Focus on capital puts the brakes on growth at Heritage

Business was slow at Heritage Bank during the December 2013 half year. Loan approvals were down almost 20 per cent and the value of loans and receivables was down more than two per cent.

On Friday, the bank reported that loan approvals of A$657 million in the six months to December were down 18 per cent, compared with the previous corresponding period.

Heritage Bank's chief executive, John Minz, said in a statement that the fall in approvals was a result of both "fierce competition" and the bank's decision to ease asset growth to strengthen its capital position.

The value of loans and receivables fell 2.4 per cent from the previous corresponding period to $6.5 billion.

Net profit fell 8.3 per cent to $17.9 million.

The fall was not all due to weaker trading conditions. In 2012 Heritage Bank sold shares in Visa Inc, which produced a net gain of $2.9 million in the six months to December 2012.

Excluding the Visa share sale, Heritage Bank's net profit for the latest half was up 2.6 per cent on the previous corresponding period.

The bank increased its tier one capital ratio from 11.07 per cent at June 30 last year to 11.69 per cent in December. Its total capital ratio is 13.37 per cent and its liquidity ratio is 21.5 per cent.

Minz said loan approval picked up towards the end of the year and the rebound had continued into the new year.

"This reflects our determination to offer pricing that is extremely competitive," he said.