Heartland Group (HGH) H1 2025 earnings summary

Executive summary

• Net profit after tax (NPAT) for 1H2025 was $3.6 million, down sharply from $37.6 million in 1H2024, mainly due to higher impairment expenses and increased operating costs, despite strong growth in Australian operations and reverse mortgages.

• Underlying NPAT for 1H2025 was $10.7 million, reflecting significant impairment and one-off expenses; FY2025 underlying NPAT is expected to be at least $45 million.

• Heartland Bank Australia's transition to deposit funding (now 60% of funding, targeting >80% by year-end) is supporting NIM expansion and growth.

• Reverse mortgage portfolios in both NZ and AU grew over 15% year-over-year, with AU achieving record new business.

• The Group remains well capitalized with strong liquidity and no changes to credit ratings.

Financial highlights

• Net operating income increased by $12 million (up 8.4% YoY) to $155.1 million, driven by strong Australian performance.

• Operating expenses rose by $31.6 million (47.5%), including regulatory costs, depreciation, and one-off items.

• Impairment expense more than doubled to $50.5 million, mainly from NZ bank derisking and repositioning non-performing loans.

• Interim dividend declared at 2.0 cents per share, with a target payout ratio of at least 50% of underlying NPAT.

• Earnings per share dropped to 0.40 cents from 5.30 cents in 1H2024.

Outlook and guidance

• Underlying NPAT for FY2025 expected to be at least $45 million; difference between reported and underlying NPAT to narrow in 2H2025.

• Net interest margin (NIM) projected to expand in H2, with NZ expected to exit above 4% and AU above 3.6%.

• Cost-to-income ratio targeted to return to the 40s in both Australia (by year-end) and New Zealand (FY26).

• Challenging NZ economic conditions expected to persist; AU outlook improving, especially in livestock and reverse mortgages.

• Dividend payout ratio targeted at least 50% of underlying NPAT for FY2025.