Heartland and TSB join forces to create $18 billion regional banking challenger
Tuesday, 2 June 2026
A banking challenger with scale is being promised to New Zealanders this morning, after NZX and ASX-listed Heartland Bank revealed a plan to merge with TSB Bank, creating a challenger bank focused on the regions.
The combined TSB and Heartland entity will have approximately $18.53 billion in total assets. The deal effectively consolidates the country’s seventh and eighth biggest banks.
Heartland Group Holdings Limited, the bank’s parent company, said it had signed a conditional merger agreement with Toi Foundation, formerly known as the TSB Community Trust and the 100% owner of TSB, to acquire the New Plymouth-based bank for a total of $620 million.
The combined entity will be known as TSB Heartland Bank.
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“By combining Heartland Bank’s specialist product expertise with TSB’s cost-effective funding platform and transactional banking capabilities, TSB Heartland Bank will be a full-service capable bank differentiated by its specialist product offerings, with a lower risk-weighted product portfolio,” Heartland’s statement to the NZX read this morning.
“Greater scale and product diversification will improve financial efficiency and resilience, which may support an uplift in the merged bank’s long-term credit rating”.
Operational synergies are mooted for both organisations within three years, and Heartland shareholders have been told higher earnings per share and an enhanced dividend with the sale can be expected.
Instead of simply one bank buying the other, Toi Foundation will receive $620m, or 76% of TSB’s book value, meaning the bank is being valued at a 24% discount relative to the assets on its balance sheet.
Part of the payment will be made in Heartland shares, giving Toi Foundation a 17.5% ownership stake in Heartland.
Toi Foundation is lending a portion of the purchase price back to Heartland to help them finance the buyout, which Heartland will pay back with interest over time.
Toi Foundation will use another portion of the funds to buy regulatory bonds (Tier 2 capital) issued by Heartland Bank, helping the merged bank satisfy its required regulatory capital cushions.
One Toi Foundation nominee will be initially appointed to the Heartland Board with effect from completion of the proposed merger, while two existing TSB directors will initially join the TSB Heartland Bank Board.
The proposed merger, which will rack up costs of $15m in the completion, is likely to be done by December 2026, subject to satisfaction of a number of conditions including community consultation by Toi Foundation with Taranaki residents, Heartland shareholder approval and any necessary New Zealand and Australian regulatory approvals.
Heartland Bank was established in Ashburton in 1875 and today runs two entities - Heartland Bank in New Zealand and Heartland Bank Australia. Its portfolio of products is focused on reverse mortgages, livestock finance, and savings and deposits and in New Zealand, motor and asset finance.
Heartland Bank operates four physical branches in New Zealand. It holds approximately 1.23% of the country’s total banking assets.
TSB Bank was originally founded in 1850 as the Taranaki Savings Bank, with its 100% ownership by the philanthropic Toi Foundation a point of uniqueness. The bank currently operates 25 branches across New Zealand, holding approximately 1.4% of the country's total banking assets