Heartland Group Holdings Ltd. · NZX:HGH
Heartland — H1 FY2025 Earnings Presentation
48 slides from Heartland's earnings presentation, February 2025
Slide 1: FY2025 Half Year Results
FY2025 Half Year Results For the six months ended 31 December 2024 HEARTLAND GROUP
Slide 2: Contents
CONTENTS 01 Group summary 3-12 02 New Zealand banking 13-27 03 Australian banking 28-37 04 Outlook 38-39 05 Additional information 40-43 06 Disclosure, appendices & glossary 44-48 2 2
Slide 3: 01 Group Summary
01 | GROUP SUMMARY Andrew Dixson Chief Executive Officer, Heartland Group 3
Slide 4: Presentation of Results
PRESENTATION OF RESULTS Financial results in this investor presentation are presented on a reported and underlying basis. • Reported results are prepared in accordance with NZ GAAP and include the impacts of one-offs, both positive and negative, which can make it difficult to compare performance bet
Slide 5: Summary of 1H2025 Result
SUMMARY OF 1H2025 RESULT Heartland’s reduced 1H2025 NPAT reflects an increase in NOI, supported by Fitch Ratings strong performance by the AU bank, offset by active derisking and long term issuer repositioning of some of the NZ bank’s NPLs which contributed to a default ratings significantly higher
Slide 6: Group Financial Results
GROUP FINANCIAL RESULTS 8m NZ, Reported Underlying Reported v Underlying 1H25 1H24 Movement 1H25 1H24 Movement 1H25 1H24 NII $149.1m $138.7m $10.4m 7.5% $149.1m $138.7m $10.4m 7.5% - - OOI1 $6.0m $4.4m $1.6m 37.5% $7.7m $6.8m $0.9m 13.4% ($1.7m) ($2.4m) NOI $155.1m $143.1m $12.0m 8.4% $156
Slide 7: 1H2025 Reported vs. Underlying
1H2025 REPORTED VS. UNDERLYING Entity 1H2025 HGH HBL HBAL Reported NPAT $3.6m ‒ De-designation of derivatives $1.1m $1.1m ‒ Fair value changes on equity investments held $0.2m $0.2m ‒ Other non-recurring income $0.4m $0.4m Other operating income (OOI) $1.7m ‒ One-off regulatory assurance costs arisi
Slide 8: Group Strategy
GROUP STRATEGY Ensure capital is deployed into value accretive activity measured by ROE. Deliver specialist banking products Core market goals 2H2025 focus that meet ROE thresholds • Leading provider of funding NZ banking • Invest where risk and return is calibrated to deliver solutions for older Ne
Slide 9: Non-Strategic Assets (NSA) Overview
NON-STRATEGIC ASSETS (NSA) OVERVIEW NSAs are primarily NZ assets that are outside of Heartland’s core lending strategy, or do not deliver threshold ROE. Balance Balance Movement Asset type Description Exit strategies Dec-24 Jun-24 ($m) ($m) ($m) • Diversified portfolio of agricultural lending primar
Slide 10: NSA Milestones & Realisation
NSA MILESTONES & REALISATION Realisation strategies will enable underlying capital to be deployed to support value accretive growth within Heartland. Asset NZ($m) 3Q25 4Q25 1Q26 2Q26 3Q26 4Q26+ Total Repayment ($m) - 7.4 13.9 7.3 2.9 91.1 122.6 Rural Relationship CET1 released ($m) - 0.9 1.8 0.9 0.4
Slide 11: Capital
CAPITAL Heartland capital movement $m Heartland capital allocation $m Heartland remains well capitalised 7 (8) 4 26 • Both banks maintain strong regulatory capital 1,238 (28) positions. 1,213 • There are currently no ordinary share capital issuances planned to meet future requirements. 453 • NSA rea
Slide 12: Shareholder Return
SHAREHOLDER RETURN ROE 2.0 CPS Interim dividend down 2.0 cps vs 1H2024 12.1% 11.9% 10.6% 10.4% 10.2% 9.8% 7.9% 7.3% 1 6.6% Dividend yield 1.9% 0.6% (1H2024: 11.9%2) Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Underlying ROE 4 Reported ROE 77% Total dividend payout ratio 12-month rolling underlying NPAT 6.7 E
Slide 13: 02 New Zealand Banking
02 | NEW ZEALAND BANKING Leanne Lazarus Chief Executive Officer, Heartland Bank Kerry Conway Chief Financial Officer, Heartland Bank 13
Slide 14: Financial Results
FINANCIAL RESULTS Reported Underlying 1H25 1H24 Movement 1H25 1H24 Movement NII $105.6m $105.5m $0.1m 0.1% $105.6m $105.5m $0.1m 0.1% OOI1 $9.4m $6.3m $3.1m 49.7% $11.1m $10.6m $0.5m 5.0% NOI $115.0m $111.7m $3.2m 2.9% $116.7m $116.0m $0.7m 0.6% OPEX $63.1m $52.1m $10.9m 21.0% $62.1m $
Slide 15: Receivables
RECEIVABLES Reverse Mortgage portfolio has shown resilience despite economic challenges. Deliberate shift to monitor and manage NSAs separately. $268m (-10.5%)1 Core business NSAs $27m (-1.3%)1 $76m (-29.8%) 1 82 (35) (32) (42) (98) (39) (21) (8) (1) 504 15.3% (11.9%) (3.9%) (64) (4) (7) (11.4%) (88
Slide 16: NIM
NIM 4.21% 4.19% NIM is expected to improve 4.14% 3.90% 3.92% 3.89% >4.00% in 2H2025 4.04% Despite pricing competition from declining interest >3.90% rates and subdued credit demand, NIM is expected 3.81% 3.78% 3.74% to exit FY25 above 4%, supported by: • fixed rate portfolios: ongoing NIM improvemen
Slide 17: Underlying OPEX
UNDERLYING OPEX 1H2025 v 1H2024 10.5m (20.4%) 1H2025 has seen incremental costs incurred in relation to: • Inter-entity staff transfers (net neutral to the Group) +$3.4m. Reallocation of group support functions as 2.3m (4.0%) required for post-ADI acquisition regulatory requirements. 2.1m Capability
Slide 18: Impairment Expense
IMPAIRMENT EXPENSE Impairment expense increase due to ongoing deterioration of economic conditions in New Zealand ultimately impacting the ability of Motor Finance and business lending customers in arrears to repay. Although a substantial increase, this will significantly derisk and reposition the a
Slide 19: Provisions & Arrears
PROVISIONS & ARREARS Total provisions and coverage Portfolio composition 1.71% 1.86% 2.10% Livestock, 1.34% 1.30% $76.7 Livestock NPLs, $74.6 3.4% $68.4 0.1% $52.4 $52.1 Dec-22 Jun-23 Dec-23 Jun-24 Dec-24 Reverse Collective Provision Specific Provision Coverage Ratio Mortgages & Residential Business
Slide 20: Funding & Liquidity
FUNDING & LIQUIDITY Heartland Bank has an improved funding mix 31-Dec-24 1 1 and strong liquidity profile, which remains well 1-Week MMR 1-Month MMR Core funding above regulatory requirements. New Zealand Banking Group 9.4 8.7 91.2 RBNZ minimum 0.0 0.0 75.0 Funding composition $m Liquidity compositi
Slide 21: Capital
CAPITAL Heartland Bank continues to operate significantly in excess of regulatory minimums and is well positioned to meet the RBNZ’s future higher capital requirements. NZ Bank1 - Capital movement $m Capital ratio and RBNZ requirements (13) 1 100 (15) 20 100 • The RBNZ future capital requirements ar
Slide 22: NZ Strategy
NZ STRATEGY Heartland Bank has focused on investing in capability to simplify and strengthen its operating model to achieve sustainable, quality growth. Growth Quality Efficiency Deliver on margin commitment and focus on Continue to improve asset quality and uplift credit risk Simplify and automate
Slide 23: NZ Lending Performance: Reverse Mortgages
NZ LENDING PERFORMANCE: REVERSE MORTGAGES Outlook expectations $1,151m Receivables as at 31 Dec 2024 +$82m, 15.3%1 since Jun 2024 • 2H2025 growth1: 15.0% • FY2025 growth: 15.7% Asset quality2 $29.2m NOI as at 31 Dec 2024 +22.3% vs 1H2024 • NPL ratio: <0.5% • Average current loan size: $147k • Weight
Slide 24: NZ Lending Performance: Rural
NZ LENDING PERFORMANCE: RURAL1 Outlook expectations $668m Receivables as at 31 Dec 2024 -$42m, -11.7%2 since Jun 2024 • 2H2025 growth1: 19.2% • FY2025 growth: 3.1% Includes $502m Rural Lending3 and $166m Livestock Finance Asset quality4 4.49% Total NPL $16.1m NOI as at 31 Dec 2024 -3.7% vs 1H2024 1.
Slide 25: NZ Lending Performance: Motor Finance
NZ LENDING PERFORMANCE: MOTOR FINANCE Outlook expectations $1,598m Receivables as at 31 Dec 2024 -$32m, -3.9%1 since Jun 2024 • 2H2025 growth1: 7.3% • FY2025 growth: 1.6% Asset quality4 $35.1m NOI as at 31 Dec 2024 +11.2% vs 1H2024 12% Motor Finance Vintage Loss Curves (180DPD and Write-Offs) 10% Pr
Slide 26: NZ Lending Performance: Asset Finance
NZ LENDING PERFORMANCE: ASSET FINANCE Outlook expectations $695m Receivables as at 31 Dec 2024 -$42m, -11.4%1 since Jun 2024 • 2H2025 growth1: -8.1% • FY2025 growth: -9.5% Asset quality4 $15.8m NOI as at 31 Dec 2024 +10.4% vs 1H2024 6.77% Total NPL 3.53% NPL, 30% • Trading conditions remained diffic
Slide 27: NZ Lending Performance: Other
NZ LENDING PERFORMANCE: OTHER Receivables NOI NPL ratio Asset quality3,4 as at 31 Dec 2024 since 30 Jun 20241 as at 31 Dec 2024 vs 1H2024 as at 31 Dec 2024 Personal $16m -$8m, -64.5% $0.6m -72.9% 4.5% Lending2 13.01% 4.48% 11.49% 0.25% Business Total NPL Total NPL Total NPL Total NPL $242m -$43m, -3
Slide 28: 03 Australian Banking
03 | AUSTRALIAN BANKING Michelle Winzer Chief Executive Officer, Heartland Bank Australia Kerry Conway Chief Financial Officer, Heartland Bank 28
Slide 29: Financial Results
FINANCIAL RESULTS Reported Underlying 1H25 1H24 Movement 1H25 1H24 Movement NII $43.4m $31.7m $11.7m 36.9% $43.4m $31.7m $11.7m 36.9% OOI1 $1.8m $1.5m $0.3m 18.7% $1.8m $1.5m $0.3m 18.7% NOI $45.1m $33.2m $12.0m 36.1% $45.1m $33.2m $12.0m 36.1% OPEX $26.6m $14.2m $12.4m 87.2% $25.5m $1
Slide 30: Receivables
RECEIVABLES Reverse Mortgages has maintained strong growth despite heightened competition. Growth returning in Livestock Finance. $125m (11.5%)1 (1) (11) 138 (1.0%) (38.1%) 2,288 15.0% 2,163 Jun-24 Reverse Mortgages AU Livestock Finance AU Other AU 2 Dec-24 Gross Receivables 2,163 1,968 272 48 2,288
Slide 31: NIM
NIM > 3.60% Further NIM improvement 3.13% expected in 2H2025 > 3.30% 2.84% 2.64% NIM improvement of 35 bps from 1H2024 (rebased) to 1H2025 was driven primarily by Heartland Bank 2.75% Australia’s transition from its sole reliance on wholesale 2.52% 2.40% funding to a mix of predominantly deposits su
Slide 32: Underlying OPEX
UNDERLYING OPEX 11.4m (80.5%) 1H2025 v 1H2024 1H2024 costs have been rebased to reflect the cost base of the ADI 4.2 (19.7%) when it was acquired, +$7.2m. 1H2025 has seen incremental 7.2m costs incurred in relation to: ADI cost base 2.0 25.5 25.6 0.8 • staff cost: investment in 1.4 additional FTE to
Slide 33: Funding & Liquidity
FUNDING & LIQUIDITY Deposit funding growth managed in line with repayment of 31-Dec-24 wholesale funding. Heartland Bank Australia’s liquidity position MLH remains strong and above regulatory requirements. Heartland Bank Australia 20.6% Funding composition1 A$m Liquidity composition1 A$m 2,715 1,306
Slide 34: Capital
CAPITAL Heartland Bank Australia continues to operate in excess of regulatory minimums and is well positioned for future sustainable growth. • HBAL maintained a strong regulatory capital position, Heartland Bank Australia - Capital movement A$m ensuring compliance with prudential requirements while
Slide 35: AU Strategy
AU STRATEGY Heartland Bank Australia is well positioned for sustainable growth beyond FY2025 through its focus on business growth, service excellence and diversifying distribution networks. Business growth Service excellence Diversify distribution Continue to focus on expansion within existing Throu
Slide 36: AU Lending Performance: Reverse Mortgages
AU LENDING PERFORMANCE: REVERSE MORTGAGES Outlook expectations $1,968m Receivables as at 31 Dec 2024 +$138m, 15.0%1 since Jun 2024 • 2H2025 growth1: 20% • FY2025 growth: 18% Asset quality2 $34.7m NOI as at 31 Dec 20243 • NPL ratio: <1.0% • Average current loan size : A$198k • Weighted average curren
Slide 37: AU Lending Performance: Livestock Finance
AU LENDING PERFORMANCE: LIVESTOCK FINANCE Outlook expectations $ 272m Receivables as at 31 Dec 2024 -$1m, -1.0%1 since Jun 2024 • 2H2025 growth1: 18% • FY2025 growth: 17% $319 $274 $276 $274 $272 $6.4m $265 $265 NOI as at 31 Dec 20242 $253 $m Jun24 Jul24 Aug24 Sep24 Oct24 Nov24 Dec24 Jun25 outlook A
Slide 38: 04 Outlook
04 | OUTLOOK Andrew Dixson Chief Executive Officer, Heartland Group 38
Slide 39: Outlook
OUTLOOK NZ banking AU banking • Trading conditions expected to remain challenging in 2H2025, particularly • Overall economic conditions are expected to pick up in 2H2025. within the forestry, transport, agriculture contractor and construction Confidence is improving for farmers and expected to posit
Slide 40: 05 Additional Information
05 | ADDITIONAL INFORMATION 40
Slide 41: NZ Reverse Mortgage Portfolio Analytics
NZ REVERSE MORTGAGE PORTFOLIO ANALYTICS $1.15b $147,446 73 17.3% NZ Reverse Mortgages Average current Average age of youngest borrower Compound annual growth rate4 +$82.4m (15.3%)1 vs June 2024 loan size5 (new customers)3 8.9% 24.6% 0.2% 6 Average Weighted average current LVR Proportion of the Numbe
Slide 42: AU Reverse Mortgage Portfolio Analytics
AU REVERSE MORTGAGE PORTFOLIO ANALYTICS A$1.80b A$197,986 73 17.5% AU Reverse Mortgages Average current Average age of youngest borrower Compound annual growth rate4 +A$126m (15.0%)1 vs June 2024 loan size5 (new customers)3 11.5% 24.0% 0.0% 1 Average Weighted average current LVR Proportion of the Nu
Slide 43: Corporate Structure
CORPORATE STRUCTURE Heartland Group BBB (stable) Fitch (NZX/ASX: HGH) NZ company NZ Banking Group Heartland Bank AU company BBB (stable) Fitch Heartland Bank Australia BBB (stable) Fitch (previously Challenger Bank) AU Banking Group Heartland Australia Holdings BBB- (stable) StockCo Australia1 Heart
Slide 44: 06 Disclosure, Appendices & Glossary
06 | DISCLOSURE, APPENDICES & GLOSSARY 44
Slide 45: Disclaimer
DISCLAIMER This presentation has been prepared by Heartland Group Holdings Limited (NZX/ASX: HGH) Non-GAAP measures (the Company or Heartland) for the purpose of briefings in relation to its Financial Statements. This presentation contains references to non-GAAP measures including underlying profit
Slide 46: 1H2024 Reported vs. Underlying
1H2024 REPORTED VS. UNDERLYING Entity 1H2024 HGH HBL HBAL Reported NPAT $37.6m ‒ De-designation of derivatives $4.3m $4.3m ‒ Fair value changes on equity investments held ($1.9m) ($1.9m) Other operating income (OOI) $2.4m ‒ ABP transaction costs $2.3m $2.1m $0.1m $0.1m ‒ Other non-recurring expense
Slide 47: Glossary
GLOSSARY ABP Australia Bank Programme NIM Net interest margin ADI Authorised deposit-taking institution NOI Net operating income bps Basis points NPAT Net profit after tax CET1 Common Equity Tier 1 O4B Open for Business Challenger Bank Challenger Bank Limited (now Heartland Bank Australia) OOI Other
Slide 48: Thank You
THANK YOU Investor & media relations Nicola Foley Head of Corporate Communications & Investor Relations +64 27 345 6809 nicola.foley@heartland.co.nz Investor information For more information heartlandgroup.info/investor-information
Heartland Group Holdings — H1 FY2025 Earnings Presentation on 6ix