Heartland Group Holdings tells shareholders it had its 'foot on the throat' to get the $620m TSB takeover done by December, but the RBNZ needed longer to get the 'i's dotted and the t's crossed' due to the complexity of the deal

The chairman of Heartland Group Holdings’ NZ banking arm says it only became clear earlier this week that Heartland’s proposed takeover of TSB wouldn't get over the line before the end of this year.

Heartland Group Holdings announced on Thursday that its proposed takeover of TSB Bank wouldn’t meet its initial deadline of December 2026 and now expects the $620 million deal to be completed by March 1, 2027.

The Australasian financial services group said the revised merger completion date reflected the remaining work required in relation to the Reserve Bank’s (RBNZ) assessment of Heartland Group and Toi Foundation’s applications for the proposed deal, as well as the RBNZ review of TSB’s regulatory liquidity and capital ratios, which was requested after TSB self-reported issues in September.

At Heartland’s annual general meeting (AGM) in Auckland on Friday, Bruce Irvine, the chairman of the Heartland Bank NZ board, told shareholders that he and Greg Tomlinson, the chairman of Heartland Group Holdings – which is the parent entity of Heartland Bank NZ and Heartland Bank Australia – had met with the RBNZ on Tuesday this week.

“Greg and I had a meeting at the Reserve Bank with the Deputy Governor and the Head of Prudential Supervision, and it became clear at that meeting that while we'd had our foot on the throat to get [regulatory approval on the merger by] 1 December, the complexity from the regulator's perspective about bringing two banking licences together into one [meant] they just needed to work through their processes properly and deal with it,” he said.

The takeover would see Heartland acquire all TSB shares on issue from its parent, the Toi Foundation. Immediately following the acquisition, Heartland Bank and TSB would merge via what’s been described as “a short form amalgamation” to create TSB Heartland Bank.

‘So we essentially came away from that meeting agreeing to the delayed timetable. It doesn't reduce in any way the commitment of TSB and Heartland and the Reserve Bank to actually get this deal across the line. But it's just sensible that we now take a little bit more time to get all the i’s dotted and the t’s crossed,” Irvine said.

Asked by a shareholder if it was “overly optimistic” for Heartland to expect to get the merger over the line by the new deadline, Irvine replied that Heartland had set its original December 1 merger completion date “quite a long time ago.”

“We had been working towards that, but there were some issues with the consultation process that Toi had in Taranaki, which delayed that whole process by a month. And we were really trying hard to get across the line on 1 December, but, you know, it was always going to be a tough ask and we're very comfortable about March,” he said.

“We can get everything sorted and over the line by then.”

HGH chair's ambition for $300 million net profit

Heartland Group Holdings chairman Greg Tomlinson said on the basis of the TSB deal being completed, his “personal ambition” is for Heartland to deliver $300 million in net profit after tax (NPAT) “over time.”

“That is my view of what this business could be capable of. It is not earnings guidance. Getting there will take sustained growth, disciplined use of capital and better efficiency. Our specialist lending focus, investment in technology and the proposed TSB transaction give me confidence that we are on the right track,” he said.

At its annual results released in August, Heartland Group beat its full-year net profit guidance by almost 10%, reporting a net profit after tax of $93.2 million. This was on the back of margin expansion, steady growth in its reverse mortgage book and strengthened asset quality.

Tomlinson also said he doesn’t believe Heartland’s share price reflects Heartland’s value or earnings potential yet.

“It is our job to demonstrate that value through consistent delivery of stronger earnings and shareholder returns,” he said.

HGH is dual-listed on both the NZ Stock Exchange (NZX) and Australian Securities Exchange (ASX). Tomlinson didn’t specify whether he was referring to HGH’s share price on one exchange or both, but a Heartland spokesperson confirmed to interest.co.nz following the meeting that Tomlinson was referring to both of Heartland’s share prices.

On the NZX, HGH’s share price closed at NZ$1.26 on Thursday, and on the ASX finished the day at A$1.02. By early afternoon Friday following Heartland’s AGM , HGH was trading at A$1.03 on the ASX and remained at $1.26 on the NZX.

Tomlinson was re-elected as a non-independent non-executive Heartland director at Friday's meeting.

Scale, scale scale

Heartland Group Holdings chief executive Andrew Dixson said in its June 2026 year, Heartland Group's return on equity rose to 7.3%, from 3.2% in the previous financial year.

“This was a step forward, but still short of our long-term ambition of at least 12%,” he said.

Heartland Group is anticipating a return on equity of at least 7.5% in 2027 and a net profit after tax of at least $102 million. This guidance will be updated on completion of the proposed TSB transaction, subject to all remaining conditions being satisfied.

“We have started the year well. In the September quarter, return on equity was 7.6%, net interest margin was 3.92% and the cost-to-income ratio was 54.7%. Asset quality continued to improve in New Zealand and remained stable in Australia,” Dixson said.

Heartland's focus for 2027 is building and acquiring scale, through accelerating growth in its core portfolios, including targeting reverse mortgage growth of more than 18% in both New Zealand and Australia, as well as completing the proposed TSB transaction.

Dixson emphasised scale when discussing the TSB takeover.

“Scale matters because it gives us operating leverage. Banking is changing quickly, and keeping up with technology, compliance and customer expectations takes significant ongoing investment. The ability to spread that investment across a bigger business is one way we expect to improve our cost-to-income ratio over time,” he said.

TSB is the seventh-largest bank in NZ by total assets and Heartland Bank is currently the ninth-largest bank. TSB Heartland Bank will become NZ’s seventh-largest bank and have around $15 billion in NZ assets. That’s a 171% increase in Heartland’s existing NZ asset base, according to Dixson.

“We expect the merged bank to achieve approximately $34 million a year in pre-tax cost synergies once fully realised, which this run-rate building progressively over three years. Combined with the transaction structure, that is expected to deliver normalised earnings per share accretion of more than 20% in the first year after completion, alongside an enhanced dividend per share profile and an improvement in return on equity,”  Dixson said.

Developing the TSB Heartland Bank 'roadmap'

Leanne Lazarus, who is the CEO of Heartland Bank NZ, told shareholders at the AGM she was “delighted” to be endorsed as the CEO-designate for the proposed TSB-Heartland Bank.

Lazarus will be joined by five of her current Heartland team and four members of TSB's leadership team, with no role for TSB's CEO Kerry Boielle or TSB'S CFO Matt Judge. TSB told interest.co.nz back in October that Boille had expressed interest in the TSB Heartland CEO role.

“This is an exceptional team, which brings complementary experience and perspectives from both Heartland Bank and TSB, and reflects the bank we're building together,” Lazarus said.

The TSB Heartland Bank leadership team has been endorsed by an establishment panel, which is set to be the combined bank's board, assuming Heartland's takeover of TSB completes as expected.

Lazarus said “significant progress” has been made in preparation for the merger.

“Subject to satisfaction of the remaining conditions and completion of the proposed transaction, Heartland and TSB teams have undertaken detailed planning to ensure the combined bank can operate safely and effectively from day one, while also developing the roadmap for integration over the following three years,” she said.

“That work covers all areas of the bank and establishes clear executive accountability, integration governance and independent assurance over delivery. Our approach is deliberately phased. Day one is about stability and continuity for customers and our people. From there, we will progressively integrate the banks, sequencing change carefully to protect customer service and operational resilience while realising the benefits of the merger.”