The division’s net operating income rose $3 million to $29.2m, an 11% increase, which was close to the 12% gain in the group’s bottom-line after-tax profit, at $60.8m for the year ended June 30.
The Rural gain was driven mainly by the growth in net receivables, chief executive Jeff Greenslade said. They rose to $675m, from $552m a year earlier and $488m in 2015.
The growth was mainly in term loans across all key rural sectors, including dairy, sheep and beef, horticulture and viticulture.
Dairy lending at balance date made up 8% of the total lending book. With total book at $3.54 billion, that put dairy lending at just over $283m. The average loan-to-value ratio for dairy lending was 63%.
Among the Rural initiatives during the year, Heartland launched its digital platform for livestock loans, called Open for Livestock, providing 100% finance for farmers buying livestock, with the bank retaining security over the animals till they were sold.
Working in with the website business, the bank had also partnered with NZX Agri section AgriHQ in a free service to farmers allowing them to calculate the potential margin after finishing livestock they were considering buying.
Another new business was the partnership with online livestock trading platform StockX. It provided for applications for Heartland livestock financing through the StockX website.
Rural was the third and smallest of the three Heartland operating divisions. As comparisons, Households net receivables were much higher at $1.9b. Within that division, motor vehicle loans alone were bigger than the Rural lending, at $824m at balance date.
Households also included the Reverse Mortgage business in NZ ($405m in receivables) and Australia ($515m).
The other division was Business which had net receivables of $995m.
Rural had the lightest operating margin at 4.33%, with Business at 4.73%, and Households 4.89%.
Shareholders would receive a final dividend of 5.5c a share plus 2.13c tax credits on September 21.
The directors said asset growth was expected to continue this year, with after-tax earnings in the $65m to $68m range expected.
