Would-be bank, listed Heartland New Zealand, has grown its asset base by $18 million to $2.09 billion through its business loans division and in coming months expects a further boost from already approved rural loans being drawn down.
The time frame surrounding Heartland's intentions to become a registered New Zealand bank remains unknown, as confidentiality surrounds formal applications to the Reserve Bank.
Craigs Investment Partners broker Chris Timms said Heartland's share price of late reflected investor sentiment, with them awaiting more details on the banking application.
"This [banking application] is the next big step and what investors are eager to find out more about," Mr Timms said.
Since listing in February 2011, Heartland shares initially traded at 88c then steadily declined to an all time low of 44c early last month, before retracing some losses to trade around the 53c mark yesterday.
Last Thursday, Heartland shares had their largest number of trades this year, with 680,000 shares changing hands in 54 transactions, which saw the price lift from 49c briefly to 53c during the day.
Mr Timms yesterday said Heartland had achieved 11 of 12 points on a "to do list", since early-2011, including merging companies and loan books, exiting the Crown guarantee umbrella and gaining an investment rating.
While shares had been sold off to 44c, Mr Timms said Heartland's "11 milestones met" should not be overlooked and the stock was undervalued at present.
"Hopefully they will be looking for a banking licence some time during 2012, but the only clear indication will be when there's a 'yes' or 'no' [announcement from the Reserve Bank]", he said.
Heartland chief executive Jeff Greenslade said in recent financial reports Heartland's overall lending book had increased slightly during the third quarter to $2.093 billion, compared to $2.075 billion at the beginning of the quarter.
"This was pleasing in a credit-constrained environment, particularly as the net increase of $18 million is largely attributable to growth in the business division," he said in a market update released earlier this month.
Mr Greenslade said the rural division continued to improve.
An increase in approved facilities had not yet been drawn and the launch of a new livestock leasing product would consolidate the division's position in the market.
"This is expected to be reflected in increased drawdowns in the coming months," he said.
For the three financial quarters ending on March 31, Heartland booked an after-tax profit of $15.1 million, which included a one-off deferred tax benefit of $6.2 million.
In an earlier interim report posted in late-March, for the half-year to December, Heartland booked net operating income had increased to $44.9 million, compared to the previous six months to June income of $39.1 million, and said the growth was not as high as expected because of "constrained credit growth", in some sectors.
Costs for Heartland to December were up $7.4 million to $35.7 million, due to the PGG Wrightson Finance acquisition, full NZX listing costs and investment in the business and rural divisions.
Assets stood at $2.38 billion while liabilities were $2.02 billion.
Mr Greenslade said the improved margins for the third quarter's trading were due mainly to a decrease in cost of funds, following expiry of the Crown guarantee scheme in December, and a change in lending product mix.
Since expiry of the Crown guarantee scheme on December 31, Heartland had surplus liquidity, in that the $480 million liquidity, made up of cash, liquid assets and unused funding lines, meant it had $177 million more than the liquidity level required under Heartland Building Society's trust deed.
Heartland New Zealand
• Parent Pyne Gould Corp recapitalised by $273 million.
• January 2011, Heartland group formed through $2 billion merger of CBS Canterbury, Southern Cross Building Society, Marac Finance Ltd and Heartland Financial Services Ltd.
• August 2011, acquires PGG Wrightson Finance Ltd for $98 million.
Divisions at December
• Retail & Consumer: 47%, loan book fell by $23 million to $979 million.
• Business: 25%, loan book up $43 million to $519 million.
Rural: 23%, loan book (boosted by PGG-W acquisition) to $466 million.
• Non-core property: 5%, property assets down $18 million to $169 million (includes $58 million in investment properties).
