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Bank reports 27.4% drop in loan volumes

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Reporter 6 minute read

A non-major lender has posted a 13.7 per cent profit increase, despite reporting a sharp decline in lending volumes.

In its full-year 2018 (FY18) financial results, Heritage Bank has reported a net profit after tax (NPAT) of $45 million, up by 13.7 per cent from $39.6 million in FY17.

The rise in Heritage’s NPAT coincided with a 27.4 per cent drop in its loan volumes, which totalled $1.7 billion.

However, Heritage CEO Peter Lock claimed that lending volumes declined because of the bank’s “deliberate decision” to moderate its credit activity.


“We had exceptionally high loan growth in 2016–17 and we took a deliberate decision to slow loan originations this year to better manage our prudential capital requirements,” Mr Lock said.

Mr Lock noted that he was satisfied with the lender’s performance, and he made reference to the bank’s ability to manage its costs and maintain profitability.

“Heritage is in excellent financial shape and we have been able to manage our expenses and funding costs well to maintain a prudent level of profitability while still delivering great value to our customers,” the CEO said.

Heritage chairman Kerry Betros also said that he believes the lender can capitalise on recent scrutiny of the major banks from the financial services royal commission.

“The major banks in Australia have been in the headlines for all the wrong reasons this year as the Hayne royal commission has exposed the dangers of their profit maximisation model,” the chairman said.


“Customer-owned institutions such as Heritage simply don’t have the drive to maximise profit above all else, so we can offer people a more satisfying banking experience.

“People are starting to realise there are other banking options out there that aren’t prone to the questionable behaviour that a focus on profit maximisation can lead to.”

Further, Mr Betros called on the federal government to seize the opportunity created by the royal commission to even the playing field for smaller lenders.

“The government must take proactive steps to address the market dominance of the big four and create a more level playing field for smaller competitors such as Heritage,” Mr Betros said.

“The simple fact has been that the big four have enjoyed systemic advantages, such as their ‘too big to fail’ status and their more generous prudential risk weighting measures.”

Echoing comments made by CEO Peter Lock, Mr Betros urged the government to consider “proportionate regulation” in the banking sector.  

“It is unfair to impose a one-size-fits-all approach, so that smaller customer-owned banks like Heritage face the same regulatory burdens and costs as the big banks,” the chairman added.

“Too often we are caught in the net of measures imposed with the big banks in mind, despite not posing the same risk.”

He continued: “Overall, however, we are optimistic that the reform process will be positive for our sector. We believe the strength of our balance sheet and our strong customer focus will see Heritage well placed to take advantage of any regulatory changes.”

[Related: Bank withdraws 2 BDMs due to ‘soft market conditions’]

Bank reports 27.4% drop in loan volumes
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