Customer Report 2015/2016 1 Heritage Bank Limited • Customer Report 2015/16 Heritage Bank Limited ABN 32 087 652 024. AFSL and Australian Credit Licence 240984. Customer Report 2015/2016 Contents Chairman’s Report ....................................................3 Auditors CEO’s Report ...............................................................5 Ernst & Young Heritage Board & CEO .............................................7 Registered Office Heritage Bank Limited About Heritage ..........................................................8 6th Floor 400 Ruthven Street Toowoomba Qld 4350 Australia The Customer Owned Advantage .......................9 Postal Address Putting Customers First .......................................11 P.O. Box 190 Toowoomba Qld 4350 Australia Putting Communities First .................................13 Contact Details Putting Staff First ..................................................15 Telephone (07) 4690 9000 International 61 7 4690 9000 Evolving Our Business ..........................................18 Internet www.heritage.com.au Contact Centre 13 14 22 Financial Highlights ..............................................21 Heritage Access Line 13 14 72 Heritage Bank Limited • Customer Report 2015/16 2 Chairman’s Report As a mutual financial institution, Most Satisfied Customers award in the Heritage Bank is committed to meeting Challenger Bank category across Australia. the needs of our members. That means We took out the 2016 Mozo People’s not only providing them with great value Choice Award for overall customer on their banking products, but also satisfaction in banking, an award based personalised service, and support for on customer reviews completed across their communities. I’m proud to say that Australia during the year. We also won the Heritage Bank has delivered on those AFR Smart Investor Blue Ribbon Award for commitments in 2015/16. Best Regional Bank 2016. In addition, independent analysis by Financial overview research company CANSTAR found that our customers were $50 million a year better off Our financial performance continues to be in 2015/16 through banking with Heritage, strong, with an increased profit, increased rather than one of the big four banks. retail deposits, and steady lending volumes. Our mutual ethos always requires us to strive for the right balance between New CEO providing financial benefits to our customers, The Board was delighted to appoint and generating the level of profit required Mr Peter Lock to the role of CEO at Heritage to secure appropriate levels of capital. Our in November 2015, following the retirement Kerry Betros, marginal decrease in total consolidated of Mr John Minz. Mr Lock brings 30 years Chairman assets this financial year is a factor of our of banking experience to the role, with a need to manage our prudential capital broad base of knowledge gained across requirements. Overall, Heritage continues several major and regional financial to maintain a strong financial position. institutions. His energy and passion for the This is evidenced by both Moody’s and Fitch future, combined with a respect for the rating agencies confirming our unchanged traditions and culture of our bank, will be ratings this year. vital for our continued success. Customer satisfaction Corporate strategy measures The Board is fully supportive of the revised Financial returns are one measure of corporate strategy which was adopted in success. Another is how well we satisfy our early 2016 to guide our ongoing operations customers’ needs. Heritage continues to and directions. The strategy places customers perform strongly in this area. We finished and staff squarely at the centre of everything the 2015/16 year with a Roy Morgan MFI we do. It acknowledges our need to attract satisfaction rating of 94.3% - the highest and grow new customers, especially in the of any financial institution in Queensland. 20-40 years age bracket. It commits us to Canstar Blue awarded Heritage the 2016 deepening our relationship with existing 3 Heritage Bank Limited • Customer Report 2015/16 customers, who have helped build us into the bank we are today. It highlights the need to attract and develop passionate staff members who will deliver the kind of services that our customers expect. And it clearly sets out a mandate to modernise the way we operate, simplify our processes, and become easier to do business with. Future prospects Heritage does need to continue evolving, as our operating environment changes. The mobile device We finished the has rapidly become the channel of choice for many of our customers in carrying out their everyday 2015/16 year with banking transactions. Similarly the power of digital technology is also helping reshape back-office a Roy Morgan MFI processing operations, making them quicker and more automated. We have to ensure that Heritage satisfaction keeps pace with those changes. This is a challenge for us. But it is also a fantastic rating of 94.3% opportunity. In past eras, banks were constrained by the need to expand their bricks and mortar - the highest of presence to grow their loan books. Branch networks were the key to growing business. However the any financial arrival of the digital age opens up greater scope for Heritage to spread and grow across Australia. institution Mutual sector in Queensland. The 2015/16 year has seen a continuation of the consolidation that is taking place across the mutual sector. As the largest mutual bank in the country, Heritage is well placed to survive and thrive in that environment. We are proud to have achieved this status from our Head Office in Toowoomba, and we look forward to remaining a strong and vibrant member of our community. We are also determined to continue championing the need for Australia to have a strong and competitive mutual sector, as a real alternative to the listed banks. Heritage Bank Limited • Customer Report 2015/16 4 CEO’s Report Heritage is a strong bank with a proud Loan approvals were down slightly (3.45%), history and an exciting future. We have reaching $1.78 billion in 2015/16. Total great potential to build our position across consolidated assets were also marginally Australia as a real and vibrant alternative lower, down from $8.56 billion to $8.44 to the listed banks. As a mutual, we offer billion. However retail deposits grew strongly, great value to our customers and our up by $294 million (6.06%) to $5.16 billion. communities. The Heritage brand is not The six months to June 2016 saw us constrained by reference to any particular perform strongly. We achieved $970 million geographic region or industry. It appeals to in loan approvals for the second half of the customers the length and breadth of the year, compared to $810 million in the first. country. We are already Australia’s largest Similarly we grew our retail deposits by mutual bank with multiple distribution $183 million in the second half, compared channels including branches, online and to $111 million in the first. digital applications, agency agreements and a long established national presence That result followed concerted efforts in that through our mortgage broker partnerships. period to attract new customers and grow the There is enormous potential to continue to business, in line with our strategic objectives. grow our business. Simplifying our processes Doing so requires a plan that can translate our strengths into sustained success. That’s Our mission is to deliver a great customer Peter Lock, why a key focus this year has been a revamp experience every time. We are focussing CEO of our corporate strategy. I’m delighted that our efforts on simplifying our processes we have developed and launched a new vision and finding ways to make it easier and and mission; set four new strategic goals; and quicker for customers to do business with adopted four key values to guide our journey. Heritage. To help achieve that, in 2015/16 This new corporate strategy framework firmly we implemented the SNAP! Program, puts our customers and communities at the which urged all staff to identify simple, centre of our thinking and sets our priorities new achievable process improvements. The and our focus in coming years. program has been a great success, with staff contributing more than 200 ideas by the end of the financial year, with more than 50 Financial overview implemented so far. SNAP! is just the start of Heritage performed well in 2015/16, our journey and we are now looking at larger growing our profits and finishing the year transformation programs to position Heritage with strong momentum. for the challenge of delivering a great customer experience in the digital world. Our pre-tax profit was $51.11 million, up 6.46% on the $48.01 million achieved the National presence previous year. Our after-tax profit was $36.14 million, up 7.55% on the Heritage currently sells home loans $33.61 million achieved in 2014/15. throughout Australia via our network of 5 Heritage Bank Limited • Customer Report 2015/16 mortgage broker partners. We currently have broker distribution service staff located in Brisbane, Sydney, Melbourne, Adelaide and Perth. To achieve our agenda for growth, we aim to increase our loan volumes in areas outside our Queensland heartland, with a greater focus on serving our broker partners and their customers. To help achieve that, we created the new role of Head of Broker Distribution in 2015/16 to lead growth in the broker market. Modern approach to banking We continue to modernise our approach to banking both via our digital channels and our branch We are already footprint. Heritage now employs in-house app developers to ensure that our mobile device banking Australia’s largest system keeps pace with customer demand. That includes releasing regular updates to apps for mutual bank. both iOS and Android operating systems, with new features that add extra functionality for users. There is enormous We are also continuing to modernise the layout and design of our branches. The new designs take potential to a radically different approach, with greater use of technology and more open space.