How is NZ’s Financials Sector Placed Amidst Global Economic Uncertainties - 2 Stocks to Consider

Overview:

Marlin Global Limited (NZX: MLN) is a listed investment company that invests in growing companies based outside of New Zealand and Australia. Heartland Group Holdings Limited (NZX: HGH) is the financial services group with operations in New Zealand and Australia.

Kalkine’s Sector Report covers the Key Financial Metrics, Risks, Outlook, Technical Analysis along with the Valuation, Target Price, and Recommendation on the stock.

Sector Landscape and Outlook

The Monetary Policy Committee recently voted to lower the OCR by 25 bps to 3.25%. As per RBNZ, the annual consumers price index inflation witnessed a rise to 2.5% in Q1 FY 2025. The inflation expectations throughout the firms and households have also witnessed an increase. That being said, the core inflation has been declining, while there is spare productive capacity in the economy. Notably, such conditions remain consistent with inflation returning to the mid-point of 1% - 3% target band in medium term. 

The NZ economy has been recovering post a contraction period. The elevated commodity prices as well as reduced interest rates have been helping the broader economic activity. The annual CPI inflation is expected to increase to 2.7% in Q3 FY 2025.  Furthermore, it is then expected to return to near the 2% target midpoint from 2026.

Exhibit 1: OCR (%)

Data Source: This work is based on/includes rbnz data which are licensed by rbnz.govt.nz for reuse under the Creative Commons Attribution 4.0 International Licence; Chart Created by Kalkine Group

Sector Lending Summary – Banks & NBLIs (April 2025)

In April 2025, housing lending stock witnessed a rise of $1.6 Bn (or 0.4%) to $375.2 Bn in April 2025, which is down on the $1.7 Bn (or 0.5%) rise encountered in the last month. The annual growth rate increased from 4.2% to 4.4%. Personal consumer lending stock encountered a decline of $53 Mn to $14.5 Bn in April 2025. This decline was driven almost entirely out of the banking sector. Also, the annual growth rate witnessed a fall from 0.6% to 0.5%.

The business lending stock fell by $394 Mn, while the annual growth rate declined from 1.7% to 1.6% in April 2025. Notably, the monthly decrease was because of declines in banking and NBLI sectors, with each encountering drops of $358 Mn and $36 Mn, respectively. The agriculture lending stock fell by $103 Mn to just below $62 Bn in April 2025.

Exhibit 2: Sector Lending Annual Growth Rates (%)

Data Source: This work is based on/includes rbnz data which are licensed by rbnz.govt.nz for reuse under the Creative Commons Attribution 4.0 International Licence; Chart Created by Kalkine Group

Credit Card Summary – April 2025

RBNZ released data about credit card summary (April 2025), with seasonally adjusted total billings in New Zealand declining to $4.4 Bn in April 2025. Annually, this reflected a rise of 0.5% from April 2024. The seasonally adjusted domestic billings on NZ issued cards amounted to $3.8 Bn in April 2025, down 1.2% from March 2025. This reflects a rise of 1.0% from April 2024.

The overseas billings on NZ issued cards stood at $673 Mn in April 2025, implying a rise of 4.5% from March 2025. Annually, there was a decline of 3.7% from April 2024. Notably, total credit limits witnessed a rise (0.4% month-on-month) to $20.9 Bn (not seasonally adjusted) in April 2025.

Key Risks and Challenges:

The Committee mentioned that, apart from the direct effect of higher tariffs, higher policy uncertainty in the international economy can impact the global investment and consumption. Overall, the uncertain trajectory of geoeconomic fragmentation as well as fall in the quality of macroeconomic institutional arrangements could lead to precautionary behaviour by firms and households. 

In aggregate, the economic growth in NZ’s main trading partners is anticipated to remain below potential over 2025, stated RBNZ.

Exhibit 3. Key Risks in Financial Sector:

Source: Analysis by Kalkine Group

Outlook:

As per RBNZ, the recent developments in the international economy could reduce global economic growth. The tariffs and elevated policy uncertainty overseas can moderate NZ’s economic recovery and reduce the medium-term inflation pressures. That being said, there is significant uncertainty around these judgements. Overall, the inflation remains within the target band, while Committee remains well-positioned to respond to domestic and international developments in order to maintain price stability in the medium term. 

The increased export prices and recent reductions in the OCR can help in modest pace of growth in the NZ economy, despite higher tariffs. The Committee assessed conditions in NZ’s labour market. Nominal wage growth continues to slow, with firms highlighting that it is easier to find workers. While the employment growth remains modest, it is anticipated to increase from H2 of the year in line with the overall economic recovery. Even though the non-performing loans in the housing and small business sectors have witnessed a rise in line with the past contraction in the broader economy, the banking system is well-capitalised, added RBNZ. Furthermore, it is in a robust financial position to support customers. 

Apart from the sector-specific factors, an analysis on 2 NZX-listed companies is provided. This report covers their insights, outlook, performance and potential as expected to be delivered in the near to medium term.

1) Heartland Group Holdings Limited (Recommendation: Buy, Potential Upside: Low Double-Digit) (M-Cap: NZD 789.6 million, Annual Dividend Yield (TTM)¹: 8.26%)

Business Description:

Heartland Group Holdings Limited (NZX: HGH) is a New Zealand-based financial services company.  

Outlook:

HGH is on track to achieve NPAT on an underlying basis of at least $45 million in FY 2025. Its NIM expanded 28 bps in Q3 FY 2025 (relative to the 6-month period to 31 December 2024 (or H1 FY 2025). There was improvement in Heartland Bank Limited and Heartland Bank Australia Limited. Also, the cost management programmes remain in place in order to improve the operational efficiency moving forward. The asset quality improvements are now visible in Heartland Bank’s Motor Finance portfolio.

Technical Overview:

HGH Daily Technical Chart, Data Source: REFINITIV

Technical Commentary

On the daily chart, HGH’s stock prices are undergoing a downtrend characterized by lower lows and lower highs, indicating a negative bias. Currently, while experiencing a minor rally, the stock is approaching a significant resistance established by its previous trough, providing further support to the previous observation. Prices are trading between its previous peak and trough, which might function as resistance and support levels for the stock, respectively. A significant support level for the stock is positioned at NZD 0.78, while critical resistance level is located at NZD 0.92

P/BV Based Relative Valuation

Stock Recommendation

Considering the facts above, a ‘Buy’ recommendation on the stock has been provided at the closing market price of NZD 0.840 per share as on 19^th June 2025.

2) Marlin Global Limited (Recommendation: Hold, Potential Upside: Low Double-Digit) (M-Cap: NZD 9 Mn, Annual Dividend Yield (TTM)¹: ~9.31%)

Business Description:

Marlin Global Limited (NZX: MLN) is a listed investment company that invests in growing companies based outside of New Zealand and Australia.

Outlook:

During H1 FY 2025, MLN’s portfolio management team remained discipline, emphasizing towards well-managed, quality businesses as well as adhering to the investment process.  Numerous stock specific issues impacted the relative performance, and the company expects its investment thesis to change from time to time. As per the monthly update (June 2025), the commentary from recent earnings calls by well-established companies like Visa, Mastercard, Costco, and Bank of America demonstrated that consumer spending remained steady.

Technical Overview:

Technical Commentary

On the daily chart, MLN’s stock prices are forming a trading range characterized by identical highs and lows, suggesting that the sideways period in the stock might continue to persist in the near future. Moreover, the momentum oscillator RSI (14-period) is hovering around its midpoint, adding more evidence to the mentioned recommendation. Prices are trading between its previous peak and trough, which might function as resistance and support levels for the stock, respectively. A significant support level for the stock is positioned at NZD 0.840, while critical resistance level is located at NZD 1.0.

Stock Recommendation

Considering the facts above, a ‘Hold’ recommendation on the stock has been provided at the closing market price of $0.91 per share, up by 2.25% as on 19^th June 2025.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: The reference date for all price data, currency, technical indicators, support, and resistance levels is June 19, 2025. The reference data in this report has been partly sourced from REFINITIV.

Note 3: Investment decisions should be made depending on an individual's appetite for upside potential, risks, holding duration, and any previous holdings. An 'Exit' from the stock can be considered if the Target Price mentioned as per the Valuation and or the technical levels provided has been achieved and is subject to the factors discussed above.

Note 4:  Annual Dividend Yield is on a Trailing Twelve Month (TTM¹) basis and are subject to change based on factors such as company performance, stock price changes, etc.

Note 5: Kalkine reports are prepared based on the stock prices captured either from REFINITIV or Trading View. Typically, REFINITIV or Trading View may reflect stock prices with a delay which could be a lag of 25-30 minutes. There can be no assurance that future results or events will be consistent with the information provided in the report. The information is subject to change without any prior notice.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock.

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices.