Heartland Group acquires Challenger Bank to expand Australian footprint

Heartland Group Holdings Limited (NZX/ASX: HGH), known for its significant presence in the financial services sector, has confirmed the completion of Heartland Bank Limited’s acquisition of Challenger Bank Limited from Challenger Limited (ASX: CGF). This acquisition marks a historic move as Heartland Bank becomes the first New Zealand registered bank to acquire an Australian authorised deposit-taking institution (ADI).

The acquisition of Challenger Bank is a pivotal part of Heartland’s strategy to bolster its long-term growth ambitions and expand its foothold in the Australian market. Heartland is already a recognized name in Australia through its subsidiaries, Heartland Finance and StockCo Australia, which together boasted about NZ$2 billion in gross finance receivables as of the end of 2023.

Heartland Finance, a leader in the reverse mortgage sector, controls a 42% market share and has assisted over 27,500 Australians since 2004 to secure a more comfortable retirement by releasing equity from their homes. StockCo Australia, a specialist in livestock finance, has been supporting food producers across Australia with innovative financial solutions since 2014.

The total consideration for the acquisition of Challenger Bank amounted to AU$115.7 million. This figure includes an initial purchase price of AU$46.4 million and an additional AU$69.3 million payment, reflecting increased capital held by Challenger Bank following its pre-completion purchase of AU$574.3 million of reverse mortgages from Heartland Australia.

This strategic acquisition not only strengthens Heartland’s market position but also sets the stage for accelerated growth. Challenger Bank’s successful deposit-raising program prior to the acquisition’s completion saw a substantial increase in retail deposits, achieving growth of AU$891.2 million at a significantly lower cost of funds compared to Heartland Australia’s current rates.

From May 1, 2024, Challenger Bank will begin operating under the new brand of Heartland Bank (Australia), transitioning to a digital specialist bank model. This rebranding aligns with Heartland’s vision to integrate and streamline its services across trans-Tasman operations, enhancing service delivery and customer engagement in the digital age.

The acquisition of Challenger Bank by Heartland Group is a strategic move that amplifies its competitive edge in the Australian financial market. This development not only demonstrates Heartland’s commitment to growth and expansion but also its ability to adapt and innovate in a dynamic financial landscape.