Heartland Group Holdings Ltd. · NZX:HGH
Heartland — Heartland Bank — FY2018 Earnings Presentation
36 slides from Heartland's earnings presentation, Aug 15, 2018
Slide 1: 2018 Annual Results
2018 Annual Results 15 August 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: Photo credit: Chris Williams
Photo credit: Chris Williams
Slide 4: Asset growth driving profitability
Asset growth driving profitability Net operating income Net profit after tax Net finance receivables 12 months to 30 June 2018 12 months to 30 June 2018 As at 30 June 2018 $196.8m $67.5m $4.0bn 15% from FY2017 11% from FY2017 12% from FY2017 Highlights • 12% growth in net finance receivables from 30
Slide 5: Growth strategy is delivering results
Growth strategy is delivering results To provide ‘best or only’ specialist products in niche markets that are under-serviced by the mainstream banks STRATEGIC OBJECTIVE ACHIEVED THROUGH TO CREATE POSITIVE OUTCOMES GROW THE CORE DIGITAL DEVELOPMENT Focus on growth in our core Utilise digital, interme
Slide 6: Growing our business and our people
Growing our business and our people Another strong financial result – in a year where we focused on infrastructure and digital development Strategy continues to deliver asset growth – particularly in Australian reverse mortgages and other core areas including NZ reverse mortgages, motor and small bu
Slide 7: The financial results in detail
The financial results in detail David Mackrell, CFO Photo credit: Chris Williams
Slide 8: Growth in income and profitability
Growth in income and profitability • Net interest income up 13% • Net profit after tax up 11% driven by asset growth • Market leading Net Interest Margin at 4.42% • Cost to income ratio improved to 40.9% • Impairment expense increased due to asset growth and increased provisioning * * *Net profit af
Slide 9: Change in profitability
Change in profitability • One-off other income includes gain on sale of property ($4.8m) and gain on sale of invoice finance business ($0.6m). • One-off operating expenses includes new system implementation expenses ($0.5m), legacy systems costs ($0.3m) and expenses in relation to the proposed corpo
Slide 10: Market leading NIM maintained
Market leading NIM maintained • Gross interest yield = Interest Income divided by Average Interest Bearing Assets • Cost of funds = Interest Expense divided by Average Interest Bearing Liabilities • Net Interest Margin (NIM) = (Interest Income – Interest Expense) divided by Average Interest Bearing
Slide 11: Asset quality
Asset quality 2018 Annual Results | Page 11
Slide 12: Asset growth supported by retail deposit growth
Asset growth supported by retail deposit growth • 12% growth in net finance receivables • Supported by 12% growth in retail deposits 2018 Annual Results | Page 12
Slide 13: Capital for growth
Capital for growth • Regulatory capital ratio of 14.12% • $59m rights issue issued in December 2017 to support continued growth and maintain a strong balance sheet • ROE 11.1% - a reduction due to increase in capital • Earnings per share increased to 13cps • RBNZ capital review 2018 Annual Results |
Slide 14: Returns to shareholders
Returns to shareholders • Final dividend 5.5cps – full year dividend 9.0cps • Dividend pay-out ratio 74.5% • Total Shareholder Return (TSR) of 174% over the last 5 years * * Total Shareholder Return means share price appreciation plus dividend received. TSR has been calculated including the benefit
Slide 15: Impact of adoption of IFRS9 on provisions
Impact of adoption of IFRS9 on provisions • IFRS9 to be adopted for the 2019 financial year • Requires provisions to be calculated on an estimate of 12 month or lifetime expected credit losses • Predictive models built to enable estimates • Impact of adoption will be an increase in provisions of $20
Slide 16: Divisional summary
Divisional summary Jeff Greenslade, CEO Photo credit: Chris Williams
Slide 17: Significant growth in reverse mortgages and motor
Significant growth in reverse mortgages and motor 2018 Annual Results | Page 17
Slide 18: Australia
Australia Our Australian business continues to achieve significant growth: • Reverse mortgages increased 31% to $677 million • Harmoney consumer lending in Australia commenced, growing to $26 million • Business lending through our partnership with Spotcap grew to $19 million. Australia As at 30 June
Slide 19: New Zealand Reverse Mortgages
New Zealand Reverse Mortgages • NZ Reverse Mortgage net finance receivables increased 12% to $453 million • NZ Reverse Mortgage Net Operating Income increased 17% to $18.5 million • Increased brand awareness and digital distribution • Growth to 15,000 customers in New Zealand. NZ Reverse Mortgages A
Slide 20: Harmoney and other consumer lending (New Zealand)
Harmoney and other consumer lending (New Zealand) • NZ Harmoney and other consumer lending net finance receivables increased 34% to $127 million • NZ Harmoney and other consumer lending Net Operating Income increased 15% to $9.9 million • Increased distribution through Harmoney • Higher volume of le
Slide 21: Motor
Motor • Motor net finance receivables increased 16% to $955 million • Motor Net Operating Income increased 3% to $51.9 million • Higher volume of lending slightly offset by lower rates • Increased partnership with intermediaries to offer vehicle finance at point of sale. Motor As at 30 June 2018 $95
Slide 22: New Zealand Business
New Zealand Business New Zealand Business lending increased 6% in the year to $1,047 million • Growth achieved in lending through our online platform for small business loans, Open for Business, and intermediary partnerships • Strategic reduction in relationship-managed business lending to decrease
Slide 23: Open for Business
Open for Business • NZ’s largest dedicated online business loan platform • Almost 98% growth in FY2018 • Proven stable technology and loan book performance consistent with expectations • Reached over 5,000 clients based on search engine marketing only • TV Commercial on the way 2018 Annual Results |
Slide 24: Rural
Rural • Rural lending decreased 3% in the year to $656 million • Average net receivables increased from $614 million in 2017 to $666 million in 2018 • Net Operating Income increased 10% to $32.3 million due to higher average lending compared to 2017. Product and distribution through digital channels
Slide 25: Retail deposits
Retail deposits • Raised $308 million of new deposits in FY18 • CANSTAR Bank of the year – Saving Award and Outstanding Value for our Direct Call Account • New Heartland Mobile App for Savings and Deposits 2018 Annual Results | Page 25
Slide 26: Corporate Restructure
Corporate Restructure David Mackrell, CFO Photo credit: Chris Williams
Slide 27: Corporate Restructure – to remove growth constraints
Corporate Restructure – to remove growth constraints • Heartland has announced its intention to conduct a corporate restructure which will result in Heartland Bank Limited becoming a wholly owned subsidiary of a new listed parent company, called Heartland Group Holdings Limited. • Existing sharehold
Slide 28: Corporate Restructure – the new group
Corporate Restructure – the new group 2018 Annual Results | Page 28
Slide 29: Removing growth constraints and providing greater flexibility
Removing growth constraints and providing greater flexibility • Future growth in the reverse mortgage business is expected to be constrained due to current Reserve Bank’s regulation: – limits the extent to which Heartland Bank is able to fund its operations with secured funding – limits the size of
Slide 30: Foreign exempt listing on the ASX
Foreign exempt listing on the ASX • Heartland is also seeking a foreign exempt listing on the ASX as part of the Restructure. • Provides improved access to additional sources of capital for future growth opportunities. • The Restructure facilitates a foreign exempt listing by Heartland Group Holding
Slide 31: Corporate Restructure – Key Dates
Corporate Restructure – Key Dates Event Key Date Scheme Booklet, Notice of Meeting, and Voting Forms sent to shareholders 15 August 2018 Voting Forms to be received by Link Market Services 10am, 17 September 2018 Date for determining eligibility to vote at the Annual Meeting 5pm, 17 September 2018 A
Slide 32: Outlook: Continued growth in FY2019
Outlook: Continued growth in FY2019 • Asset growth 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 2019 to be in the range of $75 million to $77
Slide 33: Appendices
Appendices
Slide 34: Appendix – Financial Year overview
Appendix – Financial Year overview Summary Financial Performance 12 months 12 months 30 June 2018 30 June 2017 Movement % $’000 $’000 Net interest income 183,801 163,110 13% Other income 12,993 8,142 60% Net Operating Income 196,794 171,252 15% Operating expenses 80,433 71,684 12% Impaired asset exp
Slide 35: Appendix – Financial Year overview
Appendix – Financial Year overview Summary Balance Sheet 30 June 2018 30 June 2017 Movement % $’000 $’000 Assets Cash and cash equivalents 49,588 57,040 -13% Investments and investment properties 349,742 323,607 8% Finance receivables 3,984,941 3,545,897 12% Other assets 111,655 108,127 3% Total ass
Slide 36: Appendix – Financial Year overview
Appendix – Financial Year overview Summary Ratios 30 June 2018 30 June 2017 Regulatory Total Equity Ratio 14.12% 13.56% Net Tangible Assets ($m) 584.4 490.5 Net Tangible Assets per share ($) 1.04 0.95 Earnings per share ($) 0.13 0.12 Return on Equity (%) 11.1% 11.6% Net Interest Margin (NIM) 4.42% 4