Heartland Group Holdings Ltd. · NZX:HGH
Heartland — H1 FY2018 Earnings Presentation
21 slides from Heartland's earnings presentation, Feb 20, 2018
Slide 1: Half Year Results to 31 December 2017
Half Year Results to 31 December 2017 20 February 2018
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: Continued profitability and asset growth
Continued profitability and asset growth Highlights Net Receivables – 31 December 2017 $3.8b • Net operating income up 13% on previous corresponding period Personal Loans $120m • Net profit after tax of $31.1m, up 7% on previous corresponding period Motor $886m • 13% annualised growth in net finance
Slide 4: 7% growth in profitability
7% growth in profitability • 7% growth in profitability on previous corresponding period driven by asset growth • Strong net interest margin maintained • Profit down on previous half due to higher operating expenses associated with implementation of new banking system and higher impairment expense •
Slide 5: Strong net interest margin maintained
Strong net interest margin maintained • 13% increase in net operating income over previous corresponding period Gross interest yield Cost of funds 10% 5% 9% 8% 4% 7% 6% 3% 5% 4% 2% 3% 2% 1% 1% 0% 0% H1 FY16 H2 FY16 H1 FY17 H2 FY17 H1 FY18 H1 FY16 H2 FY16 H1 FY17 H2 FY17 H1 FY18 Net interest margin 5
Slide 6: Impairment expense remains low given margin achieved
Impairment expense remains low given margin achieved 5.00% 4.50% 4.00% 3.50% 3.00% 2.50% 2.00% 1.50% 1.00% 0.50% 0.00% 30-Jun-15 30-Jun-16 30-Jun-17 31-Dec-17 NPL ratio* NIM Impairment Ratio * Non Performing Loans net of provisions / Net receivables 2018 Half Year Results | Page 6
Slide 7: Asset growth Funding growth
Asset growth Funding growth 13% annualised growth in net finance 10% annualised growth in retail receivables from FY17 deposits from FY17 Net Finance Receivables $3,783 Borrowings $3,633 $3,546 $3,430 $152m $677 (4%) $3,099 $675 (18%) (19%) $2,825 $3,000 $775 $2,846 $853 $552 (21%) (25%) $488 (18%)
Slide 8: Asset growth across all key divisions
Asset growth across all key divisions Receivables Movement FY18 ($m) 46 1 21 25 62 58 24 3,783 3,546 Receivables Reverse Reverse Motor Personal Loans Business Rural FX and other Receivables June 2017 Mortgage NZ Mortgage AU December 2017 2018 Half Year Results | Page 8
Slide 9: Household – New Zealand $1,460m
Household – New Zealand Household products offered in New Zealand comprise Reverse Mortgages, Motor and Personal lending. • Net receivables of household lending increased 15% (annualised) to $1,460m. Household - NZ Australia • Personal receivables increased 36% (annualised) to $112m, due Business to
Slide 10: Business – New Zealand $1,032m
Business – New Zealand Strong growth in net operating income from business lending of 14% to $26.3m underpinned by growth in net receivables of 9% (annualised) to $1.0b. Household - NZ • Growth achieved through focus on small business market and Australia intermediary partnerships. Business Rural •
Slide 11: Rural $677m
Rural Rural Net Operating Income increased 17% compared to the previous reporting period due to significant growth in these receivables in the Household - second half of 2017 financial year. NZ Australia Growth has slowed in the first half of 2018 financial year, with receivables only growing 0.4% (
Slide 12: Australia $615m
Australia Significant increased product offering in Australia in the period to expand to three key product offerings: • Reverse mortgages continues to grow with 22% (annualised Household - NZ excl. FX) growth in the six months from $516m to $598m. Australia • New personal lending through the launch
Slide 13: Capital for growth
Capital for growth • Regulatory capital ratio of 14.76% • A $59m rights issue (Dec 17) to support continued growth in its loan portfolio and maintain a strong balance sheet • ROE reduced due to increase in capital Regulatory Capital 14.76% 13.56% 13.78% 12.96% 14.31% 13.79% 12.99% 13.15% 30-Jun-15 3
Slide 14: Returns to shareholders
Returns to shareholders • Interim dividend of 3.5 cents per share (fully imputed) • Total Shareholder Return (TSR) of 120% over the last 3 years TSR: Heartland vs. NZ50G Dividends (cps) 300 Share Price / Index Value (Rebased to 100) 6.0 250 5.0 200 4.0 Dividends (cps) Heartland TSR: 120% 150 3.0 100
Slide 15: A clear strategic direction
A 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. Ta
Slide 16: Strategic priorities
Strategic priorities • Build the first end-to-end, fully automated online deposit platform. • Continue to grow the successful online SME lending platform, Open for Business. • Expand product offering in Australia, including Open for Business. 2018 Half Year Results | Page 16
Slide 17: Diversity & inclusion
Diversity & inclusion • Committed to becoming a more diverse and inclusive place of work. • Member of Champions for Change. • Focused on attracting and retaining female leaders and improving gender balance across the business. • Increase Māori representation. • Aiming to be an employer of choice for
Slide 18: 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 net profit after tax for the year ending 30 June 2018 to be at the upper-e
Slide 19: Appendices
Appendices
Slide 20: Appendix – Financial Year overview
Appendix – Financial Year overview 6 months to 6 months to Dec 2017 Dec 2016 (NZ$m) (NZ$m) Net interest income 90.1 79.0 Net other income 3.8 4.1 Net operating income 93.9 83.1 Expenses 40.2 36.0 Profit before impairments and tax 53.7 47.1 Impaired asset expense 10.4 6.9 Net profit before tax 43.3 4
Slide 21: Appendix – Balance Sheet summary
Appendix – Balance Sheet summary Dec 2017 Jun 2017 (NZ$m) (NZ$m) Total assets 4,307.5 4,034.7 Total liabilities 3,666.1 3,465.1 Total equity 641.3 569.6 Equity ratio 14.9% 14.1% Net tangible assets ($m) 563.3 490.5 NTA per share ($) 1.01 0.95 2018 Half Year Results | Page 21
Heartland Group Holdings — H1 FY2018 Earnings Presentation on 6ix