Heartland Group Holdings Ltd. · NZX:HGH
Heartland — 1H2021 Earnings Presentation
33 slides from Heartland's earnings presentation, Feb 22, 2021
Slide 1: 2021 Interim Results
2021 Interim Results 22 February 2021
Slide 2: Important notice
Important notice • This presentation has been prepared by Heartland Group Holdings Limited (NZX/ASX: HGH) (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,
Slide 3: 1H2021 highlights
1H2021 highlights
Slide 4: Financial performance
Financial performance Underlying other operating income (OOI) $6.9m (-19.2% vs 1H2020), excluding the impact of fair value gain on equity investment in Harmoney Corp Limited (Harmoney) Net interest margin (NIM) 4.28% (+5 bps vs 1H2020) Net interest income Average interest earning assets +$299.8m (6.
Slide 5: Financial performance highlights
Financial performance highlights Receivables growth Stable margin ‒ Continued growth in core lending portfolios ‒ Strong NIM maintained (Motor, Reverse Mortgages, Business Intermediated) ‒ Asset yields reduced in line with low interest rate ‒ Overall growth impacted by continued reduction in environ
Slide 6: Interim highlights
Interim highlights Relaunch of Heartland Further digitalisation of 45 participants in the Launch of Rocket, a Home Loans with NZ’s product applications and 2020/2021 Manawa Ako mobile financial literacy lowest interest rates digital platforms in NZ and internship – up from 34 in programme for school
Slide 7: Impairment expense
Impairment expense ‒ Impairment expense decreased by $4.5m, decreasing the impairment expense ratio1 from 0.40% in 1H2020 to 0.19% in 1H2021 Driven by: ‒ remediation of accounts previously in arrears, and the release of provisions held against those borrowers largely due to repayments, refinancing a
Slide 8: Impact of COVID-19
Impact of COVID-19 ‒ An economic overlay of $9.6m (pre-tax) was taken at 30 June 2020 to: ‒ allow for the uncertainty created by COVID-19, not − The financial impact of the COVID-19 pandemic on the New due to any inadequacy of existing provisions Zealand economy has been more subdued than forecast b
Slide 9: Financial results
Financial results
Slide 10: Growth in profitability
Growth in profitability ↗ 5.1 (13.4%) 6.9 ↗ 4.2 (10.6%) 39.03 40.5 32.1 (1.4) (0.2) 2.7 (0.4) +11% (1.6) (0.9) 39.9 44.1 33.1 +20% (6.5) (1.8) FY19 FY20 FY21 1H2020 one-offs: 1H2020 one-offs: $3.3m upfront Reverse Mortgage costs H1 H2 COVID-19 Overlay2 $2.1m fair value gain on equity investments $2.
Slide 11: Growth in receivables
Growth in receivables ↗ 63 (2.7%) 13% 18% 6% 7% 75% 5% 14% 56% 40% 11% 1. The graph shows 1H2021 growth in receivables by portfolio excluding the impact of changes in FX rates. Relative growth is annualised. 2. All figures in NZ$m. 11
Slide 12: Key performance measures
Key performance measures CTI NIM 48.8% 4.65% 46.0% 45.4% 4.59% 41.6% 4.46% 4.44% 45.1% 45.9% 44.5% 39.9% 4.33% 4.33% 4.28% 4.23% Jun-19 Dec-19 Jun-20 Dec-20 Jun-19 Dec-19 Jun-20 Dec-20 Reported CTI Underlying CTI Total NIM NIM excl. Liquid Assets Non Performing Loans Impairment Expense Ratio 1.87% 2
Slide 13: Shareholder return
ROE 12.2% Shareholder return 11.7% 11.1% 11.4% 0.9% 10.5% ‒ Underlying return on equity (ROE) of 11.9% (up 80 bps vs 1H2020)1 Jun-19 Dec-19 Jun-20 Dec-20 Adjusted ROE Reported ROE ‒ Earnings per share (EPS) 2 of 7.6 cps, up 0.7 cps Earnings per share (cps) compared to 1H2020 1.2 ‒ Interim dividend o
Slide 14: Divisional summary
Divisional summary
Slide 15: Australian Reverse Mortgages
Australian Reverse Mortgages ‒ Net operating income increased 15.2% compared with 1H2020 to $18.2m. ‒ Receivables increased 10.6%1 in 1H2021 to $1,030.8m. ‒ Receivables growth in 1H2021 impacted by elevated repayments (+28% vs 2H2020). ‒ Australian Seniors Finance product recently rebranded to Heart
Slide 16: NZ Reverse Mortgages
NZ Reverse Mortgages ‒ Net operating income decreased -13.8% compared with 1H2020 to $11.2m. Excluding the impact of one-offs1 from 1H2020, underlying net operating income was largely flat half-on-half. ‒ Receivables increased 5.9% in 1H2021 to $576.6m. As at 31 December 2020 ‒ Receivables growth in
Slide 17: Reverse mortgages portfolio analytics
Reverse mortgages portfolio analytics NZ Reverse AU Reverse Mortgages Mortgages $577m A$966m +$16m (5.9%) +A$51m (11.1%) vs June 2020 vs June 2020 Average loan size: $108,797 A$131,362 :Average loan size Weighted average borrowers’ age : 79 77 :Weighted average borrowers’ age Elevated repayments in
Slide 18: Open for Business (O4B)
Open for Business (O4B) ‒ Net operating income increased 13.6% compared with 1H2020 to $7.5m. ‒ Receivables decreased -18.4% in 1H2021 to $140.7m. ‒ Growth slowed down in 2H2020 as a result of COVID-19 disruptions and the availability of Government-backed funding As at 31 December 2020 for small bus
Slide 19: Business Intermediated
Business Intermediated ‒ Net operating income increased 25.2% compared with 1H2020 to $13.4m. ‒ Receivables increased 13.2% in 1H2021 to $532.1m. ‒ Continued deepening and expansion of the intermediary network underpinned by a strong focus on distributor/vendor As at 31 December 2020 and point of sa
Slide 20: Business Relationship
Business Relationship ‒ Net operating income increased 8.9% compared with 1H2020 to $12.2m. ‒ Receivables decreased -6.6% 1 in 1H2021 to $479.8m. ‒ The continued downward trend reflects Heartland’s strategy to continue to optimise non-core Relationship lending to reduce As at 31 December 2020 low ma
Slide 21: Motor Finance
Motor Finance ‒ Net operating income increased 9.6% compared with 1H2020 to $33.0m. ‒ Receivables increased 13.8% in 1H2021 to $1,203.9m. ‒ Growth was mainly from the Motor dealer book via car dealerships, brokers and partnerships such as Kia Finance and Jaguar/Land Rover Financial Services. As at 3
Slide 22: Harmoney and other personal lending
Harmoney and other personal lending ‒ Net operating income decreased -19.0% compared with 1H2020 to $6.8m. ‒ Harmoney Receivables decreased -55.6%1 in 1H2021 to $143.9m. ‒ Both New Zealand and Australian Harmoney portfolios continued to contract in 1H2021 as a result of high repayments, and continue
Slide 23: Home Loans
Home Loans ‒ Home Loans1 Receivables increased +7.0m in 1H2021 to $7.6m. ‒ Following a successful pilot, Heartland’s digital Home Loans product was launched in October 2020 with conservative lending criteria targeting high quality applicants. ‒ Loans were slow to draw down over the summer holiday pe
Slide 24: Rural
Rural ‒ Net operating income decreased 0.5% compared with 1H2020 to $15.6m. Rural Relationship net operating income increased by 5.0% to $12.7m and Livestock net operating income decreased by -15.3% to $2.9m. ‒ Receivables decreased -11.5% in 1H2021 to $570.5m. Rural Relationship receivables reduced
Slide 25: Funding and liquidity
Funding and liquidity New Zealand ‒ Heartland Bank increased borrowings by $32.7m (0.9%) in 1H2021 ‒ Deposits grew $1.9m (0.1%) ‒ Heartland Bank increased total liquidity by $18.8m (2.6%) ‒ Heartland Bank holds liquidity well in excess of regulatory minimums ‒ Continued focus on reducing risk concen
Slide 26: Strategic update
Strategic update
Slide 27: Strategic objectives
Strategic objectives New Zealand Australia Digital Acquire scale Expand in Australia Digitalise everything we do • By consolidating banking services in • Service the needs of a broader • New/enhanced platforms launched New Zealand demographic of the aged sector – Home Loans • By increasing market sh
Slide 28: Looking forward
Looking forward • 1H2021 NPAT exceeded expectations, contributing factors being: ‒ lower than forecast impaired asset expense ‒ strong origination levels in core portfolios ‒ NIM stable. NPAT for FY2021 • Overall modest balance sheet (primarily due to Provided repayment activity and elevated repayme
Slide 29: Appendices
Appendices
Slide 30: Appendix 1 – Financial position
Appendix 1 – Financial position 31 December 30 June Movement Movement $m 2020 2020 ($m) (%) Liquid Assets 602 544 57 10.6% Net Finance Receivables 4,650 4,584 66 1.4% Other Assets 186 190 (4) (2.0%) TOTAL ASSETS 5,438 5,318 120 2.3% Retail Deposits 3,269 3,264 4 0.1% Other Borrowings 1,374 1,268 106
Slide 31: Appendix 2 – Financial performance
Appendix 2 – Financial performance $m W 1H2021 1H2020 Change ($) Change (%) Net Operating Income1 125.3 118.6 6.7 5.6% Operating Expenses (61.1) (54.6) (6.5) (12.0%) Impairment Expense (4.5) (9.0) (4.5) (49.7%) Profit Before Tax 59.6 55.0 4.6 8.4% Tax Expense (15.5) (15.1) (0.4) (2.5%) Net Profit Af
Slide 32: Appendix 3 – Reconciliation of reported with underlying results
Appendix 3 – Reconciliation of reported with underlying results $m 1H2021 1H2020 Movement ($) Movement (%) Reported NOI 125.3 118.6 6.7 5.6% Less: Upfront Reverse Mortgage fees -2.8 2.8 Fair value gain on equity investments -5.2 -2.1 -3.1 Underlying NOI 120.1 113.7 6.4 5.6% Reported OPEX 61.1 54.6 6
Slide 33: Thank you
Thank you For Heartland’s 1H2021 Interim Results announcement, please see shareholders.heartland.co.nz
Heartland Group Holdings — 1H2021 Earnings Presentation on 6ix