Fitch Ratings report shows strong growth for Heartland Bank
Heartland Bank continues to grow strongly, with gross loans increasing at double-digit rates in the financial year ended 30 June 2017, credit rating agency Fitch Ratings announced this week.
The agency said Heartland Bank (HLB) had raised additional capital during FY17 to support growth. It noted that a more “aggressive risk appetite reflected in strong growth could lead to weaker funding and capital positions, and negatively impact asset quality and profitability”.
Fitch Ratings affirmed HLB's Long Term ForeignCurrency Issuer Default Rating (IDR) at “BBB” with a stable outlook, its Short Term ForeignCurrency IDR at “F2” and its Viability Rating at “bbb”.
The bank’s Support Rating was also affirmed at “5” and its Support Rating Floor at “No Floor.” At the same time, Fitch Ratings has assigned the bank localcurrency IDRs.
The affirmation of the IDRs, viability rating and instrument ratings, and the stable outlook reflect the bank’s view that it will continue to perform solidly over the next year or two, absent a significant acquisition. HLB continues to improve its underwriting standards and risk controls, which Fitch Ratings said it viewed as important given its higher risk appetite relative to peers.
Fitch Ratings said the bank had achieved a leading franchise and some price setting power by focusing on niche markets. This has resulted in a strong net interest margin that partly offsets the higher risks associated with its lending book.
Macro-economic risks continued to increase due to high household leverage driven by house-price appreciation over a sustained period. But the employment market remained relatively strong, with employment rates at their lowest levels since 2008.
Fitch Ratings added that after three seasons of depressed dairy prices, the market had observed a sustainable recovery this season, which should help ease the pressure on the farmers and subsequently the bank’s asset quality.
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The agency said Heartland Bank (HLB) had raised additional capital during FY17 to support growth. It noted that a more “aggressive risk appetite reflected in strong growth could lead to weaker funding and capital positions, and negatively impact asset quality and profitability”.
Fitch Ratings affirmed HLB's Long Term ForeignCurrency Issuer Default Rating (IDR) at “BBB” with a stable outlook, its Short Term ForeignCurrency IDR at “F2” and its Viability Rating at “bbb”.
The bank’s Support Rating was also affirmed at “5” and its Support Rating Floor at “No Floor.” At the same time, Fitch Ratings has assigned the bank localcurrency IDRs.
The affirmation of the IDRs, viability rating and instrument ratings, and the stable outlook reflect the bank’s view that it will continue to perform solidly over the next year or two, absent a significant acquisition. HLB continues to improve its underwriting standards and risk controls, which Fitch Ratings said it viewed as important given its higher risk appetite relative to peers.
Fitch Ratings said the bank had achieved a leading franchise and some price setting power by focusing on niche markets. This has resulted in a strong net interest margin that partly offsets the higher risks associated with its lending book.
Macro-economic risks continued to increase due to high household leverage driven by house-price appreciation over a sustained period. But the employment market remained relatively strong, with employment rates at their lowest levels since 2008.
Fitch Ratings added that after three seasons of depressed dairy prices, the market had observed a sustainable recovery this season, which should help ease the pressure on the farmers and subsequently the bank’s asset quality.
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