Highlights:

  • On track for FY26 NPAT of at least $85m and ROE of 7%+
  • Net interest margins improved, with mixed trends across NZ and Australia
  • Strong growth in reverse mortgages and rural lending, asset quality improving

Overview:

Heartland Group Holdings Limited (NZX:HGH) reported a solid trading update for the third quarter of FY2026, maintaining guidance for an underlying net profit after tax of at least $85 million and return on equity above 7%. The group benefited from expanding net interest margins and improved cost efficiency, particularly within its Australian operations.

Asset quality trends strengthened, with a reduction in non-performing loans as the company continues to wind down non-strategic assets. Growth was supported by strong performance in reverse mortgages across both New Zealand and Australia, alongside continued momentum in rural lending. Motor finance also returned to growth during the quarter, aided by increased electric vehicle lending activity. Despite these positives, Heartland remains cautious due to ongoing geopolitical uncertainty, particularly in the Gulf region, which could impact customer demand and credit quality. Overall, the company continues to balance growth with prudent risk management.

New Zealand Banking Performance:

Heartland’s New Zealand banking division delivered stable performance, with asset quality improving and non-performing loan ratios declining. Growth returned in motor finance and asset finance, supported by a strategic focus on higher-quality lending and increased demand for electric vehicle financing. Reverse mortgages and rural lending remained key growth drivers, with strong increases in receivables. However, overall portfolio growth remained modest due to ongoing non-strategic asset reduction. Net interest margins saw slight compression during the quarter but are expected to recover in the near term. The division continues to monitor external pressures, including rising fuel costs and geopolitical risks, which may impact borrowers.

Australian Banking and Cost Efficiency:

Heartland’s Australian operations showed notable improvement, particularly in profitability and efficiency metrics. Net interest margins expanded significantly following funding cost reductions, while the cost-to-income ratio declined due to disciplined expense management and higher operating income. Reverse mortgage growth remained strong, driving overall portfolio expansion. However, livestock finance experienced a decline due to adverse weather conditions and changes in customer funding strategies.

Asset quality remained stable, with minimal impairment expenses recorded during the quarter. Looking ahead, costs are expected to rise slightly due to increased investment in technology and higher volumes in reverse mortgage lending, though overall performance remains solid.