Heartland Group Holdings Ltd. · NZX:HGH
Heartland — 1H2020 Earnings Presentation
32 slides from Heartland's earnings presentation, Feb 18, 2020
Slide 1: 2020 Half Year Results
2020 Half Year Results 18 February 2020
Slide 2: Important Notice
Important Notice o This announcement is based on the 31 December 2019 unaudited interim consolidated financial statements of Heartland Group Holdings Limited (Heartland). o Following a corporate restructure on 31 October 2018, Heartland Bank Limited (Heartland Bank) became a 100% controlled subsidia
Slide 3: 1H2020 Highlights
1H2020 Highlights HEARTLAND 3 — croup ——
Slide 4: Financial Performance
Financial Performance 1 2 3 1. Net operating income includes fair value gains/losses on investments. 4 2. Gross finance receivables includes Reverse Mortgages. 3. Excluding the impact of changes in foreign currency exchange (FX) rates.
Slide 5: Strategy
Strategy o Continued focus on business simplification and growing core portfolios where best or only. o Launch of Heartland’s digital small business lending platform Open for Business (O4B) in Australia. o Leveraging corporate restructure, existing platforms and capabilities to broaden the reach of
Slide 6: Customers and Culture
Customers and Culture Customers o Increased focus on customer experience, demonstrated through the introduction of a dedicated Customer Experience team and continual digital improvements. o Product feature enhancements to meet customer needs, e.g. YouChoose and Australian Reverse Mortgages. o Contin
Slide 7: Financial Results
Financial Results HEARTLAND 7 — croup ——
Slide 8: Growth in Profitability
Growth in Profitability +9% +20% +6% 8 1. All figures in NZ$m.
Slide 9: Growth in Receivables
Growth in Receivables +4% +9% 9 1. The graph shows year-to-date (YTD) movement in Receivables by individual portfolio excluding the FX impact. 2. All figures in NZ$m.
Slide 10: Key Performance Measures
Key Performance Measures Net Interest Margin (NIM)1 Cost to Income (CTI) Ratio2 Non Performing Loans (NPL) Ratio Impairment Expense Ratio3 1.84% 1.80% 0.64% 1.72% 1.68% 0.58% 82.30 0.49% 73.86 75.58 70.93 0.40% Jun 18 Dec 18 Jun 19 Dec 19 Jun 18 Dec 18 Jun 19 Dec 19 Non Performing Loans Non Performi
Slide 11: Shareholder Return
Shareholder Return ROE 11.70% o Earnings per share (EPS) of 6.9 cps, up 10.38% 1.0 cps compared to 1H19. 10.05% 10.08% o Interim dividend of 4.5 cps, up 1.0 cps from 1H19. Jun 18 Dec 18 Jun 19 Dec 19 o Interim dividend reflects consistent Dividend per share (cps) performance, with return on equity (
Slide 12: Divisional Summary
Divisional Summary HEARTLAND 12 — croup ——
Slide 13: O4B
O4B o O4B portfolio increased $25m since June 2019 to $158m (37% annualised growth). o Net Operating Income of $6.6m is 53.9% up on 1H19. O4B As at 31 December 2019 o Supported more than 800 small Kiwi businesses with $48 million of new financing in 1H2020 to achieve their business goals and grow th
Slide 14: AU Reverse Mortgages
AU Reverse Mortgages o Receivables increased $79m since June 2019 to $887m (20% annualised growth)1. o Net Operating Income of $16.6m is 41.6% up on 1H19. AU Reverse Mortgages o Another 800 families helped live a more comfortable As at 31 December 2019 retirement. o Heartland remains the leading ori
Slide 15: NZ Reverse Mortgages
NZ Reverse Mortgages o Receivables increased $26m since June 2019 to $536m (10% annualised growth). o Net Operating Income of $13.0m is 26.4% up on 1H19. NZ Reverse Mortgages o Another 400 Kiwi families helped live a more As at 31 December 2019 comfortable retirement. $536m o Continued enhancements
Slide 16: Business Intermediated
Business Intermediated o Receivables increased $69m since June 2019 to $494m (32% annualised growth). o Net Operating Income of $10.1m is 27.7% up on 1H19. Business Intermediated o Supported more than 1,100 businesses with over $172 As at 31 December 2019 million of new financing in 1H2020 to purcha
Slide 17: Motor Finance
Motor Finance o Receivables increased $35m since June 2019 to $1,124m (6% annualised growth). o Net Operating Income of $30.1m is 6.8% up on 1H19. Motor Finance As at 31 December 2019 o Growth continued in spite of market slowdown. o More than 12,000 customers supported in purchasing a new car durin
Slide 18: Harmoney and Other Personal Lending
Harmoney and Other Personal Lending o New Zealand Harmoney portfolio continues to grow steadily, increasing $7m since June 2019 to $159m (10% annualised growth). Harmoney and other o Strong growth in Australian Harmoney portfolio to personal lending $61m, up $22m since June 2019 (116% annualised As
Slide 19: Livestock
Livestock o Livestock portfolio increased $16m to $108m since December 2018 (17% annual growth)1. o Net Operating Income of $3.4m is 20.2% up on 1H19. Livestock As at 31 December 2019 o More than 900 existing customers supported with finance to purchase and trade livestock without having to mortgage
Slide 20: Relationship
Relationship o Receivables decreased $66m since June 2019 to $1,028m (12% annualised decrease). o Net Operating Income of $23.3m is 16.7% down on Relationship 1H19. As at 31 December 2019 o Continued managed reduction of low margin concentration in non-core Business and Rural $1,028m Relationship po
Slide 21: Funding
Funding o Heartland operates a diversified funding base that continues to grow with the business, with focus on matching asset duration, increasing leverage and improving capital efficiency. o Heartland Bank utilises deposits and other funding sources as required: • 90-day registered certificate of
Slide 22: Funding Continued
Funding Continued o Optimisation of the Heartland Mobile App to enable a better user experience. o Awarded Canstar’s Bank of the Year – Savings Awards (second year running). o Awarded Canstar’s 5-Star Rating for Outstanding Value Savings Account for the Direct Call Account (fourth year running). o P
Slide 23: Strategic Update
Strategic Update HEARTLAND 23 — croup ——
Slide 24: New Zealand Banking
New Zealand Banking o Achieving sustainable growth and performance underpinned by customer success through providing best or only products. o Reduced concentration risk on low margin Business and Rural portfolios. o Focus on building new, and further strengthening and broadening existing strategic B
Slide 25: Australia
Australia o Continued growth in Australian Reverse Mortgages distributed through broker and direct channels, with an increased focus on direct channels. o Funding diversification work continues, with A$100m of new funding obtained in November 2019 via an MTN issuance. o A new securitisation facility
Slide 26: Digital
Digital o Developing digital services, platforms and processes to enable the provision of high-quality customer outcomes, superior customer experiences and seamless access to products and services. Including through: • free online calculator of potential lending amount now available for New Zealand
Slide 27: Regulatory Update
Regulatory Update FMA and RBNZ review of conduct and culture in New Zealand retail banks1 o The review found no conduct and culture issues of material concern but urged banks to strengthen management of conduct risks. o The findings are consistent with Heartland’s constant internal focus on positive
Slide 28: 2H2020 Outlook
2H2020 Outlook o Asset growth in core lending, particularly reverse mortgages in New Zealand and Australia, and O4B. o Continued investment in: • increasing brand and product awareness in both markets, particularly for O4B and Reverse Mortgages • increasing operational capacity to support opportunit
Slide 29: Appendices
Appendices HEARTLAND 29 — croup ——
Slide 30: Appendix – Financial Position
Appendix – Financial Position 31 Dec 30 June Movement Movement $m 2019 2019 ($m) (%) Liquid Assets 492 417 75 17.9% Net Finance Receivables 4,521 4,350 171 3.9% Other Assets 177 162 15 9.0% TOTAL ASSETS 5,190 4,929 260 5.3% Retail Deposits 3,234 3,154 80 2.5% Other Borrowings 1,210 1,055 155 14.7% O
Slide 31: Appendix – Financial Performance
Appendix – Financial Performance $m 1H2020 1H2019 Change ($) Change (%) Net Operating Income1 118.6 102.1 16.5 16.2% Operating Expenses (54.6) (43.4) 11.2 25.9% Impairment Expense (9.0) (13.3) (4.3) (32.1%) Profit Before Tax 55.0 45.5 9.5 21.0% Tax Expense (15.1) (12.4) 2.8 22.6% Net Profit After Ta
Slide 32: Thank you
Thank you HEARTLAND GROUP
Heartland Group Holdings — 1H2020 Earnings Presentation on 6ix