Heritage Bank welcomes record loan approvals

Loan approvals reached a new record over the 2022 financial year, Heritage Bank has announced.

It comes as the customer-owned bank prepares for a proposed merger with People’s Choice Credit Union, which remains dependent on regulatory approvals and a member vote.

Read more: Heritage Bank and People’s Choice merger to go ahead

In its full-year results, which cover the year to June 30, Heritage Bank announced an after-tax profit of $40.56m, down 9.5% on the 2021 financial year. Excluding merger planning costs, profit was $42.69m, down 5.1%, the bank said.

Lending approvals were at “record levels”, reaching $2.85 billion in FY22, an increase of 15.9% on FY21, Heritage Bank said.

Approved loans originated through the mortgage broker channel were up 44%, hitting a record $2.06 billion, the bank said.  Lending growth boosted total consolidated assets, which reached $12.32 billion (as at June 30), up 3.2%.

As at June 30, 2022, 0.23% of mortgage loans had arrears greater than 30 days: an “extremely low rate”, the bank said.

Heritage Bank CEO Peter Lock (pictured above) said performance had moderated from the record levels of the previous year, but said it remained at a “high level”.

“While profit was down slightly, we recorded growth across many of our key metrics, while continuing to invest in both our digital transformation and branch network expansion,” Lock said. “The expenses incurred in our merger planning activities, and the rising cost of labour in a tight job market, must also be taken into account.”

Although lending approvals were at record levels, Lock said net loan growth was restrained as members continued to take advantage of historically low interest rates to make higher than normal prepayments on their loans.

“Nonetheless, the results were extremely pleasing, and Heritage has maintained its long history of sound financial stewardship. We are well positioned financially ahead of our proposed merger.”

Lock said the bank’s interstate branch expansion program had resumed, with the opening of two new branches in NSW: one at Macquarie Park in Sydney, and one at Tweed Heads.

“While we constantly hear of the big banks continuing to close more and more branches, we are adding to our network,” Lock said. “We understand that people want both high-quality digital banking services, as well as the face-to-face service you can only get at a branch. It’s not one or the other for Heritage – we are investing in both.”

Read next: Macquarie Bank, Heritage Bank win at MFAA National Excellence Awards

Heritage Bank highlights for FY22 include:

• After tax profit: $40.56 billion, down 9.5% on FY21
• Loan volumes: $2.85 billion, up 15.9% on FY21
• Loan approvals – broker channel: $2.06 billion, up 44% on FY21
• Arrears over 30 days: 0.23% of loan book (June 30)
• Retail deposits: $9.83 billion, up 4.8% on FY21
• Total members: 333,117, up 3% on FY21

Heritage Bank chairman Kerry Betros said the proposed merger with People’s Choice Credit Union was an opportunity to lead the creation of a new “force for good” in Australian banking. It would establish a strong, national mutual that could stand as a “true alternative” to major listed banks, he said.

“It would be a true merger of equals, combining two proudly member-owned organisations with deep regional roots and a successful track record in member-owned banking,” Betros said. “Both Heritage and People’s Choice are also fiercely committed to delivering exceptional customer service and member value. That will not change.”

Betros said the merger remained dependent on obtaining all regulatory approvals, as well as approval from members of Heritage Bank and People’s Choice. The member vote is expected to take place before the end of the year.