ANZ.NZX - Anyone holding?

[Snoopy]

My particular measuring stick of choice at the moment is 'Operating Margin'. This is 'Operating Profit' divided by assets under management. I regard 'Operating Profit' as the same as Earnings Before Interest and Tax (EBIT).

If you turn to page 156 of AR2013, the 'Segment Result Before Tax' (EBT) for NZ operations is listed at $A1,219m. ( I will work in $A for the NZ operation because this is the currency used in in the Annual Report.) To get EBIT I have to add back an allowance for the core underlying bank debt.

Total interest expense is shown in note 4 as $15,869m. But this includes interest payable to depositors. The underlying interest bill is only $4,789m.

Where the allocation of corporate interest between segments is not specified, I prefer to allocate this in proportion to divisional revenue. Again using the information on page 156, New Zealand revenue is:

$2,208m / $18,446m = 12% of the total.

12% of $4,789m comes out to $574m

Adding this to the NZ segment result gives me my EBIT figure.

$1,219m + $579m = $1,793m

Total NZ 'external assets' are listed on p156 as $85,229m.

So the 'operating margin' based on assets in loans is:

$1,793m / $85,229m = 2.104%

I note that this is the operating margin, looking at the NZ business in its entirety.

Thanks to Belgarian for pointing me in the right place to uncover the equivalent figures for UDC. UDC is ANZ's wholly owned finance subsidiary and probably a better measuring stick for some of those other NZ listed finance companies.

https://www.udc.co.nz/pdf/UDC_Prospectus.pdf

The 'profit before tax' is listed as $59.664m (p35). But this includes a provision for credit impairment of $7.123m which I would remove to get the picture of ongoing operational performance. So I get EBT of $66.787m.

Now go to note 4 (p43) on interest expense. There is underlying interest over and above what is due to debenture holders of $16.623m.

So total underlying EBIT = $66.787m + $16.623m = $83.07m

Now turn to page 45 (note 8) and you will see total loans and advances of: $2,065.117m

So the operating margin based on the end of year loan balance book is:

$83.07/$2065.11 = 4.02%

That is almost twice the margin of the underlying ANZ bank in NZ, which is not what I was expecting. I will have to consider.

1/ whether I have made a mistake.
2/ what all this means for the likes of the potential of Heartland.

SNOOPY