HGH - Heartland Group Holdings

[janner]

Golly! HNZ not on the NZX first page anymore. Percy on holiday? ;)

More seriously ... a pullback from 98c to 96c. Volumes at 96c pretty thin. Will 96c become the new 88c? Or are buyers being coy and sellers hiding?

Still picking over a $1.00 in the next month or two. (Yeah, I know that likely to be a safe bet.)

Hmmm...

Why are you seeking news about HNZ on the first page Belg.. ??..

It is almost bottom drawer stuff ..

Not quite yet percy.. :-))

[winner69]

Aussies taking to reverse mortgages

[percy]

Aussies taking to reverse mortgages

Thanks Winner69.
Nice to know Heartland are big in reverse mortgages in Australia too.!!
Could rightly be said they are The Australasian reverse mortgage specialists.

[winner69]

Playing around with their HEL calculator

Put in a modest house price decline rate in and remaining equity disappears pretty fast

Home heartland stay away from these forthcoming red zoned or zombie towns. Could get into trouble. Even places like Wanganui are mentioned as potential zombie town

[percy]

Playing around with their HEL calculator

Put in a modest house price decline rate in and remaining equity disappears pretty fast

Home heartland stay away from these forthcoming red zoned or zombie towns. Could get into trouble. Even places like Wanganui are mentioned as potential zombie town

Might pay you to tx or email Jeff first thing in the morning and warn him ?!
Time to get Snoopy on to it!!!!! lol.

[winner69]

Might pay you to tx or email Jeff first thing in the morning and warn him ?!
Time to get Snoopy on to it!!!!! lol.

No need to ....his staff read sharetrader and they will pass this on

What's her name again .....your nice lady you talk to?

[percy]

No need to ....his staff read sharetrader and they will pass this on

What's her name again .....your nice lady you talk to?

No cause for concern then!!! lol.
Look forward to the HER calculator being recalibrated before morning tea tomorrow!!!
Have they got a means to contact you should they need help,or do you think you mate at The Co-Op could help them????

[winner69]

No cause for concern then!!! lol.
Look forward to the HER calculator being recalibrated before morning tea tomorrow!!!
Have they got a means to contact you should they need help,or do you think you mate at The Co-Op could help them????

They probably have feel sorry for those people and give them cheaper rates in the first place and hope they move on sooner than later

What's happened to the shareprice Percy ......it's way off a buck at the moment

[winner69]

Must have plenty of cash or nobody wanting to borrow if their deposit rates are anything to go by

2 year rate was 4.85 but wouldn't budge when I said anz was 5.00 but rabobank were a bit keener at 5.25 so they got it

Maybe all those delinquent loans have been repaid with money in bank .....ha ha

[winner69]

Must have plenty of cash or nobody wanting to borrow if their deposit rates are anything to go by

2 year rate was 4.85 but wouldn't budge when I said anz was 5.00 (and mentioned percy said do a deal for mr winner) but rabobank were a bit keener at 5.25 so they got it

Maybe all those delinquent loans have been repaid with money in bank .....ha ha

Mind you my mate at coop wouldn't go above 4.75 ...he some mate eh

[percy]

They probably have feel sorry for those people and give them cheaper rates in the first place and hope they move on sooner than later

What's happened to the shareprice Percy ......it's way off a buck at the moment

I can see you taking out a REL and then sending HNZ near broke living to 120 years of age,!!! Think you would be getting a daily call from Jeff asking how is you health!!!
Share price is one of the very few in NZ that is trading above both its 50day and 200 day moving average.So I am very pleased with the 96cents it finished on Friday.
Only about 5 weeks to the full year result announcement.

[percy]

Mind you my mate at coop wouldn't go above 4.75 ...he some mate eh

All to do with matching demand,maturities,renewals.
I do think consumer lending growth is a challenge to all banks/finance companies at present.
That makes the strong demand/growth for REL a good sector for HNZ to be the leading player.
From a broker's research;"HNZ should continue to re-rate as it improves its ROE and continues to grow and develop its business.HNz remains on undemanding multiples."
I would expect we will see a lot on updated broker's research after the result is announced.
ps winner69."Remember you are better to own a bank,than having money in the bank,."
HNZ's yield is a lot better than the deposit rates you were quoted.!

[Beagle]

ANZ were 5.75% for five years when I looked recently. People are paying brokerage and buying well rated medium term bonds and getting lower returns than that, go figure ?

Anyway...sorry I digress...back to business and its messy.


REL: 0917 HRS Motor Trade Finances Limited

MEETING: MTF: MTF provides more information for special meeting

The Board of MTF has become aware that Heartland New Zealand Limited or MARAC
or their agents (HNZ), has been engaging with selected MTF shareholders. The
Board believes this engagement is related to a recent proposal by HNZ to
acquire MTF that was rejected by the MTF Board for reasons outlined below. In
the interests of ensuring all shareholders are equally informed, and
correcting any misinformation that may exist across the MTF shareholding
base, the Board believes that shareholders should be aware that:

- HNZ had approached the Board of MTF over a considerable period regarding
the prospect of making an offer to acquire MTF. These approaches culminated
in an undated draft written proposal from HNZ received early May 2014. After
taking legal and commercial advice, the Board formed the view that the
proposal in the form received was without merit, as to the indicative price
and in other respects. The proposal was incomplete, highly conditional and
incapable of acceptance. After taking advice, the Board formed the view that
the proposal did not require disclosure, at that time
- the nature of the proposal from HNZ revealed that HNZ holds a materially
different view than MTF's Board as to the potential impact on MTF from the
High Court case brought by the Commerce Commission, in which the High Court
finding of breaches of the Credit Contract and Consumer Finance Act 2003, in
respect of credit fees charged in 39 credit contracts originated by Sportzone
Motorcycles Ltd (in liquidation), , is subject to appeal at the Court of
Appeal
- the Board offered to engage further with HNZ to see if an appropriate
proposal that could be put to shareholders could be agreed. This would have
involved sharing MTF's confidential information regarding the Commerce
Commission case, and other information, with HNZ under appropriate
confidentiality
- we failed to agree a basis for moving forward with HNZ. HNZ was not
prepared to accept confidentiality arrangements and undertakings which, given
HNZ is a direct competitor of MTF, we regarded as appropriate and HNZ has
failed to indicate a willingness to re-consider its indicative price.
- as a consequence, formal discussions were terminated
- the Board is aware that HNZ has been engaging with selected MTF ordinary
shareholders. As mentioned in our announcement on 16 July 2014, MTF has
received a letter from a group of ordinary shareholders, requesting that MTF
convenes a special meeting of ordinary shareholders to consider certain
resolutions. The resolutions effectively request the MTF Board to make
public the information that HNZ was seeking but would not enter
confidentiality agreements in regard to
- MTF believes the proposed resolutions and the supporting statement contain
some errors of fact and assumptions and has proposed to meet with the
proposing shareholders, prior to issuing a notice of meeting, to address
those errors and discuss their proposed approach more generally
- MTF expects to issue a notice of meeting setting out the resolutions, and
your Board's response to them, as soon as practicable after that meeting
- we will provide more detail when the notice of meeting is issued. In the
interim, shareholders should note:
- the Board of MTF wish to ensure that shareholders do not have misleading or
confusing information regarding the Commerce Commission issues and the
outlook for MTF, including as a result of communications from HNZ
- the Board has not viewed the communications between HNZ and selected
shareholders, but, based on the views expressed by HNZ to the MTF Board,
shareholders should know that the MTF Board does not agree with the
assumptions underlying HNZ's views and does not regard the proposal HNZ
recently presented to MTF as having merit for either MTF's shareholders or
originators, in its current form
- HNZ has no obligation to act in the best interests of MTF shareholders;
that is the role of your Board and we are very focussed on that in our
handling of this matter. Any views HNZ expresses about MTF's business or
financial position must be considered by shareholders in light of the fact
that HNZ is a competitor and potential acquirer of MTF, and will be acting
consistent with its own interests in communicating any such views about MTF
to MTF shareholders
- if HNZ wishes to make an offer for the shares in MTF, it should do so under
the Takeovers Code. If it wishes to develop a transaction proposal to take
to the shareholders and originators of MTF, the appropriate channel is
through the MTF Board, under appropriate confidentiality arrangements, and
not through selected ordinary shareholders. The Board is happy to work with
HNZ on a proposal that it considers has merit for shareholders and through a
process that is acceptable; to date no such proposal or process has been put
forward
- until HNZ is prepared to amend its proposal, we can only continue to regard
it as being without merit.

The Board will update shareholders if there are any meaningful developments
in relation to HNZ.

In the meantime, the Board strongly advises that shareholders:

- do not make any undertakings to any party regarding the pending Special
Meeting until after the Notice of Meeting and explanatory detail have been
issued;

- do not make any undertakings to HNZ or any other party in regard to their
MTF shares before the Board of MTF has received and reviewed any formal
proposal, taken proper advice and is able to make an appropriate
recommendation to shareholders;

- treat any communications from HNZ with caution, given that it is a
competitor and potential acquirer of MTF. In that latter capacity, HNZ has
an interest in raising unsubstantiated questions that may negatively affect
the value perception of MTF.

The next steps for the Board of MTF are:

- meet with the proposing shareholders in relation to the special meeting and
the resolutions they wish to put;
- issue a notice of meeting and further explanatory notes to MTF ordinary
shareholders.

In the meantime, if any shareholder has any questions or wants to discuss the
situation or any approach you may have had, please contact:

Angus Bradshaw 03 467 7988 abradshaw@mtf.co.nz
Glen Todd 03 474 6370 gtodd@mtf.co.nz

Yours sincerely

Stephen Higgs
Chairman
End CA:00252892 For:MTF Type:MEETING Time:2014-07-21 09:17:56

[percy]

Thanks for posting that MTF release.
I had heard there were a number of "unhappy" shareholders in MTF.I think their special meeting should give them a chance to air their views.
Should HNZ end up taking over MTF it would great fit.

[Bjauck]

Thanks for posting that MTF release.
I had heard there were a number of "unhappy" shareholders in MTF.I think their special meeting should give them a chance to air their views.
Should HNZ end up taking over MTF it would great fit.

I think it sounds a good fit. However it would seem to make HNZ even more of a finance company rather than a bank.


ANZ were 5.75% for five years when I looked recently. People are paying brokerage and buying well rated medium term bonds and getting lower returns than that, go figure ?

Anyway...sorry I digress...back to business and its messy. The recent MRP capital bond issue has a coupon of 6.9% reviewed every five years and is trading at 6.6%. You can sell your bonds whenever you want (especially in a larger issue) and get the money within 4 days for the cost of the commission ($40 with ANZ Secs). If you want to break a term deposit there are costs involved including a clawback of interest and I am not sure how long it takes to get the money. On the face of it MRP010 is riskier but if Mighty River goes under we are probably in pretty dire financial straits anyway.

What do the HNZ scions think of the big Chinese Banks setting up shop in NZ?

[blobbles]

I think it sounds a good fit. However it would seem to make HNZ even more of a finance company rather than a bank.

The recent MRP capital bond issue has a coupon of 6.9% reviewed every five years and is trading at 6.6%. You can sell your bonds whenever you want (especially in a larger issue) and get the money within 4 days for the cost of the commission ($40 with ANZ Secs). If you want to break a term deposit there are costs involved including a clawback of interest and I am not sure how long it takes to get the money. On the face of it MRP010 is riskier but if Mighty River goes under we are probably in pretty dire financial straits anyway.

What do the HNZ scions think of the big Chinese Banks setting up shop in NZ?

I was going to write a blurb on Chinese banks, but this guy sums it up very well: http://www.thebubblebubble.com/china-bubble/

[GTM 3442]

I was going to write a blurb on Chinese banks, but this guy sums it up very well: http://www.thebubblebubble.com/china-bubble/

This guy writes a regular piece about "bubbles". Only the country name changes.

If he's right about China this article, was he right about New Zealand in his recent article?

I'd rather read you, Blobbles.

[mouse]

Closing share price today, Wednesday, 23rd, is a bit naughty. What to do?

[couta1]

Closing share price today, Wednesday, 23rd, is a bit naughty. What to do?
Nothing sit tight:cool:

[winner69]

Closing share price today, Wednesday, 23rd, is a bit naughty. What to do?

With thoughts like that you need to sell first thing tomorrow

Where's the faith and conviction that this a great company

[percy]

Closing share price today, Wednesday, 23rd, is a bit naughty. What to do?

Go to bed dreaming of the fat growing dividends you will receive FOR EVER from Heartland.
I go to bed every night counting dollars coming in from Heartland, rather then counting sheep.Some nights I don't care whether I fall asleep or not.!!
Just keep on counting and counting!!! More and more shares,more and more dollars.Other nights I try and work out the compound effect of the dividend reinvestment .Just more and more shares worth more and more. Wife says I always wake up in the morning with a big smile on my face!!

[mouse]

Go to bed dreaming of the fat growing dividends you will receive FOR EVER from Heartland.
I go to bed every night counting dollars coming in from Heartland, rather then counting sheep.Some nights I don't care whether I fall asleep or not.!!
Just keep on counting and counting!!! More and more shares,more and more dollars.Other nights I try and work out the compound effect of the dividend reinvestment .Just more and more shares worth more and more. Wife says I always wake up in the morning with a big smile on my face!!

Just waking up puts a big smile on my face, Percy!

[percy]

Just waking up puts a big smile on my face, Percy!

So true for a lot of us !!!

[zigzag]

One of the main drivers of this companies profitability is credit growth, which is dependent on continuing economic growth and confidence. So what happens if National loses the election, and we end up with what they call a "coalition of losers." These idiots could seriously tank the economy. Who will borrow to buy a car if they have doubts about their employment, what farmer will borrow to expand and what company will borrow to invest in new plant, if they have no confidence in their future prospects? I own shares in HNZ and would like to buy more, but I will wait until I know who is going to be running the country for the next term. Don't wish to spoil your sleep Percy.

[percy]

One of the main drivers of this companies profitability is credit growth, which is dependent on continuing economic growth and confidence. So what happens if National loses the election, and we end up with what they call a "coalition of losers." These idiots could seriously tank the economy. Who will borrow to buy a car if they have doubts about their employment, what farmer will borrow to expand and what company will borrow to invest in new plant, if they have no confidence in their future prospects? I own shares in HNZ and would like to buy more, but I will wait until I know who is going to be running the country for the next term. Don't wish to spoil your sleep Percy.

Don't tell any one but my first business was a toy shop.Always did better with a Labour government.
Labour/National need businesses to do well,so they can employ people.People employed pay taxes which means the politicians can keep getting paid.Better businesses do, the better the country does.The share market is where we can buy a holding in these companies.
Off to bed in a minute.So many Heartland dollars to count I have to get to bed early.!!!

[Bjauck]

One of the main drivers of this companies profitability is credit growth, which is dependent on continuing economic growth and confidence. So what happens if National loses the election, and we end up with what they call a "coalition of losers." These idiots could seriously tank the economy. Who will borrow to buy a car if they have doubts about their employment, what farmer will borrow to expand and what company will borrow to invest in new plant, if they have no confidence in their future prospects? I own shares in HNZ and would like to buy more, but I will wait until I know who is going to be running the country for the next term. Don't wish to spoil your sleep Percy. About 10 years ago I read in the Grauniad in the UK (sorry no link!) since ww2 that Labour governments there produced (coincided with?) greater strength on the stock exchange. That included a time when there was a strong Trotsky element in Old Labour in the UK. So red flag wavers don't necessarily make for a poor showing on the share markets. Redistributing wealth from rich to poor may also stimulate consumption and hence the fortunes of some companies.

[Harvey Specter]

So red flag wavers don't necessarily make for a poor showing on the share markets. Yip - nothing better for the economy than wasteful spending. not sustainable though.

[janner]

Um. Sorry to be nit picky but that's wrong. (yeah I know it was tongue in cheek.)

Should read: nothing better for the economy than sensible, sustainable spending.

Which group on the electoral gravy train would they be ???..

Why are there so many clipping the tickets as this train travels ??

4.5 million people..

How many people. Local and Central are just ticket clippers ??

Should they not be included in the welfare statistics ??

[nextbigthing]

Can someone please advise me about the dividend policy? I see from their last report they had a record date for an interim divvy on 12/3/14 but I couldn't see anything about future dividends. What's the story?

[percy]

Can someone please advise me about the dividend policy? I see from their last report they had a record date for an interim divvy on 12/3/14 but I couldn't see anything about future dividends. What's the story?

When Heartland announce their full year result at the end of August for the year ended 30/6/2014 they will advise the amount of the dividend and the ex and date payable.

[nextbigthing]

Thanks Percy. Do you have a list of their historical dividends?

[Under Surveillance]

Can someone please advise me about the dividend policy? I see from their last report they had a record date for an interim divvy on 12/3/14 but I couldn't see anything about future dividends. What's the story?

At, or in conjunction with, the AGM on 30 Nov 2012, the directors of Heartland announced a dividend policy as follows: Heartland will determine dividends (both interim andfinal) based on its net profit after tax, subject to maintaining a prudentlevel of capital for its needs. Heartland’s capital needs will vary from timeto time, depending on a range of factors (including regulatory and creditrating requirements, general economic conditions, current and expected growthand the mix of business). A key objective is to ensure an appropriate balancebetween maximising shareholder returns, and protecting the interests ofdepositors through prudent capital management.
I can't recall there being any formal change to that policy.

[Under Surveillance]

From the NZX website, HNZ dividends to date (sorry if the format gets scrambled as tends to happen on Sharetrader):


Ex Dividend
Period
Amount
Supp.
Imputation
Payable
Currency


10 Mar 2014
Interim
2.500c
0.441c
0.972c
4 Apr 2014
NZD


18 Sep 2013
Final
2.500c
0.441c
0.972c
4 Oct 2013
NZD


18 Mar 2013
Interim
2.000c
0.353c
0.778c
5 Apr 2013
NZD


12 Dec 2012
Special
1.500c
0.265c
0.583c
21 Dec 2012
NZD

[winner69]

What's up Percy, you said it was going to be a buck by now buts it's down at 94

Hope we don't have to wait for moosies meeting in October to celebrate

[percy]

What's up Percy, you said it was going to be a buck by now buts it's down at 94

Hope we don't have to wait for moosies meeting in October to celebrate

Given up waiting for it to hit $1,more interested to see how long it will take to hit my current "fair value" price of $1.25.
I find after loading up my portfolio with Heartland I am "well positioned."
You may have noticed Moosie's meeting is on Friday night the 3rd of October.I expect all of us Heartland shareholders will be very happy in the knowledge, that we will wake up on the Saturday morning, with our fully imputed dividend sitting in our bank accounts.
Come on down and I will shout you a couple of beers.!!![I can afford it]

[winner69]

OMG Heartland down to 93 cents

Another cent and I'll be underwater with HNZ - what an embarrassment being the only one on this thread who is losing money on HNZ

What a dog of a share.

Teach me to believe the hype you read on the Internet, if eel I have been sucked in good and proper

Won't blame belg and his little TA analysis saying it was going to go up. Will only blame myself for listening to and believing to all the crap/noise on this thread

[noodles]

OMG Heartland down to 93 cents

Another cent and I'll be underwater with HNZ - what an embarrassment being the only one on this thread who is losing money on HNZ

What a dog of a share.

Teach me to believe the hype you read on the Internet, if eel I have been sucked in good and proper

Won't blame belg and his little TA analysis saying it was going to go up. Will only blame myself for listening to and believing to all the crap/noise on this thread

And look at the market depth Winner. After 93 is broken, the price will just collapse. Some might read that depth and panic sell.... All the way down to my bid:)

EDIT: and just remember that Hoop warning this morning. Cyclical Bear starting?
EDIT2: At least Percy will get to sleep earlier. Less money to count.

[vorno]

OMG Heartland down to 93 cents

Another cent and I'll be underwater with HNZ - what an embarrassment being the only one on this thread who is losing money on HNZ

What a dog of a share.

Teach me to believe the hype you read on the Internet, if eel I have been sucked in good and proper

Won't blame belg and his little TA analysis saying it was going to go up. Will only blame myself for listening to and believing to all the crap/noise on this thread

meh, if it crashes down to the eighties then I'll just top-up. Looking long-term with this stock.

[percy]

OMG Heartland down to 93 cents

Another cent and I'll be underwater with HNZ - what an embarrassment being the only one on this thread who is losing money on HNZ

What a dog of a share.

Teach me to believe the hype you read on the Internet, if eel I have been sucked in good and proper

Won't blame belg and his little TA analysis saying it was going to go up. Will only blame myself for listening to and believing to all the crap/noise on this thread


Did you really muck around and only buy in at over 90cents?
You really are an embarrassment.!
You have listened to the wrong posters.You should know better.!!!!
Share price at the time of posting is 94cents.

[mouse]

Did you really muck around and only buy in at over 90cents?
You really are an embarrassment.!
You have listened to the wrong posters.You should know better.!!!!
Share price at the time of posting is 94cents.

When are we going to get to a Dollar???????? Aaaargh!

[traineeinvestor]

meh, if it crashes down to the eighties then I'll just top-up. Looking long-term with this stock.

Yeah - a nice little correction would be very welcome right about now so I could put some cash to good use.

[iceman]

OMG Heartland down to 93 cents

Another cent and I'll be underwater with HNZ - what an embarrassment being the only one on this thread who is losing money on HNZ

What a dog of a share.

Teach me to believe the hype you read on the Internet, if eel I have been sucked in good and proper

Won't blame belg and his little TA analysis saying it was going to go up. Will only blame myself for listening to and believing to all the crap/noise on this thread

LOL. Another humorous and good post .
Another way to look at it winner is like me, hoping it will go down even further before we get the DRP shares so we get a few more new shares :t_up:

[couta1]

OMG Heartland down to 93 cents

Another cent and I'll be underwater with HNZ - what an embarrassment being the only one on this thread who is losing money on HNZ

What a dog of a share.

Teach me to believe the hype you read on the Internet, if eel I have been sucked in good and proper

Won't blame belg and his little TA analysis saying it was going to go up. Will only blame myself for listening to and believing to all the crap/noise on this thread
You obviously didnt listen to as much crap/noise as me , you've still got a house I take it:scared: PS-Not referring to my HNZ shares

[winner69]

Did you really muck around and only buy in at over 90cents?
You really are an embarrassment.!
You have listened to the wrong posters.You should know better.!!!!
Share price at the time of posting is 94cents.

Now now Percy .....think I have done better with others than I would have done with HNZ.

Can't invest in everything can we

[winner69]

meh, if it crashes down to the eighties then I'll just top-up. Looking long-term with this stock.

But your circumstances with HNZ different tha mine.

Even in the eighties you probably still well ahead so no pain for you and buying more is easier

For me in the eighties is under water .....pain pain ....and everybody says don't catch falling knives or averaging down bad idea.

And I have a stop loss so maybe all sold.

In that case I will decide HNZ and me don't get on and won't even bother try to get in again .....maybe might just at 75 cents

[winner69]

You obviously didnt listen to as much crap/noise as me , you've still got a house I take it:scared: PS-Not referring to my HNZ shares

And haven't lost my shirt yet either

You haven't lost your house have you?

[winner69]

LOL. Another humorous and good post .
Another way to look at it winner is like me, hoping it will go down even further before we get the DRP shares so we get a few more new shares :t_up:

Does that mean I might get even more shares that are under water ......ironic

[winner69]

LOL. Another humorous and good post .
Another way to look at it winner is like me, hoping it will go down even further before we get the DRP shares so we get a few more new shares :t_up:

Does that mean I might get even more shares that are under water ......ironic ....like a reward for being a loser

[percy]

Does that mean I might get even more shares that are under water ......ironic ....like a reward for being a loser

Sell while you are ahead !!!!! [If you can find better value on the NZ market,go there.]
I notice from the sharetrader competition Heartland is up 14.96%.This includes the interim dividend.
I am very relaxed with my Heartland investment.Only the other day I read a report on how few impaired assets NZ banks have.With Heartland's excellent record of "putting runs on the board", the fantastic REL acquisition,the care they are taking over MTF possible acquisition [making sure there are no on going issues],means they are being careful and sensible,looking after the business.
I am looking forward to the annual result,and the announcement of the final fully imputated dividend.

[winner69]

When are we going to get to a Dollar???????? Aaaargh!

That's what heard a week or so ago. I had waited for so long to buy and the chart finally looked healthy and I bought a bundle ......and it was so exciting to see it go all the way to 98 and was praising my timing skills

And now all this

Still holding .....in profit .....and hoping

[percy]

That's what heard a week or so ago. I had waited for so long to buy and the chart finally looked healthy and I bought a bundle ......and it was so exciting to see it go all the way to 98 and was praising my timing skills

And now all this

Still holding .....in profit .....and hoping

Don't like the look of the chart.
Could be a head and shoulders pattern.
Take your profits and go water the Rata trees.!! lol.

[PartyPooper]

waiting on the side lines for 0.8X entry will we see it though?

The way the market is constantly running out of puff lately maybe

[winner69]

Don't like the look of the chart.
Could be a head and shoulders pattern.
Take your profits and go water the Rata trees.!! lol.


Rata doing great. Percy rata must be a few feet taller than Snoopy rata now

Saw a ruru up the gully last week .... exciting to see such wildlife coming back to what was a scrub/weed covered valley 15 years ago. The regeneration is certainly working

[percy]

Rata doing great. Percy rata must be a few feet taller than Snoopy rata now

Saw a ruru up the gully last week .... exciting to see such wildlife coming back to what was a scrub/weed covered valley 15 years ago. The regeneration is certainly working

Fantastic.
We were lucky enough to live at the foot of the Port Hills in Cashmere about 5 years ago,and it was wonderful to see the reappearance of native wood pigeons .As you say nice to see regeneration working.

[ziggy415]

I posted heaps about the flat-lining between 86 and 88 and buying in this range would be a good idea. Clearly that wasn't the bit of TA advice you're referring to. ;)

And now to add insult to injury, a disclosure: I was selling a few into the spike to 98c and averaged 96.9c. Will choose a new buy price once the looming "correction" has petered out. Sorry.

Still 70% expect 1.00 plus by Christmas (down from 100%) as NZ's economic outlook is not as it was a few months back and HNZ will suffer a slow down accordingly.

heartland has some exposure to the rural sector so lower milk payout will affect i guess...not sure how much....have owned heartland before and regretted selling but cant work out a price to buy in....sold all my nzo week or so ago so am cash rich but lacking in the technical department....can only marvel at the experts when it comes to finance

[BlackPeter]

Interesting analysis on NBR:

http://www.nbr.co.nz/article/heartlands-tilt-mtf-signals-competitive-pressures

In a nutshell: they feel that Heartland lost growth momentum (as well with dairy down) and is now sort of compelled to grow through purchases ... which may or may not be a good thing.

Discl: sold out during the recent peak - happy to watch from the side lines.

[winner69]

Snoopy has done a lot of analysis about HNZ loan book. Most of this has been rubbished by the believers.

I for one always wonder how much banks/insurance companies 'smooth' profits by subtle changes to provision assumptions / discount rates etc.

Good on Snoops for trying to work out HNZ accounts.

John Kay is a renowned economic commentator. Interesting piece he as written on such issues. Seeing its a weekend have a read

http://www.johnkay.com/2014/07/30/why-mean-outcomes-are-often-meaningless

Last couple of paragraphs -

There is no “right” answer to the problem of accounting for these kinds of uncertainty; only a need to acknowledge that there is never such a thing as a single true and fair view, only a range of possible outcomes. When a business has many long-term contracts, or teeters on the verge of bankruptcy, that range may be very wide.

I can see the difficulty a bank chief financial officer will encounter if they tell depositors, shareholders and regulators that annual earnings are something between a loss of $5bn and a profit of $10bn; but such a statement may be the only view of the company’s affairs that is genuinely true and fair.

[Beagle]

There was a brief surge to 98 from a base built first in the late 80's and then in the low 90's and now were back to low 90's after its confirmed there will be a $4B hole in the economy caused by the dramatic fall in Dairy prices and recent equity market weakness generally. Further the absolute avalanche of new IPO's sucks the wind out of the market. Why is anyone surprised by a correction of a few cents ?

[couta1]

There was a brief surge to 98 from a base built first in the late 80's and then in the low 90's and now were back to low 90's after its confirmed there will be a $4B hole in the economy caused by the dramatic fall in Dairy prices and recent equity market weakness generally. Further the absolute avalanche of new IPO's sucks the wind out of the market. Why is anyone surprised by a correction of a few cents ?
Well said Roger this is one stock I'm quite happy to just leave in the bottom drawer along with my PGW ,Genesis and MRP:cool:

[percy]

Interesting analysis on NBR:

http://www.nbr.co.nz/article/heartlands-tilt-mtf-signals-competitive-pressures

In a nutshell: they feel that Heartland lost growth momentum (as well with dairy down) and is now sort of compelled to grow through purchases ... which may or may not be a good thing.

Discl: sold out during the recent peak - happy to watch from the side lines.

At last year's agm Heartland made it very clear they would look for growth via acquisitions.
Since then they have acquired the market leader in the REL sector in NZ.They also have an REL business in Aussie.This sector is fast growing in both countries.[A fantastic acquisition]
Was not that long ago they acquired the finance division of PGW.
Motor Trade Finance would be a great fit with Heartland,but thankfully Heartland are being cautious as the deal appears to contain too many fish hooks.
Heartland made it very clear at last years agm they want to be the best bank and not the biggest.Only looking to do "good business". And have had their credit rating upgraded.
So nothing new in the NBR article for me.
Growth momentum?All financial intos are finding organic growth hard to achieve.DPC are taking over TUA to achieve it.

[BlackPeter]

At last year's agm Heartland made it very clear they would look for growth via acquisitions.
Since then they have acquired the market leader in the REL sector in NZ.They also have an REL business in Aussie.This sector is fast growing in both countries.[A fantastic acquisition]
Was not that long ago they acquired the finance division of PGW.
Motor Trade Finance would be a great fit with Heartland,but thankfully Heartland are being cautious as the deal appears to contain too many fish hooks.
Heartland made it very clear at last years agm they want to be the best bank and not the biggest.Only looking to do "good business". And have had their credit rating upgraded.
So nothing new in the NBR article for me.
Growth momentum?All financial intos are finding organic growth hard to achieve.DPC are taking over TUA to achieve it.

Hi Percy - didn't meant to criticize the stock ... I consider HNZ as a solid share, nothing wrong with investing into it. Just not sure I expect short term such amazing SP growth as some people on this thread seem to hope for. As well - I learned my lessons on finance companies the hard way, and given that HNZ is sort of moving into this direction (again - no affront intended) would I request higher rewards from this stock than it currently seems to offer.

But hey - forecasts are very difficult, particularly if they involve the future. HNZ stays on my watchlist, and if the price is right I may very well buy in again.

[percy]

Hi Percy - didn't meant to criticize the stock ... I consider HNZ as a solid share, nothing wrong with investing into it. Just not sure I expect short term such amazing SP growth as some people on this thread seem to hope for. As well - I learned my lessons on finance companies the hard way, and given that HNZ is sort of moving into this direction (again - no affront intended) would I request higher rewards from this stock than it currently seems to offer.

But hey - forecasts are very difficult, particularly if they involve the future. HNZ stays on my watchlist, and if the price is right I may very well buy in again.

Sorry BlackPeter my post was aimed at replying to the NBR article,not you.
You will have noted from my posts I have been adding to my HNZ holding as they achieve more runs on the board.I see it as a solid,well run business, founded on strong foundations,on modest ratios,a low PE,paying a good fully imputed dividend,with the capacity to increase it .
I have no concerns at today's share price.When it makes $1 does not worry me.What I am looking forward to is the day it hits my value target of $1.25.!

[Balance]

Sorry BlackPeter my post was aimed at replying to the NBR article,not you.
You will have noted from my posts I have been adding to my HNZ holding as they achieve more runs on the board.I see it as a solid,well run business, founded on strong foundations,on modest ratios,a low PE,paying a good fully imputed dividend,with the capacity to increase it .
I have no concerns at today's share price.When it makes $1 does not worry me.What I am looking forward to is the day it hits my value target of $1.25.!

Earnings update - at top end of guidance.

[RTM]

Well...that really rocked the share price. Wonder what a slightly negative report might have done ?
High expectations of this stock. Hasn't disappointed us yet. (Thanks Percy )

[winner69]

None too dusty. W69, you're going to be fine. ;)

Hope so but $36m is a bit disappointing.

They said $34m-$37m before we new about Seniors. Seniors contributing $1m so that's good. But in reality the $36m is really $35m in the context of the original guidance. So not that great

And heaps more shares to spread the $36m around too.

Never mind - I take heart that belg says I going to be fine. Nice

[Hawkeye]

The update mentioned above
https://www.nzx.com/companies/HNZ/announcements/253582

[winner69]

The update mentioned above
https://www.nzx.com/companies/HNZ/announcements/253582

EPS of 7.8 cents if punters interested. But they will report on time weighted basis so 'official' figure will be higher. It's all honky dory

[Hawkeye]

NBR article
http://www.nbr.co.nz/article/heartland-says-full-year-profit-soars-after-one-charges-wash-through-bd-160423

[percy]

Well...that really rocked the share price. Wonder what a slightly negative report might have done ?
High expectations of this stock. Hasn't disappointed us yet. (Thanks Percy )

With a good company built on solid foundations we are unlikely to get any nasty surprises.!??
I think we will see it growing nice and steadily. [slowly]
The fundamentals are excellent,being on a low PE and paying excellent dividends.
Interestingly they are improving the ROE [return on equity].They said they were looking to improve it, and are doing so.

[Longhaul]

Interestingly they are improving the ROE [return on equity].They said they were looking to improve it, and are doing so.

Yes, great to see. Hopefully one day they will be on par with the major banks (somewhere between 14-20% ROE I believe). Like many other shareholders I have very high hopes for the reverse mortgage business over the next couple of years.

[BlackPeter]

Well...that really rocked the share price. Wonder what a slightly negative report might have done ?
High expectations of this stock. Hasn't disappointed us yet. (Thanks Percy )

Rocking? I see just two trades with 95 cents and than back to 94. What numbers are you looking at?

[hummerh40]

Rocking? I see just two trades with 95 cents and than back to 94. What numbers are you looking at?

Bit of sarcasm mate

[winner69]

Yes, great to see. Hopefully one day they will be on par with the major banks (somewhere between 14-20% ROE I believe). Like many other shareholders I have very high hopes for the reverse mortgage business over the next couple of years.

ROE 14%-20% eh

Hypothetical question: What would you say if someone offered you an investment with a promised real return of close to say 17% over many years?. You mighty say: “How much can I buy?” or like most sensible people: “What is the catch?”

Think about it

[percy]

ROE 14%-20% eh

Hypothetical question: What would you say if someone offered you an investment with a promised real return of close to say 17% over many years?. You mighty say: “How much can I buy?” or like most sensible people: “What is the catch?”

Think about it
Always a lot of fun looking for the next EBO,MFT or RYM.
Even more fun holding onto that share,when you have found it.
As early investors in EBO,MFT and RYM will tell you, you have to be patient.
Yet those three companies have all been very open about where they want to go, and how they are going to get there.
Sound familiar????

[winner69]

So Heartland "assessing possible capital management options to improve ROE,"

interesting

wonder what they have in mind?

[winner69]

Percy, you know why (the rationale) they hell bent on making excessive returns on equity?

Save me contacting Jeff. He can't not respond now I am a shareholder

[percy]

So Heartland "assessing possible capital management options to improve ROE,"

interesting

wonder what they have in mind?

You need your long memory cells working here Winner69.
When everyone was going on about cash issues,rights issues,lack of capital,etc,I posted that HNZ talked about returning excess capital if they did not require it.!!!!!
Sound familiar?????
They have proved they can raise capital in a big hurry,so why have excess doing nothing?

[percy]

Percy, you know why (the rationale) they hell bent on making excessive returns on equity?

Save me contacting Jeff. He can't not respond now I am a shareholder

I can't answer that as I am not a banker.
Heartland [Jeff Greenslade] have always stated they want to be "the best" bank,not "the biggest."
Maybe they see ROE as benchmark? I know I prefer to look at ROE and EPS rather than loan book growth.

[winner69]

I can't answer that as I am not a banker.
Heartland [Jeff Greenslade] have always stated they want to be "the best" bank,not "the biggest."
Maybe they see ROE as benchmark? I know I prefer to look at ROE and EPS rather than loan book growth.

Its just that going from current levels of ROE to say 15% could mean taking more 'risks' and increased leveraging of the balance sheet

[percy]

Its just that going from current levels of ROE to say 15% could mean taking more 'risks' and increased leveraging of the balance sheet

Agreed.Yes,however they have been recycling money from low margin lending into more profitable "niche " areas.
All the time they are also wanting to improve their credit rating,and are mindful of equity and other ratios The Reserve Bank require them to keep in order.
As for greater "risks" I think their record of "provisions","overdues" etc is most acceptable.
Getting to 10% was a target set. At the time it was an aggressive target,.I think the easy fruit has been picked,ie going from 2% ROE to 9%,yet today's announcement Jeff Greenslade did say;"We will continue our product centric strategy focussing on higher yielding products where a leading market position can be achieved.".

[Longhaul]

ROE 14%-20% eh

Hypothetical question: What would you say if someone offered you an investment with a promised real return of close to say 17% over many years?. You mighty say: “How much can I buy?” or like most sensible people: “What is the catch?”

Think about it

Sorry it's not quite so high. "New Zealand’s major banks average annualised return on equity has increased from 13.8% in 1H13 to 14.8% in 2H13." From PWC Feb 2014 Banking Perspectives - PDF link (http://www.pwc.co.nz/PWC.NZ/media/pdf-documents/industries/banking/pwc-new-zealand-banking-perspectives-february-2014-final.pdf).

[percy]

Sorry it's not quite so high. "New Zealand’s major banks average annualised return on equity has increased from 13.8% in 1H13 to 14.8% in 2H13." From PWC Feb 2014 Banking Perspectives - PDF link (http://www.pwc.co.nz/PWC.NZ/media/pdf-documents/industries/banking/pwc-new-zealand-banking-perspectives-february-2014-final.pdf).

Thanks for the link,I will enjoy reading it.It is off course on the five major banks.
Would it be too much to expect a smaller more nimble HNZ, focussing on "niches" to ultimately out performer the majors on ROE?
I note Craig's have a 16.4% target ROE for ANZ.

[percy]

About time Heartland did something to cheese me off.!!!
They did it today announcing their AGM will be in Auckland at 4pm on 31st October.
All very well,but my other big holding is in EBO, whose AGM is at 11am on the same day in Christchurch.
Bugger!!
Right I expect the full Auckland team Forest, Roger, Noodles and other to file full and complete reports.!!
Maybe Balance could find time to attend too.?
Jet star fight arrives in Auckland too late.!

[winner69]

About time Heartland did something to cheese me off.!!!
They did it today announcing their AGM will be in Auckland at 4pm on 31st October.
All very well,but my other big holding is in EBO, whose AGM is at 11am on the same day in Christchurch.
Bugger!!
Right I expect the full Auckland team Forest, Roger, Noodles and other to file full and complete reports.!!
Maybe Balance could find time to attend too.?
Jet star fight arrives in Auckland too late.!

You traitor - Roger would say fly Air New Zealand

There's a 1.25pm fight - get you there in time even with AKL traffic

[Beagle]

If you change your mind mate and want to fly up for the meeting I'm more than happy to help with Airport transfers.

[percy]

You traitor - Roger would say fly Air New Zealand

There's a 1.25pm fight - get you there in time even with AKL traffic

Well I started to try and work it so I could attend both meetings.
Luckily I rang the company secretary at EBO to confirm time and place,and he told me EBO agm is now 2pm at Chateau on The Park,so I will miss HNZ's.
Thanks for your kinf offer Roger,and thanks Winner69 advising me of the 1.25pm flight.

[Beagle]

I'll be there. But I'm only going to see whether the food is up to scratch. :)

LOL Me too but keep it quiet :) I know we can rely on Snoopy to have a good sniff around for any anomalies in the accounts but I'll run the ruler over them too and bring my corporate B.S. meter along to the AGM to see if I get a signal from any possible corporate "spin".

[winner69]

Well I started to try and work it so I could attend both meetings.
Luckily I rang the company secretary at EBO to confirm time and place,and he told me EBO agm is now 2pm at Chateau on The Park,so I will miss HNZ's.
Thanks for your kinf offer Roger,and thanks Winner69 advising me of the 1.25pm flight.

They could do a split meeting

Live video link. Chairman in Chch and CEO in Auckland and plenty of punters in both places.



Did they think little ol Ashburton is now too small for a BIG bank meeting

[vorno]

Did they think little ol Ashburton is now too small for a BIG bank meeting

...always wanted to go to Ashburton :)

[percy]

LOL Me too but keep it quiet :) I know we can rely on Snoopy to have a good sniff around for any anomalies in the accounts but I'll run the ruler over them too and bring my corporate B.S. meter along to the AGM to see if I get a signal from any possible corporate "spin".

Gee Wiz you and Belgarion are a bit slow!!!!!
Look at the day and time the meeting is!!??????????????!!!!!!!!!!!!!!!!!!!!!
Forget the tucka,concentrate on the fine wines they serve up,and the premium beers.!!!!

[percy]

They could do a split meeting

Live video link. Chairman in Chch and CEO in Auckland and plenty of punters in both places.



Did they think little ol Ashburton is now too small for a BIG bank meeting

Be careful next year's could be in Wellington!!!

[vorno]

Be careful next year's could be in Wellington!!!

..In that case I would definitely expect a fine selection of craft beers!

[Beagle]

Gee Wiz you and Belgarion are a bit slow!!!!!
Look at the day and time the meeting is!!??????????????!!!!!!!!!!!!!!!!!!!!!
Forget the tucka,concentrate on the fine wines they serve up,and the premium beers.!!!!

LOL You've got to get up bloody early in the morning to out-think good ol uncle Percy :) Forest, you're driving :)

[winner69]

As a HNZ shareholder, ie one who now has some rights to the future cash flows, I will be disgusted with management if there is anything more than cracker biscuits / wine biscuits / tea or coffee.

Old corporate trick having a meeting at 4pm on a Friday just to keep the numbers down and to make sure it doesn't drag on. Obviously not wanting to encourage shareholder participation.

[Beagle]

As a HNZ shareholder, ie one who now has some rights to the future cash flows, I will be disgusted with management if there is anything more than cracker biscuits / wine biscuits / tea or coffee.

Old corporate trick having a meeting at 4pm on a Friday just to keep the numbers down and to make sure it doesn't drag on. Obviously not wanting to encourage shareholder participation.

Or they're about to announce a cracker annual result that exceeds market expectations and previous guidance and want everyone in Auckland to get on the piss with them to celebrate in due course :)

[percy]

As a HNZ shareholder, ie one who now has some rights to the future cash flows, I will be disgusted with management if there is anything more than cracker biscuits / wine biscuits / tea or coffee.

Old corporate trick having a meeting at 4pm on a Friday just to keep the numbers down and to make sure it doesn't drag on. Obviously not wanting to encourage shareholder participation.

Old so called trick has never worked down here!!!
Will have to wait for Thirsty Forest,Roger The Soak, and Boozer Belgarion's reports before we can judge whether it worked in Auckland.
Be prepared to be completely digusted.!! lol.

[percy]

I am offended.

I only drink when I have to make stock picks for the ST NZX competition! ... They're doing okay I expect? Are they? I haven't checked recently.

Sorry I have not had time to check your stock picks.........been too busy offending fellow share traders..,,,,,,,, you did say you were only going to go along to check the food....... I thought Yeah Right.!! My mistake.!!!

[forest]

LOL You've got to get up bloody early in the morning to out-think good ol uncle Percy :) Forest, you're driving :)

Roger as this is your first HNZ AGM coming up I am happy to be your driver, so you can fully enjoy HNZ hospitality. I trust you will have one fine wine with me in oner off Percy.

[winner69]

Old so called trick has never worked down here!!!
Will have to wait for Thirsty Forest,Roger The Soak, and Boozer Belgarion's reports before we can judge whether it worked in Auckland.
Be prepared to be completely digusted.!! lol.

If the air conditioning is set at 10 degrees you'll know you not wanted

And then if Jeff starts presenting believable slides with lots of words he is really saying i want to go home

And I bet Greenlane Rd a hell of a place to get to as well on Friday afternoon.

Enjoy yourselves

[percy]

If the air conditioning is set at 10 degrees you'll know you not wanted

And then if Jeff starts presenting believable slides with lots of words he is really saying i want to go home

And I bet Greenlane Rd a hell of a place to get to as well on Friday afternoon.

Enjoy yourselves

I wish you were going to the meeting Winner69.
Would love to read your full report and your in depth analysis of Jeff's presentation.
Must admit I have always enjoyed them.Been great rereading them some months later, and seeing Heartland achieving the goals set out in Jeff's presentations.

[Beagle]

Roger as this is your first HNZ AGM coming up I am happy to be your driver, so you can fully enjoy HNZ hospitality. I trust you will have one fine wine with me in oner off Percy.

Good on ya mate :)

[winner69]

I wish you were going to the meeting Winner69.
Would love to read your full report and your in depth analysis of Jeff's presentation.
Must admit I have always enjoyed them.Been great rereading them some months later, and seeing Heartland achieving the goals set out in Jeff's presentations.

I'm angling for a private audience with Jeff Percy - don't want to mix with the riff raff, especially the Auckland riff raff

Next they be changing their name ....Heartland not appropriate for their love of Auckland

Hope they don't forget where their roots lie

[percy]

I'm angling for a private audience with Jeff Percy - don't want to mix with the riff raff, especially the Auckland riff raff

Next they be changing their name ....Heartland not appropriate for their love of Auckland

Hope they don't forget where their roots lie

Auckland has always been very kind to Heartland.One of the building societies that merged to form HNZ was Southern Cross Building Society, which opened for business in Auckland in 1923. The present Chairman and CEO are both Auckland based.
The Auckland sharetraders ,most of whom own HNZ shares,could never be referred to as riff raff, nor could my book suppliers.All very fine people.
I am only sorry I will miss the meeting,and not catching up with my friends Janner,Forest,Roger and the other Auckland sharetraders.

[winner69]

Getting to know my new love in life better.

Absolutely appalled at something I have noticed

For a business that uses the word 'community' a lot in telling us about why they are good etc Heartland sure has a huge DIVERSITY problem.

From their web site under Our People.
,
Board - 7 male / 1 female

Management Team - 8 male / 2 female (and those being the HR and Legal people, easy way to increase diversity)

Business Team - 17 make / NO female

Rural Team - 15 make / 1 female (assuming Kelly is a female here as no photo)

So of 46 (jeff included twice above) people presented as Our People only 4 are female. Appalling state of affairs, esp as 2 of them are the HR and Legal people

I am writing to Jeff asking if Diversity is on the Heartland agenda and if not why not and if it is what he doing about improving it.

[winner69]

Gender appalling but looking at the photos that are on Our People (quite a few missing) the 46 mentioned are a long way off representing NZ

Ethnicity is a real problem by the looks of it. Hate to think what average age is as well.

[percy]

I think we were better off when you were outside the tent pissing in,than now having you inside the tent pissing everywhere.! lol.

[winner69]

I think we were better off when you were outside the tent pissing in,than now having you inside the tent pissing everywhere.! lol.

Pretty appalling figure though eh Percy

Even you must be a bit disappointed in this

[Deej5]

I think they are being cautious. According to my Misses and I quote: "A woman's work is never done".

[artemis]

Maybe they selected the best people for the roles. There are more ways to include diversity than appointing to board roles etc.

Still and all, not a bad idea to raise the issue.

[percy]

Pretty appalling figure though eh Percy

Even you must be a bit disappointed in this

No I think the boards and staff are doing a great job.

[percy]

No I think the boards and staff are doing a great job.
Greenslade impresses me by being able to attract the people he wants for specialist positions.
All the time we are seeing very highly qualified people joining the company, and the boards being strengthened.

[winner69]

No I think the boards and staff are doing a great job.

Don't disagree Percy but could they do even better. Maybe opportunities are not being taken.

Even Mr Cook from Apple is not proud of his companies diversity profile. He laments leading a team of middle aged white males.

Generally being more diverse helps with being more innovative and being better positioned to better understand customer’s needs so they can be met. Above all it empowers (or forces) the company to cast wider nets for get the best talent. Diversity of thinking (whether across gender, ethnicity, age, sexuality, cultures, disabilities etc) is a very powerful force.

I'll see what Jeff comes back with.

[winner69]

Heartland a couple of years ago had a CFO called Sean Kam

He came from Marac I think and was around when when all the mergers were taking place and was in charge of HNZ purse strings at the time of the capital raisings

He a good guy that Sean, a Chinese NZer from Auckland, and a strong advocate businesses, esp Boards and senior management, to become more culturally rich

[percy]

Heartland a couple of years ago had a CFO called Sean Kam

He came from Marac I think and was around when when all the mergers were taking place and was in charge of HNZ purse strings at the time of the capital raisings

He a good guy that Sean, a Chinese NZer from Auckland, and a strong advocate businesses, esp Boards and senior management, to become more culturally rich

Not only a good guy,but was brilliant at what he did.
Last I heard he was helping an insurance company that was thinking of listing.Not sure which one.
The give away that HNZ would achieve the bank licence was when he left,job done.!
Just googled Sean Kam; CFO at Partners Life.

[RTM]

I'd like to see them appoint the best person for the jobs. Irrespective of race, religion or gender.

[Beagle]

I'd like to see them appoint the best person for the jobs. Irrespective of race, religion or gender.

I agree 100%. Makes a pleasant change from SUM's board.

[percy]

Me too. The problem is the people choosing are inevitably biased even when they try not to be.

CEO & coy owner friend in UK says he always picks people who p1ss him off a bit by challenging what's been done. This way he knows he's not talking to a yes-wo/man and the person has learnt something about the company and its environment. He's been successful doing this both with mgt team and board. Went to a bbq and you should have heard how they argue. Good constructive arguing by people who clearly really know their stuff with only humorous, well known, to their face teasing. In Good to Great, Jim Collins calls such behaviour "critical thinking".

Can not think why,but this somehow reminds me of my friend who had to judge a "baby contest."
He gave up and in the end decided the "best baby" on the mother who had the tastiest legs!!!!

[BlackPeter]

I'd like to see them appoint the best person for the jobs. Irrespective of race, religion or gender.
Absolutely agree! However, isn't it funny, that the best person for the job in companies like HNZ nearly always seems to be a white, middle aged male? Call this statistical aberration - or what?

[Bjauck]

Absolutely agree! However, isn't it funny, that the best person for the job in companies like HNZ nearly always seems to be a white, middle aged male? Call this statistical aberration - or what?

I imagine they are middle-aged because they have more experience than youngsters and have not slowed down as much as more elderly people.

White? With HNZ, you have to look for those who are familiar with the NZ environment, with appropriate educational qualifications. I think more NZ Asians are appearing on boards. Do you think racism is holding people back? Then more thorough societal change is needed but in the meantime I hope HNZ is picking the best person for the job, regardless of race.

Male? Fact is fewer men have to take time out to bear children! I cannot see how this will ever change unless surrogates are used by wealthy families! There will always be potentially fewer women with uninterrupted experience at senior level.

[vorno]

Absolutely agree! However, isn't it funny, that the best person for the job in companies like HNZ nearly always seems to be a white, middle aged male? Call this statistical aberration - or what?

You have to keep in mind the simple fact that there are not a lot of women who want to be a 'suit', much like you don't get a lot of men who wish to become fashion designers. It comes down to simple choice, usually influenced by our social factors in life. For instance would you expect a guy with dreadlocks to head it up?! Now that would be an un-usual occurrence!

Statistical aberration? Well, it is expected so I would call it normal!

[Lizard]

You have to keep in mind the simple fact that there are not a lot of women who want to be a 'suit', much like you don't get a lot of men who wish to become fashion designers.

Seriously?? I think there are plenty of women out there that would be keen. As for the "time out to bear children" bit, this argument amazes me. For a start, the number of years a women takes out of the work force these days is only 10-15% of a typical career span which is hardly a killer. Secondly, that argument incredulously presumes that women become cabbages while at home and learn nothing, whereas it is likely that by the time they have learnt to manage toddler behaviour and served on kindergarten committees that they have learned more about management, governance, self-motivation and time-management than they would have in the workforce.

Looking around my friends these days (at age 49), most of the women are now the main income earner in their family.

As an aside, I would love to see a study on the brain reactions of men when a middle-aged woman makes a point as opposed to a man or younger woman saying the same thing... I reckon the amygdala would fire up when the middle-aged woman speaks, with the man automatically reacting like a teenager being berated by his mother. :eek2:

[Bjauck]

As for the "time out to bear children" bit, this argument amazes me. For a start, the number of years a women takes out of the work force these days is only 10-15% of a typical career span which is hardly a killer. :eek2: 10% less experience when all others things are equal could be a clincher.

[BlackPeter]

You have to keep in mind the simple fact that there are not a lot of women who want to be a 'suit', much like you don't get a lot of men who wish to become fashion designers. It comes down to simple choice, usually influenced by our social factors in life. For instance would you expect a guy with dreadlocks to head it up?! Now that would be an un-usual occurrence!

Statistical aberration? Well, it is expected so I would call it normal!

LOL - that's the argument alpha males use since diluvial times ... the females just don't want to wear a suit! I am sure that the ISIS terrorists say as well that women always wanted to be suppressed ...

Now - I am male and worked for a long time in the industry. I have seen several examples for capable women bumping against the glass ceiling (or just accidentally not selected by white middle aged male senior managers).

I used to work as well a long time in recruitment of technical staff in New Zealand. Funny thing is, if you are in the candidate selection open related to skin colour or gender, than you can find in NZ basically throughout the year top quality graduates happy to work for you. Funny thing is - only between say June to August you find great graduates from all genders and races. The rest of the year you still can find great people, but most of them will have darker skin, Asian eyes and / or might be female - the top quality white males find their jobs already during the first application round.

But for sure - NZ does not discriminate based on race, skin colour and gender - yeah right - somebody give me a TUI, please!

[vorno]

Edit - let's move this debate to private chat! I feel I'm going off topic!

[winner69]

PGW have a Board approved Diversity Policy

http://www.pggwrightson.co.nz/Userfiles/files/Legal/2014/Diversity%20Policy%20v%201.0%20-%20Approved%2028%20April%202014.pdf

Can't find similar document for Heartland and a search of the last Annual Report for diverse or diversity brings nil findings

I look forward to what PGW put in their Annual Report .....and a response from Heartland seeing if they haves policy

[winner69]

Under NZX Listing rules there is now a requirement to give some gender breakdowns in Annual Reports and if a company so desires voluntary disclose any policy or commentary about diversity

The crux of the Listing Rule is in the preamble

There is credible research based evidence which suggests that diversity, and gender diversity in particular, contribute to improved performance at both Board and senior management level.


I hope that Heartland go beyond minimum disclosure requirements in the Annual Report

[Okebw]

3.5 c final divie. Must say I'm stoked I finally pulled the trigger and bought in to HNZ

[Toasty]

3.5 c final divie. Must say I'm stoked I finally pulled the trigger and bought in to HNZ

Same here. I have only been a holder for the last few weeks basically because it looked a lot less volatile than everything else I seem to hold. The results certainly make for good reading but I am waiting for the more detailed analysis from the long termers before I jump up and down.

[Beagle]

Same here. I have only been a holder for the last few weeks basically because it looked a lot less volatile than everything else I seem to hold. The results certainly make for good reading but I am waiting for the more detailed analysis from the long termers before I jump up and down.

Me too. I'll put my hand up for the full analysis on AIR's result on Wednesday but will rely on long term holders thoughts on this one. On the face of it this looks like a good credible result and they continue to deliver on the growth promises they've made.

[percy]

I am very pleased with the result,and the very nice dividend.
Non-core property further reduced.
ROE increasing from 2.8% in 2011 up to 9.75% in the last quarter of 2014.
EPS increasing from 5cents in 2011 to 9 cents in 2014 [yes up 80%]
Equity ratio still most impressive at 15%.
Loved the "Heartland is now in growth phase."
Pleasing to see low earning mortgages being replaced with higher yielding products.
NTA is a very respectible 86cents per share.

[Toasty]

I am very pleased with the result,and the very nice dividend.
Non-core property further reduced.
ROE increasing from 2.8% in 2011 up to 9.75% in the last quarter of 2014.
EPS increasing from 5cents in 2011 to 9 cents in 2014 [yes up 80%]
Equity ratio still most impressive at 15%.
Loved the "Heartland is now in growth phase."
Pleasing to see low earning mortgages being replaced with higher yielding products.
NTA is a very respectible 86cents per share.

Yay Percy. I feel happy about being happy with the results now.

[Beagle]

I am very pleased with the result,and the very nice dividend.
Non-core property further reduced.
ROE increasing from 2.8% in 2011 up to 9.75% in the last quarter of 2014.
EPS increasing from 5cents in 2011 to 9 cents in 2014 [yes up 80%]
Equity ratio still most impressive at 15%.
Loved the "Heartland is now in growth phase."
Pleasing to see low earning mortgages being replaced with higher yielding products.
NTA is a very respectible 86cents per share.

You forgot to add, we're well positioned :D

[noodles]

I am very pleased with the result,and the very nice dividend.
Non-core property further reduced.
ROE increasing from 2.8% in 2011 up to 9.75% in the last quarter of 2014.
EPS increasing from 5cents in 2011 to 9 cents in 2014 [yes up 80%]
Equity ratio still most impressive at 15%.
Loved the "Heartland is now in growth phase."
Pleasing to see low earning mortgages being replaced with higher yielding products.
NTA is a very respectible 86cents per share.
No surprises.
The outlook is solid.
Guidance for FY15 $42-45mil. Within current analyst forecasts.

[Beagle]

No surprises.
The outlook is solid.
Guidance for FY15 $42-45mil. Within current analyst forecasts.

But we have to survive snoopy getting his mischievous snout into analysing the contingencies before getting too excited. :)

[percy]

You forgot to add, we're well positioned :D

Posted in a bit of a rush!!!
Yes, we are certainly "well positioned."

[winner69]

Posted in a bit of a rush!!!
Yes, we are certainly "well positioned."

No no Percy

INCREDIBLY well positioned

Must say all an anti-climax. Seen all those charts before

[percy]

No surprises.
The outlook is solid.
Guidance for FY15 $42-45mil. Within current analyst forecasts.

I would expect at the AGM you/we will get further updates on REL and "investigating possible capital management options to improve ROE."
The FY15 guidance $42-45mil I am happy with.The $42mil would be an increase of 16.66% while the $45mil would be a whooper 25%!!!
All the time we will continue to receive ongoing increasing dividends. "Poised".

[percy]

[QUOTE=winner69;500386]No no Percy

INCREDIBLY well positioned

Yes you are right to correct me.
Nice to know you too are on board.INCREDIBLY well positioned.!! lol.

[percy]

But we have to survive snoopy getting his mischievous snout into analysing the contingencies before getting too excited. :)

I now do not read his posts on this thread,so I remain totally "excited."!!! lol.

[Beagle]

Okay...pauses for thought...yes, I will fire the first snooping question, seeing as the Snoop Dog is obviously asleep in his kennel.

How do they get EPS of 9 cps in their analysts presentation ? They must be using an average number of shares on issue during the year because based on the issued shares at year end of 463.266m and earnings of 36.0 after tax I get EPS of 7.77cps and based on a SP of 95 cents = a PE of 12.22.

Based on the mid point forecast for 2015 of $43.5m I get EPS of 9.39 cps for a 2015 PE of 10.12. Thoughts ?

[percy]

Okay...pauses for thought...yes, I will fire the first snooping question, seeing as the Snoop Dog is obviously asleep in his kennel.

How do they get EPS of 9 cps in their analysts presentation ? They must be using an average number of shares on issue during the year because based on the issued shares at year end of 463.266m and earnings of 36.0 after tax I get EPS of 7.77cps and based on a SP of 95 cents = a PE of 12.22.

Based on the mid point forecast for 2015 of $43.5m I get EPS of 9.39 cps for a 2015 PE of 10.12. Thoughts ?

Ring Simon Owen DDI [09] 9279195 and ask him.

[Beagle]

Thanks Percy. Flat out at present but if nobody else can answer this I'll ring him in due course. Thanks again mate.

[Under Surveillance]

Thanks Percy. Flat out at present but if nobody else can answer this I'll ring him in due course. Thanks again mate.
Earnings Per Share was $0.09 based on weighted average shares on issue.
Page 2 of NZX and Media Release

[Under Surveillance]

The discount for those opting into the dividend reinvestment programme is reduced from 2.5% to 1.0%. Seems they don't particularly want more capital. Fair enough.

[Beagle]

Earnings Per Share was $0.09 based on weighted average shares on issue.
Page 2 of NZX and Media Release
Thanks...so looking forward we're on a 2015 PE of 10.12 based on mid point of forecasted profit. In my view the current historical PE is spot on for a small bank and with forecasted earnings growth of 20% this year this leaves room for circa 20% SP appreciation over the year ahead as they continue to meet their target growth. Add in say 7 cps divvy fully imputed for the yeah ahead and you're looking at a circa gross 30% return for holders in the coming year :)

[noodles]

I would expect at the AGM you/we will get further updates on REL and "investigating possible capital management options to improve ROE."
.
I read this as either special dividend or buyback. I think they should suspend the Divi Reinvestment plan. Any other ideas?

[winner69]

Eps calculated on weighted (time wise) average number of shares being 411million. Theory being those new shares were only generating income for a little while, not the whole year.

On the 463 million shares at year end it is 7.7 cents as Roger calculated.

Lets run with 9 cents calculation. As per Roger next year it's 9.3 cents EPS ......not much of in increase in EPS is it. Is the acquisition really EPS accretive in its first year?

That's why they need a share buy back ....increase the EPS (lower number of shares) and ROE (reduced equity) at the same time. Tricky eh.

(Just as well the divie is paid on all the 463 million shares eh, not just the weighted number)

[percy]

I read this as either special dividend or buyback. I think they should suspend the Divi Reinvestment plan. Any other ideas?

Not sure what to expect? Some form of buyback I think would have the most affect on ROE.
As for suspending the divie reinvestment plan? Again I am not sure.Can see the point,but may upset those who are in it.

[winner69]

Thanks...so looking forward we're on a 2015 PE of 10.12 based on mid point of forecasted profit. In my view the current historical PE is spot on for a small bank and with forecasted earnings growth of 20% this year this leaves room for circa 20% SP appreciation over the year ahead as they continue to meet their target growth. Add in say 7 cps divvy fully imputed for the yeah ahead and you're looking at a circa gross 30% return for holders in the coming year :)

So your 20% is essentially a market rerating, PE expansion in other words?

[Beagle]

So your 20% is essentially a market rerating, PE expansion in other words?

My view in a forward PE of about 12 is fair and reasonable for a small bank. I take your point about the debate about EPS growth, (weighted average v end of year shares on issue). I think as the market becomes more comfortable with HNZ's story some modest PE expansion isn't out of the question.

[percy]

My view in a forward PE of about 12 is fair and reasonable for a small bank. I take your point about the debate about EPS growth, (weighted average v end of year shares on issue). I think as the market becomes more comfortable with HNZ's story some modest PE expansion isn't out of the question.

The increasing fully imputated dividend should also be taken into account espically when comparing HNZ with Aussie banks.
Say 7 cents pa ? Nett yield at 95cents 7.36% Tasty.!!!

[Beagle]

Yes Percy, thanks for reminding us about the value of the N.Z. imputation credits v our inability to claim franking credits from Australian banks a point that shouldn't be overlooked by any astute investor.

[noodles]

6173


Thanks...so looking forward we're on a 2015 PE of 10.12 based on mid point of forecasted profit. In my view the current historical PE is spot on for a small bank and with forecasted earnings growth of 20% this year this leaves room for circa 20% SP appreciation over the year ahead as they continue to meet their target growth. Add in say 7 cps divvy fully imputed for the yeah ahead and you're looking at a circa gross 30% return for holders in the coming year :)

Roger, As much as I would like to see 20% gain this year, I don't think it is going to happen unless we get some corporate action such as a buyback or an acquisition. For the last 18 months, the ceiling on the share price has been the broker targets (see image). I'd expect this to stay the same and I wouldn't expect broker targets to change much as a result of this result.

[Beagle]

6173



Roger, As much as I would like to see 20% gain this year, I don't think it is going to happen unless we get some corporate action such as a buyback or an acquisition. For the last 18 months, the ceiling on the share price has been the broker targets (see image). I'd expect this to stay the same and I wouldn't expect broker targets to change much as a result of this result.

I respect your opinion but in my experience it takes quite some time for a new acquisition to get traction and I expect better weighted average EPS growth in 2016. SP seems fair and reasonable to me where it is for now. Good hold in my opinion.

[Balance]

Buffett, the most well-known value investor of all time, is usually amazed when stock prices fall so low: "When hamburgers go down in price, we sing the 'Hallelujah' chorus in the Buffett household. When hamburgers go up, we weep. For most people, it's the same way with everything in life they will be buying -- except stocks. When stocks go down and you can get more for your money, people don't like them anymore."

NTA of HNZ is 85 cents per share.

Sp is 54 cents, courtesy of George Kerr - a very nice discount of 36% or potential upside of 57%.

Very satisfying to make big gains out of George Kerr.

All so predictable?

http://www.sharetrader.co.nz/showthread.php?8425-Heartland-New-Zealand-Ltd-%28HNZ%29/page35

:D :D :D

[percy]

Very satisfying to make big gains out of George Kerr.

All so predictable?

http://www.sharetrader.co.nz/showthread.php?8425-Heartland-New-Zealand-Ltd-%28HNZ%29/page35

:D :D :D

Your history on this thread has been outstanding.
Sensible ,right on the money posts.
thank you.

[Balance]

Your history on this thread has been outstanding.
Sensible ,right on the money posts.
thank you.

Thanks, Percy.

It is poetic justice that Georgie Porgie was forced to sell down PGC and his shares in HNZ - resulting in the temporary sp dip at that time and the great buying opportunity.

Well, time to head home.

Cheers!

[Beagle]

Well done Balance, your balanced and objective approach has served you well :)

[winner69]

Hope heartland advertising increases advertising in this sector


http://www.nzherald.co.nz/personal-finance/news/article.cfm?c_id=12&objectid=11313859

http://s3.documentcloud.org/documents/1279470/reversemortgage.pdf

[noodles]

Jeff on the radio. Talking about aquisitions
http://podcast.radionz.co.nz/business/bus-mnr-20140826-0654-heartland_says_annual_net_profit_this_year_may_ris e-048.mp3

[iceman]

"cautious, disciplined and in no hurry" . That's what I like to hear. I hope they find a niche in the household or rural sectors where they can put our money to good use rather than a share buyback.
Very pleased with the result. I think we are now starting to really see the benefit of lower cost of funds after bank registration reflected in increasing NOI.

Non core property reduction continues to be reduced slightly ahead of schedule and a reduction in rural loans where they are in direct competition with the big banks. HNZ will instead continue to look for higher yielding niche lending in this and other sectors.

Motor vehicle loan book has a steady and healthy growth.
They have also managed to reverse the HER loan book decline in NZ and started growing it in June and July. The development of this part of the business will be very interesting to watch both in NZ and Australia in the next year or two.

Well done HNZ, steady as she goes !

[Beagle]

"cautious, disciplined and in no hurry" . That's what I like to hear. I hope they find a niche in the household or rural sectors where they can put our money to good use rather than a share buyback.
Very pleased with the result. I think we are now starting to really see the benefit of lower cost of funds after bank registration reflected in increasing NOI.

Non core property reduction continues to be reduced slightly ahead of schedule and a reduction in rural loans where they are in direct competition with the big banks. HNZ will instead continue to look for higher yielding niche lending in this and other sectors.

Motor vehicle loan book has a steady and healthy growth.
They have also managed to reverse the HER loan book decline in NZ and started growing it in June and July. The development of this part of the business will be very interesting to watch both in NZ and Australia in the next year or two.

Well done HNZ, steady as she goes !

Well said mate.

[noodles]

I respect your opinion but in my experience it takes quite some time for a new acquisition to get traction and I expect better weighted average EPS growth in 2016. SP seems fair and reasonable to me where it is for now. Good hold in my opinion.
I tend to agree. From what I have read, there will be additional costs throughout FY15 for the HER business. The real bottom line benefit will come FY16. I still don't see much upside this year. As you say, a good hold.

[winner69]

Would you guys be in for HNZ Bonds?

A Bond issue before the next acquisition announced?

[Snow Leopard]

Accounts for the group as a whole and the banking group look OK to me.

Should survive another year in reasonable circumstances. :)

Quite a dramatic shift with the reduction in the non-core property and the Sentinel acquisitions.

No plans to buy any more or sell any at the moment except for the dividend recycling.

Best Wishes
Paper Tiger

[SCOTTY]

The increasing fully imputated dividend should also be taken into account espically when comparing HNZ with Aussie banks.
Say 7 cents pa ? Nett yield at 95cents 7.36% Tasty.!!!

Hi Percy

I agree with you regarding the net yield. Looking at a gross yield it looks even tastier; ie. the final divi of 3.5c carries imputation credit of 1.361c which totals a gross divi of 4.861c. Should the interim be the same, then the annual gross divi would be 9.722c and @ a share price of $1.00 this would be a gross yield of 9.722%. At the current share price of 95c the gross yield would be 10.23368%. It certainly beats bank deposit rates which are always quoted @ a gross return rate. :)

Cheers

[Snoopy]

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.



The underlying debt of the company (borrowings removed) according to the full year statement of financial position is: $39.375m + $0.431m = $39.806m

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:

$3,016.888m - ($2,607.393m +$24.888m + $238.859m) = $145.748m

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

$145.798m - $47.421m = $98.327m

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

$39.806m/$98.327m= 40.5% < 90%

Result: PASS TEST

SNOOPY

[Snoopy]

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?



Updating for the full year result FY2014:

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) = $210.297m - $64.739m= $145.558m

Interest expense is listed as $101.221m.

So (EBIT)/(Interest Expense)= ($145.558)/($101.221)= 1.44 > 1.20

Result: PASS TEST, a significant improvement from the FY2013 position, which confirms the improvement reported during HY2014.


SNOOPY

[Snoopy]

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%.


Updating this number for the full year FY2014

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

Using numbers from the Heartland FY2014

= $452.622m/ $3016.888m = 15.0%

As at EOFY2014, there is a significant jump in the capital base of Heartland compared to last year. $20m of the increase has come from a capital raising on 18th February 2014 (note 30). New Zealand and Australian Home Equity Release mortgage businesses were purchased from Seniors Money International Limited ("SMI"). This acquisition was part paid for by issuing $37.8m worth of Heartland shares on 1st April 2014. That means total new capital put into Heartland during FY2014 was a hefty $57.8m.

Take the $57.8m worth of new capital away from the end of year equity position and I get $394.82m of residual historical equity. This means that of the new equity in Heartland during the year only

$394.82 - $370.543 = $24.290m

or 30% has come from re-organizing the FY2013 model Heartland business.

The customer loan base has increased in proportion, meaning the whole business has upsized.

SNOOPY

[Snoopy]

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



Once again there is no mention of Tier 1 or Tier 2 in the Heartland FY2014 report.

The 'best case' scenario is that all loans are Tier 1. $2,564.266m of loans are outstanding. 20% of that figure is:

0.2 x $2,564.266m = $512.9m

Heartland has total equity of $452.6m which is still below the 20% of loan target no matter what the tier classification of the loans.

Result: FAIL TEST

PS Other posters have protested at my 20% of equity to back up the loan measuring stick in the past. 20% 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

[Snoopy]

Today I want to look at the ability of Heartland to match their cash ingoings and cash outgoings over specified time periods. This goes back to what happened during the financial crisis where some finance companies declared a moritorium on payments to debenture holders because although solvent on paper, they ran out of cash to make the payments. My previous attempts at doing this were not very successful due to lack of disclosire in the annual and half year reports. Since Heartland has become a bank more information has come into the public domain . This time I will look at the end of period positional statement supplied to the reserve bank:

http://www.heartland.co.nz/uploadGallery/Legal/Heartland%20Bank%20disclosure%20statement%20Dec13. pdf

to see if I can do a better job.

Heartland looks at this issue under note 20

-----

20 Interest rate risk

Interest rate risk is the risk that the value of assets or liabilities will change because of changes in interest rates or that market interest rates may change and thus after the margin between interest earning assets and interest earning liabilities. Interest rate risk for the banking group refers to the risk of loss due to holding assets and liabilities that may mature or re-price in different periods. Interest rate risk is mitigated by managment's frequent monitoring of interest rate repricing profiles of borrowings and finance receivables and where appropriate the use of derivative instruments"

----



A change of tactic is required here as six months ago I was writing tosh. The revised HY2014 report is as follows:

Time to look at the Liquidity Buffer ratio, the balance between monies borrowed and monies lent and matching up those maturity dates using a one year time horizon. The equation we are looking to satisfy is:

(Total Current Money to Draw On)/(Net Current Loans Outstanding) > 10%

On one side of the equation, we have borrowings.

HNZ BORROWINGS

HNZ has total borrowings of $2,524.460m (see Statement of Financial Position). This is made up of:

1/ Term deposits ($1,805.954m) lodged with Heartland (see note 11 'Borrowings').
2/ Securitized Borrowings total $267.645m
3/ Subordinated Bonds (new for HY2014 but only worth $3.369m)

Note 11 'Borrowings' gives no clear breakdown given of current and longer-term borrowing maturity dates.

The group has securitized bank facilities totalling $400m, all in relation to the Heartland ABCP Trust 1 (ABCP Trust). ABCP Trust has a maturing facility of $400m maturing 7th August 2014 (barely 5 weeks away),

These facilities are drawn by $268m (c.f. FY2013: $259m).

All securitized asset activity relates to a time frame no more than one year out in the future, but in this case just 5 weeks. Nevertheless, maturity date rollover renegotiations have happened without trouble over the last two years.

The amount of securitized holdings drawn has increased by $8m (3.1%). The maximum amount that can be borrowed under securitized arrangements has dropped too, from $500m to $400m. This is because the extra CBS Trust securitisation arrangements, worth up to $100m, have been wound up. The net result of all this is that the borrowing headroom available using securitized bonds is now:

$400m - $268m = $132m

All three sources of funds (itemized above) have been on loaned to customers who want loans.


HNZ LENDINGS

Customers owe HNZ 'Finance Receivables' of $1.905.850m. There is no breakdown in note 10 as to what loans are current or longer term. However, if we look at note 18b 'Contractual liquidity profile of financial assets and liabilities', we can see the expected maturity profile of total finance receivables due over the next twelve months.

$180.669m + $463.129m + $349.681m = $993.479m

These are offset by short-term borrowings over twelve months of

$599.902m + $751.307m + $647.731m = $1998.980m

Thus, the net expected maturity of receivables is:

$993.479m - $1,998.980m = -$1,005.501m

The negative sign means that less money is coming in from loans to customers that have matured, than the amount of money due to be repaid to the debenture holders. Such a gap can be closed by simply taking on more debenture borrowings. Nevertheless, it is also prudent to have some back up bank borrowing headroom (HNZ has $132m) to partially close the gap.

$132m / $1,005.501m = 13.1% > 10%

=> Pass Short term liquidity test

SNOOPY

[Snoopy]

A change of tactic is required here as six months ago I was writing tosh. The revised HY2014 report is as follows:

Time to look at the Liquidity Buffer ratio, the balance between monies borrowed and monies lent and matching up those maturity dates using a one year time horizon. The equation we are looking to satisfy is:

(Total Current Money to Draw On)/(Net Current Loans Outstanding) > 10%

On one side of the equation, we have borrowings.

HNZ BORROWINGS

HNZ has total borrowings of $2,524.460m (see Statement of Financial Position). This is made up of:

1/ Term deposits ($1,805.954m) lodged with Heartland (see note 11).
2/ Securitized Borrowings total $267.645m
3/ Subordinated Bonds (new for HY2014 but only worth $3.369m)

Note 11 gives no clear breakdown given of current and longer-term borrowing maturity dates.

The group has securitized bank facilities totalling $400m, all in relation to the Heartland ABCP Trust 1 (ABCP Trust). ABCP Trust has a maturing facility of $400m maturing 7th August 2014 (barely 5 weeks away),

These facilities are drawn by $268m (c.f. FY2013: $259m).

All securitized asset activity relates to a time frame no more than one year out in the future, but in this case just 5 weeks. Nevertheless, maturity date rollover renegotiations have happened without trouble over the last two years.

The amount of securitized holdings drawn has increased by $8m (3.1%). The maximum amount that can be borrowed under securitized arrangements has dropped too, from $500m to $400m. This is because the extra CBS Trust securitisation arrangements, worth up to $100m, have been wound up. The net result of all this is that the borrowing headroom available using securitized bonds is now:

$400m - $268m = $132m

All three sources of funds (itemized above) have been on loaned to customers who want loans.


HNZ LENDINGS

Customers owe HNZ 'Finance Receivables' of $1.905.850m. There is no breakdown in note 10 as to what loans are current or longer term. However, if we look at note 18b, we can see the expected maturity profile of total finance receivables due over the next twelve months.

$180.669m + $463.129m + $349.681m = $993.479m

These are offset by short-term borrowings over twelve months of

$599.902m + $751.307m + $647.731m = $1998.980m

Thus, the net expected maturity of receivables is:

$993.479m - $1,998.980m = -$1,005.501m

The negative sign means that less money is coming in from loans to customers that have matured, than the amount of money due to be repaid to the debenture holders. Such a gap can be closed by simply taking on more debenture borrowings. Nevertheless, it is also prudent to have some back up bank borrowing headroom (HNZ has $132m) to partially close the gap.

$132m / $1,005.501m = 13.1% > 10%

=> Pass Short term liquidity test



Time to update the Liquidity Buffer ratio, the balance between monies borrowed and monies lent and matching up those maturity dates using a one year time horizon. The equation we are looking to satisfy is:

(Total Current Money to Draw On)/(Net Current Loans Outstanding) > 10%

On one side of the equation, we have borrowings.

HNZ BORROWINGS

HNZ has total borrowings of $2,524.460m (see note 28). This is made up of:

1/ Term deposits ($1,736.751m) lodged with Heartland. However, in a big change from FY2013…
2/ $555.708m of Bank Borrowings now appears on the balance sheet.
3/ Securitized Borrowings total $228.623m
4/ Subordinated Bonds (new for FY2014 but only worth $3.378m)

Note 28 does not contain a clear breakdown of current and longer-term borrowing amounts and their maturity dates.

Banking facilities are provided by CBA Australia but for both Australia and New Zealand. These facilities are, I believe, in relation to the recently acquired reverse mortgage portfolio. These banking facilities are secured over the homes on which the reverse mortgages have been taken out. These loans have a maturity date of 30th September 2019. That means they are classed as ‘long term’ for accounting purposes. Additional borrowing capacity is available up until 30th June 2016, but only if certain scheduled repayments are met by the Heartland group. It follows that Heartland can’t rely on CBA Australia as a source of short-term funds.

The information given in note 28 on the securitized borrowing facilities is as follows:

-------

The group has securitized bank facilities totalling $400m, all in relation to the Heartland ABCP Trust 1. (ABCP Trust) has a maturing facility of $400m maturing 4th February 2015,

These facilities are drawn by $229m (c.f. FY2013: $259m).

--------

Bank borrowings no longer explicitly rank equally with the securitized bonds. Therefore, I think it is safe to assume that if HNZ got into cashflow difficulty, the different classes of borrowings would be repaid in the following order:

1/ Bank Borrowings,
2/ Securitized Borrowings,
3/ Subordinated Bond (new for FY2014 but only worth $3.378m) and finally
4/ deposits from debenture holding customers.

IMO that represents a large new incremental risk for Heartland depositors that has received no media attention.

All securitized asset activity relates to a time-frame no more than one year out in the future, in this case just 6 months. Nevertheless, maturity date rollover renegotiations have happened without trouble over the last two years.

The amount of securitized holdings drawn has decreased by $30m (12%). This is a significant drop. The maximum amount that can be borrowed under securitized arrangements has dropped too since FY2013, from $500m to $400m. This is because the extra CBS Trust securitization arrangements, worth up to $100m, have been wound up. The net result of all this is that the borrowing headroom available using securitized bonds is now:

$400m - $226.6m = $173.4m

All four sources of drawn funds itemized have been on loaned to customers who want loans.


HNZ LENDINGS

Customers owe HNZ 'Finance Receivables' of $2,607,393,000. There is no breakdown in note 20 as to what loans are current or longer terms. However, if we look at note 39, we can see the expected maturity profile of total finance receivables due over the next twelve months.

$50.234m + $629.645m + $483.727m = $1,163.426m

These are offset by short-term borrowings for repayment over twelve months of

$18.922m + $242.431m + $195.682m = $457.035m

Thus the net expected maturity of receivables is:

$1,163.426m - $457.035m = $706.391m

If more money is coming in from customer loans being repaid, than is having to be repaid to the debenture holders, then this is a good thing for liquidity. There is no need to increase corporate borrowings to supplement debenture repayments.

=> Pass Short term liquidity test

I do note is that the amount borrowed as ‘debentures and deposits’ (borrowings) from customers has gone up by $426.9m (+21%) and the amount lent to customers (receivables) has gone up by $597.0m (+30%). This is a huge turnaround. In its formative years (FY2012 and FY2013) Heartland did nothing but shrink and now for the very first time it is growing. However finance receivables at fair value acquired as a result of the newly acquired “Heartland Home Equity Release” business were valued at $715.222m. That means the underlying legacy business at Heartland is continuing to shrink, down:

$715.2m - $597.0m = $118.2m

This is a drop of 6% in finance receivables terms.

Borrowing facilities have gone down by at least $100m over the same annual comparative period. So Heartland have upped their current period risk profile by having a smaller buffer to cover a growing mismatch between borrowings and receivables. It is still well within limits though!

SNOOPY

[Snoopy]

The half year report for HY2014 (to 31st December 2013) is as much of interest for what it doesn't say than what it does say.

In contrast to last year, Note 13 on 'Borrowings', makes no mention of the relatively high proportion of deposits from the Canterbury region. Perhaps many of those Cantabs with deposits followed Percy's advice and used their deposit money to buy Heartland shares when those deposits matured? In any instance the overall deposit book has shrunk very slightly from the full year balance date. So the rebalancing of regional risk doesn't reflect a lot more money coming in from other regions and growing the deposit book overall. I would have expected the overall deposit book to strengthen as Heartland's credit rating improves. But I can't see any real evidence for that in the HY2014 report.

The previous half year report had a section headed 'credit risk and asset quality'. That heading is no longer there in the latest HY report. Instead the 'Asset quality of Finance Receivables' information has migrated to the 'Finance Receivables' section. Of particular note is the fall in 'At least 90 days past due' receivables down to $19.5m, from $49.2m a year previously.

The 'Provision for impaired assets' has its own stand alone note (17).

The RECL (Real Estate Credit Limited) agreement for difficult property assets, much discussed in the HY2013 report, has been brought back in house. Overall though this report does not go into enough detail to get a great feel for customer concentration risk.



Time for our once a year peak into customer ‘asset distribution’ and ‘asset quality’. Our concentration test is that:

Highest single new customer group exposure (as a percentage of shareholder funds) <10%

The greatest regional area of credit risk in dollar terms is Auckland, with $725.318m worth of assets. This represents:

$725.218m/ $2,891.597m = 25% of all loans

However this represents a proportion well short of the 40%+ regional loan share that used to apply to the Canterbury region at HY2013. So I don’t rate that concentration of loans in Auckland as being an issue. Particularly so when ‘Auckland’ is such a varied catch all group.

Now a word on asset loan quality.

Looking at Note 38d, the Grade 6 monitor assets have come down a lot from $198.37m to $115.76m. Great news!

Next, the sum of the grade 7, 8 and 9 assets is now $31.765m, down from $67.313m. This is a very significant improvement.

When these loans appear on the balance sheet, they are netted off against provisions for impaired assets already made. The provision for collectively impaired assets is now $6.999m, down from $15.961m. However, there is a new provision that wasn’t there in FY2013 of $8m, a ‘fair value adjustment for present value of future losses’. What does that new provision mean? The losses are going to be realized sooner than expected perhaps?

Overall, ‘problem assets’ (grade 6, 7, 8 and 9 combined) total $147.591m. This is down 45% on the $265.683m recorded in FY2013.

SNOOPY

[Snoopy]

The 'Finance Receivables' on the balance sheet have alrady had a $34.214m provision for impairment taken off them. From note 11 'Gross Finance Receivables' were $1,940.064m



Rexamining note 11, I may have double counted some of those problem property assets. The note says:

At least 90 days past due $19.518m
Individually impaired $53.1m
Restructured assets $3.994m

That sums to $76.712m. Take off a provision for impairment of $34.214m and I get $42.498m.

However that $76.712m does not correspond to the:

"non-core property assets comprised net receivables of $25.6m and investment properties of $61.5m." (page 5 in same report)

which sum to $87.1m. Anyone know why the difference?



$42.498m / $1,905.85 = 2.2%

A much less worrying result. Apologies to all those Heratland shareholders that suffered a heart attack yesterday as a result of my calculations. I wonder why HNZ chose to stop measuring bad debts this way?


Bad debts are outlined as follows:

At least 90 days past due $34.034m
Individually impaired $27.617m
Restructured assets $4.064m

Allowance for impairment ($16.361)m
PV of Future Losses Adjustment ($8.000)m

Total Stressed Loans (impairments deducted) $41.354m

Gross Financial Receivables $2,631.754m
Total Finance Receivables $2,607.393m

Stressed Loan Percentage (impairment removed)= $41.354 m/ $2,607.393m = 1.59%

SNOOPY

[vorno]

SNOOPY

Oh yip, I see now.

[Snow Leopard]

...However, there is a new provision that wasn’t there in FY2013 of $8m, a ‘fair value adjustment for present value of future losses’. What does that new provision mean? The losses are going to be realized sooner than expected perhaps?...

...and when you get to HNZ Financial Statements for the Full Year to 30th June 2014: Note 20 all will become clear.

Best Wishes
Paper Tiger

[Snoopy]

...and when you get to HNZ Financial Statements for the Full Year to 30th June 2014: Note 20 all will become clear.


Ah I see. The $8m provision is in connection with the home equity release portfolio acquisition.

"Of the $8m fair value adjustment, $0.5m was raised as a result of the acquisition of $30.5m of home equity release loans in December 2015 and $7.5m was raised persuant to the HER acquisition."

Then follow the number trail to note 43.

"This ($7.5m) amount is conservative relative to the actual loss history in the acquired businesses. Since inception of the acquired business in 2003, actual losses of $0.2m have occured. However the group has determined to take this amount as a fair value adjustment having considered actuarial modelling (based on conservative assumptions) as to the portfolio performance in the future. While there is no material current loss history in the home equity release portfolio acquired, every home equity release portfolio (including the acquired businesses) will ultimately experience some loss across the life of the portfolio."

From note 43 the HER portfolio has a fair value of $713.971m. So a $7.451m provision represents:

$7.451m / $713.971m = 1.0% of the portfolio, and that figure is regarded as 'conservative' (?). That doesn't sound very conservative to me. But since Heartland haven't released their assumptions in coming to this conclusion, there isn't much more I can say about it except to say it is certainly not 'clear'.

SNOOPY

[winner69]

Ah I see. The $8m provision is in connection with the home equity release portfolio acquisition.

"Of the $8m fair value adjustment, $0.5m was raised as a result of the acquisition of $30.5m of home equity release loans in December 2015 and $7.5m was raised persuant to the HER acquisition."

Then follow the number trail to note 43.

"This ($7.5m) amount is conservative relative to the actual loss history in the acquired businesses. Since inception of the acquired business in 2003, actual losses of $0.2m have occured. However the group has determined to take this amount as a fair value adjustment having considered actuarial modelling (based on conservative assumptions) as to the portfolio performance in the future. While there is no material current loss history in the home equity release portfolio acquired, every home equity release portfolio (including the acquired businesses) will ultimately experience some loss across the life of the portfolio."

From note 43 the HER portfolio has a fair value of $713.971m. So a $7.451m provision represents:

$7.451m / $713.971m = 1.0% of the portfolio, and that figure is regarded as 'conservative' (?). That doesn't sound very conservative to me. But since Heartland haven't released their assumptions in coming to this conclusion, there isn't much more I can say about it except to say it is certainly not 'clear'.

SNOOPY

Snoopy, time to retread John Kay. I bet you did not do your homework and read it last time I posted it

Why mean outcomes are often meaningless

http://www.johnkay.com/2014/07/30/why-mean-outcomes-are-often-meaningless

Last couple of paragraphs

There is no “right” answer to the problem of accounting for these kinds of uncertainty; only a need to acknowledge that there is never such a thing as a single true and fair view, only a range of possible outcomes. When a business has many long-term contracts, or teeters on the verge of bankruptcy, that range may be very wide.

I can see the difficulty a bank chief financial officer will encounter if they tell depositors, shareholders and regulators that annual earnings are something between a loss of $5bn and a profit of $10bn; but such a statement may be the only view of the company’s affairs that is genuinely true and fair.

So Snoopy you just have to have faith in their 'judgement' in assessing these things.

[winner69]

Snoopy - maybe the question should be 'was $25m a good price for a market leading HER business?'

(Would have been $17m if it wasn't for that adjustment)

[Snoopy]

Snoopy - maybe the question should be 'was $25m a good price for a market leading HER business?'

(Would have been $17m if it wasn't for that adjustment)


Have you turned up the rose tint on your glasses Winner? Note 43 on the FY2014 annual results clearly shows consideration paid for the HER business by Heartland was $86.140m, not $24.984m. The circa $25m that you refer to was the goodwill element of the purchase only, as you well know.

I kind of see where you are coming from though. Of that $86m paid, $61m of that price was for net tangible assets. So what you are saying is, paying $61m and getting $61m dollars worth of assets is a 'value neutral' transaction, and the only bit that Heartland are really paying for is the $25m in goodwill, over and above the net asset price. I don't buy that though.

IMO your position is tantamount to saying you can decouple the net assets that make up the business from the 'intellectual property' that you bought into that was running the assets. The two have to work together for the business to have value. But I am sure that in your heart of hearts you know that anyway.

SNOOPY

[luigi]

IMO your position is tantamount to saying you can decouple the net assets that make up the business from the 'intellectual property' that you bought into that was running the assets. The two have to work together for the business to have value. But I am sure that in your heart of hearts you know that anyway.

SNOOPY

What if you were to simply have bought the HER loan portfolio and not the 'operating business'? The $25m goodwill represents the value HNZ attributes to the future profits from writing new HER business using branding/market position/institutional know-how that they have acquired.

[Beagle]

HER will be a HUGE earner in the years to come as the grey tsunami gets older.
We are well positioned :)

[winner69]

Snoopy - you got it, yes $25m for a leading HER business. The platform for growth now they have the people, processes, market knowledge and all that stuff,
.

So is $25m cheap or not in your view?

[percy]

You think so? Track record to-date suggests maybe not. Why? IMHO NZ lacks the regulatory framework.

I think the poor record to date was because REL suppliers appeared to have run out of funds after the GFC,there was also a lack of promotion.
NZ's ageing, property loving population, who are asset rich cash poor are ideal customers for this product.
NZ Govt will be like other governments around the world,keen to keep "oldies" in their own home,where they enjoy better health and are less of a drain on social services.Therefore, it is in the Government's interest to have the regulatory framework in place.
ASB,HNZ and SBS will add respect to the REL market.
I expect Heartland will give an update at the agm as to how "the pipeline" is progressing.I believe they started advertising REL in Australia in July.
I did note Heartland said the processing timeframe was quiet long.Yet once they have a good system/s in place progress will follow.

[percy]

Um ... only about a third are as asset rich as this urban statistic suggests. That aside ...

My "asset rich" mum was aiming to downsize in Akl by selling her 3-bed home for $1.5 million. Alas, its now only likely to bring in $2.25 million. And while the house is top-notch ... Its the land everyone wants.

Suddenly selling looks better than taking out a reverse mortgage? ... No, I jest. The rest of NZ isn't Akl (and thank someone for that!)

Has she considered selling her home and living on a Cruise ship until her money runs out?

[Harvey Specter]

Has she considered selling her home and living on a Cruise ship until her money runs out?It can run out very quickly if they start needing care. OVer $200k pa if they need 24/7 carers if you go through agencys (maybe cheaper to go direct).

[Harvey Specter]

My "asset rich" mum was aiming to downsize in Akl by selling her 3-bed home for $1.5 million. Alas, its now only likely to bring in $2.25 million. And while the house is top-notch ... Its the land everyone wants.Given they have very small LVR for these types of loans, the risk of bad debts has to be pretty small, even if the bubble bursts.

[percy]

[QUOTE=belgarion;501885]No. She's worried her grand children won't be able to afford houses, schooling and healthcare in NZ

She is not alone !
Also a major concern is jobs for school leavers.

[winner69]

Given they have very small LVR for these types of loans, the risk of bad debts has to be pretty small, even if the bubble bursts.

And with 8.35% interest rate at the moment can't go wrong can they. Fact sheet says 1.5% to 2.0% over major banks variable rates suggests non of this fixing nonsense either.

I see at the moment they have 3 year term deposits at 5.5% - guy from chris lee's website suggests that possibly reflects demand for equity release products. If this is case nearly 3% points margin is good stuff.

Hope they try to get the 2% premium forever. Not good for the old folks but great for shareholders and that's what's what needed eh. The old folks need the cash - Heartland give it to them ... at a cost.

Those %ages always seem small. People are always surprised that the gaps are quite big. Say HNZ borrow at 5% and lend to the old folks at 8.35% that essentially is a 67% mark up or a 40% gross margin (in retail parlance) .... something that Pumpkin Patch can't even manage some years.

[Beagle]

Apologies for being lazy, anyone know off the top of their head when it goes ex divvy, (this divvy hound always keen on the next feed) :)

[couta1]

Apologies for being lazy, anyone know off the top of their head when it goes ex divvy, (this divvy hound always keen on the next feed) :)
Ex Sept 17th Mr Hound:cool:

[Beagle]

Ex Sept 17th Mr Hound:cool:

Thanks mate, so there's plenty of time to buy more and order from the upsized menu :)

[janner]

[QUOTE=belgarion;501885]No. She's worried her grand children won't be able to afford houses, schooling and healthcare in NZ

She is not alone !
Also a major concern is jobs for school leavers.

A major concern for all First World Countries Perc..

Peasants will continue quite happily in their life style.. Earning very little, paying no Taxes :-)))

Who is going to pay the welfare for the 45% of the educated people, who are going to be replaced by Automation and Robots ???

Possibly with in the next 5 to 10 years.. :-))))

[Snoopy]

What if you were to simply have bought the HER loan portfolio and not the 'operating business'?


Heartland did by the loan portfolio for $61m and then paid a premium of $25m because all the guys and gals that who were running the services of the HER portfolio day to day were doing such a good job. Short of telling those guys and gals to sit at their desks and do nothing after the purchase, I am not sure it is possible to not buy the operating business in with the package.



The $25m goodwill represents the value HNZ attributes to the future profits from writing new HER business using branding/market position/institutional know-how that they have acquired.


Yes. But how could Heartland have bought only this?

Sentinal: "Ms Jeeves, cancel all my calls for the rest of the rest of the day. I especially don't want to hear from that rambunctious kiwi Heartland who keeps calling me up."
Jeeves: "Sorry boss, Heartland is on the line right now, am putting him through.
Heartland: "Hi Sentinal. Heartland here. This portfolio you are looking at quitting for $86m? Well I've decided I don't want to pay that. You can keep it. I do like your staff and all though. I am prepared to pay $25m for their services. But you can keep your loan portfolio. I realise this will leave you in the lurch, with no-one to look after your business interests. But being an Ozzie I am sure you will bounce back. Once I have your staff I will be using their inside knowledge to pinch all your business anyway. So your portfolio problems will only be short term. What do you say!"
Sentinal "Deal" (or just perhaps Sentinal would not have said that).

SNOOPY

[Snoopy]

Snoopy - you got it, yes $25m for a leading HER business. The platform for growth now they have the people, processes, market knowledge and all that stuff,
.

So is $25m cheap or not in your view?

Sir John Anderson, former boss of ANZ NZ, who as Percy keeps reminding us is NZs greatest banker, would say Heartland paid $25m too much! Post financial crisis all these second tier finance operations are only worth net asset backing, according to his accumulated wisdom.

SNOOPY

[winner69]

So Snoopy .....you think they paid over the top for this 'business'. ....like wasted shareholder money?

[Snoopy]

So Snoopy .....you think they paid over the top for this 'business'. ....like wasted shareholder money?


Don't know Winner. I haven't had too much experience in valuing HER businesses.

SNOOPY

[BlackPeter]

[QUOTE=percy;501887]

Who is going to pay the welfare for the 45% of the educated people, who are going to be replaced by Automation and Robots ???

Possibly with in the next 5 to 10 years.. :-))))

Funny that - I remember that we discussed exactly this problem in high school (must have been in the early 70'ies). Funny thing is: We are now in 2014 and people still work 40 hour weeks (and many a bit more) and people still pay taxes. Trust me, won't be different in 5, 10 or 20 years from now. Maybe different jobs, but somebody else will ask the same question, then.

[Longhaul]

[QUOTE=janner;501902]

Funny that - I remember that we discussed exactly this problem in high school (must have been in the early 70'ies). Funny thing is: We are now in 2014 and people still work 40 hour weeks (and many a bit more) and people still pay taxes. Trust me, won't be different in 5, 10 or 20 years from now. Maybe different jobs, but somebody else will ask the same question, then.


Hmmm yes that's easy to say, but the automation coming our way will have even larger implications than what we've seen in the past. For example, there are up to 70 million people employed around the world to drive various cars, trucks, vans, trains etc. However, driverless technology is already here and could have a massive impact on those jobs. Why pay a driver when a computer can drive a truck far more safely and efficiently right around the clock?

Definitely some big change coming, who knows how to prepare for it though :/

[Beagle]

Chris Lee's take on Heartland, (emphasis added in bold by myself)


Heartland NZ - Heartland NZ Ltd (HNZ) has released its financial result for the Full Year ended 30 June 2014 and continues to deliver on the milestones it has set itself since origination in 2008, a performance that warrants the compliments received.


Key Financials included: (Full year to 30 June 2013 in brackets)


- Net operating income $122.2m ($107.3m)
- Operating expenses $64.7m ($70.3m)
- Impairment expense and revaluation $7.1m ($27.6m)
- Net profit before tax $50.8m ($9.4m)
- Net profit after tax $36.0m ($6.9m)

Note: NPAT for 2013 included a one-off pre-tax expense of $24.3m incurred as a result of the change in strategy with respect to the impaired non-core property assets. When adjusted for this one-off charge NPAT for the 2014 year was up $11.6m or 48% on the previous year.


HNZ’s balance sheet now exceeds $3 billion, up almost $500 million largely as a result of the purchase of the Home Equity Release business during the past year. The good news is that HNZ forecasts higher profits in the year ahead partly through lending growth but also through further reductions to the expense ratio of the bank.


Net interest margin is HNZ’s main source of profit and it represents the margin between what the bank charges its borrowers and what it pays its investors. Like NZ’s major trading banks HNZ has managed to steadily increase its net interest margin over recent years, growing the margin from 3.62% in 2012 to 4.11% in 2013 to 4.44% in 2014. The wider margins (mainstream banks are about 2.40%) reflects HNZ’s strategy of targeting wider margin lending opportunities and not targeting home mortgage lending which is the mainstay of the larger banks.
HNZ shareholders, who were patient in the initial years when the bank was established, are now no doubt very happy with the dividends being received (6 cents per share plus imputation credits for 2014) and forecast by us given the likely 2015 profit and dividend policy (7 cents per share plus imputation credits). Very few investments are offering the prospect of rising income at present so it is nice to be discussing one where this outcome is likely.


HNZ enjoys very high reinvestment rates, and growth from new depositors, which in our view is a reflection of the service provided by the bank to each depositors; something that investors often tell us is missing from their relationship with the major banks.


HNZ deposit rates have not exceeded those of the major banks recently, and have not needed to given the support that they receive from depositors, however the bank is currently offering a special rate for the 3 year term (5.50%) which may be indicative of growth being experienced from the HER lending business.

If they do pay a fully imputed dividend of 7 cps next year the dividend hound in me calculates that at a gross distribution of 9.72 cents, (7/.72) and based on an ex divvy price of 91.5 cents (95-3.5cps divvy due shortly), investors are looking at a gross return of 10.62% :)...with more growth in the years following given reasonable trading conditions and that ladies and gentlemen is the power of investing in a N.Z. owned bank with full imputation credits. Begs the question of why bother backing Australian owned banks doesn't it !! Did I add enough emphasis to those superior interest rate margins above :)

In today's news http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11317538

[winner69]

Chris Lee's take on Heartland, (emphasis added in bold by myself)



If they do pay a fully imputed dividend of 7 cps next year the dividend hound in me calculates that at a gross distribution of 9.72 cents, (7/.72) and based on an ex divvy price of 91.5 cents (95-3.5cps divvy due shortly), investors are looking at a gross return of 10.62% :)...with more growth in the years following given reasonable trading conditions and that ladies and gentlemen is the power of investing in a N.Z. owned bank with full imputation credits. Begs the question of why bother backing Australian owned banks doesn't it !! Did I add enough emphasis to those superior interest rate margins above :)

In today's news http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11317538

Roger - commentary was from Michael Warrington at chrislee.co.nz

As I posted yesterday high margins are good but sound better in real terms than the differential basis used.

Like borrow at 5.0% and lend at 8.35% (for the equity release stuff) would be seen as a 3.3% margin

But it is the same as say Rod Duke buying something for $100 and selling it for $167 (rogues both of them?) but Heartland probably doesn't have the same shrinkage problem as Duke

We'll get the shareprice up somehow Roger .... pumping is more than just saying they do what they so they will do and well positioned and just hoping the shareprice will rise

It is our job to get some hype and excitement out there with some real numbers

I haven't made much at all (stuff all in fact) on HNZ since buying and I getting grumpy

[Beagle]

Have patience my friend. Its a nice steady slow burner, just sit back and plan how to spend the upcoming dividend :)

[iceman]

Have patience my friend. Its a nice steady slow burner, just sit back and plan how to spend the upcoming dividend :)

Mate, for a conservative accountant I thought you'd be more disciplined and sign up to the DRP and let Jeff put your divies to good use again and again :p

[percy]

Had a chat with Bruce McLachlan from that other small BANK the o day. He seems a good guy and has a pretty clear vision of where he wants to take his BANK. Like Greenslade he has had plenty of experience as wel

I like the cooperative model .....fits with the principled side of me. Gave them some more dosh today ...at least greedy shareholders won't be making any money of it.

The way the world is heading and how generational values are deveoloping i wouldnt be surprised to see a rise in these types of cooperatively owned businesses ....not this year but in due course

Heck where is the occupy meeting

Above was posted 19-12-2012.
Heartland share price that day was 70 cents.
Well Grumpy one, in hindsight we can work out how costly your lack of foresight has been.Rather than chewing the fat with your Co-Op mate you should have been buying Heartland Bank shares.
You have missed 35.7% rise in share price.And you would now be enjoying 10% net dividends.

[Beagle]

Mate, for a conservative accountant I thought you'd be more disciplined and sign up to the DRP and let Jeff put your divies to good use again and again :p

LOL mate. Haven't you noticed I like a good beer or three using my dividends :)

[winner69]

Above was posted 19-12-2012.
Heartland share price that day was 70 cents.
Well Grumpy one, in hindsight we can work out how costly your lack of foresight has been.Rather than chewing the fat with your Co-Op mate you should have been buying Heartland Bank shares.
You have missed 35.7% rise in share price.And you would now be enjoying 10% net dividends.

Oh dear Percy that's good of you digging back into the past.

So HNZ up 35.7% since Dec 2012 - NZX50 up 30.2% in same period

As many gurus say "a rising tide lifts all boats . Heartland sort of been just average hasn't it? OK I'll concede its been slightly above average.

I done better than 35% in that time so no regrets not holding HNZ. However most (nearly all) of those that contributed to the gains have stopped increasing in price. Some have been sold.

A lot of that cash now in HNZ primarily due to the growth prospects and potential rerating upwards as well. This underpinned by a solid dividend and probably little downside to the shareprice. But it's really capital growth I want. Wasn't much choice and HNZ won the selecting race b default really, most other things did not meet set criteria.

But I not emotionally tied to it and unless Heartland starts performing to MY expectations out it will go.

Bruce still doing good things. Coop have more members (customers) than before and steadily collecting more by the day. They will continue to do well without greedy shareholders getting in the way.

[winner69]

That $42m-$45m guidance is as weak as. Wonder who they trying to kid here, wimps.

My deep research and full reading of the annual results presentations (including what was between the lines) has resulted in me doing one of those NPBT Bridges for FY14 to FY15. Components mainly impacts of lending growth, a column for new HER loans, a bit of improved interest margin and keeping costs down.

After allowing for tax my forecast NPAT for FY15 is $49.2m with an upside case of $50.6m.

My view meeting guidance of $45m is failure on their part.

Come ASM time I bet Jeff will just confirm the $45m guidance That would be disappointing and doesn't really tie in with the words of the recent announcements.

[percy]

Gee Whiz we are on very different pages.!!!
This years's net profit was $36mil,the guidance of 42mil to 45mil is up between 16% and 25%.Your 49.2mil is up 36.6%!!!
PEG ratios .PE 10.7 growth 16% = 10.7 divided by 16 gives a very respectable .67 and growth at 25% gives 10.7 divided by 25 a fantastic .428
and if you factor in 7 cents dividend the PEGD are; 10.7 divided by 23 [growth 16 plus 7 dividend] =.465 and growth at 25% we get 10.7 divided by 32 [25 growth plus 7 dividend ] gives an incredible .334.
So I am more than happy with the company's guidance.

[Beagle]

Gee Whiz we are on very different pages.!!!
This years's net profit was $36mil,the guidance of 42mil to 45mil is up between 16% and 25%.Your 49.2mil is up 36.6%!!!
PEG ratios .PE 10.7 growth 16% = 10.7 divided by 16 gives a very respectable .67 and growth at 25% gives 10.7 divided by 25 a fantastic .428
and if you factor in 7 cents dividend the PEGD are; 10.7 divided by 23 [growth 16 plus 7 dividend] =.465 and growth at 25% we get 10.7 divided by 32 [25 growth plus 7 dividend ] gives an incredible .334.
So I am more than happy with the company's guidance.

If I may intercede in this debate I think where W69 is coming from is EPS guidance is only up from a weighted average of 9 cps in 2014 to 9.3 cps for 2015 based on the mid point of the forward guidance.
I'm comfortable with moderate EPS growth this year because I know its takes time for new business ventures, (HER), to gain traction and I remain confident of stronger EPS growth in 2016 and beyond.
That and the gross dividend yield of 10.62% I mentioned this morning with prospects for future dividend growth in 2016 and beyond means....you guessed it, we are well positioned :)

Also its worth noting that if they meet the mid point of 2015 EPS guidance 9.3 cps then based on an ex divvy price of 91.5 cps the stock is on a forward PE of only 9.8, so there's definitely room for the stock to appreciate :) Now go and take your gloves off and have a rest in your respective corners LOL.

[winner69]

Gee Whiz we are on very different pages.!!!
This years's net profit was $36mil,the guidance of 42mil to 45mil is up between 16% and 25%.Your 49.2mil is up 36.6%!!!
PEG ratios .PE 10.7 growth 16% = 10.7 divided by 16 gives a very respectable .67 and growth at 25% gives 10.7 divided by 25 a fantastic .428
and if you factor in 7 cents dividend the PEGD are; 10.7 divided by 23 [growth 16 plus 7 dividend] =.465 and growth at 25% we get 10.7 divided by 32 [25 growth plus 7 dividend ] gives an incredible .334.
So I am more than happy with the company's guidance.

Where's your ambition Percy, and theirs

Maybe need more woman and young people on this stodgy old goods train to turn it into a an express

Haven't heard back about diversity but they need to say something in the Annual Report. Probably have to wait to then.

[Beagle]

Where's your ambition Percy, and theirs

Maybe need more woman and young people on this stodgy old goods train to turn it into a an express

Haven't heard back about diversity but they need to say something in the Annual Report. Probably have to wait to then.

Rome wasn't built in a day. With all due respect mate its a Bank. I think most shareholders would prefer them to build their business in a conservative systematic way with prudent lending policies rather than the approach we've seen some other financial institutions use in the past, (South Canterbury Finance for some strange reason springs very readily to mind).

If you're looking for a stock that might appreciate 35% in the next year you're probably need to take on more risk, you know my favourite :)

[Snoopy]

Chris Lee's take on Heartland, (emphasis added in bold by myself)
<snip>
Net profit after tax $36.0m ($6.9m)

Note: NPAT for 2013 included a one-off pre-tax expense of $24.3m incurred as a result of the change in strategy with respect to the impaired non-core property assets. When adjusted for this one-off charge NPAT for the 2014 year was up $11.6m or 48% on the previous year.
<snip>


I would take out the impaired assets expense too, if each year to get a handle on the operational performance of Heartland. That gives the following results:

FY2014: $36.089m + 0.72($5.895m+$1.203m) = $41.140m
FY2013: $6.912m + 0.72($5.101m+$22.527m) + 0.72($7.700m) = $32.349m

So underlying performance is up 27% on the year. As far as shareholder are concerned though, it is earnings per share growth that is important, not profit growth.

At EOFY2013 there were 388.704m shares on issue
=> For FY2013 eps = $32.349m / 388.704m = 8.3cps


At EOFY2014 there were 463.267m shares on issue.
=> For FY2014 eps= $41.140m / 463.267m = 8.9cps

So underlying eps is only up 7.2% for the year

Forecast for FY2015 is $42m to $45m
=> For FY2015 eps = ($42m to $45m)/ 463.267m = 9.1 to 9.7cps

That represents a forecast gain of between 2.2% and 9.0%. Actual percentage gain in eps will be less than that, because of shares issued during the year in the dividend reinvestment plan.

SNOOPY

[Beagle]

Agreed Snoopy. This hound will be happy with 10-15% SP appreciation in the forthcoming year as well as the 10.6% gross dividend yield knowing that as the HER division gains traction there's probably stronger EPS growth to come in future years. If people are looking for greater SP appreciation than that maybe they should bark up a different tree ? These are fundamentally good numbers, (cheap PE) for a moderate risk business in a market that's choc-a-block with fully priced stocks IMHO.

[percy]

Where's your ambition Percy, and theirs

Maybe need more woman and young people on this stodgy old goods train to turn it into a an express

Haven't heard back about diversity but they need to say something in the Annual Report. Probably have to wait to then.

As I have always pointed out on this thread I am pleased as punch Heartland achieve all they set out to do. They have the right people in the right places.A winning team.

[winner69]

Equity June 14 is $450m

ROE improving they say (9.7% in last quarter) and we have aspirations to improve it (something a lot higher)

Guidance at top end end for FY15 is $45m NPAT - hey that's 10% ROE - on opening equity - you would hope that equity would increase (from DRP and retained earnings) so likely figure less than 10% ROE.

Not good

I feel some financial 'engineering' coming onto make some ratios look better. Making more money seems to be off the agenda. Has interest margin maxed out at 4.44%? Are efficiencies becoming harder to achieve (even though they say further improvements will be made)? Aren't ey going to make any money out of equity release loans?

Normalised NPAT increased by $7m from FY11 to FY12 then by $10m from FY12 to FY13 and then by $12m in FY14. Now they trying to tell us that FY15 will be up between $6m to $9m, after acquiring $700m odd of business which is going to be eps accretive and improve ROE

Doesn't seem right does it that $42m to $45m guidance

Redid my numbers - still reckon something closer to $50m has to classed as respectable.

Shucks what have I got myself into. And shareprice down again today so only marginally ahead but heck that divie is needed.

[couta1]

I'm just happy to hold long term along with Air, PGW and GNE as these are a set of lovely blue arrows amongst a sea of Red:cool:

[noodles]

Shucks what have I got myself into. And shareprice down again today so only marginally ahead but heck that divie is needed.
Winner, I have never seen you so shaken. Are you going to sell? After all, clearly the company profit expectations are short of the mark for you. I wonder how many punters like you are hanging out for that divi before they sell? Imagine what the ex-div price will be! #panicsell

[Snoopy]

Over the last few weeks I have been concentrating on Heartland's operational statistics. It is all very well being a good zookeeper, feeding out the straw and clipping the customers ticket as they come through the door. However, it can all mean very little if as a keeper you go home and find an elephant in your lounge. So I want to look again at Heartland's elephant.

Here is what Fitch said when they inspected Heartland's elephant on 3rd November 2013.

"The weak asset quality performance of HBL's non-core property assets remains a drag on profitability and capital. A change in strategy to reduce these loans, which totalled NZD107m at financial year end 30 June 2013 (FY13), is likely to support a faster run-off. Provisioning of the portfolio is high, covering a significant proportion of impaired assets. Should further provisioning be needed, HBL benefits from sound pre-impairment operating profits, providing some absorption capacity. Fitch views the legacy property portfolio as one of the main constraint to a higher rating."

Now that $107m figure surprised me. $107m represents 27.5cps of capital. That is around three years worth of normal operating profit which brings all the day to day Heartland zookeeping into perspective.

If you look at the 30th June 2013 balance date, you will see that Heartland value their "investment property portfolio" (problem property bucket) at only $58.287m. That still leaves some $49m unaccounted for. I can only assume that the 'missing' problem properties are still in the 'finance receivables' part of the balance sheet.

Of course that $107m does not mean that this capital is lost. It just means that some but hopefully not all will be difficult to recover. But something else caught my eye in the Fitch statement (my bold).

"The weak asset quality performance of HBL's non-core property assets remains a drag on profitability and capital."

I had presumed that Heartland will still be racking up interest on these risky loans. But does the drag on 'profitability' mean Heartland have given up collecting interest on part of this portfolio to the extent that even the interest they are still collecting is not enough to balance any loans that have already collapsed?

Heartland. From a public perspective they have been quite good zookeepers over FY2013. But nothing was done to address their elephant, apart from making it incrementally bigger.


The bad debt position of Heartland's problem property assets has evolved. I have prepared a graphic to show what has happened over the years, and how that relates to capital risk

6228

Now to explain.

Each year (FY2012, FY2013 and FY2014) is represented by three columns. The column to the left (total height) represents Heartlands shareholder funds at the end of each financial year. The LH column is made up of three colours. The first section, in wavy blue pyjamas, is the minimum amount of capital Heartland needs to satisfy Reserve Bank requirements. The mauve and yellow sections on top of that represent the safety margin. This is the amount of capital in excess of reserve bank requirements. The yellow section, which on the original version of this graph I drew was part of the mauve section, represents net profits earned during the financial year, less dividends paid. The yellow part therefore represents retained earnings from normal operations.

The second column (orange) represents 'doubtful debts' as taken from the company's breakdown of asset quality. The third column (red) I have labelled 'difficult debts' and this one incorporates the 'doubtful debts' as well. I calculated this by starting with the doubtful debts and adding on the next categpry of debt (not quite bad enough to be doubtful).

The effect of all the doubful debts going bad can be seen by subtracting the height of column 2 from column 1. You can see that for all three years that if all of the doubtful debts went bad, it wouldn't affect Heartland that much. The capital buffer above minimum reserve bank standards is still largely intact. However, if all the 'difficult debts' went bad, then that is where things could get interesting.

SNOOPY

[winner69]

Rome wasn't built in a day. With all due respect mate its a Bank. I think most shareholders would prefer them to build their business in a conservative systematic way with prudent lending policies rather than the approach we've seen some other financial institutions use in the past, (South Canterbury Finance for some strange reason springs very readily to mind).

If you're looking for a stock that might appreciate 35% in the next year you're probably need to take on more risk, you know my favourite :)

Yep I appreciate it s just a BANK

But that Bank has recently grown its loan book by 30%. This along with ongoing organic growth and becoming more efficient makes a forecast $6m increase in profitability a bit nonsensical ((obviously my view only)

[noodles]

The bad debt position of Heartland's problem property assets has evolved. I have preapred a graphic to show what has happened over the years, and how that relates to capital risk

6212

SNOOPY

Wow! If that chart is accurate, it paints fantastic progress. No wonder they got a ratings upgrade.

[Beagle]

Yep I appreciate it s just a BANK

But that Bank has recently grown its loan book by 30%. This along with ongoing organic growth and becoming more efficient makes a $6m increase in profitability a bit nonsensical ((obviously my view only)

Like the Mainland Cheese advertisement Good Things Take time.
Giving the HEL product a big marketing push in Aussie certainly won't be cheap and progress won't be instantaneous. In my view one needs to look past the modest 2015 EPS growth, look at those banking margins and think longer term.
That and I think we could see a profit upgrade later this financial year. Very limited downside and circa 10.6% gross dividend return.

[winner69]

Like the Mainland Cheese advertisement Good Things Take time.
Giving the HEL product a big marketing push in Aussie certainly won't be cheap and progress won't be instantaneous. In my view one needs to look past the modest 2015 EPS growth, look at those banking margins and think longer term.
That and I think we could see a profit upgrade later this financial year. Very limited downside and circa 10.6% gross dividend return.

Am thinking long term mate, or at least as long as they perform as they should do.

Almost certain a profit upgrade sometime this year. I wouldn't be surprised if they actually feel a little embarrassed at the moment with forecasting a pitiful $6m increase for this year.

Come ASM time end of October Jeff will say $44m-$47m and you can give him a standing ovation, knowing full well he is really saying $49m-$51m

Unless the old financial engineering tricks kick in or a big acquisition clouds the issue it will be hard to stick with even $45m after the half year anyway

[Harvey Specter]

The second column (orange) represents 'doubtful debts' as taken from the company's breakdown of asset quality. The third column (red) I have labelled 'difficult debts' and this one incorporates the 'doubtful debts' as well. I calculated this by starting with the doubtful debts and adding on the next category of debt (not quite bad enough to be doubtful).If they are doubtful debts per the accounts, then they are already factored into equity. The bar should therefore go upwards from the top of the equity bar, not downwards. That is, if all the doubtful debts were miraculously paid tomorrow, profit would go up and would be added to equity; if they were written off to the exactly level as the provision, there would be no equity effect. Its only if an amount greater than the provision, your dodgy debts column, would there be an impact on equity.

Regardless, the graph looks impressive.

[Snoopy]

Wow! If that chart is accurate, it paints fantastic progress. No wonder they got a ratings upgrade.


Yes, and you can see that the big step change in risk occurred between EOFY2013 and EOFY2014. Part of the reason for the decreased risk position is that the company has got larger with the HER portfolio. The bad loan property portfolio has shrunk in its own right of course. But it has shrunk much more in relative terms because the loan portfolio overall has grown. As you sain Noodles 'fantastic progress'.

There are a couple of cautionary notes to observe though. Look at the capital safety margin for FY2014. It has got much smaller than a year ago. Part of the reason for that is that in FY2013, the minimum capital requirement was 12% of outstanding loans. In FY2014 that requirement went up to 14.5%. (this comment of mine is incorrect, should still be 12% as Heartland exempted from 2.5% buffer requirement of other banks) Yet even if you remove that hurdle height change, (now done in diagram) the margin is still smaller. So this needs watching.

Another concern of mine is that the worst posssible scenario that Heartland can imagine with their HER portfolio is that 1% of it might go bad. The absolute worst case! I wonder what management would do if , shudder, 2% went bad? Anyway, all the data I have used I have pulled directly from the appropriate Heartland reports. I haven't imposed any higher safety margin hurdles of my own, even if part of me says that I should!

SNOOPY

[Snoopy]

If they are doubtful debts per the accounts, then they are already factored into equity. The bar should therefore go upwards from the top of the equity bar, not downwards.


Harvey, the equity figure I have used is taken from the end of year balance sheet (for FY2014 $452.622m less intangible assets of $47.421m). This is calculated from the difference between total assets and total liabilities.

Total assets include finance liabilities of $2,607.393m. Go to note 20 and you will see that an allowance for impairment of $16.361m and a deduction associated with the HER loans have already been taken off. I think you are right and I should add these on again. However, these deductions do not necessarily relate to what I have called 'doubtful debts'.

If you go to table 39c my 'doubtful debts' is the sum of the 'Behavioural Portfolio' loans in the 'Recovery' and 'Non-performing/Repossession' added to the 'Grade 8' 'At Risk of Loss' ,'Doubtful' and Substandard' categories. Once this sum is obtained I take off the 'Provision for Collectively Impaired Assets'. To not do so would mean that I would be counting the worst of the loans twice



That is, if all the doubtful debts were miraculously paid tomorrow, profit would go up and would be added to equity; if they were written off to the exactly level as the provision, there would be no equity effect. Its only if an amount greater than the provision, your dodgy debts column, would there be an impact on equity.


Correct if my 'Doubtful Debts' = 'Provisions' but as I have explained this is not the case.



Regardless, the graph looks impressive.


I will correct the graph as per your suggestion when I get time. Thanks for that. But I don't think the essential message of the graph will be affected.

SNOOPY

[noodles]

Yes, and you can see that the big step change in risk occurred between EOFY2013 and EOFY2014. Part of the reason for the decreased risk position is that the company has got larger with the HER portfolio. The bad loan property portfolio has shrunk in its own right of course. But it has shrunk much more in relative terms because the loan portfolio overall has grown. As you sain Noodles 'fantastic progress'.


I sense a monster BUY order about to hit the market with SNOOPY's name on it .

[winner69]

Below is a chart HNZ proud off. Interest margin being one of the key drivers of net operating income

Looks good eh. All from lower cost of funds and working towards a more optimum lending mix

Question then - can we assume that FY15 will be higher then the 4.44% reported in FY14? and if yes by how much?

[Beagle]

If anyone in Auckland wants to hit the bid at 94 and sell, please PM me. I have off market transfer forms and am happy to save both of us the brokerage.

[winner69]

If anyone in Auckland wants to hit the bid at 94 and sell, please PM me. I have off market transfer forms and am happy to save both of us the brokerage.

You not getting mine ....I in for the long term .... ha ha

[percy]

You not getting mine ....I in for the long term .... ha ha

Wonder if you will ever use the Buffett phase "Forever is a good holding period." ?????????????????????????????

[Snow Leopard]

.... Part of the reason for that is that in FY2013, the minimum capital requirement was 12% of outstanding loans. In FY2014 that requirement went up to 14.5%. Yet even if you remove that hurdle height change, the margin is still smaller. So this needs watching....

I think you will find that the 'minimum capital requirement' (for the Bank) remains at 12%.

It is also not appropriate to apply it to HNZ as a whole as you are doing here.

Best Wishes
Paper Tiger

[winner69]

Wonder if you will ever use the Buffett phase "Forever is a good holding period." ?????????????????????????????

But I also have this etched in my memory, Another Buffett

Don't be fooled by that Cinderella feeling you get from great returns

[percy]

But I also have this etched in my memory, Another Buffett

Don't be fooled by that Cinderella feeling you get from great returns

His Bank of America and Wells Fargo investments must have come after he said that.!!

[Onion]

If anyone in Auckland wants to hit the bid at 94 and sell, please PM me. I have off market transfer forms and am happy to save both of us the brokerage.

560,993 gone through at 94 cents -- is that you filling your boots Roger?

[Beagle]

560,993 gone through at 94 cents -- is that you filling your boots Roger?

LOL I wish it was. I couldn't get a fill and am too tight arse to pay 95 at this stage.

[Snoopy]

I will correct the graph as per your suggestion when I get time. Thanks for that. But I don't think the essential message of the graph will be affected.


Hi again Harvey. I have reviewed my own 'doubtful debt' calculation (the size of the orange bar) and am pleased to report I got it right first time after all. So no need to change the graph.

My excuse? I had been fiddling with the presentation of my graph, off and on, for a few days. By the time I had decided what information to present and in what form I had forgotten some of the details of how I calculated the information in the first place! The balance sheet equity has the impaired assets already removed. And to match that I did the same with my own patented 'snoopshot' on doubtful debts. Thanks for making me look at it again though, to remind me of what I had actually done!

SNOOPY

[Snoopy]

I sense a monster BUY order about to hit the market with SNOOPY's name on it .


You sense wrongly, for the moment anyway. I buy something normally for a bundle of reasons of which one favourable statistic is just one element.

SNOOPY

[Snoopy]

I think you will find that the 'minimum capital requirement' (for the Bank) remains at 12%.


This 'minimum capital requirement' has been discussed on this thread before. See post 2990, the interest.co.nz reference quoted by Captain Dan. You are correct PT, the 'minimum capital requirement' (for the Bank) remains at 12%.

"Since January 1 this year banks also require a buffer ratio for common equity tier one capital of at least 2.5%. This buffer ratio is described by the Reserve Bank as a counter-cyclical capital buffer that can be applied in times of excessive credit growth. It's part of the Reserve Bank's version of the global Basel III bank capital adequacy standards, which have been endorsed by the G20. Heartland isn't required to maintain this buffer."

My 14.5% equated to 12% + 2.5% (the buffer). I now see that Heartland has an exemption regarding this buffer. I will correct my chart accordingly. But I don't think that correction is material enough to affect my conclusions.



It is also not appropriate to apply it to HNZ as a whole as you are doing here.


If you have a better way to do things I will implement it. As it stands, just using the HNZ group figures as I have done looks to me as though it is the best I can do.

SNOOPY

[Snoopy]

Below is a chart HNZ proud off. Interest margin being one of the key drivers of net operating income

Looks good eh. All from lower cost of funds and working towards a more optimum lending mix

Question then - can we assume that FY15 will be higher then the 4.44% reported in FY14? and if yes by how much?


Winner I can't help but notice (note 28) that the deposits held by the group have reduced during the year from $1,838.619m to $1,736.751m, a 5% reduction. There was clearly no pressure during the year to keep depositors reinvesting, so no pressure to offer really good interest rates. By contrast a lot of bank borrowing, relating to the HER loans acquisition is now on the balance sheet out of Australia, probably at relatively low rates in New Zealand terms. It might be that which has contributed to the increasing net interest margin. There are no facilities to materially increase that borrowing. So I would guess net interest margin may flatten out, or even decline into FY2015.

SNOOPY

[Snoopy]

Equity June 14 is $450m

ROE improving they say (9.7% in last quarter) and we have aspirations to improve it (something a lot higher)

Guidance at top end end for FY15 is $45m NPAT - hey that's 10% ROE - on opening equity - you would hope that equity would increase (from DRP and retained earnings) so likely figure less than 10% ROE.

Not good

<snip>

Now they trying to tell us that FY15 will be up between $6m to $9m, after acquiring $700m odd of business which is going to be eps accretive and improve ROE

Doesn't seem right does it that $42m to $45m guidance

Redid my numbers - still reckon something closer to $50m has to classed as respectable.


Winner, the equity transferred to get the HER business was $86.140m (note 40). Assuming an ROE of 10% that equates to an after tax profit increment of $8.614m.

The business was acquired on 1st April, so one quarter of that incremental gain is already in this years profit figure. So teh three quarters Heartland can expect in FY2015 amounts to

0.75 x $8.614 = $6.5m

On my normalised profit of $41m for FY2014 this means a profit of $47.5m for FY2015. So maybe a reduction in the interest margin explains the difference?

SNOOPY

[winner69]

Winner, the equity transferred to get the HER business was $86.140m (note 40). Assuming an ROE of 10% that equates to an after tax profit increment of $8.614m.

The business was acquired on 1st April, so one quarter of that incremental gain is already in this years profit figure. So teh three quarters Heartland can expect in FY2015 amounts to

0.75 x $8.614 = $6.5m

On my normalised profit of $41m for FY2014 this means a profit of $47.5m for FY2015. So maybe a reduction in the interest margin explains the difference?

SNOOPY

So a guidance of $42m plus maybe a bit more more is not very good then?

[winner69]

I think I have sussed the secret formula as to how Heartland arrive at their guidance figures.

So how did they get $45m for next year. The thinking is -

1 - We made $36m last year.
2 - NPAT has been steadily increasing by about $3m each half year for a while
3 - But our business )exc HER) is reaching maturity and growth will slow
4 - So lets say that for FY15 we will increase NPAT by $2m each half year.
5 - Still pretty respectable (and that guy percy will be ok with this)
6 - So that's means H1 of $21.3 and H2 of $23.3m
7 - Hey that's just under $45m for the full year. Good
8 - Analysts will be happy (esp Forbar)
9 - So we can play it safe in case something goes wrong and say $42m-$45m

Easy peasy eh.

And No 10 - of course nobody is expecting us to make any money out of home equity stuff (even an accountant on Sharetrader says so). We'll keep that up our sleeves eh

As Buffett says .... 'the rearview mirror is always clearer than the windshield'

The rear view mirror sure is clear but heck the windscreen has got many dirty streaks over it and when I squirt the washer button the blades sure do make it even murkier. Hope no sun strike.

Anyway what my theory looks like in picture form

[winner69]

Roger has to promise to start a standing ovation when Jeff announces an upgraded FY guidance figure of $47m at the ASM

Headlines next day in The Herald "Rapturous applause greets Heartland profit upgrade"

Bout time ASMs had a bit of excitement

Sounds like you will have mates there to help you out

Please promise

[Beagle]

I think I have sussed the secret formula as to how Heartland arrive at their guidance figures.

So how did they get $45m for next year. The thinking is -

1 - We made $36m last year.
2 - NPAT has been steadily increasing by about $3m each half year for a while
3 - But our business )exc HER) is reaching maturity and growth will slow
4 - So lets say that for FY15 we will increase NPAT by $2m each half year.
5 - Still pretty respectable (and that guy percy will be ok with this)
6 - So that's means H1 of $21.3 and H2 of $23.3m
7 - Hey that's just under $45m for the full year. Good
8 - Analysts will be happy (esp Forbar)
9 - So we can play it safe in case something goes wrong and say $42m-$45m

Easy peasy eh.

And No 10 - of course nobody is expecting us to make any money out of home equity stuff (even an accountant on Sharetrader says so). We'll keep that up our sleeves eh

As Buffett says .... 'the rearview mirror is always clearer than the windshield'

The rear view mirror sure is clear but heck the windscreen has got many dirty streaks over it and when I squirt the washer button the blades sure do make it even murkier. Hope no sun strike.

Anyway what my theory looks like in picture form

LOL. No9 should read The Dairy prices are in freefall so we'd better allow some provisioning in there just in case some of our customers in that sector end up in the shyte. :)
Regarding said standing ovation, I think I'm on safe ground, no profit upgrade this early in the financial year...too much uncertainly down on the farm.
I promise to have a drink or two to put a dent in their AGM entertainment budget though :)

[winner69]

I sense I am going to get banned from this thread .... or even worse be put on the Ignore list like Snoopy is.

Jeez if you read the Annual Accounts thoroughly and read between the lines in the presentations and talk to a nice lady in their Wellington office you can really glean a lot. Even the man from Coop is quite complementary about Heartland and willing to share insights.

I think I know heaps about Heartland now - except their Diversity Policy

[Beagle]

I don't know about others but I don't mind a good satirical post with good humour. I suspect your musings about profit projections aren't too far from the truth.
I can't help myself I bought more today. Has anyone got a good remedy for dividend fever :)

[Tevita]

I think I know heaps about Heartland now - except their Diversity Policy

That should be your first question at the Annual Meeting. Unless somewhere, in a mass of data, Snoopy has answered it.

[percy]

An interesting article in this morning's The Press, page B4 headed ,"Reverse mortgages have their place."
"Quite frankly there's not a lot of personal downside."
Good to see a well balanced informative article.

[winner69]

An interesting article in this morning's The Press, page B4 headed ,"Reverse mortgages have their place."
"Quite frankly there's not a lot of personal downside."
Good to see a well balanced informative article.

This months Consumer has an article about these products.

They write-off the TSB product because no guarantee of staying in the house and if the outstanding amount at the end of the day is more than the sale price the difference needs to be paid.

They say these products have fish hooks and other options are available but the only realistic one is to borrow from the children using the house as collateral (all legally drawn up of course)

At the end of the day if the old folk want some cash just trot down (or use the old motorised buggy) to Heartland and they will sort something out for you

[winner69]

An interesting article in this morning's The Press, page B4 headed ,"Reverse mortgages have their place."
"Quite frankly there's not a lot of personal downside."
Good to see a well balanced informative article.

Was it one of those advertorial pieces or a genuine bit of financial reporting.

Hope Heartland are encouraging more media to do bits on this.