Heartland Group Holdings Limited Analysis

Overview

Heartland Group Holdings Limited (NZX:HGH) is a financial services group with operations in New Zealand and Australia.

In New Zealand, Heartland Bank Limited (NZX:HBL) is a registered bank that focuses on 'best or only' banking products in three key markets: Household (which includes investment products, consumer lending, reverse mortgages and motor vehicle lending); Business; and Rural. In Australia, Heartland is a specialist provider of reverse mortgage loans and also provides funding to partners in the Small Business and Consumer Lending sectors.

Since first listing on the NZX Main Board in February 2011, Heartland has successfully progressed through several strategic phases, establishing itself as a specialist financial services group that is listed on both the NZX Main Board and ASX under a Foreign Exempt Listing.

A corporate restructure of the Heartland group was implemented in October 2018. For announcements prior to 1 November 2018 relating to Heartland shares, please refer to Heartland Bank Limited's listing (NZX:HBL).

Performance

The following information was extracted from Heartland Bank Limited's half year results, released on 28 February 2025:

Heartland announces 1H2025 results

Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) has announced a net profit after tax (NPAT) of $3.6 million for the six-month period ended 31 December 2024 (1H2025). On an underlying basis, 1H2025 NPAT was $10.7 million.

Heartland’s reduced 1H2025 NPAT reflects an increase in net operating income (NOI) (up $12.0 million or 8.4% on the six month period ended 31 December 2023 (1H2024) to $155.1 million), supported by strong performance by the Australian bank, Heartland Bank Australia Limited (Heartland Bank Australia), offset by active derisking and repositioning of some of the New Zealand bank, Heartland Bank Limited’s (Heartland Bank), non-performing loans (NPL) which contributed to a significantly higher impairment expense. The result was also impacted by an increase in operating expense (OPEX), up $31.6 million (47.5%) in 1H2025. However, this includes a $11.4 million uplift related to the regulatory and operational requirements of the Australian business becoming an authorised deposit-taking institution (ADI), $2.8 million in additional depreciation and amortisation primarily related to Heartland Bank’s core banking system upgrade and $7.7 million related to one-off expenses.

Overview

‒Strong Reverse Mortgage growth continued in both countries, with Receivables up 15.3% in New Zealand and 15.0% in Australia. The Australian Reverse Mortgage business achieved record new business in 1H2025 of $193 million, up 4.1% from 1H2024.

‒Livestock market confidence returning in Australia, flowing through to increased application volumes and livestock purchases in Heartland Bank Australia’s Livestock Finance business.

‒Heartland Bank Australia’s transition to becoming funded primarily by deposits was substantially progressed in 1H2025, with deposits now making up 60% of funding, and having a positive effect on net interest margin (NIM). When NIM is adjusted for the impact of the ADI acquisition (rebase NIM), the exit rebase NIM for 1H2024 was 2.64%, up 49 basis points (bps) to 3.13% by 1H2025.

‒Heartland Bank’s NIM has remained stable in 1H2025, but is expected to expand in the six month period ending 30 June 2025 (2H2025), with the exit NIM for the financial year ending 30 June 2025 (FY2025) expected to be above 4.00%.

‒Heightened focus on simplification within Heartland Bank, with clear realisation strategies in place for Non-Strategic Assets (NSAs).

‒OPEX is at peak investment and expected to moderate by the end of FY2025.

‒Heartland remains well capitalised with strong liquidity and no changes to credit ratings.

‒Interim dividend of 2.0 cps.