Heartland Group is working on solutions for millennials and Gen Z, mobile and card payments and an end-to-end depositors’ platform, the financial services company told its investor day.

Millennials typically cover people born in the early-1980s to mid-1990s and Gen Z spans the mid-1990s to mid-2000s. 

Greater use of robotic process automation is also on its agenda and Heartland is likely to adopt more than one software solution, including the Blue Prism robotics software developed by Britain’s software industry.

Heartland is also planning to start a “request for information” process to seek a partner or partners to develop an overall robotics strategy to be rolled out over two years.

Heartland has also reported an 8.7 percent increase in net profit to $17.4 million for the three months ended September, fuelled by growth in reverse mortgages, online small business lending and motor vehicle lending.

Net receivables rose an annualised 10.2 percent to $4.1 billion at Sept. 30 compared with June with the biggest slice of growth, $43.5 million, coming from sales of reverse mortgages, followed by $31.4 million growth in motor lending.

Notably, Heartland’s net interest margin ticked up to 4.44 percent, more than double that of the five major banks, from 4.42 percent, a point of difference the company highlights as reflecting its strategy of focusing on niche products and avoiding head-to-head competition with the majors.

The results cover a period in which Heartland was still a bank – to avoid Reserve Bank of New Zealand restrictions on its Australian reverse mortgage business, Heartland restructured from Oct. 31 and the bank is now a subsidiary of the group.

Heartland trimmed its cost-to-income ratio to 40.48 percent in the latest quarter from 40.87 percent in the year ended June.

Impairment expense rose to $6.2 million for the latest three months from $5.1 million in the same three months last year with the impairment expense ratio climbing to 0.61 percent at Sept. 30 from 0.59 percent in June.

Heartland says that was a function of applying new accounting standards that require provisions to be made earlier.

And its non-performing loans actually fell a smidgeon to $73.4 million at Sept. 30 from $73.9 million at June 30.

Heartland is New Zealand’s only reverse mortgage provider and the largest in Australia with an estimated 19.8 percent market share, up from 14.9 percent in June 2017 and where bank competitors, including Westpac, Macquarie and Commonwealth Bank of Australia (CBA) are leaving or have exited the market.

Over the last three years, Heartland’s Australian reverse mortgage business has grown at a compound 18 percent and the New Zealand reverse mortgage business at a compound 11 percent – Heartland says it expects the businesses will grow at a similar pace this year.

Heartland Seniors Finance is currently funded by CBA but the company says it wants to develop multiple warehouse facilities and to introduce mezzanine investors to the business.

It is also considering a reverse mortgage-backed note programme and/or an Australian dollar medium term note programme using its group “BBB-“ credit rating from Fitch.

The motor lending business achieved annualised growth of 13 percent in the September quarter, down from 16 percent in the year ended June, but Heartland says it sees plenty of growth because the company’s lending accounts for just 7.3 percent of dealer-to-public sales.

The Open For Business online lending platform, which guarantees loan decisions within three minutes, lifted its book to $111 million at Sept. 30 and the company says it is managing down its legacy large relationship business and rural loans – net receivables for each fell $4 million and $7.2 million respectively in the September quarter.

Heartland confirmed previous guidance that net profit for the year ending June 2019 will come in at $75-77 million.

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