Heartland Group (HGH) H2 2024 earnings summary

Executive summary

• Underlying NPAT for FY24 was NZD 102.7 million, 4.9% below guidance, mainly due to elevated provisions and one-off items, with reported NPAT at NZD 74.5 million.

• Receivables grew 6.4% in a challenging environment, with reverse mortgages expanding over 20% in both NZ and Australia.

• Strategic achievements included the acquisition and integration of Challenger Bank (now Heartland Bank Australia), a $210m capital raise, and a core system upgrade in NZ.

• Total assets increased to $9.29 billion, driven by finance receivables growth and the acquisition.

• One-off and non-cash technical items impacted NPAT by $28.2m.

Financial highlights

• Net interest income was $277.6 million, down 1.5% year-over-year, with NIM contracting 36 bps to 3.64%.

• Operating expenses rose 8.8% to $139.4 million, with CTI ratio at 41.9% (underlying) and 48.0% (reported).

• Impairment expense nearly doubled to $46.4 million, with total provisioning up NZD 22 million and impairment expense ratio at 0.44% (underlying).

• Dividend declared at 3 cents per share, a 55% payout of underlying NPAT.

• Basic and diluted EPS were 9.85 cents, down from 13.96 cents.

Outlook and guidance

• NIM expected to expand above 4% by Q3 FY25 in NZ and above 3.4% in Australia, with CTI ratio targeted below 35% by FY28.

• Impairments expected to remain elevated short-term but within acceptable bands, with improvement anticipated as economic conditions recover.

• No formal FY25 NPAT guidance due to ongoing volatility; payout ratio for FY25 expected at least 50%.

• Focus on integrating Heartland Bank Australia and leveraging synergies.