By Paul McBeth
Heartland New Zealand, the lender which took on PGG Wrightson’s finance unit this year, has flagged first-half profit of up to $10 million, while trimming the top end of its forecast annual earnings by $2 million.
The Christchurch-based lender expects to post net profit of between $9 million and $10 million in the six months ended Dec. 31, as net interest margins improve at a slower-than-expected pace, the company said in a statement.
Full-year earnings are forecast at between $20 million and $22 million, clipping the top of the $20 million-to-$24 million range flagged as recently as last month’s annual meeting.
“Despite a late start to our rural strategy and subdued demand for retail in Christchurch, the forecast half-year and full-year results reflect underlying earnings in excess of those achieved in the year ended 30 June 2011, by the combined predecessor entities,” chief executive Jeff Greenslade said.
Heartland was formed through a merger of Pyne Gould’s Marac Finance unit and the Canterbury and Southern Cross Building Societies, and later purchased Wrightson’s finance arm for some $100 million. It’s currently in the process of applying for a banking licence.
The lender’s rural strategy was delayed due to early grass growth which led to slower growth in its loan book, though this is expected to catch up in the second half.
Heartland lifted net receivables to $2.1 billion as at Oct. 31, from $1.7 billion at the end of June, and it expects to grow this by a further $130 million to $170 million.
Impairment expenses were lower in the first quarter and are forecast to track at budgeted levels for the rest of the year, it said.
Once the extension to the government’s retail deposit guarantee expires at the end of the year, Heartland will progressively reduce its surplus liquidity, though it will keep it above regulatory requirements.
The surplus liquidity was $496 million as at the end of October, with the lender dipping into its cash reserves to retire the PGG Wrightson Finance bonds it took on board as part of the acquisition.
Shares in Heartland were unchanged at 49 cents in trading today, and have shed 44 percent this year.