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The customer-owned bank has recorded a 5 per cent decline in its profit after tax despite growth in both loan approvals and deposits.
Heritage Bank has released its half-year results for the 2020 financial year (HY20), reporting a 1.7 per cent increase in loan approvals on the previous corresponding period, from $963.5 million to $980 million.
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The increase in loan approvals drove net loan growth of $100.3 million, taking its total loan book to $8.57 billion.
Heritage also reported strong retail deposit growth, up 85 per cent on the previous corresponding period to $357 million in the six months to 31 December.
However, the bank posted a profit after tax of $23.8 million, down 5 per cent from $25.1 million in the previous corresponding period.
The bank partly attributed the earnings slide to increased investment in Heritage’s branch network, with two new branches opened in NSW in the half.
Heritage CEO Peter Lock said he was pleased with the overall result amid “challenging” conditions.
“The excellent growth in our retail deposits has had a positive impact on our margin. We’ve also continued to be very disciplined in managing our expenses and very effective in capital allocation decision making,” he said.
“We’ve built good momentum in our lending in recent months after a sluggish start to the period, and we’re looking to maintain that for the rest of the year.
“Our profit result is solid, balancing the need to generate capital to support future investments while still delivering great value on products and services for our members.”
Mr Lock added that the bank’s new branches in Sydney would lay the groundwork for future growth outside Heritage’s traditional market in Queensland.
“We opened new branches at Castle Hill in October last year and at Parramatta in December. They have performed extremely well in their first few months, and the response from the people of those areas has been outstanding,” he continued.
Heritage chairman Kerry Betros also lauded the bank’s performance, particularly in light of low interest rates and strong competition in the banking sector.
“Conditions in the banking market have been challenging in this period. Interest rates are at record lows, and competition has never been greater. Revelations at the Hayne royal commission have also dented the trust that people have in the major banks,” the chairman said.
“However, the continued strong performance of Heritage shows that people value the customer-centric philosophy that drives our business.”
Mr Betros concluded: “We’re looking forward to building on the platform that our new branches in Sydney have provided to attract more customers to enjoy the advantages that come from banking with customer-owned organisations such as Heritage.”
[Related: Heartland earnings bolstered by reverse mortgage growth]
