Heartland Group (HGH) H2 2024 earnings summary

Executive summary

• Reported NPAT for FY2024 was $74.5 million, down 22.2% year-over-year, with underlying NPAT at $102.7 million, 4.9% below guidance, mainly due to elevated provisions and one-off items.

• Receivables grew 6.4% to $7.2 billion, with strong expansion in reverse mortgages in NZ (up 20.2%) and Australia (up 19.7%).

• Strategic milestones included the acquisition and integration of Challenger Bank (now Heartland Bank Australia), a $210 million equity raise, and a core banking system upgrade in New Zealand.

• FY2024 results were impacted by deteriorating economic conditions in late FY2024, leading to increased provisions, especially in Asset Finance, Motor Finance, and Rural portfolios.

Financial highlights

• Net interest income was $277.6 million, down 1.5% year-over-year, with reported NIM at 3.39% (down 58 bps) and underlying NIM at 3.64% (down 36 bps).

• Operating expenses rose to $139.4 million, with underlying OPEX down $1.3 million but higher IT and personnel costs; CTI ratio was 48.0% (reported) and 41.9% (underlying).

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

• Final dividend of 3.0 cps declared, with a 55% payout of underlying NPAT and an 8.7% yield.

Outlook and guidance

• Long-term ambitions target underlying NPAT above $200 million, NIM above 4%, CTI ratio below 35%, and ROE of 12-14% by FY2028.

• NIM expected to expand above 4% in NZ and above 3.4% in Australia by Q3 FY25, with CTI ratio projected to rise short-term but targeted to fall below 35% by FY28.

• No formal FY2025 NPAT guidance due to ongoing volatility; payout ratio for FY25 expected at least 50%.

• Integration of Heartland Bank Australia and digitalisation initiatives expected to drive future growth.