Heartland Group Holdings Limited (HGH) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Heartland Group FY '26 Full Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Andrew Dixson, CEO, Heartland Group. Please go ahead.

Thank you, and good morning. Welcome to the Heartland Group 2026 Full Year Results Call. I am Andrew Dixson, Chief Executive of the Heartland Group, and I'm joined today by Leanne Lazarus, Head of Heartland Bank in New Zealand; Michelle Winzer, Chief Executive of Heartland Bank in Australia; and Kerry Conway, Chief Financial Officer of Heartland Banking Group. Starting with Slide 5, the FY 2026 summary. We set ourselves a number of clear objectives for FY 2026, namely to rebuild the profitability and return profile of the group but in particular, to restore margins, improve asset quality and complete the nonstrategic asset program. Heartland has achieved these objectives, meeting all underlying FY 2026 guidance metrics delivering an improved return on equity and turnaround of profitability. In doing so, we have established a strong foundation to support the next phase of growth. Underlying net profit after tax was $90.4 million, up from $46.9 million in FY 2025. Reported impact was higher at 93.2%, and I'll discuss those differences alongside the impact of foreign currency translation on the results shortly. Underlying return on equity was up 286 basis points to 7.3%. This improvement was driven by a combination of factors. Firstly, a lower cost of funds, both the New Zealand and Australia drove the group's average NIM expansion of 36 basis points to 3.98%. Heartland Bank Australia completed its transition to being predominantly deposit-funded and benefited from this on average for a full year. Substantial progress was made on asset quality with a significant reduction in nonperforming loans across the business as NSA realization exceeded expectations and all motor finance arrears greater than 180 days past due were cleared. This resulted in a 55 basis point reduction in the impairment expense ratio to 0.45%. Despite a $12.2 million increase in operating expenses, early signs of improved operating leverage are emerging with a 155 basis point improvement in the cost-to-income ratio to 54.6%. The group strengthened its capital position during the year, providing support for strong organic growth that is being experienced in some of our core portfolios. Reverse mortgages for both Heartland Bank and Heartland Bank Australia continued to perform well, with receivables up 16.8% and 19.7%, respectively. Heartland Bank's Rural portfolio also delivered strong receivables growth of 10.8%. Importantly, these results have been achieved all while the business continues to build for the future. The NSA realization program successfully concluded with a $254 million reduction in receivables exposure across the financial year. Technology transformation programs in both countries have progressed to plan in FY 2026 with initial production deployments and the launch of Reverse Mortgages to their respective platforms. Both remain on track with no change to delivery timetables or implementation costs. Finally, we were pleased to announce at the start of urine, the proposed merger of Heartland Bank and TSP to create a New Zealand Challenger Bank scale with the regional focus. Moving to Slide 6, group financial results. I will discuss the differences in reporting against underlying NPAT on the next slide and Kerry will unpack individual bank performance in more detail later. Heartland recorded underlying NPAT for FY 2026 of $90.4 million, with all key metrics showing a strong improvement from the prior comparative period. I would note that movements in FX rates contributed $2.6 million to NPAT relative to FY 2025 and excluding the impact of changes on the FX, aggregate receivables growth was 3.9%, a solid achievement given the $254 million reduction in NSA receivables over the period. Importantly, our earnings recovery has been broad-based, with net operating income of $354.3 million up $31.5 million, while OpEx of $193.5 million was up $12.2 million. Highlighting operating leverage in the business is beginning to reemerge despite carrying costs associated with technology and repositioning the business. The cost-to-income ratio of 54.6% reduced under [ 55 ] basis points, and the impairment ratio reduced 55 basis points to 0.45%. Moving to Slide 7, reported versus underlying results. Before detailing the key differences, I wanted to state clearly that from FY 2027 onwards, Heartland intends to present its financial results on a reported basis only and we'll note any exceptional items were applicable. As such, this will be the last time when we see this slide or indeed the dual financial tables throughout the pack. For FY 2026, reported NPAT was $2.8 million higher than underlying NPAT due to the combination of 3 items: firstly, a fair value gain following the full divestment of the Harmony equity exposure. Secondly, the net impact of a change in accounting for Reverse Mortgage commissions in Australia, which is detailed on Slide 33 and will be discussed in more detail by Kerry. And finally, transaction costs incurred in FY 2026, related to the proposed merger of Heartland Bank and TSB. Moving to Slide 8 capital. The financial year has been a year of positive outcomes that have enhanced the capital position of the group. NSA realization has released approximately $32 million of capital. The RBNZ's final capital settings for deposit takers announced in December 2025, will provide for lower Tier 1 and total capital ratio requirements compared to its prior review that removes additional Tier 1 capital instruments, while allowing for more Tier 2 and introduces more granular and reduce risk weights. The RBNZ also reduced Heartland Banks transitional capital overlay imposed after the acquisition of [ Wasow ] Heartland Bank Australia from 2% down to 0.5%, reflecting the completion of integration activities in relation to Heartland Bank Australia and stronger [ trans-tasman ] oversight arrangements alongside an improvement in the overall risk profile of the banking group. The [indiscernible] is also expected to review Reverse Mortgage risk weights in the second half of calendar year 2026 and Heartland Bank continues to participate in this review. Overall, we enter FY 2027, with considerable excess capital held across the group, which is expected to grow in implementation of the aforementioned changes. This positions happen with a stronger high-quality balance sheet with greater flexibility to support scale, growth and improve shareholder returns. Moving to Slide 9, NSA realization. The NSA realization program has successfully concluded with the $94 million residual portfolio no longer considered material as at 30 June 2026 and returning to business as usual management. Heartland, therefore, no longer intends to report on the NSA realization program. The total value of NSAs reduced by $270 million during FY 2026, creating $32 million of available capital. As at 30 June 2026, the residual NSA portfolio is either on a scheduled rundown or has a specific exit plan and is well provided for. Pleasingly, since 30 June 2026, the properties NSA has been successfully realized and further progress has been made across the receivables portfolio. I'd like to specifically acknowledge the incredible work that everyone involved in this program has done. From 31 December 2024 when Heartland began reporting against its NSA realization program to 30 June 2026. The total value of NSAs reduced by $374 million with a 94% recovery rate, creating $42 million of available capital. Moving to Slides 10 to 12, the proposed transaction. On 2 June 2026, we announced a conditional agreement with Toi Foundation to acquire TSB for an aggregate consideration of $620 million and immediately following that acquisition, merge Heartland Bank and TSB. The proposal would create TSB Heartland Bank, a challenge a New Zealand challenger bank of scale with a regional focus. We remain confident in the strategic rationale for the proposed merger and the benefits it has the potential to deliver at its core, the rationale is about bringing together 2 highly complementary banks. Heartland Bank brings specialist banking expertise in areas such as Reverse Mortgages, Motor Finance, Rural and Asset Finance. TSB brings residential mortgage portfolio, established transactional banking capability and a cost-effective retail funding base. Together, that would create a full service bank of approximately $15 billion of New Zealand assets, greater product and fund and diversification and the ability to support customers through their financial life cycle. Greater scale will provide an opportunity to spread the increasingly significant fixed costs of running a bank, particularly those associated with technology and compliance across a much larger portfolio, while delivering greater financial resilience. Importantly, this isn't about moving away from what has made either bank distinctive. Heartland Bank specialist products address customer needs that often aren't well served out with, and we intend to retain their specialist [indiscernible]. We also recognize the importance of TSB's connection with [ Telenacke ] and its original identity. Our intention is for [ Telenorke ] to remain a key operational hub with a local branch network and customer-facing roles in the region while maintaining Heartland Bank's existing nationwide presence. Strategically, we see a compelling combination, greater scale, resilience and product diversification, complementary capabilities and the opportunity to create a stronger New Zealand domestic bank with a regional focus. In terms of process, the transaction remains conditional. Remaining conditions include Toi Foundation trustee approval. Heartland shareholder approval and necessary regulatory approvals. We went the outcome of the Toi Foundation trustee process as there is also a matter before the court relating to that process, we won't comment on it or speculate on potential outcomes. Should the Toi Foundation trustee approval condition be satisfied, our next steps include progressing the RBNZ application and progressing with our shareholder meeting. currently scheduled for 30 September. We are continuing to target completion in December, subject to the remaining conditions being satisfied. While there are still important steps ahead, we remain focused on completing the proposed transaction and are confident in the strategic rationale and the potential benefits that could deliver to all stakeholders. Finally, moving to Slide 13, shareholder return. Harland has declared an FY 2026 final dividend of [ $3.5 ] per share, up $1.5 per share on FY 2025 final dividend. Due to Heartland's strong capital position, the dividend payout ratio of 73% considerably exceeds Heartland's target of at least 50% of underlying NPAT and the DRP will not apply to the final dividend. I'm pleased to hand to Leanne and Kerry to discuss our New Zealand Bank.

Thank you, Andrew, and good morning, everyone. Turning to Slide 15. Financial year '26 was pivotal for the New Zealand Bank, and I'm proud to present these results today. We've used the foundation set for our strategic reset in financial year '25 to deliver what we said we would. We materially met our underlying guidance across key metrics. We saw margin expansion on the prior year significantly improved asset quality and strong Reverse Mortgage and Rural growth. Against this backdrop, there are 2 key messages I would like to emphasize. Firstly, we reduced risk. We significantly improved the quality of our motor finance portfolio, clearing arrears greater than 180 days past due, accelerated the exit of nonstrategic assets and finished the year with the strongest nonperforming loan position the bank has reported since 2017. Secondly, we built on our strengths. Core lending has returned to growth, driven by strong performance in our Reverse Mortgage and Rural businesses. Our technology transformation program is underway with the first phase of Reverse Mortgages now live on the platform. I'll speak to this in more detail a little later. We've maintained very strong liquidity and capital positions throughout the year, and we delivered profit above guidance. One of the strongest external validations of the progress we have made with the Reserve Bank's decision to reduce the transitional capital overlay imposed on Heartland Bank after our acquisition of what is now Heartland Bank Australia. The overlay reduced from 200 basis points to 50 basis points, reflecting an improved risk profile. This means we have released capital an important enabler for the coming year. Financial year '27 will be about converting the stronger foundation into sustainable growth and greater efficiency through technology and automation. This will support sustainable returns from the New Zealand business. I will now hand over to Kerry Conway, Chief Financial Officer, to cover the financial performance of the New Zealand Bank.

Thanks, Leanne. The financial position remains robust across New Zealand and the wider banking group with capital and liquidity ratios well above board and regulatory minimums. Reported net profit after tax for FY '26 was $49.8 million, up $27.9 million on last year, with profit before impairments and tax of $98.4 million, down $3.5 million. Underlying results exclude the impact of $2.6 million pretax one-off largely related to fair value changes on equity in the first half. Stripping out one-off underlying NPAT was $47 million, up $24.6 million. On to receivables, Slide 17, receivables retracted $121 million in the year, ending at $4.6 billion. Core portfolios grew $157 million, but the growth was offset by successful NSA execution, driving [ 254 million ] retraction. Leanne will cover this in more detail later. Moving to NIM. Average NIM expanded as expected in the year, up 17 basis points to 4.08%. The OCR decreased 100 basis points during the year. Coupled with soft credit demand, this intensified pricing competition in some of our key portfolios, resulting in gross yields down 91 basis points but this has been mitigated by active funding management in light of excess liquidity, which saw cost of funds reduced by 108 basis points. FY '27 NIM is expected to remain steady at about 40.5%. On to OpEx on Page 19. OpEx of $126.9 million is down $0.7 million on FY '25 and down $2.3 million on a like-for-like basis. Staff costs increased by $2.2 million, driven by one-off costs and the reintroduction of an LTI program. Inflationary increases were absorbed by active recruitment management in light of the impact of subdued growth. IT costs increased, reflecting higher contract renewal costs and additional IT security investment. A deliberate investment in growth saw marketing expenses increased $1.9 million, notably to support Reverse Mortgages with a brand refresh and TVC campaign. Disciplined cost management in other areas has helped to fund these investments. The CTI ratio of 55.6% increased 0.8% versus last year. 1.4% of this uplift was a result of reduced income from NSAs with the corresponding benefit of that being seen in impairments versus OpEx. On impairment provisions and asset quality, net provisions decreased $18.2 million to $50.8 million, with collective provisions down $15.9 million as a result of improvements in stage mix and reduction in provisioning rates across the board. The FY '26 impairment expense of $30.4 million was $38.3 million lower than last year, with the key driver being the nonrepeat of large write-off activity related to the change in approach implemented in FY '25. The impairment ratio of 67 basis points reflects a material improvement in asset quality. We expect FY '27 to stabilize with no further material CP releases noting the current global instability could put pressure on impairments. The nonperforming loan ratio continues to improve, down 129 basis points from June 25 to 1.92%. The key drivers being a large number of NSA repayments, continued improvement in motor and a reduction in business finance areas. Finally, moving on to capital, Slide 22. With a regulatory capital ratio of 16.6%, the New Zealand bank continues to operate well above the future regulatory minimum of 14.5% demonstrating a strong capital position and readiness to support future growth, transitioning through the impending regulatory changes. I'll now hand back to Leanne to talk about portfolio and tech transformation.

Thank you, Kerry. I refer you to Slide 23. Turning to Motor Finance. The portfolio performance reflects the discipline we have applied throughout the year. Overall, Motor Finance receivables grew modestly by 1.5% to $1.72 billion. But the important point is the improved quality of the portfolio. Dealer receivables reduced as we deliberately shifted from low-quality broker and non-franchise lending towards higher-quality franchise lending. Although global supply chain disruption impacted demand in the first half, new business volumes improved in the second half supported by the [ CIO ] wholesale funding partnership and record EV lending in March. At the same time, our direct-to-consumer channel grew strongly, up 25.7%. Slide 24. Turning to Reverse Mortgages, which had another strong year, growing 16.8% to $1.44 billion. That growth has been supported by our investment again market awareness, our regional presence and our process improvements that make it easier for customers to engage with us. Reverse Mortgages remains one of the clearest growth opportunities in the New Zealand Bank. Our customers continue to use their Reverse Mortgage for a range of purposes, including easing cost of living pressures. Credit quality for this portfolio remains very strong with an average current loan size of $163,000 and weighted average current loan-to-value ratio of 27.5%. Looking ahead to financial year '27, our focus is to convert the current momentum into more high-quality growth, supporting more New Zealanders to access the equity of their home while maintaining the discipline and safeguards that underpin the strength of this product. Slide 25. The Rural portfolio delivered a very strong result in financial year '26, with receivables up 10.8% to $675 million ahead of sector growth of 1.8%. This was supported by a stronger livestock finance intermediary partnerships and expanded regional presence and improved market conditions. For financial year '27, we are focused on sectors, customers and partnerships at the smaller end of the market where Heartland Banks specialist capability is valued and with the risk-adjusted returns support sustainable performance. Slide 26. Business Finance is a different story, and we have been very deliberate in how we manage this portfolio in current economic conditions. Receivables reduced 18.1% to $639 million, which is within guidance and reflects our continued focus on and quality and pricing for risk. The market remains subdued, particularly in construction and transport with our important sectors that we [indiscernible]. As conditions improve, this portfolio is well positioned to participate in a quality-led recovery. At the instances remains the same. We will grow where the return is appropriate and where the credit quality supports sustainable performance. Slide 27 and 28. The New Zealand technology program is a critical tool to look efficiency and scale the New Zealand bank. We have continued investing in simplifying and modernizing our technology from the modern foundations implemented through financial year '23 to financial year '25 to now leveraging those modern platforms with an AI-enabled layer of automation and integration. Our objectives are simpler digital journeys for customers, faster lending decisions, more automated lower cost operations and a less complex, more resilient technology landscape. Over time, this will improve our ability to serve our customers, make product changes and scale without adding equivalent operational cost. The initial [ pig ] capability went live in June 2026, focused on Reverse Mortgages and represents the first production release of the program. We have invested $3.3 million towards implementation in financial year '26, and this is within our budget expectations. The primary expected benefit for Reverse Mortgages is scalable growth. In the year ahead, the technology program is focused on completing the Reverse Mortgage back book migration, improving the customer self-service experience and starting the motor finance migration and automation. To conclude. Overall, financial year '26 has been a year of significant progress and renewed momentum for the New Zealand bank. I want to thank our people for their commitment and our customers and Heartland's shareholders for their continued trust and support. I'll now hand over to Michelle Winzer, Chief Executive Officer of Heartland Bank of Australia.

Thank you, Leanne, and good morning, everyone. I'm pleased to share Heartland Bank Australia's results for FY '26. Moving to Slide 30. In FY '26, Heartland Bank Australia materially met its underlying guidance across all key financial metrics. Despite an evolving macroeconomic backdrop, performance was anchored by strong Reverse Mortgages growth and market leadership. Disciplined balance sheet and funding management supported margin expansion and improved the cost-to-income ratio while customer service remained strong. For the Reverse Mortgage portfolio, we delivered 19.7% growth, bringing total receivables to $2.37 billion. Maintaining this momentum while concurrently executing a major core technology transformation demonstrates the operational resilience and capability of our team. As Australia's leading Reverse Mortgage provider, Heartland reinforced its total market share of over 40%, while catering 55% of new business market share across the financial year. Customer and partner engagement metrics also remained strong. We recorded an 85% customer satisfaction score and a Net Promoter Score of plus [ 49 ] in our Reverse Mortgage business. Borrowers highlighted processes, transparent communication and empathetic support as defining features of their experience. This positive momentum extended across our deposit suite with our savings and term deposit customers reporting a customer satisfaction score of 77% and a Net Promoter Score of plus 20. A key strategic milestone in FY '26 was commencing a program to simplify the bank's core infrastructure. We went live on our new platform in July 2026 for new Reverse Mortgage application origination commencing initially with our direct channel and a cohort of pilot brokers. We are also seeing clear evidence of operational consistency across our servicing channels, a contact center maintained positive service levels despite core volumes increasing by 46%. Across our distribution channels, we expanded key broker partnerships which contributed directly to increased Reverse Mortgages origination volumes. In our Livestock portfolio, we deepened our regional footprint by onboarding 13 new service providers under stock [indiscernible], strengthening key industry partnerships across regional markets. The Livestock portfolio is positioned for growth in 2027 supported by repeat customer demand, specialist capability with targeted partnerships and stronger agent channels, helping to expand distribution while maintaining credit quality and risk-adjusted returns. I will now hand over to Kerry to cover the financials.

Thanks, Michelle. Like New Zealand the financial position for HL is robust with capital and liquidity ratios well above board and regulatory minimums. Reported NPAT for FY '26 was $43 million, up $15.8 million on last year. Underlying results exclude the impact of $6.6 million pretax one-offs relating to a change in accounting treatment of Reverse Mortgage commissions, which I'll cover a bit later. Stripping out one-offs, underlying NPAT was $38.4 million, up $10.3 million. Moving to receivables, Slide 32. Receivables grew $373 million in FY '26 to $2.6 billion, with strong growth in Reverse Mortgages and a marginal retraction in Livestock, which Michelle has covered. On Slide 33, I mentioned, we've refined the way we account for broker commissions on our Reverse Mortgage book backdated to the 1st of January. We now include both upfront and trail commissions as part of the fair value of those loans and release this cost as contract income over the life of the loan rather than expensing immediately as invoiced through OpEx. This is a [indiscernible] with the majors and remove the distortion where previously margin looked overstated with the commission sitting separately in OpEx. We now match the commission's cost against the income in terms. The resulting adjustments net to $6.6 million, a 7 basis point reduction in NIM and 392 basis point improvement in CTI. In summary, a $2 million reduction in [ net II ] from reclassifying second half trail commission from OpEx and second half amortization of the upfront commission pool. $5.7 million increase in other operating income from recognizing the life-to-date upfront commissions in the carrying value of the loans and $2.9 million reduction in OpEx from reclassifying second half trail commission to [ net II ] and recognizing second half upfront commissions in the carrying value of the loans. On NIM, Slide 34, excluding the impact of the accounting change, average NIM expanded 73 basis points to 3.81% primarily driven by a meaningful reduction in cost of funds. A key driver has been our deliberate transition away from wholesale funding to deposits, now at [ 84% ] as well as liquidity balances now normalized through no longer needing to prefund large securitization date-based calls or wholesale funding maturities. Looking ahead, we expect NIM to contract by about 13 basis points to around 3.68%. 7 basis points is driven by the accounting change and the remainder from competitive pressure on price in Reverse Mortgages and the margin compression from higher TD rollover rates. Moving to OpEx. OpEx [ $57.6 million ] is up $11 million versus last year, with the key drivers being staff costs, investments in the tech program and cost linked to growth. Increase in staff cost is driven by the full year impact of FTE hired in FY '25 and additional FTE in FY '26 to support growth the tech program and to ensure customer experience has not been impacted while we've been implementing the new platform. Total project costs of $2.4 million are as expected with the investment in Constantinople. Although OpEx has increased, CTI has reduced by 340 basis points from growth in Reverse Mortgage income. Funding and liquidity on Slide 36. Repayment of the final $100 million MTN was completed on October funded through customer deposit growth. Deposits increased to $2.5 billion, further strengthening the funding mix and reducing reliance on wholesale funding as well as contributing to lower funding costs supporting NIM performance. And finally, on capital, Slide 37. The bank maintains a strong capital position while supporting portfolio growth. Total capital increased to $360 million, driven by retained earnings of $43 million during the period. The total capital ratio remained strong at 19.3% above regulatory minimum requirements. I'll now hand back to Michelle to discuss portfolio performance and the tech transformation.

Thank you, Kerry. Turning to Slide 38, which outlines the lending performance of our core Australian Reverse Mortgage portfolio for FY '26. As I mentioned, total receivables reached $2.37 billion as of 30th of June '26, representing an increase of $391 million or 19.7% over the prior year. This sustained portfolio expansion translated directly into top line earnings growth. Net operating income for the portfolio reflected both volume growth and disciplined margin management. Growth across the put period was supported by ongoing customer demand alongside balanced momentum across both our direct and broker channels. Our diversified broker network continues to positively impact our market reach, ensuring we capture growing market demand as awareness of equity release solutions increases. This growth has been achieved while maintaining strong credit metrics and underwriting standards across the portfolio. Our nonperforming loan ratio remains low 0.74%. Our average current loan size is AUD 223,000 and our weighted average current loan to valuation ratio stands at 24.8%. We expect strong growth to continue in FY '27. Moving to Slide 39 for an update on our Livestock Finance portfolio in Australia. As of 30th of June '26, our receivables stood at $250 million, down by 1.7% or $4.3 million compared to the prior corresponding period. This variance reflects higher trading velocity within the portfolio where Livestock sales exceeded purchases over the 12 months. Underlying customer activity remained healthy with the business funding a solid volume of Livestock trades amidst supportive cattle market conditions. Despite a lower year-end receivables position, earnings performance was strong. The net operating income for the portfolio increased 20% to $15.1 million, up from $12.6 million in FY '25. This growth was driven by improved funding costs and higher overall portfolio quality, while average receivables remained stable across the financial year. A key milestone for this portfolio was the significant improvement in asset quality. Through active portfolio management and targeted customer workouts, nonperforming loans reduced [ $36.9 million ] at 30th of June '25, down to $26.5 million at 30th of June 2026. While Livestock markets are expected to remain dynamic in FY '27, the improved quality of the portfolio and ongoing customer activity provide a solid foundation for 10% growth and sustainable earnings performance. Moving to Slide 40 on our transformation program. To support our growth ambitions and streamline our operating model, we have partnered with Constantinople to consolidate multiple legacy platforms into a single cloud-based core banking system. Consolidating onto one infrastructure simplifies our architecture, removes legacy platform complexity and eliminates redundant manual processes. As this new platform matures, the program will deliver operational and financial benefits over time. Including streamlined digital workflows and automated decisioning, which will deliver faster turn times, improving the experience for our customers, broker partners and employees, higher Reverse Mortgage origination volumes and future product growth and a simplified cloud-based architecture, which reduces vendor complexity enables total legacy system decommissioning and drives down our overall cost to serve on a per account basis. Following migration completion and full adoption of the target operating model, these efficiency gains will drive sustainable long-term improvements in our operating leverage and cost-to-income ratio. On to Slide 41. As mentioned, in July '26, we launched the first phase of our Reverse Mortgage origination on the Constantinople platform. The program remains on schedule and within scope with FY '26 external implementation costs estimated at $2.4 million. We are already seeing early proof of execution with approximately 40% of all new Reverse Mortgages origination volumes currently being processed through the new platform. Looking ahead to FY '27, our focus shifts to platform utilization and our legacy retirement schedule. We plan to transition our remaining Reverse Mortgage broker channels onto the new platform to achieve 100% of new Reverse Mortgages originations on the system to deploy additional digital functionality to further streamline processing and enhance decisioning speed and to migrate existing deposit portfolios onto the core platform while introducing new digital savings and deposit products. In summary, in FY '26, Heartland Bank Australia materially met underlying guidance, delivering 19.7% Reverse Mortgage growth, expanding net interest margin by 73 basis points and going live with the first phase of our core cloud platform. With strong customer outcomes and a clear transformation road map we enter FY '27 focused on delivering continued business growth and further improvements in our operational performance. Finally, I would like to thank our people for looking after our customers and partners with so much care and dedication this year as well as our Board and shareholders for their ongoing guidance and support. I will now hand back to Andrew.

Thanks, Michelle. So just [indiscernible] with the outlook and starting with Slide 43 in terms of our focus for the current financial year. Our priority for FY 2027 is to continue improving shareholder return by growing return on equity to at least 7.5% and lifting profitability to at least $102 million. As our FY 2026 results demonstrate Heartland has reset its core strategic foundation, margin and asset quality have been restored to target levels. Our enhanced collections, recoveries and write-off strategies are embedded as BAU now and the NSA program has successfully included. We will use this foundation in FY 2027 to focus on building and acquiring scale through accelerating growth in core portfolios with Reverse Mortgage growth targets greater than 18% in both countries and successfully completing the proposed transaction, subject to satisfying all MIA conditions. This will be supported by executing the next phase of our technology transformation programs to enhance operating leverage and to unlock future growth. And commencing merger integration subject to completion of the proposed transaction. These activities will provide the opportunity for Heartland to optimize capital held within the business as the financial year progresses. Turning to Slide 44 and FY 2027 guidance. Heartland expects NPAT for FY 2027 to be at least $102 million, excluding any costs related to the proposed transaction. Subject to satisfaction of all MIA conditions as the proposed transaction nears completion, guidance will be updated to reflect the impact of Heartland Bank merging with TSB. As previously mentioned, FY 2027 guidance is provided by Heartland on a reported basis only, and we intend to add this approach to guidance and the presentation of our financial results going forward with any exceptional items disclosed where applicable. The Board continues to target a total dividend payout ratio of at least 50% of NPAT in FY 2027. In closing, thank you all for joining the call. As you will have seen, FY 2026 has been a big year, and we have achieved a lot. I'd like to acknowledge the efforts and hard work of our dedicated staff who have worked tirelessly to achieve these outcomes. I will now open it up for questions.