Efficiencies help drive Heritage Bank’s record half-year profit

26 February 2018

A focus on greater process efficiencies has helped Heritage Bank post a record half-year profit in the six months to December 2017, CEO Peter Lock announced today.

Heritage’s pre-tax profit for this six month period was $37.59 million, up 25.6% on the $29.92 million earned in the same period the previous year. 

Profit after tax was $26.27 million, up 25.8% on the corresponding period in the previous year.

Loan volumes totalled $800.9 million, down 29.1% on the same six-month period Retail deposit growth was also lower at $122.8 million, due to two main factors – a reduced need for retail funds in the subdued lending environment, and a successful wholesale investment issue that raised $750 million.

Mr Lock said: “The results reflected a deliberate decision to consolidate our position following exceptionally strong growth in the previous 12 months. The slower rate of growth has enabled us to focus strongly on improving our processes and efficiencies.

“We’re continuing to streamline and automate our processes more, moving away from outdated manual processes and taking advantage of the benefits of new digital technologies.  That’s helped us to achieve good profitability while maintaining our high levels of customer service and satisfaction.

“We will reinvest our profits back into the business to continue improving our digital capabilities, improving the platform we need to build and grow the business in future. 

Mr Lock said Heritage’s lending volumes were also adversely affected by APRA’s imposition of caps on investor and interest-only lending.

“We had to reduce lending volumes in those areas to remain within the cap, even though the primary targets of the measures were the big banks. The impacts on us were a perfect example of the Productivity Commission’s draft report into competition in the banking sector, which found that APRA’s macroprudential intervention in the home loan market was too blunt and did not take into account impacts on competition or differences between mutuals and the big banks.

“Heritage has remained well under those APRA caps and is now competitively placed to target stronger lending volumes.”

He also said Heritage had tapped into longer-term wholesale funding markets to take advantage of favourable pricing, lessening the reliance on retail deposits and contributing to the positive profit outcome. 

Heritage maintained its standing as the largest customer-owned bank in Australia in this period, growing its total consolidated assets by 1.5% to $9.52 billion.  Prudential ratios were also strong, with the capital adequacy ratio up from 13.44% at 30 June 2017 to 14.31% at 31 December 2017, and the liquidity ratio up from 15.43% to 16.45% in the same period. 


Mortgage Loan arrears greater than 30 days sat at just 0.57% of the total mortgage portfolio balance, illustrating the quality of Heritage’s loan book.  

Chairman Mr Kerry Betros said it was gratifying that Heritage had been able to move forward on its strategic transformation while maintaining its absolute commitment to the customer. 

“We are focussed on transforming Heritage into a more modern and digitally driven bank so we can achieve our mission of delivering a great customer experience every time. By simplifying our processes, eliminating paperwork and using the power of digital technologies we will be able to provide customers with the modern banking capabilities that they expect.

“To do that, we need to continue investing in our digital capabilities, and we can only do that by becoming more efficient and maintaining profitability.

“Importantly, we are doing this while retaining the people first culture and personal service that our customers value so highly.

“In fact, we are doing this so well that we were ranked number one in the country for customer satisfaction in the 2017 JD Power Australian Retail Banking Study, announced last December. That’s the second year in the row we were ranked highest in that study.

“Our top ranking in that study followed us winning the 2017 Mozo People’s Choice Awards in two categories - for Excellent Customer Service and Most Recommended.”

Mr Betros said Heritage’s success in implementing its strategic goals meant it was well positioned for future success.

“Heritage is a strong and successful bank that’s highly valued by our customers and well positioned for continued growth,” he said.

“We’ve been building a strong platform that will deliver an even better customer experience which will resonate with people no matter where they might be around Australia.”