Heartland Bank has delivered a ''solid'' full year result and issued upbeat profit guidance for 2017, picking this year's $54.2 million profit could be up 5%-10% in a year's time.
Net operating income for the year to June, including a share of Marac Insurance's profit, rose from $144.9 million a year ago to $157.6 million, with expenses up $1.5 million to $69.9 million and after-tax profit up 12%, from $48.2 million to $54.2 million.
Heartland's chief executive Jeff Greenslade said the growth in lending was across all core divisions, of household, business and rural and he expected asset growth to continue through 2017, from all three divisions.
He predicted after-tax profit for 2017 would be in a range of $57 million to $60 million.
Major balance sheet improvements during 2016 included motor vehicle lending, up 9.5%, or by $66.6 million, reverse mortgages in New Zealand grew 8.2%, by $27.4 million, and in Australia by 10.3%, or $A38.6 million ($NZ40.3 million).
Heartland's total assets, before liabilities, grew by $187.9 million, from $2.86 billion last year to $3.11 billion; with total equity as at June 2016 at $480.1 million.
Mr Greenslade said motor vehicle lending ''grew strongly'' and increased 9.5%, or by $66.6 million to $767.4 million.
The business division increased by $95 million, or 11.8%, and rural division was up $64.8 million, or 13.3%, while non-core residential mortgages decreased by $32.8 million, or 41.8%; a sector Heartland is withdrawing from.
Heartland's dividend rose from 4.5c last year to 5c. Shares in Heartland were up slightly at $1.44 following the announcement.
Craigs Investment partners broker Peter McIntyre said it was a ''solid'' result, with profit up 12.5% on a year ago to $54.2 million, which was ahead of market expectations and towards the upper end of guidance.
''With cost growth of just 2% for the year, Heartland continues to demonstrate the scalability of the business,'' he said.
Net operating income grew 9% to $157.6 million, on the back of increased receivables and lower cost of funds, Mr McIntyre said.
He said with Heartland expecting next year's profit at between $57 million and $60million, with Craigs' picking $56 million, Mr McIntyre was expecting stock upgrades ahead in 2017.
Forsyth Barr broker Lyn Howe described it as a ''strong'' result, being near the top-end of guidance and in line with Forsyth Barr expectations.
''The excellent second-half 2016 asset growth is supportive of a continuation of robust earnings growth estimated for full year 2017,'' she said.
The company remained well capitalised with a a tier 1 capital ratio of 13.8%, versus its internal minimum target of 12.5% and the Reserve Bank's requirement of 10.5%, Mrs Howe said.
The profit was driven by more than 9% growth in finance receivables and a declining cost-to-income ratio, indicative of the scalability benefits Heartland was starting to generate.
She noted impairment expense was ''slightly higher'' than Forsyth Barr was targeting, with a ramp-up in collective provisioning for rural assets; largely dairy, affecting that result.
While there was some pressure on cost of funds, given competition for funding in the retail market, Heartland continued to operate with the highest net interest margin in the sector.
''As such, Heartland has headroom to continue to increase funding rates to support asset growth if required,'' Mrs Howe said.
Mr Greenslade said Heartland's dairy sector exposure grew, primarily through additional support to existing clients, but remained ''small at only 7%'' of its total lending book.
The average loan to value ratio for Heartland's dairy exposures was just 64%, Mr Greenslade said.
