Heartland Group (ASX: HGH) expects improvement in cost to income ratio in FY24

Highlights

• Heartland Group provides financial services in New Zealand and Australia
• In 1HFY24, underlying NPAT of the company dropped by 3.6% YoY to NZD 52.7 million
• For FY24, the expected range of NPAT of HGH is NZD 93 to 97 million

Heartland Group Holdings Limited (ASX: HGH) is an ASX and NZX listed financial services company headquartered in New Zealand. It operates across Australia and New Zealand. The company offers savings and deposits products, reverse mortgages, business loans, online home loans, car loans, and rural loans in New Zealand. In Australia, HGH also operates Heartland Bank, a digital specialist bank.

In the first half of the financial year 2024 (1HFY24), net operating income of the company grew by 1% YoY to NZD 143.1 million, driven by a substantial rise of 54.9% in other operating income, which was partially offset by lower net interest income.

During the reported period, underlying NPAT fell by 3.6% YoY to NZD 52.7 million, underpinned by higher impairment expenses incurred in 1HFY24.

Key drivers for Australia’sbanking and financial services sector

The data released by the Australian Bureau of Statistics (ABS) on 3 May 2024 indicated that in March 2024, new loan commitments grew by 3.1% for housing and 3.9% for personal fixed term loans.

Since March 2023, the value of new housing loans jumped 17.9% to AUD 27.6 billion, after 3.1% increase in March 2024. Value of owner-occupier housing loans increased by 11.4% annually and investor housing loans grew by 31.1% annually. Lending indicators for March 2024 bodes well with the banking and financial service sector.

Recent business update

Through an ASX-filing dated 30 April 2024, the company informed about the conclusion of the acquisition of Challenger Bank Limited. With this development, Heartland Bank becomes the first registered bank in New Zealand to buy an Australian Authorized Deposit-taking Institution.

Outlook

For FY24, the expected range of NPAT is NZD 93 to 97 million. Due to ongoing cost discipline, digitalization initiatives and revenue growth, HGH expects its cost to income ratio to improve gradually in FY24.

In CY25, net interest margin is anticipated to improve.

Share performance of HGH

HGH shares closed 0.53% lower at AUD 0.940 apiece on 6 May 2024. In the last one year, HGH’s share price has declined by 33.63%, and in the last three months, it has declined by 26.25%.

The 52-week high of HGH is AUD 1.69, recorded on 18 July 2023, while the 52-week low is AUD 0.945, recorded on 2 May 2024.

HGH Daily Technical Chart, Source: REFINITIV

Note 1: Past performance is neither an Indicator nor a guarantee of future performance.

Note 2: The reference date for all price data, and currency, is 06 May 2024. The reference data in this report has been partly sourced from REFINITIV.

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