is currently about 6% "which we believe is sub-standard. We think double digit returns are what are required," Stephen says.


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