Heartland Bank chair Geoff Summerhayes
Heartland Group received final approval from APRA and the Reserve Bank of New Zealand yesterday for its acquisition of Challenger Bank and notified the market that it completed the transaction.
Heartland Bank paid A$46.4 million for Challenger Bank and made an additional payment of $69.3 million reflecting the increased capital being held by Challenger Bank following its pre-completion purchase of a book of reverse mortgages from Heartland.
It is the first New Zealand registered bank to acquire an Australian ADI,
Last week, Heartland Group completed a NZ$210 million equity raising, which was a condition of approval. The new equity capital will support regulatory capital requirements and asset growth.
On May 2, Heartland will transfer Heartland Australia Holdings and its subsidiaries, reverse mortgage lender Heartland Finance and livestock finance business StockCo Australia, to Challenger Bank. The bank will be rebranded Heartland Bank (Australia) immediately.
The group plans to continue what it calls its “best and only” strategy in Australia, operating in specialist financial markets. It is one of only a handful to reverse mortgage lenders here, claiming a 42 per cent market share, and claims to be the only specialist livestock finance provider.
Areas of expertise in New Zealand that it will look to develop here include motor and asset finance.
It believes it can accelerate growth in Australia by leveraging the bank’s retail deposit funding platform and combine that with its New Zealand experience in distribution. It has reported that Challenger Bank’s deposit growth in 2023 was achieved at a lower cost of funds than Heartland Australia’s current cost of funds.
Its current funding is through securitisation and medium term note programs. It said it expects the majority of funding to come from retail deposits within 12 months from completion of the acquisition.
The chair of Heartland Bank (Australia), Geoff Summerhayes, said in a statement: With the acquisition complete and the launch of the Heartland Bank brand underway, Heartland has a unique opportunity to deliver specialist banking products to areas of the Australian market which we believe are under-serviced by larger banks.”
Heartland Australia has a NZ$1.7 billion reverse mortgage book and a NZ$296 million livestock finance portfolio.
The group has forecast that Heartland Bank Australia will have total assets of A$3.04 billion by the end of the 2024/25 financial year and will report net profit of around $36 million.