HGH - Heartland Group Holdings

[raW tent Buffer]

$45m NPAT is nothing to be excited about.

The big increase in overheads (increase of 47 percent year on year) at last result surprised analysts, as it was explained they were NOT mostly one offs (7 percent). A cost-to-income (CTI) ratio of ~63 percent in 1H25H and 58 percent 3Q is far in excess of its <35% FY28 target. That's a real issue and a major concern. Increasing NIM is good but they also need a step change in income with such high over heads.

As far as the NSA'S go, taking out the home loans very little has changed. 

$200m NPAT by 2028....... I suspect that goal and the CTI targets will need to be reviewed.

Don't think the market will be impressed with the update.

CTI down, NPL down, NIM up, livestock and RM seeing more growth in NZ and AUS... Not saying it's an amazing announcement but for once it's not a negative one, and it's not going to be an overnight fix so like Percy said, looks like they are making progress. And market seems to have liked it enough to not continue the SP slide at least. Picked up a bunch more at 70c yesterday...

[Greekwatchdog]

CTI down, NPL down, NIM up, livestock and RM seeing more growth in NZ and AUS... Not saying it's an amazing announcement but for once it's not a negative one, and it's not going to be an overnight fix so like Percy said, looks like they are making progress. And market seems to have liked it enough to not continue the SP slide at least. Picked up a bunch more at 70c yesterday...

Agree, its a small step forward and if your a medium to long term investor these levels are good to buy into. The management team are going to gave to earn investors trust again and rightly so going forward.

Of course you have to be able to watch the volatility without panicking.

[Basil]

I have a very large term deposit coming off 6.3% this week, now on offer 4.3% which for me does not reflect risk that has come to light due to their reckless lending, I can get 4.2% with the big boys.
You have to wonder how many depositors are thinking the same

Deposit guarantee scheme set to start on 1 July can't come soon enough for HGH but there's talk with the costs and Govt guarantee up to $100K, term deposit rates are set to take another big tumble.  3 point something percent will be the term deposit norm in a few months mate.  Now do you see why some people are astutely hoovering up relatively safe utilities like GNE on a 9%+ gross yield ?

As far as the NSA'S go, taking out the home loans very little has changed.

More holes in their balance sheet than a ten ton block of Swiss cheese.
I guess some people are thinking it must be cheap in the 70's and most of the skeletons are out of the closet.  With a price to book of ~ 75% or thereabouts you can't go wrong, right ?  But is it really all that cheap given non-performing loans only came down 25 bps to a still very high 3.4% at the half year result ?

Interesting segment on CNBC this morning pricked up my ears.  Citibank with all its heritage, several experts on that segment reckon that's a buy.  Price to book of only 60% and very cheap PE https://www.marketscreener.com/quote/stock/CITIGROUP-INC-4818/finances/  Anyway..I reckon you're very pleased you followed me out just north of $1 and you're wise to at least wait for the audited full year result and see how many more skeletons are in the closet.

[Shareguy]

Interesting

https://www.interest.co.nz/banking/132928/heartland-bank-chipping-away-car-loan-troubles-forsyth-barr-analysts-say-tough-times

[Left Field]

Just discovered this interesting tool to compare banks by key financial metrics....... Have a play, it's quite revealing.

https://www.interest.co.nz/saving/bank-financial-comparator

[winner (n)]

Just discovered this interesting tool to compare banks by key financial metrics....... Have a play, it's quite revealing.

https://www.interest.co.nz/saving/bank-financial-comparator

Thanks

Profit line for Hesrtland pretty shameful eh

[Basil]

WOW...fascinating tool, thanks Left field.
Benchmarking Heartland against the biggest bank in N.Z., ANZ I noted
Non performing business loans Heartland 6.3%, ANZ 1.4%
Non performing agricultural loans Heartland 4%, ANZ 0.5%
Total Non performing loans Heartland 3.4% ANZ 0.9%

Very poor up-front lending policies and ongoing loan management at Heartland ?...you be the judge.
I remain of the view that this train wreck is only part of the way through being played out and there needs to be huge changes at a management and board level before I'd ever consider being an investor again.

[Shareguy]

Just discovered this interesting tool to compare banks by key financial metrics....... Have a play, it's quite revealing.

https://www.interest.co.nz/saving/bank-financial-comparator

Great stuff. Thanks for that Left Field

[winner (n)]

Hey Basil ...you didn't compare NIMs

Naughty, as Heartland NIM is awesome

[Basil]

Hey Basil ...you didn't compare NIMs

Naughty, as Heartland NIM is awesome

Doesn't matter what you NIM is if you make poor lending and risk decisions and lend to any old bunch of Muppets and then the loans are managed by people who are incompetents'.   HGH management increasingly talk about fully automating their lending process's like that's some magic panacea for improved profitability. What could possibly go wrong...lol  The only part of their business model that's any good is the reverse mortgages and only because its really hard to make a mess of that.

[winner (n)]

Doesn't matter what you NIM is if you make poor lending and risk decisions and lend to any old bunch of Muppets and then the loans are managed by people who are incompetents'.   HGH management increasingly talk about fully automating their lending process's like that's some magic panacea for improved profitability. What could possibly go wrong...lol  The only part of their business model that's any good is the reverse mortgages and only because its really hard to make a mess of that.

They should adopt that Stellare thing that Harmoney has.....their custom credit risk tool backed by machine learning and AI that allows superior risk and loan making decisions.

That'll fix it for Heartland

[Left Field]

WOW...fascinating tool, thanks Left field.
Benchmarking Heartland against the biggest bank in N.Z., ANZ I noted
Non performing business loans Heartland 6.3%, ANZ 1.4%
Non performing agricultural loans Heartland 4%, ANZ 0.5%
Total Non performing loans Heartland 3.4% ANZ 0.9%

Very poor up-front lending policies and ongoing loan management at Heartland ?...you be the judge.
I remain of the view that this train wreck is only part of the way through being played out and there needs to be huge changes at a management and board level before I'd ever consider being an investor again.

Mind you, holders will say all the adverse comparison figures are historical (hysterical?) and HGH's future is bright.



 

[Basil]

To that I would say from my experience at the annual meeting, I didn't get a single answer to any question asked of directors or management either during the meeting or afterwards that gave me any confidence there had been any learnings from past mistakes. Their overall demeneour was, we know we have to do better and trust us, we know what we are doing. What could possibly go wrong lol

[BlackPeter]

Mind you, milk prices are currently in the stratosphere (which historically was always good for HGH), and I am sure the high prices for red meat help as well.

Apparantly there is as well a beef shortage in the US (with prices moving up), and putting a pig in the white house didn't help ...

Anyway - might well help some of these NZ farmers to pay back their debts, which would be good for HGH.

HGH already up 6.5% (5 cents) from recent lows and just moved through the MA50. Clearly - the backwards looking numbers don't look that flash compared with the more conservative competition (but hey, if they just would be a mini ANZ, they couldn't scale ..). Some people in the market seem to think now is a good time to  buy ...

[Basil]

Dairy going gangbusters for sure BP.  Take that out and one or two other primary industries that are doing well though, and oh dear, the rest of the economy still looks like its mired in recession.  Then there's the global economic outlook with the petulant child in the Oval office throwing regular tantrums and its difficult to see what's going to make our economy start humming along in a satisfactory manner again, anytime soon ?  Maybe 50 bps cut by RBNZ on 28 May will help to a fair extent but I doubt that's the panacea to all that irks most Kiwi's  The big learning for me last year with HGH, is the fortunes of this company are inextricably tied in very tightly with that of the economy.    I thought the economy would emerge from recession in the latter half of last year, it still hasn't in my opinion. Have a read of this, its pretty grim.  https://www.theguardian.com/world/2025/may/09/leaving-new-zealand-record-departure-numbers?fbclid=IwY2xjawKLYuRleHRuA2FlbQIxMQBicmlkETF6T3JtWjdUZ3NWcDJEZXpZAR5RUD0jXJUp5brBj8oq9dTFSLPvy1xb_W1u6ogyIfhVoMY5xi2WOGgbBiNjZw_aem_qvPmRTuS0inrqY_CXB7X5Q

Taking a ~ $50m hit on their loan book in late February 25 that ostensibly wiped out the first half profit and then the rhetoric that went with that claiming it to be a big reset of the balance sheet and transformational this and reset that and other words to that effect...all sounded wonderful until you actually read the numbers that non performing loans were only reduced by a very modest 25 bps from 3.65% to 3.4%.

That very slight non performing loan reduction didn't match all the fancy narrative that went with it that management uttered, far from it.  Its very easy to be forgiven for thinking management talks a very big story but their delivery is sadly wanting.