Heartland trading update
23/10/2025 09:58 NZDT, MKTUPDTE
NZX/ASX release
23 October 2025
Heartland trading update
Heartland Group Holdings Limited (Heartland) (NZX/ASX: HGH) today provides a trading update for the three months to 30 September 2025 (Q1).
Heartland has delivered a solid performance for Q1 of the financial year ending 30 June 2026 (FY2026), improving profitability and return on equity (ROE) across the quarter. Overall net interest margin (NIM) continued to expand and cost growth has remained stable. Asset quality for Heartland Bank Limited’s (Heartland Bank) Motor Finance portfolio demonstrated consistent improvement as a result of enhanced collections, recoveries and write-off strategies. As New Zealand business conditions remain challenging, Heartland Bank’s Business Finance non-performing loans (NPLs) have increased – the portfolio remains appropriately provisioned, and Heartland Bank expects NPL improvement in the second quarter of FY2026 (1 October to 31 December 2025, Q2). Livestock Finance seasonal impacts have affected Heartland Bank Australia Limited (Heartland Bank Australia)’s NPL ratio and are also expected to improve in Q2.
Strong momentum was maintained in Reverse Mortgages within both banks, while subdued markets and usual seasonal contractions impacted growth in Heartland’s other core lending portfolios. Lending performance is expected to improve as FY2026 progresses. Notably, strong progress has been made in the realisation of Heartland’s non-strategic assets (NSAs), surpassing quarterly estimates.
Non-Strategic Assets (NSAs)
NSA realisation accelerated in Q1 and is exceeding Heartland’s estimates, with momentum continuing early into Q2. Highlights include:
‒ good progress in achieving accelerated exits from Rural and Business Relationship borrowers primarily through sale of security and refinance:
• the largest Relationship exposure partially settled in Q1 with the residual refinance now unconditional and scheduled to settle in October 2025
• the third largest Relationship exposure went unconditional in September 2025 and was repaid in early October 2025
‒ Home Loans continues to wind down ahead of expectations through early repayments
‒ the unconditional sale of one of the two dairy farms which make up the Properties NSA – settlement is expected in October 2025
‒ the full exit of Heartland’s Harmoney Corp Limited shareholding, significantly above carrying value as at 30 June 2025 – this generated a fair value gain of $3.1 million which is the key difference between underlying and reported results in Q1
‒ the sale of Heartland Bank Australia’s shareholding in Alex Bank settled in October 2025.
By the end of the 2025 calendar year (CY2025), Heartland estimates the total value of NSAs to be $179.5 million, a $358.1 million (-66.6%) reduction since 30 June 2024.
NZ banking
Heartland Bank’s Q1 NIM of 4.06% and exit NIM of 4.08% were down 12 bps and 5 bps respectively on the previous quarter (1 April to 30 June 2025, Q4). Q4 NIM benefitted from a year-to-date correction between other operating income and net interest income generated by derivatives. Excluding that benefit, Q4 NIM was 4.06%. Therefore, on a like-for-like basis, Q1 NIM was flat on Q4. This was primarily due to a substantial rate reduction for Reverse Mortgages, partially offset by improvements in cost of funds.
With stable NOI, underlying OPEX reduced by $2.4 million in Q1 to $31.1 million, driving a reduction in the Q1 underlying CTI ratio to 52.4%4, down from 56.9% in Q4.
Heartland Bank’s impairment expense ratio improved, down 9 bps from Q4 to 0.61% in Q1. Heartland Bank’s total non-performing loan (NPL) ratio of 3.22% was flat on Q4, however the value of NPLs reduced by $3.5 million from 30 June 2025 to $148.2 million as at 30 September 2025 as overall asset quality continued to improve. Excluding NSAs and Unsecured Lending , Heartland Bank’s NPL ratio improved, reducing by 4 bps to 2.36% as at 30 September 2025.
As at 31 August 2025, Heartland Bank’s Consumer Motor Finance arrears of 4.6% (as per Centrix’s measure of arrears greater than or equal to 14 days past due (DPD)) continues to outperform the industry average of 5.1%. Late-stage arrears for the Motor Finance portfolio have seen further improvement in Q1, and recoveries continue to perform as expected. Heartland Bank maintains its expectation that it will have no arrears greater than 180 DPD by 30 June 2026.
Trading conditions remained challenging for the business sector, resulting in subdued demand and elevated arrears for Heartland Bank’s Business Finance portfolio. Arrears were up $2.9 million from 30 June 2025 and are being carefully managed. Heartland Bank is working closely with customers in arrears and expects to see a reduction in NPLs in Q2. The Business Finance portfolio remains appropriately provisioned recognising the secured nature of this lending.
Reverse Mortgage growth continued, with Receivables up $43.6 million (14.0%) in Q1 to $1,276.9 million as at 30 September 2025. Excluding Livestock Finance which experienced the usual seasonal contraction, the Rural portfolio grew by $5.8 million (6.1%) in Q1 to $380.3 million as at 30 September 2025. Motor Finance Receivables were down $10.8 million (-2.5%) in Q1 to $1,683.6 million as at 30 September 2025, as economic conditions remain subdued, and reflecting Heartland Bank’s shift to higher quality distribution channels.
AU banking
While Heartland Bank Australia’s NIM expanded 15 bps in Q1 to 3.62%, the exit NIM of 3.50%, reflects a full pass through of the official cash rate reduction to Reverse Mortgages.
Underlying OPEX in Q1 was AU$13.8 million, an increase of AU$1.7 million on Q4, while the underlying CTI ratio increased to 48.1%4 in Q1, from 47.7% in Q4. This was driven by:
• a AU$0.4 million increase in professional services, marketing and broker costs linked to Reverse Mortgage growth
• AU$0.3 million related to the exploration phase of the implementation of a new unified origination and servicing platform – costs related to this technology initiative are expected to be elevated in Q2 as vendor negotiations and programme planning continues
• the AU$0.6 million impact of additional roles filled in the previous financial year to strengthen capability and capacity for growth, and to fill compliance and marketing vacancies in Q1.
The NPL ratio increased to 3.09% in Q1 from 2.40% in Q4 largely due to seasonal impacts related to the Livestock Finance portfolio which are expected to normalise in Q2.
Reverse Mortgage Receivables were up AU$85.9 million (17.2%) in Q1 to AU$2,066.3 million as at 30 September 2025. Livestock Finance Receivables were down AU$22.2 million (-34.7%) in Q1 to AU$231.7 million as at 30 September 2025 due to the usual seasonality of the portfolio.
In October 2025, Heartland Bank Australia repaid its final outstanding AU$100 million medium-term note prior to its contractual maturity in October 2027, replaced by cheaper deposit funding. The early repayment attracted a break fee which will impact NPAT and NIM in Q2. However, this impact will be recovered across the remainder of FY2026 given the margin benefits of deposit funding and will provide significant benefit into the financial years ending 30 June 2027 and 30 June 2028.
2025 Investor Day
Heartland intends to present to investors its updated long-term ambitions at an upcoming investor day. While the investor day will no longer take place ahead of Heartland’s Annual Meeting on 13 November 2025, significant progress has been made in negotiations with preferred vendors for Heartland’s technology initiatives. Following which, Heartland will be able to confirm a date for its investor day, which is still intended to take place in CY2025.
– ENDS –
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