Heartland's net profit for the six months ended December 31 was $9.8 million compared with its forecast of between $9 million and $10 million. As previously advised, the result includes a $6.2 million one-off tax benefit and four months' results from PGG Wrightson Finance (PWF).

Heartland has forecast full-year net profit between $20 million and $22 million.

"Economic conditions remain challenging and lending volumes to date are lower than expected," the company says.

"Therefore, this forecast is dependent on the rural division, which will have a full six months' contribution from PWF, and the business division building on their first-half performances. The forecast also assumes that costs will be controlled as planned and that impairments continue to remain stable," it says.

The Wrightson business had a slow start with asset growth impacted by seasonal influences but a strong pipeline of business should convert in the second half and new product development should further consolidate the company's position.

The company, whose credit rating was affirmed by Standard & Poor's at "BBB-" just before Christmas and its outlook revised to stable from negative, says it has started talking to the Reserve Bank about applying for a banking licence.

"The process through to formal application is of indeterminate length" and its discussions with the central bank are confidential, Heartland says.

Heartland's deposit book was stable at $1.67 billion at December 31 and the company says the overall quality of its deposit base has improved with the purging of those investors who had been chasing the government's guarantee which expired on December 31.