Heartland New Zealand says it wants to put the legacy of its unwanted and troubled property portfolio behind it so both it and investors can focus on its core banking business.
It has announced a new strategy which will allow it to quit most of those assets within 18 months, although that will come at the cost of a one-off, non-cash $18 million hit to this year's annual net profit.
Heartland chief executive Jeff Greenslade says the old strategy, which involved an arrangement with his bank's former parent company, Pyne Gould Corporation, was complex and difficult for the market to understand.
He says the strategic driver is to deal with property in isolation and to have the flexibility to either realise properties through sale, or put them in a position where they can be sold in the future.
Mr Greenslade says the company wants to be able to focus on its core business.
Although the one-off write-down will reduce profit to about $7 million for the year ending June, the expected underlying profit of $25 million will be slightly higher than Heartland's previous guidance.
The bank expects the following year's profit will be between $34 and $37 million, up to 48% higher than this year's underlying result.
Mr Greenslade says the sharp jump in profitability reflects a lower cost of funds, more high-margin lending and less low-margin lending, generally lower operating costs and fewer impairment charges.
Heartland shares rose as much as 10% on Wednesday after the new strategy was announced.