Heartland Group Holdings Limited has confirmed it remains on track to deliver an underlying return on equity of at least 7% and underlying net profit after tax of at least $85 million for the financial year ending 30 June 2026, according to its trading update released on 23 April 2026. This guidance maintenance represents a positive signal from the NZX/ASX listed lender, despite acknowledged headwinds from geopolitical uncertainty in the Gulf region.
The company’s underlying net interest margin expanded further during the three-month period ended 31 March 2026, though Heartland expects some compression in the final quarter of FY2026. The average NIM across the group stood at 3.97% for the quarter, with the exit NIM at 4.01%. For Heartland Bank’s New Zealand operations specifically, the average NIM of 4.09% represents a decline of 3 basis points from the prior quarter, with the exit NIM falling 9 basis points to 4.02%, primarily due to portfolio mix shifts. Management indicated both metrics should improve in the fourth quarter from reduced cost of funds benefits, though geopolitical risks remain a potential drag on earnings.
Cost management has delivered measurable improvements across the group. The underlying cost-to-income ratio fell to 54.1% from the prior quarter, driven by better efficiency in Heartland Bank Australia’s operations. For Heartland Bank specifically, costs remained stable at $32.4 million in underlying terms, though the CTI ratio increased to 57.7% from 55.3% in the prior quarter, a result of subdued portfolio growth in Motor Finance and Asset Finance alongside ongoing non-strategic asset realisation activities. This metric warrants investor attention as it reflects the tension between cost discipline and top-line growth constraints.
Asset quality improvements continue to represent a bright spot in the earnings trajectory. Heartland Bank’s impairment expense increased to $10.8 million as the company accelerates clearance of non-performing Motor Finance loans between 180 and 364 days past due, on track for completion by 30 June 2026. Strong performance in Reverse Mortgages across both the New Zealand and Australian operations, combined with resilience in Heartland Bank’s Rural portfolio, helped offset near-term credit costs. The company generated $5.3 million of available capital during the quarter from non-strategic asset realisation, with $139.3 million in outstanding NSA value remaining as at 31 March 2026.
Motor Finance and Asset Finance portfolios returned to growth in 3Q2026 after earlier contraction, though the company notes overall growth in these segments remains subdued. Heartland’s cautious stance regarding Gulf region uncertainty suggests management recognises the potential for customer demand deterioration and credit quality pressures in both New Zealand and Australian markets. The fourth quarter will be critical for validating whether margin expansion can offset slower lending growth and provide confidence toward FY2027 earnings momentum. This announcement is price sensitive and has been flagged as material by the ASX.
View the full ASX announcement (PDF)
About Heartland Group Holdings Limited (ASX: HGH)
Heartland Group Holdings Limited provides various financial services in New Zealand and Australia, including motor vehicle finance, reverse mortgage lending, home loans, personal loans, and business lending solutions. The company operates through multiple segments offering specialist financial products to individuals, small-to-medium sized businesses, and farmers. It was founded in 1875 and is based in Auckland, New Zealand.
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