Heartland Group Holdings Ltd. · NZX:HGH
Heartland — Heartland Bank — FY2017 Earnings Presentation
24 slides from Heartland's earnings presentation, Aug 14, 2017
Slide 1: 2017 Annual Results
2017 Annual Results 14 August 2017
Slide 2: Important Notice
Important Notice • This presentation has been prepared by Heartland Bank Limited (NZX : HBL) (the Company or Heartland) for the purpose of briefings in relation to its financial statements. • The presentation and the briefing (together the Presentation) contain summary information only, and you shou
Slide 3: A year of continued growth for Heartland
A year of continued growth for Heartland Net Finance Receivables • Net profit after tax of $61m, up 12% • 14% growth in net finance receivables Rural Motor • Return on equity of 11.6% $675m $824m • Launched multiple digital origination Personal platforms Loans $95m • Implemented new core banking Bus
Slide 4: Increased profitability
Increased profitability • 12% growth in profitability driven by asset growth • Strong net interest margin • Continued reduction in cost to income ratio to 42% Net Profit After Tax Cost to Income Ratio 60.8 54.2 48.2 53% 36.0 47% 44% $m 42% FY14 FY15 FY16 FY17 FY14 FY15 FY16 FY17 2017 Annual Results
Slide 5: Strong net interest margin maintained
Strong net interest margin maintained Gross interest yield Cost of funds 10% 5% 9% 8% 4% 7% 6% 3% 5% 4% 2% 3% 2% 1% 1% 0% 0% Jun-15 Jun-16 Jun-17 Jun-15 Jun-16 Jun-17 Net interest margin 5.00% 4.50% 4.46% 4.34% 4.00% 3.00% 2.00% 1.00% 0.00% Jun 15 Jun-16 Jun-17 *Source: KPMG Financial Institutions H
Slide 6: Asset growth Funding growth
Asset growth Funding growth 14% growth in net finance receivables 13% growth in retail deposits Net Finance Receivables 3,546 Borrowings 3,430 675 3,099 (19%) 3,000 853 2,862 2,825 (25%) 552 (18%) 714 488 724 (24%) (17%) 995 (26%) (28%) 899 804 Wholesale (29%) Rural (28%) Retail $m $m Business House
Slide 7: Impairments Stable
Impairments Stable Impairment ratios 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Jun 14 Jun 15 Jun 16 Jun 17 Net impaired loans ratio Impairment expense ratio 2017 Annual Results | Page 7
Slide 8: Asset growth across all key divisions
Asset growth across all key divisions Receivables Movement 123 96 (10) 126 72 40 $m 3,546 3,099 Receivables Personal Motor Reverse Business Rural Residential Receivables 2016 Loans Mortgages Mortgages 2017 2017 Annual Results | Page 8
Slide 9: Clear strategic direction
Clear strategic direction Right place, right time Identifying customer intent Digital, intermediated and direct channels Utilisation of data insights to accurately utilised to ensure we are in easy reach for identify customer intent, driving strong our customers. lead generation and conversion. Targ
Slide 10: Motor Vehicle Loans $824m
Motor Vehicle Loans Product and distribution: • Product distribution through intermediated channels (motor vehicle dealers), branded partnerships (eg. Holden Financial Services) and through digital platform, Open for You • Development of bespoke digital origination platforms (eg. Open for Isuzu) str
Slide 11: Reverse Mortgages (New Zealand) $405m
Reverse Mortgages (New Zealand) Product and distribution: • Market leading product • Product distribution primarily through high-touch telephony service • Product and brand awareness increased through TV advertising Looking forward: • Digital distribution capability to enable full online Net receiva
Slide 12: Reverse Mortgages (Australia) $516m
Reverse Mortgages (Australia) Product and distribution: • Market leading product • Growth of intermediary channel (112% increase in the number of active brokers) and direct sales through online lead generation • Digital marketing used to educate partners and prospective customers, raising brand and
Slide 13: Personal Loans $95m
Personal Loans Product and distribution: • Heartland-branded personal loan product distributed through digital platform providing a fast and simple customer experience • Lending through the Harmoney platform increased by $40m or 108% to $78m Looking forward: • Increase brand awareness and platform t
Slide 14: Business $995m
Business Product and distribution: Focus on lending to small businesses through: • Development of digital platform, Open for Business, providing a fast and simple customer experience for time- poor small business owners; and • Extended reach through intermediary network enabling point of sale transa
Slide 15: Rural $675m
Rural Product and distribution: • Launch of digital platform for livestock loans, Open for Livestock, providing 100% finance to farmers purchasing livestock, with security over the livestock • Launched online finisher tool in partnership with NZX Agri subsidiary, AgriHQ • Formed strategic partnershi
Slide 16: Capital and funding for growth
Capital and funding for growth • Regulatory capital ratio of 13.56% • $40m via placement (December) and share purchase plan (March) to support asset growth • A$20m of Tier 2 regulatory capital (April) from wholesale investors to further support asset growth 15% Regulatory Capital 10% 14.46% 13.78% 1
Slide 17: Returns to shareholders
Returns to shareholders Dividends 6 • Final dividend of 5.5 cents per share 5 (fully imputed) 4 cents • Total dividend for FY17 of 9.0 cents 3 per share 2 1 0 2013 2014 2015 2016 2017 Interim Final Special TSR - Heartland vs NZ50G 540.00 480.00 HBL: +354% 420.00 Index Value 360.00 300.00 240.00 180.
Slide 18: Our digital partnerships
Our digital partnerships • Heartland has partnered with three digital lenders by way of minority shareholdings and/or the provision of debt facilities • Objective to maximise low cost online distribution coupled with fast risk decisioning tools to reach the customer quickly and cost effectively Harm
Slide 19: New core banking system implemented
New core banking system implemented • New Oracle core banking system (Flexcube) implemented in May • Flexcube is a modern, modular core banking system which is highly configurable and introduces automation and workflow capabilities • A refreshed and contemporary IT architecture that will sustain Hea
Slide 20: Key growth opportunities
Key growth opportunities Digital distribution channels • Eight digital platforms now launched, including for small business loans, livestock loans and personal loans • Designed to provide a quick and simple customer experience • Low cost of customer on-boarding • Opportunity to drive scalable growth
Slide 21: Launch of retail bond to support growth
Launch of retail bond to support growth • Heartland Bank Limited (“Issuer”), has today announced that it is considering making an offer of five year, unsecured, unsubordinated, fixed rate notes ("Notes") to institutional and New Zealand retail investors. • If the offer proceeds, it is expected to op
Slide 22: Outlook: Continued growth in FY2018
Outlook: Continued growth in FY2018 • Asset growth across all divisions through continued execution of strategy with digital distribution and intermediated channels providing low cost growth opportunities • Heartland expects its net profit after tax for the year ending 30 June 2018 to be in the rang
Slide 23: Appendix – Financial Year Overview
Appendix – Financial Year Overview 12 months to 12 months to Jun 2017 Jun 2016 (NZ$m) (NZ$m) Net interest income 163.1 146.7 Net other income 8.2 10.9 Net operating income 171.3 157.6 Expenses 71.7 69.9 Profit before impairments and tax 99.6 87.7 Impaired asset expense 15.0 13.5 Net profit before ta
Slide 24: Appendix – Balance Sheet Summary
Appendix – Balance Sheet Summary Jun 2017 Jun 2016 (NZ$m) (NZ$m) Total assets 4,034.7 3,532.9 Total liabilities 3,465.1 3,034.6 Total equity 569.6 498.3 Net tangible assets 490.5 433.5 NTA per share 0.95 0.91 2017 Annual Results | Page 24