Heritage Bank delivers record loan volumes ahead of merger

In particular, more than 60 per cent of home loans came through the broker channel, up 44 per cent, to a record $2.061 billion. 

According to the bank, that overall growth in lending helped total consolidated assets reach $12.3 billion (up 3.2 per cent) on the $11.9 billion last year. 

Overall, Heritage Bank recorded an after-tax profit of $40.5 million in its FY22 results, which was down 9.5 per cent on the previous year’s record figure. 

However, excluding the planned merger costs of approximately $3 million, the underlying after-tax profit was $42.6 million, down 5.1 per cent on the previous year. 

Last year the two customer-owned lenders Queensland-based Heritage Bank and South Australia-based People’s Choice entered into a non-binding agreement to explore a merger opportunity.

While the merger remains dependent on obtaining all regulatory approvals, as well as approval from the members of both Heritage and People’s Choice, it would have a combined membership base of about 720,000 with a loan book of about $23 billion.

To go through, 75 per cent of members voting need to approve it, which is expected to take place before the end of the year.

Heritage Bank chairman Kerry Betros said the merger was an exciting opportunity for the two banks to establish a “strong, national mutual” that can stand as a “true alternative to the major listed banks”.

“It would be a true merger of equals, combining two proudly member-owned organisations with deep regional roots and a successful track record in member-owned banking,” Mr Betros said.

“Both Heritage and People’s Choice are also fiercely committed to delivering exceptional customer service and member value. That will not change.

“The proposed merger will deliver more for our members, and provide the size and scale needed to ensure that we continue to remain competitive, to thrive and to serve our members well into the future.” 

Acknowledging this slight dip in profits, Heritage Bank chief executive Peter Lock said the bank recorded growth across many of its key metrics and continues to invest in both “digital transformation and branch network” expansion. 

“The expenses incurred in our merger planning activities, and the rising cost of labour in a tight job market, must also be taken into account,” Mr Lock said.

He added, members took advantage of record low-interest rates in 2021/22, made higher-than-normal prepayments on their loans, and also repaid loans in full, which contributed to a restrained net loan growth. 

While some banks closed branches recently, Heritage has been expanding with the opening of two new branches in NSW – one at Macquarie Park in Sydney and one at Tweed Heads.

“While we constantly hear of the big banks continuing to close more and more branches, we are adding to our network,” he said. 

“We understand that people want both high quality digital banking services, as well as the face-to-face service you can only get at a branch. It’s not one or the other for Heritage — we are investing in both.”

[Related: Big four banks to shutter another 37 branches]