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 21 August 2025:

Heartland announces FY2025 result and outlook for FY2026; Addresses long-term ambitions, with further detail to be provided at a 2025 Investor Day

Following a year of significant reset, change and integration, Heartland Group Holdings Limited’s (Heartland) (NZX/ASX: HGH) net profit after tax (NPAT) for the financial year ended 30 June 2025 (FY2025) was $38.8 million. On an underlying basis, FY2025 NPAT was $46.9 million, meeting underlying NPAT guidance of at least $45 million. Heartland prioritised capital efficiency during FY2025, restoring a superior margin and actively derisking its lending portfolios to strengthen its foundations for the future.

Overview: FY2025 performance

• After a reset of some of its New Zealand lending portfolios in the first half of FY2025 (1H2025), Heartland substantially met the financial performance expectations set in its interim financial results announcement (Outlooks) for the second half of FY2025 (2H2025).
• Superior margin restored, with net interest margin (NIM) up 17 basis points (bps) to 3.56% and each bank ending FY2025 with a strong exit margin (4.13% in New Zealand and 3.59% in Australia).
• Operating expenses (OPEX) were up $53.2 million (38.1%) primarily due to non-repeating benefits in the financial year ended 30 June 2024 (FY2024), the cost base of the authorised deposit-taking institution (ADI) and subsequent costs related to regulatory requirements following the ADI acquisition, hiring for growth, and software related costs. Cost growth is stabilising.
• Impairment expense was up $25.2 million (54.3%) due to a significant increase for Heartland Bank Limited (Heartland Bank) in 1H2025 in response to the impact of the ongoing deterioration in economic conditions on some lending portfolios and to derisk and reposition some of its lending portfolios (as previously announced on 18 February 2025).
• The introduction of more prescriptive collections and recoveries policies in 2H2025 has had a positive effect on asset quality and recovery outcomes, exceeding Heartland’s initial expectations. Overall asset quality is improving and Motor Finance arrears are now performing better than the industry average.
• An increased focus on capital optimisation through several key initiatives by Heartland Bank and accelerated non-strategic asset (NSA) realisation is enabling capital to be redeployed to high-return core lending portfolios.
• Heartland’s existing Australian businesses have now been integrated into the acquired ADI to form a new and unique Australian bank.
• The Australian funding transition has been successful, with deposits forming 81% of the bank’s funding. Heartland Bank Australia Limited (Heartland Bank Australia) now has a deep, stable and diverse platform to efficiently fund future lending growth.
• Strong growth continued in Reverse Mortgages in both countries (Receivables up 15.5% in New Zealand and 18.5% in Australia), demonstrating growing market demand for this product.
• Good momentum achieved in Livestock Finance in New Zealand (Receivables up 18.4%) and a return to growth in Australia (Receivables up 1.5%, arresting the FY2024 decline of 27.5%).
• Growth has remained challenged in Heartland Bank’s other core lending portfolios of Motor Finance and Asset Finance due to subdued economic conditions and a focus on higher quality lending.
• Final dividend of 2 cents per share (cps), bringing the total FY2025 dividend to 4 cps.