Heartland Group Holdings Ltd. · NZX:HGH
Heartland — Investor Presentation (April 2024)
44 slides from Heartland's investor presentation, Apr 8, 2024
Slide 1: Equity Raise Investor Presentation
Equity Raise Investor Presentation 8 April 2024 Not for release to US wire services or distribution in the United States
Slide 2: Agenda
Agenda Section Item Page Executive summary 3 Overview of Heartland and continued 01 5 expansion in Australia Heartland’s business in Australia and 02 12 New Zealand moving forward 03 Equity raise overview 23 04 Key risks 27 05 Disclaimer, glossary and appendices 34 2
Slide 3: Executive summary
Executive summary Challenger Bank acquisition summary • In October 2022, Heartland Group Holdings Limited (Heartland) announced it had signed a conditional share purchase agreement for the purchase of Challenger Bank Limited (Challenger Bank). Heartland Bank Limited (Heartland Bank) will be the enti
Slide 4: Executive summary (cont.)
Executive summary (cont.) Equity Raise summary – institutional placement and entitlement offer • Heartland is seeking to raise NZ$210m (Equity Raise) in new equity via a: • NZ$105m placement to eligible investors (Placement); and • 1 for 6.85 pro-rata accelerated non-renounceable entitlement offer t
Slide 5: Overview of Heartland and continued expansion in Australia
DRAFT 01 Overview of Heartland and continued expansion in Australia
Slide 6: Overview of Heartland
01 Overview of Heartland Heartland is an Australasian financial services group focused on providing products that are “best or only” of their kind, through scalable digital platforms. Heartland overview Key metrics 517 • Heartland’s origins date back to 1875 where it started as a small building soci
Slide 7: Significant growth opportunities in Australia
01 Significant growth opportunities in Australia Completing the Challenger Bank acquisition is a critical step in Heartland’s strategy for expansion in the Australian market. The acquisition of Challenger Bank provides a significant platform for growth Significant market sizes in Heartland’s target
Slide 8: Australia is well set up for continued growth
01 Australia is well set up for continued growth To accelerate growth in Australia, Heartland will leverage Challenger Bank’s foundation and Opportunities for outsized growth funding platform, Heartland’s c.10-year successful track record in Australia and its New Zealand product and distribution exp
Slide 9: Heartland Bank Australia’s funding strategy
01 Heartland Bank Australia’s funding strategy Heartland’s funding strategy in Australia is to access deep, stable, efficient deposit funding and transition from its sole reliance on wholesale funding. Heartland’s business in Australia today Heartland’s funding strategy in Australia • Heartland’s Au
Slide 10: Highly experienced Board and Management to drive Australian expansion
01 Highly experienced Board and Management to drive Australian expansion Highly experienced Heartland Bank Australia Board with strong level of independence and knowledge of prudential regulatory requirements. Heartland Bank Australia’s Management team carries extensive experience in banking and fin
Slide 11: Heartland Bank Australia FY2025 projection
01 Heartland Bank Australia FY2025 projection1 Heartland Bank Australia will leverage Heartland’s existing expertise in Australia and New Zealand, and scale deposits in order to grow. Heartland Bank Australia FY2025 projection (underlying)2 Income statement (underlying)2 Balance sheet Key metrics (u
Slide 12: Heartland’s business in Australia and New Zealand moving forward
DRAFT 02 Heartland’s business in Australia and New Zealand moving forward
Slide 13: Heartland’s business across Australia and New Zealand
02 Heartland’s business across Australia and New Zealand Heartland has $6.4b Receivables1 across New Zealand and Australia portfolios which have a proven track record of profitable growth. • The acquisition of Challenger Bank2 and the growth opportunity presented in Australia allows Heartland to rea
Slide 14: Heartland’s pathway to $200m+ underlying NPAT and 12%-14% ROE
02 Heartland’s pathway to $200m+ underlying NPAT and 12%-14% ROE FY2028 ambitions are driven by modest Receivables growth, NIM expansion, cost savings from automation and improvement in impairments. FY2028 Financial metric Today Commentary ambition • Assumes modest Receivables growth below Heartland
Slide 15: Heartland is positioned to benefit from structural tailwinds
02 1 Heartland is positioned to benefit from structural tailwinds Strong structural tailwinds are supporting Heartland’s Receivables growth. Reverse Mortgages Livestock Finance Motor Finance Australia and New Zealand population aged 65+1 Global projected beef, veal and sheep meat production New Aust
Slide 16: Heartland has shown a long history of strong growth
02 1 Heartland has shown a long history of strong growth Heartland has a long history of growth in New Zealand driven by asset specific experience and operational expertise which can be leveraged in Australia. Historical Receivables growth (NZ$m) CAGR1 FY2028 underlying NPAT and ROE ambition assumes
Slide 17: Heartland’s net interest margin
02 2 Heartland’s net interest margin NIM is expected to benefit from positive tailwinds and transitioning Australia from 100% wholesale to a mix of wholesale and deposit funding. Heartland net interest margin (%) Positive tailwinds supporting NIM 4.28% 4.30% 4.35% 4.16% 4.02% 4.00% • Heartland’s his
Slide 18: Heartland’s cost to income ratio
02 3 Heartland’s cost to income ratio Heartland’s cost efficiency has improved consistently over the last 3 years despite NIM compression impacting CTI ratio. Heartland cost to income ratio (%) Key drivers of underlying CTI ratio2 ambition of <35% 48.8% Digitalisation and • Zero inbound calls: Enabl
Slide 19: Heartland’s impairment expense ratio
02 4 Heartland’s impairment expense ration Underlying impairment expense ratio ambition of <0.30% driven by a continued mix shift to higher quality reverse mortgages. Heartland impairment expense ratio (%) New Zealand Motor Finance5 Clear strategy to 0.65% 0.70% 2 5.46% 5.54% 5.58% support underlyin
Slide 20: Reverse Mortgages credit quality
02 4 Reverse Mortgages credit quality Heartland’s reverse mortgage book is high quality with only <23% weighted average LVR. New Zealand Reverse Mortgage portfolio analytics Australia Reverse Mortgage portfolio analytics3 As at 31 December 2023 As at 31 December 2023 $972m $135,139 $1,668m $190,849
Slide 21: Heartland’s ‘best or only’ strategy delivers outsized risk-adjusted NIM
02 Heartland’s ‘best or only’ strategy delivers outsized risk-adjusted NIM Heartland’s risk-adjusted margins are superior to listed Australian banking peers, some of which have operations across Australia and New Zealand.1 Risk-adjusted NIM1 3.46% 2.60% 1.92% 1.88% 1.81% 1.80% 1.67% 1.66% 1.62% 1.25
Slide 22: Capital allocation management
02 Capital allocation management Heartland has increased Reported NPAT from c.$7m to c.$110m over the past 12 years, predominantly funding that growth through organic capital generation, coming to market for M&A related capital. Capital will be deployed to ROE and Capital resources to Further capita
Slide 23: Equity raise overview
DRAFT 03 Equity raise overview
Slide 24: Equity raise offer summary
03 Equity raise offer summary • Heartland is seeking to raise NZ$210m (Equity Raise) in new equity via a: Offer size and ‒ NZ$105m placement to eligible investors (Placement); and structure ‒ 1 for 6.85 pro-rata accelerated non-renounceable entitlement offer to raise approximately NZ$105m (Entitleme
Slide 25: Equity raise timetable
03 Equity raise timetable • Shareholders entitled to Event Date1 participate in the Retail Entitlement Offer should visit Announcement of Equity Raise Monday 8 April 2024 www.heartlandshareoffer.co.nz Record date for the Entitlement Offer Tuesday 9 April 2024 and apply online by 5.00pm (NZST) on Mon
Slide 26: Equity Raise impact on regulatory capital
03 Equity Raise impact on regulatory capital Heartland Bank Australia and Heartland Bank will have strong capital bases and be well positioned for growth. Commentary Pro-forma total capital ratio • Use of proceeds primarily applied to acquisition of Challenger Bank and the 31 March 2024 pro-forma fo
Slide 27: Key risks
DRAFT 04 Key risks
Slide 28: Key risks
04 Key risks This section outlines the key risks that Heartland has identified as relevant to investors in the proposed equity raise, including in relation to the acquisition of Challenger Bank. These risks may affect the future operating and financial performance of Heartland and the Heartland shar
Slide 29: Key risks (cont.)
04 Key risks (cont.) Completion risk • The acquisition of Challenger Bank remains conditional on final regulatory approvals being received from APRA and the RBNZ. While Heartland Bank has received indicative regulatory approvals from the respective regulators, final approvals will not be received un
Slide 30: Key risks (cont.)
04 Key risks (cont.) Successful • From completion, Challenger Bank will be pursuing a strategy to create sustainable growth and differentiation through “best or only” products delivered through scalable digital execution of platforms. This includes growing Heartland’s existing Australian reverse mor
Slide 31: Key risks (cont.)
04 Key risks (cont.) Information • Investing in technology and improving customer experience while lowering costs through removing friction is a core pillar of Heartland’s strategy. Heartland relies on technology and the performance, reliability and availability of its information technology, commun
Slide 32: Key risks (cont.)
04 Key risks (cont.) Credit risk • Heartland Bank and Challenger Bank are exposed to credit risk and may incur losses from defaults by customers or counterparties. Levels of credit risk vary according to the economic cycle, with increased risk ordinarily evident during periods of tighter economic co
Slide 33: Key risks (cont.)
04 Key risks (cont.) Climate risk • Heartland’s subsidiaries provide motor vehicle lending, reverse mortgage lending and residential mortgage lending, asset financing and lending to small-to-medium sized New Zealand businesses and the rural sector (including small-to-medium sized New Zealand farming
Slide 34: Disclaimer, glossary & appendices
DRAFT 05 Disclaimer, glossary & appendices
Slide 35: Disclaimer and important notice
05 Disclaimer and important notice This presentation has been prepared by Heartland Group Holdings Limited (the Company or Heartland) in relation to an offer of new shares in the Company (New Shares) by way of: •a placement to eligible institutional and other selected investors (Placement); and Not
Slide 36: Disclaimer and important notice
05 Disclaimer and important notice Financial data officers, partners, employees, agents or advisers have authorised, permitted or caused the issue, submission, dispatch or All dollar values are in New Zealand dollars (NZ$ or NZD) unless otherwise stated. provision of this presentation and none of th
Slide 37: Disclaimer and important notice
05 Disclaimer and important notice Forward-looking statements Acceptance This presentation may contain certain forward-looking statements with respect to the financial condition, results of By attending or reading this presentation, you agree to be bound by the foregoing limitations and restrictions
Slide 38: Glossary
05 Glossary ABP Australia Bank Programme NIM Net interest margin ADI Authorised deposit-taking institution NOI Net operating income APRA Australian Prudential Regulation Authority NPAT Net profit after tax AT1 Additional Tier 1 NPL Non performing loans Australian Seniors Australian Seniors Finance P
Slide 39: Presentation of financial results
05 Presentation of financial results Unaudited 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
Slide 40: Appendix 1: Sustainability
05 Appendix 1: Sustainability Heartland’s sustainability framework is built on three key pillars: environment, people and financial wellbeing. Heartland is making good progress to meet StockCo Australia announced a two-year Heartland Bank awarded Canstar NZ’s the new Climate-Related Disclosures pilo
Slide 41: Appendix 2: Current Board of Directors
05 Appendix 2: Current Board of Directors Diversified and experienced Boards with a demonstrated good governance track record supported by extensive expertise in finance, banking and risk management. Heartland Group Heartland Bank Chairman & Non-Executive Director | Appointed in 2018 (2013 to Heartl
Slide 42: Appendix 3: Current Management
05 Appendix 3: Current Management Management team with a deep understanding of banking and finance and a commitment to achieving great outcomes for stakeholders. Heartland Group1 Heartland Bank Chief Executive Officer | Joined in 2009 Chief Executive Officer | Joined in 2022 • Over 30 years experien
Slide 43: Appendix 4: Internal offer restrictions
05 Appendix 4: Internal offer restrictions This document does not constitute an offer of new ordinary shares (“New Shares”) of the Company in any jurisdiction in which it would be unlawful. In particular, this document may not be distributed to any person, and the New Shares may not be offered or so
Slide 44: Thank you
Thank you Investor & media relations Investor information Nicola Foley For more information Group Head of Communications heartlandgroup.info/investor-information +64 27 345 6809 nicola.foley@heartland.co.nz
Heartland Group Holdings — Investor Presentation (April 2024) on 6ix