HGH - Heartland Group Holdings

[Snoopy]

And where are they at now .... ;)

Time to jump the PGGW Finance hurdles as imposed by their banking syndicate of the day (November 2009). How does Heartland stand up against them? I have gone to the latest half-year report for the
period ended 31st December 2011 (HY2012) to pull out the following figures:

(Note to readers: I haven't attempted to analyze a financial institution like this before. So I could be talking out of a hole in my WW1 goggles. Please feel free to put an alternative interpretation on the
judging criteria and correct me.)

Let the analysis begin!

SNOOPY

[Snoopy]

Let the analysis begin!


1/ EBIT to interest expense > 1.2

EBIT is not listed as that, so I have had to improvise. On p10 (Interim
Statements of Comprehensive Income) we find the 'Interest Income'
figure and I have subtracted from that the selling and administration
costs also on p10.

EBIT = $101.770m-$35.691m= $66.079m

Interest expense is listed as $62.64m.

So (EBIT)/(Interest Expense)= ($66.079)/($62.64)= 1.05 < 1.2

Result: FAIL TEST

SNOOPY

[winner69]

That seems a pretty thin margin of safety vSnoopy ..... EBIT only $3m odd above interest expense

Wouldn't want mch to go wrong

Is the 1.2 a benchmark of good performance or one that is seen as a minimum acceptable level .... like you I know vey littlr about finance companies ..... whats the norm

[percy]

I think we are all very pleased with the quarter ended 31/3/12,[management a/cs] announced on 10/4/12 .This quarter would give a better indication of future profit. Operating profit for the quarter was $5.3mil compared with the first two quarters combined profit of $3.6mil.The figures up to 31/12/11 were quiet frankly hopeless,and a lot of people thought why bother. All hurdles have been jumped,and banking licence would appear to be on track,and profit now looks to be worth the effort.Finance companies borrow at one figure and lend at a different figure.To get cheap funds it pays to have the word bank in your name.To lend at a higher figure it pays to have the word finance in your name. So we are looking at Heartland Bank borrowing money to be lent by Marac finance.! The difference from what you borrow to what you lend is your margin.Borrow $1mil at 6% and lend at 14% your gross profit is 8%,or $80,000 less your overheads.It is a funny fact that banks/finance companies usually make greater profits when interest rates are higher.Of course the bank that stays in business is the one who gets their loans repaid.

[Arbitrage]

LOL ... 60c ??? ... Yeah right ... :) ... I hope not as my pyrimid is yet to be fully complete as sellers have been pretty thin on the ground (unless you're buying huge packets of course) ... ;)

editted: Increased margins = music to my ears (just need NPX and FPA to do the same!)

59 cents this morning.

[RazorX]

60 cents @ 12:35 :) She is grinding up slowly.

[Snoopy]

That seems a pretty thin margin of safety vSnoopy ..... EBIT only $3m odd above interest expense

Wouldn't want much to go wrong

Is the 1.2 a benchmark of good performance or one that is seen as a minimum acceptable level? .... like you I know very little about finance companies ..... whats the norm?

I can't answer if (EBIT)/(Interest Expense) < 1.2 is some kind of 'norm'. All I can do is outline the circumstance in which this hurdle was set:

1/ PGG Wrightson Finance was quite a well respected finance company in its own right at the time. Their answer to NZX queries on their liquidity at the time almost smacked of boasting how good their reinvestment rate was (80%+).
2/ PGG Wrightson, the parent firm, was heavy with debt and in need of a cash issue (hence the prospectus)
3/ The hurdle was set by a banking syndicate who wanted their money back.

My inkling is that the 1.2 figure might contain some margin of safety. But I don't really know. Still as a small investor in HNZ, wouldn't you want some margin of safety?

SNOOPY

[Snoopy]

This quarter would give a better indication of future profit. Operating profit for the quarter was $5.3mil compared with the first two quarters combined profit of $3.6mil. The figures up to 31/12/11 were quiet frankly hopeless.


I take your point about HNZ being a work in progress Percy. Consequently your argument that the last reported half year report should not be taken as indicative of future half years has merit.

Let's say we are heading for a full year profit of $20m. How does that stack up in context? It turns out, not that well when considered in light of the Tier 1 and Tier 2 lending covenant test.

Criterion 5/ Minimum Equity Contribution:
Tier 1 Risk Share Lending (basic equity capital and disclosed reserves) > 20%,
Tier 2 Risk share lending (this applies to undisclosed debts, and provisions against bad debts) > 30%.

There is no mention of Tier 1 or Tier 2 in the Heartland HY2012 interim report. I am not sure how to apply this test. Perhaps someone will confirm or correct my opinion?

I think the loans have to be grouped into both 'Tier 1' and 'Tier 2' categories. Once this is done then enough equity capital has to be set aside to cover 20% of the gross lending value of 'Tier 1' loans and
likewise 30% of the 'Tier 2' loans. Add these two required amounts of capital together and the figure should not exceed the actual underlying capital on the company balance sheet.


The 'best case' scenario is that all loans are Tier 1. $1,985.55m of loans are outstanding. 20% of that figure is:

0.2 x $1,985.55m = $397.0m

From p3, Heartland has total equity of $360m, which is insufficient no matter what the tier classification of the loans. Even if $20m of profit is booked to boost shareholder capital, there would still be a shortfall of capital of $17m assuming no growth in the loan portfolio.

Result: FAIL TEST

SNOOPY

[Snoopy]

Sp action smells of banking license decision coming soon.


For an alternative opinion this looks more like noise to me as the SP moves up and down with the market. I think if a banking licence was imminent the share would be trading a lot closer to asset backing. A banking licence as I see it would have two benefits.

1/ An increase in the number of term deposits taken in, due to customer perception the company has become safer.
2/ A decrease in borrowing costs because of reserve bank approval.

But what is the quantitative effect of this in terms of profit? I don't know.

SNOOPY

[Snoopy]

60 cents @ 12:35 :) She is grinding up slowly.


I am appearing as the voice of caution on this thread not because I don't think Heartland will succeed (I think on balance it will). But I want investors to keep in mind other possible options of Heartland either falling over or coming back to shareholders for more capital.

If current asset backing sits at 90c, and current market norms are to value finance companies at asset backing there is another way of looking at that 60c shareprice. One might say 60c reflects a 2/3 chance of success and a 1/3 chance of failure. A 1/3 chance of failure is not insignificant to those shareholders who want to retain capital. OTOH you could say a 60c to 90c move would be quite a good return if things go well.

I see HNZ as a genuine investment with a decent risk return arbitrage. But a ticket to print money this is not.

I can see myself coming back to HNZ after the 2013 full year results come out. If things continue to go well and I invest then I would be looking at a much lesser return than those buying in today. But I will also face a much lesser risk of losing all my capital! In the meantime HNZ looks like too risky an investment for the likes of me. I will put it out there are a challenge for others to convince me otherwise!

SNOOPY

[Arbitrage]

Within the spectrum of risk of a portfolio I would put this share in the high end at present. However when it was 50c it was worth a short term spec based on price trends and anticipated growth. As I said a few posts ago, I am fighting irrational greed and have a finger hovering over the sell button.

[Snoopy]

Within the spectrum of risk of a portfolio I would put this share in the high end at present. However when it was 50c it was worth a short term spec based on price trends and anticipated growth. As I said a few posts ago, I am fighting irrational greed and have a finger hovering over the sell button.


If I believe my own 2/3 chance of coming good, 1/3 chance of falling over, then I agree with you Arbitrage. At 50c HNZ would be a buy. You assume that if the share price suddenly heads south there will be buyers for your stake. As long as your holding is not too large, in relation to your overall wealth protection, then you will probably be right. Of course different shareholders have different risk profiles and that can influence what is 'right ' for 'the average shareholder' to do. It sounds like you have your head screwed on over this. I wish you well.

SNOOPY

[Arbitrage]

Sorry Belg, your earlier cryptic comments made you sound like you missed the buying opportunities. Well done.

[percy]

I see HNZ on a great growth path of 15 to 20% over the next 3 to 5 years .I see EPS of 10,15 and 20cents.I see PEs of 14.I see the SP trading at 2 or 3 times NTA.
So in 3/4 years time I see a SP of $2.50 to $3.paying big fat divies of 12cents or more.Buy today to enjoy 20% yields in a few years time.
History has shown us that a well run bank or finance company can be one of the fastest growing companies on the sharemarket.
Jeff Greenslade has laid the foundations for a great company.Ticked all the boxes.We are "very well positioned" to reap the full financial benefits that will be generated.

[Master98]

So in 3/4 years time I see a SP of $2.50 to $3.paying big fat divies of 12cents or more.Buy today to enjoy 20% yields in a few years time.

I sold most of my 45c shares today, only leave a few for that day you described. Finger Cross.

[percy]

Thought everyone would post I am mad.!!! But Kerr did not organise the recap of PGC to put Marac into Heartland ,for it to do charity work.The idea was to have Marac as a bank,so it would trade on higher multiplies.Kerr could have just recapped Marac and traded on.So why all the work putting Heartland together? Because there is money to be made.I figure big money.!!!! And the ground work is complete.[well just about]
belgarion.With the passage of time I think your pyramid will generate huge wealth for you.!!!!

[SCOTTY]

Thought everyone would post I am mad.!!! But Kerr did not organise the recap of PGC to put Marac into Heartland ,for it to do charity work.The idea was to have Marac as a bank,so it would trade on higher multiplies.Kerr could have just recapped Marac and traded on.So why all the work putting Heartland together? Because there is money to be made.I figure big money.!!!! And the ground work is complete.[well just about]
belgarion.With the passage of time I think your pyramid will generate huge wealth for you.!!!!

I like the cut of your gib Percy - I agree with you and have been buying as funds permitted. Regretfully ran out of $$ @ 53c. Very surprised that they went as low as they did - not complaining though.

Keep your crystal ball polished!!

Cheers

[Snoopy]

Jeff Greenslade has laid the foundations for a great company.Ticked all the boxes.We are "very well positioned" to reap the full financial benefits that will be generated.


I guess the gearing ratio would be one important numerical foundation of a company. So how does HNZ stack up?

-------------

Criterion 3/ Gearing Ratio (Total non-risk share liabilities to total non risk tangible assets) < 90%

Once again we look at p12 ('Interim Statements of Financial Position') where we can find the underlying debt of the company: $34,808,000.

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:

$2,380.54m - ($2,075.21m +$58.08m + $24.31) = $222.94m

By contrast the Vehicles on lease should be readily saleable so for this exercise I would count those as non-risk assets.

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

$222.94m - $21.98m = $200.96m

Now we have the information needed to calculate the information asked for:

$34.8m/$200.96m= 17.3% < 90%

Result: PASS TEST

-------

So perhaps Jeff Greenslade is right?

SNOOPY

[Snoopy]

So perhaps Jeff Greenslade is right?


I have had a conceptual problem with this question for a while, so this might be the time to lay the cards I have on the table, using Heartland as an example.

Criterion 3 shows that Heartland's core assets: offices staff and the tools they need to do their job, are quite conservatively financed with plenty of capital.

Criterion 5 shows that in relation to the business and home loans outstanding on the books, Heartland is if anything quite short of capital.

So, does Heartland have adequate capital or not?

SNOOPY

[Balance]

Anyone else picked up on rumor that an overseas bank is looking to JV with HNZ?

[percy]

I have had a conceptual problem with this question for a while, so this might be the time to lay the cards I have on the table, using Heartland as an example.

Criterion 3 shows that Heartland's core assets: offices staff and the tools they need to do their job, are quite conservatively financed with plenty of capital.

Criterion 5 shows that in relation to the business and home loans outstanding on the books, Heartland is if anything quite short of capital.

So, does Heartland have adequate capital or not?

SNOOPY

In the announcement dated 14/3/12 they state HNZ's equity ratio is 13.5% compared with regulatory requirement 9.58% so they have room to grow their book.

[percy]

Anyone else picked up on rumor that an overseas bank is looking to JV with HNZ?

At one meeting I spoke to G.Kerr and he spoke of looking for a 25% return on equity,so am not surprised an overseas bank would like a piece of the action.

[Snoopy]

In the announcement dated 14/3/12 they state HNZ's equity ratio is 13.5% compared with regulatory requirement 9.58% so they have room to grow their book.


Define 'Equity Ratio' in this case Percy. How is that 13.5% figure calculated?

SNOOPY

[Snoopy]

In the announcement dated 14/3/12 they state HNZ's equity ratio is 13.5% compared with regulatory requirement 9.58% so they have room to grow their book.

What happens if Heartland increase their lending right up to the limit of their 9.58% regulatory requirement? Then a single loan defaults and they have to write off some equity. Does the reserve bank then tip Heartland into receivership?

SNOOPY

[Snoopy]

So, does Heartland have adequate capital or not?


Here is my thought experiment answer.

Suppose Heartland were to sack all of their staff and move out of all their premises. To replace everyone a single 'super executive' would be hired. ''Superexec" would possess the knowledge to perform every company task, no matter how complex or menial. "Superexec" could also snap her fingers and stop time. That would prove a handy asset because it would then be possible for a single person to complete every task, because from the perspective of everyone else she would have infinite time available to run the company. Concommitant expenses would be minimal because she would be able to run the entire company from a computer on her kitchen table.

This example would be the lowest cost of capital way to run Heartland: a single salaried employee and a laptop. I cannot see why the Reserve Bank would force Heartland in this situation to raise the money to buy an office building and some furniture, simply because it deemed a single laptop to be inadequate capital for a bank to run on.

What difference does the amount of operational capital a company has on its books make to the mechanics of running a banking business? I would say no difference.

If every customer paid their debenture back on time, no debentures were redeemed early and the lending periods perfectly matched the borrowing periods a perfect finance company would need no lending capital of its own capital at all.

Surely what the reserve bank is after is enough capital to cover the odd loan going bad? And this has nothing whatever to do with the number of Office blocks that Heartland operates from!

SNOOPY

[percy]

Define 'Equity Ratio' in this case Percy. How is that 13.5% figure calculated?

SNOOPY

Ring the company.

[percy]

What happens if Heartland increase their lending right up to the limit of their 9.58% regulatory requirement? Then a single loan defaults and they have to write off some equity. Does the reserve bank then tip Heartland into receivership?

SNOOPY

No as with any other bank they would have to raise extra capital.
Are you coming down to the sharetaders' meeting? I am on my way and will buy you a beer when you arrive.

[percy]

Here is my though experiment answer.

Suppose Heartland were to sack all of their staff and move out of all their premises. To replace everyone a single 'super executive' would be hired. ''Superexec" would possess the knowledge to perform every company task, no matter how complex or menial. "Superexec" could also snap her fingers and stop time. That would prove a handy asset because it would then be possible for a single person to complete every task, because from the perspective of everyone else she would have infinite time available to run the company. Concommitant expenses would be minimal because she would be able to run the entire company from a computer on her kitchen table.

This example would be the lowest cost of capital way to run Heartland: a single salaried employee and a laptop. I cannot see why the Reserve Bank would force Heartland in this situation to raise the money to buy an office building and some furniture, simply because it deemed a single laptop to be inadequate capital for a bank to run on.

What difference does the amount of operational capital a company has on its books make to the mechanics of running a banking business? I would say no difference.

If every customer paid their debenture back on time, no debentures were redeemed early and the lending periods perfectly matched the borrowing periods a perfect finance company would need no lending capital of its own capital at all.

Surely what the reserve bank is after is enough capital to cover the odd loan going bad? And this has nothing whatever to do with the number of Office blocks that Heartland operates from!

SNOOPY

That is why the ratio is 9.58%.

[Snoopy]

That is why the ratio is 9.58%.

9.58% may satisfy the Reserve Bank Percy, but it may not satisfy the banking syndicate that is behind funding the business!

--------

Criterion 5/ Minimum Equity Contribution:
Tier 1 Risk Share Lending (basic equity capital and disclosed reserves) > 20%,
Tier 2 Risk share lending (this applies to undisclosed debts, and provisions against bad debts) > 30%.

--------

SNOOPY

[Snoopy]

Snoopy wrote:
"Define 'Equity Ratio' in this case Percy. How is that 13.5% figure calculated?"

Ring the company.


The objective of this exercise is to try and get you to think for yourself Percy. Ringing the company will only get you the answer that they want you to hear. In its simplest terms 'Equity Ratio' is only one number divided by another. Your challenge (or anyone else who takes it up) is to go to the last released interim report and calculate it.

Because the date of that report is 31st December 2011 not 14th March 2012 it is unlikely to be 13.5% though, even if that figure is likely tpo be 'ballpark correct'.

SNOOPY

[percy]

The objective of this exercise is to try and get you to think for yourself Percy. Ringing the company will only get you the answer that they want you to hear. In its simplest terms 'Equity Ratio' is only one number divided by another. Your challenge (or anyone else who takes it up) is to go to the last released interim report and calculate it.

Because the date of that report is 31st December 2011 not 14th March 2012 it is unlikely to be 13.5% though, even if that figure is likely tpo be 'ballpark correct'.
SNOOPY
Should the Reserve Bank be happy to accept given equity ratio so am I."ballpark correct."Happy to accept that too.
PS Trackers enjoyed your beer.

[janner]

Belgarion and myself are just about the only ones to have HNZ in their picks for the competition..

Percy.. I can not see me waiting for 3/4 years for a .. HUGE return.. ( which will come IMO ).

I.. Like i think Belgarion .. Have been accummullating.. ( sp )..

Price has gone up.. Good percentage made.. Time to sell..

My thoughts .. not Belgarions..

[percy]

Belgarion and myself are just about the only ones to have HNZ in their picks for the competition..

Percy.. I can not see me waiting for 3/4 years for a .. HUGE return.. ( which will come IMO ).

I.. Like i think Belgarion .. Have been accummullating.. ( sp )..

Price has gone up.. Good percentage made.. Time to sell..

My thoughts .. not Belgarions..

I was recently alerted by a friend that HNZ was looking good on charts,and only needed volume to confirm this.I viewed charts of HNZ and added to my wife's and my own holding on 10/4/12 at 49cents.The recent SP run has confirmed the break out.Positve news from the company has also helped.Time to sell? I don't know,however I would warn against selling a share in an up trend.

[Marilyn Munroe]

Balance said;

"Anyone else picked up on rumor that an overseas bank is looking to JV with HNZ? "

It shouldnt be an Aussie European or American bank as thay are capital constrained.

The most likely source of a joint venture, if it exists, is someone recycling petrodollars or the Chinese seeking to convert the value of their US Treasuries before Zimbabwe Ben Bernanke prints them into oblivion.

Boop boop de do

Marilyn

[Kiwi]

Balance said;

"Anyone else picked up on rumor that an overseas bank is looking to JV with HNZ? "

It shouldnt be an Aussie European or American bank as thay are capital constrained.

The most likely source of a joint venture, if it exists, is someone recycling petrodollars or the Chinese seeking to convert the value of their US Treasuries before Zimbabwe Ben Bernanke prints them into oblivion.

Boop boop de do

Marilyn

I'm thinking Kiwi Bank, maybe?
From what I read they seem to be on a growth drive ?
If HNZ parntner up with an existing bank then I assume they wont need a banking licence.
Great day in Palmy Nth

[Under Surveillance]

I've heard the Union Bank of Israel and the Bank of Jerusalem could be involved. Something to do with laundering money the Saudis are putting up for the Israelis to cut off the head of the snake, Iran. The whisper is that the Isaelis called on Ben Shalom Bernanke for suggestions, and have gone along with a NZ bank only reluctantly, as NZ has been difficult over their spies.

[Marilyn Munroe]

Under Surveillance are you one of those splitists and counter-revolutionaries from the Judea Peoples Front?

Only us members of the Peoples Front of Judea are in the vanguard of the struggle for Judean freedom.

All together now;

Free Galilee, free Galilee, free Galilee!

Boop boop de do

Marilyn

[Snoopy]

Anyone else picked up on rumor that an overseas bank is looking to JV with HNZ?


From p2 of the Heartland HY2012 Interim Report.

"Our intention is to become the only fully New Zealand operated, controlled and managed banking group listed on the New Zealand Stock Exchange. All funding is derived locally and is also on-lent locally
providing support to New Zealand households, small-to-medium sized businesses and farms that form the backbone of the country 's economy."

Can anyone explain how a link up with an overseas bank will help fulfill
this vision?

SNOOPY

[Snoopy]

In the announcement dated 14/3/12 they state HNZ's equity ratio is 13.5% compared with regulatory requirement 9.58% so they have room to grow their book.


According to 'investorwords' (www.investorwords.com) the equity ratio is defined as:

=(Total Equity)/(Total Assets)

Using numbers from the Heartland HY2012 report dated 31-12-2012, page 11

= $360.2m/$2380.5m = 15.1%

The declaration by Heartland on 14/03/2012 of an equity ratio of 13.5% represents a significant deterioration in this statistic. This has to be a worry as if the deterioration keeps up like this hopes of becoming bank will be extinguished in about 18 months. Shareholders would need to budget for a substantial capital raising before then. No warning bells ringing yet Percy?

SNOOPY

[Under Surveillance]

The closest I get to Judean freedom is the desire never again to hear Hey Jude (you'll remember the Beatles, and might even have given one or two of them a Ticket To Ride?).

[percy]

According to 'investorwords' (www.investorwords.com) the equity ratio is defined as:

=(Total Equity)/(Total Assets)

Using numbers from the Heartland HY2012 report dated 31-12-2012, page 11

= $360.2m/$2380.5m = 15.1%

The declaration by Heartland on 14/03/2012 of an equity ratio of 13.5% represents a significant deterioration in this statistic. This has to be a worry as if the deterioration keeps up like this hopes of becoming bank will be extinguished in about 18 months. Shareholders would need to budget for a substantial capital raising before then. No warning bells ringing yet Percy?

SNOOPY

None at all.

[Snoopy]

2/ Liquidity buffer ratio (including bank lines) >10%

The hurdle setters don't specify, but I believe that this test is to provide an insight into how current liabilities are matched to current assets. It could be thought of as a 'stress test' on liquidity with a twelve-month time horizon.

From p12 (Interim Statements of Financial Position) we see HNZ has total borrowings of $1,985,551,000, made up principally of term deposits lodged with Heartland. Note 11 is meant to give a breakdown of these borrowings. Strangely there is no breakdown given of current and longer-term borrowings. Nevertheless Note 11 contains this tantalizing hint.

"On 2 August 2011, the Group entered an agreement with its securitisation facility provider to increase the MARAC ABCP Trust 1 securitisation facility by $100m to $300m, and to extend its maturity date to 8 August 2012."

This gives the impression of Heartland almost operating 'hand to mouth' with even this new banking syndicate agreement expiring within just a
year of being signed. To proceed further I can only assume that all funds deposited with Heartland, directly or indirectly (via securitisation) are 'current liabilities'.

This money has been on loaned to customers who want loans. These customers owe HNZ 'Finance Receivables' of $2,075,211,000. Again there is no breakdown as to what loans are current and longer term. Given:

1/ I understand 'liquidity' to be a balance between the maturity profile of current debenture holders VERSES
2/the loan periods associated with those on lent funds are unknown,

then my analysis comes to a full stop. Any ideas as to how to proceed from here, or even opinions on if I am on the right track, would be greatly appreciated.

Result: UNCERTAIN (due to lack of published loan data). But if almost all depositors have put their money with Heartland on a one year or less basis, then I am not encouraged.

SNOOPY

[Snoopy]

Thought everyone would post I am mad.!!! But Kerr did not organise the recap of PGC to put Marac into Heartland ,for it to do charity work.The idea was to have Marac as a bank,so it would trade on higher multiplies.Kerr could have just recapped Marac and traded on.So why all the work putting Heartland together? Because there is money to be made.I figure big money.!!!!



This is the same George Kerr that is so sure of the prospects of Heartland that he has recently sold all of his own shares in HNZ is it?

From
http://www.stuff.co.nz/business/opinion/6610871/For-a-non-bank-to-be-a-bank-it-must-be-whiter-than-white


------------

"Was PGC buying Kerr's shares, thus helping finance its own takeover?

No, said Mogridge. "There has been no buying from Mr Kerr," he told NBR through a spokesman last week.

Really?

NZX disclosures show Kerr's company Pyne Holdings had 7.7 per cent of Heartland last August, a holding it had sold down to 4.99 per cent by January 31. Thereafter no more public disclosures had to be made because the stake was below the 5 per cent threshold.

To find out what happened next, Chalkie checked the share register. On February 8, it showed PGC had yet to buy any more shares, and Pyne Holdings still had 19.3 million shares, or 4.98 per cent.

Pyne sold a few small chunks in the following days, but on February 27 it disposed of 19.1 million shares through broker First NZ Capital Securities. These were then transferred to a holding account at NZ Central Securities Depository.

---------

Still those warning bells aren't ringing Percy?

SNOOPY

[Under Surveillance]

According to 'investorwords' (www.investorwords.com (http://www.investorwords.com)) the equity ratio is defined as:

=(Total Equity)/(Total Assets)

Using numbers from the Heartland HY2012 report dated 31-12-2012, page 11

= $360.2m/$2380.5m = 15.1%

The declaration by Heartland on 14/03/2012 of an equity ratio of 13.5% represents a significant deterioration in this statistic. This has to be a worry as if the deterioration keeps up like this hopes of becoming bank will be extinguished in about 18 months. Shareholders would need to budget for a substantial capital raising before then. No warning bells ringing yet Percy?

SNOOPY

Your industry is commendable, Snoopy.
Somehow I think you're off beam here.
SBS Bank at 31 Dec 2011 had an equity ratio, according to your definition, of 213M/2,845M or 7.5%.
Percy should be pleased that HNZ eclipses at least one banking licence holder in this metric.

[Snoopy]

Your industry is commendable, Snoopy.
Somehow I think you're off beam here.
SBS Bank at 31 Dec 2011 had an equity ratio, according to your definition, of 213M/2,845M or 7.5%.
Percy should be pleased that HNZ eclipses at least one banking licence holder in this metric.


Well I could be wrong Under Surveillence. I am in the sights waiting to be shot down. But I don't think anyone has hit me with a straight between the eyes shot yet. It could be there is some different definition of 'equity ratio' that Heartland is using that is not in accordance with the 'investorwords' definition. But unless someone can point out what that is I will stick with what 'investorwords' says.

Your example above is interesting but doesn't disprove anything as it stands.

Apparently the Reserve bank requirement is for an equity ratio of 9.58%. But where has this figure come from? And why is it so precise to two decimal places? Perhaps in pre GFC days the figure was less? Maybe SBS bank qualifed as such when the hurdle was set at a lower level? I am interested if anyone can shed any light on these questions!

SNOOPY

[percy]

This is the same George Kerr that is so sure of the prospects of Heartland that he has recently sold all of his own shares in HNZ is it?

From
http://www.stuff.co.nz/business/opinion/6610871/For-a-non-bank-to-be-a-bank-it-must-be-whiter-than-white


------------

"Was PGC buying Kerr's shares, thus helping finance its own takeover?

No, said Mogridge. "There has been no buying from Mr Kerr," he told NBR through a spokesman last week.

Really?

NZX disclosures show Kerr's company Pyne Holdings had 7.7 per cent of Heartland last August, a holding it had sold down to 4.99 per cent by January 31. Thereafter no more public disclosures had to be made because the stake was below the 5 per cent threshold.

To find out what happened next, Chalkie checked the share register. On February 8, it showed PGC had yet to buy any more shares, and Pyne Holdings still had 19.3 million shares, or 4.98 per cent.

Pyne sold a few small chunks in the following days, but on February 27 it disposed of 19.1 million shares through broker First NZ Capital Securities. These were then transferred to a holding account at NZ Central Securities Depository.

---------

Still those warning bells aren't ringing Percy?

SNOOPY

None at all.

[percy]

Your industry is commendable, Snoopy.
Somehow I think you're off beam here.
SBS Bank at 31 Dec 2011 had an equity ratio, according to your definition, of 213M/2,845M or 7.5%.
Percy should be pleased that HNZ eclipses at least one banking licence holder in this metric.

In fact eclipses it by over 40%.

[percy]

Hopefully we may have some correct answers to so many questions shortly, as I rang the company and advised them of our discussion here on sharetrader.

[Snoopy]

In fact eclipses it by over 40%.

Yes, but I need to remind readers of this forum of one crucial point. We are trying to determine what a suitable equity ratio for HNZ is. All the figures being bandied about (bar my suggested 20% minimum) are assuming Heartland is a bank. But Heartland is not a bank. Closing your eyes and wishing yourself to be a bank does not cut it with me.

SNOOPY

[Snoopy]

2/ Liquidity buffer ratio (including bank lines) >10%

<snip>

Result: UNCERTAIN (due to lack of published loan data). But if almost all depositors have put their money with Heartland on a one year or less basis, then I am not encouraged.


Just in case anyone gets the wrong idea about my comment. I am not suggesting that HNZ is doing anything improper by not publishing a maturity profile of their debentures. I am sure that the accounts are correct as published and meet all accounting standards.

What I am suggesting is that the NZ finance sector has gone through such a rough time that publishing the bare bones legal requirements on what the accounting standards set out may not be enough engender investor confidence. And this is an issue that all finance sector companies must face.

SNOOPY

[Master98]

What I am suggesting is that the NZ finance sector has gone through such a rough time that publishing the bare bones legal requiements on what the law requires may not be enough engender investor confidence. And this is an issue that all finance sector companies must face.

SNOOPY

make sense.

[percy]

Hopefully we may have some correct answers to so many questions shortly, as I rang the company and advised them of our discussion here on sharetrader.

CFO of Heartland,Craig Stephen returned my call.He told me they don't reply to blogs such as sharetrader.Told him I was disappointed to hear that.However, he said if any sharetraders had any questions he would be pleased to answer them .His phone number is [09] 9279219.

[percy]

Craig needs to get with the times ... ST is an active forum and not a blog. ;)

Please ring and tell him that.!!!!
I would have thought a financial institution who was looking for a banking licence would be the first company to help sharetraders ,by posting reguarly,and correcting any posters who made mistakes.
Not helpful at all.I did tell him I am a shareholder.

[kizame]

Arrogance!!! I think that is a reflection also of PGC management.
A company that wants to grow,needs management expertise,but also good shareholder/customer relations,they need to be humble imop.
They need to provide whatever clarity they can, so that shareholders get a good understanding of the financial workings,or just provide that info in the first place.
Smaks of"We are way to good to give you little people that sort of info" or"we don't really want you digging there".

[Jaa]

A bank also needs excellent IT systems, not being able to tell the difference between a blog and NZ's top share trading forum is not a good start!

[Snoopy]

It could be there is some different definition of 'equity ratio' that Heartland is using that is not in accordance with the 'investorwords' definition. But unless someone can point out what that is I will stick with what 'investorwords' says.


Had another look at the Heartland FY2012 interim report. Found this comment on page 2

"Total equity was $360 million at 31 December 2011 compared to $296 million at 30 June 2011, which was an equity ratio of 15% to total assets (up from 14% at 30 June 2011)."

This shows my calculated figure for the equity ratio as at 31-12-2011 was absolutely correct. It also shows that the HNZ declared equity ratio on 14/03/2012 of 13.5% has declined to below what it was on 30-06-2011. And all this has happened in a sub three month period when the great wash out from the wind up of the government guarantee was thought (at least by me) to be over!

SNOOPY

[kizame]

Am ignorant as to the latest report,but could this drop in equity be an increase in lending?

[Snoopy]

Am ignorant as to the latest report,


No need to be

http://www.heartland.co.nz/_upload/reports/pdfs/4243%20HNZ%20Interim%20Financials_LR.pdf



but could this drop in equity be an increase in lending?


Just be be clear HNZ's equity has not gone down, it has in fact gone up. The 'equity ratio' has gone down. Since assets include finance receivables your hunch is probably correct. Yes HNZ have more equity but if they have concommitant new lending going out proportionately faster than their own equity is increasing then that would weaken the equity ratio.

I think you are probably onto it kizame.

SNOOPY

[Snoopy]

I have been covering these hurdles out of my original order to better match the flow of this thread. But there is one more bankers test that HNZ must face.

4/ Single new customer group exposure (as a percentage of shareholder funds) <10%

This criterion may have lead to the downfall of PGGW Finance (PGF) as an independent entity. As at 31/12/2010 PGG had $126.7m of loans in the dairy sector from a total loan portfolio of $491.8m. Total Crafer loans from all institutions are reputedly $200m. PGF claim they are a 'junior partner' in the banking syndicate. But if the PGF exposure was say $40m, then as other loans were wound back those
Crafer loan interest is capitalized, Crafer farms might approach 10% of all PGF loans.

I can't find any information in the Heartland HY2012 interim report on customer concentration. Since one of the objectives of merging all the entities that formed Heartland together was to reduce the concentration of risk, I don't think it likely that a single customer has 10% or more of the balance of the loans outstanding.

The HNZ interim report does say that post merger, 40% of loans are now in the Canterbury region (note 11). That might mean regional volatility need be considered in future.

Result: PROBABLE PASS (interim report has insufficient information)

[percy]

According to 'investorwords' (www.investorwords.com) the equity ratio is defined as:

=(Total Equity)/(Total Assets)

Using numbers from the Heartland HY2012 report dated 31-12-2012, page 11

= $360.2m/$2380.5m = 15.1%

The declaration by Heartland on 14/03/2012 of an equity ratio of 13.5% represents a significant deterioration in this statistic. This has to be a worry as if the deterioration keeps up like this hopes of becoming bank will be extinguished in about 18 months. Shareholders would need to budget for a substantial capital raising before then. No warning bells ringing yet Percy?

SNOOPY

Should Heartland increase lending by 57% or 1370mil your figures would be 360.2m/3750.5m =9.6%.Still within Reserve bank equity ratio.
No allowance has been made for increasing profits which would increase total equity.

[percy]

Out of interest I looked at Westpac on yahoo finance.Their return on equity is 16.82%.Should HNZ achieve this HNZ's profit would be over $60mil.
WBC equity was a low 6.176% 381,890,000/618,277,000.
ANZ bank.ROE 14.88% equity 6.247% 33,220,000/531,739,000
CBA bank.ROE 18.81% equity 5.5% 35,570,000/646,330,000

[Lizard]

1/ EBIT to interest expense > 1.2

EBIT is not listed as that, so I have had to improvise. On p10 (Interim
Statements of Comprehensive Income) we find the 'Interest Income'
figure and I have subtracted from that the selling and administration
costs also on p10.

EBIT = $101.770m-$35.691m= $66.079m

Interest expense is listed as $62.64m.

So (EBIT)/(Interest Expense)= ($66.079)/($62.64)= 1.05 < 1.2

Result: FAIL TEST

SNOOPY

Hi Snoopy,

Only just getting the chance to read through your analysis - possibly someone else has commented, as yet to finish reading. My calc for the EBIT ratio would be 1.08. However, we knew they would not be running at top return in first half as they still had a considerable quantity of debentures that they were having to allow for possible repayment on close to end of period - that meant holding lots of cash while also paying interest to the debenture holders. Once the last of the guarantee debentures had expired, they would either not have the interest payments to make on them OR they would have been renewed and HNZ could then reduce the amount of cash on hand through lending once they no longer needed to allow for a bulge of maturing deposits.

As expected, the third quarter is said to have lower funding costs and it could be expected that this would be maintainable. Therefore, we could probably comfortably multiply the 3rd quarter NPAT of $5.3m by 4x, divide by 0.7 to allow for tax and add to funding costs (doubling first half funding costs of $62m). That would give an EBIT ratio of 1.24 by my calc - and given the funding costs have likely reduced somewhat, conceivably higher.

[Lizard]

9.58% may satisfy the Reserve Bank Percy, but it may not satisfy the banking syndicate that is behind funding the business!

--------

Criterion 5/ Minimum Equity Contribution:
Tier 1 Risk Share Lending (basic equity capital and disclosed reserves) > 20%,
Tier 2 Risk share lending (this applies to undisclosed debts, and provisions against bad debts) > 30%.

--------

SNOOPY

I don't think you should get too hung up on these figures right now Snoopy - at the time that those covenants were put in place, we know there was a material level of impairment going on in regards to loans and I am guessing these equity covenants were set to cover.

For instance, by comparison, Kiwibank has $11,500m of loans and $608m of equity, so ratio there was only 5.2% (Kiwibank could probably do with more equity capital though in my not-so-expert opinion).

I think Percy is correct - in the current environment with the bulge of impairments dealt with and now at more stable levels, the Reserve Bank regulatory requirement is a satisfactory test. And while they are making a profit, the equity ratio should only improve, at least until they start to pay dividends.

[Lizard]

According to 'investorwords' (www.investorwords.com) the equity ratio is defined as:

=(Total Equity)/(Total Assets)

Using numbers from the Heartland HY2012 report dated 31-12-2012, page 11

= $360.2m/$2380.5m = 15.1%

The declaration by Heartland on 14/03/2012 of an equity ratio of 13.5% represents a significant deterioration in this statistic. This has to be a worry as if the deterioration keeps up like this hopes of becoming bank will be extinguished in about 18 months. Shareholders would need to budget for a substantial capital raising before then. No warning bells ringing yet Percy?

SNOOPY

Actually Snoopy, Percy may have just read the wrong column on the table and given you the Jan 2011 equity ratio, as the table on page 29 of the Mar 14 presentation says 15.1% equity in Dec 11 up from 13.5% in Jan 11.

They would have to have significant impairments or abnormals of some description for the equity ratio to have fallen, not the operating profits they are indicating.

[Lizard]

2/ Liquidity buffer ratio (including bank lines) >10%

The hurdle setters don't specify, but I believe that this test is to provide an insight into how current liabilities are matched to current assets. It could be thought of as a 'stress test' on liquidity with a twelve-month time horizon.

From p12 (Interim Statements of Financial Position) we see HNZ has total borrowings of $1,985,551,000, made up principally of term deposits lodged with Heartland. Note 11 is meant to give a breakdown of these borrowings. Strangely there is no breakdown given of current and longer-term borrowings. Nevertheless Note 11 contains this tantalizing hint.

"On 2 August 2011, the Group entered an agreement with its securitisation facility provider to increase the MARAC ABCP Trust 1 securitisation facility by $100m to $300m, and to extend its maturity date to 8 August 2012."

This gives the impression of Heartland almost operating 'hand to mouth' with even this new banking syndicate agreement expiring just a
year of being signed. To proceed further I can only assume that all funds deposited with Heartland, directly or indirectly (via securitisation) are 'current liabilities'.

This money has been on loaned to customers who want loans. These customers owe HNZ 'Finance Receivables' of $2,075,211,000. Again there is no breakdown as to what loans are current and longer term. Given:

1/ I understand 'liquidity' to be a balance between the maturity profile of current debenture holders VERSES
2/the loan periods associated with those on lent funds are unknown,

then my analysis comes to a full stop. Any ideas as to how to proceed from here, or even opinions on if I am on the right track, would be greatly appreciated.

Result: UNCERTAIN (due to lack of published loan data). But if almost all depositors have put their money with Heartland on a one year or less basis, then I am not encouraged.

SNOOPY

You are probably best to go back to the Jun 11 Annual Report and look at the liquidity risk tables on page 49 and 50. There are two sets of tables - the first is based on "contractual maturity" and the second on "expected maturity" (i.e. taking into account expected rates of roll-over of deposits. Not surprisingly, there was a very high rate of maturity in the 0-6 month category as investors tended to take advantage of the guarantee for as long as possible.

Gaze at these tables for long enough and it becomes clear that the securitisation measures were mostly just to allow space in case an unexpectedly large proportion (i.e. nearly all of the investors with maturities prior to the end of the guarantee) turned out to be only hanging in until expiry (after all, at that stage they could be perceived as safer than the bank, but with better rates!). I think from memory that later announcements have indicated that the reinvestment rate actually held up solidly and new investments rose, so the extra liquidity buffer provided by the securitised facility was probably not necessary. Having said that, in financial services, safety begets investor confidence and investor confidence begets safety. So there was no point risking any false rumours tipping things over at the last minute.

[Lizard]

I have been covering these hurdles out of my original order to better match the flow of this thread. But there is one more bankers test that HNZ must face.

4/ Single new customer group exposure (as a percentage of shareholder funds) <10%

This criterion may have lead to the downfall of PGGW Finance (PGF) as an independent entity. As at 31/12/2010 PGG had $126.7m of loans in the dairy sector from a total loan portfolio of $491.8m. Total Crafer loans from all institutions are reputedly $200m. PGF claim they are a 'junior partner' in the banking syndicate. But if the PGF exposure was say $40m, then as other loans were wound back those
Crafer loan interest is capitalized, Crafer farms might approach 10% of all PGF loans.

I can't find any information in the Heartland HY2012 interim report on customer concentration. Since one of the objectives of merging all the entities that formed Heartland together was to reduce the concentration of risk, I don't think it likely that a single customer has 10% or more of the balance of the loans outstanding.

The HNZ interim report does say that post merger, 40% of loans are now in the Canterbury region (note 11). That might mean regional volatility need be considered in future.

Result: PROBABLE PASS (interim report has insufficient information)

Possibly there is some indication in the 14 March presenation - the trust deed limit is 15% of consolidated group capital to one customer. From the last annual report, the only concentrations of credit risk look to be the concentrations of cash held at other banks if I'm reading the note at bottom of page 46 correctly.

[percy]

Possibly there is some indication in the 14 March presenation - the trust deed limit is 15% of consolidated group capital to one customer. From the last annual report, the only concentrations of credit risk look to be the concentrations of cash held at other banks if I'm reading the note at bottom of page 46 correctly.

Given that the equity ratio of banks being so much lower than HNZ it may in fact have been a real credit risk.!!!!!!! lol.

[forest]

Good thread. Good to see a few sharetraders looking into the finer details. I asked and just received hard copies of HNZ financials. With this, came a bussiness card of HNZ investment relation manager (IRM), Ben Searle.
Maybe the job of IRM is more to relate to term deposit investers than to share holders. Even so I would like to think that Ben Searle has a commitment to answer share holders questions.
Below are Bens contact details, please share anything of interest,
ph (09) 9279210, F (09) 9279321 and E ben.searle@heartland.co.nz

[janner]

I have total agreement with you forest..

Also with Belgarions ..

" Craig needs to get with the times ... ST is an active forum and not a blog. "..

With quality members like Lizard.. and many, many, many, others.. We have influence !!!....

Front up and face the questions... Or on your own head be it !!..

[janner]

Influence example !!..

How many PGC shares passed hands this week ??..

[percy]

I think Percy is correct - in the current environment with the bulge of impairments dealt with and now at more stable levels, the Reserve Bank regulatory requirement is a satisfactory test. And while they are making a profit, the equity ratio should only improve, at least until they start to pay dividends.
It would be very unlikely for HNZ to pay out all profits in dividends,so equity ratio will improve.$20mil profit would mean over $200mil of extra lending is possible, if no dividend were paid. Easy to see how banks can grow earnings/profits very quickly.The next few months should see further gains,and we all may be surprised with an early dividend.Certainly the equity ratio of HNZ would be the envy of many a bank.For us shareholder it is a comfort to know we have invested in a company that has built a solid platform for future growth.Looks as though HNZ could increase lending by 65% without putting too much pressure on equity ratio.Don't think any other bank could do that without requiring more capital from shareholders.

[Snoopy]

Out of interest I looked at Westpac on yahoo finance.Their return on equity is 16.82%.Should HNZ achieve this HNZ's profit would be over $60mil.
WBC equity was a low 6.176% 381,890,000/618,277,000.
ANZ bank.ROE 14.88% equity 6.247% 33,220,000/531,739,000
CBA bank.ROE 18.81% equity 5.5% 35,570,000/646,330,000


Your thinking has got me thinking again Percy. I have to admit the equity ratio of Heartland looks good compared to all of those bank statistics you have rolled out. The question in my mind is, what is the difference in Reserve Bank thinking on banks vs NBDTS (Non bank deposit takers) ?

SNOOPY

[Snoopy]

Hi Snoopy,

Only just getting the chance to read through your analysis - possibly someone else has commented, as yet to finish reading. My calc for the EBIT ratio would be 1.08. However, we knew they would not be running at top return in first half as they still had a considerable quantity of debentures that they were having to allow for possible repayment on close to end of period - that meant holding lots of cash while also paying interest to the debenture holders. Once the last of the guarantee debentures had expired, they would either not have the interest payments to make on them OR they would have been renewed and HNZ could then reduce the amount of cash on hand through lending once they no longer needed to allow for a bulge of maturing deposits.

As expected, the third quarter is said to have lower funding costs and it could be expected that this would be maintainable. Therefore, we could probably comfortably multiply the 3rd quarter NPAT of $5.3m by 4x, divide by 0.7 to allow for tax and add to funding costs (doubling first half funding costs of $62m). That would give an EBIT ratio of 1.24 by my calc - and given the funding costs have likely reduced somewhat, conceivably higher.

Apologies if I am paraphrasing your retort to my Heartland hurdle test too briefly Lizard. But:

1/ HNZ EBIT at 31-12-2011 is in a transitional state. Underlying EBIT/ Interest Expense is already around 1.24 > 1.2, so EBIT/ Interest Expense hurdle is cleared. I accept that.
2/ The securitisation of loans in August 2011 was a way to bring more cash onto the balance sheet in case of a wall of debenture redemption after the government guarantee expired. A good point which leads me to a QUESTION:

What happens come August 2012? Do Heartland buy their own loans back, effectively swapping equity for debt but boosting their loan book? Or do they try to renegotiate with the banks on those securitized loans?

3/ The 20% minimum equity contribution hurdle was based on PGF being a distressed company and is too conservative. Not sure I can agree with that

In the PGW FY2010 share issue prospectus, PGF was snapshotted like this:

"In the first four months of FY2010, PGF's net interest margin increased (+20.6%) while EBITDA declined (-10.5%) relative to the previously comparable period. This was due to the cost of the Crown Retail Deposit Scheme and higher bad and additional doubtful debt provisioning. From 30-06-2009 to 31-10-2009 the loan book remained largely static and as at 31-10-2009 was $565m and assets under management grew 0.5% to $639m driven by natural growth from existing credit commitments. (Equity at 30-06-2009 was $66.82m). Over the same period the deposit book reduced 7.5% to $281m, driven by reduced levels of new deposits, while average reinvestment rate of existing deposits were maintained at 76% over the same period which is comparable with historical averages."

I would argue that PGF itself was not distressed at the point the prospectus was compiled. And it was even less distressed when following the PGW cash issue, PGF had a new total of $100.38m of shareholder equity (as at 30-06-2010). I would argue that it was the cash bolstered post capital raising PGF that the banking syndicate had in mind when drawing up their financial hurdles.

SNOOPY

[Snoopy]

I now move to the PGW documentation relating to the sale of PGF which was discussed at the PGW special general meeting of FY2011

Northington Partners suggested that investors should look for a few more signs of improvement. One of these is a reduction in bad debts. In the HY2012 commentary we learn:

"New impaired and past due loans over 90 days were $88m which was 4.2% of net finance receivables as at 31st December 2011. This is down from $101m and 5.0% of debts as at 30th June 2011."

Bad debts were at least going in the right direction.

SNOOPY

[Snoopy]

Northington asks us to look out for the reinvestment rates of existing deposits. There is no direct information in HNZ HY2012 about that. However, if we look in Note 11 we can see that total deposits from NZ total $1,664.9m as at 31st December 2011, up from $1,556.6m as at 30th June 2011. Overall Heartland has more money on deposit at the end of the half-year than six month previously, and that has to be good.

But didn't the merger with PGG Finance occur after the 30th June 2011 balance date? I am not sure what the value of PGGW Finance term deposits were transferred over. But if it was less than $108.3m, then pre merger Heartland went backwards over the last reported half year. On this evidence, I think it is too early to say that Heartland has the confidence of the retail deposit market.

A quote from p2 of the Heartland HY2012 commentary backs this up:

"Cash and cash equivalents reduced to $120m from $267m at 30th June 2011 as excess liquidity held in the lead up to the expiry of the crown guarantee was utilized as planned."

Translation: Term deposit holders have pulled a net $147m out of the company in the last six months.

SNOOPY

[percy]

Your thinking has got me thinking again Percy. I have to admit the equity ratio of Heartland looks good compared to all of those bank statistics you have rolled out. The question in my mind is, what is the difference in Reserve Bank thinking on banks vs NBDTS (Non bank deposit takers) ?

SNOOPY

I wondered that myself.HNZ equity ratio is so much greater than the banks.Around about 2.5 x the banks ?!
I can understand the ROE figures,but having banks with 5.5% equity is a real worry.I am thinking of all the banks exposure to property in both Australia and NZ.I believe Australian property prices are under pressure,so it would not take too much for the banks to take some pretty big hits.Their 5'5% equity could disappear very quickly.We have been there before,I think it was 1992 when Westpac was under threat from Kerry Packer.Westpac came back to shareholders for more capital.This course of action is open to all listed finnacial instituations.In fact HNZ is the result of PGC having to recap after losing their shareholders funds in property.From memory Marac had an equity ratio of over 16% but ofcourse had 25 to 30% of total lending in property.
Back to the Reserve Bank's thinking.I suspect dark thoughts.!!!!!!

[percy]

LOL - which is why my ASX Share competition selections are all for banking institutions ... I'm aiming to finish last of course which is just as hard as trying to finish first (although I'm probably the only person trying to do this?) I'm pleased to say that I'm currently only a few places off the bottom at present. :)

LOL,I think you are "well positioned" for the down turn.!!!!!

[janner]

Your not to far of of the top on the NZX Belg.. !!..

[winner69]

I have total agreement with you forest..

Also with Belgarions ..

" Craig needs to get with the times ... ST is an active forum and not a blog. "..

With quality members like Lizard.. and many, many, many, others.. We have influence !!!....

Front up and face the questions... Or on your own head be it !!..

Guarantee that Craig et al keep a watching brief on ST and what punters are saying

He probabaly having a good laugh and thinks we are no hopers anyway .... thats what happens to good guys when they get sucked into the corporate way of doing things .... the more passionate they get about the company the less they listen to others who have an alternative view

I shall send my sincerest apologies to HNZ for some of the things I have said .... and implore Xerof and some others to do the same ..... Prob this Craig and a few others got a pissed off hearing some of the things we say .... heck we are only ignorant nobodys and wouldn't have a clue about what we are talking about

[percy]

Guarantee that Craig et al keep a watching brief on ST and what punters are saying

He probabaly having a good laugh and thinks we are no hopers anyway .... thats what happens to good guys when they get sucked into the corporate way of doing things .... the more passionate they get about the company the less they listen to others who have an alternative view

I shall send my sincerest apologies to HNZ for some of the things I have said .... and implore Xerof and some others to do the same ..... Prob this Craig and a few others got a pissed off hearing some of the things we say .... heck we are only ignorant nobodys and wouldn't have a clue about what we are talking about

Agree with you 100% Winner69.All the more reason for Craig to supply guidance from "above".

[Xerof]

Speak for yourself w69...I shall continue to challenge the spin coming out of this FINANCE COMPANY as I see fit.
:ohmy:

Still of the view that Kerr remains an embarassment to HNZ, and will be a stumbling block to them being granted a banking license.

BTW, when was Craig appointed CFO percy? Last I saw was an announcement saying a recruitment company was to be appointed to fill the vacancy. Perhaps you mean 'acting CFO'?

[K1W1G0LD]

Craig Stephen , toe's the company line, you'll get nothing sensitive or revealing from him. His title when I contacted him a few weeks ago was "Group treasurer" he may have had a promotion since then??.

[percy]

Craig Stephen , toe's the company line, you'll get nothing sensitive or revealing from him. His title when I contacted him a few weeks ago was "Group treasurer" he may have had a promotion since then??.

I noticed when I looked up HNZ web page to check the spelling of Stephen he was listed as "Group Treasurer",so error may be mine.
Although against posting here,I found him easy to speak to.He made a genuine offer to discuss HNZ with anyone who cared to phone him.He then gave me his phone number,which I posted.

[percy]

[QUOTE=Xerof;372971]


Still of the view that Kerr remains an embarassment to HNZ, and will be a stumbling block to them being granted a banking license.

Hope not.Any loose talk/actions by Kerr will only result in him shooting himself in the foot.

[winner69]

Speak for yourself w69...I shall continue to challenge the spin coming out of this FINANCE COMPANY as I see fit.
:ohmy:

Still of the view that Kerr remains an embarassment to HNZ, and will be a stumbling block to them being granted a banking license.

BTW, when was Craig appointed CFO percy? Last I saw was an announcement saying a recruitment company was to be appointed to fill the vacancy. Perhaps you mean 'acting CFO'?

Of course it was toungue in cheek .... like you Xerof I would never apologise for saying what I think .... and I take heart that it might hurt those who passionately 'toe the company line' as percy puts it

But then again their eyes we are ignorant nobodys anyway

Love the way you say FINANCE COMPANY

[percy]

Your thinking has got me thinking again Percy. I have to admit the equity ratio of Heartland looks good compared to all of those bank statistics you have rolled out. The question in my mind is, what is the difference in Reserve Bank thinking on banks vs NBDTS (Non bank deposit takers) ?

SNOOPY
In todays "The Press" NZ Post [kiwi bank] chairman Michael Cullen said "NZ Post had 'some small capacity" to supply more capital,Kiwi-bank's needs-which included new capital levels required by the Reserve Bank-could not be met by NZ Post alone."
So would appear to me the day of banks having 5.5% equity ratios may becoming to an end.

[Snoopy]

Still of the view that Kerr remains an embarassment to HNZ, and will be a stumbling block to them being granted a banking licence.


But Xerof, Kerr has sold all of shares in HNZ. Granted there is still an attachment there because Kerr has a large stake in PGC which holds HNZ shares. But whatever anyone thinks of Kerr one thing he is not is stupid. Do you suppose that Kerr has realised that HNZ is unlikely to get a banking licence when he is so closely associated with the company? And that pulling back one step behind the PGC mask is a way to overcome this?

SNOOPY

[winner69]

But Xerof, Kerr has sold all of shares in HNZ. Granted there is still an attachment there because Kerr has a large stake in PGC which holds HNZ shares. But whatever anyone thinks of Kerr one thing he is not is stupid. Do you suppose that Kerr has realised that HNZ is unlikely to get a banking licence when he is so closely associated with the company? And that pulling back one step behind the PGC mask is a way to overcome this?

SNOOPY

But with todays announcement from PGC (maybe it was boardroom turmoil) one would have to say that mask has become very transparent

[Marilyn Munroe]

What is the current relationship between Heartland, Pyne Gould Corp, and Torchlight.

Given the current PGC turmoil with the auditor leaving, it is hard to imagine that the Reserve Bank will look favourably on issuing a banking licence if there is a relationship between these parties.

Boop boop de do

Marilyn

[Snoopy]

Only just getting the chance to read through your analysis - possibly someone else has commented, as yet to finish reading. My calc for the EBIT ratio would be 1.08. However, we knew they would not be running at top return in first half as they still had a considerable quantity of debentures that they were having to allow for possible repayment on close to end of period - that meant holding lots of cash while also paying interest to the debenture holders. Once the last of the guarantee debentures had expired, they would either not have the interest payments to make on them OR they would have been renewed and HNZ could then reduce the amount of cash on hand through lending once they no longer needed to allow for a bulge of maturing deposits.

As expected, the third quarter is said to have lower funding costs and it could be expected that this would be maintainable. Therefore, we could probably comfortably multiply the 3rd quarter NPAT of $5.3m by 4x, divide by 0.7 to allow for tax and add to funding costs (doubling first half funding costs of $62m). That would give an EBIT ratio of 1.24 by my calc - and given the funding costs have likely reduced somewhat, conceivably higher.


Hi Lizard, just going over your calculation again.

If I annualize 3rd quarterly profits while annualizing first half funding costs, while assuming a 30% income tax rate, this gives an "EBIT to interest expense ratio" of:

[4($5.3m/0.7) + 2x$62m]/ 2($62m) =1.24

I agree with you on the mathematics. However the HNZ third quarter results are a bit lacking in detail for me on exactly what is meant by 'operating profit', and whether this is truly an equivalent figure to the 'operating profit' disclosed in the more finely detailed previous half year report.

Generally though I think your calculation method is better than the one I was using, so I was wondering if you could detail how you came to your figure of 1.08 for that previous half year period.

Keeping all figures six monthly this time and working from p10 of the HNZ interim financial statements I get:

[$5.426m + $62m]/ ($62m) =1.09

But that $5.426m is after an impaired asset expense of $3.788m which is not a cashflow item (or is it in this instance?).

Sorry to be so pedantic about this. I realise it is all historical, but I want to make sure I have my methods right for the future.

SNOOPY

[Lizard]

Hi Snoopy,

Yes, my calculations would have been as per your method. And yes, I would have left the impaired asset expense in for now - a level of impairment will always be part of this business. I would hope it would reduce in future, but that is in the same category as saying I hope their funding costs will continue to reduce as their excess cash (held as liquidity buffer during the expiry of the guarantee) continues to be deployed... i.e. probably more crystal-ball gazing than you are looking for here.

[Snoopy]

Yes, my calculations would have been as per your method. And yes, I would have left the impaired asset expense in for now - a level of impairment will always be part of this business. I would hope it would reduce in future, but that is in the same category as saying I hope their funding costs will continue to reduce as their excess cash (held as liquidity buffer during the expiry of the guarantee) continues to be deployed... i.e. probably more crystal-ball gazing than you are looking for here.


The problem I am wrestling with when analyzing banks is that 'one off impairments' - which have to be judged as a real loss for 'testing the health' of the bank - are not distinguishable (in my eyes) from the 'core business' of the bank when it comes down to the basic level of passing money across the desk to and from your bank manager. No bank wants to make a bad loan. A bad loan is always a good loan that has turned bad. So here is my latest thought experiment.

What is the difference between two bags of money when:

1/ A bank passes over the first bag of loan money to an existing client to refinance their debt, while at the same time
2/ The bank passes over a second bag of money to ring-fence and refinance a bad performing 'bad business unit' as an impaired asset?

I would argue that there is no difference at the across the desk level - and by extension at any level. Any bank loan money sitting in an impaired assets is not available for that bank to make an alternative use of that money as a regular loan. It therefore follows that for a bank there is no such thing as a one off impairment cost. One off impairments have to be incorporated into the regular business profits, which is quite the opposite of what would happen with any non-financial business. Anyone agree or disagree?

SNOOPY

[Lizard]

Hi Snoopy,

In certain types of contracting business, some would say it pays to invoice everything you can and write credits when you need to - if you're not writing the odd credit, you're probably not asking for enough in the invoicing. And sometimes, it is also better to finance the cashflow yourself to keep a regular customer who always pays a month late, but never argues the bill. Likewise, for a finance company, if they're not having to write off a few bad debts or accept a few overdue accounts, they're probably not going to be taking enough business at the edge to maximise the profits.

There is always uncertainty with anything that is valued on the basis of future cashflows, whether it is property, biological assets, loan assets or a collection agency book... at some point, you have to evaluate whether the assumptions used are appropriate to the business or liable to eventually result in tears. Maybe Winner or Balance would be able to give some pointers on a long-range "typical" level of impairments to allow for in a business of this type. Although "normal" might not be a good reference point for this decade.

Thankfully, IFRS provides for a level of transparency in the accounts that should allow underlying assumptions to be examined (even if it doesn't always prevent them from occasionally being laughable!).

[Snoopy]

In certain types of contracting business, some would say it pays to invoice everything you can and write credits when you need to - if you're not writing the odd credit, you're probably not asking for enough in the invoicing. And sometimes, it is also better to finance the cashflow yourself to keep a regular customer who always pays a month late, but never argues the bill. Likewise, for a finance company, if they're not having to write off a few bad debts or accept a few overdue accounts, they're probably not going to be taking enough business at the edge to maximise the profits.


You are agreeing with me that a bank impairment charge should be regarded as just normal bank business?

But you are also saying that for some other businesses, like certain contractors, that bad debts are part of the normal way of doing business? So my supposition that impaired loans are only normal business for banks and no other businesses doesn't really hold? That point is outside the one I was trying to make (or is it?, I will let you be the judge). I guess that an unrecoverable bad debt does ultimately become an impairment. But the kind of impairment that I was thinking of in my bad bank loan context was a one off large quantum event.

One real example I can think of was PGW putting a deposit on a large Brazilian farm, to the extent of some millions of dollars, and then pulling out of the purchase deal because the company decided it was going in another direction. Nothing changed on the farm and there was no 'act of god' weather event that suddenly changed the profitability potential of the land. PGW management simply changed their minds and rather than complete the deal and sell off the unwanted farm later, decided to just walk away from their deposit. As far as PGW shareholders were concerned the deposit money was written off. By extension the bank behind PGW that put up the deposit money to buy that land also lost it, at least in a superficial 'hand over the cash' way. Of course PGW still had the obligation to pay the bank that lost loan money out PGW shareholders funds.

Another way of thinking about that same transaction could be that PGW did not lose any shareholder funds immediately, but instead set up a 'bad loan' to offset against PGW shareholder funds. There was to be no hope of the bad loan ever 'coming right', because there was no brazilian farmland land in PGW ownership to offset against this lost deposit. Nevertheless the banking syndicate supporting PGW did not put the company into receivership, because most of the other loans made to the PGW company were still OK.

From the PGW perspective the write off of the farm deposit was a one off impairment event. However, from the point of view of the banking syndicate which viewed all of the collected loans given to PGW as 'one big loan' the write off was just part of doing business as normal with PGW. The banking syndicate would like to continue doing business with PGW in the future even though the overall loan portfolio to PGW has been permanently weakened by PGW management action.

This brazilian farm cancelled purchase was only one event. But:

1/ From a PGW perspective it was a one off impairment.
2/ From the point of view of the perspective of the banking syndicate supporting the deal it was an ongoing and normal part of doing business with PGW, and cannot be separated from the overall package of loans made to PGW that comes under the heading 'normal banking business'.

Thus we have a bad loan that was a one off impairment event to PGW, but not a one off impairment event to the banking syndicate supporting it.

Does that make any sense?

SNOOPY

[janner]

Who is the one dropping 9 mill ??. An associate of GK ??

[percy]

Well, well ... The boys at the ACC are in. Good sign IMO as they do a pretty good job.

Hmmm ... Does that vote of confidence mean that banking license is immenent?

Yes, very positive having ACC on board.Banking licence immenent? Maybe?

[Snoopy]

Who is the one dropping 9 mill ??. An associate of GK ??

Torchlight today notifed the market they offloaded around 9m HNZ shares between 16th March and 17th May.

SNOOPY

[Master98]

PGC sold 19m PGW shares in March and bought 17m HNZ shares under 45cps,now sold at 52cps, made good profit.

They could buy back PGW shares at under 35cps( sold at 40cps ).

[Xerof]

The parcel sold for 50 cents yesterday - you forget PGC is buried on the rest they own at 75,65 cents

and boys stop being silly with your frivolous imminent banking license comments - the RBNZ now has them where they want them and where they should remain - caught by the NBDT rules and reporting directly to them - anything else is simply moral hazard

[Master98]

The parcel sold for 50 cents yesterday

just checked, you are right, 52cps was sourced from today's media.

[Snoopy]

Using 'Heartland' as an example I have been through five bank-imposed hurdles that any finance company, that will give you your invested capital back, must jump through. However, I know that numbers make some readers glaze over. So I think it is worthwhile trying to explain the reasoning behind imposing each of these 'hurdle tests' in a 'number free' way.

H1/ 'Interest Cover Ratio' In order to pay out interest to debenture holders, a finance company must have someone feeding cash into the other end of the 'debenture paying machine'. That cash must be sufficient to cover all debenture interest, with a margin for safety.

H2/ 'Liquidity Buffer Ratio' Real cash is required to pay debenture interest. " I have earned the money but I will pay it to you later" is not an acceptable business practice. Matching payments with incoming money can only be achieved when there is some kind of connection between the term over which the money is used and the term the money is lent.

H3/ 'Gearing ratio' Underlying every finance company is a building, some staff and a few computers. 'The office' must be in sound financial shape itself to provide a firm foundation to the lending capital business that is built on top of it.

H4/ 'Single Customer Group Exposure' If a disproportionate amount of business is done with a single customer, however good that customer seems, the potential exists for the whole finance group to collapse because of an unexpected glitch in one customer arm.

H5/ 'Minimum Equity Contribution' Why don't you and I don't go out and start a finance company tomorrow? Because a certain buffer of shareholder funds to cover unexpected bad debts and to help massage any small mismatch between borrowers and lenders expectation in the timing of loans.

Once you understand the importance of these five hurdles you can see how unhelpful the information generally published in share tables on finance companies is. PE ratio? Yield? Asset backing? Profit trends? As an potential investor in the finance industry I won't be considering those statistics any more. Because whatever their value, unless the finance company under consideration can pass the five hurdle test then I don't think it can survive at all in the medium term.

SNOOPY

[percy]

Now you can understand why the team at HNZ spent so much time and effort wooing high nett worth depositors and kept so much money on hand to get through govt quarantee period.
At long last they have the building blocks in place and can start generating some real profits.

[Snoopy]

Once you understand the importance of these five hurdles you can see how unhelpful the information generally published in share tables on finance companies is. PE ratio? Yield? Asset backing? Profit trends? As an potential investor in the finance industry I won't be considering those statistics any more. Because whatever their value, unless the finance company under consideration can pass the five hurdle test then I don't think it can survive at all in the medium term.


I am now going to take Heartland shareholders on a little trip back in time to when PGGW Finance was an independent entity. As soon as PGGW Finance was sold to Heartland all the business financial reports were taken off the PGW website very quickly and not put back on the web under the Heartland brand. Changing names can be an effective way to whitewash the past. However those that do not learn from the past are often doomed to repeat past mistakes.

Unfortunately for Heartland management (but fortunately for you Heartland shareholders) I have retained this information. The aim of what I am going to present is this:

1/ Look at how PGW Finance stacked up hurdle wise before the PGGW cash issue bailout (at the end of FY2009).
2/ Look at how PGW Finance stacked up hurdle wise after the PGGW cash issue bailout (at the end of FY2010).
3/ See if any lessons can be learned from the exercise.

SNOOPY

[Snoopy]

Now you can understand why the team at HNZ spent so much time and effort wooing high nett worth depositors and kept so much money on hand to get through govt quarantee period.
At long last they have the building blocks in place and can start generating some real profits.

I would argue that from a conservative shareholder perspective that Heartland are still short of capital, when regarded as the finance company that they are. YMMV Percy.

SNOOPY

[percy]

I would argue that from a conservative shareholder perspective that Heartland are still short of capital, when regarded as the finance company that they are. YMMV Percy.

SNOOPY

You can argue all you like,but you are only argueing with your self.

[Snoopy]

1/ Look at how PGW Finance stacked up hurdle wise before the PGGW cash issue bailout (at the end of FY2009).


Here is how PGGW Finance stacked up as at 30th June 2009.

H1/ Interest Cover Ratio:

EBIT/(Interest Expense) = ($10.180m)/($37.758m)= 0.270 cf target figure of 1.2.
Result: Fail Test

H2/ Liquidity Buffer Ratio:

(Current Liabilities)/(Current Assets) = [$83.032m+($180.0-$71.5)]/$411.56m) = 0.465 cf target figure of 1.1.
Result Fail Test

H3/ Gearing ratio

(Non risk Share Liabilities)/(Non risk Tangible Assets)
= [508.659-83.032-(71.5+123.584+221.05)]/[575.475-559.659-1.163]= 9.493/14.653= 0.6479 = 65% cf 90%. Result: Fail Test

H4/ Single Customer Group Exposure

(Single Customer Loan Exposure)/(Shareholder Funds)
= ($20m)/($66.8m)= 30% cf 10% target
Result: Fail Test

(Note total Crafer farm debt is $200m so I am assuming PGW has 1/10th of this. This is a guess on my behalf)

H5/ Minimum Equity Contribution

(Shareholder Funds)/(Risk Share Lending)
= $66.8m/$559.659m= 11.9% cf target 20%
Result: Fail Test

(note all loans are assumed to be Tier 1, a conservative assumption)

The old PGGW Finance failed every banking hurdle test. It looks like it was a disaster waiting to happen despite all the bullish management comments of strong profitability and 80% debenture reinvestment rates plastering the media at the time. So did the subsequent capital injection after the PGW rights issue shore up the situation?

SNOOPY

[Snoopy]

2/ Look at how PGW Finance stacked up hurdle wise after the PGGW cash issue bailout (at the end of FY2010).


Here is how PGGW Finance stacked up as at 30th June 2010.

H1/ Interest Cover Ratio:

EBIT/(Interest Expense) = ($13.095m)/($30.357m)= 0.430 cf target figure of 1.2.
Result: Fail Test

H2/ Liquidity Buffer Ratio:

(Current Liabilities)/(Current Assets) = [$70.819m+($120.0-$21.0)]/$432.105m = 0.393 cf target figure of 1.1.
Result Fail Test

H3/ Gearing ratio

(Non risk Share Liabilities)/(Non risk Tangible Assets)
= [449.287-70.819-(21.0+99.658+247.58)]/[549.662-530.119-1.180]= 0.6479 = 56% cf 90%.
Result: Fail Test

H4/ Single Customer Group Exposure

(Single Customer Loan Exposure)/(Shareholder Funds)
= ($20m)/($100.375m)= 19.9% cf 10% target
Result: Fail Test

(Note total Crafer farm debt is $200m so I am assuming PGW has 1/10th of this. This is a guess on my behalf)

H5/ Minimum Equity Contribution

(Shareholder Funds)/(Risk Share Lending)
= $100.375m/$530.119= 18.9% cf target 20%
Result: Fail Test

(note all loans are assumed to be Tier 1, a conservative assumption)

A casual glance at those figures shows that PGGW Finance was in a poor situation, even after being bailed out by the shareholders!

SNOOPY

[percy]

SNOOPY.
Forget for a moment PGWF or PGGW F.
Some real fun would be to have a closer look at ANZ Bank,whose 6% equity ratio has to withstand,a falling Australian property market,struggling retailers,and fast going broke Australian manufacturers. 6% equity for that sort of concentration of risks must be of great concern to both shareholders and the Australian Reserve Bank.
HNZ is in a very strong position with spread of lending and avenues of funding,and has an equity ratio far superior to any Australian or NZ financial institution.
The outcome must be sell ANZ,buy HNZ.

[Snoopy]

A casual glance at those figures shows that PGGW Finance was in a poor situation, even after being bailed out by the shareholders!


OK time to assess what all of this means.

It is possible I have made some mistakes in my calculations. But I guess only those who have those old PGGW Finance annual reports will know!

Assuming I haven't made mistakes here is my explanation for PGGW Finances apparently desperate situation before it was acquired by Heartland.

1/ The interest cover figure probably represents a loan portfolio in transition. PGW is on record as saying that they were exiting a number of long term loans before the business was sold. Taking write downs or even just downsizing the investment portfolio before the supporting debentures were due would have reduced the earnings side while leaving the amount of interest due to debenture holders unchanged. This interest cover statistic is being distorted by the restructuring process.

2/ The liquidity buffer ratio was being influenced by the expiry of the government guarantee. A whole wall of debentures was maturing before the guarantee expired, thus spiking the 'current assets' total sharply higher than it would normally be post and pre guarantee. Due to this special situation, the liquidity buffer ratio is probably not a suitable test for FY2010 (or FY2009 for that matter).

3/ The gearing ratio largely depends on the asset allocation policy within PGW. Start thinking of PGW Finance as a separate company with its own administration structure and I think this fail would be fixed.

4/ Single Customer Group Exposure. As I stated by figure for the Crafers debt of $20m was a guess. If it was only $10m then things would look better.

5/ Shareholder funds are within cooee of the 20% level required by the banks.

In summary I don't think the picture of PGG Finance as I paint it on 30th June 2010 is quite as bad as those bare figures suggest. Heartland shareholders could take solace from the fact that some of the worst debts were retained within PGW when the finance business was sold.

SNOOPY

[Snoopy]

SNOOPY.
Forget for a moment PGWF or PGGW F.
Some real fun would be to have a closer look at ANZ Bank,whose 6% equity ratio has to withstand,a falling Australian property market,struggling retailers,and fast going broke Australian manufacturers. 6% equity for that sort of concentration of risks must be of great concern to both shareholders and the Australian Reserve Bank.


You are getting ahead of me Percy. Scrutinizing ANZ bank was going to be my next project!

SNOOPY

[Snoopy]

I have been covering these hurdles out of my original order to better match the flow of this thread. But there is one more bankers test that HNZ must face.

4/ Single new customer group exposure (as a percentage of shareholder funds) <10%

This criterion may have lead to the downfall of PGGW Finance (PGF) as an independent entity. As at 31/12/2010 PGG had $126.7m of loans in the dairy sector from a total loan portfolio of $491.8m. Total Crafer loans from all institutions are reputedly $200m. PGF claim they are a 'junior partner' in the banking syndicate. But if the PGF exposure was say $40m, then as other loans were wound back those
Crafer loan interest is capitalized, Crafer farms might approach 10% of all PGF loans.

I can't find any information in the Heartland HY2012 interim report on customer concentration. Since one of the objectives of merging all the entities that formed Heartland together was to reduce the concentration of risk, I don't think it likely that a single customer has 10% or more of the balance of the loans outstanding.

The HNZ interim report does say that post merger, 40% of loans are now in the Canterbury region (note 11). That might mean regional volatility need be considered in future.

Result: PROBABLE PASS (interim report has insufficient information)

OK my concentration appears to have strayed while making this post. Heartland shows shareholder funds of $356.5m as at 30th December 2011. So even if the Crafar farm exposure was $40m, that is still only just over 10% of shareholder equity. I think we can be fairly sure that Heartland does not have a concentration of single loan exposure problem.

SNOOPY

[Master98]

OK my concentration appears to have strayed while making this post. Heartland shows shareholder funds of $356.5m as at 30th December 2011. So even if the Crafar farm exposure was $40m, that is still only just over 10% of shareholder equity. I think we can be fairly sure that Heartland does not have a concentration of single loan exposure problem.

SNOOPY

Snoopy, as i know that loan to crafar farm didn't sell to HNZ, PGW keep it in a special vehicle.

[percy]

OK my concentration appears to have strayed while making this post. Heartland shows shareholder funds of $356.5m as at 30th December 2011. So even if the Crafar farm exposure was $40m, that is still only just over 10% of shareholder equity. I think we can be fairly sure that Heartland does not have a concentration of single loan exposure problem.

SNOOPY

Wrong again.Get over to ANZ.!!!!1
Crafar and other problems loans remain with PGW.HNZ only took over "the good" loans.
Correct, HNZ does not have a concentration of single loan exposure.
What we may say is a well balanced book,the envy of any ;I was going to say Australasian financial organization,but really I must say any world wide organization.
The other side of the coin is HNZ's strong balance of funding.

[Kiwi]

Hello Percy,
I have been reading your posts with interest lately as I'm considering buying a few thousand of HNZ shares.
Am I right in thinking that these could sky rocket if and when they are granted a banking licence?
Can anybody see why I should'nt have a go at trying to make a few dollars on these?
Lost a few thousand on PRC, would'nt mind a bit of good luck right now.

[percy]

Hello Percy,
I have been reading your posts with interest lately as I'm considering buying a few thousand of HNZ shares.
Am I right in thinking that these could sky rocket if and when they are granted a banking licence?
Can anybody see why I should'nt have a go at trying to make a few dollars on these?
Lost a few thousand on PRC, would'nt mind a bit of good luck right now.

First of all I am sorry you lost money on PRC.I have also lost money on shares.
Now HNZ.At present I feel HNZ is the best value for money on the NZ market.It is trading at over 35% discount to NTA.
It has achieved a lot in a short time,getting approvals and merging three companies.It has successfully got through the Govt guarantee,and now looks to be getting on with the business on making money.From earlier posts you will note the high rate of return banks/finance companies earn.This means they can grow quickly.You will also note that bad loans/deals have been left at PGC or PGW.
Once we have seen good earnings we will see HNZ rerated.It will /could trade at two or three times NTA.ie $1.60 to $2.40.The recent announcement of ACC buying approx 10% means a lot of the risk is past us.Kerr's influence is gone.
On the downside low interest rates,and low demand for money could delay big profits.
I think in two or three years time we will all look back,and kick ourselves for not buying more HNZ shares at today's price.
Whether the SP rockets on bank licence or not I do not know.In fact I see HNZ doing very well with out one,so a bank licence does not concern me,however I would rather have one>!!!

[percy]

Hello Percy,
I have been reading your posts with interest lately as I'm considering buying a few thousand of HNZ shares.
Am I right in thinking that these could sky rocket if and when they are granted a banking licence?
Can anybody see why I should'nt have a go at trying to make a few dollars on these?
Lost a few thousand on PRC, would'nt mind a bit of good luck right now.

Kiwi.HNZ should not be your only share.It could be a part of a small porfolio of four shares.
Sector 1/.Finance, HNZ.
sector 2/Health,either EBO,or ABA.
sector 3/Retirement,either RYM or SUM.
sector 4/Utiity,either AIA,POT,CNU,TEL,or CEN.

[Kiwi]

Kiwi.HNZ should not be your only share.It could be a part of a small porfolio of four shares.
Sector 1/.Finance, HNZ.
sector 2/Health,either EBO,or ABA.
sector 3/Retirement,either RYM or SUM.
sector 4/Utiity,either AIA,POT,CNU,TEL,or CEN.

Hello again Percy,

Thanks for your comments on HNZ, its always good to get someone else's opinion.
I'm pleased that my thinking is on the right track.
I do have some other shares that I have had for a while, but now I'm reading these posts on a regular basis, I may have to re think on some of them. While I think of it Percy,what are your thoughts on A2 Corp ?
I'M holding,
DIL
NEW
FPA
GEL
Snakk Media via Claridge Capital
LME

[percy]

Hello again Percy,

Thanks for your comments on HNZ, its always good to get someone else's opinion.
I'm pleased that my thinking is on the right track.
I do have some other shares that I have had for a while, but now I'm reading these posts on a regular basis, I may have to re think on some of them. While I think of it Percy,what are your thoughts on A2 Corp ?


I'M holding,
DIL
NEW
FPA
GEL
Snakk Media via Claridge Capital
LME

With your holdings you will never find the sharemarket boring.!!!!!!!1
ATM.I was never impressed with Cliff Cook when he was at MET,so never brought any ATM.However I never brought any DIL because of the Henry's track record.!!! Wrong again !!! ATM have a good product,and are doing everything right,so you should do well. with them.

[Snoopy]

Wrong again.Get over to ANZ.!!!!1
Crafar and other problems loans remain with PGW.HNZ only took over "the good" loans.


Got to get 'Heartland' out of my heart first before moving on!

I stand corrected by you and Master 98 regarding Heartland leaving those Crafer loans with PGW. In my defence, I don't think PGW ever admitted the make up of the so called bad loans that they retained in house. Although it would be logical to assume the Crafer farms were one of them. Nevertheless I remember chatting to some senior management at the PGW EGM just proir to the finance division sale. They were adament that the retained loans would all be recovered in full, in time.

SNOOPY

[Snoopy]

In the announcement dated 14/3/12 they state HNZ's equity ratio is 13.5% compared with regulatory requirement 9.58% so they have room to grow their book.


I have been sniffing around the NBDT section of the New Zealand Reserve Bank website.

The minimum capital ratio for a non bank deposit taker is 8% with a credit rating and 10% without a credit rating.

SNOOPY

[Snoopy]

In fact I see HNZ doing very well with out one,so a bank licence does not concern me,however I would rather have one>!!!


Here are the latest basel 3 requirements outlining hoops that must be jumped through for all new banks.

http://www.rbnz.govt.nz/finstab/banking/regulation/3564868.pdf

I draw your attention to Clause 10(c) amongst the information the Reserve Bank need to have on record.

----
10(c) Financial accounts for the parent company or bank for the last 3 years.
----

Since Heartland have only existed since the second half of last year, I think this means we can rule out registration of HNZ as a bank for about three years.

SNOOPY

[percy]

I have been sniffing around the NBDT section of the New Zealand Reserve Bank website.

The minimum capital ratio for a non bank deposit taker is 8% with a credit rating and 10% without a credit rating.

SNOOPY

Heartland building Society has a BBB-[outlook stable] credit rating from Standard & Poor's.

[winner69]

Does HNZ have a Treasury function ..... one that is charged (and incentivised) to make profit out of idle funds?

[percy]

Does HNZ have a Treasury function ..... one that is charged (and incentivised) to make profit out of idle funds?

Craig Stephen's title is treasurer,so expect they do.

[Snoopy]

Out of interest I looked at yahoo finance.

ANZ bank.ROE 14.88% equity 6.247% 33,220,000/531,739,000


Just been looking at the latest (FY2011) ANZ annual report Percy.

The balance sheet on page 88 shows net assets of $37.954m. Net loans and advances are listed on the same page $396.337m. So I get an equity to loan ratio of:

$37.954m/$396.337m= 9.58%

ROE based on end of year equity was

$5.873m/$37.954= 15.5%

Of course the true ROE figure uses the average equity over the year which could account for the different figure you quoted. I am intrigued though that our equity to loan ratios are so different though. Can you clarify your figure?

SNOOPY

[Snoopy]

At present I feel HNZ is the best value for money on the NZ market.It is trading at over 35% discount to NTA.
It has achieved a lot in a short time,getting approvals and merging three companies.It has successfully got through the Govt guarantee,and now looks to be getting on with the business on making money. From earlier posts you will note the high rate of return banks/finance companies earn.This means they can grow quickly.You will also note that bad loans/deals have been left at PGC or PGW.
Once we have seen good earnings we will see HNZ rerated.It will /could trade at two or three times NTA.ie $1.60 to $2.40.The recent announcement of ACC buying approx 10% means a lot of the risk is past us. Kerr's influence is gone.
On the downside low interest rates,and low demand for money could delay big profits.


Percy you have missed your calling. You should have been the Heartland head of publicity in 2007. Of course the fact that Heartland did not exist in 2007 may have mitigated against the chances of your successful job application.

I will get the bit I agree on with you over first. I do agree that Heartland has significant share appreciation potential. In these post GFC days that means it may end up trading at asset backing. As for going to two to three times that figure, I think you would need to wind the clock back to 2007 to achieve it.

Why? Post GFC regulations have tightened around finance companies and banks. All are now required to hold a lot more capital in relation to the loans that underlying capital supports. If the NZ economy suddenly upticks that means HNZ cannot suddenly expand the amount of lending they do like finance companies of yore. Any expansion in lending will require very careful management of company equity so that everything expands in proportion. To make best use of capital I would say a dividend should not be paid.

Likewise if there is a downturn HNZ should keep their capital base strong so that they can manage the reduction in their lending book and any mismatch of depositors and lending interest that entails. That means no dividend in those circumstances either. In short it is hard to think of a scenario post GFC where HNZ will ever pay a dividend again.

The other 'problem' is that unlike a factory where plant can lie idle between downturns and be fired up again when the demand kicks in, modern finance industry requirements mean that the 'finance factory' itself must now be dismantled and rebuilt between business cycles. This is very different to loans being written on whiffs of capital as happened pre GFC.

The finance industry is not dead. But the former thoroughbred is wearing concrete clogs. There is a reason that even the likes of the National bank will be changing their promotional animal from thoroughbred steed to a draught horse.

SNOOPY

[percy]

Just been looking at the latest (FY2011) ANZ annual report Percy.

The balance sheet on page 88 shows net assets of $37.954m. Net loans and advances are listed on the same page $396.337m. So I get an equity to loan ratio of:

$37.954m/$396.337m= 9.58%

ROE based on end of year equity was

$5.873m/$37.954= 15.5%

Of course the true ROE figure uses the average equity over the year which could account for the different figure you quoted. I am intrigued though that our equity to loan ratios are so different though. Can you clarify your figure?

SNOOPY

Unfortunately Yahoo finance do not seem to have received the latest annual reports.May I aplogise on their behalf.
However all comparisons were based on Yahoo figures, so apples were being compared with apples or in this case banks with banks.
ROE.ANZ is achieving over 15%.For a huge elephant like ANZ to achieve this,makes the case for HNZ coming from a much smaller capital base very compelling.20% or more.?
After you making me do some comparisons I have begun to believe what I have posted,and today sinned and brought some more HNZ.!!!!

[Snoopy]

ROE.ANZ is achieving over 15%.For a huge elephant like ANZ to achieve this,makes the case for HNZ coming from a much smaller capital base very compelling. 20% or more.?
After you making me do some comparisons I have begun to believe what I have posted,and today sinned and brought some more HNZ.!!!!


I don't believe that stacking up banks against finance companies is an apples with apples comparison. I would say that the 'huge elephant' is liable to be more efficient on a per loan basis, not less efficient. You should also remember that all that surplus Heartland capital you think is there is also required to spruce up the branch offices, and pay for advertising.

Maybe I haven't been looking in the right places but I haven't seen any advertising at all for Heartland this year. I imagine this is because they are downsizing their loan portfolio as the recession bites. Nevertheless I am not going to say you were wrong with your purchase today. Just that your tolerance for risk is higher than mine. Personally I will be waiting for the next set of HNZ results and reviewing the terms of any possible cash issue before buying in.

SNOOPY

[percy]

[QUOTE=Snoopy;374420]I don't believe that stacking up banks against finance companies is an apples with apples comparison. I would say that the 'huge elephant' is liable to be more efficient on a per loan basis, not less efficient.

.Agree to disagree with you.

[winner69]

For what's it worth I'd be really worried if HNZ were making 20% ROE .... to me it would mean they are taking too many risks and/or are too highly leveraged

Leverage has stuffed the world ..... aided and abetted by measuring (and paying) bankers on ROE .... things will revert to the old fashioned ways of doing things one day .... like building societies / financial institutions only lending out what is prudent to do so

And I still would like too know what that 'treasurer' does with the spare cash .........

[Snoopy]

[QUOTE=Snoopy;374420]I don't believe that stacking up banks against finance companies is an apples with apples comparison. I would say that the 'huge elephant' is liable to be more efficient on a per loan basis, not less efficient.

Agree to disagree with you.

Just to be clear I am not saying that comparing the likes of Heartland with banks is a waste of time. Just that you should realize that when you compare an Apple with say a Nashi, you might need to adjust your comparative stick.

For starters I would expect a significantly higher equity to loan portfolio ratio with a finance company. That would imply a lower ROE for Heartland than the likes of ANZ, without any consideration of economies of scale.

SNOOPY

[percy]

For what's it worth I'd be really worried if HNZ were making 20% ROE .... to me it would mean they are taking too many risks and/or are too highly leveraged

Leverage has stuffed the world ..... aided and abetted by measuring (and paying) bankers on ROE .... things will revert to the old fashioned ways of doing things one day .... like building societies / financial institutions only lending out what is prudent to do so

And I still would like too know what that 'treasurer' does with the spare cash .........


Well ring him and ask him.His name is Craig Stephen and his phone number is [09] 9279219. Then you can tell us all.Tell him you are a mate of percy's.
Must admit I would be happy if they could match ANZ's ROE.
remember the Aussie bank's have HUGE risks with their property,retailers and manufacturers.HNZ does not have these risks.

[percy]

[QUOTE=percy;374421]

Just to be clear I am not saying that comparing the likes of Heartland with banks is a waste of time. Just that you should realize that when you compare an Apple with say a Nashi, you might need to adjust your comparative stick.

For starters I would expect a significantly higher equity to loan portfolio ratio with a finance company. That would imply a lower ROE for Heartland than the likes of ANZ, without any consideration of economies of scale.

SNOOPY
Nashi/apples ?? maybe.As I have pointed out before the Aussie banks have huge loan problems.The Australian housing and realestate market is facing big right downs.Australian retailers are losing the battle and Australian manufacturers have long since lost the battle to Asian manufacturers.HNZ does not have these problems/risks.All the Australian banks could queit easily lose more than their shareholders funds.We have been there before in 1991 when Aussie banks lost their shirts in the property down turn.
A case of comparing fresh NZ apples with ....... Aussie apples.!!!!!

[Snoopy]

Nashi/apples ?? maybe.As I have pointed out before the Aussie banks have huge loan problems.The Australian housing and real estate market is facing big right downs.Australian retailers are losing the battle and Australian manufacturers have long since lost the battle to Asian manufacturers.HNZ does not have these problems/risks.All the Australian banks could quite easily lose more than their shareholders funds.We have been there before in 1991 when Aussie banks lost their shirts in the property down turn.
A case of comparing fresh NZ apples with ....... Aussie apples.!!!!!

Percy, there are no huge loan problems in Australia or at least nothing that isn't manageable in my eyes. You seem to think that a 5% fall in house prices will wipe out ANZs equity which is only just above 5%. In fact ANZs tier 1 capital is 9.5%. And a fall of 9.5% in house prices would only be a problem if:

1/ Every Oz homeowner is mortgaged to the hilt.
2/ Every Oz homeowner cannot manage their cashflow situation, irrespective of the capital position of their loan.

Australian retailers may be 'losing the battle'. But that means reduced profits for retailers, not the write off of all loans to retailers. Australian manufacturers have had to adjust just like those in Kiwiland and have had many years to do it.

I don't buy your doomsday scenario for banks in Australia Percy.

Besides if you really do believe Australia is in such trouble, how do you think NZ and by implication HNZ will escape, as Oz are our biggest trading partner?

A more realistic concern might be the collapse of rural lending in NZ, with PGGW Finance severely hit, as farmers tighten their belts. That would flow through to a housing downturn in Canterbury , where HNZ have most of their mortgages. I can see two years of book deconstruction at Heartland as the asset base shrinks back towards that share price.

I have no objection to people taking weighed up risks on the market Percy. But I am a bit worried Percy about the way you have weighed the risks of owning HNZ shares. I see the price has slipped below 50c today.

SNOOPY

[percy]

May I direct you to KW's post No.50 on ASX forum:NOD nomad ;"The residential real estate market is going down the toilet I'd steer clear of the whole sector.even mining is not saving property prices-perth was the first to crash and burn."
Google Australian real estate bubble;"prices have fallen for the last 21months."
ILF meeting booklet,page 16;"given advice that there is an extensive number of distressed retirement villages and portfolios currently for sale in the market."
Australians have over spent because of over lending by Australian banks.Retailers and manufacturers under pressure.
NZ rural sector has paid down debt and is in good shape.
HNZ SP did weaken today.This is because of the PF [percy factor].When he buys SP weakens and only strenghtens when he sells.As he is not selling the SP may further weaken.

[Snoopy]

HNZ SP did weaken today.This is because of the PF [percy factor].When he buys SP weakens and only strengthens when he sells.As he is not selling the SP may further weaken.


Glad to see that your sense of humour at least is still intact Percy. I had not considered the 'Percy Factor' before and it will certainly require some study. However, I do not believe you have considered the GS factor. Glen Stevens is the Reserve Bank Governor of Oz. In case you hadn't noticed, interest rates in Australia are (still) some of the highest in the western world. Property prices may ease back in Australia but GS is sitting by the interest rate button to make sure things don't correct too far.

Meanwhile back to Heartland.

I check in a 'sharechat' daily Percy and always note that in the top deposit rate section Heartland usually offer the best returns. However something curious has happened of late. BNZ (a proper bank) are currently offering the same call deposit rate as Heartland. Heartland are not paying any more, 4.5% for 90 day money. So why take the risk with Heartland when you can get the same return with a real bank?

My conclusion is that Heartland are not all that keen for funds because their lending book is shrinking, not growing as some shareholders think. I think that the full year result Y/E 30-06-2012 , will be a milestone but not in the way shareholders hope.

PGG Finance will not save them. PGF were getting out of lending on land and doing more seasonal lending and lending on new farm equipment when sold to HNZ. This side of farming will be very heavily hit should the farming downturn gather momentum.

As I explained in a previous post there is little prospect of a dividend, and even less of becoming a bank within the next two years. I can can see a very good argument for holding off investing in HNZ before the first integrated result is out in mid August at the earliest. I am still interested in HNZ as an investment prospect. But I think my timing and pricing can get a lot better than buying today.

SNOOPY

[winner69]

Snoopy, whatever happened to your swap your fridge man ......... surely you have a new hero by now

[percy]

GS factor resulted in Myer's profit warning /downgrade which confirms the state of Aussie retail.
HNZ sharehoders will be "heartened" by FPA finance result,which shows there is life in NZ finance market.Lets hope Marac are doing as well.
Agree that next profit result/announcement will be of great interest.
I personally do not mind forgoing divies so long as they are reinvested wisely.Wish I owned some Berkshire,who have never paid a divie.

[winner69]

What's this GS factor Percy?

[percy]

What's this GS factor Percy?

Read Snoopy's post No.430.
Then go back and read my post no.426.You better send another one of your "memos to yourself "before I send you a "please explain notice."!!!!!!

[winner69]

Read Snoopy's post No.430.
Then go back and read my post no.426.You better send another one of your "memos to yourself "before I send you a "please explain notice."!!!!!!

Ah so I am so stupid sometimes

Retail sales still look pretty robust if you believe the chart from ABS shoen below

Michael Pascoe had this in the SMH the other day about Myer - Was anyone surprised that Myer continues to slide? No, I thought not. And the best insight into the chain’s problems might well come from an anonymous butcher in Sydney’s Sutherland Shire: “If the number of people coming into my shop drops off, it’s my fault and it’s up to me to fix it. If they start buying more mince instead of rump steak, that’s the economy.”

Rather good I thought .... and as one punter aptly said yhe problem with Myer and David Jones they don't sell the mince

GS prob thinks the retailers just have to face up to changing times and sort themselves out.

Notice how the headlines in Australia always seem to be the same as we saw in The Press etc four or five yewars ago .... and even Postie Plus survived

Read more: http://www.theage.com.au/business/retail-and-manufacturing-sausages-and-excuses-20120524-1z6iy.html#ixzz1vrbAOL1v

[percy]

Another good article,thank you.However if you google Book City Hobart,I don't think they would agree with either Michael Pascoe or the butcher. I know that the owner of this business has had his house on the market for over a year.My brother lives opposite him. Not easy to sell houses in Hobart.In fact, near impossible.!!!!

[winner69]

Another good article,thank you.However if you google Book City Hobart,I don't think they would agree with either Michael Pascoe or the butcher. I know that the owner of this business has had his house on the market for over a year.My brother lives opposite him. Not easy to sell houses in Hobart.In fact, near impossible.!!!!

Hobart eh .... went there last year for a break and it rainred continously for 5 days and we did not see Mount Wellington at all .... even when we drove to the top it the mist was so thick a few metres visibility was it.

Nice place but not surprising Tassie and Hobart has negative population growth

I note that the nuymber of house sales in Hobart have halved over the last 10 years but also note the property prices have trebled (RP data) So that joker across the road from your brother maybe asking too much?

The Hobart paper had a story about the book shops closing down .... seems a trend world wide and not unique to Hobart -- the times they are a changing Bob once said .... and bookshops are a casulty eh

Liked one of the comments under that article - If Bill Blake is correct, one power cut and we'll be doomed. The people with books will survive. And good luck to the rest of you. .... better not throw out my books

[percy]

Better not go into my wife's nephew who lives in Sydney's problems,other than to say he has sold his house to put the money into his business ,which is suffering from 'lack of buying interest' for his goods and services.
Like the joker in Hobart he most probably asked too much for his house,however he got to sell it before the bank did.
Hairdressers must be doing well as a lot of people are taking a haircut.!!!!!

[winner69]

Better not go into my wife's nephew who lives in Sydney's problems,other than to say he has sold his house to put the money into his business ,which is suffering from 'lack of buying interest' for his goods and services.
Like the joker in Hobart he most probably asked too much for his house,however he got to sell it before the bank did.
Hairdressers must be doing well as a lot of people are taking a haircut.!!!!!

Not if punters are going bald with the worry about their customers 'lack of buying interest'

Isn't NZ much the same situation as Australia anyway Percy ... just we been practising a bit longer at being poor

[percy]

Not if punters are going bald with the worry about their customers 'lack of buying interest'

Isn't NZ much the same situation as Australia anyway Percy ... just we been practising a bit longer at being poor

Not sure about that; I am a bit like the butcher Michael Pascoe was talking about,still selling a lot of chops.!!!
I did read recently somewhere, that a very highly repected commentator said "we should be proud to have a strong currency........means a strong economy." Yeah right.!!!!!

[winner69]

Not sure about that; I am a bit like the butcher Michael Pascoe was talking about,still selling a lot of chops.!!!
I did read recently somewhere, that a very highly repected commentator said "we should be proud to have a strong currency........means a strong economy." Yeah right.!!!!!

He's quite famous that commentator .... it would be good to have the world seeing us in good light .... aren't his initials GS

[Grimy]

Glad to see that your sense of humour at least is still intact Percy. I had not considered the 'Percy Factor' before and it will certainly require some study.
SNOOPY

And here I was thinking it was the "Grimy Factor"..........

[percy]

And here I was thinking it was the "Grimy Factor"..........

After much thought I think in future we should refer to this phenomenon as "GPF";Grimy Percy Factor.
Only hope Snoopy's analysis does not find it depends on what side of the bed we got out of in the morning.!!!
On this subject of factors, I must confess to having a 100% record of failure picking the direction of the NZ$.But that is another story.!!!

[winner69]

Percy - maybe you are right, things are worse in OZ than I realised if these remarks from a laid off Hastie staff ‘‘I’m a little bit older, my mortgage is nearly paid off so I’m probably not in as bad a position as some of the others. But I know a lot of them, they could lose their house in 28 days the way banks are at the moment,’’ Mr Guest said

Then again the NBR over here had a big headline today Bankers eye dairy farm debt as payout slides .... maybe we need to be worried as well

[percy]

Percy - maybe you are right, things are worse in OZ than I realised if these remarks from a laid off Hastie staff ‘‘I’m a little bit older, my mortgage is nearly paid off so I’m probably not in as bad a position as some of the others. But I know a lot of them, they could lose their house in 28 days the way banks are at the moment,’’ Mr Guest said

Then again the NBR over here had a big headline today Bankers eye dairy farm debt as payout slides .... maybe we need to be worried as well

Yes/no/yes/maybe,The article two pages earlier on page 8 "The growth was across most sectors." "The deleveraging has largley gone sideways,as an average figure,but you can still call that deleveraging if you look at credit growth relative to GDP'. Refering to NZ.
Again you and I know it is the heavily leveraged person/farmer/retailer/manufacturer who gets caught out when markets turn.
We all know this has happened in NZ but forget that it is also happening in Aussie.The equity ratios of financial institutions therefore has to be looked at more carefully.Also, as you rightly pointed out in an earlier post a very high ROE gives warning that that institution may be taking too bigger risks.
Another area we have not gone into [yet] is bank/finnace company sources of funds.Again off the top of my head I think HNZ has fewer worries than the Aussie banks.
Hastie Group.Luckily I do not have any shares in it.Did not realise how big it was.Serious problems, and a lot of jobs lost.

[winner69]

33 cents .... you could have offered more than that percy ..... cheeky fella ... and hiding under an Australian comapny name (maybe your sisters relative?) isn't fair either .. naughty of you

[percy]

33 cents .... you could have offered more than that percy ..... cheeky fella ... and hiding under an Australian comapny name (maybe your sisters relative?) isn't fair either .. naughty of you

Not me.!!!! John Armour;wonder if Torchlight are backing him.?

[pierre]

The shonky offers from these low-lifes really piss me off. At least they now have to include the FMA warning but probably still trap a few of the unwary and /or unworldly.

It's not much satisfaction but I do I take a minor amount of childish pleasure in writing a suitable response across their documents and returning them in their (unstamped) envelope. Wish there was more that could be done to take these types out of the market.

[Master98]

PGW low-ball offer was 35c apiece couple months ago, now market price has been pushed down to as low as 31c apiece, does it happen to HNZ? let's see.

[Snoopy]

Now HNZ.
It has achieved a lot in a short time,getting approvals and merging three companies.It has successfully got through the Govt guarantee,and now looks to be getting on with the business on making money.

Whether the SP rockets on bank licence or not I do not know.In fact I see HNZ doing very well with out one,so a bank licence does not concern me,however I would rather have one!!!


Just a street observation on Heartland. Have walked past a couple of branches down here. The two I saw were branded CBS Canterbury, with small print if you peered inside the window 'part of the Heartland group'.

I would say there is quite a big rebranding exercise to do when this Heartland thing finally comes together. How many offices nationwide will need rebranding/refurbishing? And what kind of hole will that make in the balance sheet? There must be a very large latent capital expense haunting on the HNZ books. My guess is that any rebranding will be put on ice until Heartland gain their banking licence. Otherwise HNZ might have to rebrand twice, first as the finance company that it is, and later as a bank. That banking licence could be years away. That is probably a good thing with the equity ratio at HNZ looking tight (IMO).

SNOOPY

[percy]

Just a street observation on Heartland. Have walked past a couple of branches down here. The two I saw were branded CBS Canterbury, with small print if you peered inside the window 'part of the Heartland group'.

I would say there is quite a big rebranding exercise to do when this Heartland thing finally comes together. How many offices nationwide will need rebranding/refurbishing? And what kind of hole will that make in the balance sheet? There must be a very large latent capital expense haunting on the HNZ books. My guess is that any rebranding will be put on ice until Heartland gain their banking licence. Otherwise HNZ might have to rebrand twice, first as the finance company that it is, and later as a bank. That banking licence could be years away. That is probably a good thing with the equity ratio at HNZ looking tight (IMO).

SNOOPY

Don't see it that way at all.Heartland are not going to be the new Westpac with tellers,red green VWs etc.More an updated Marac/F&PFinance, still supplying finance to car yards,industry,manufacturing ,farming as they have done successfully for years.Don't expect to see 100 Heartland Branches on the high streets of NZ.Banking licence does not/will not see a roll out of branches.Banking licence will mean they pay less for their funds.
Equity ratio.Been there,learnt ,it is the envy of all .
Start worrying about Aussie banks sauces of funds.They appear to have a problem.

[janner]

" Aussie banks sauces " ???.. I know that there is a war on for the mortgage market Percy..

Are they asking .. " Would you like fries with that " .. ??

[K1W1G0LD]

All this debate between you and Snoopy is fascinating Percy . But for what its worth I'm firmly in your corner. HNZ have done a lot of the hard yards but they have to maintain and increase their profits!

[percy]

All this debate between you and Snoopy is fascinating Percy . But for what its worth I'm firmly in your corner. HNZ have done a lot of the hard yards but they have to maintain and increase their profits!

Yes,I look on it as doing my community service helping Snoopy out.
Last announcement showed they were now in business of generating profits.The next announcement should show further progress.FPA finance is doing well,so I hope Marac is too.However the market is challenging".
As you point out they have done the hard yards.Whether it is football,running a school,or whatever, it is always the organization with the firm foundations that prospers.

[percy]

We know F&P Finance is/are doing well,and I expect Marac is too.This mornings' sharetrader AM update confirms finance companies are doing well;
G E Capital;The "strong" growth stemmed from commercial finance volumes increasing 15% and consumer volumes 18%.

[Xerof]

F&P is exclusively consumer loans. GE is primarily consumer with a small portion of commercial. Neither have exposure to rural or housing.

To compare them to Heartland is mischievous or pure ignorance

[percy]

F&P is exclusively consumer loans. GE is primarily consumer with a small portion of commercial. Neither have exposure to rural or housing.

To compare them to Heartland is mischievous or pure ignorance

Pure ignorance.!!! Was thinking commercial and consumer were compareable to Marac.

[Snoopy]

GE is primarily consumer with a small portion of commercial. Neither have exposure to rural or housing.


But maybe not for long?

"The company (GE) also planned to be more aggressive in the agricultural lending sector and to take a more active part in businesses associated with rebuilding activity in Christchurch."

Heartland now in GE's sights?

SNOOPY

[Snoopy]

Start worrying about Aussie banks sauces of funds.They appear to have a problem.


Taking ANZ as an example Percy, I don't believe the picture is as bad as you paint it. Take a look at the latest 30th September 2011 Balance Sheet. There is an item on there called 'bonds and notes' that is unrelated to any shareholders equity that ANZ may have built up. It accounts for $56.551m which when added to the $37.954m of shareholders equity must make ANZs 'total loan capital' to 'loans outstanding' rather superior to Heartland's position.

The bonds and notes are further explained under Note 26. They are basically set by the bank on the banks terms and almost all are due to mature within five years. I think I am right in saying that these bonds/notes are tradeable on the open market but are not subject to any third party redemption risk. OTOH they are callable five years before maturity. In effect that means, as I see it, ANZ can redeem these bonds and notes at any time. From what I can figure out Heartland have no such equivalent instruments. The fact that Heartland rely entirely on equity capital to prop up their loan portfolio means it is in a far more precarious position than the likes of ANZ. If I have got that interpretation wrong someone please tell me!

SNOOPY

[winner69]

Jeez Percy your reading of the Oz market is spot on

Oz house prices fell in May. The paper says the biggest fall in 6 years.

And an impending implosion must be about to happen Like Melbourne prices fell about as much as they fell in Hobart. What a disaster for those people .... And no doubt they owe the banks heaps as well

Just as well HNZ are insulated from this.

PS did you read about that private school in Melourne with 1500 students going broke the other day owing $18 million in debt ...... To the banks. A sign of the times eh

[percy]

Jeez Percy your reading of the Oz market is spot on

Oz house prices fell in May. The paper says the biggest fall in 6 years.

And an impending implosion must be about to happen Like Melbourne prices fell about as much as they fell in Hobart. What a disaster for those people .... And no doubt they owe the banks heaps as well

Just as well HNZ are insulated from this.

PS did you read about that private school in Melourne with 1500 students going broke the other day owing $18 million in debt ...... To the banks. A sign of the times eh

First of all I missed the story of the Melbourne private school.Did the Burser bugger off with Matron? $18 million in debt.Cracker.!! I know Nelson College had to auction off the school's art work because of debt.Think the old boys brought it and gave it back to the school.
I have got myself in trouble on NPX thread saying I feel there will be a hole in their Aussie earnings,but other than minning Aussie have big troubles,which you have picked up on.Sauce,[source] of funds;I think Aussie Banks have borrowed off shore big time,so watch this space.
TSB are doing well,don't know if it will affect the price of fish or not,but I think they are maybe a bank?
Xerof will no doubt enlighten me.!!!
HNZ as you point out are well away from the troublesome Aussie market.
Fun starts when you have negatively geared your house,and your business suffers a down turn.Bit like playing Russian roulette with a bullet in every chamber.Banks panic,suppliers panic,good staff panic and look for a job elsewhere.Out come; everyone takes a haircut.!!!!

[winner69]

About the school
http://www.theage.com.au/national/education/crushing-debt-leaves-private-school-struggling-20120529-1zhfv.html

[percy]

About the school
http://www.theage.com.au/national/education/crushing-debt-leaves-private-school-struggling-20120529-1zhfv.html

.
You may wish to google;calls for rba rate cut grow as outlook darkens.
Funny how a school is really just another type of business,poor CEO,poor board,leds to poor decisions which leds to "big haircuts' all round.
May pay to send "our leader" over there.Sack the teachers,bring in Philipine teachers for half the cost,and increase class sizes to 55 pupils.

[Breastwork]

http://www.nbr.co.nz/article/monty-python-couldnt-have-scripted-it-better-119777

[percy]

Please go to PGC thread to see my sumary of this article.

[percy]

F&P is exclusively consumer loans. GE is primarily consumer with a small portion of commercial. Neither have exposure to rural or housing.

To compare them to Heartland is mischievous or pure ignorance

Enjoy my GE Capital update on PGC thread.

[percy]

" Aussie banks sauces " ???.. I know that there is a war on for the mortgage market Percy..

Are they asking .. " Would you like fries with that " .. ??

Hi janner,and a special hi to Snoopy.Looks as though the Banks could get fried.Article in The Age headed "Drop in banks' cross-border lending".; The larger Australian banks rely on global funding markets.Not a good secure Sauce [source] I would have thought.Warnig bells.?

[Snoopy]

special hi to Snoopy.Looks as though the Banks could get fried. Article in The Age headed "Drop in banks' cross-border lending".; The larger Australian banks rely on global funding markets.Not a good secure Sauce [source] I would have thought.Warnig bells.?


Just found the article Percy. It is about European banks lending money to do development in Australia and now wanting their money back. That is a problem for European banks, not Australian banks.

The last line of the article

"However given the larger Australian banks rely on global funding markets, they would be affected by the turmoil in the markets that would follow any break-up of the euro area or a European sovereign or banking default, he said."

doesn't appear to follow from the content of the rest of the article. It reads like a desperate attempt to give European bank loan problems a 'relevant to Australia' spin.

SNOOPY

[Snoopy]

The larger Australian banks rely on global funding markets.


According to the FY2011 ANZ annual report, ANZ don't have to repay any of their overseas bonds or notes until 2015 at the earliest. This 2015 date relates to 200 million GBP. If demand for funds from ANZ customers goes up then ANZ might have a problem raising more funds in Europe. But this seems unlikely in the current financial climate in Australia.

If demand goes down they can repay some bonds early without penalty. I don't see the same threat to the likes of ANZ that you do.

Again using ANZ as an example, total overseas bonds on issue are $A56,551m compared to deposits of $A368,729m. I would hardly say ANZ is beholden on overseas borrowings for funds. So far I am not even the slightest bit worried that the likes of ANZ is in any kind of trouble. Can you supply anything more concrete on what you might be on about?

SNOOPY

[percy]

Glad we agree we are comfortable with funding,you with ANZ and me with HNZ.

[SCOTTY]

Have just mailed back the 30c offer form in an unstamped envelope with the words - "Get stuffed you thieving Bastards!!" printed in bold, black marker pen. Hope they don't mind paying the postage!!

[percy]

Have just mailed back the 30c offer form in an unstamped envelope with the words - "Get stuffed you thieving Bastards!!" printed in bold, black marker pen. Hope they don't mind paying the postage!!

You do have a nice way with words.!!!!
I just sent the empty envelope back,but I did mark it FAST POST.

[SCOTTY]

You do have a nice way with words.!!!!
I just sent the empty envelope back,but I did mark it FAST POST.

An empty envelope Percy!! - what a waste, especially when it went FAST POST. That was a very nice touch though. Wish I had thought of that as I sent 3 envelopes :)
Cheers

[percy]

Hi Snoopy.
Think you will find article in "The Age" positive;"ANZ to close fund after $100m lost".They don't appear to have a very good investment record.

[Snoopy]

Hi Snoopy.
Think you will find article in "The Age" positive;"ANZ to close fund after $100m lost".They don't appear to have a very good investment record.

It is merely a lesson against the folly of trend following Percy

"Former ANZ chief executive John McFarlane launched the fund in 2006, at the peak of the boom, with high hopes that its plans to invest in small to medium-sized companies in Australia and New Zealand would pay handsome dividends."

"However, many of the companies in which it invested wilted when the global financial crisis struck two years later."

Jumping on a bandwagon normally ends in tears in the end. But as the article said, the loss is not material to an entity the size of the ANZ. Of course if it had been Heartland in this hot seat, such a venture might have finished them!

SNOOPY

[winner69]

Percy - Hobart can't be too bad housing wise



http://www.themercury.com.au/article/2012/06/16/337471_most-popular-stories.html

[percy]

Percy - Hobart can't be too bad housing wise



http://www.themercury.com.au/article/2012/06/16/337471_most-popular-stories.html

Would appear we have a real estate market of two halfs.! Top half over $1mil strong,while bottom half under $1mil weak.!!The bookseller's house which remained unsold after a year on the market was in the $650,000 to $750,000 bracket from memory.Situated in Churchill Ave,Sandy Bay.

[Snoopy]

Just a street observation on Heartland. Have walked past a couple of branches down here. The two I saw were branded CBS Canterbury, with small print if you peered inside the window 'part of the Heartland group'.

I would say there is quite a big rebranding exercise to do when this Heartland thing finally comes together. How many offices nationwide will need rebranding/refurbishing? And what kind of hole will that make in the balance sheet? There must be a very large latent capital expense haunting on the HNZ books. My guess is that any rebranding will be put on ice until Heartland gain their banking licence. Otherwise HNZ might have to rebrand twice, first as the finance company that it is, and later as a bank. That banking licence could be years away. That is probably a good thing with the equity ratio at HNZ looking tight (IMO).


Breaking News! Heartland have just rebranded my local CBS Canterbury store in Riccarton as 'Heartland'. This is very clever timing. The work is done in June and Heartland gets the bill in July. But Heartland's balance date is 30th June. That means Heartland can shunt their transformation costs into the following financial year!

One more observation. The new branding is 'Heartland' not 'Heartland bank'. That means we can rule out Heartland becoming a bank in the next year. If a banking licence decision was near Heartland would have delayed their rebranding IMO.

SNOOPY

[Under Surveillance]

One more observation. The new branding is 'Heartland' not 'Heartland bank'. That means we can rule out Heartland becoming a bank in the next year. If a banking licence decision was near Heartland would have delayed their rebranding IMO.

SNOOPY
In your post #415 you ruled out registration of HNZ as a bank for about 3 years. Now, a couple of months later, you rule it out in the next year. Seems to me you are prejudiced against HNZ [and/or percy] and tending to make a fool of yourself with inconsistent assertions.

[percy]

[QUOTE=Snoopy;376543]Breaking News! Heartland have just rebranded my local CBS Canterbury store in Riccarton as 'Heartland'.

Looks very smart.I notice they have left plenty of room to add "Bank" to the signage [at very little cost] if and when they get a bank licence.

[kizame]

[QUOTE=Snoopy;376543]Breaking News! Heartland have just rebranded my local CBS Canterbury store in Riccarton as 'Heartland'.

Looks very smart.I notice they have left plenty of room to add "Bank" to the signage [at very little cost] if and when they get a bank licence.

Yep the Tauranga shop front in Devonport road has been rebranded as well,looks ok in white with green borders.

[kizame]

Only thing is tho,it only says heartland,so heartland what? no bank of course,but no building society either,so maybe holding off in expectation I think,but after all it is only paint.

[Snoopy]

In your post #415 you ruled out registration of HNZ as a bank for about 3 years. Now, a couple of months later, you rule it out in the next year. Seems to me you are prejudiced against HNZ [and/or percy] and tending to make a fool of yourself with inconsistent assertions.


US, I probably have more robust exchanges with Percy than other posters. But then again Percy is one of the more active posters, so that is to be expected.

As for being biased against HNZ, well, I do think I should point out the counterfactual arguments to some of the over exuberant spin from the Heartland fans. As I have stated before on this forum, I would like to see Heartland succeed. But I want to see them earn their stripes, not spin them.

As for 'inconsistent assertions', I would only point out that stating IMO that

1/ Heartland will not become a bank within the nest year and stating that
2/ Heartland will take about three years to become a bank.

are both true statements if Heartland takes about three years to become a bank.

SNOOPY

[Snoopy]

Only thing is tho,it only says heartland,so heartland what? no bank of course,but no building society either,so maybe holding off in expectation I think,but after all it is only paint.


Thanks for confirmation of 'the Heartlandisation' spreading to other parts of the country Kizame.

I think Percy is onto it when he says that should the banking licence be approved, there is enough 'sign real estate' to add the word 'bank' later. As I said before -clever. I would do exactly the same thing if I was running Heartland.

I would also maximize my shareholder equity for the end of year accounts. And a good way to do this would be to shunt as many transformation expenses into the next financial year as possible. I am pointing this out to shareholders and potential shareholders not because I believe this practice is bad. But I wouldn't want shareholders to think the cash position of Heartland is better than it really is because of the timing of this transformation work.

SNOOPY

PS And yes I like the new look too.

[percy]

US, I probably have more robust exchanges with Percy than other posters. But then again Percy is one of the more active posters, so that is to be expected.

As for being biased against HNZ, well, I do think I should point out the counterfactual arguments to some of the over exuberant spin from the Heartland fans. As I have stated before on this forum, I would like to see Heartland succeed. But I want to see them earn their stripes, not spin them.

As for 'inconsistent assertions', I would only point out that stating IMO that

1/ Heartland will not become a bank within the nest year and stating that
2/ Heartland will take about three years to become a bank.

are both true statements if Heartland takes about three years to become a bank.

SNOOPY

I am very mindful of the huge contribution SNOOPY makes to Sharetrader.I think the exchanges he has with me are good for me,as they make me explain more clearly my reasoning for a post I have posted.I trust other posters have learnt more about the company from our exchanges.As we both post a lot the chances of us making mistakes increases.

[iceman]

I am very mindful of the huge contribution SNOOPY makes to Sharetrader.I think the exchanges he has with me are good for me,as they make me explain more clearly my reasoning for a post I have posted.I trust other posters have learnt more about the company from our exchanges.As we both post a lot the chances of us making mistakes increases.

I am definitely one that has very much enjoyed and learnt from the contributions you and Snoopy have made to this (and other) thread. Great stuff from both of you thank you.

[Arbitrage]

Hopefully there will be a dividend this year.

[percy]

Only thing is tho,it only says heartland,so heartland what? no bank of course,but no building society either,so maybe holding off in expectation I think,but after all it is only paint.

I don't know whether it is to do with branding or not,but I note Westpac and ASB have opened new branches at Barrington Mall,ChCh.Westpac does not include bank in their signage,while ASB does.
I think it is a step in the right direction branding all Heartland business Heartland,however I would like the finance company to retain MARAC name which has a strong brand to me.ANZ use UDC for their finance.

[percy]

I'd perfer growth myself ... One notes a lots ads recently from other large players (e.g. UDC) saying they've got money to lend ... Maybe if HNZ can't find suitable opportunities it'll come as a divie ...

Yes I agree with you perfering growth.However, a divie would be most welcome,and would do the SP a power of good.

[kizame]

I don't know whether it is to do with branding or not,but I note Westpac and ASB have opened new branches at Barrington Mall,ChCh.Westpac does not include bank in their signage,while ASB does.
I think it is a step in the right direction branding all Heartland business Heartland,however I would like the finance company to retain MARAC name which has a strong brand to me.ANZ use UDC for their finance.

Yep totally agree,keeping Marac brand would be a big plus,but the Heartland brand,The reason i think they should state what they are on their signage, is because it is a new brand and I don't think anybody would know what they are,apart from the interest rates in the window.If i wasn't a shareholder taking interest I wouldn't know anything about them,so just Building society on the sign might just alleviate this lil problem a bit.Even if only temporary or not.

[Snoopy]

The reason i think they should state what they are on their signage, is because it is a new brand and I don't think anybody would know what they are,apart from the interest rates in the window.If i wasn't a shareholder taking interest I wouldn't know anything about them,so just Building society on the sign might just alleviate this lil problem a bit.Even if only temporary or not.


Agree Kizame. I saw a big Heartland billboard earlier this year. Turned out it was for Heartland Hotels!

SNOOPY

[percy]

Agree Kizame. I saw a big Heartland billboard earlier this year. Turned out it was for Heartland Hotels!

SNOOPY

I hate to admit to it,but I think I saw one for Heartland Potatoe chips.!!!!

[percy]

Torchlight sells down ... Shame they're still there tho

The vultures have been waiting for this ... :) ... But they'll need to wait a little longer ... ;)

Well belgarion I hope you are in a "huge pyramid" building mood.Expect you to quickly mop GK/PGC's
7 846% .!!!!!!! Better move before Winner69 gets buying.!! lol.

[winner69]

I hate to admit to it,but I think I saw one for Heartland Potatoe chips.!!!!

Not being cheeky Percy but your spelling as good as Al Gore's

No doubt branding themselves as Heartland was to capture the hearts and minds of NZers by capitalizing on the emotion at attached to the term Heartland being associated with rural NZO

I always thought it rather strange branding strategy. Heartland is a now a rather generic term associated with rugby and TV and as pointed out motels, breweries, potato chips and various other products.

Heartland (without a world Bank or Building Society or Finance) on a sgn or a front window seems rather weak ... No identity ..... What does it do? Maybe if it ever gets the word Bank it it look better but NZers won't be fooled by the word Heartland meaning good for them

Must say that Cooperative Bank have done a bloody good job in their rebranding. Nows there's a real people's bank for you ......stolen a march on Heartland?

[percy]

Not being cheeky Percy but your spelling as good as Al Gore's

No doubt branding themselves as Heartland was to capture the hearts and minds of NZers by capitalizing on the emotion at attached to the term Heartland being associated with rural NZO

I always thought it rather strange branding strategy. Heartland is a now a rather generic term associated with rugby and TV and as pointed out motels, breweries, potato chips and various other products.

Heartland (without a world Bank or Building Society or Finance) on a sgn or a front window seems rather weak ... No identity ..... What does it do? Maybe if it ever gets the word Bank it it look better but NZers won't be fooled by the word Heartland meaning good for them

Must say that Cooperative Bank have done a bloody good job in their rebranding. Nows there's a real people's bank for you ......stolen a march on Heartland?

Agree with you.
BANK OF BELGARION has a certain ring to it.?!!!!!

[janner]

Winner 69

I think you will find that it was Dan Quayle who spelt it as " Potatoe "..

[winner69]

Winner 69

I think you will find that it was Dan Quayle who spelt it as " Potatoe "..

You are so right janner .... better memory than me

[percy]

Winner 69

I think you will find that it was Dan Quayle who spelt it as " Potatoe "..

Always thought Dan was a bit of a "percy". !!!!

[Balance]

Harrowgate creaps closer to 10% ... Guess they want to block any takeover at a rediculous price?

They are the party to watch for a takeover!

But only after they have squeezed Georgie Pork Kerr out of the ret of his shares at a bargain basement price.

[K1W1G0LD]

Yes Impact capital would be a better fit than George Kerr , but then anyone would be !
What about Kiwibank?
HNZ is rated outperform with a target price of 60 cents according to the findings of two analysts as reported today in NZ Investor.

[Master98]

They are the party to watch for a takeover!

But only after they have squeezed Georgie Pork Kerr out of the ret of his shares at a bargain basement price.

So sp will continue sliding until GK fork out the rest 7.8% holding, that's will be interesting.

[Xerof]

They are the party to watch for a takeover!

Frayed knot..... Winner69 is closer to the mark with his astute comment on the PGC thread #1177

Just more entries on the money-go-round

When do those GT underwrite shares come off that 'voluntary' escrow?

[Master98]

Seems like GK is on action, another 15m shares changed hand.

[janner]

Good to see !!.. The sooner GK winds his way out of HNZ the better.. Also the sooner PGC " may " come onto an even keel..

A share that I have written out of my portfolio, but still hold .. Only holding out of sheer cussedness.

Hoping it is hurting GK .. :-))

[percy]

Good to see !!.. The sooner GK winds his way out of HNZ the better.. Also the sooner PGC " may " come onto an even keel..

A share that I have written out of my portfolio, but still hold .. Only holding out of sheer cussedness.

Hoping it is hurting GK .. :-))

What one are you holding HNZ or PGC ?
I added to mine and my wife's HNZ a couple of months ago,after selling out of PGC some time ago.
Forgetting all the noise I feel we are "well positioned" in HNZ.

[Master98]

What one are you holding HNZ or PGC ?
I added to mine and my wife's HNZ a couple of months ago,after selling out of PGC some time ago.
Forgetting all the noise I feel we are "well positioned" in HNZ.

I only hold small amount shares after sold most of my 45cps, i will buyback until i can convince myself that this "would be" bank shares do already "touchdown".

[Balance]

Seems like GK is on action, another 15m shares changed hand.

15m shares to go and like PGW, the stench of George Kerr will be lifted from HNZ.

That banking license for HNZ will be so much easier to get after George Kerr's decomposing credibility is gone.

Time to pick up on some cheap shares from George - not often in life you get a mortgagee sale situation as George Kerr's selling looks desperate.

[Master98]

15m shares to go and like PGW, the stench of George Kerr will be lifted from HNZ.

That banking license for HNZ will be so much easier to get after George Kerr's decomposing credibility is gone.

Time to pick up on some cheap shares from George - not often in life you get a mortgagee sale situation as George Kerr's selling looks desperate.


Because both HNZ and PGW sp are manipulated, so are very hard to predicate the sp trend, at least the game is over for PGW, but for HNZ may be still a way to go for the rest 15m shares, keeping eye on.

[percy]

Nice to see the 15mil shares go to a nice home.Takes Philip Carter's holding up to 20,973,492shares.
Very positive.

[Under Surveillance]

Nice to see the 15mil shares go to a nice home.Takes Philip Carter's holding up to 20,973,492shares.
Very positive.
Tell us more. Why is it very positive? Who is he?

[percy]

https://www.nzx.com/files/attachments/159971.pdf

Still good Percy?

editted:

... I think this is Phillip
-- http://www.nbr.co.nz/philip-carter
-- http://www.stuff.co.nz/the-press/news/4981210/Maurice-Carter-leaves-behind-immense-legacy

I'm not to sure of Kerr's relationship with Carter but Carter's history and pedigree suggests he's of a different mold altogether. Anyone confirm this?

Seems Heartland is becoming a truly mainland concern. Odd we haven't seen Hugh Greene playing as I'd have thought he'd like this action. But maybe the old fox is waiting in the wings.

.... Methinks HNZ is about to go off on tear :)

Yes,yes,yes. Very sure no relationship with GK.He has a record of investing in the sharemarket.I have noticed his name a number of times in shareholder lists.He is a son of Maurice Carter who was a very succesful ChCh builder.One brother is David Carter the MP while another brother is a university lecturer I think.Would expect him to be his own man.

He owns a very large property portfolio in ChCh.He may have received a lot of insurance money from earthquake pay outs.
i brought a few more this morning at 51cents.Sold out ofFor MLN.
Bit surprised Hugh Green and others have not brought in.Although it may be SI buyers of shares at present,a huge part of HNZ is in the NI
We are "well positioned"for the upturn.!!!!! lol

[Balance]

Well, looks like the stench of George Kerr (and his equally smelly lackey Bryan Mogridge) is starting to lift from HNZ.

[Grantas]

Yeah, this article shows PGC down to less than 4%
http://www.sharechat.co.nz/article/829e0e80/carter-group-boss-picks-up-torchlight-stake-in-heartland.html

[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%.

[Xerof]

Gee, i get the uneasy feeling you're pumping for distribution here Balance. Is it on behalf of tomlinson or carter?

[Master98]

Gee, i get the uneasy feeling you're pumping for distribution here Balance. Is it on behalf of tomlinson or carter?

Yeah, have to judge by yourself.

[Balance]

Gee, i get the uneasy feeling you're pumping for distribution here Balance. Is it on behalf of tomlinson or carter?

Pumping?

I doubt Tomlinson and Carter would appreciate anyone 'pumping' as they are squeezing GK out of his shares. There's 3.9% more left to squeeze out of George.

Problem for small investors is that they cannot access this big lines of stocks and when they are gone, the share prices seem to spike upwards very quickly.

Nope, I bought some at 53 cents and putting money where my mouth is.

Or where the big boys' mouths are?

Greg Tomlinson - 8.8%
Philip Carter - 5.4%
C mace & G Ricketts - 5.3%

Note that Tomlinson got his initial stake at 75 cents, underwriting.

Now why do I get the feeling that this is a forum of 'pumpers' and 'downrampers'?

[Xerof]

Tomlinson's underwriting debacle was well documented at the time. I guess the current view for all the 'big' mouths is to average down at the expense of those who conned them into it in the first place, and hope for a recovery in the future. Nothing particularly wrong with that approach, but it probably means heavy overhead resistance will become apparent in due course.

But good on you for piggy backing.

I'm chuffed....I have coaxed what I believe is the first ever disclosure of a shareholding out of you Balance :p

Discl: me no hold

[Balance]

Tomlinson's underwriting debacle was well documented at the time. I guess the current view for all the 'big' mouths is to average down at the expense of those who conned them into it in the first place, and hope for a recovery in the future. Nothing particularly wrong with that approach, but it probably means heavy overhead resistance will become apparent in due course.

But good on you for piggy backing.

I'm chuffed....I have coaxed what I believe is the first ever disclosure of a shareholding out of you Balance :p

Discl: me no hold

Well, you sure are Diligent(DIL)!

[Arbitrage]

Does anyone think we will see a share price of 50c again?

[percy]

Does anyone think we will see a share price of 50c again?

No. Full steam ahead.Time for a good old TOOT TOOT.!!!!!!

[Snow Leopard]

I decided to join the share register for this one, being reasonably confident that the way is now not down* and the discount to NTA provides some comfort.

best wishes
Paper Tiger

*watch it dive!

[Balance]

Nope, No and Absolutely NOT. discl: hold and buying from time to time so this doesn't become another aussie bank. Bring on the KiwiBank IPO!

Looks like Dodgie Podgie Georgie and PGC sold the last of their HNZ shares yesterday.

The game now is "closing the NTA gap" and with their stench of decay out of the way, HNZ should start reflecting fair value - rather than the discount as investors steered clear to avoid the stench.

Not many shares in the market with a discount of 30 cents to NTA of 85 cents or potential upside of 54.5%.

Not without risks but certainly without George Kerr, Bryan Mogridge and all the other George's lackeys like Greg "not So" Bright to screw the scrum into their pockets all the time.

[kiwi_on_OE]

Bank of Queensland and Bendigo & Adelaide are at discount to NTA if that's what you want. And they are proper banks, paying dividends.

Looking at the fundamentals for HNZ, profit of $20m for the year, so a PE of 10, ROE of 6%, ROA 1%. They obviously need to improve their ROE. TSB are have a similar NTA, but have twice the asset base, ROE 12%, ROA 1%. So TSB is a good example to follow. The question is, can they?

Given the size similarity with TSB, it almost makes me wonder if they could be tempted to take it over.

[percy]

[QUOTE=kiwi_on_OE;377571]Bank of Queensland and Bendigo & Adelaide are at discount to NTA if that's what you want. And they are proper banks, paying dividends.

Looking at the fundamentals for HNZ, profit of $20m for the year, so a PE of 10, ROE of 6%, ROA 1%. They obviously need to improve their ROE. TSB are have a similar NTA, but have twice the asset base, ROE 12%, ROA 1%. So TSB is a good example to follow. The question is, can they?

Looking at those fundamentals you do not get a true picture.First half hopeless.Govt guarantee/holding too much cash,set up costs etc.
3rd and 4th quarters give/ and will give a true picture of progress made and and indication of future earnings.Would expect we will have
4th quarter and full year result soon.In a year or two I expect ROE of 15 or more.

[Balance]

Bank of Queensland and Bendigo & Adelaide are at discount to NTA if that's what you want. And they are proper banks, paying dividends.

Looking at the fundamentals for HNZ, profit of $20m for the year, so a PE of 10, ROE of 6%, ROA 1%. They obviously need to improve their ROE. TSB are have a similar NTA, but have twice the asset base, ROE 12%, ROA 1%. So TSB is a good example to follow. The question is, can they?

Given the size similarity with TSB, it almost makes me wonder if they could be tempted to take it over.

The problems of Bank of Queensland and Bendigo/Adelaide are well known and documented - over-exposures to one sector/state and consequential losses which necessitate capital raisings (BOQ has had to raise capital twice in 3 years to plug the consequential hole!).

Interesting enough, they still trade at close to NTA.

[SCOTTY]

If you are a T.A. believer - the share price is well above the 30 and 100 day moving averages - the charts say - BUY

Chocks away :t_up:

[Balance]

fianlly sold our remaining shares in pgc

our family trust only has 5000 odd, but after the after buying the rights issue we have 21000. my late father , an accountant had had his broker buy at above 4 dollars back in the days when marac paid a dividend.

now days i trade the market and dont go long

i would have to say that even though we only lost about 19000 dollars.

the pritty is it now appears that in order to buy shares in PGC and aquire the company G Kerr has taken out related party loans

it matters not where the money came from in order for kerr to buy shares, his related party loans allowed him to keep operating and buying shares even if it was through another party such as the US partnership.

Share holder wealth has been used to corner the major stake in the company even if the loans were used else where.

It matters not becuase with out these loans Kerr may never have had the public good will to make the take over due to the public knowing of his related party loans.

the FMA intervention would hve shut the process down ages ago.

if now appears that kerr and co have dupped the public and the shareholders in to selling down there shares at major losses.

Dodgie Georgie was trying to make up the horrendous losses he took from the first 10% shareholding he bought in PGC back in 2006 to 2008 - 9.8m shares at around $4.50 each.

He managed to pull off a few fast ones, shuffling assets, loans and shareholdings around the place, but ultimately got caught big time with his hands in the cookie jar with Torchlight/Perpetual.

As Shoeshine at NBR speculated last week, could be a lot more skeletons to come out of PGC yet now that the FMA is having a close look. FMA took away a lot of files, emails etc so there will be some serious analysis going on there now.

Meanwhile, HNZ has fortunately been insulated from all of his shenanigans by a very strong independent board - all independents save for the MD.

Dodgie Georgie's last link to HNZ was PGC's shareholding.

[Xerof]

Yep, seems the fog has now lifted off HNZ.

For anyone who heeded the warnings a couple of years ago and sold, if you still have the balls to buy equity in a finance co, now would seem a good time to reenter for a short term rerating imo.

I still don't hold a candle for the banking license scenario, nor do I believe the new large s/holders are committed, so for me there is limited upside. There will be a HUGE number of holders pleased to get back to breakeven before holding costs, who want rid of the whole sorry affair.


This is opinion based on my own research only, not investment advice. DYOR

[Balance]

Yep, seems the fog has now lifted off HNZ.

For anyone who heeded the warnings a couple of years ago and sold, if you still have the balls to buy equity in a finance co, now would seem a good time to reenter for a short term rerating imo.

I still don't hold a candle for the banking license scenario, nor do I believe the new large s/holders are committed, so for me there is limited upside. There will be a HUGE number of holders pleased to get back to breakeven before holding costs, who want rid of the whole sorry affair.


This is opinion based on my own research only, not investment advice. DYOR

Reminds me of Diligent.

Thanks for the balance, Xerof - two sides make a story and only time will tell which side is correct.

Pike River is of course one which many NZOG and PRC shareholders would like to really really forget but they shouldn't - good lessons to be learnt there.

Never fall in love with a stock and accept a balance view.

[Balance]

Official announcement from PGC that Dodgie Georgie is well and truly out of HNZ.

https://www.nzx.com/files/attachments/160297.pdf

I like the part about PGC now having money to make investments. I wonder how the other shareholders in PGC feel about buying more of Dodgie's assets?

Where has that decomposing dead fish stench from HNZ disappeared to?

[Marilyn Munroe]

Heartland bank fails.

Not here, in Kansas

http://www.fdic.gov/news/news/press/2012/pr12085.html


Boop boop de do

Marilyn

[percy]

Received two letters today from Heartland NZ Ltd.,;[ in the same envelope]
1/ Unsolicited offers for Heartland shares.
2/ Notice of proposal to give financial assistance.
Conculsion,At least the unsolicitied offer guy/gal has to pay for his/her shares.??????
"These unsolicitied offers are not themselves against the law,so your Board cannot prevent these repeated approaches".
Would think the Board may pay to give financial assistance to shareholders before they start "giving" more shares to staff,or they will not be re-elected.Financial assistance to staff is just a transfer of wealth from shareholders to staff.

[spmcg]

Yes, I also thought that was ill-timed at best.

[Snow Leopard]

Received two letters today from Heartland NZ Ltd.,;[ in the same envelope]
1/ Unsolicited offers for Heartland shares.
2/ Notice of proposal to give financial assistance.
Conculsion,At least the unsolicitied offer guy/gal has to pay for his/her shares.??????
"These unsolicitied offers are not themselves against the law,so your Board cannot prevent these repeated approaches".
Would think the Board may pay to give financial assistance to shareholders before they start "giving" more shares to staff,or they will not be re-elected.Financial assistance to staff is just a transfer of wealth from shareholders to staff.

Letter contents 'announced' to market today.
I now see what you are complaining about.
(My paper copies will eventually catch up with me).

best wishes
Paper Tiger

[Balance]

Received two letters today from Heartland NZ Ltd.,;[ in the same envelope]
1/ Unsolicited offers for Heartland shares.
2/ Notice of proposal to give financial assistance.
Conculsion,At least the unsolicitied offer guy/gal has to pay for his/her shares.??????
"These unsolicitied offers are not themselves against the law,so your Board cannot prevent these repeated approaches".
Would think the Board may pay to give financial assistance to shareholders before they start "giving" more shares to staff,or they will not be re-elected.Financial assistance to staff is just a transfer of wealth from shareholders to staff.

Relax, Percy.

All banks give options to executives/staff as part of their packages plus the sp has moved upwards by 10% since the stench of Kerr and Mogridge lifted from the stock.

More upside to come once the traders who bought at around the 50 cents level are moped up.

The revelation of which fund manager has been buying should give the sp another boost in my opinion.

[percy]

Relax, Percy.

All banks give options to executives/staff as part of their packages plus the sp has moved upwards by 10% since the stench of Kerr and Mogridge lifted from the stock.

More upside to come once the traders who bought at around the 50 cents level are moped up.

The revelation of which fund manager has been buying should give the sp another boost in my opinion.

Yes,I suppose you are right,but still sends the wrong message to this shareholder.Wouldn't be nice to get someone like Ralph Norris as Chairman? Wouldn't mind giving him some options based on SP performance.!!!!!

[K1W1G0LD]

Received two letters today from Heartland NZ Ltd.,;[ in the same envelope]

Conculsion,At least the unsolicitied offer guy/gal has to pay for his/her shares.??????
"These unsolicitied offers are not themselves against the law,so your Board cannot prevent these repeated approaches".
Would think the Board may pay to give financial assistance to shareholders before they start "giving" more shares to staff,or they will not be re-elected.Financial assistance to staff is just a transfer of wealth from shareholders to staff.

Percy, I don't think Heartland will be helping you out with financial assistance anytime soon. I emailed Stephen Craig (whose official title now appears to be "Head of Treasury & Strategy") to ask him when they would be announcing their long overdue dividend policy and he replied that this is to be announced by the chairman at their AGM on November 2nd. So the long suffering shareholders will have to wait many more months it seems.

[percy]

Percy, I don't think Heartland will be helping you out with financial assistance anytime soon. I emailed Stephen Craig (whose official title now appears to be "Head of Treasury & Strategy") to ask him when they would be announcing their long overdue dividend policy and he replied that this is to be announced by the chairman at their AGM on November 2nd. So the long suffering shareholders will have to wait many more months it seems.

Good work K1W1GOLD.Would be most acceptable to sharehoders to have a divie, as well as the dividend policy announced at AGM.Divie paid before Xmas? Am sure if The Chairman is up for reelection he will be keen to make a maiden divie announcement.

[K1W1G0LD]

Good work K1W1GOLD.Would be most acceptable to sharehoders to have a divie, as well as the dividend policy announced at AGM.Divie paid before Xmas? Am sure if The Chairman is up for reelection he will be keen to make a maiden divie announcement.

I like the way you put a positive spin on it Percy, I hope you're right.

[percy]

I like the way you put a positive spin on it Percy, I hope you're right.

AGMs are fun when a lot of "old chaps" turn up.Mr Fitzgerald ,who was once a Reverend,and a director of PGC has a certain way with words.I look forward to going to this year AGM as I feel there will be a lot said about "staff shares" when shareholders are left waiting for a divie.Once some one brings the subject up, I am sure the board will be left in no doudt how shareholders feel. !!!! lol.

[K1W1G0LD]

Percy, here's what the same gentleman had to say about staff shares when I contacted him recently.


Many thanks for your enquiry
>>
>> The proposed performance based share allocation is part of the overall performance package each executive receives. This is not in addition to, but replaces potential cash bonuses with shares.
>>
>> The purpose of providing shares as opposed to cash bonuses is (from my perspective) designed to ensure the executives motivation is aligned with that of shareholders, being long term sustainable profit and share price appreciation. One thing the global financial crisis has taught us is that short term incentives in many instances have resulted in value destruction. As such your Board is very much focussed on ensuring longevity and sustainability of earnings.
>>
>> It is important to note that no shares will be made available to these executives unless the performance targets are achieved. If the targets are not achieved, then the shares would not vest. The Board has absolute discretion in this regard. Whilst I am not yet privy to the performance criteria, I assume it would naturally include minimum return on equity hurdles; the payment of dividends to share-holders; and share price appreciation.
>>
>> I hope this goes some way to answering your questions. If you require clarification on any point or wish to discuss anything further, please do not hesitate to give me a call.
>>
>> Regards
>>
>> Craig
>>
>> Craig Stephen
>> HEARTLAND BUILDING SOCIETY | HEAD OF TREASURY & STRATEGY

[percy]

Percy, here's what the same gentleman had to say about staff shares when I contacted him recently.


Many thanks for your enquiry
>>
>> The proposed performance based share allocation is part of the overall performance package each executive receives. This is not in addition to, but replaces potential cash bonuses with shares.
>>
>> The purpose of providing shares as opposed to cash bonuses is (from my perspective) designed to ensure the executives motivation is aligned with that of shareholders, being long term sustainable profit and share price appreciation. One thing the global financial crisis has taught us is that short term incentives in many instances have resulted in value destruction. As such your Board is very much focussed on ensuring longevity and sustainability of earnings.
>>
>> It is important to note that no shares will be made available to these executives unless the performance targets are achieved. If the targets are not achieved, then the shares would not vest. The Board has absolute discretion in this regard. Whilst I am not yet privy to the performance criteria, I assume it would naturally include minimum return on equity hurdles; the payment of dividends to share-holders; and share price appreciation.
>>
>> I hope this goes some way to answering your questions. If you require clarification on any point or wish to discuss anything further, please do not hesitate to give me a call.
>>
>> Regards
>>
>> Craig
>>
>> Craig Stephen
>> HEARTLAND BUILDING SOCIETY | HEAD OF TREASURY & STRATEGY

I can just see chairman Bruce Irvine or Craig Stephen explaining it at the AGM.
I can also "hear" Mr.Fitzgerald's reply."As a shareholder I have TWO performance figures I look at.One the share price,the other the dividend.On both perfomance figures the board has failed." lol

[percy]

Today's announcement.Result will be reported 28th August.
Bank licence;"Heartland expects that a decision will be avaliable by a date in November of this year." Interesting, they appear to be further down the track then I thought.Trajectory should see the SP close the gap to NTA.Further trajectory will see the SP at a premium to NTA,while a divie will greatly increase rate of the trajectory .