Reverse mortgages drive growth
Heartland Group has reported a net profit after tax (NPAT) of $38.8 million for the year ended 30 June 2025 (FY2025). On an underlying basis, NPAT was $46.9 million, in line with its guidance of at least $45 million.
The result follows a year of significant reset, portfolio repositioning, and integration work, with Heartland prioritising capital efficiency, restoring margins, and de-risking lending portfolios.
The outcome had been widely anticipated after Heartland in April flagged a sharp drop from the $110.2 million net profit posted in 2023, as weak returns from non-reverse mortgage lending weighed on profitability. Former CFO Andrew Dixson, who became CEO in September 2024, has been steering the bank away from underperforming legacy businesses dating back to its 2011 merger.
Reverse mortgages drive growth
Net interest margin (NIM) rose 17 basis points to 3.56%, with exit margins of 4.13% in New Zealand and 3.59% in Australia. Reverse mortgage receivables grew 15.5% in New Zealand and 18.5% in Australia, reinforcing their role as Heartland’s “jewel in the crown.”
Market analysts have noted that Heartland holds more than 90% share of the New Zealand reverse mortgage market, far ahead of SBS Bank’s $96 million book.
In Australia, however, competition is intensifying, with players like Household Capital, Gateway Bank, and Inviva expanding their books alongside the government’s Home Equity Access Scheme.
Mixed performance across lending portfolios
Rural lending provided another bright spot, with receivables in New Zealand up 18.4% and a return to modest growth in Australia.
However, motor finance and asset finance portfolios contracted, reflecting subdued economic conditions and a tighter lending focus.
Heartland also wound down unsecured lending and accelerated the realisation of non-strategic assets, releasing capital for redeployment into higher-return areas.
Outlook for FY2026
Looking ahead, Heartland expects FY2026 underlying NPAT of at least $85 million and a return on equity (ROE) of 7% or more. Its strategy will focus on core product sets – reverse mortgages, rural finance, motor finance, asset finance, and deposits – alongside technology investment, disciplined cost control, and capital efficiency.
Forsyth Barr forecasts further earnings recovery, projecting $83.3 million profit in FY2026 and $105.7 million in FY2027.
Analyst Andrew Harvey-Green noted that while reverse mortgages continue to deliver returns above Heartland’s cost of equity, “securing a re-rating by investors will require allocating more capital to reverse mortgages while improving performance across other lending segments.
For more details, read the NZX announcement.
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