Heartland Group (HGH) investor relations material

Executive summary

• FY2025 marked a significant reset focused on capital efficiency, integration, margin restoration, and derisking lending portfolios, with strong growth in reverse mortgages and livestock finance in both NZ and Australia.

• Underlying NPAT was $46.9M, meeting guidance, while reported NPAT was $38.8M.

• Integration of Australian businesses into a new bank and successful transition to 81% deposit funding.

• NIM improved by 17 bps to 3.56%, with strong exit margins in NZ (4.13%) and AU (3.59%).

• Asset quality improved, especially in Motor Finance, now outperforming industry arrears averages.

Financial highlights

• Underlying NPAT: $46.9M, meeting guidance of at least $45M; reported NPAT: $38.8M, down 47.9% YoY.

• Impairment expense increased by $25M to $71.6M, reflecting economic headwinds and portfolio repositioning.

• Operating expenses rose $53M (up 38.1%) to $192.5M, mainly from integration, ADI acquisition, and regulatory costs.

• Receivables retracted $85M, reflecting a shift to higher-return, lower-capital assets.

• Dividend: 4 cps for FY2025, payout ratio 80%.

Outlook and guidance

• FY2026 targets: underlying NPAT of at least $85M and ROE of at least 7%.

• Focus on core product sets, technology investment, and operational cost control; no further material cost increases anticipated.

• NZ bank: NIM >4.20%, CTI <53.5%, impairment expense ratio <0.85%.

• AU bank: NIM >3.40%, CTI <45.5%, impairment expense ratio <0.10%.

• Prioritizing growth and innovation in reverse mortgages, with >18% growth forecast in NZ and >19% in Australia.