Heartland Group (HGH) H2 2025 earnings summary

Executive summary

• FY2025 marked a significant reset, focusing on capital efficiency, margin restoration, and de-risking lending portfolios, with underlying NPAT of $46.9 million meeting guidance and reported NPAT at $38.8 million.

• Strong growth in Reverse Mortgages and Livestock Finance in both NZ and AU, while Motor and Asset Finance faced subdued growth due to economic conditions.

• Integration of Australian businesses into a new ADI created Heartland Bank Australia, with a successful funding transition and 81% deposit funding.

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

• Final FY2025 dividend declared at 4 cps, with a payout ratio of 80%.

Financial highlights

• Underlying NPAT was $46.9 million (vs $45m+ guidance); reported NPAT was $38.8 million, down 47.9% year-over-year.

• NIM improved by 17 bps to 3.56%, with NZ exit NIM at 4.13% and AU exit NIM at 3.59%.

• Operating expenses rose 38.1% to $192.5 million, mainly due to ADI acquisition, integration, and regulatory costs.

• Impairment expense increased by 54.3% to $71.6 million, mainly in NZ, reflecting economic deterioration and portfolio repositioning.

• Dividend payout ratio for FY2025 was 80%.

Outlook and guidance

• FY2026 targets include underlying NPAT of at least $85 million and ROE of at least 7%.

• Focus on core products, technology investment, operational cost control, and capital efficiency.

• 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%.

• Board targets at least 50% dividend payout of underlying NPAT in FY2026.

• Long-term ambitions reset to FY2030, aiming for significant increases in ROE and profit through capital efficiency and core product growth.