HGH - Heartland Group Holdings

[percy]

I think we all would agree with you,yet govts in USA and UK say people doing this and remaining in their own home is the best thing for them.
I would not borrow money to buy a car.
Yet people are wanting to borrow money for cars,houses,farm,stock,school fees,medical expenses,boats ,planes and much more.
It is freedom of choice whether someone wants to stay in their own home or not.Sentinel are supplying a service to those who want it.They make sure the person wanting the loan get their own legal advice. Why is the demand there?
I think people having a "trusted bank" in Heartland owning Sentinel will give people more comfort/security in this product.
I suppose far too many New Zealanders have all their wealth/capital tied up in their home,so I expect Sentinel will grow very quickly with our ageing population.

[Harvey Specter]

Kiwigold - Agree but if people want them fine.

A much better way to do (in a one kid family) would be to gift house to kid. They then get loan taking advantage of lower interest rates and fees (maybe even a free tv) on the presumption they have a job to service. Their inheritance will be more. You should be able to structure better but you get the point.

[percy]

Result out.
Net profit $16.7mil.
EPS 4.5 cents.
NTA.89cents
Dividend 2.5cents [you were right Paper Tiger]
Equity Ratio 15.3%
Non core property down to $99.2 mil and projected to be $67.5mil at 30/6/2014.
All boxes ticked.Well done Heartland,and new acquisition is both substantial and exciting, being focused on NZ's ageing property owning population.
We shareholders remain "well positioned."!!!!! [sorry Paper Tiger]

[Jay]

We might be "well positioned" in a number of shares. However I would like to move to "reaped big rewards" at some stage before I retire from these well positioned shares :)
Good result and look forward to the full year result.

[artemis]

Kiwigold - Agree but if people want them fine. A much better way to do (in a one kid family) would be to gift house to kid. They then get loan taking advantage of lower interest rates and fees (maybe even a free tv) on the presumption they have a job to service. Their inheritance will be more. You should be able to structure better but you get the point.

Not everyone has offspring of course, or even rellies they like. Some offspring are not willing or able to be involved. And there might be rather a lot of older folk whose aim in life is for the cheque to the undertaker to bounce. And good for them! (OK, not so good for the undertaker.)

[Master98]

Result out.
Net profit $16.7mil.
EPS 4 cents.
NTA.88cents
Dividend 2.5cents [you were right Paper Tiger]
Equity Ratio 15.3%
Non core property down to $99.2 mil and projected to be $67.5mil at 30/6/2014.
All boxes ticked.Well done Heartland,and new acquisition is both substantial and exciting, being focused on NZ's ageing property owning population.
We shareholders remain "well positioned."!!!!! [sorry Paper Tiger]

minor correction:
EPS 4.3cents
NTA 89cents
cheers

[iceman]

Result out.
Net profit $16.7mil.
EPS 4 cents.
NTA.88cents
Dividend 2.5cents [you were right Paper Tiger]
Equity Ratio 15.3%
Non core property down to $99.2 mil and projected to be $67.5mil at 30/6/2014.
All boxes ticked.Well done Heartland,and new acquisition is both substantial and exciting, being focused on NZ's ageing property owning population.
We shareholders remain "well positioned."!!!!! [sorry Paper Tiger]

Yes a steady and healthy result Percy. NTA 89c according to report. Very pleasing to see the benefit of becoming a Bank clearly coming through in this report with a big reduction in cost of funds.
Non core property being worked on nicely and also exiting some lower margin and higher risk rural lending from the PGW loanbook.
But we are seeing increased competition in the business and rural sectors which they have to deal with, but they seem to be trying to stay away from direct competition with the big banks and focus more on livestock lending in the rural sector.
Motor vehicles showing a healthy increase while they continue to reduce the home mortgage book with more than 50% of the re-financing moving to Kiwibank where we clip the ticket.

So a pleasing steady as she goes result with a nice little divie. We are well positioned indeed.

[percy]

We might be "well positioned" in a number of shares. However I would like to move to "reaped big rewards" at some stage before I retire from these well positioned shares :)
Good result and look forward to the full year result.

Just loved your post.!!! lol.

[couta1]

I don't hold these but have looked into Sentinel reverse mortgages as a future option and if you want to use your money rather than leaving it to others who don't need the money then why not? At least you get to enjoy the fruit of your labor whilst still alive Disc-Held Marac bonds previously

[Snow Leopard]

Result out.
Net profit $16.7mil.
EPS 4 cents.
NTA.88cents
Dividend 2.5cents [you were right Paper Tiger]
Equity Ratio 15.3%
Non core property down to $99.2 mil and projected to be $67.5mil at 30/6/2014.
All boxes ticked.Well done Heartland,and new acquisition is both substantial and exciting, being focused on NZ's ageing property owning population.
We shareholders remain "well positioned."!!!!! [sorry Paper Tiger]

NTA is at least 1.5cps higher than I calculated recently, lose one point.
I actually said that this dividend would be 2cps -lose another point.

The accounts are actually a little better than I expected at first glance.

A quick look at the disclosure statement shows that the banks tier capital ratios are 14.69% at Dec13, for those of us who like to worry about such things.

Best Wishes
Paper Tiger

[Snoopy]

Just to add to this, the half year result disclosure does not contain all the detail of full year report, as regards the risk analysis on outstanding loans. So I do not expect it to be all that useful in seeing how Heartland is progressing with their problem loans. However, one figure that we can check out will be the 'Investment Properties' as listed on the balance sheet. We know that Heartland are ahead of their own schedule in selling down these problem loans. But have the loans sold down come from here, or have they come from the regular loans outstanding? And have the loans been wound up at a profit or a loss? Those questions at least should be answered.


I wrote the above on 7th February. Now looking at the 31st December balance sheet and in particular the heading 'investment properties'.

December 2012: $55.316m
June 2013: $58.217m
December 2013: $61.481m ( +11.1% on pcp )

That means the value of 'problem' investment properties on the balance sheet is in fact going up, and has been doing so consistently since last June.

That fact is at odds with the declared statement by Heartland:

"Heartland continues to significantly reduce its non-core property holdings"

Total Property Book

30th June 2013 - $122.3m
31 December 2013 - $99.2m

The difference in the declared gross values of the property book is because Heartland's problem property book is split between those 'investment properties' and reduced grade regular loans. The half year report does not give shareholders the detail of what is happening to the latter. But if shifting loans from problem regular loans to 'investment properties' is part of the debt reduction process that is going on, I find that distinctly uninspirational.

Looking at note 12, the provision for individually impaired assets was $5.131m, up from $3.611m in the pcp. This is an indicator that increasing losses are probably being incurred as the problem properties are (supposedly?) being wound down.

SNOOPY

[Snow Leopard]

Snoopy - I find your interpretation of the half year accounts very imaginative.

Best Wishes
Paper Tiger

[Snoopy]

The underlying debt of the company according to the full year statement of financial position is: $33.673m+ $2.859m = $36.532m

To calculate the total underlying company assets we have to (at least) subtract the finance receivables from the total company assets. I would argue that you should also subtract the problem 'Investment Properties' and the unspecified 'Investments' from that total:

$2,504.627m - ($2,010.376m +$58.287m + $165.223m) = $270.741m

We are then asked to remove the intangible assets from the equation as well:

$270.741m - $22.963m = $247.778m

Now we have the information needed to calculate the underlying company debt net of all their lending activities:

$36.532m/$247.778m= 14.7% < 90%

Result: PASS TEST

The position has improved significantly over the last year. Looks like the debt position has not worsened during the year because of all the deferred branch transformation expenditure that was shunted into the FY2013 year as I feared.

An update from the previous reporting period, FY2013.

The underlying debt of the company according to the HY2014 statement of financial position is: $32.612m

To calculate the total underlying company assets we have to (at least) subtract the finance receivables from the total company assets. I would argue that you should also subtract the problem 'Investment Properties' and the unspecified 'Investments' from that total:

$2,492.090m - ($1,905.850m +$61.481m + $255.427m) = $269.332m

We are then asked to remove the intangible assets from the equation as well:

$269.332m - $22.891m = $246.441m

Now we have the information needed to calculate the underlying company debt net of all their lending activities:

$32.612m/$246.441m= 13.2% < 90%

Result: PASS TEST

This means the position has improved usefully over the latest half year.

SNOOPY

[Snoopy]

Results are out so time to have another look at those Heartland banking covenants.

Updating for the full year result FY2013. The EBIT figure is not in the financial statements. So I will use 'interest income' as an indicator for EBIT, once I have taken out the selling and administration costs

EBIT (high estimate) = $206.349m-$70.347m= $136.002m

Interest expense is listed as $110.895m.

So (EBIT)/(Interest Expense)= ($136.002)/($110.895)= 1.22 > 1.20

Result: PASS TEST, a significant improvement from the FY2012 position.


Results are out for HY2014 so time to update.

Updating for the half year result HY2014. The EBIT figure is not in the financial statements. So I will use 'interest income' as an indicator for EBIT, once I have taken out the selling and administration costs

EBIT (high estimate) = $100.500m-$32.417m= $68.083m

Interest expense is listed as $48.114m.

So (EBIT)/(Interest Expense)= ($68.083)/($48.114)= 1.42 > 1.20

Result: PASS TEST, a significant improvement from the FY2013 position. Perhaps that drop in interest being paid to debenture holders as a result of becoming a bank is starting to come through?

SNOOPY

[Snoopy]

Updating this number for the full year

Equity Ratio = (Total Equity)/(Total Assets)

Using numbers from the Heartland FY2013

= $370.542m/$2504.627m = 14.6%

This is a significant deterioration on the FY2012 position. Not surprising as borrowings from debenture customers have increased, which results in a larger total asset position and dividend payments have weakened the balance sheet by shrinking equity. Unfortunately I believe that if HNZ is going to grow as they proclaim, they simply can't do it by shrinking their share capital base.


Updating this number for the half year HY2014

Equity Ratio = (Total Equity)/(Total Assets)

Using numbers from the Heartland FY2013

= $382.510m/$2492.090m = 15.3%

This is an improvement on the FY2013 position. It does not include any effect from the just announced reverse mortgage acquisitions. Nevertheless the underlying loan book continues to shrink away, albeit by a miniscule 0.5%.

SNOOPY

[noodles]

Nevertheless the underlying loan book continues to shrink away, albeit by a miniscule 0.5%.


The shrinking loan book is due to their exit from the unprofitable residential mortgages from the former building societies. Until this trend stops, I think it is a but pointless focusing on the loan book size. What is important is the Net Operating Income. This increased 13%.

[Snoopy]

The shrinking loan book is due to their exit from the unprofitable residential mortgages from the former building societies. Until this trend stops, I think it is a but pointless focusing on the loan book size. What is important is the Net Operating Income. This increased 13%.

I agree with you Noodles that the long term profitability of the loan portfolio is more important than maintaining the size of the loan book at any cost.

One thing that has surprised me though is the reduction in size of the rural loan portfolio. This has fallen over the past calendar year from $481m to $416m, a fall of 13.5%. By contrast the fall in 'Retail and Consumer' (including residential mortgages) has been from $946m to $906m a fall of 4.2%.

In both gross terms and percentage terms, the biggest 'shrinkage' in Heartland's loan portfolio is on the rural loan book. Proof that the real 'Heartland' of New Zealand is actually Auckland?

SNOOPY

[Harvey Specter]

Result: PASS TEST


Result: PASS TEST,


This is an improvement on the FY2013 position.Is Snoopy becoming a belieber? When will he rate this a buy.

[Snoopy]

So $10mil net profit will allow Sentinel to grow loan book by approx. $90mil.[which from memory is the amount they said they intended to grow the book by per year.]
As Heartland's net profit will be nearly four times this amount,they may decide to grow the loan book even more.!!


Good point Percy. Yes Heartland could use their retained earnings to boost their loan book by far more than just their new retained capital. And $10m in retained earnings from capital could indeed allow the reverse mortgage loan book to expand by $90m. But Heartland are going to have to choose where they deploy any new retained earnings. And of course they can't boost dividends and boost retained earnings with a static earnings per share outlook. Shareholders can benefit from one or the other, but not both.

SNOOPY

[Harvey Specter]

Shareholders can benefit from one or the other, but not both.That's what the DRiP is for. Allows those that want the income to have it, but those that dont, to reinvest for growth. Not quite both, but a half way house.

[noodles]

I agree with you Noodles that the long term profitability of the loan portfolio is more important than maintaining the size of the loan book at any cost.

One thing that has surprised me though is the reduction in size of the rural loan portfolio. This has fallen over the past calendar year from $481m to $416m, a fall of 13.5%. By contrast the fall in 'Retail and Consumer' (including residential mortgages) has been from $946m to $906m a fall of 4.2%.

In both gross terms and percentage terms, the biggest 'shrinkage' in Heartland's loan portfolio is on the rural loan book. Proof that the real 'Heartland' of New Zealand is actually Auckland?

SNOOPY

Again this is their strategy, rather than a drop off in business.

"This decrease was driven by reductions in the receivables book acquired from PGG Wrightson Limited, in areas of either higher risk or overlapping competition with major banks. Heartland’s emphasis is mainly
on livestock lending with the pipeline looking good for the next few months. Livestock lending
continued to perform well, growing 10.6% over the 12 months ended 31 December 2013.
"

[Snoopy]

Back to the acquisition.

From page 29 of the February 2014 presentation:

----

43m shares at 90c works out at $38.7m in share value. Add the $48.3m in 'cash' being paid to the seller and I get $87m, the acquisition consideration.

Heartland say they are funding the $28.3m cash component of their purchase over and above the $20m capital raising from existing cash (by definition surplus or the Reserve bank would not allow them to do it) on their balance sheet.

Now go back to page 14 of the February 2014 acquisition presentation. The portfolio size is listed as $NZ340m plus $A380m ($NZ420m at prevailing exchange rates). So the total in $NZ terms is around $760m.

The underlying capital used to support this acquisition is $NZ87m.

So the loan value to underlying capital ratio is $87m/$760m= 11.4%



The above relates to the Reverse Mortgage acquisition. But we can also work backwards and see from a 'reserve bank' pair of eyes (wheels?) deduce what is considered an acceptable operating leverage ratio for the rest of the business.

Apparently, just before the purchase of the reverse mortgages, Heartland had 'surplus' cash of $28.3m on the balance sheet. If we look at the 31st December 2013 HY2014 balance sheet $178.5m in cash was there. So we can deduce that:

$178.5m - $28.3m = $150.2m

of cash is required , as part of a more comprehensive asset package, to fund all the rest of the Heartland business. Put another way, the 'total equity' (again from the balance sheet) needed to fund the rest of the Heartland business is:

$382.5m - $28.3m = $354.2m

The size of the loan book at balance date was $2,077.0m

So the equity to loan book ratio for the rest of the business, as judged acceptable under the watchful eye of Mr Wheeler, is:

$354.2m/$2,077m = 17.0%

SNOOPY

[Snoopy]

Is Snoopy becoming a belieber? When will he rate this a buy.


Heartland has always been a buy, but only at the right price. The right price is the sticking point. As for becoming a belieber, don't expect me to place myself on You Tube doing some sort of celebratory belly dance when this happens!

SNOOPY

[Harvey Specter]

Heartland has always been a buy, but only at the right price.Interesting - I always thought you were off the opinion that this was too risky. Having said that, any company is a buy at the right price provided it has a positive liquidation value.

What do you consider the right price (a general range would be fine if you dont have a exact figure) as I think it would give some more insight to your detailed analysis.

[winner69]

Jeff was on the radio yesterday and said the NZ economy isn't as strong as most make out ...good in pockets but not that good in other areas

Also said heartland is in a low growth lending market at the moment

http://www.radionz.co.nz/audio/player/2587034

About 4.30 in

[Snoopy]

Once again there is no mention of Tier 1 or Tier 2 in the Heartland FY2013 report.

The 'best case' scenario is that all loans are Tier 1. $2,097.553 of loans are outstanding. 20% of that figure is:

0.2 x $2,097.553m = $419.5m

Heartland has total equity of $370.5m which is well below the 20% of loan target no matter what the tier classification of the loans.

Result: FAIL TEST


Once again there is no mention of Tier 1 or Tier 2 in the Heartland HY2014 report.

The 'best case' scenario is that all loans are Tier 1. $2,097.553m of loans are outstanding. 20% of that figure is:

0.2 x $2,076.968m = $415.4m

Heartland has total equity of $382.5m which is still below the 20% of loan target no matter what the tier classification of the loans.

Result: FAIL TEST

PS I do note that while other posters have protested at my 20% of equity to back up the loan measuring stick in the past, it is not too far away from the 17% which by implication is judged acceptable by management under the watchful eye of Reserve Bank chairman Graeme Wheeler. The reserve bank further qualifies their views that a company of Heartlands credit rating still has a 1 in 30 chance of going broke in any year. I prefer to think in business cycles and 30 years will contain around five of those. So you could restate the Reserve Bank's view as saying that HNZ has a one in five chance of going broke at the bottom of the business cycle. For me that investment risk is too high. So I am sticking to my 20% equity requirement, even if the Reserve Bank will settle for less.

[Snoopy]

Interesting - I always thought you were of the opinion that this was too risky. Having said that, any company is a buy at the right price provided it has a positive liquidation value.

What do you consider the right price (a general range would be fine if you dont have a exact figure) as I think it would give some more insight to your detailed analysis.


Personally I do think there are lower risk options out there in this general sector generating a similar return. That is why I am not a Heartland shareholder as of now. To get me on the share register would require.

1/ A strengthening of the balance sheet. About $35m -$40m of new equity should cover this (that addresses the risk issue).
2/ A dividend yield of some 7-8% (that addresses the return issue).

SNOOPY

PS Of course it would also have to stack up favourably with other comparable investments.

[Snoopy]

Snoopy,

In HNZ's case, I'd expect shareholders would be smart enough to support any small to medium shortfall in funds at the bottom of the cycle via a nicely priced rights issue. I think most of us would support it as we're been well treated ... well almost ... Grrr ... tiny public pools! This is how it should work imho. Nice tight ship churning out dividends and capital gains for 5 out of 7 years of the cycle with supportive shareholders covering them for the 2 out of 7 years when they need it.

Would you disagree?

Belg, when I said that Heartland had a one in five chance of going broke in any business downturn, according the Reserve bank credit ratings, I do not expect it to actually go bankrupt in such a situation. As you point out, supportive shareholders could be asked for more capital or a placement made to save the company in an extreme stress situation.

What I believe is that any future heroic supportive shareholders are almost certain to demand a discount as the price of their heroism! While HNZ remains if not short of capital, at least wearing shorts with paper thin material making up the seat of those pants, why go overboard and invest heavily now? The alternative of being one of those "heroic supportive shareholders" sometime in the future seems so much more lucrative, er I mean heroic!

SNOOPY

[percy]

An equity ratio any financial insto would be proud of.Liquidity strong,supportive shareholders,and improving profits,will drive a better credit rating.
A NZ bank supporting New Zealanders.

[percy]

LOL Snoopy, I've found being one of the "heroic supportive shareholders" generally works out quite well so long as one takes a longer term view. Both in terms of the discounted rights and the longer term success of the company.

LOL sums up how I see it too.!!!

[Snow Leopard]

Once again there is no mention of Tier 1 or Tier 2 in the Heartland HY2013 report.

The 'best case' scenario is that all loans are Tier 1. $2,097.553m of loans are outstanding. 20% of that figure is:

0.2 x $2,076.968m = $415.4m

Heartland has total equity of $382.5m which is still below the 20% of loan target no matter what the tier classification of the loans.

Result: FAIL TEST

PS I do note that while other posters have protested at my 20% of equity to back up the loan measuring stick in the past, it is not too far away from the 17% which by implication is judged acceptable by management under the watchful eye of Reserve Bank chairman Graeme Wheeler. The reserve bank further qualifies their views that a company of Heartlands credit rating still has a 1 in 30 chance of going broke in any year. I prefer to think in business cycles and 30 years will contain around five of those. So you could restate the Reserve Bank's view as saying that HNZ has a one in five chance of going broke at the bottom of the business cycle. For me that investment risk is too high. So I am sticking to my 20% equity requirement, even if the Reserve Bank will settle for less.

So let us apply this metric of yours to a couple of other financial institutions:
The Heartland figures of $2,076.968 are Liabilities: Borrowings and the $382.5 is total equity (including intangibles :scared:)

ANZ: (Dec-13 Disclosure Statement)
Interest and discount bearing liabilities: $93,757M
Required equity for 20% ratio: $18,751M
Total equity: $11,832M, Ratio only: 12.6%

Westpac: (Dec-13 Disclosure Staement)
Interest and discount bearing liabilities: $61,261M
Required equity for 20% ratio: $12,252M
Total equity: $6,439M, Ratio only: 10.5%

Best Wishes
Paper Tiger

[percy]

As well as the better equity ratio, Heartland shareholders get to enjoy imputated divies.

[Joshuatree]

Hi percy seems your pearly whites are gleaming:). Im looking ahead and i can see a sideways movement in the s/p for a while. Be great if Heartland can refresh the reverse annuity model so the oldies see it as a viable option in future. Always are surprises but my shallow gaze doesn't see many other catalysts on the immediate horizon but steady as she goes. cheers JT

[vorno]

Jeff was on the radio yesterday and said the NZ economy isn't as strong as most make out ...good in pockets but not that good in other areas...



Yeah there have been unheard hints of another collapse but as to when is difficult to measure. We're currently sitting (overall) at a very high & strong level as I understand it, so it only makes sense that this "hype" will correct itself at some stage.

...Probably 5-10 years away according to an article I read a while back, however they admitted that it could be a lot longer!

Opinions?

[Snoopy]

So let us apply this metric of yours to a couple of other financial institutions:
The Heartland figures of $2,076.968 are Liabilities: Borrowings and the $382.5 is total equity (including intangibles :scared:)

ANZ: (Dec-13 Disclosure Statement)
Interest and discount bearing liabilities: $93,757M
Required equity for 20% ratio: $18,751M
Total equity: $11,832M, Ratio only: 12.6%

Westpac: (Dec-13 Disclosure Staement)
Interest and discount bearing liabilities: $61,261M
Required equity for 20% ratio: $12,252M
Total equity: $6,439M, Ratio only: 10.5%

Best Wishes
Paper Tiger

Fair call PT, but not quite a fair comparison. Both ANZ NZ and WBC NZ have different credit ratings to HNZ. And although all three banks have NZ banking licences as approved by the NZ Reserve Bank, the terms of those licences are not equal. Heartland's terms are a bit more - er- restrictive.

SNOOPY

[Snoopy]

As well as the better equity ratio, Heartland shareholders get to enjoy imputated divies.

Actually ANZ (Oz) and WBC (Oz) now partially impute their dividends too for NZ share holders. However, they are not 100% imputed dividends which of course Heartland does have.

SNOOPY

[percy]

Just so much nicer having a fully imputed divie.!!! lol.

[Snow Leopard]

Fair call PT, but not quite a fair comparison. Both ANZ NZ and WBC NZ have different credit ratings to HNZ. And although all three banks have NZ banking licences as approved by the NZ Reserve Bank, the terms of those licences are not equal. Heartland's terms are a bit more - er- restrictive.

SNOOPY
So what would be a fair comparison then?
What thresholds should apply to ANZ(NZ) and Westpac(NZ), and what authority is the source of these thresholds?

Best Wishes
Paper Tiger

[Snoopy]

So what would be a fair comparison then?
What thresholds should apply to ANZ(NZ) and Westpac(NZ), and what authority is the source of these thresholds?

Best Wishes
Paper Tiger

I would take the ratios you have calculated. But instead of comparing them with each other, for each one measure the 'headroom' between the actual figure and the minimum figure that the Reserve Bank of NZ requires for each specific bank under examination.

SNOOPY

[Snow Leopard]

I would take the ratios you have calculated. But instead of comparing them with each other, for each one measure the 'headroom' between the actual figure and the minimum figure that the Reserve Bank of NZ requires for each specific bank under examination.

SNOOPY

So here we go:



Tier1&2 a la Snoopy %
RBNZ Requirement %
Buffer %


ANZ
12.6
8
4.6


WBC
10.5
8
2.5


HNZ
18.4
12
6.4



It would seem that HNZ still wins hands down. I have just followed the calculation method and instructions of Snoopy.

Best Wishes
Paper Tiger

[Snoopy]

So here we go:



Tier1&2 a la Snoopy %
RBNZ Requirement %
Buffer %


ANZ
12.6
8
4.6


WBC
10.5
8
2.5


HNZ
18.4
12
6.4



It would seem that HNZ still wins hands down. I have just followed the calculation method and instructions of Snoopy.



OK, thanks for that PT. What your table is telling us is that assuming equal stability of capital, it is Heartland that has the greater capacity to leverage its existing business for its existing capital base.

This is where the analysis gets a bit chicken and egg. The higher RBNZ capital requirement for HNZ is because HNZ is perceived as having a less stable capital base. However the calculation assumes that the capital base is stable, because the equity base used is a fixed number. So if the Tier 1 capital of Heartland were to change, for the worse or for the better, the RBNZ 12% requirement is still stuck in the immediate historical past. Ultimately the capital requirement for HNZ may approach the 8% of ANZ and Westpac (the optimistic scenario). Then Heartland will be able to leverage their existing capital even more, greatly affecting the ability of Heartland to grow off its current capital base in a positive way.

However, if Heartland has a significant loss of capital, and because it is small that might include the collapse of the property market in Queenstown (for example) that 12% buffer erquirement could suddenly look very close. And those heroic shareholders might face another call on funds.

I guess what I am saying is that on that one raw figure Heartland looks best. But that one figure does not consider the sensitivity of alternate futures that may play out.

SNOOPY

[percy]

Alternative futures look more challenging for Australian Banks than NZ's Heartland.
Australian Mining Industry;In decline.
Australian Manufacturing,In decline.
Australian Automotive Industry,In decline.
Australian Retail Stores.In decline.
Australian Qantas.In decline.
One wonders whether Australian banks will look after Australian interests before NZ intersts.Will NZ Reserve Bank ask the Australian Banks to shore up their capital ratios for their NZ subsidiaries?
The future for Heartland looks a lot more secure to me.! New Zealanders serving New Zealanders.

[Beagle]

Alternative futures look more challenging for Australian Banks than NZ's Heartland.
Australian Mining Industry;In decline.
Australian Manufacturing,In decline.
Australian Automotive Industry, On death row.
Australian Retail Stores.In decline.
Australian Qantas.In decline.
One wonders whether Australian banks will look after Australian interests before NZ intersts.Will NZ Reserve Bank ask the Australian Banks to shore up their capital ratios for their NZ subsidiaries?
The future for Heartland looks a lot more secure to me.! New Zealanders serving New Zealanders.

Fixed that for ya. You'll be right apart from in a serious collapse when the default rate on car loans of which Heartland has HEAPS goes absolutly ballistic.

You've got no idea in the heat of the last GFC how many leased and heavily encumbered luxury cars were simply left at the airport when people left the country for Australia. Unlike housing, its relativly easy to walk away from cars.

[percy]

Fixed that for ya. You'll be right apart from in a serious collapse when the default rate on car loans of which Heartland has HEAPS goes absolutly ballistic.

You've got no idea in the heat of the last GFC how many leased and heavily encumbered luxury cars were simply left at the airport when people left the country for Australia. Unlike housing, its relativly easy to walk away from cars.

Yes I think the Australian banks will feel the heat with rising unemployment.
People close to the car finance business, will tell you people keep payments up on their car before the house,as they need their car to get to work.No work no income.

[Jay]

Full page advert in the NZ Herald today for their Reverse Mortgages - did not take them long.

I know they are available at several other Banks and other "finance" institutions, but you very rarely see them advertised

[SCOTTY]

Full page advert in the NZ Herald today for their Reverse Mortgages - did not take them long.

I know they are available at several other Banks and other "finance" institutions, but you very rarely see them advertised

Quarter page ad in the "Press" today as well. Looks good :)

[Longhaul]

Quarter page ad in the "Press" today as well. Looks good :)

Is it branded as HNZ?

[Jay]

Herald ad is

[SCOTTY]

Is it branded as HNZ?

Yes it is :)

[kizame]

Also advertising hard out on the rock for livestock purchases,and no repayments for 18 months if i remember correctly.

[Longhaul]

Asking for a bit of help for a newbie...

Can anyone explain how the June 2013 ROE of -6.5% is calculated as per slide 5 of the recent investor presentation (http://www.heartland.co.nz/_upload/news/Investor%20Presentation%20140022013.pdf)?

(My own calculation was ridiculously different!)

Thanks

[Snow Leopard]

Asking for a bit of help for a newbie...

Can anyone explain how the June 2013 ROE of -6.5% is calculated as per slide 5 of the recent investor presentation (http://www.heartland.co.nz/_upload/news/Investor%20Presentation%20140022013.pdf)?

(My own calculation was ridiculously different!)

Thanks

Normalised ROE = Normalised NPAT / Equity.

6.5% = $24.3M / $372M (approx)

Normalised NPAT is what they would have earned if they had not impaired all that property & RECL fee)

Does that help?

Best Wishes
Paper Tiger

[Longhaul]

Normalised ROE = Normalised NPAT / Equity.

6.5% = $24.3M / $372M (approx)


Thank you for explaining that PT.

Another minor question, in the 2013 Annual Report total equity at 30 June 2013 is $370.5m. Is there a reason your figure of $372m (approx) above is different?

Sorry one more silly question, in the Annual Report there is share equity for both Company and Group. What is each figure referring to and which one should I be looking at?

[winner69]

Thank you for explaining that PT.

Another minor question, in the 2013 Annual Report total equity at 30 June 2013 is $370.5m. Is there a reason your figure of $372m (approx) above is different?

Sorry one more silly question, in the Annual Report there is share equity for both Company and Group. What is each figure referring to and which one should I be looking at?

As PT had pointed out on numerous occasions most things are in the Annual/Interim Reports

In response to your query re Company and Group here is Note 1 -

Note 1-.
Reporting entity

The financial statements presented are the consolidated financial statements comprising Heartland New Zealand Limited (Company) and its subsidiaries and joint venture (Group).

The Company, through a subsidiary, owns 100% of Heartland Bank Limited (Bank). The Bank was formerly known as Heartland Building Society. Heartland Building Society was established in January 2011, as a result of the merger of Canterbury Building Society (CBS) and Southern Cross Building Society (SCBS).

The Bank owns 100% of MARAC Finance Limited (MARAC) and PGG Wrightson Finance Limited (PWF). The Company owns 100% of Heartland Financial Services Limited (HFSL) which holds a 50% joint venture interest in MARAC JV Holdings Limited (MJV) with the New Zealand Automobile Association. Refer to Note 5 - Significant subsidiaries.

The Bank acquired PWF on 31 August 2011, as a result comparatives for the year ended 30 June 2012 only include the PWF result from the date of acquisition.

The Group includes Heartland ABCP Trust 1 and CBS Warehouse A Trust (collectively the Trusts), which are special purpose vehicles holding securitised loans purchased from MARAC and the Bank.

All entities within the Group offer financial services or are special purpose entities. The Group operates and is domiciled in New Zealand. The registered office address is 75 Riccarton Road, Christchurch.


OK clear as mud now?

The short answer is always look at the Group figures

[Snow Leopard]

Thank you for explaining that PT.

Another minor question, in the 2013 Annual Report total equity at 30 June 2013 is $370.5m. Is there a reason your figure of $372m (approx) above is different?

Sorry one more silly question, in the Annual Report there is share equity for both Company and Group. What is each figure referring to and which one should I be looking at?

Q2 seems to have been satisfactorily answered by winner69.

Q1:

A1: $372M approx is approximately $370.5M :t_up:

A2: $24.3M / $370.5M = 6.6% rounded to 1 decimal place (6.57% to 2 dp) So they:

A2.1: Forgot to round it up :t_down:

A2.2: Had a different figure for Equity calculated by:

A2.2.1: taking the average of the equity at beginning and end of the year :mellow:

A2.2.2: restated the equity like they restated the $24.3M which was $24.4M in the Annual report which was because:

A2.2.2.1: I will stop now :D

So I thought I would use an approx figure that looked right-ish, wish I had not now :scared:

Best Wishes
Paper Tiger

[percy]

Hi there holders ... Is there anyone out there NOT applying for some or the full 15k worth? If so, why not?

I have not decided what to do as yet.I have a rather large holding [for me] and will be receiving shares in lieu of dividend.
My wife will receive cash dividend.
Why I have not decided is because I get sick of applying for large amounts of shares and ending up with a small amount.It means taking money off deposit and tying it up for a few weeks.
With the HNZ issue only being for $5mil I doubt whether I would get more than $500 to $1,000 worth.
May just apply for the minimum $2,500 for wife and self.

[vorno]

Hi there holders ... Is there anyone out there NOT applying for some or the full 15k worth? If so, why not?

Well, apart from not having enough money I haven't received an invitation to do so. No forms received, nothing.

[percy]

Well, apart from not having enough money I haven't received an invitation to do so. No forms received, nothing.

If you don't receive them in today's mail and want to apply for the SPP I think you should get in touch with Link Market Services
phone [09] 375 5998.

[iceman]

Hi there holders ... Is there anyone out there NOT applying for some or the full 15k worth? If so, why not?

Yes me for 2 reasons. HNZ is already above the weighting in my portfolio that I want any stock to be and I have been using all spare cash to accumulate more SUM recently.
But I find the offer enticing so will apply for $5-7k just to be in !

[Harvey Specter]

Will scaling be proportional. ie. if 10 times oversubscribed, if you applied for $15,000, you will get $1,500 but if you apply for the $2,500 minimum, you only get $250 worth.

Or is applying for a smaller amount likely to give you a better proportional result.

[Snow Leopard]

I see that I can email the acceptance form so I am in for all I can get.
I will worry about portfolio weightings afterwards.

So I just need to print the scanned blank form, sign it, scan it and send it.

Bring on the day when if you send them the money electronically that is all you need to do to apply as per many ASX companies.

Best Wishes
Paper Tiger

[Harvey Specter]

Paragraph 9.2 in the SPP document says "If Heartland receives applications in excess of $5 million, it will scale back all applications on a proportional basis."

So I read that as all applications, be they big $15k or small $2.5k would be scaled back equally.That was my reading of earlier info. I haven't received my investor pack yet.

Catch 22 - I expect it to be heavily oversubscribed so no point applying as it will tie up too much cash, but if everyone does they same, then it I will have missed out on a great opportunity.

[newtrader]

I'm not too familiar with SPPs, can someone explain how will this affect the share price once the new shares are issued? Will the price drop below the share issue price?

[Harvey Specter]

I'm not too familiar with SPPs, can someone explain how will this affect the share price once the new shares are issued? Will the price drop below the share issue price?have a look at VML, SEA and a few others that have done recently.

My view, is it will hold Dow the price for a bit but definitely not below issue price due to a overhang, bit due to small pool, it will rise shortly after on its current trajectory.

[RTM]

My son has an entitlement and may not take it up.
Is there a way for me to fund this and then have them transferred to my ownership after they have been issued ?

[percy]

My son has an entitlement and may not take it up.
Is there a way for me to fund this and then have them transferred to my ownership after they have been issued ?

Yes,you can fund them,and then do an off market transfer for the ones he gets.

[Lizard]

Yes, I was just looking at this thinking perhaps I would arbitrage by selling shares at 91cps to buy back and make a few cents per share... but then my maths reckons I'll be lucky to get half of any application, so is a bit of a gamble that I'll end up with too few.

[couta1]

I purchased a parcel of these on March 5th through DB and it goes Ex on March 10th,will I get divvy? Money settlement occurs on 10th,cheers

[Xerof]

I purchased a parcel of these on March 5th through DB and it goes Ex on March 10th,will I get divvy? Money settlement occurs on 10th,cheers

yep, record date is 12th

[couta1]

yep, record date is 12th
Thank you Xerof

[artemis]

My son has an entitlement and may not take it up.
Is there a way for me to fund this and then have them transferred to my ownership after they have been issued ?

Computershare and Link both have off market transfer forms. I download them from the Direct Broking site, left hand navigation bar - 'Download Forms' - near the bottom. Easy.

[RTM]

Computershare and Link both have off market transfer forms. I download them from the Direct Broking site, left hand navigation bar - 'Download Forms' - near the bottom. Easy.

Thank you Percy and Artemis.
Appreciated.

RTM

[RTM]

I thought HNZ closed last week at 90 cents. Yet this morning DB says up 1.5 @88cents.
Realise it is ex dividend.....but ....I am a little confused. Can anyone educate me please !
Thanks
RTM

[Ginger_steps_]

I thought HNZ closed last week at 90 cents. Yet this morning DB says up 1.5 @88cents.
Realise it is ex dividend.....but ....I am a little confused. Can anyone educate me please !
Thanks
RTM
ASB says up 1.5 @ 89c ??

[Xerof]

The trade at 88 is an off-market sp, which doesn't register as 'last price' for change calculation on DB

the sp doesn't register on ASB at all!

at 89, it is up 1.5 ex div

the inconsistencies drive me nuts too.......

[newtrader]

Is ex dividend at the opening or closing time?

[couta1]

Is ex dividend at the opening or closing time? Opening time

[Ginger_steps_]

Thanks Xerof

the inconsistencies drive me nuts too.......[/QUOTE]

[kizame]

I'm sure someone can answer this for me,How am I able to claim my imputation credits?
they used to be paid out automatically,this last divie was worth $900+in credits.
Thanks in advance.

[winner69]

I'm sure someone can answer this for me,How am I able to claim my imputation credits?
they used to be paid out automatically,this last divie was worth $900+in credits.
Thanks in advance.

Usually accounted for in your annual tax return

Are you sure they were paid out automatically? Who paid them out?

You keen as - not being paid until April 4th (next tax year?)

[777]

I'm sure someone can answer this for me,How am I able to claim my imputation credits?
they used to be paid out automatically,this last divie was worth $900+in credits.
Thanks in advance.

The amount you get paid into your bank account is correct for any 33c/$ tax payer. If your tax rate is less then you need to file an annual tax return to get a refund of any extra tax deduction or imputation credit. As winner says this payment is in the next tax year.

May be you should look site the IRD site and learn about them treatment of these credits and other tax obligations.

Tax 101 should be taught at school.

Off my soap box.

[couta1]

Imputation credits reduce your tax liability and therefore tax payable whether you are a IR3 filer or employed on PAYE,claim them in the applicable year on your IR3 or by phoning ird after getting your personal tax summary and they will make the adjustment for you,the only time they are not worth claiming is for PIE type investments which are taxed at 28% and you happen to be on the 33% rate

[kizame]

Thanks cout1, 777, winner,I better go check and get schooled up.

[Harvey Specter]

Imputation credits reduce your gross income and therefore tax payable whether you are a IR3 filer or employed on PAYE,claim them in the applicable year on your IR3 or by phoning ird after getting your personal tax summary and they will make the adjustment for you,the only time they are not worth claiming is for PIE type investments which are taxed at 28% and you happen to be on the 33% rateslightly wrong. They don't reduce your gross income. They are a tax credit, like RWT, that reduces you tax liability.

They are non- refundable, but to the extent you have other refundable tax credits, like RWT or PAYE, this is not an issue as that will get refunded. This can be an issue if you invest through a company structure etc which has no other income, but does have expenses.

[couta1]

Have amended first sentence in post #3179 above HS,cheers

[Kagrok]

I have a couple questions about how paying for the SPP works. It'd be great if anyone knows the answer.

If you're buying the shares using direct debit, when is the money withdrawn from the account?
Is it the allotment date (25 Mar) or earlier, when the deadline closes (18 Mar)?

Also, if you apply for $15k, do they take the full amount, then return the rest if there's scaling? Or do they just take exactly however much it is?

I had a look thru the SPP pdf, but it didn't seem to say.

Thanks

[Harvey Specter]

Direct debit - dont know but I assume they will take the cash as they process the form so expect it to be once applied for. Make sure you have the cash as if the transaction gets declined, so will your application.
The shares wont be allotted to the allotment date. The time between the deadline and that date is for them to count the cash and do the admin.
They take the full amount, and refund any oversubscription.

[Snow Leopard]

Today (Tuesday 18th Mar) at 5 pm NZ is the deadline for Link to have your application for the SPP.
You can fax or email if you have not posted it off.

Hopefully not too many of you have applied for many shares.

Little bit of price weakness at the moment, though not enough to take the SPP buy price below $0.855 - presumably a bit of arbitrage going on.

Best Wishes
Paper Tiger

[Bjauck]

I've been very slack on this one, so need some help. I've recently had an operation, am laid up in bed, have access to phone and internet but not fax or the ability to scan and email. Is there anyway I can get my application into HNZ in time?

If so great, if not, not too worried. The SP differential between current SP and $0.855 used to be significant (i.e. 7% when the SP was at 91c) but now it's only 2% at most, so it won't be a disaster if I miss out.
The form says you can scan and email. If your phone has a camera, take photos of the application and attach to an email. ( A scan is a photo anyway). Make sure you write in your contact details so that Link can say if it is acceptable or not.

[Bjauck]

Hope it works. I had filled in my application a long time ago and put the envelope to one side waiting for closer to the deadline to post it.....only to forget about it! So I had to do a quick scan and email yesterday!

[iceman]

Today (Tuesday 18th Mar) at 5 pm NZ is the deadline for Link to have your application for the SPP.
You can fax or email if you have not posted it off.

Hopefully not too many of you have applied for many shares.

Little bit of price weakness at the moment, though not enough to take the SPP buy price below $0.855 - presumably a bit of arbitrage going on.

Best Wishes
Paper Tiger

You PT saying in an earlier post that we did not have to worry about being overweight with HNZ for the time being and Belgie's suggestion we should all apply for the full $15k to send a message (can't remember what message ) convinced me to apply for the full $15 amount, despite earlier hesitation. Who am I not to listen to the sound advice of such ST luminaries I thought
The money came out of the account moments after I posted the application and now only the wait to see if they send any of it back through scaling

[couta1]

Are there any forecasts for the share price on this stock in a years time? I probably paid to much at 91c but got the dividend but not entitled to participate in offer as only bought last week,thought it would be a good consistent dividend stock looking forward and I was a Marac customer for many years so a bit of a sentimental play as well.

[noodles]

Are there any forecasts for the share price on this stock in a years time? I probably paid to much at 91c but got the dividend but not entitled to participate in offer as only bought last week,thought it would be a good consistent dividend stock looking forward and I was a Marac customer for many years so a bit of a sentimental play as well.
Brokers have an average target price of 93c
http://www.4-traders.com/HEARTLAND-BANK-LTD-11344518/consensus/

[couta1]

Cheers Noodles obviously a dividend play then at this stage

[Harvey Specter]

Cheers. Hey and does anyone have any best guess on how much scaling there will be?Significant. I am picking less than $7.5k worth from a full $15k application.

[couta1]

Not sure you will get many on here agreeing with that statement! There was a discussion (probably several) on this thread where people were stating their target prices with rationale etc. Many were about $1 from memory. Have a read of the thread, you might find some useful info to help answer your question!
My comment was based on the 93c target and my buy price of 91c plus working out the dividend plus imps which is healthy and their desire to pay increasing dividends in the future,cheers

[couta1]

Yeah OK, but first and foremost where does that 93c target come from? Which analysts and who says they are correct?
Who says others on this thread (talking targets of over $1 are not correct?) Seems like you have seen the 93c target price and believed that this is "obviously" now a dividend play only, whereas surely you should be doing more research than that...
Nothing wrong with a conservative initial approach,off course we all want more growth,bought stock to balance my portfolio so all good.

[couta1]

This was an old post of mine that compiled 3 regular posters valuations on HNZ couta. Note these were late last year before the latest acquisition and SPP etc, however it should give you some idea of where some investors think this SP is going and that for them at least it is far from a dividend play only at this stage.

I'd be really interested in hearing these same guys updated target prices now.
Thanks for this

[Longhaul]

All good mate, hopeful those numbers get hit sometime this year :)

Hmmm, wonder what the catalyst(s) will be to make the market take notice? (Not saying there's anything wrong with a slow and steady climb).

[percy]

Forbar have a 12month target price of 97 cents,while Craig's is 85 cents.
Should Heartland's credit rating improve, I think we will see a huge re-rating which will have an immediate affect on the share price.
Then will will see Paper Tiger's $1.15,Noodles's $1.16 and my $1.47 all being reached.From memory Sparky The Clown was either $1.25 or $1.35.
My cheque for the SPP was banked last night.Was getting a little concerned as I posted it last Tuesday night.I don't like SPPs so only applied for the minimum.

[percy]

Percy, both my brokers were falling over themselves to arrange everything for me ... I'm pretty sure there must be something in it for them.

Yes there will be,but not sure how much.
In the top right hand corner of the SPP application form their is a box for Broker name/Advisor code,so they can "clip the ticket."

[percy]

Percy, both my brokers were falling over themselves to arrange everything for me ... I'm pretty sure there must be something in it for them.

Yes there will be,but not sure how much.
In the top right hand corner of the SPP application form their is a box for Broker name/Advisor code,so they can "clip the ticket."

[percy]

Percy, both my brokers were falling over themselves to arrange everything for me ... I'm pretty sure there must be something in it for them.

Yes there will be,but not sure how much.
In the top right hand corner of the SPP application form their is a box for Broker name/Advisor code,so they can "clip the ticket."

[Snow Leopard]

The bank of England has recently published a couple of little pdfs:

Money in the modern economy (http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneyintro.pdf)

Money creation in the modern economy (http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf)

useful reading for all and essential reading for bank shareholders.

Best Wishes
Paper Tiger

[Xerof]

They can only take oversubs if it was explicitly mentioned.

[Harvey Specter]

Wow, $5k aint gonna get me much then!Less than $1,250 worth.

[Snow Leopard]

So when you & I get our monies back we will be buying on market given we think it is such a wonderful company and we wanted more.

Won't we?

Best Wishes
Paper Tiger

[Joshuatree]

Course you will, psychologically you feel you've missed out so to get back in the perceived winning circle you may be compelled to buy;). I passed so i feel I'm a winner by doing nothing and can gloat to self as the s/p comes back; ....tricking myself again.

[Bjauck]

Well...I hope all the SPP money is in an interest bearing account and that Heartland gets the interest rather than Link! I prefer the traditional rights issue procedure.

[Arbitrage]

GENERAL: HNZ: HNZ Share Purchase Plan Closes Oversubscribed

HNZ
19/03/2014 16:19
GENERAL

REL: 1619 HRS Heartland New Zealand Limited

GENERAL: HNZ: HNZ Share Purchase Plan Closes Oversubscribed

NZX Release

HNZ Share Purchase Plan Closes Oversubscribed

19 March 2014

Heartland New Zealand Limited ("Heartland") (NZX: HNZ) is pleased to advise
that its Share Purchase Plan ("SPP") has closed oversubscribed. The SPP
offer closed at 5.00pm on 18 March 2014. Under the SPP, Heartland sought to
raise up to $5,000,000 by offering eligible shareholders the opportunity to
subscribe for new shares having a maximum total value of $15,000 per
shareholder. The issue price will be announced upon market open on 20 March
2014 and will be calculated as the lesser of:

(a) a 2.5% discount to the average end of day market price of shares over the
5 day trading period from 13 March to 19 March 2014; and

(b) $0.855 per share (being the price paid by investors in the equity
placement, reduced by the amount per share of the cash dividend declared by
Heartland on 25 February 2014).

The SPP offer received strong shareholder support with Heartland receiving
applications totalling $20,475,000 which exceeded the offer maximum of
$5,000,000 by $15,475,000 or 309.5%. In accordance with the terms and
conditions of the SPP, Heartland will scale back all applications on a
proportionate basis, based on the total amount of application moneys received
from all applicants (and any rounding of the number of shares to be allotted
will be up to the nearest share).

Shares to be issued under the SPP offer are expected to be allotted on 25
March 2014, with refunds direct credited or mailed by cheque to shareholders
within 5 business days of the allotment date. No interest will be paid on
any application monies returned to shareholders.

- Ends -

For further information please contact:

Jeff Greenslade
Managing Director
Heartland New Zealand Limited
DDI 09 927 9149
End CA:00248417 For:HNZ Type:GENERAL Time:2014-03-19 16:19:01

[percy]

No surprises there.
Confirms why I don't like SPPs.
Wasted effort.!

[Snow Leopard]

Mmmm..... depends PT. My situation requires me to think a bit broader than just the company at hand right now, so when I get my $ back I will make that decision. And U? I can't recall, you asked for the max did you not? Will we see a few 10,000 + volume orders in the coming weeks?

My situation is that HNZ is already on the limit of the self-imposed 15% of my portfolio in any one share. That includes a ridiculous (for the current market state) 23.91% cash so I really need to be spending the cents on other things (but what?)...




...or bending the rules :ohmy:

Best Wishes
Paper Tiger

[Xerof]

No surprises there.
Confirms why I don't like SPPs.
Wasted effort.!

A bit of tokenism has probably tarnished their good name percy.

Can you find out when they are going to put up their deposit rates?.....they clearly didn't read the RBNZ announcement last week:p

[rocketship]

Everybody should apply for as much as they can ... Thereby sending the message to HNZ management that our pool is just too small!

Maybe this explains it...


Why is there a maximum application amount?
The offer under the SPP needs to comply with the conditions imposed
by New Zealand securities legislation and Listing Rule 7.3.4(c) which caps the
maximum application amount of each Eligible Shareholder at $15,000.

The SPP is being offered to EligibleShareholders under the terms of the
Securities Act (NZX — Share and Unit Purchase Plans) Exemption Notice
2010. That exemption notice also imposes an annual limit of $15,000 on
the total issue price of securities that may be offered to each shareholder.

[rocketship]

Maybe this explains it...


Why is there a maximum application amount?
The offer under the SPP needs to comply with the conditions imposed
by New Zealand securities legislation and Listing Rule 7.3.4(c) which caps the
maximum application amount of each Eligible Shareholder at $15,000.

The SPP is being offered to EligibleShareholders under the terms of the
Securities Act (NZX — Share and Unit Purchase Plans) Exemption Notice
2010. That exemption notice also imposes an annual limit of $15,000 on
the total issue price of securities that may be offered to each shareholder.




Unsure why they would limit it to a total of $5M though??

[percy]

A bit of tokenism has probably tarnished their good name percy.

Can you find out when they are going to put up their deposit rates?.....they clearly didn't read the RBNZ announcement last week:p

Yes I think a lot of shareholders will be disappointed, but $5mil was always going to be massively oversubscribed.
My not be able to get "the good oil" on deposit rates.Was looking forward to Heartland's presentation with Macquaries at 5.30 pm on Wednesday 9th April,however it looks as though 20 plus schools in Nelson, may have the pleasure of availing themselves with opportunity of buying my books.

[percy]

Not really that much effort though is it? I did it all in 15min without even having to pick up my crutches and get out of bed. Minimal amount in the end but a discount the the current SP so cant complain too much :)

Was not really thinking of you.Was thinking the paperwork to send to all shareholders,then all the fees Link will charge.Same effort could have raised a decent amount.Say they were looking at $30mil plus, people would have applied for $15,000.I did not bother to apply for any for my wife,and a trust I am involved with did not apply either.I did not break a deposit and only applied for the $2,500 minimum.
The positive I suppose is they only raised the amount needed.

[percy]

Gotchya, my bad :) I guess one thing that we might hope for is that a bunch of people sold down thinking arbitration was the play, and those people are unlikely to have got the amount they wanted. Therefore a bit of a SP rise tomorrow maybe? Bigger picture though, they (HNZ) now have their capital and all systems go for future growth!!

Most financial companies seen to have vey little organic growth,and growth comes from acqusitions.The Sentinel acquisition will work well for Heartland[plenty of growth].The board will have confidence to look for other acquisitions knowing shareholders are prepared to open their wallets. Rising confidence in NZ ecomony should benefit Heartland [an others] .
Yes I think arbitration was never on.Had the issue been bigger, and they had stated they would accept over subscriptions,then you could have had fun with arbitration.

[Xerof]

You mean Arbitrage, performed by Arbitraguers

Mathematically it is defined as follows:
http://upload.wikimedia.org/math/c/7/6/c7685873cd55963ab38fcc12dc7adc50.pngwhere http://upload.wikimedia.org/math/a/1/4/a14df75e15845c8751b3aa75856a1a48.png and http://upload.wikimedia.org/math/f/2/d/f2d8ad6c8eee7080f25f3441c9eaeba2.png denotes the portfolio value at time t.

I think the arbitrageurs will be left holding the refunds, and might scurry back into the spot market in a couple of weeks....Hmmmm, I might try and arbitrage them :p

[percy]

You mean Arbitrage, performed by Arbitraguers

Mathematically it is defined as follows:
http://upload.wikimedia.org/math/c/7/6/c7685873cd55963ab38fcc12dc7adc50.pngwhere http://upload.wikimedia.org/math/a/1/4/a14df75e15845c8751b3aa75856a1a48.png and http://upload.wikimedia.org/math/f/2/d/f2d8ad6c8eee7080f25f3441c9eaeba2.png denotes the portfolio value at time t.

I think the arbitrageurs will be left holding the refunds, and might scurry back into the spot market in a couple of weeks....Hmmmm, I might try and arbitrage them :p

Yes well...?????????
Think I may have to keep selling books to schools a little longer!!!!! lol.

[percy]

You mean Arbitrage, performed by Arbitraguers

Mathematically it is defined as follows:
http://upload.wikimedia.org/math/c/7/6/c7685873cd55963ab38fcc12dc7adc50.pngwhere http://upload.wikimedia.org/math/a/1/4/a14df75e15845c8751b3aa75856a1a48.png and http://upload.wikimedia.org/math/f/2/d/f2d8ad6c8eee7080f25f3441c9eaeba2.png denotes the portfolio value at time t.

I think the arbitrageurs will be left holding the refunds, and might scurry back into the spot market in a couple of weeks....Hmmmm, I might try and arbitrage them :p

Yes well...?????????
Think I may have to keep selling books to school libraries a little longer!!!!! lol.

[Arbitrage]

Heartland New Zealand SPP Issue Price Fixed
20 March 2014
Heartland New Zealand Limited (“Heartland”) (NZX: HNZ) advises that the price at which shares will be
issued under its $5,000,000 Share Purchase Plan (“SPP”) has been fixed by the board at $0.8541 per share
which represents the lesser of:
(a) a 2.5% discount to the average end of day market price of shares over the 5 day trading period
from 13 March to 19 March 2014; and
(b) $0.855 per share (being the price paid by investors in the equity placement, reduced by the
amount per share of the cash dividend declared by Heartland on 25 February 2014).
The SPP offer received strong shareholder support with Heartland receiving applications totalling
$20,475,000 which exceeded the offer maximum of $5,000,000 by $15,475,000 or 309.5%. In accordance
with the terms and conditions of the SPP, Heartland will scale back all applications on a proportionate
basis, based on the total amount of application moneys received from all applicants (and any rounding of
the number of shares to be allotted will be up to the nearest share).
Shares to be issued under the SPP offer are expected to be allotted on 25 March 2014, with refunds direct
credited or mailed by cheque to shareholders within 5 business days of the allotment date. No interest will
be paid on any application monies returned to shareholders.
- Ends -
For further information please contact:
Jeff Greenslade Geoff Ricketts
Managing Director Chairman
Heartland New Zealand Limited Heartland New Zealand Limited
DDI 09 927 9149 DDI 09 377 7503

[iceman]

Unsure why they would limit it to a total of $5M though??

And that's exactly the point rocketship. They did not have to limit the shareholders pool to $5M and as it turned out, limiting the highest allocation to each shareholder to a lousy $ 3,663.
I am disappointed and hope the message Belgie suggested we sent, has been received and acknowledged by the Board.
Thanks to the posters on here that suggested the scaling would be very big as it made me increase my application significantly.

[Harvey Specter]

Hopefully they have learnt that next purchase, they dont need to get institutional investors if the amount is small or that (and I am not sure if this is practical), that the institutional placement should be after the SPP. I am sure a few funds would have effectively underwritten it at no fee other than the discount given.

[Snow Leopard]

Ok, so the name of the game is not to make a profit as such :blink: but to support the company in it's noble quest to allow old people to stay in their own homes instead of them signing up with the likes of MET, RYM & SUM :t_down: (Wait - hang on a minute - that can not be right :ohmy:).

So having applied for the full whack it seems I will get 4,289 new shares and a bonus $11,337 rebate.

Lost interest @ 3% on the $11k over two weeks is about $13.10 and the total price difference between the $0.8541 and the market price is $68.20 @ $0.87 or $111.09 @ $0.88.

So overall nearly a worthwhile exercise.

Best Wishes
Paper Tiger

[Bjauck]

So having applied for the full whack it seems I will get 4,289 new shares and a bonus $11,337 rebate.

Lost interest @ 3% on the $11k over two weeks is about $13.10 and the total price difference between the $0.8541 and the market price is $68.20 @ $0.87 or $111.09 @ $0.88.

So overall nearly a worthwhile exercise.

Best Wishes
Paper Tiger
So all our excess application funds are sitting in the Link bank account..which I imagine is earning some interest (at on call rates) at perhaps 1% pa. Will that be credited to Heartland or Link. Anybody know what happens?

[iceman]

So all our excess application funds are sitting in the Link bank account..which I imagine is earning some interest (at on call rates) at perhaps 1% pa. Will that be credited to Heartland or Link. Anybody know what happens?

Yes this is something I never understand. I posted my application on a Monday and the money came out of my account on Tuesday. Yet we have to wait a couple of weeks for return of our cash that they don't now want, despite them knowing already exactly how much each of us will/should get back. It could be returned at the press of a button ! I understand why HNZs biggest supporter Percy can't be bothered taking part in the SPP

[luigi]

The interest would either stay with Link or Link would be paid a fee for service provided.

[K1W1G0LD]

Great to see that HNZ is still well positioned and should be for some time to come?!!

[Omega]

Just logged in and surprised to pick up my SPP scaleback on market at 0.86c considering there was $15m oversubscriptions at 85.5c

[Bjauck]

There seems to be a big seller/s around. What is the chance that the SP will drop below the SPP price?

[Xerof]

You have to take into account that not everyone who participates in the placement or SPP is a loyal LT holder. There is almost always an overhang, no matter how sought after the placement was.

Give it time to be absorbed by the proletariat and all should be well in the camp again

no holding (but would like them to up their interest rates)

[K1W1G0LD]

LOL thats brillaint.
I jumped in today and doubled my holdings it will be back at 90 cps soon

Appalling standards of english spelling being misused on this forum , I presume you mean brilliant don't you snapiti?
or does brillaint mean you aint?
Could be a good time to top up when it hits 85 cents though.

[winner69]

The squiggles or whatever they are on the chart

The blue line is heading down and just crossed over the purple line ... and the actual line is below the purple line

Is that good?

[Snow Leopard]

The squiggles or whatever they are on the chart

The blue line is heading down and just crossed over the purple line ... and the actual line is below the purple line

Is that good?

Nope!

How did it come to this?

I need chocolate* - and fast!

In Panic Mode
Paper Tiger

*70+% cocoa

[K1W1G0LD]

The squiggles or whatever they are on the chart

The blue line is heading down and just crossed over the purple line ... and the actual line is below the purple line

Is that good?

Phew , I'm colourblind so thats alright then.

[zigzag]

Sent in $2500 and got 715 shares. Looks like I'll get most of my money back. Probably will add it to my WYN SPP, and see how I get on there.

[RTM]

Sent in $2500 and got 715 shares. Looks like I'll get most of my money back. Probably will add it to my WYN SPP, and see how I get on there.

You can buy HNZ on market at very close to the issue price ! If you do want them.

[blackcap]

You can buy HNZ on market at very close to the issue price ! If you do want them.

Could this be bad for Heartland?

http://www.stuff.co.nz/business/industries/9865934/Nandos-franchise-in-liquidation

Or is it just part and parcel of doing business and a mere blip on the landscape?

[Harvey Specter]

Could this be bad for Heartland?

http://www.stuff.co.nz/business/industries/9865934/Nandos-franchise-in-liquidation

Or is it just part and parcel of doing business and a mere blip on the landscape?just business. They should hold first security so should get most of the money back when they sell the rights to the royalty stream, provided the head franchisers doesn't just confiscate it.

[Snow Leopard]

Could this be bad for Heartland?

http://www.stuff.co.nz/business/industries/9865934/Nandos-franchise-in-liquidation

Or is it just part and parcel of doing business and a mere blip on the landscape?

Remember that they called the receivers in last year and almost certainly the HY accounts impairment provisions would have included an amount for this particular item [$5M13 of new individual impaired assets was added).

When this is all settled then they might have to write off more or less than the amount currently set aside.

Best Wishes
Paper Tiger

[BlackPeter]

SP down to 86 cents ... another cent and we can buy the shares cheaper on market than what we paid through the SPP.

Huge sales overhang (600k at average 90 cents) and hardly any buyers (80k at average 84 cents) around.

Looks like the board missed a huge opportunity by not accepting over-subscriptions.

[Bjauck]

Maybe the SPP allocation to institutions should have been substantially less and the amount allocated to small investors should have been more.

[percy]

With the latest announcement confirming they are on track,I think the interim, to be announced in late Feb , will also be positive.I am also looking forward to them making an acquisition/s ,which will project their future growth to new greater heights.

Posted on 03-01-2014.
The acquisiton was certainly a surprise,[was expecting $25mil to $35mil to be funded by cash reserves].The acquisition is a lot better deal than I could have hoped for.Sentinel is the dominate player is the reverse mortgage market.This market is growing with an ageing property owning population, and will grow quicker, with the security people will have dealing with the listed bank Heartland behind it.
Only the capital needed was raised .In fact the SPP was massively over subscribed.
The interim result confirmed the year's guidance is on track.
As we have come to expect Heartland declared an imputed dividend.
Where to now? Well, we now can have confidence Heartland will prosper with the improving NZ economy.We may even see another acquisition before 31st June balance date.Runs on the board is what Heartland had to do.They have certainly done that,and done it well.!

[RTM]

Yes...Impressive volumes of Heartland today at 86c.
Good to see.5632




Volumes are pretty pathetic. Those placing sells at 89c don't seem to be in any hurry. If you wanted a big stake - say a few million shares - you'd never get them at 86c and probably not even at 90c ... you might be able to "average" 90c though but I doubt that too.

[Bjauck]

It looks like some of the institutions who got a got a generous spp are trying to flick them on at a profit to private shareholders who got a severely throttled spp. At the moment, it looks like the private shareholders are not obliging!

[winner69]

David Chaston who writes in interest.co.nz no fan of reverse mortgages and is disappointed in Heartland


4. The pitfalls of reverse mortgages
I admit I am no fan of reverse mortgages when the lender is a bank or financial company. It is very disappointing to see Heartland Bank adopting this 'product' as a key element of their growth plans. The social sting in these arrangements can leave some very unpleasant outcomes. Dealbook has been looking at them in the US:

And links to this article from the US
http://dealbook.nytimes.com/2014/03/26/pitfalls-of-reverse-mortgages-may-pass-to-borrowers-heirs/?_php=true&_type=blogs&src=me&_r=0


Surely hnz won't ed up being this mean

[Joshuatree]

Quote Be great if Heartland can refresh the reverse annuity model so the oldies see it as a viable option in future.cheers JT[/QUOTE]

[percy]

I think people taking out reverse mortgages will be a lot better dealing with Heartland .
From the link you gave it appears to me the people complaining, are expecting to have their cake and eat it too.
ie "their inheritance has been spent keeping their parents in their home."Yes that's right.Yet, it was their parents, whose house it was,who decided to take out the reverse mortgage.Any one looking to take out a reverse mortgage will get legal advice,and this will be spelt out to them.Most will discuss this issue of reduced inheritance with their children.
From what I read US and UK governments are encouraging people to take out reverse mortgages,because it is seen to be good for their health and well being to stay in their home.
A bit much when the kids complain they did not inherit as much as they would have like."Damm dad was rotten enough to live too long, and spent all his money before we could get our hands on it.And we waited for years for the old sod to die!! ." Tough.
Its the same as buying a $70,000 car on HP.At the end of the day your car is worth $20,000 and you have paid the finance company $30,000 in interest. Toatal cost $100,000.Today's resale value $20,000. $80,000 done cold.! [approx. figures] .Tough.
If I lend money I want interest and the capital repaid when due. Tough.No, just good commercial practice.All banks are the same.
The tooth fairy died.[poor].

[Joshuatree]

Touche Percy. And Heartland are savvy enough to modernise/ poplarize reverse mortgages. And re their Inheritage its quite sickening how little support many offspring give their parents anyway.

[percy]

Touche Percy. And Heartland are savvy enough to modernise/ poplarize reverse mortgages. And re their Inheritage its quite sickening how little support many offspring give their parents anyway.

Thank you for your post Joshuatree.
I was expecting a bit of flack!!
It is difficult for people with all their capital tied up in their home.What are they to do? Sell the house so the kids can have a good inheritance,and then go jump off a cliff?

[Harvey Specter]

And links to this article from the US
http://dealbook.nytimes.com/2014/03/26/pitfalls-of-reverse-mortgages-may-pass-to-borrowers-heirs/?_php=true&_type=blogs&src=me&_r=0


Surely hnz won't ed up being this meani stopped reading after the first paragraph. Some BS story you expect from the Herald about kids getting no inheritance because their parents decided to spend their own money.

[Harvey Specter]

You meant the New York Times no doubt. ...

I read it through and concluded that the US set up may be far more regulated than ours in NZ. Was my conclusion right?I dont read the NYT but the NZ Hearld has lots of articles like that - you know the type - the mother of 5 kids and another on the way cant afford to feed her family. Or the family think the retirement village riped of their parents bacause they dont get the 'capital gain' even though their parents loved living there and knew that when they signed up.

As I said, I only read the first paragraph - I had no sympathy for the 'kids' that their inheritance was spend by the parents who earned it.

I am sure Heartland will do it right so that their reputation is intact.

[Banksie]

As I said, I only read the first paragraph - I had no sympathy for the 'kids' that their inheritance was spend by the

I read the article and must say it was a very disappointing piece of reporting. All it talks about is how much is owed to the companies. No mention of how much was borrowed and spent. As you say - just like the Herald - no balance at all.

[artemis]

Touche Percy. And Heartland are savvy enough to modernise/ poplarize reverse mortgages. And re their Inheritage its quite sickening how little support many offspring give their parents anyway.

Some parents are really not nice people at all, and their sensible children get and stay as far away as possible. I know a couple of seriously nasty ones, one rather close to home. Only a minority I hope, but still, abandoned olds may be the authors of their own misfortune. They are not all apple pie baking grandmas and stern but fair patriarchs. We will likely never know the reasons, but that doesn't mean there are none.

[mouse]

The tooth fairy died.[poor].

Percy!!! When did the tooth fairy die? Who killed her? Tragic situation, murdered for being a tooth fairy.

[noodles]

Remember that they called the receivers in last year and almost certainly the HY accounts impairment provisions would have included an amount for this particular item [$5M13 of new individual impaired assets was added).

When this is all settled then they might have to write off more or less than the amount currently set aside.

Best Wishes
Paper Tiger
Looks like we have a buyer. I wonder if HNZ will get their money back?

http://www.stuff.co.nz/business/industries/9901100/Aussies-buy-Nandos-from-receivers

[percy]

Looks like we have a buyer. I wonder if HNZ will get their money back?

http://www.stuff.co.nz/business/industries/9901100/Aussies-buy-Nandos-from-receivers

One never knows their luck in a big city? Let's hope so,yet receivers often leave very little after they have paid for the receivership.

[percy]

Percy!!! When did the tooth fairy die? Who killed her? Tragic situation, murdered for being a tooth fairy.

She was driven to suicide by her bank losing her cash trading the derivatives' markets.
We know it as the GFC.
What a lot of people don't know is she thought she had her cash in Bear Stories,which she had always enjoyed,but it turned out to be Bear Sterns who went broke.

[Bjauck]

Looks like we have a buyer. I wonder if HNZ will get their money back?

http://www.stuff.co.nz/business/industries/9901100/Aussies-buy-Nandos-from-receivers

HNZ is a secured creditor. IRD will have priority. Are there any back wages owed? Unsecured trade creditors will be last in line.

As an aside. is the liquidator/receiver Gary Whimp connected to the Whimp who was behind the low-ball offers for various NZX listed companies?

[percy]

Percy you are making up stories the tooth fairy is alive and has plenty of reserve funds as she has been in kiwisaver for many years and bought XRO at $1.
She visited my house last night and left $5 for one tooth.

Fantastic news.!!
Born again Tooth Fairy!!!

[Harvey Specter]

I have friends in the receivership business and they tell me that it is ACC that force alot of companies into recievership.Receivership and liquidations are different - I think it would be unlikely ACC would appoint a receiver, more likely file for a liquidation - it is normally the securred creditors that call for a receivership. IRD would by far seek to liquidate the most companies in NZ, in part because they have a team to do it, even if the balance is reasonably small. Your average M&D business will just write of the debt as the court costs etc normally outweight the benefit, especeilly since the liquidated company normally has no funds left after the secured creditors are paid (including the owners family trust).

[ziggy415]

not so sure about reverse mortgages but i think annuities are going to be big.....kiwi saver accounts are getting bigger and the government set up kiwi saver to ease the governments cost of retirements...at this stage its costing them..ie $1000..kick start etc....so at some stage your kiwi saver accounts are going to fund your own retirement...it amazes me when people write in and say my kiwi account will have $100,000 when i get to 65 so will go on oversees trip and blow the lot then i,ll go on government super...sorry aint gonna happen...you will have to buy an annuity.....even the financial advisers wont admit this cos their not going to rock the boat in case they upset the gravy train

[GTM 3442]

not so sure about reverse mortgages but i think annuities are going to be big.....kiwi saver accounts are getting bigger and the government set up kiwi saver to ease the governments cost of retirements...at this stage its costing them..ie $1000..kick start etc....so at some stage your kiwi saver accounts are going to fund your own retirement...it amazes me when people write in and say my kiwi account will have $100,000 when i get to 65 so will go on oversees trip and blow the lot then i,ll go on government super...sorry aint gonna happen...you will have to buy an annuity.....even the financial advisers wont admit this cos their not going to rock the boat in case they upset the gravy train

I agree that it won't take much in the way of "Jim blew his kiwisaver money" stories for the pressure to come on "to protect Kiwi savers from themselves".

Scary.

However I note that the Brits have just dumped the "compulsory annuity" aspect of their super scheme after an ongoing outcry about the amount being made by the provider in relation to the amount paid to the beneficiaries.

[ziggy415]

I agree that it won't take much in the way of "Jim blew his kiwisaver money" stories for the pressure to come on "to protect Kiwi savers from themselves".

Scary.

However I note that the Brits have just dumped the "compulsory annuity" aspect of their super scheme after an ongoing outcry about the amount being made by the provider in relation to the amount paid to the beneficiaries.
interesting about the britz....must admit am not sure when and how which government will tie up everyones kiwi saver......it will become compulsory first with no opt out option.... but it wont be a popular decision...could possibly loose them the election unless they do it in first term of new parliament

[noodles]

Well I would have expected my SPP refund by now. Has anybody else received theirs?

[noodles]

I note that there has been a earnings upgrade from an analyst. See http://www.reuters.com/finance/stocks/analyst?symbol=HNZ.NZ

FY15 earning per share now 9.9c for one broker.

Has anybody seen the report? Anything interesting to note? Was it due to the acquisition or other factors. Also interested what the broker forecasted for FY14 (NPAT)?

[iceman]

Well I would have expected my SPP refund by now. Has anybody else received theirs?
I received mine on 25 March !

[winner69]

I note that there has been a earnings upgrade from an analyst. See http://www.reuters.com/finance/stocks/analyst?symbol=HNZ.NZ

FY15 earning per share now 9.9c for one broker.

Has anybody seen the report? Anything interesting to note? Was it due to the acquisition or other factors. Also interested what the broker forecasted for FY14 (NPAT)?

That Reuters thing says been a DOWNGRADE for 2014over the last week

Consensus Jun14 now 8.80 .... week ago 8.9 and 2 months ago 9.03

Also June 15 at 9.27 is less than the 9.50 2 months ago

Growth figures pretty abysmal - not the usual analyst bullishness

[Harvey Specter]

Well I would have expected my SPP refund by now. Has anybody else received theirs?Yip - are you expecting a cheque as payments into an account were last week(?).

[noodles]

Yip - are you expecting a cheque as payments into an account were last week(?).

I expect payment into my account since that was how I paid.

[noodles]

I expect payment into my account since that was how I paid.

I am a muppet. I have received it. Just looked at my CMA account for 25 March. Expected it would have been deposited into another one.

It was a different account than what the funds came out of. I guess Link Market Services must use my Dividend Payment acoount for the SPP refund.

[noodles]

That Reuters thing says been a DOWNGRADE for 2014over the last week

Consensus Jun14 now 8.80 .... week ago 8.9 and 2 months ago 9.03

Also June 15 at 9.27 is less than the 9.50 2 months ago

Growth figures pretty abysmal - not the usual analyst bullishness

Winner 69,

The trend down for FY14 is explained by the addition shares issued with the purchase of the Reverse Mortgage business combined with a poor first half result. FY 15 cannot be explained with additional shares. I suppose we need to see the original reports to really get an idea. But the last report has caused an upward revision from 9.1 to 9.27 a week ago. More importantly, the last report has a eps is 9.9c.

I really wish management would narrow guidance for FY14. I fear a downgrade.



Sales and Profit Figures in New Zealand Dollar (NZD)







Earnings and Dividend Figures in New Zealand Dollar (NZD)








Current
1 Week
Ago
1 Month
Ago
2 Month
Ago
1 Year
Ago


SALES (in millions)


Year Ending Jun-14
119.81
119.81
119.81
118.72
120.41


Year Ending Jun-15
129.14
129.14
129.14
123.51
130.13


Earnings (per share)


Quarter Ending Jun-14
8.8
8.9
8.9
9.03
8.4


Quarter Ending Jun-15
9.27
9.1
9.1
9.5
9.25

[winner69]

but they said EPS accretive

I assume that the analysts eliminate one off costs etc and the consensus is 'normalised'

[noodles]

but they said EPS accretive

I assume that the analysts eliminate one off costs etc and the consensus is 'normalised'

I think you are right.

Concensus FY14 NPAT is 35100.

This works out at 7.6cps fully diluted.

So the reuters figures are normalised

[RTM]

https://www.nzx.com/companies/HNZ/announcements/249494
Has to be a good thing....a Directory buying 3,000,000 Ordinary Shares on market at 87c.
Nice big public commitment to the company.

[Banksie]

https://www.nzx.com/companies/HNZ/announcements/249494
Has to be a good thing....a Directory buying 3,000,000 Ordinary Shares on market at 87c.
Nice big public commitment to the company.

So the 43mill shares issued to Senior Money International made them the largest shareholder. Looks like Mr Tomlinson topped up to push himself to No. 1 again.
https://opencorporates.com/companies/nz/3152425

Shouldn't there be a Change in Substantial Shareholder's Interest announcement, not just a ongoing disclosure?

[Omega]

Thats only required for movements of more than 1%

[noodles]

Another Heartland customer goes down
http://www.nbr.co.nz/article/creditors-owed-257-million-after-mediaweb-magazine-collapse-vy-p-155195

Hope this does not affect FY14 results

I guess the 3rd quarter report (end of May) will give us a sniff if there is any trouble meeting forecast.

Good volume in the stock of late. Must be some institutions trading (or percy).

[Arbitrage]

It will be interesting to see what security was used. Hopefully a nice villa in Grey Lynn or some other million dollar asset. The share price rose to 89c so it can't be too bad a loss, if any.

[Master98]

New vehicle sales accelerate
http://www.stuff.co.nz/business/industries/10002225/New-vehicle-sales-accelerate

Good news for our HNZ holders

[percy]

New vehicle sales accelerate
http://www.stuff.co.nz/business/industries/10002225/New-vehicle-sales-accelerate

Good news for our HNZ holders

Thanks for the link.
I read an article the other day that stated sheep and beef farmers will enjoy a record year,with profits expected to jump 35% [$113,000 per farm].This should be good for HNZ's rural lending .
I think HNZ's purchase of Sentinel will add weight and respectability to the reverse mortgage sector.
Can't help feeling we are well positioned. !! lol,.

[janner]

Thanks for the link.
I read an article the other day that stated sheep and beef farmers will enjoy a record year,with profits expected to jump 35% [$113,000 per farm].This should be good for HNZ's rural lending .
I think HNZ's purchase of Sentinel will add weight and respectability to the reverse mortgage sector.
Can't help feeling we are well positioned. !! lol,.

Belg post 3307..

percy post 3312..

Agree..

[noodles]

Checkout John Key's response to council high rates for the retired. He suggests reverse mortgages are a good idea. Move over Oravida, could Heartland be the next big national donor? Or maybe he has been reading some of Percy's posts on this thread and decided HNZ was a good place for his millions:)

Of course, he is dead right. Just not for my parents:)

http://www.nbr.co.nz/ask-the-pm

[percy]

Checkout John Key's response to council high rates for the retired. He suggests reverse mortgages are a good idea. Move over Oravida, could Heartland be the next big national donor? Or maybe he has been reading some of Percy's posts on this thread and decided HNZ was a good place for his millions:)

Of course, he is dead right. Just not for my parents:)

http://www.nbr.co.nz/ask-the-pm

Absolutely great news to have "our leader" as the new chief Heartland ramper.!!!! And having so many wonderful photos taken showing him wearing his new "Skellerup" gum boots, means he with retain his natural affinity to Heartland New Zealand.!!!
It is a moments like this I feel it is time to replay Freddie Mercury's "I want it all."
We are quickly moving from "well positioned" to "poised."

[Arbitrage]

On another topic, the Adelaide and Bendigo Bank has paid $1.8 billion for the Rural Finance Corporation from the Victorian State Govt. I can't help but think that Heartland Bank could be a takeover target at some stage. One of the big four banks looking for access to a niche market? Or perhaps Rabobank expanding its rural interests. Even a bank like SBS Bank expanding. Any thoughts?

[Marilyn Munroe]

I can't help but think that Heartland Bank could be a takeover target at some stage. One of the big four banks looking for access to a niche market? Or perhaps Rabobank expanding its rural interests. Even a bank like SBS Bank expanding. Any thoughts?

Maybe one of the big Aussie Banks, like Trust Bank got swallowed by Westpac.

I don't think that Heartland has anything that Rabobank would want. Rabobank is interested in rural lending not running a retail banking network. I am under the impression that Heartlands rural book is nothing special.

SBS is a mutual so any take-over offer would have to be all cash, thus unlikely.

Boop boop de do
Marilyn

[Longhaul]

Who's the major holder willing to keep offloading at these levels?

Seems incredible that it's traded in such a narrow range for the better part of 12 months (apart from the brief jump over 90c).

[winner69]

Who's the major holder willing to keep offloading at these levels?

Seems incredible that it's traded in such a narrow range for the better part of 12 months (apart from the brief jump over 90c).

Is the "overhang" that snoopy mentioned still holding the shareprice back?

[percy]

Who's the major holder willing to keep offloading at these levels?

Seems incredible that it's traded in such a narrow range for the better part of 12 months (apart from the brief jump over 90c).

Appears to be two major sellers.I believe Carter has reduced his holding from 18.5mil shares to about 12.5mil shares,while George Gould has sold about 2mil shares.
Tomlinson has been adding to his holding.

[Longhaul]

Appears to be two major sellers.I believe Carter has reduced his holding from 18.5mil shares to about 12.5mil shares,while George Gould has sold about 2mil shares. Tomlinson has been adding to his holding.

Thanks percy. When do you think we'll get any indication how the home equity release business is going? In September?

[vorno]

"New Zealand's rural lending, which more than doubled to an all-time high of $50.6 billion in the past decade on dairy farm expansion, may slow as farmers use record milk payouts to reduce debt, spurred on by rising interest rates."
- Full article here: http://www.nbr.co.nz/article/nz-rural-lending-growth-may-slow-after-doubling-past-decade-dairy-expansion-bd-155757

[percy]

Thanks percy. When do you think we'll get any indication how the home equity release business is going? In September?

Last year on 5th June Heartland's announcement was "Forecast",so maybe we will get another update about the same time this year.
My very un official ear to the ground tells me the reverse mortgages have grown in respectability with Heartland's backing,so this will certainly give Heartland an area for excellent organic growth.Car sales are at record highs,farm incomes increasing [go to PGW thread for link showing lamb and beef farmers' hugh profit increases of about $113,000 per farm],and lower unemployment,should all work in Heartland's favour.It should be noted Australian Banks' NZ divisions are recording record profits.
I also believe Forbar research dated 3rd April projected 6.5 cents per share dividend for 2014, and 8 cents per share for 2015.

[Master98]

just saw Heartland TV ads on Prime TV 5:30 news for their reverse home loan:t_up:

[winner69]

just saw Heartland TV ads on Prime TV 5:30 news for their reverse home loan:t_up:

"Every quarter is now a record quarter' seems a common theme

Hnz in this category?

Some numbers around all banks

http://www.kpmg.com/NZ/en/IssuesAndInsights/ArticlesPublications/FIPS-quarterly/Documents/KPMG-FIPS-Quarterly-December-2013-v2.pdf

[Longhaul]

Some numbers around all banks

http://www.kpmg.com/NZ/en/IssuesAndInsights/ArticlesPublications/FIPS-quarterly/Documents/KPMG-FIPS-Quarterly-December-2013-v2.pdf

Excellent thanks winner69. Am I reading this right? HNZ's net interest margin is 4.61% for the quarter, compared to the average of 2.27%?

[Harvey Specter]

Excellent thanks winner69. Am I reading this right? HNZ's net interest margin is 4.61% for the quarter, compared to the average of 2.27%?
Looks like it, and they achieved that with the second highest capital adequacy ratio.

[Xerof]

Looks like it, and they achieved that with the second highest capital adequacy ratio. bear in mind the type of assets they carry are not the same as 'mainstream', they are still morphing from finance company style assets which carry very high margins.

[Longhaul]

bear in mind the type of assets they carry are not the same as 'mainstream', they are still morphing from finance company style assets which carry very high margins.

Yeah I guess it isn't necessarily a good thing if it is poor quality lending.

It will be very interesting to see how fast they can grow the loan book with the new reverse mortgages given that it has stalled compared to other banks.

[percy]

Thanks for the link Winner69.
Reads very well for Heartland.
With all of Moosie 900's signals firing up,that is MACD,Bollinger Bands,Stochastic,you could say all the ducks are lined up for Heartland,which is appropriate considering it is the start of the duck season.Just hope Heartland keep flying high out of shooters' range.

[noodles]

It will be very interesting to see how fast they can grow the loan book with the new reverse mortgages given that it has stalled compared to other banks.
The company has purposely exited residential mortgages as it was hard to compete with the big banks. This is the reason for the lack of loan growth.

[Xerof]

Yeah I guess it isn't necessarily a good thing if it is poor quality lending.

It will be very interesting to see how fast they can grow the loan book with the new reverse mortgages given that it has stalled compared to other banks.

percy would call it 'well secured, higher risk' assets, rather than poor quality, and so would I.

Growth does seem elusive in their traditional markets, but growth is very hard to achieve in high turnover assets, like cars, so standing still is possibly a good effort

[Longhaul]

percy would call it 'well secured, higher risk' assets, rather than poor quality, and so would I.

Growth does seem elusive in their traditional markets, but growth is very hard to achieve in high turnover assets, like cars, so standing still is possibly a good effort

Sorry poor choice of words. Just implying the the risk/return trade off on different types of loans. Thanks for the insight into high turnover assets.

[Beagle]

I dipped my toe in the water with this one yesterday and PGW. Its hard to find growth stories on reasonable price earnings ratio's and I think over the years this stock will reward with solid growth and a good divvy yeild. We are well positioned :)

[percy]

I dipped my toe in the water with this one yesterday and PGW. Its hard to find growth stories on reasonable price earnings ratio's and I think over the years this stock will reward with solid growth and a good divvy yeild. We are well positioned :)

Been waiting for you.
The train is now ready to leave the station.Toot!!! Toot.!!! lol.
Yes I agree with you value is difficult to find.Yet once found you can enjoy the ride in comfort.

[Beagle]

Been waiting for you.
The train is now ready to leave the station.Toot!!! Toot.!!! lol.
Yes I agree with you value is difficult to find.Yet once found you can enjoy the ride in comfort.

Mate I really just bought these and PGW so I can get on the piss with you after their AGM's LOL :)

[percy]

Mate I really just bought these and PGW so I can get on the piss with you after their AGM's LOL :)

I will gladly transport you,Forest and hopefully Iceman to and from the airport to HNZ's agm.Look forward to it.
I have never [yet] been to a PGW agm, as it is usually on at the same time as EBO's.However should they not conflict I will be at that one too.

[Beagle]

Thanks mate, I'm looking forward too it:D

[iceman]

Welcome aboard Roger. This one has been a great ride for me, which I have little doubt will continue for a long time yet.
I will most certainly be at the AGM Percy as long as I'll be in the country at the time. Have been reading the book you recommended. Great reading. Many thanks.

[vorno]

Just out of curiosity, when & where is the next AGM? I can only see last-years one.

PS: Decided to increase my holding today.

[iceman]

Just out of curiosity, when & where is the next AGM? I can only see last-years one.

PS: Decided to increase my holding today.

No date announced yet but expect late October - early November like last year.

[noodles]

I will gladly transport you,Forest and hopefully Iceman to and from the airport to HNZ's agm.Look forward to it.
I have never [yet] been to a PGW agm, as it is usually on at the same time as EBO's.However should they not conflict I will be at that one too.
Percy, if Jeff listened to me, I'll be picking you up in Auckland:)

[percy]

Percy, if Jeff listened to me, I'll be picking you up in Auckland:)

I may have jumped the gun thinking it would be in Christchurch again.!!
If he has listened to you, I will look to meeting you and catching up with the rest of the Auckland crew.

[forest]

I dipped my toe in the water with this one yesterday and PGW. Its hard to find growth stories on reasonable price earnings ratio's and I think over the years this stock will reward with solid growth and a good divvy yield. We are well positioned :)

Roger it will be great if you join us to the next HNZ AGM's. (Whenever it is) Its something to look forwards too.

After the meeting usually some good discussions with fellow shareholders and instant dividend payout in the form of beer.
I know you like them both. :).

[Arbitrage]

Here is an example where one of the Big Four banks is moving into Heartland territory : http://www.sharechat.co.nz/article/58ed1724/bnz-grabs-more-agribusiness-lending-upbeat-on-rural-sector.html

[Harvey Specter]

4 YEARS TO GAIN 2% geez hardly making big in roads.3% isn't it which I am sure their reports to the board report as over 15% growth (22.2/19.2) ;)

[BlackPeter]

Just received a thick envelope from AA Finance - containing a flood of investment statements and disclosure notes from Heartland and an invitation from the AA to invest with them (i.e. Heartland).

Lots of trees must have died to print this bunch of boring (and unattractive) disclosure statements, but somehow they forgot to add a convincing message why anybody reading the lot should open an account with Heartland. Well, sounds like AA members enjoy now a "special" rate, but they didn't say what the rate is and whether it is specially good or bad or just specially normal).

To be honest - so far I never received anything worthwhile reading and processing from AA Finance (typically its some overpriced life insurance proposals I don't need) - and the paper they distribute their proposals on is typically not even suitable to start a fire in our log burner (too glossy). I was however surprised this time to see the Heartland logo on the documents (which made me look twice, before I disposed the lot into the bin for paper recycling).

As an AA member my disappointment is limited - I know that they are no finance specialists and don't expect better from them (related to financial advise), but as Heartland shareholder I start wondering, whether I better should start selling my shares and realise a small gain before they blow all the money in weak campaigns. Can't really see them growing into a successful business if they continue to go this way. But than - maybe they just need a marketing department?

[Beagle]

Roger it will be great if you join us to the next HNZ AGM's. (Whenever it is) Its something to look forwards too.

After the meeting usually some good discussions with fellow shareholders and instant dividend payout in the form of beer.
I know you like them both. :).

Thanks mate. It was a real pleasure attending SUM's AGM with you and meeting some other bloody good blokes down in Wellington :)

[percy]

Just received a thick envelope from AA Finance - containing a flood of investment statements and disclosure notes from Heartland and an invitation from the AA to invest with them (i.e. Heartland).

Lots of trees must have died to print this bunch of boring (and unattractive) disclosure statements, but somehow they forgot to add a convincing message why anybody reading the lot should open an account with Heartland. Well, sounds like AA members enjoy now a "special" rate, but they didn't say what the rate is and whether it is specially good or bad or just specially normal).

To be honest - so far I never received anything worthwhile reading and processing from AA Finance (typically its some overpriced life insurance proposals I don't need) - and the paper they distribute their proposals on is typically not even suitable to start a fire in our log burner (too glossy). I was however surprised this time to see the Heartland logo on the documents (which made me look twice, before I disposed the lot into the bin for paper recycling).

As an AA member my disappointment is limited - I know that they are no finance specialists and don't expect better from them (related to financial advise), but as Heartland shareholder I start wondering, whether I better should start selling my shares and realise a small gain before they blow all the money in weak campaigns. Can't really see them growing into a successful business if they continue to go this way. But than - maybe they just need a marketing department?

Thanks for sharing your thoughts with us.Think it would be good of you to share with Jeff Greenslade [HNZ's CEO] [09]9279149.M.021563693 or Simon Owen[HNZ's CFO] [09]0279195.M 0276294602.
It was pointed out to me by a fellow shareholder,who is in advertising,that HNZ should have provided an information folder to every shareholder who attended the agm,with new a/c forms and deposit rates.

[Sgt Pepper]

Just received a thick envelope from AA Finance - containing a flood of investment statements and disclosure notes from Heartland and an invitation from the AA to invest with them (i.e. Heartland).

Lots of trees must have died to print this bunch of boring (and unattractive) disclosure statements, but somehow they forgot to add a convincing message why anybody reading the lot should open an account with Heartland. Well, sounds like AA members enjoy now a "special" rate, but they didn't say what the rate is and whether it is specially good or bad or just specially normal).

To be honest - so far I never received anything worthwhile reading and processing from AA Finance (typically its some overpriced life insurance proposals I don't need) - and the paper they distribute their proposals on is typically not even suitable to start a fire in our log burner (too glossy). I was however surprised this time to see the Heartland logo on the documents (which made me look twice, before I disposed the lot into the bin for paper recycling).

As an AA member my disappointment is limited - I know that they are no finance specialists and don't expect better from them (related to financial advise), but as Heartland shareholder I start wondering, whether I better should start selling my shares and realise a small gain before they blow all the money in weak campaigns. Can't really see them growing into a successful business if they continue to go this way. But than - maybe they just need a marketing department?

BP
I know what you mean regarding AA. I lined up recently to renew my membership(been a member for 36years). There was a hard sell with my renewal, I wanted the standard membership, the staff member tried several times to upgrade me to AA Plus and was extremely persistent. Anyway eventually renewed my membership. Then she started to try and sell me life insurance!! I replied that I did have life insurance but there was no way I would be taking out cover with AA Life as their policies are by far the most expensive on the market as validated by Consumer annual sampling of Life Premiums. I dare say the same process was endured by every member renewing memberships in person.

[winner69]

Thanks for sharing your thoughts with us.Think it would be good of you to share with Jeff Greenslade [HNZ's CEO] [09]9279149.M.021563693 or Simon Owen[HNZ's CFO] [09]0279195.M 0276294602.
It was pointed out to me by a fellow shareholder,who is in advertising,that HNZ should have provided an information folder to every shareholder who attended the agm,with new a/c forms and deposit rates.

In fairness to these very busy people who have zillions to look after I use the "Contact Jeff Greenslade" form on their website

I outline what I want to discuss and the questions I would like responded to and invite him to ring me when he has the answers or even just respond by email.

Think an efficient and productive way to communicate with a busy man. Thought it better than just leaving a message when calls inevitably end up at a voice mail.

Unfortunately approach don't work ...three times in the last year totally ignored

Never mind ...I just take it as an insight into the company culture

But then again being ignored these days is no big deal

[percy]

In fairness to these very busy people who have zillions to look after I use the "Contact Jeff Greenslade" form on their website

I outline what I want to discuss and the questions I would like responded to and invite him to ring me when he has the answers or even just respond by email.

Think an efficient and productive way to communicate with a busy man. Thought it better than just leaving a message when calls inevitably end up at a voice mail.

Unfortunately approach don't work ...three times in the last year totally ignored

Never mind ...I just take it as an insight into the company culture

But then again being ignored these days is no big deal
Ring them.It works.

[winner69]

Ring them.It works.

I don't like talking to machines after the beep

[percy]

I don't like talking to machines after the beep

I have given two people's phone numbers.Both direct lines and their mobiles,so hopefully you can get straight through to them.
Some time ago I rang the CEO of TUA at 7.30pm and sorted out one of Snoopy's queries in a couple minutes.
Talking to a machine, or secretary is poor form. Should they then not return your call, you know to stay away from the company.
This was proven by that MVN Fella not returning my call.Saved me plenty.!!!

[BlackPeter]

Thanks for sharing your thoughts with us.Think it would be good of you to share with Jeff Greenslade [HNZ's CEO] [09]9279149.M.021563693 or Simon Owen[HNZ's CFO] [09]0279195.M 0276294602.
It was pointed out to me by a fellow shareholder,who is in advertising,that HNZ should have provided an information folder to every shareholder who attended the agm,with new a/c forms and deposit rates.

fair enough - sent Jeff an email (well, using HNZ's not quite bug free web interface, but I hope it got there in the end). Shall report back, if appropriate.

[winner69]

Talking to a machine, or secretary is poor form. Should they then not return your call, you know to stay away from the company.
This was proven by that MVN Fella not returning my call.Saved me plenty.!!!

Ha ha Percy - that's exactly how I feel - staying away I am on that advice

[couta1]

Ha ha Percy - that's exactly how I feel - staying away I am on that advice
Come on now winner grow some bigger wee fellows and jump aboard nothing like a wild ride not to mention bargain prices and an upcoming divvy:eek2:

[vorno]

News just in, new head of business banking for HNZ South Island - 30 years XP.
http://www.heartland.co.nz/_upload/news/Chris%20Cowell%20Appointment%20as%20Exec.pdf

Good news to bare I reckon! Will be interesting to see if it breaks the stalemate of the past week.

[psychic]

Plenty of the right experience for sure Belg. You reckon going from GM Commercial ANZ to CEO UDC then (after a stint as s.i boss) to Head of Business Banking HNZ is heading in the right direction? Just askin, dunno.

[winner69]

Plenty of the right experience for sure Belg. You reckon going from GM Commercial ANZ to CEO UDC then (after a stint as s.i boss) to Head of Business Banking HNZ is heading in the right direction? Just askin, dunno.

Heading in the right direction ......good question

He did "retire" from UDC so probably bored with "retirement" and joined HNZ when Jeff asked him

Maybe he has some experience in niche areas

But HNZ does seem to be getting pretty experienced ......no sign of energetic innovative people getting on board to pump things up a bit

[winner69]

This Chris guy onceGeneral Manager of Commercial Banking for ANZ. National Bank


Percy's mate Jeff once the managing director of corporate and commercial banking for ANZ National Bank.

Probably old drinking buddies from days paste

[Xerof]

Often how it goes. Should be noted that the old NBNZ were NZ's heaviest supporter of agricultural sector, and under Sir JA guided that sector through some pretty dark moments. These guys should know what they are doing, despite being over 35.......:cool:

[Beagle]

There's no substitute for experience. Older highly experienced blokes have seen almost all the B.S. there is to be seen and accordingly can see the wood for the trees and smell B.S. coming from a mile off...like an experienced old Beagle dog at the airport...remind me again how many finance companies we saw fall over due too loose lending policies, nuff said.

[vorno]

vorno ... You left out the best bits ...

Chris joined Heartland in December 2013 as Head of South Island and has over
30 years banking experience most recently as CEO of UDC and prior to that,
General Manager of Commercial Banking ANZ National Bank.


Experience in spades!

I only show you the cake!

[psychic]

Don't think anyone was implying it was a bad move for HNZ snaps. UDC is an excellent Company with a great loan book, always poorly imitated by its competitors eg Marac in its various forms (incl under HNZ) So great to get Chris aboard. Thanks Winner for pointing out the "retiring" bit, all fits now.

[percy]

Heading in the right direction ......good question

He did "retire" from UDC so probably bored with "retirement" and joined HNZ when Jeff asked him

Maybe he has some experience in niche areas

But HNZ does seem to be getting pretty experienced ......no sign of energetic innovative people getting on board to pump things up a bit

The Sentinel Reverse mortgages should "pump things up a bit" and will benefit from "experienced" people driving it.

[percy]

An article in The NZ Hearald, headed "Top Shop chain set for NZ launch" may hold the answer for The Carter Group's recent sell down of Heartland.
Carter Group are taking a holding in Top Retail who hold the rights to own,develop and operate the London based brand in NZ.
CEO of Carter Group is Mary Devine,Briscoes director and ex CEO of Ballantynes and ex CEO of EziBuy.

[winner69]

This from an email from Personal Investor - Australian view.

The Commission of Audit has recommended including homes above a certain value in the means test that determines who gets the age pension and how much.

Under the proposal, homes valued in excess of A$500,000 would be assessable for singles, while for couples the trigger would be A$750,000.

The family home is currently exempt from the assets test but the commission argues this is inequitable because it means high levels of wealth are sheltered. It suggests a more comprehensive means testing regime be put in place by 2027-28.

If this proposal is picked up by the federal government, it would see a sizable group of retirees required to call on the equity in their homes to help fund their retirement.

It would be a brave government that "forced" pensioners to sell their homes to release that equity, which makes reverse mortgages a likely tool for retirees who need to convert their home into cash flow.

Even now, a reverse mortgage can be an alternative to "downsizing" into a smaller and cheaper home to release funds for retirement.

A reverse mortgage allows homeowners to access a loan, or a regular stream of cash (an annuity), using their home as collateral. Borrowers continue to live in the property until death - or they move into aged care - after which the loan is repaid from the sale of the house.

The mortgage can apply to the full value of a property, or borrowers may be able to access "residual value protection", allowing them to set aside a portion of the house's value to be available for aged care or as an inheritance.

Interest rates are generally higher than for standard home loan products due to less competition in this sector and higher risks for the lender.

For some years now, on the back of the lessons learnt from the global financial crisis, there have been government-imposed rules around "negative equity" that prevent lenders from extracting repayments beyond the value of the house. This means lenders can suffer a loss if the loan amount exceeds the value of the house at the date of the sale, something that may happen in a softening property market.

Reverse mortgages involve compounding interest, where interest charges are added onto the loan as they accrue. This means the loan amount can rise quickly.

Taking out a reverse mortgage can affect the availability of funds for major items such as aged care and bequests, and it can have an impact on other family members who may live in the house.

Ultimately reverse mortgages demand a much higher degree of financial literacy from individuals, who may need professional advice on issues such as tax and Centrelink implications.

Despite the fact that reverse mortgages helped send mortgage insurer the Federal Housing Administration bankrupt in the US, the market there is returning.

How would increased demand for reverse mortgages change the Australian financial system?

The bulge of baby boomers entering retirement, along with a change to means testing along the lines proposed, could be expected to lead to an increase demand in such products[/B[B]]. In theory, new lenders would be attracted into the market, thus increasing competition and driving interest rates down (in relative terms, against the risk-free rate).

Three main sources of risk are apparent, the first of which is declining real estate values, or the risk of negative equity. The loan amount may end up being larger than expected if the borrower enjoys a long life or property values fall.

Second, with a reverse mortgage the lender generally has no recourse to assets other than the home. Third, at this stage of life borrowers may neglect maintenance and property improvements, eroding the value of the home.

Many of these risks, in particular real estate values and an ageing population, are systematic and may become systemic. Should reverse mortgages enjoy significant growth, as projected, Australian lenders would have increased exposure to house price risk. If house prices dropped, more defaults would occur.

The impact of growth in reverse mortgages on the housing market itself may be limited, as properties are sold only after death or upon a move into aged care. But there may be a decrease in downsizing activity if these products become more popular.

Currently, reverse mortgages are mainly provided by the banking sector, which is already over-exposed to mortgages. At the same time, the superannuation sector is looking for long-term investment opportunities. Why not create financial products where super funds provide cash flow for retirees in exchange for access to the value in their homes?

Some super fund members may not want further exposure to Australian real estate, particularly if they are already house owners, but this could be an additional option in the current portfolio of investment choices offered by funds to their members.

The outcome might be comparable to the situation in overseas pension systems - such as Germany's - where pensions are organised to a large degree as intergenerational wealth transfers, where one generation pays for the next generation.

Such a system could increase the resilience and efficiency of the Australian financial system.

Harry Scheule is associate professor, finance, UTS Business School at University of Technology, Sydney. This article was originally published on The Conversation.

[percy]

Thanks for posting that very interesting article Winner69.

[Joshuatree]

Yes thanks guys and int to re carter selldown. Hope reverse mortgages gain traction.need to break down the sacred cow of home ownership and negative legacy experiences of past reverse mortgage companies greed and hidden/small print details.

[winner69]

Might pay HNZ to stay in Australia, if they were thinking of selling the OZ bit off

[SCOTTY]

Great post thanks Winner

Cheers

[percy]

Might pay HNZ to stay in Australia, if they were thinking of selling the OZ bit off

From what I have read Heartland are keen to hold onto the Aussie business.
Heartland's chairman, Geoffrey Ricketts is on the board of Suncorp Group Ltd,which should provide him [and Heartland] with good contacts in Australia.

[iceman]

Positive news that S&P raises HNZ's credit rating a notch:

NZX Release

S&P raises credit rating on Heartland Bank

22 May 2014

Heartland New Zealand Limited (NZX: HNZ) is pleased to announce that Standard
& Poor's (S&P) has raised its long term issuer credit rating on HNZ
subsidiary Heartland Bank Limited (Heartland) to 'BBB' from 'BBB-' and
assigned a negative outlook. The rating upgrade reflects S&P's view that:

o Heartland's business position strengthened over the past three years upon
the bank's transition toward its core niche markets (such as vehicle asset
finance, invoice financing, livestock financing and reverse mortgage loans)
and away from non-core assets.

o Contestability in these, typically higher-risk, specialist markets is lower
compared to traditional commoditised markets such as the residential mortgage
loans market.

o Heartland has made progress in exiting its non-core property portfolio and
reducing its residential mortgage lending portfolio.

The negative outlook reflects the negative economic risk trend assigned to
the New Zealand banking system and S&P's concerns around economic imbalances,
which are not specific to Heartland. S&P's full report is attached.

Heartland is delighted with the raised rating, and in particular with S&P's
acknowledgement of a strengthened business position for Heartland.

[Harvey Specter]

S&P raises credit rating on Heartland BankBBBoom

Positive sign and hopefully we will see more raised ratings. To see the ratings of all banks: http://www.rbnz.govt.nz/regulation_and_supervision/banks/prudential_requirements/credit_ratings/

[percy]

Will the upgrade be enough to trigger the overdue breakout? ...

If those new entries buying at 86 realise their orders aint gonna get filled and they get impatient ... then Probably! ...

But if those sellers realise that their holdings have just become more valuable and step back up a few cents ... then Certainly!

Whatever happens ,probably or certainly?! "We are well positioned."!!!!!!!!!!!!!!!!!!!!!
Again Heartland have delivered on what they said they would achieve.

[vorno]

Will the upgrade be enough to trigger the overdue breakout? ...

If those new entries buying at 86 realise their orders aint gonna get filled and they get impatient ... then Probably! ...

But if those sellers realise that their holdings have just become more valuable and step back up a few cents ... then Certainly!

Something you probably need to realise... Heartland does appear to be one of the most stable stocks on the market & thus, we're well positioned ;)

[Arbitrage]

Buyers seem to lining up now.

[Beagle]

Will the upgrade be enough to trigger the overdue breakout? ...

If those new entries buying at 86 realise their orders aint gonna get filled and they get impatient ... then Probably! ...

But if those sellers realise that their holdings have just become more valuable and step back up a few cents ... then Certainly!

Mr market was slow to react so I added this morning at 87 cents :)....didn't see any point waiting for the inevitable breakout. Very encouraging to see the S&P upgrade. I'm not sure but did someone mention we are well positioned :)

[Arbitrage]

Last sale 88c.