New Zealand’s Heartland Group wants to get into the Australian banking market and has made initial moves to buy Avenue Bank.
Heartland announced yesterday that it has entered into a non-binding memorandum of understanding with Avenue Hold Ltd in relation to the potential acquisition of Avenue Hold and its subsidiary Avenue Bank.
Avenue Bank has a restricted ADI licence, which APRA granted in September last year. Its focus is business banking and its restricted licence allows it to offer working capital finance to a limited number of customers pending the granting of a full licence.
Avenue’s major shareholder is Liberty Financial Group. Heartland has made an initial subscription for A$5 million of capital in Avenue Hold.
Heartland expects to pay around $49 million for Avenue. It said a transaction is conditional on Heartland being satisfied that Avenue Bank will progress to a full ADI licence.
Heartland has a banking licence in New Zealand and it envisages that the two banks would operate under a non-operating holding company based in Australia.
Heartland’s current business activities in Australia include a reverse mortgage business and a livestock finance business.
It acquired Australian Seniors Finance in 2014 and has gone on to become the reverse mortgage market leader. Yesterday it reported that Australian reverse mortgage receivables increased by 15.2 per cent to $1.2 billion in the year to June.
It claims a 74 per cent share of originations in 2021/22 and a 33.1 per cent share of total balances. It said the total market is currently $3.3 billion and estimates that there is an addressable market of $10 to $15 billion.
In May this year it acquired specialist livestock finance business StockCo from its joint owners StockCo Australia and Elders Rural Service Australia. The business has around $358 million of assets and Heartland paid $154.4 million, funded through a bridging facility with a big Australian bank.
Elders will remain involved as a distribution partner and has signed a five-year agreement that will commence on completion of the sale. Heartland has a rural finance business in New Zealand and will draw on that expertise to develop the local business.
Heartland announced a $200 million equity raising yesterday. It will use to proceeds to repay the bridging facility and the balance for growth capital.
Overall, Heartland reported a profit of $95.1 million for the year to June – an increase of 9.3 per cent over the previous year. It has $6.1 billion of receivables across all its business areas – up 22.7 per cent over the year. Its capital ratio at June 30 was 13.5 per cent.