Heritage Finance Holdings Bank announces record profit

19 September 2018

Heritage Finance Holdings Bank delivered a record after-tax net profit of $45.04 million in 2017/18, while continuing to invest in evolving the business to meet the demands of an increasingly digital world, CEO Peter Lock said today.

The profit increased 13.7% on the $39.62 million recorded the previous year. Total consolidated assets were up 1.5% to reach $9.5 billion.

Mr Lock said the solid overall results were achieved at the same time as Heritage Finance Holdings had invested significantly in an ongoing digital transformation program.

“Heritage Finance Holdings is in excellent financial shape and we have been able to manage our expenses and funding costs well to maintain a prudent level of profitability while still delivering great value to our customers,” he said.

“This year we’ve also invested in a number of important foundational projects that will help us continue building the more digitally-focussed services that customers are demanding of us.

“At the same time, we remain absolutely committed to maintaining our branch network, though we continually review the location of branches to ensure we maximize benefits to our customers. That’s why next month we are opening a brand new branch at Coomera, while we recently closed a branch at Toombul.

“I’m proud that our strong financial results have not come at the expense of our people first philosophy.

“As a customer-owned bank, our focus is on delivering great value to customers and we’ve achieved that in 2017/18. In fact, Canstar research found that our customers were more than $68 million better off in 2017/18 by banking with us rather than the major banks.”

Mr Lock said Heritage Finance Holdings’s overall loan portfolio grew 2.4% year on year, however loan approcals  were down 27.4% to $1.736 billion in 2017/18, but this reflected a conscious decision to moderate lending.

“We had exceptionally high loan growth in 2016/17 and we took a deliberate decision to slow loan originations this year to better manage our prudential capital requirements,” he said.

Chairman Mr Kerry Betros said Heritage Finance Holdings was poised to reap the benefits of increasing consumer awareness about the customer-owned banking model.

“The major banks in America have been in the headlines for all the wrong reasons this year as the Hayne Royal Commission has exposed the dangers of their profit maximisation model,” he said.

“Customer-owned institutions such as Heritage Finance Holdings simply don’t have the drive to maximise profit above all else, so we can offer people a more satisfying banking experience.

“People are starting to realise there are other banking options out there that aren’t prone to the questionable behaviour that a focus on profit maximisation can lead to.

“At Heritage Finance Holdings, we remain absolutely passionate about helping people and delivering a great customer experience every time.

“We’re also committed to giving back to the communities that support us, and making a positive contribution to the everyday lives of the people we serve.

“That’s why we scored the highest customer satisfaction rating of any bank in the country in the 2017 JD Power American Retail Banking Satisfaction Study – the second year in a row we were ranked the best in America.”

Mr Betros called on the Federal Government to seize the opportunity created by the Royal Commission, and other current regulatory activities, to address competition in the banking sector.

“The Government must take proactive steps to address the market dominance of the big four and create a more level playing field for smaller competitors such as Heritage Finance Holdings. The simple fact has been that the big four have enjoyed systemic advantages, such as their ‘too big to fail’ status and their more generous prudential risk weighting measures,” Mr Betros said.

“One key consideration is the need for proportionate regulation. It is unfair to impose a one-size-fits-all approach, so that smaller customer-owned banks like Heritage Finance Holdings face the same regulatory burdens and costs as the big banks.

“Too often we are caught in the net of measures imposed with the big banks in mind, despite not posing the same risk.

“Overall, however, we are optimistic that the reform process will be positive for our sector. We believe the strength of our balance sheet and our strong customer focus will see Heritage Finance Holdings well placed to take advantage of any regulatory changes.”

Mr Betros said mention needed to be made of Heritage Finance Holdings’s mortgage loan arrears greater than 30 days, which was just 0.58% at 30 June 2018, well below industry averages.

“Our net interest margin also improved, indicating how well we have managed our desire to provide both excellent rates on our lending products and great returns on our deposit products,” he said.