Heartland Group Holdings (ASX: HGH) – Heartland Releases Trading Update 16

Heartland Group Holdings reported continued quarterly improvement in profitability, with management reaffirming guidance for return on equity of at least 7.5% and net profit after tax of at least $102 million for the financial year ending 30 June 2027. The trading update covers the first quarter of FY2027, the three months ended 30 September 2026.

The improvement was driven primarily by strong growth in Reverse Mortgages, stable operating expenses and improving asset quality across both its New Zealand and Australian operations. The group’s average net interest margin came in at 3.92%, above the FY2027 guidance floor of 3.88%, while the cost-to-income ratio was 54.7%, comfortably below the 55.7% guidance ceiling. These metrics suggest Heartland is managing the challenging operating environment effectively and maintaining pricing discipline while controlling costs.

Asset quality continued to improve, with Heartland Bank’s total non-performing loan ratio declining to 1.87% from 1.92% at 30 June 2026. Within the core lending portfolios, the NPL ratio remained stable at 1.37%. This improvement is notable given the difficult conditions being experienced by businesses in sectors served by Heartland’s Business Finance division, where management has continued to manage exposures prudently. The impairment expense ratio of 0.34% remained within guidance parameters, suggesting conservative provisioning.

Reverse Mortgage receivables increased by $46.9 million in New Zealand, representing annualised growth of 12.9%, while Australian Reverse Mortgages grew $117 million, an annualised 19.6%. Management noted that growth in New Zealand was impacted by lower productivity during the technology transformation implementation, but indicated that the pipeline has rebounded with early signs of improved application-to-settlement conversion timelines. This suggests the worst of the technology transition impacts may be behind the business.

Other lending portfolios contracted. Rural receivables fell $50.6 million, primarily due to a large borrower’s funding strategy change. Motor Finance declined $36 million, with weakness concentrated in the Wholesale Lending segment due to delayed shipping arrivals. Business Finance receivables decreased $23.5 million as credit demand remained subdued amid challenging economic conditions. These movements reflect both specific transactional factors and the cyclical weakness in certain lending segments.

The proposed acquisition of TSB Bank Limited and subsequent merger with Heartland Bank continues to progress. The company incurred $0.9 million in transaction costs during the quarter, in line with the $9.5 million expected for the full financial year. Management continues to target completion no earlier than December 2026, subject to satisfaction of all remaining conditions. Investors should monitor progress toward this milestone, which would materially expand Heartland’s New Zealand banking platform and represent the most significant strategic development for the group in several years. 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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