Heartland Group Holdings Ltd. · NZX:HGH
Heartland — NZX Investing in New Zealand conference and Asia roadshow 2018
34 slides from Heartland's conference presentation, October 2018
Slide 1: NZX Investing in New Zealand conference and Asia roadshow
NZX Investing in New Zealand conference and Asia roadshow October 2018 Heartland Bank – Asia roadshow| October 2018 | Page 1
Slide 2: About Heartland
About Heartland • A New Zealand registered bank with operations in New Zealand and Australia • Listed on the NZX Main Board in 2011 and obtained bank registration in 2012 • Focus is on providing “best or only” banking products within the Household, Business and Rural sectors • NZX$4.0bn of finance r
Slide 3: Heartland Group
Heartland Group Business Finance Reverse Mortgages $1,066m, up 7% in 2018 NZ - $453m, up 12% in 2018 Working capital and plant and Primarily distributed through our equipment finance distributed Heartland Seniors Finance sales through Heartland’s relationship team in New Zealand. managers, partners
Slide 4: Growth strategy is delivering results
Growth strategy is delivering results To provide ‘best or only’ specialist products in niche markets that are under-serviced by the mainstream banks STRATEGIC OBJECTIVE ACHIEVED THROUGH TO CREATE POSITIVE OUTCOMES GROW THE CORE DIGITAL DEVELOPMENT Focus on growth in our core Utilise digital, interme
Slide 5: Asset growth driving profitability
Asset growth driving profitability Net operating income Net profit after tax Net finance receivables 12 months to 30 June 2018 12 months to 30 June 2018 As at 30 June 2018 $196.8m $67.5m $4.0bn 15% from FY2017 11% from FY2017 12% from FY2017 Highlights • 12% growth in net finance receivables from 30
Slide 6: Heartland’s point of difference
Heartland’s point of difference • Highest Net Interest Margin among our peers • Resulting in highest Return on Assets • Competitive Return on Equity • Highest growth rate in Gross Loans and Advances (Net Finance Receivables) – 2.7% in the June quarter and 12.3% year on year Source: Reserve Bank of N
Slide 7: Corporate Restructure
Corporate Restructure Photo credit: Chris Williams
Slide 8: Corporate Restructure – to remove growth constraints
Corporate Restructure – to remove growth constraints • Shareholders approved a corporate restructure at the Annual Meeting in September. • Heartland’s Australian group companies will be separated from Heartland’s banking group and no longer be regulated by the Reserve Bank of New Zealand. • The Rest
Slide 9: Corporate Restructure – the new group
Corporate Restructure – the new group Heartland Bank – Asia roadshow| October 2018 | Page 9
Slide 10: Foreign exempt listing on the ASX
Foreign exempt listing on the ASX • Heartland is also seeking a foreign exempt listing on the ASX as part of the Restructure. • Provides improved access to additional sources of capital for future growth opportunities. • The Restructure facilitates a foreign exempt listing by Heartland Group Holding
Slide 11: 2018 Annual Results Highlights
2018 Annual Results Highlights Photo credit: Chris Williams
Slide 12: Significant growth in reverse mortgages and motor
Significant growth in reverse mortgages and motor Heartland Bank – Asia roadshow| October 2018 | Page 12
Slide 13: Growth in income and profitability
Growth in income and profitability • Net interest income up 13% • Net profit after tax up 11% driven by asset growth • Market leading Net Interest Margin at 4.42% • Cost to income ratio improved to 40.9% • Impairment expense increased due to asset growth and increased provisioning * * *Net profit af
Slide 14: Market leading NIM maintained
Market leading NIM maintained • Gross interest yield = Interest Income divided by Average Interest Bearing Assets • Cost of funds = Interest Expense divided by Average Interest Bearing Liabilities • Net Interest Margin (NIM) = (Interest Income – Interest Expense) divided by Average Interest Bearing
Slide 15: Asset quality
Asset quality Heartland Bank – Asia roadshow| October 2018 | Page 15
Slide 16: Reverse Mortgages – responsible lending
Reverse Mortgages – responsible lending Three promise reverse mortgage guarantee: Your home will remain the place you Lifetime Occupancy Guarantee live in for as long as you choose The loan repayment will never exceed the No Negative Equity Guarantee net sale proceeds of the property There is no req
Slide 17: Australia
Australia Our Australian business continues to achieve significant growth: • Reverse mortgages increased 31% to $677 million • Harmoney consumer lending in Australia commenced, growing to $26 million • Business lending through our partnership with Spotcap grew to $19 million. Competitive and economi
Slide 18: New Zealand Reverse Mortgages
New Zealand Reverse Mortgages • NZ Reverse Mortgage net finance receivables increased 12% to $453 million • NZ Reverse Mortgage Net Operating Income increased 17% to $18.5 million • Increased brand awareness and digital distribution • Growth to 15,000 customers in New Zealand. Competitive and econom
Slide 19: Open for Business
Open for Business • NZ’s largest dedicated online business loan platform • Almost 98% growth in FY2018 • Proven stable technology and loan book performance consistent with expectations • Reached over 5,000 clients based on search engine marketing only • Unsecured loans up to $75,000 • Partially secu
Slide 20: Motor
Motor • Motor net finance receivables increased 16% to $955 million • Motor Net Operating Income increased 3% to $51.9 million • Higher volume of lending slightly offset by lower rates • Increased partnership with intermediaries to offer vehicle finance at point of sale. Competitive and economic sna
Slide 21: Harmoney and other consumer lending (New Zealand)
Harmoney and other consumer lending (New Zealand) • NZ Harmoney and other consumer lending net finance receivables increased 34% to $127 million • NZ Harmoney and other consumer lending Net Operating Income increased 15% to $9.9 million • Increased distribution through Harmoney • Higher volume of le
Slide 22: Retail deposits
Retail deposits • Raised $308 million of new deposits in FY18 • CANSTAR Bank of the year – Saving Award and Outstanding Value for our Direct Call Account • New Heartland Mobile App for Savings and Deposits Heartland Bank – Asia roadshow| October 2018 | Page 22
Slide 23: New Zealand Business
New Zealand Business New Zealand Business lending increased 6% in the year to $1,047 million • Growth achieved in lending through our online platform for small business loans, Open for Business, and intermediary partnerships • Strategic reduction in relationship-managed business lending to decrease
Slide 24: Rural
Rural • Rural lending decreased 3% in the year to $656m • Average net receivables increased from $614m in 2017 to $666m in 2018 • Net Operating Income increased 10% to $32.3m due to higher average lending compared to 2017. Product and distribution through digital channels: • Increase livestock lendi
Slide 25: Asset growth supported by retail deposit growth
Asset growth supported by retail deposit growth • 12% growth in net finance receivables • Supported by 12% growth in retail deposits Heartland Bank – Asia roadshow| October 2018 | Page 25
Slide 26: Returns to shareholders
Returns to shareholders • Final dividend 5.5cps – full year dividend 9.0cps • Dividend pay-out ratio 74.5% • Total Shareholder Return (TSR) of 174% over the last 5 years * * Total Shareholder Return means share price appreciation plus dividend received. TSR has been calculated including the benefit
Slide 27: Conclusion and Outlook
Conclusion and Outlook • 2018 was a year of investment in infrastructure, long-term capability and efficiency. • We have developed a strong digital platform and confirmed a strategy for growth. • Asset growth will be achieved through continued execution of strategy with digital distribution and inte
Slide 28: Thank you – Q&A
Thank you Q&A Appendices For further information, please contact: David Mackrell Chief Financial Officer +64 21 311 911 david.mackrell@heartland.co.nz Julia Belk Investor Relations Manager +64 9 926 3837 +64 21 2408 997 julia.belk@heartland.co.nz https://www.heartland.co.nz/ Heartland Bank – Asia ro
Slide 29: Appendices
Appendices Heartland Bank – Asia roadshow| October 2018 | Page 29
Slide 30: New Zealand – a stable growing economy
New NewZealand’s Zealand –stable economy a stable growing economy A stable country • Stable MMP Government – Ranked 2nd (out of 102) for open government environment1 • Ranked 1st (out of 190 economies) for easy of Starting Business and 2nd (out of 139 nations) for Business Friendliness1 • Progressiv
Slide 31: Key financial service sector regulators
Key financial service sector regulators • Reserve Bank of New Zealand (RBNZ) - the prudential regulator of the banking industry in New Zealand • Financial Markets Authority (FMA) - regulates the sale of financial products in New Zealand • Commerce Commission - enforces the Credit Contracts and Consu
Slide 32: Historical Summary Financial Information
Historical Summary Financial Information Statement of Comprehensive Income For the year ended 30 June 2018 30 June 2017 30 June 2016 30 June 2015 $m $m $m $m Interest income 309.3 278.3 265.5 260.5 Interest expense 125.5 115.2 118.8 126.0 Net interest income 183.8 163.1 146.7 134.4 Other net income
Slide 33: Historical Summary Financial Information
Historical Summary Financial Information Statement of Financial Position As at 30 June 2018 30 June 2017 30 June 2016 30 June 2015 $m $m $m $m Assets Cash and cash equivalents 49.6 57.0 84.2 37.0 Investments 340.5 318.7 236.4 329.3 Investment properties 9.2 4.9 8.4 24.5 Finance receivables 3,984.9 3
Slide 34: Historical Summary Financial Information
Historical Summary Financial Information Summary Ratios 30 June 2018 30 June 2017 30 June 2016 30 June 2015 Regulatory Total Equity Ratio 14.1% 13.6% 14.0% 14.3% Net Tangible Assets ($m) 584.4 490.5 433.5 420.3 Net Tangible Assets per share ($) 1.04 0.95 0.91 0.89 Earnings per share ($) 0.13 0.12 0.
Heartland Group Holdings — NZX Investing in New Zealand conference and Asia roadshow 2018 on 6ix