Heartland Group Holdings Ltd. · NZX:HGH
Heartland — H1 2022 Earnings Presentation
33 slides from Heartland's earnings presentation, Feb 22, 2022
Slide 1: Half year results
2022 Half year results 22 February 2022
Slide 2: Important notice
This presentation has been prepared by Heartland Group Non-GAAP measures Holdings Limited (NZX/ASX: HGH) (the Company or Heartland) for the purpose of briefings in relation to its financial statements. This presentation contains references to non-GAAP measures Important including underlying profit o
Slide 3: 1H2022 highlights
1H2022 highlights 3
Slide 4: Financial highlights
Financial highlights FINANCIAL PERFORMANCE Net interest margin Net interest income 4.30% FINANCIAL (NIM) 4.30% (+ 3 basis $123.9m NET INTEREST MARGIN POSITION points (bps) vs 1H2021). +9.4% vs 1H2021 Underlying other + 3 bps vs 1H2021 operating income (OOI) $6.9m ( flat Average interest $5,358m earn
Slide 5: Strategic highlights
Strategic highlights Significant progress towards digitalisation goals Australian Reverse Mortgages awarded with continuous integration of product Excellence Awards at Australia Mortgage applications and platforms. Awards 2021, and won a 5-Star Lender Award in Your Mortgage’s Mortgage of the Year Aw
Slide 6: Impairments and COVID-19 provisioning
Impairments and COVID-19 provisioning • Impairment expense increased by $4.0 million (88.1%) to $8.5 million. • The impact of COVID-19 has not disrupted business as usual activity. • Impairment expense as a percentage of average receivables increased • Heartland is following government guidance and
Slide 7: Financial results
Financial results 7
Slide 8: Growth in profitability
Growth in profitability ↗ 3.8 (8.8%) NPAT ↗ 3.4 (7.8%) 6.9 42.9 40.5 32.1 +8% +20% +11% +20% 47.5 39.9 44.1 33.1 5.3 5.2 10.7 (4.0) FY19 FY20 FY21 FY22 0.3 1 (5.3) 3.8 H1 H2 COVID-19 Overlay 1 0.5 (1.8) 0.8 47.5 44.1 1H2021 one-offs: 1H2021 one-offs: $4.3m voluntarily accelerated amortisation 1H2022
Slide 9: Growth in receivables
Growth in receivables ↗ $351m (13.9%) 162 - 10 (13) 57 (46) (7) 38 36 47 (68.5%) (23.5%) 8.8% 543.7% 4.3% 65 13.7% (9.3%) 12.4% 15.6% 5,369 12.1% 5,018 June 21 AU Reverse NZ Reverse Asset Finance Open for Wholesale Rural Livestock Motor Personal Retail Dec 21 Mortgage Mortgage Business Lending Relat
Slide 10: Key performance measures
NIM CTI 4.69% 4.65% 4.63% 4.59% 48.8% 45.4% 46.8% 43.8% Key 44.9% 45.9% 44.8% 43.1% 4.33% 4.35% 4.28% 4.30% performance Jun-20 Dec-20 Jun-21 Dec-21 Jun-20 Dec-20 Jun-21 Dec-21 measures Total NIM NIM excl. Liquid Assets Reported CTI Underlying CTI Non Performing Loans Impairment Expense Ratio 2.50% 1
Slide 11: Shareholder return
Shareholder ROE Dividend per share (cps) return 7.0 6.5 2.5 12.2% 12.2% • Return on equity (ROE) of 12.2% 11.9% (up 7 bps vs 1H2021). 5.5 10.5% 4.5 4.0 3.5 • Earnings per share (EPS) of 8.1 cps, up 0.5 cps compared to 1H2021. Jun 20 Dec 20 Jun 21 Dec 21 FY19 FY20 FY21 FY22 • 1H2022 interim dividend
Slide 12: Divisional summary
Divisional summary 12 13
Slide 13: Reverse Mortgages portfolio analytics
Reverse Mortgages portfolio analytics NEW ZEALAND 1 AUSTRALIA 1 Average loan size $111,842 A$141,357 Average loan size Weighted average borrowers’ age 78 77 Weighted average borrowers’ age Average origination LVR 10.0% 11.4% Average origination LVR Weighted average LVR 19.3% 21.2% Weighted average L
Slide 14: AU Reverse Mortgages
AU Reverse Mortgages • Receivables increased by $65.4 million (12.1%)1 to $1.14 billion. $19.0m +4.7% • New business was strong, driving higher than NET OPERATING INCOME increase since 1H2021 expected new lending, due to a buoyant property market, and repayments below long- As at 31 December 2021 te
Slide 15: NZ Reverse Mortgages
NZ Reverse Mortgages • New Zealand Reverse Mortgages NOI was up 36.6% from 1H2021 due to record asset growth $15.3m +36.6% and improved margins. NET OPERATING INCOME increase since 1H2021 • Receivables increased $47.4 million (15.6%) to $648.9 million due to strong new business As at 31 December 202
Slide 16: Open for Business
Open for Business • 1H2022 saw a decrease of $0.3 million (4.2%) in NOI as a result of subdued confidence $7.2m -4.2% resulting from COVID-19-related lockdowns and travel restrictions. NET OPERATING INCOME decrease since 1H2021 • Receivables decreased $6.8 million (9.3%)1 to As at 31 December 2021 $
Slide 17: Asset Finance
Asset Finance1 • Asset Finance NOI was up 17.9% from 1H2021. $15.8m +17.9% • Receivables increased $35.7 million (12.4%) to NET OPERATING INCOME increase since 1H2021 $606.6 million. As at 31 December 2021 • The underlying demand from transport, logistics and other productive sectors has remained co
Slide 18: Wholesale Lending
Wholesale Lending1 • Receivables increased $38.4 million (13.7%)2 to $593.4 million. $15.7m +28.8% NET OPERATING INCOME increase since 1H2021 • Go Car Finance contributed to growth with continued funding for its New Zealand loan book. As at 31 December 2021 • Expansion of wholesale motor vehicle dea
Slide 19: Motor Finance
Motor Finance • Organic growth from Heartland’s existing dealer network, increase in intermediaries and $36.4m +10.4% key partnerships through Heartland’s 'white NET OPERATING INCOME increase since 1H2021 label' strategy. As at 31 December 2021 • Franchises contributed 48% of business as new car sal
Slide 20: Personal Lending
Personal Lending • The New Zealand Harmoney portfolio contracted $38.0 million (98.1%) to $5.4m -38.8% $38.8 million. NET OPERATING INCOME decrease since 1H2021 • The Australian Harmoney portfolio decreased by $18.1 million (73.7%)1 to As at 31 December 2021 $30.7 million. • Both New Zealand and Aus
Slide 21: Rural
Rural • A decrease in Livestock Receivables of $12.9 $15.5m million (23.5%) to $96.4 million, partly offset by a $10.4 million (4.3%) increase in Rural Receivables to $487.7 million. flat • Average Livestock receivables position up 7.1% NET OPERATING INCOME increase since 1H2021 year on year. As at
Slide 22: Home Loans
Home Loans¹ • Home Loans1 Receivables increased $163.2 $0.6m million in 1H2022 to $213.1 million. • Lending growth supported by Heartland’s low interest rates, currently market-leading for 2- and 3-year fixed rates, and standard floating rate. NET OPERATING INCOME • CCCFA changes have added to the t
Slide 23: Funding and liquidity
Funding and Heartland increased borrowings by $290.8 million (6.0%), contributed to by increases in both New Zealand and Australia. liquidity New Zealand • Heartland Bank increased borrowings by $236.4 million (6.4%). Funding Composition $m • Deposits grew $117.0 million (3.6%). 503 622 • Launched 3
Slide 24: Capital
Capital • Partial restriction on bank dividends remains in place (currently until 1 July 2022). Heartland Capital Allocation $m • Heartland Bank’s capital ratio as at 31 December 2021 is 13.98% (up from 13.88% in 30 June 2021). 683 49 46 • As part of the RBNZ capital implementation review requiring
Slide 25: Strategic update
Strategic update 1 25
Slide 26: Regulatory update
Regulatory update Heartland continues to monitor the significant volume of regulatory change. • Changes to the CCCFA came into force on 1 December. Heartland has implemented new processes and technologies to enable it to comply with the changes and continues to refine these. • Deposit Takers Act is
Slide 27: Strategic objectives
Strategic objectives Heartland’s strategic vision to provide best or only products via scalable digital Provide best or only platforms will be achieved through: products through scalable digital platforms, at the 1. Business as usual growth 3. Expansion in Australia lowest cost Broadening product of
Slide 28: Looking forward
Looking forward • 1H2022 NPAT exceeded expectations, despite a challenging backdrop of continued COVID-19 impacts and legislative disruption. • Strong asset growth has been achieved, though 2H2022 growth is expected to slow in Motor and online Home Loans as a result of CCCFA impact. • Continued shif
Slide 29: Appendices
Appendices 29
Slide 30: Appendix 1: Financial position
Appendix 1 31 December 30 June Movement Movement $m 2021 2021 ($m) (%) Liquid Assets 503 539 (36) (6.7%) Gross Finance 5,358 5,018 339 6.8% Receivables Provisions (53) (54) 0 0.8% Financial Other Assets TOTAL ASSETS 191 5,999 179 5,683 12 316 6.7% 5.6% position Retail Deposits Other Borrowings 3,332
Slide 31: Appendix 2: Financial performance
Appendix 2 $m 1H2022 1H2021 Change ($) Change (%) Net Operating Income 1 130.7 125.3 5.4 4.3% Operating Expenses 57.3 61.1 (3.8) (6.3%) Impairment Expense 8.5 4.5 4.0 88.1% Profit Before Tax 64.9 59.6 5.3 8.8% Financial Tax Expense 17.4 15.5 1.8 11.8% Net Profit After Tax 47.5 44.1 3.4 7.8% performa
Slide 32: Appendix 3: Reconciliation of reported with underlying results
Appendix 3 $m 1H2022 1H2021 Movement ($m) Movement (%) Reported NOI 130.7 125.3 5.4 4.3% Less: Net fair value gain on investments (0.1) 5.2 (5.3) Reconciliation of Underlying NOI Reported OPEX 130.8 57.3 120.1 61.1 10.7 (3.8) 8.9% (6.3%) reported with Less: underlying results Voluntarily accelerated
Slide 33: Thank you
Thank you For Heartland’s 1H2022 half year results announcement, please see shareholders.heartland.co.nz
Heartland Group Holdings — H1 2022 Earnings Presentation on 6ix