Market update

Note: All figures in NZD unless otherwise stated. Endnotes are located at the end of this announcement.

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info
NZX/ASX release
26 November 2024

Market update

Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) today provides a trading update for
the four months to 31 October 2024 (YTD2025).
1


As anticipated by Heartland in its recent financial results announcement dated 29 August 2024, the
volatility experienced during the financial year ended 30 June 2024 (FY2024) has continued during
YTD2025. Heartland continues to carefully manage credit quality and expects growth to return
during the second half of FY2025 as interest rates reduce and credit demand strengthens.

Heartland remains committed to its stated ambitions for the financial year ending 30 June 2028
(FY2028), including to deliver an underlying return on equity between 12-14% while achieving an
underlying net profit after tax (NPAT) of $200 million by the end of FY2028. Heartland’s pathway to
achieving this is through simplification, core lending portfolio growth and capital efficiency.

NZ Banking

Heartland Bank Limited’s (Heartland Bank) net interest margin (NIM) is improving and remains on
track to achieve an exit NIM
2
greater than 4.00% in the financial year ending 30 June 2025 (FY2025).

Reverse Mortgages continued to perform well, experiencing annualised growth of 16.8% during
YTD2025. As expected, however, growth in other sectors, primarily Motor Finance and Asset
Finance, has been more challenging due to subdued demand in both markets.

The Motor Finance portfolio retracted 2.5% on an annualised basis during YTD2025. This is against
the backdrop of a market which has seen a continuation of subdued new and used car sales through
intermediaries, down 14.8% and 9.4% respectively between 1 January and 31 October 2024.
3
An
uplift in vehicle sales is anticipated as the economy recovers and consumer and business confidence
returns.

The Asset Finance portfolio retracted 9.9% on an annualised basis during YTD2025 with limited
capital investment taking place in the plant and equipment market and a significant increase in
competition on price and credit appetite. Heartland Bank is holding firm to its credit quality and
pricing strategy as it positions itself for market improvement. Subdued growth in YTD2025 has been
exacerbated by the early repayment of an $80 million wholesale funding facility by a client who is
exiting the New Zealand market.

Economic conditions remain challenging, with Heartland Bank’s business customers in particular
continuing to report tough trading conditions. Monthly total business liquidations in New Zealand
reached a 10-year high in September 2024.
4
This trend has affected Heartland Bank’s customers in
the forestry and transportation sectors, with a number of firms entering liquidation in the first
quarter of FY2025.

Both Motor Finance and Asset Finance arrears are elevated and are expected to remain this way for
the rest of the 2024 calendar year. However, conditions are expected to start to improve in the third

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info 2
quarter of FY2025 following the traditional post-Christmas arrears peak, and as the benefits of lower
interest rates flow through. The prospects for the dairy sector are however much brighter given the
stronger forecast payout and reducing interest rate environment.

In this context, Heartland Bank has taken new specific provisions of $6.6 million in the first quarter
of FY2025. As at 30 September 2024, Heartland Bank’s overall non-performing loan ratio stood at
3.8%.

Good progress is being made towards realising the portfolio of Non-Strategic Asset (NSA) receivables
which are no longer consistent with Heartland Bank’s business writing strategy.
5
Dedicated teams
are now in place to execute on a realisation strategy, with preliminary discussions underway in
respect of the potential divestment of certain NSA receivables portfolios.

Good progress also continues with Heartland Bank’s digitalisation and automation programme of
work.

AU Banking

Heartland Bank Australia Limited’s (Heartland Bank Australia) transition from wholesale funding to
retail deposit funding continues to progress successfully and remains on track to be largely complete
by 30 June 2025. As at 31 October 2024, Heartland Bank Australia was 57% funded by retail deposits,
providing the bank with the flexibility to be more competitive in the markets within which it
operates.

Retail deposit flow and cost continue to track well, with greater direct-to-bank business being
attracted. A new high interest online savings product is planned for release in the second half of
FY2025.

Reverse Mortgages have performed well, with annualised growth of 14.5% during YTD2025. Strong
ongoing demand continues to be driven by Australia’s ageing population. A focus on process
efficiency and an investment in resourcing will increase Heartland Bank Australia’s ability to meet
this demand and contribute to further growth in this portfolio. In YTD2025, Heartland Bank Australia
has more than halved its time to originate loans, with further reductions expected over the coming
year.

Livestock Finance (provided under the StockCo brand) retracted in YTD2025, down 8.1% excluding
the A$12 million repayment of a large non-performing loan in full. October and November 2024 saw
a significant return in confidence across many regions. In November 2024, StockCo experienced its
largest volume of sheep and lambs funded since October 2022. The increase in market confidence
will be supported by product development and distribution network expansion, leading to portfolio
growth in FY2025.

Looking forward

Looking towards the end of FY2025, while Heartland remains cautious in the near term, it expects
growth in core lending to return as the New Zealand and Australian economies improve. Heartland
expects to provide a NPAT guidance range for FY2025 in February 2025 as part of its interim financial
results release.

– ENDS –

Heartland Group Holdings Limited | NZX/ASX: HGH | PO Box 9919, Newmarket, Auckland 1149 | heartlandgroup.info 3
The person who authorised this announcement:
Andrew Dixson, Chief Executive Officer

For further information and media enquiries, please contact:
Nicola Foley, Head of Corporate Communications & Investor Relations
+64 27 345 6809, nicola.foley@heartland.co.nz
Level 3, Heartland House, 35 Teed Street, Newmarket, Auckland, New Zealand


Endnotes

1
All financial results in this announcement are based on the unaudited financial statements of Heartland and
its subsidiaries for YTD2025.
2
FY2025 exit NIM is NIM for the month of June 2025.
3
Data sourced from Autograb for the period 1 January to 31 October 2024.
4
As reported in the Centrix Credit Insights Report October 2024.
5
NSAs do not reflect a structural change to Heartland’s operations.