5 Jun 2013

Heartland deals to its problem properties

7:15 pm on 5 June 2013

Heartland New Zealand expects underlying net profit this year will be slightly above its previous guidance and that next year's profit will rise sharply.

The bank says this year's result will be dragged lower by a one-off write-down of its problem $139 million property portfolio, most of which it expects to quit within 18 months.

Heartland expects net profit for the year ending June to come in at about $25 million, but that the non-cash write-down will cut the bottom line to $7 million.

The following year's profit is expected to be between $34 million and $37 million, up to 48% higher than this year's underlying result.

Heartland says it wants to deal with most of its property portfolio now, rather than the five-year workout originally planned with former parent company Pyne Gould Corporation.

That agreement will be terminated and Pyne Gould will pay the maximum compensation of $26.75 million promised under that agreement.

Pyne Gould will report a one-off increase in annual net profit of nearly $8 million as a result of the agreement being terminated.

Heartland New Zealand chief executive Jeff Greenslade says the new strategy is about his bank taking control of its own destiny.

Ratings agency Standard & Poor's says terminating the agreement hasn't changed its BBB- credit rating for Heartland, and the outlook remains negative.