Heartland Groups Reverse Mortgage Growth Continues Amid Decline in Online-Only Home Loans

Highlights:

Consistent Growth in Reverse Mortgages: Heartland Group Holdings Limited (NZX: HGH) reported a 20% increase in its New Zealand and Australian reverse mortgage portfolios, reaching $1.07 billion and A$1.67 billion, respectively.

Decline in Online-Only Home Loans: The company’s online-only home loan portfolio saw a 0.6% decrease, with limited details provided about its current size and performance.

Profit Impacted by Provisions: Heartland's net profit fell 22.2% to $74.5 million, largely due to an additional $10.1 million in provisions amid a sudden economic downturn in May and June 2024.

Heartland Group Holdings Limited (NZX: HGH) has reported continued growth in its reverse mortgage business during the 2024 financial year, maintaining the 20% growth rate achieved in the previous year. However, the company's online-only home loans saw a slight decline.

Reverse Mortgages See Steady Growth

Heartland Group's New Zealand reverse mortgage portfolio grew by $180 million, or 20.2%, reaching $1.07 billion. In Australia, the reverse mortgage book expanded by A$276 million, or 19.7%, bringing the total to A$1.67 billion. This consistent growth underscores the strong demand for reverse mortgage products in both markets.

Interestingly, the company shifted its reporting for the Australian reverse mortgage book from New Zealand dollars to Australian dollars, providing less detailed information compared to previous years. According to financial statements, the total increase in the Australian reverse mortgage portfolio was approximately NZ$298 million, with NZ$145 million added in the second half of the year alone.

The New Zealand reverse mortgage portfolio's weighted average loan-to-valuation ratio (LVR) increased slightly to 23.5%, up from 22.8% at the end of December 2023. The average age of borrowers decreased from 78 to 77 years, while the average loan size rose to $141,183, compared to $128,938 a year earlier.

Online-Only Home Loans Face Challenges

In contrast to the robust growth in reverse mortgages, Heartland Group's online-only home loan portfolio experienced a 0.6% decline. The company provided minimal details about this segment, only noting that the portfolio remains "similarly robust" with a low arrears rate of 0.4%. The specific size of the online-only home loan book as of June 30 was not disclosed.

Financial Performance Impacted by Provisions

Heartland Group's net profit for the year ended June 30 dropped by 22.2% to $74.5 million. The underlying profit was $102.7 million, falling short of the company's guidance range of $108 million to $112 million. CEO Jeff Greenslade attributed the decline to an additional $10.1 million in provisions taken late in the year due to a sudden economic downturn in May and June.

Despite the challenges, Greenslade emphasized the resilience of the reverse mortgage portfolio, highlighting its ability to perform well in both favorable and adverse conditions.

Customer Notice:

Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.

Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com