Heritage Bank has decided to slow its branch expansion in the face of the pandemic but has not given up on its plan to have a physical presence in Sydney and Melbourne.
Heritage made its first move outside Queensland last October, when it opened a branch in the Sydney suburb of Castle Hill. Two months later it opened a branch in Parramatta.
Heritage chief executive Peter Lock said the branches have performed well and the bank is sticking with its goal of having 10 branches in Sydney. The move into Melbourne has been put back.
Lock said: “Everyone is talking about how digital traffic is up and that is our experience too. What we thought would happen over five to 10 years in terms to the take-up of digital services looks like happening in two.
“We have increased our digital offerings with the addition of services like Apple Pay.
“But branch traffic is also up. After an initial fall when the crisis started, it has come back up.”
Heritage released details of its 2019/20 financial results, reporting a 16.2 per cent fall in net profit to A$36.3 million.
After adjusting for COVID-related costs, including a $7.8 million credit provision, the bank’s underlying profit was $44.3 million – an increase of 2.3 per cent over the previous year.
Loan approvals of $1.9 billion were 0.4 per cent lower than the previous year. Total assets were up 6.5 per cent to $10.7 billion.
The retail deposit book grew by 8.8 per cent to $7.9 billion.
The bank’s net interest margin was steady at 1.89 per cent.
Lock said 3000 customers applied for loan repayment deferral. The bank took the time to assess every applicant and 1200 proceeded with a deferral arrangement, representing 6 per cent of borrowers.
The bank has completed its three-month assessment and, based on that, 60 per cent will revert to their normal loan repayments.
“We’ve got a very accurate read on who is in there and we are confident about the level of our overlay,” Lock said.
He said the upside of COVID has been that consumers have used the various assistance measures to strengthen their household financial positions. The impact for banks includes accelerated loan repayments and low arrears.
“The book is running off quicker than normal and arrears are well within our tolerance,” he said.