The owner of TSB has agreed to sell the bank to Heartland Group Holdings for $620 million to create a “larger New Zealand challenger bank” with a regional focus.
Under a proposed deal, Toi Foundation will sell all of its shares on issue to Heartland Group to create ‘TSB Heartland Bank Limited’.
Toi Foundation will then reinvest in the bank, so it had a 17.5% shareholding in Heartland Group.
A Toi Foundation nominee will also be appointed to the Heartland Group board, and two existing TSB directors will join the TSB Heartland Bank board.
Toi Foundation chairman Chris Ussher said this structure would enable Toi Foundation to support the merged bank’s strategic direction, while also freeing up capital for the foundation (a philanthropic community trust) to support other projects in Taranaki.
Heartland chief executive Andrew Dixson said the scale that would be created by the merger would enhance the bank’s ability to compete and increase its financial resilience.
“By combining Heartland Bank’s specialist product expertise with TSB’s cost-effective funding and everyday banking services, we’ll be able to offer more New Zealanders a better‑value banking alternative,” he said.
“As a larger bank, TSB Heartland Bank will be in a stronger position to keep investing in products and technology, while supporting the delivery of improved financial returns for our shareholders.”
TSB and Heartland are New Zealand’s seventh and nineth largest banks respectively, by assets. Once merged, they will be the seventh largest bank, behind the big four Australian-owned banks, Kiwibank and Rabobank.
TSB’s assets are worth $9.5 billion. Heartland’s are worth $5.6b. To put these numbers in context, Kiwibank’s assets are worth $43.1b.
TSB, or the Taranaki Savings Bank, has been owned by Toi Foundation since 1988. The foundation also owns 66% of Fisher Funds.
Heartland is listed on the NZX and ASX and provides specialist banking products to New Zealanders and Australians.
Dixson said the merger would enable Heartland to deploy capital more effectively across the group, and “have the scale needed to deliver a stronger cost-to-income ratio through greater operating leverage”.
“Our commitment to specialist products remains unchanged – this will simply be enhanced by full-service capabilities in New Zealand.”
The proposed deal is expected to be completed in December, provided it receives the appropriate regulatory and shareholder approvals. Taranaki residents will also be consulted.
Jenée Tibshraeny is the Herald’s Wellington business editor, based in the parliamentary press gallery. She specialises in government and Reserve Bank policymaking, economics and banking.
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