Heartland Group Holdings Limited reported an underlying NPAT of NZD 46.9 million for FY2025, meeting guidance, while setting ambitious growth and efficiency targets for FY2026.
- FY2025 underlying NPAT of NZD 46.9 million meets guidance
- Net interest margin improved, with strong exit margins in NZ and Australia
- Operating expenses rose due to acquisition and regulatory costs but growth is stabilizing
- Successful integration of Australian businesses into a new Australian bank
- FY2026 outlook targets underlying NPAT of at least NZD 85 million and ROE of at least 7%
FY2025 Financial Performance
Heartland Group Holdings Limited (NZX/ASX, HGH) has released its FY2025 results, reporting a net profit after tax (NPAT) of NZD 38.8 million on a reported basis and an underlying NPAT of NZD 46.9 million, meeting its guidance of at least NZD 45 million. The company emphasized capital efficiency, successfully restoring superior net interest margins (NIM) and actively derisking lending portfolios to build a stronger foundation for future growth.
Net interest margin increased by 17 basis points to 3.56%, with exit margins reaching 4.13% in New Zealand and 3.59% in Australia. Operating expenses rose by 38.1% to NZD 131.8 million, primarily due to acquisition-related costs, regulatory compliance following the ADI acquisition, hiring for growth, and software investments. However, cost growth showed signs of stabilizing in the second half of the year.
Asset Quality and Portfolio Management
Impairment expenses increased by 54.3%, reflecting the impact of challenging economic conditions on some lending portfolios and the strategic repositioning of certain New Zealand lending segments. The introduction of more prescriptive collections and recoveries policies in the latter half of FY2025 has positively influenced asset quality, with Motor Finance arrears now performing better than the industry average.
Heartland accelerated the realisation of non-strategic assets (NSAs), reducing the NSA balance by NZD 103 million in 2H2025 and releasing NZD 7.7 million of capital. Capital optimisation initiatives, including the run-off of Marac Insurance and reduction of stakes in certain equity investments, have further strengthened the group’s capacity for organic growth.
Australian Business Integration and Funding Transition
Heartland’s Australian operations have been successfully integrated into the acquired Authorised Deposit-taking Institution (ADI), forming a new Australian bank. The funding transition in Australia has been notably successful, with deposits now comprising 81% of the bank’s funding base, providing a stable and diverse platform to support future lending growth.
Strong growth was recorded in Reverse Mortgages in both New Zealand and Australia, with receivables increasing by 15.5% and 18.5% respectively. Livestock Finance also showed positive momentum, particularly in New Zealand, while Motor Finance and Asset Finance portfolios faced growth challenges amid subdued economic conditions.
FY2026 Outlook and Strategic Priorities
Looking ahead, Heartland aims to deliver an underlying return on equity (ROE) of at least 7% and an underlying NPAT of at least NZD 85 million in FY2026. The group plans to maintain a refined strategic focus on core product sets, including Reverse Mortgages, Rural Lending, Motor Finance, Asset Finance, and Deposits in New Zealand, and Reverse Mortgages, Livestock Finance, and Deposits in Australia.
Significant investment in technology uplift is planned to simplify and automate manual processes, introduce new digital capabilities, and enhance customer and employee experiences. Operational cost control remains a priority, with underlying operating expenses expected to remain largely flat in New Zealand and increase moderately in Australia, tied mainly to growth-related variable costs.
Capital efficiency will continue to be a key focus, with ongoing NSA realisation and participation in regulatory reviews aimed at optimizing capital requirements. Heartland also highlighted the substantial market opportunity in Reverse Mortgages, estimating addressable markets of NZD 170 billion in New Zealand and AUD 660 billion in Australia, driven by demographic trends and growing home equity among seniors.
Long-Term Ambitions and Investor Engagement
Heartland has reset its long-term ambitions, extending its planning horizon to FY2030. The company expects significant increases in underlying ROE and NPAT driven by capital efficiency, growth in core product portfolios with a bias towards Reverse Mortgages, superior margins, enhanced asset quality, and improved cost-to-income ratios. Detailed plans and growth drivers will be presented at a 2025 Investor Day ahead of the annual general meeting.
Heartland declared a final dividend of 2 cents per share, bringing the total dividend for FY2025 to 4 cents per share, with a payout ratio of 80%. The Dividend Reinvestment Plan (DRP) will apply to the final dividend with no discount, offering shareholders an opportunity to reinvest dividends into additional shares.
Bottom Line?
Heartland’s FY2025 reset sets the stage for ambitious growth and efficiency gains, but execution risks around economic conditions and technology investments remain.
Questions in the middle?
- How will planned technology investments impact FY2026 profitability and capital allocation?
- What are the risks to asset quality from ongoing economic challenges in key lending sectors?
- How will Heartland maintain competitive margins amid evolving funding costs and regulatory changes?