Reserve Bank needs more time to review $620m challenger bank merger
Heartland Group Holdings’ $620 million takeover of TSB Bank will take longer than planned. The Reserve Bank (RBNZ) needs more time to assess the deal and to complete its review of TSB’s regulatory capital and liquidity ratios.
Heartland told the NZX that the merger is now expected to be completed by 1 March 2027, subject to the remaining conditions, rather than December this year, interest.co.nz reported. Once complete, the deal will create TSB Heartland Bank, which would become New Zealand’s seventh-largest bank, with around $15 billion in local assets.
Regulator works through complexity
The delay is partly due to issues at TSB. In September, TSB self-reported problems with how it calculates its regulatory liquidity and capital ratios, and the RBNZ asked for an independent review. Deloitte is carrying out that review, with a final report due to the regulator in November. TSB has also disclosed that an error in its liquidity calculations meant it had been non-compliant with a condition of its banking registration since 2010.
At the group’s annual meeting, Heartland Bank NZ chairman Bruce Irvine said the new timeline was agreed at a meeting with the RBNZ’s deputy governor and head of prudential supervision on Tuesday 10 November, according to interest.co.nz. He said combining two banking licences was complex from the regulator’s point of view, and that a month’s delay to the Toi Foundation’s consultation in Taranaki had also set the process back. He said the original date “was always going to be a tough ask and we’re very comfortable about March”.
What it means for customers
Heartland says the merged bank will increase competition and choice for New Zealanders. In the meantime, there are no changes for existing customers of either bank.
Heartland Bank NZ chief executive Leanne Lazarus, who is set to lead the combined bank if the deal completes, said integration would be phased over three years to protect customer service.
“Day one is about stability and continuity for customers and our people,” she said.
Building scale
Heartland Group chief executive Andrew Dixson said size was central to the deal’s rationale, because technology and compliance costs are rising.
“Scale matters because it gives us operating leverage,” he said.
The group expects the merged bank to deliver about $34 million a year in pre-tax cost savings, building up progressively after completion. The lender is also targeting growth of more than 18% in its reverse mortgage book in both New Zealand and Australia.
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