Heartland forecasts flat profit next year

Heartland New Zealand, which expects to hear back on its banking licence application before Christmas, sees flat profit in the 2013 financial year and has announced a pre-Christmas special dividend.

At yesterday's annual meeting, the Auckland-based lender told shareholders net profit would probably be between $21 million and $24 million in the year ending June 30.

That compares with annual profit of $23.6 million in the 2012 year.

That profitability represents a 45 per cent to 66 per cent improvement in pre-tax profit, and depends on asset growth, lower cost of funds from a successful bank registration, a focus on costs and charges on impaired assets staying at current levels, Heartland said.

The company's board also declared a 1.5c per share special dividend, which would be payable on December 21.

Heartland's directors gave no details on future dividend policy, saying only that payouts would be based on its after-tax profit, subject to maintaining a prudent level of capital.

"Heartland's capital needs will vary from time to time, depending on a range of factors [including regulatory and credit rating requirements and general economic conditions, current and expected growth and the mix of business]," the company said.

The company's shares closed up 2c yesterday at 70c.

The stock is rated an average "outperform", based on two analyst recommendations compiled by Reuters with a median target price of 65c.

Heartland was formed through the merger of Pyne Gould's Marac Finance unit with the Canterbury and Southern Cross building societies, with a view to securing a banking licence in a shift away from a new regulatory regime that imposed stricter conditions on non-bank financial institutions.

Last month, Heartland had its investment grade BBB- credit rating affirmed with a stable outlook by Standard & Poor's.

The ratings agency cited the lender's strengths as very strong capital and earnings assessment, good geographic and business diversity, and sticking to its timeline for its post-merger plan.