Heartland is a digital, online only operating bank. Photo: 123RF
- Heartland Bank lending battered by recession.
- Significant increase in bad and doubtful debts.
- Company sets aside $49.6m for impairments, including write-offs in long dated arrears.
- Half year profit expected to plunge to $2m-$5m from nearly $38m year ago.
Leading vehicle and industry lender Heartland Bank has taken a near $50 million hit on bad loans caused largely by the recession.
The company said it would write off long dated arrears in car, business and equipment loans, and set aside more money for potential loan failures.
"This is in response to the impact of ongoing deterioration in economic conditions in New Zealand, and to de-risk and reposition some of the New Zealand bank's lending portfolios," the company said ina statement to the NZ stock exchange.
"This impairment expense relates predominantly to arrears within Heartland Bank's Motor Finance and business lending portfolios where collectability of customer arrears has been impacted by continued economic deterioration in New Zealand."
It said it would write off $20m on car loans and business lending more than a year in arrears.
Another $19.4m was being put aside to cover potential bad loans in business equipment and other business financing, with another $10m to cover other car and business loans.
Heartland is a digital, online only operation and specialises in reverse mortgages in New Zealand and Australia, car loans, finance to companies for assets and working finance, and finance for livestock.
As at June last year it had loans of $7.2bn but reported a near doubling in bad and doubtful debts.
The company said it was now taking a harder line in recovering debts and chasing defaulters through re-possession and use of credit bureau.
It said its overall finances remained in strong shape with its capital levels remaining at necessary statutory levels, and it still expected to pay a half year dividend when it publishes its half year result in a week.
Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
