Introducing Heartland Bank Australia
30 September 2024
Te Whakatakinga o Heartland Bank ki Ahitereiria
The acquisition of Challenger Bank on 30 April 2024 marked a critical milestone in Heartland’s strategy for expansion in Australia. The ADI has since been rebranded to Heartland Bank Australia, bringing together Challenger Bank, Heartland Finance (Heartland’s Australian Reverse Mortgage brand) and StockCo Australia (Heartland’s Australian Livestock Finance brand).
Already well-established in Australia, Heartland’s Australian portfolio collectively had approximately $2 billion1 of Receivables at 30 June 2024. Heartland Bank Australia is now the only specialist ADI provider of both reverse mortgages and livestock finance.
HEAD-START TO FUNDING
Prior to the acquisition, Heartland’s Australian businesses relied on costly wholesale funding. With an ADI licence and access to retail deposits, the bank can now more sustainably fund its existing lending products and expand its offering in the Australian market. And it’s already ahead of Heartland’s expectations.
A pre-completion deposit raising programme by Challenger Bank achieved retail deposit growth of A$1,147 million between 1 January and 30 June 2024. This enabled the full repayment of a CBA reverse mortgage funding facility prior to completion of the acquisition and is having a positive effect on Heartland Bank Australia’ s cost of funds. In the six months to 30 June 2024, the ADI achieved deposit growth at a weighted average rate of 4.85%, 2.03% lower than Heartland Australia’s (comprising Heartland Australia Holdings Pty Ltd and its subsidiaries) cost of funds across the same period.
Since completion, Heartland Bank Australia has been originating and funding all lending through deposits on its own balance sheet while its wholesale facilities continue to repay. This included the repayment of Heartland Australia’s A$75 million Medium-Term Note on 9 July 2024.
The bank is now well underway with its transition from a 100% wholesale funding base to a retail and wholesale funding mix. The funding mix is expected to be about 90% retail funding by the end of FY2025.
To further diversify and strengthen its capital base, in June 2024, Heartland Bank Australia successfully completed an inaugural A$50 million Tier 2 Subordinated Note transaction. The transaction received strong support from a broad range of institutional investors, with demand nearly three times oversubscribed. Proceeds from the Subordinated Notes are intended to support future growth opportunities for the existing Australian lending portfolios.
All of this leaves Heartland Bank Australia well capitalised, profitable and with strong access to retail deposits to fund its growth expectations.
AN EXPERIENCED BOARD
On 30 April 2024, Heartland Bank Australia appointed a diverse, highly qualified and experienced Board to enable the successful delivery of its best or only product strategy. The Board is led by Geoff Summerhayes. A Director of Heartland since 2021, on 30 April 2024, Geoff resigned from the Heartland Board and was appointed Chair and Independent Non-Executive Director of Heartland Bank Australia.
He is joined by Independent Non-Executive Directors Shane Buggle, Lyn McGrath (who was a Director of Challenger Bank prior to Heartland’s acquisition), Vivienne Yu and Bruce Irvine (who is also Chair and Independent Non-Executive Director of Heartland Bank in New Zealand). Leanne Lazarus and Jeff Greenslade were also appointed Non-Independent Non-Executive Directors.²
See full biographies at heartlandbank.com.au/board-of-directors
A STRONG LEADERSHIP TEAM
Since acquisition completion, a core area of focus has been on bringing together the cultures of the three businesses as Heartland Bank Australia continues to establish itself in the Australian market. In May 2024, the Challenger Bank and Heartland Finance teams came together in a new Melbourne office, becoming the main hub for the business. Sydney employees also relocated to a new office, while StockCo Australia employees mostly remain in Brisbane.
On 22 July 2024, after supporting the successful acquisition completion and aiding the transition of the Australian businesses, Chris Flood moved from Acting CEO of Heartland Bank Australia back to his role as Deputy Group CEO of Heartland.³ On this date, Heartland welcomed Michelle Winzer as CEO of Heartland Bank Australia.
Michelle’s initial focus has been setting the structure of the business, appointing key roles to join the executive team and creating the appropriate operating rhythm.
On 1 July 2024, Vaughan Dixon was appointed Chief Technology & Operations Officer. Vaughan leads Heartland Bank Australia’s technology and operations teams, combined under a new structure to deliver synergy across both critical functions. In August 2024, Medina Cicak was appointed Chief Commercial Officer to lead a newly created Commercial business unit, comprising the Retail, Reverse Mortgage and Livestock Finance teams. Medina’s focus is on creating and maintaining synergy across the distribution teams with a targeted approach to growth.
These new appointments complement the highly experienced executive team, comprising David Brown, Chief Risk Officer, Richard Collier, Chief Financial Officer, Sharon Yardley, Chief Compliance & Sustainability Officer and Sarah Burgemeister, General Counsel.
See full biographies at heartlandbank.com.au/management-team
LOOKING AHEAD
Heartland Bank Australia’s focus as a specialist digital bank is on delivering banking products which are the best or only of their kind to underserved areas of the market in which it has expertise – such as reverse mortgages for older Australians and finance options for livestock producers.
As it aims to become the lowest cost provider in the areas it operates, Heartland Bank Australia will remain focused on margin expansion and cost reduction through its funding mix transition and commitment to digitalisation.
Through the ongoing integration of business systems and practices post-acquisition, Heartland Bank Australia will continue to identify opportunities to improve operational efficiencies and digitalise processes, reducing friction for customers and contributing to a reduced CTI ratio over time.
Growth in FY2025 is expected to be driven by ongoing demographic demand for Australian Reverse Mortgages, and a turnaround in conditions for Australian Livestock Finance as market confidence in the sector returns, supported by the execution of product development initiatives and distribution network expansion.
Heartland Bank Australia is well capitalised, profitable and has good access to retail deposits to fund its future growth aspirations. With strong leadership in place, local expertise and learned experience from Heartland Bank in New Zealand, Heartland is confident in what lies ahead for its Australian bank.