Heartland Group Holdings Ltd. · NZX:HGH
Heartland — FY2024 Earnings Presentation
38 slides from Heartland's earnings presentation, 2024
Slide 1: FY2024 Results Investor Presentation
FY2024 Results Investor Presentation For the year ended 30 June 2024
Slide 2: Contents
Contents 01 Highlights 3-5 02 Financial results 6-18 03 Australian banking 19-20 04 New Zealand banking 21-23 05 Closing remarks 24-25 06 Additional information 26-33 07 Presentation of results, disclaimer & glossary 34-38 2 2
Slide 3: Highlights
01 | Highlights Jeff Greenslade Chief Executive Officer Heartland Group 3
Slide 4: Solid FY2024 result sets foundation for continued growth
Solid FY2024 result sets foundation for continued growth Solid result achieved in a challenging economic Significant strategic milestones set foundation to environment achieve growth ambitions • Growth in Receivables up 6.4%1 on FY2023. • Completed Challenger Bank acquisition and subsequently rebran
Slide 5: Growth achieved in a challenging economic environment
Growth achieved in a challenging economic environment $432m (6.4%) Household Business Rural $215m (7.6%) $44m (-3.2%) $9m (1.3%) (103) 57 298 (27.5% 0.0% (22) (2) (24) 59 54 (44) (30) (7) 7 10 (46.2%) 180 (0.6%) (9.9%) 3.8% (13.4%) 8.0% (25.9%) 19.7% (1.6%) 3.4% 11.3% 7,223 20.2% 6,791 Jun-23 Revers
Slide 6: Financial results
02 | Financial results Andrew Dixson Chief Financial Officer Heartland Group 6
Slide 7: Group financial results
Group financial results Reported Underlying FY2024 FY2023 Movement FY2024 FY2023 Movement NII $277.6m $282.0m ($4.3m) (1.5%) $277.8m $283.9m ($6.1m) (2.1%) OOI1 $12.7m $3.3m $9.4m 282.0% $20.2m $16.9m $3.4m 19.9% NOI $290.4m $285.3m $5.0m 1.8% $298.0m $300.7m ($2.7m) (0.9%) OPEX $139.4m
Slide 8: Reported vs underlying
Reported vs underlying FY2024 FY2023 FY2024 one-offs and non-cash technical items included in the reported result (pre-tax) • De-designation of derivatives: a $6.6m loss was recognised in relation to derivatives that were de- Reported NPAT $74.5m $95.9m designated from prior hedge accounting relatio
Slide 9: Profitability
Profitability NPAT ($ million) 0.9%1 Heartland Group 95.1 95.9 Reported: 95.9 → 74.5 87.0 21.3 (22.2%) 72.0 74.5 +1% -22% +21% +9% Underlying: 110.2 → 102.7 7.4 (6.7%) FY20 FY21 FY22 FY23 FY24 Underlying NPAT ($ million) 7.5% 1 110.2 102.7 96.1 87.9 76.9 +15% -7% +9% +14% FY20 FY21 FY22 FY23 FY24 9
Slide 10: Net interest margin
Net interest margin NIM Underlying NIM expansion expected in FY2025 4.33% 4.35% NZ Banking 4.16% • Underlying NIM forecast to rise above 4% by Q3, driven by: 4.33% 4.35% 4.00% 3.81% • continued Underlying NIM improvement in fixed rate portfolios, primarily Motor 4.05% 3.64% 3.75% Finance and Asset F
Slide 11: Costs
Costs CTI ratio Committed to underlying CTI ratio of <35% by FY2028 FY2025 to set foundation for underlying CTI ratio improvement in FY2026 48.0% and onwards 45.4% 46.8% 44.9% 43.6% • Heartland’s underlying CTI ratio is expected to increase in FY2025 as the full cost base of the ADI is absorbed, and
Slide 12: Impairments
Impairments Impairment expense ratio Non-performing loans ratio • Impairments are at elevated levels but not outside an expected band based 2.92% on the economic environment. • Heartland expects impairments to remain elevated in the short term. 1.87% 1.81% 1.87% 1.58% 1 0.65% 0.66% FY20 FY21 FY22 FY
Slide 13: Provisions
Provisions Motor Finance arrears Total provisions 3.99% 3.89% 2.75% 3.12% 3.18% 2.95% 22.5 2.66% 5.3 2.54% 2.47% 7.1 1.86% 1.99% 16.3 2.31% 15.2 57.4 53.9 1.26% 1.17% 1.21% 46.6 36.8 37.0 Jun-22 Dec-22 Jun-23 Dec-23 Jun-24 Jun-20 Jun-21 Jun-22 Jun-23 Jun-24 5 - 29 DPD % 30 - 89 DPD % NPLs % Collecti
Slide 14: NZ funding & liquidity
NZ funding & liquidity Solid retail deposit growth • Heartland Bank achieved retail deposit growth of 5.9% compared to market growth of 5.8% in challenging market conditions.1 Heartland Bank Heartland Bank • Market competition resulted in a higher cost of Funding Composition2 $m Liquidity Compositio
Slide 15: AU funding & liquidity
AU funding & liquidity Funding mix expected to be ~90% retail deposits by the end of FY2025 Heartland Bank Australia Heartland Bank Australia • Funding transition was accelerated by Challenger Funding Composition1 A$m Liquidity Composition1 A$m Bank’s pre-completion deposit raising programme 2,715 1
Slide 16: Capital
Capital Banking HBA Level HBA Level NZBG Group One Two Equity $1,196m $1,200m A$399m A$395m Deductions $(304m) $(584m) A$(273m) A$(149m) CET1 Capital $892m $616m A$126m A$246m Tier Two Heartland Capital Movement $m Heartland Capital Allocation $m $98m $100m A$50m A$50m Capital 41 Total Regulatory $9
Slide 17: Shareholder return
Shareholder return • Final dividend of 3.0 cps, down 3.0 cps on FY2023. • Having regard to Heartland’s next stage of growth, the Board expects to target a total • Dividend yield of 8.7%1 (FY2023: 9.3%2). dividend payout ratio of at least 50% of underlying NPAT in FY2025. The Board will, as it has hi
Slide 18: FY2028 growth ambitions
FY2028 growth ambitions FY2028 ambitions are driven by modest Receivables growth, NIM expansion, cost savings from automation, and an improvement in impairments. Financial FY2028 FY2024 Commentary metric ambition • Assumes modest Receivables growth below Heartland’s track record of 11.8% over the la
Slide 19: Australian banking
03 | Australian banking Michelle Winzer Chief Executive Officer Heartland Bank Australia 19
Slide 20: AU FY2025 focus
AU FY2025 focus Heartland Bank Australia is well positioned for sustainable growth beyond FY2025 through its focus on business growth, operational efficiency, service excellence and risk management. Business growth Operational efficiency Service excellence Continue to focus on expansion within exist
Slide 21: New Zealand banking
04 | New Zealand banking Leanne Lazarus Chief Executive Officer Heartland Bank 21
Slide 22: NZ FY2025 focus
NZ FY2025 focus In New Zealand, Heartland Bank aims to expand its margin and reduce costs to deliver better returns. These key strategic priorities will drive a strong contribution to the Group’s FY2028 ambitions. Margin expansion Cost reduction Simplification and better returns NIM expansion >4% Re
Slide 23: Non-Strategic Assets
Non-Strategic Assets Non-Strategic Assets includes assets that earn little or no income or are returning less than Heartland’s cost of capital.1 • Non-Strategic Assets will be managed and reported separately in FY2025 to provide greater transparency and enable more focused resolution strategies to b
Slide 24: Closing remarks
05 | Closing remarks Jeff Greenslade Chief Executive Officer Heartland Group 24
Slide 25: Looking forward
Looking forward Long-term outlook remains positive Volatility to continue through the towards FY2028 ambitions remainder of CY2024 • Long-term outlook is positive as Heartland expects to realise benefits • In Heartland’s view, this creates too much uncertainty at this stage for from the significant
Slide 26: Additional information
06 | Additional information 26
Slide 27: NZ Reverse Mortgage portfolio analytics
NZ Reverse Mortgage portfolio analytics $1.07b $141,183 77 17.5% NZ Reverse Mortgages Average Average age of youngest borrower CAGR FY2020-FY20241 +$179.6m (20.2%) vs June 2023 loan size on a loan 9.1% 23.5% 0.1% 2 Average Weighted Proportion of the Number of loans in the origination LVR average LVR
Slide 28: AU Reverse Mortgage portfolio analytics
AU Reverse Mortgage portfolio analytics A$1.67b A$188,756 76 17.8% AU Reverse Mortgages Average Average age of youngest borrower CAGR FY2020-FY20241 +A$276m (19.6%) vs June 2023 loan size on a loan 11.5% 23.5% 0.0% 2 Average Weighted Proportion of the Number of loans in the origination LVR average L
Slide 29: Sustainability strategy
Sustainability strategy As part of the new Climate-Related Disclosures obligations introduced through the Financial Sector (Climate-Related Disclosures and Other Matters) Amendment Act 2021, Heartland’s first climate statement is required as part of its full year reporting for FY2024. Heartland’s fi
Slide 30: Regulatory update
Regulatory update With the completion of the acquisition of (now) Heartland Bank Australia, the In mid-June 2024, the Finance Minister announced a joint Select Committee Heartland group now includes an APRA-regulated ADI which is subject to inquiry into banking competition with a focus on rural bank
Slide 31: Corporate structure
Corporate structure Heartland Group BBB (stable) Fitch (NZX/ASX: HGH) Introducing Heartland Bank Australia • On 30 April 2024, Heartland Bank completed the NZ company NZ Banking Group acquisition of Challenger Bank and became the first Heartland Bank AU company BBB (stable) Fitch registered New Zeal
Slide 32: Board of Directors
Board of Directors Heartland Group Heartland Bank (New Zealand) Heartland Bank (Australia) Chair & Non-Independent Non-Executive Chair & Independent Non-Executive Chair & Independent Non-Executive Greg Director Director Geoff Director Bruce Irvine Summerhayes Tomlinson Appointed in 2018 (2013 to Hea
Slide 33: Management
Management Heartland Group Heartland Bank (New Zealand) Heartland Bank (Australia) Jeff Chief Executive Officer Chief Executive Officer Leanne Lazarus Chief Executive Officer Michelle Winzer Joined in 2024 Greenslade Joined in 2009 Joined in 2022 Chief Risk Officer David Brown Joined Challenger Bank
Slide 34: Presentation of results, disclaimer & glossary
07 | Presentation of results, disclaimer & glossary 34
Slide 35: Presentation of results
Presentation of results Audited 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 perform
Slide 36: 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 This presentation contains references to non-GAAP measures including underlying profit or Statement
Slide 37: Glossary
Glossary Heartland Australia Heartland Australia Holdings Pty Ltd and its direct and indirect ABP Australia Bank Programme Group wholly-owned subsidiaries ADI Authorised deposit-taking institution Heartland Bank Heartland Bank Limited APRA Australian Prudential Regulation Authority Heartland Bank Au
Slide 38: Thank you
Thank you Investor & media relations Investor information Nicola Foley For more information, go to Group Head of Communications heartlandgroup.info/investor-information +64 27 345 6809 nicola.foley@heartland.co.nz
Heartland Group Holdings — FY2024 Earnings Presentation on 6ix