Heartland Group Holdings Ltd. · NZX:HGH
Heartland — FY2016 Earnings Presentation
31 slides from Heartland's earnings presentation, Aug 16, 2016
Slide 1: Full Year Results to 30 June 2016
Full Year Results to 30 June 2016 Jeff Greenslade | Simon Owen | Chris Flood Annual Meeting 1 November 2013 | Page 1 16 August 2016
Slide 2: Important Notice
Important Notice • This presentation has been prepared by Heartland Bank Limited (NZX : HBL) (the Company) 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 should not rely o
Slide 3: Agenda
Agenda • Introduction • Financial overview • Dividend • Core business updates and Strategy • Looking forward • Questions | Page 3
Slide 4: Introduction
Introduction Annual Meeting 1 November 2013 | Page 4
Slide 5: Full Year Highlights
Full Year Highlights • Asset growth in core business divisions – net finance receivables up 9% • Continued profitability growth (up 12% year on year NPAT) • Return on equity of 11.1% • Strongest Net Interest Margin amongst competitors • Successful amalgamation of Heartland Bank and Heartland New Zea
Slide 6: Financial Overview
Financial Overview Photo credit: Chris Williams Annual Meeting 1 November 2013 | Page 6
Slide 7: Financial Full Year Overview
Financial Full Year Overview 12% Growth in Profitability • Achieved NPAT of $54.2m Financial Year Overview • Increase in NPAT of $6.0m or 12% 12 months to 12 months to Jun 2016 Jun 2015 • NOI increase of $12.7m or 9%* Net interest income (NZ$m) 146.7 (NZ$m) 134.4 Net other income 10.9 10.5 Net opera
Slide 8: Net Profit Before Tax
Net Profit Before Tax Continued Profitability Growth Trend • Continued profit growth year on year • Organic asset growth prime driver of increased profit in last two years • $9.8m (15%) increase from FY15 | Page 8
Slide 9: Net Profit Before Tax - Bridge
Net Profit Before Tax - Bridge Breakdown of component parts | Page 9
Slide 10: Net Operating Income
Net Operating Income NOI driving profitability growth • NOI up $12.9m (9%) on prior year • Growth in NOI due to: – Growth from all core divisions – Continued reduction CoF • Strongest Net Interest Margin amongst competitors (see FIPS March 2016 Quarterly results) | Page 10
Slide 11: Operational Efficiency
Operational Efficiency Cost to income ratio down to 44% • Ratio trending lower as NOI continues to grow • Cost to income ratio down to 44% as NOI grew at a much faster rate than costs • Still scope for further reductions in Cost to income ratio, highlighting scalability | Page 11
Slide 12: Balance Sheet Summary
Balance Sheet Summary Strong growth in receivables • Total assets increased by $187.9m • Net finance receivables increased by $251.9m or 9% • Regulatory capital ratio of 13.8%, down 0.7% in last six months due to asset growth | Page 12
Slide 13: Net Finance Receivables Bridge
Net Finance Receivables Bridge Portfolio mix movements | Page 13
Slide 14: Asset Quality Trends
Asset Quality Trends Sound asset quality • Continued improvement in asset quality • Non-Core Property to be no longer reported separately as now immaterial • Impairments up $1.4m to $13.5m for the year • Household impairments up $1.3m – due to the growth in personal loan and motor vehicle books, and
Slide 15: Cost of Funds
Cost of Funds Solid funding position • Decrease in COF on back of OCR decreases • Deposit growth to support receivables growth • The bank remains predominantly retail deposit funded • Term deposit margin increased to promote deposit growth to meet receivable growth | Page 15
Slide 16: Dividend
Dividend Photo credit: Chris Williams Annual Meeting 1 November 2013 | Page 16
Slide 17: Dividend
Dividend Fully imputed interim dividend of 5.0 cents per share Three year relative performance to NZ50G: • 42% share price appreciation • 76% total shareholder return (TSR) | Page 17
Slide 18: Core Business Updates and Strategy
Core Business Updates and Strategy Photo credit: Chris Williams Annual Meeting 1 November 2013 | Page 18
Slide 19: Heartland's Strategy
Heartland’s Strategy Strategy ‘Best or Only’ innovative products, delivered via ‘best or only’ channels, tailored for under-serviced niche markets, in particular: • the growing seniors demographic (65+) - high touch, personal service • the emerging ‘millennial’ demographic – frictionless, fast digit
Slide 20: Seniors (65+)
Seniors (65+) A rapidly growing demographic with a need to manage wealth or release equity from housing assets Deposits Home Equity Release (HER) • High touch, personal service • Comfortable branches with no queues • Friendly telephone engagement with someone who knows you | Page 20
Slide 21: Digital Distribution
Digital Distribution Combine Heartland’s smaller size and greater agility with disruptive new technologies and powerful digital marketing channels to: • Extend Heartland’s reach into key specialist markets • Deliver a better customer experience based on ‘speed and ease’ of application and credit dec
Slide 22: Digital Distribution - Business
Digital Distribution - Business Open for Business Heartland aims to transform how New Zealand SMEs access finance enabling small businesses (the backbone of New Zealand’s economy) to operate more efficiently or grow “We identified a gap in the market for small business owners, the vast majority • In
Slide 23: Digital Distribution - Consumer
Digital Distribution - Consumer Harmoney • In September 2014, Heartland acquired a 10% stake in Harmoney Corp, New Zealand’s first licensed peer-to-peer lending platform • The Harmoney lending model challenges the traditional bank lending model • This model is complementary to Heartland’s strategy o
Slide 24: Core Business Updates
Core Business Updates Household – Consumer: Net Receivables NZ$822m • Personal lending and motor vehicle loans – 26% of net receivables • Growth of $86m or 12%, expected to continue • Fast, simple, transparent loans originated online NZ$780m • Online distribution business growing • i-finance now $18
Slide 25: Core Business Updates
Core Business Updates Household – Seniors Finance: Net Receivables NZ$363m/AU$413m • 26% of net receivables • $27m or 8% growth in NZ and A$39m or 10% in Australia • Combined growth of $39m or 5% (net of FX movement) • Steady increase in new business, high repayment levels • NZ – increase awareness
Slide 26: Core Business Updates
Core Business Updates Business: Net Receivables NZ$899m • 29% of net receivables • Growth of $95 million or 12%. • Reposition lending towards smaller loans to SMEs • Open for Business – “quick application-quick decision” business loans grew to $11m NZ$833m • Continue providing single relationship fo
Slide 27: Core Business Updates
Core Business Updates Rural: Net Receivables NZ$552m • 18% of net receivables • Growth of $65m or 13%, primarily from sheep and beef sector • Livestock financing, financing younger farmers, farm transition NZ$506m loans • Alliance partner channel • Monitoring the dairy sector with close attention (s
Slide 28: Core Business Updates
Core Business Updates Dairy Update • Direct exposure to dairy farmers is only 7% of Heartland’s total lending book • The average loan to value ratio (LVR) for Heartland’s dairy exposures is also low at 64% • Should the downturn continue or worsen beyond current expectations such that the viability o
Slide 29: Looking forward
Looking forward Annual Meeting 1 November 2013 | Page 29
Slide 30: Looking forward
Looking forward • Expect underlying asset growth to continue across all divisions • Greater growth opportunities in: ‒ Consumer: Online personal loan market ‒ Reverse Mortgages: Ageing demographic ‒ SME: Differentiated online distribution opens up significant SME market • Greater acquisition opportu
Slide 31: Questions
Questions Annual Meeting 1 November 2013 | Page 31
Heartland Group Holdings — FY2016 Earnings Presentation on 6ix