Heritage Bank lifts profit in 2016/17

28 August 2017

Heritage Bank recorded a 10% growth in pre-tax profit for the 2016/17 financial year, CEO Peter Lock announced today.

Heritage today released its financial results for the 2016/17 year, showing strong growth across a range of metrics.

Pre-tax profit growth was solid, up 10.2% to $56.31 million compared to $51.11 million the previous year.  The after-tax profit of $39.62 million was up 9.6% on the $36.14 million achieved in 2015/16.

Retail deposits increased by $978 million to reach $6.133 billion, representing 19% growth in the 12-month period.

Loan approvals totalled $2.391 billion, up 34.3% on the $1.78 billion achieved in the previous year.

Total consolidated assets grew by 11.1% to reach $9.379 billion, up from $8.441 billion.

Mr Lock said after accounting for one-off structural items, including the gain on the sale of Heritage’s Financial Planning business, the adjusted pre-tax profit of $52.77 million was still a 3.3% increase on the previous year.

“Heritage Bank has had a very successful year, as we continue to grow and reshape the business for the future,” Mr Lock said.

“We have been on a deliberate growth trajectory, as we look to build our loan book, retail deposits and assets. That growth will be critical for us in reshaping the business and investing more in our digital capabilities in coming years, both in the front-end and in the back office.

“Almost exactly 50% of our loan approvals came via originations through our broker channel, and we will continue to build our presence outside Queensland.

“Heritage is a strong brand and our customer-owned status means we have a fantastic value proposition that resonates with banking consumers.”

Mr Lock said Heritage had maintained its net interest margin at a similar level as the previous year, and had slightly reduced its cost to income ratio.

“Maintaining our margin is indicative of the fact that our growth has not come on the back of unsustainable pricing. We continue to manage our margins well and reduce our costs through more efficient processes and procedures.”

Chairman Mr Kerry Betros said the results reflected Heritage’s determination to position itself for success in the increasingly digital banking environment while still staying true to its customer-owned values.

“The Board and senior executive group have worked closely together to set a very clear path for our future. We are focused on modernising our bank, simplifying our processes, streamlining our operations to our core business, and delivering great value of customers,” Mr Betros said.

“I’m delighted at the way our staff have taken up the challenge of delivering on our strategic goals. The growth we have achieved this year is clear evidence of our success in pursuing those goals.

“This is a time of change for Heritage, as we start reshaping the business to meet the demands of the increasingly digital banking environment.

“What will not change in future is our absolute commitment to delivering the benefits of the customer-owned model. 

“We will continue giving customers excellence in service, pricing and products, and providing a real alternative to the listed banks.”

Mr Betros said proof of Heritage’s success in delivering for its customers was evident in the independent evaluation measures obtained during the year.

“In December 2016, Heritage Bank topped Australia for customer satisfaction in the first-ever Australia Retail Banking Satisfaction Survey carried out by global market research firm JD Power.

“Our Roy Morgan national customer satisfaction rating at 30 June 2017 was 94.9%, the equal highest of all financial institutions across Australia*.

“In addition, independent analysis by research company CANSTAR, found that our customers were $54 million a year better off in 2016/17 through banking with Heritage rather than one of the big four banks.

“We’re proud to continue providing our customers with a satisfying and rewarding banking experience, just as we have throughout our 142-year history.”

Heritage’s capital adequacy ratio at 30 June 2017 was 13.44% and its liquidity ratio was 15.43%, well above regulatory requirements. 

Mr Betros said mention also needed to be made of Heritage’s mortgage loan arrears greater than 30 days, which was just 0.32% at 30 June 2017

“Compare that to the latest available Standard and Poor’s Performance Index (SPIN) industry figure of 1.16%, as at May 2017.  We sit at one third of the industry average, which illustrates the continued strength of our loan book and the robustness of our credit practices,” he said.

* Roy Morgan, Customer Satisfaction: Consumer Banking In Australia, Main Financial Institution Customer Satisfaction, June 2017