Key Highlights

  • Heartland Group's FY26 NPAT increased to $93.2 million from $38.8 million, while underlying NPAT rose to $90.4 million.
  • Underlying net interest Margin expanded 36 basis points to 3.98%, supporting an improvement in underlying ROE to 7.1%.
  • The Impairment expense ratio declined 55 basis points to 0.45% as Heartland Bank improved asset quality.
  • Heartland ended FY26 with approximately $110 million of regulatory Capital above expected requirements.

Heartland Group (ASX: HGH) climbed +1.96% to $1.04 AUD today following a dramatic improvement in Earnings and margins. The NZ-listed finance company's transformation delivered on capital management expectations.

The company reported a substantial improvement in profitability for FY2026, with net profit after tax rising to $93.2 million from $38.8 million a year earlier. Underlying NPAT also increased to $90.4 million from $46.9 million. The result was accompanied by wider margins, lower impairment costs and progress in the group’s technology transformation programmes.

Margin Expansion Supports Profit Growth

Heartland’s average net interest margin was 3.95% for FY26, while average underlying NIM increased 36 basis points to 3.98%. The improvement in margin was a key contributor to the recovery in profitability during the year.

Underlying Return on Equity rose to 7.1%, an increase of 286 basis points, while reported ROE was 7.3%. Operating expenses increased by 6.7% on an underlying basis to $193.5 million. Despite the higher expense base, the underlying cost-to-income ratio improved by 155 basis points to 54.6%.

The company also reported an impairment expense ratio of 0.45%, down 55 basis points from the prior year. Heartland Bank cleared all Motor Finance Non-Performing Loans that were more than 180 days past due, while arrears in the portfolio continued to perform below the industry average.

Lending Growth Across Key Portfolios

Reverse Mortgage receivables continued to expand in both New Zealand and Australia. Heartland Bank’s Reverse Mortgage receivables increased 16.8%, while Heartland Bank Australia recorded growth of 19.7%.

The Rural portfolio also contributed to balance-sheet expansion, with Heartland Bank reporting 10.8% growth in Rural receivables. These areas formed part of the company’s focus as it redirected capital released through its non-strategic asset realisation programme towards growth opportunities.

The programme reduced the value of non-strategic Assets by $270.7 million during FY26 and generated $31.7 million of available capital. Since the programme began reporting in December 2024, the total reduction has reached $374.2 million, with a reported 94% recovery rate.

Capital Position and Technology Transformation

Heartland reported approximately $110 million of regulatory capital above expected requirements at 30 June 2026. Applying anticipated risk-weight changes to the period-end Balance Sheet would increase this excess to approximately $160 million.

The Reserve Bank of New Zealand also reduced Heartland Bank’s transitional capital overlay from 2.0% to 0.5% from 1 March 2026. The change followed completion of integration activities involving Heartland Bank Australia and improvements in the banking group's risk profile.

Technology transformation programmes in New Zealand and Australia also progressed during FY26. Both businesses reached initial production deployments, including the migration of Reverse Mortgage products onto their respective new platforms. The programmes remain on their existing delivery timetables and implementation costs.

Proposed TSB Transaction

In June 2026, Heartland announced a proposal to acquire all shares in TSB Bank from Toi Foundation and subsequently merge TSB with Heartland Bank. The proposed combination is intended to create a larger New Zealand banking operation with a regional focus.

Heartland said excess capital could ultimately be directed towards opportunities supporting scale and growth once anticipated regulatory changes are embedded and the proposed Merger is completed, subject to the relevant conditions.

Dividend and FY26 Outlook

The Board declared a final Dividend of 3.5 cents per share. The dividend decision follows the improvement in earnings and capital position during FY26.

Heartland enters its next phase with improved profitability, wider underlying margins and lower impairment costs, while its technology programmes and proposed TSB transaction remain important developments for the group. The FY26 figures also show that the recovery in earnings was accompanied by progress in asset quality and capital management.

Conclusion

Heartland’s FY26 results show a marked recovery in earnings, supported by higher underlying margins, reduced impairment costs and growth in selected lending portfolios. The improvement in underlying NPAT and ROE was accompanied by a lower cost-to-income ratio and completion of the non-strategic asset realisation programme. At the same time, the proposed TSB transaction, technology investments and evolving regulatory capital requirements will remain significant factors in the company’s next phase.