New Zealand Professional Investment Services Firm, Forsyth Barr

Forsyth Barr

New Zealand Professional Investment Services Firm

We are proud to be a New Zealand owned firm, with 21 offices throughout the country and over 300 employees. We assist personal, institutional and corporate clients providing a full range of investment services.

Forsyth Barr is a foundation New Zealand Exchange firm (NZX) and accredited market participant. We have been confirmed by the Financial Markets Authority as a Qualifying Financial Entity (QFE).

Research is the cornerstone of our advice. We have one of New Zealand's leading teams of analysts. Our global affiliations ensure comprehensive research coverage of all major investment markets.

Equity Bottom-Up

Heartland Group Holdings / Equity Bottom-Up

<ul><li>Heartland Group Holdings (HGH) reported a weak FY24 result, which was characterised by compressed net interest margins (NIM) and higher impairments.</li><li>Importantly, progress has been made on key strategic initiatives, with the completion of the Challenger Bank acquisition, having its Australian authorised deposit-taker license granted, and completing work on its core banking system upgrade in NZ.</li><li>The operating backdrop remains challenging, particularly for the motor and business lending portfolios, which is expected to continue into FY25. </li></ul>

Heartland Group Holdings (HGH) reported a weak FY24 result, which was characterised by compressed net interest margins (NIM) and higher impairments.Importantly, progress has been made on key strategic initiatives, with the completion of the Challenger Bank acquisition, having its Australian authorised deposit-taker license granted, and completing work on its core banking system upgrade in NZ.The operating backdrop remains challenging, particularly for the motor and business lending portfolios, which is expected to continue into FY25. 

Heartland Group - FY24 — Strategic Ticks, Operational Crosses

<ul><li>Heartland Group (HGH) has received indicative regulatory approval to acquire small Australian bank, Challenger Bank, with an expected completion date of 30 April 2024.</li><li>The last significant hurdle to clear is raising ~NZ$210m, roughly half of which is to capitalise the Australian bank.</li><li>Whilst we see this as a positive, execution on its strategy and delivering on the promised growth and earnings is now the key. </li></ul>

Heartland Group (HGH) has received indicative regulatory approval to acquire small Australian bank, Challenger Bank, with an expected completion date of 30 April 2024.The last significant hurdle to clear is raising ~NZ$210m, roughly half of which is to capitalise the Australian bank.Whilst we see this as a positive, execution on its strategy and delivering on the promised growth and earnings is now the key. 

Heartland Group - Challenger Cleared for Launch

<ul><li>Heartland Group's (HGH) 1H24 result was weak as expected, with pressure from both slowing receivable growth and shrinking net interest margins (NIM) due to higher funding costs.</li><li>Conditions should gradually become more conducive for receivable growth through 2024, but relief from elevated funding costs appears further off.</li><li>While HGH appears attractive at current levels, the combination of the lagged impact from the weakening economic backdrop and execution risk in its Australian venture make us cautious on the near-term outlook. </li></ul>

Heartland Group's (HGH) 1H24 result was weak as expected, with pressure from both slowing receivable growth and shrinking net interest margins (NIM) due to higher funding costs.Conditions should gradually become more conducive for receivable growth through 2024, but relief from elevated funding costs appears further off.While HGH appears attractive at current levels, the combination of the lagged impact from the weakening economic backdrop and execution risk in its Australian venture make us cautious on the near-term outlook. 

Heartland Group - 1H24 — Counting Down to Challenger Launch

<ul><li>Heartland Group (HGH) downgraded its FY24 underlying NPAT guidance -20% at the midpoint, a mix of short-term operational headwinds, costs relating to the purchase of Challenger Bank and additional provisioning.</li><li>The negative 2023 September quarter New Zealand GDP print, released the same day as the guidance downgrade, underscores the risks for HGH in the face of a weakening consumer environment. </li><li>Material potential upside remains in the form of lowering Australian borrowing costs when HGH completes its acquisition of Challenger Bank, though the uncertain path for the NZ consumer over the coming months leads us to maintain our NEUTRAL rating with a target price of NZ$1.70.</li></ul>

Heartland Group (HGH) downgraded its FY24 underlying NPAT guidance -20% at the midpoint, a mix of short-term operational headwinds, costs relating to the purchase of Challenger Bank and additional provisioning.The negative 2023 September quarter New Zealand GDP print, released the same day as the guidance downgrade, underscores the risks for HGH in the face of a weakening consumer environment. Material potential upside remains in the form of lowering Australian borrowing costs when HGH completes its acquisition of Challenger Bank, though the uncertain path for the NZ consumer over the coming months leads us to maintain our NEUTRAL rating with a target price of NZ$1.70.

Heartland Group - Battening Down the Hatches

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

<ul>
<li>During 1H24 CGF expects to sell its bank for ~AUD36m which could include a AUD11m gain and allow to free-up bank capital of around AUD40-50m.</li>
<li>Return on capital is now at the highest it has been since FY10 at 6.2% with a substantial 160bps increase in normalized ROE in 2H23 YoY to 13.1%</li>
<li>85% market share of annuity FUM from 50% about 10 years ago, operating in system with strong forced savings in superannution funds now at AUD3.5tr up 91% over 10 yrs.</li>
</ul>


During 1H24 CGF expects to sell its bank for ~AUD36m which could include a AUD11m gain and allow to free-up bank capital of around AUD40-50m.
Return on capital is now at the highest it has been since FY10 at 6.2% with a substantial 160bps increase in normalized ROE in 2H23 YoY to 13.1%
85% market share of annuity FUM from 50% about 10 years ago, operating in system with strong forced savings in superannution funds now at AUD3.5tr up 91% over 10 yrs.


Challenger (CGF AU) - Bank Sale 1H24 | ROC Highest in 23 Yrs | 85% Market Share Annuity FUM

New Zealand

Heartland Group Holdings Limited operates as a holding company. The Company, through its subsidiaries, provides banking services which includes savings and deposits, mortgage, business loans, consumer financing, and Internet banking services. Heartland Group Holdings serves clients in New Zealand.

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Heartland Group Holdings (HGH NZ)

Heartland Group - FY24 — Strategic Ticks, Operational Crosses

Heartland Group Holdings (HGH) reported a weak FY24 result, which was characterised by compressed net interest margins (NIM) and higher impairments.

Forsyth Barr

Heartland Group - Challenger Cleared for Launch

Heartland Group (HGH) has received indicative regulatory approval to acquire small Australian bank, Challenger Bank, with an expected completion...

Forsyth Barr

Heartland Group - 1H24 — Counting Down to Challenger Launch

Heartland Group's (HGH) 1H24 result was weak as expected, with pressure from both slowing receivable growth and shrinking net interest margins...

Forsyth Barr

Heartland Group - Battening Down the Hatches

Heartland Group (HGH) downgraded its FY24 underlying NPAT guidance -20% at the midpoint, a mix of short-term operational headwinds

Forsyth Barr

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52-week Range

Market Cap (USDm)

P/E

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Heartland Group - FY24 — Strategic Ticks, Operational Crosses

Heartland Group Holdings (HGH) reported a weak FY24 result, which was characterised by compressed net interest margins (NIM) and higher impairments.

Forsyth Barr

Heartland Group - Challenger Cleared for Launch

Heartland Group (HGH) has received indicative regulatory approval to acquire small Australian bank, Challenger Bank, with an expected completion...

Forsyth Barr

Heartland Group - 1H24 — Counting Down to Challenger Launch

Heartland Group's (HGH) 1H24 result was weak as expected, with pressure from both slowing receivable growth and shrinking net interest margins...

Forsyth Barr

Heartland Group - Battening Down the Hatches

Heartland Group (HGH) downgraded its FY24 underlying NPAT guidance -20% at the midpoint, a mix of short-term operational headwinds

Forsyth Barr

Challenger (CGF AU) - Bank Sale 1H24 | ROC Highest in 23 Yrs | 85% Market Share Annuity FUM

Bank divestment in 1H24 can see gains, capital release, and better focus on life and funds. Improving returns are substantial, into a growing...

Daniel Tabbush