HGH - Heartland Group Holdings

[percy]

Yes another very solid quarter.
W69 ;UDC result was a prelude .Usually follows when UDC does well, so do HNZ.Seems a growing market for both.And yes UDC is a very well run business too.
And plenty of gas in the tank.
I think the agm presentations will include profit projections,and the usually comprehensive commentary of where HNZ sees their future .
We remain "well positioned."

[Beagle]

At the mid point of their forecast range $53m on 473.6m shares on issue FY16 EPS is 11.19 cps. Leaving aside loan defaults which has been thoroughly discussed, apply whatever PE you feel is right but I note that historically its tended to trade in a range of 11-12 and this is broadly consistent with the current trading range of Aussie banks which suggests fair value is $1.23 - $1.34.

[K1W1G0LD]

i see they've reaffirmed guidance yet again , I wonder how many quarters in a row now they've done that and either met or exceeded or exceeded their target . Steady as she goes.

[percy]

i see they've reaffirmed guidance yet again , I wonder how many quarters in a row now they've done that and either met or exceeded or exceeded their target . Steady as she goes.

Yes "Steady as she goes."
We like it like that.!!!

[winner69]

Heartland says "Key drivers of growth for Heartland are GDP and employment

More good news today on that front


@ANZ_cambagrie: ANZ business outlook survey for NZ shows further improvement. Firms flag better activity, employmt and investmt. +ve signs for growth


FY16 earnings heading $60m - guidance of $51m to $55m rubbish

[Snow Leopard]

At the mid point of their forecast range $53m on 473.6m shares on issue FY16 EPS is 11.19 cps. Leaving aside loan defaults which has been thoroughly discussed, apply whatever PE you feel is right but I note that historically its tended to trade in a range of 11-12 and this is broadly consistent with the current trading range of Aussie banks which suggests fair value is $1.23 - $1.34.

1Q statements lack a lot of the detail of full year and only cover the bank, which is not yet all of HNZ.

But they have a net impairment expense of
$3,306K (with rural being $399K)
as opposed to this time last year when it was
$1,838K (with rural being $10K)

Interestingly 90+ day overdue loans on rural as gone from $17,904K to $11,704 in the last three months, possibly as a result of some/many them being reclassified given that Heartland are supporting dairy in these difficult times.

Whilst I think winner69 and his $60M is just winner69 being winner69 I am going to suggest that the $55M end of guidance is looking very achievable at the moment.

And so hot from the Paper Tiger Institute of Obscure Numbers:

Current value: $1.373
30-Jun-16 value: $1.428
30-Nov-16 value: $1.465

Assuming nothing special whatsoever happens. (i.e. No Tier2, no buybacks, no MTF, No smoking...)

Best Wishes
Paper Tiger

[Beagle]

Not asking you to be silenced mate. I am sure they will simply "manage" their way towards the mid point of their FY16 guidance range by changing some of the underlying assumptions that are supportive of what amounts to nothing more than guesses, (opps sorry, professional estimations) of loan provisioning at year end so I am happy to agree to disagree with you and will stick with my fair value assessment and note that the current price is within my fair value range.

I called it as fairly valued on 1 February 2015 at $1.30...not much has changed, EPS up a little and sector PE down a little bit reflecting underlying risks in a slowing economy and commodity environment.
Those thinking that auditors give a really thorough and impartial scrutiny of the company in terms of the adequacy or otherwise of loan provisioning. Oh dear, that's a pretty sad indictment on professional standards isn't it :eek2:
http://www.sharechat.co.nz/article/baf6ac63/nz-auditors-still-struggling-to-meet-standards-in-latest-fma-review.html?utm_medium=email&utm_campaign=NZ+auditors+still+struggling+to+meet+ standards+in+latest+FMA+review&utm_content=NZ+auditors+still+struggling+to+meet+s tandards+in+latest+FMA+review+CID_27dd0a8babc9d611 c5c9a23cbaf3b54b&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticlebaf6ac63nz-auditors-still-struggling-to-meet-standards-in-latest-fma-reviewhtml

[Snow Leopard]

Not asking you to be silenced mate. I am sure they will simply "manage" their way towards the mid point of their FY16 guidance range by changing some of the underlying assumptions that are supportive of what amounts to nothing more than guesses, (opps sorry, professional estimations) of loan provisioning at year end so I am happy to agree to disagree with you and will stick with my fair value assessment and note that the current price is within my fair value range.

I called it as fairly valued on 1 February 2015 at $1.30...not much has changed, EPS up a little and sector PE down a little bit reflecting underlying risks in a slowing economy and commodity environment.
Those thinking that auditors give a really thorough and impartial scrutiny of the company in terms of the adequacy or otherwise of loan provisioning. Oh dear, that's a pretty sad indictment on professional standards isn't it :eek2:
http://www.sharechat.co.nz/article/baf6ac63/nz-auditors-still-struggling-to-meet-standards-in-latest-fma-review.html?utm_medium=email&utm_campaign=NZ+auditors+still+struggling+to+meet+ standards+in+latest+FMA+review&utm_content=NZ+auditors+still+struggling+to+meet+s tandards+in+latest+FMA+review+CID_27dd0a8babc9d611 c5c9a23cbaf3b54b&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticlebaf6ac63nz-auditors-still-struggling-to-meet-standards-in-latest-fma-reviewhtml

So, never believe an accountants valuation of anything, got that.

Best Wishes
Paper Tiger

[Beagle]

LOL PT auditing standards and valuations are of course two entirely different things. In my view the fundamental problem with auditing is the inherent compromises.

Auditing firms are being paid by the company to audit their financial statements. Its a competitive process so fee pressure is very real and insurance costs extremely high after Enron and any other number of failures you care to recall.

Auditors can be removed by the company so there's pressure on the job to do it at the right price and pressure for the right result. Attracting the right staff with the right experience at a competitive price is also a challenge.

Too often junior and intermediate level staff simply accept what they're told by high priced bankers as being fair and reasonable. You're far better off looking at the macro economic picture and asking if the level of provisioning is really adequate given the severity of sector headwinds. Sooner or later bad debts come out in the wash.

I've spent year's auditing, (no longer) and my gut instinct tells me HNZ's provisioning in the area of dairy loans could only be described as reasonable if there's a really steep recovery in Fonterra's pay-out next season. Whether that happens remains to be seen but all the risk in this area seems to be towards significant increases in future loan provisioning which will of course impact future profit results.

[percy]

As all of us who follow the banking sector know, the most useful comparisons and updates of the sector is provided by KPMG with their reviews.
They are most probably the most respected banking "analysts".
They also happen to be HNZ's auditors.

[winner69]

As all of us who follow the banking sector know, the most useful comparisons and updates of the sector is provided by KPMG with their reviews.
They are most probably the most respected banking "analysts".
They also happen to be HNZ's auditors.

And ANZ

Your point being?

[percy]

Decide for yourself.
I have found in any field you do get better advice from a specialist,whether it is your car,your body,and I would expect audit is the same.

[Beagle]

As all of us who follow the banking sector know, the most useful comparisons and updates of the sector is provided by KPMG with their reviews.
They are most probably the most respected banking "analysts".
They also happen to be HNZ's auditors.

I wish I could have faith in auditors and trustees after the GFC but what we leaned as the GFC unfolded was that most provisioning was grossly inadequate when the "custard" hit the fan and the situation many highly leveraged dairy farms are currently in is analogous to a GFC type situation. I find it very interesting that almost every other bank is dramatically ramping up their dairy loan provisioning other than HNZ...hmmm.

[gv1]

Ditto, no faith in auditors....fudge to make things look good or look at places that makes them feel good.

[K1W1G0LD]

In this instance , the Company seems to know best and so far have been spot on . Bankers know Banking ...............accountants ..well , they can be creative!
HNZ certainly more accurate than the Guru of Doom and gloom.:D

[Beagle]

So most of the other banks that are being conservative and really ramping up dairy sector loan provisioning have it wrong and HNZ are right...yeah that makes perfect sense. Time for a Tui :)

[Beagle]

Yeah they probably would mate. After all what does excessive LVR average loan ratio's really mean and if the guy in the fancy suit paid a seven figure salary says dairy is recovering next year who is he to argue especially seeing as said suit is paying the wages ! We're supporting our clients through this...its such a wonderfully politically correct approach to take isn't it.

[Snow Leopard]

So most of the other banks that are being conservative and really ramping up dairy sector loan provisioning have it wrong and HNZ are right...yeah that makes perfect sense. Time for a Tui :)

So which banks?

Provide verifiable figures for at least two of them.

Best Wishes
Paper Tiger

[trader_jackson]

So which banks?

Provide verifiable figures for at least two of them.

Best Wishes
Paper Tiger

Good question...

(I myself have yet to see ANZ announce a, for example, $100m hit on its large rural lending book)

[winner69]

BNZ reported this a month or so ago

The bank's charge to provide for bad and doubtful debts surged $42 million, or 91.3%, to $88 million. The rise was attributed to an increase in collective provision charges, mainly due to the outlook for the dairy industry.

http://www.interest.co.nz/business/78334/bnz-annual-cash-earnings-rise-2-income-growth-outpacing-rise-expenses

[winner69]

So which banks?

Provide verifiable figures for at least two of them.

Best Wishes
Paper Tiger

Paper Tiger grumpy? - well, just being Paper Tiger again I suppose

In return for yesterdays comment about winner69 - couldn't resist

[Beagle]

BNZ reported this a month or so ago

The bank's charge to provide for bad and doubtful debts surged $42 million, or 91.3%, to $88 million. The rise was attributed to an increase in collective provision charges, mainly due to the outlook for the dairy industry.

http://www.interest.co.nz/business/78334/bnz-annual-cash-earnings-rise-2-income-growth-outpacing-rise-expenses

Yeah that's part of what I was referring too, thanks for posting mate. Here's another article that quite explicitly expresses the forward view that loan provisioning is in for a huge increase if dairy stays low
http://www.interest.co.nz/rural-news/77267/rabobank-nz-warns-potential-impact-it-dairy-prices-staying-low-extended-period
Those obsessed with life in the rear view mirror and who accept recent loan provisioning at face value can't see a problem whereas those who spend time trying to look around the corner ahead see trouble coming...two different perspectives. No telling people looking backwards they need to change their point of view I suppose... Must be that auditor training, like a beagle at the airport sniffing out problems ahead, (with apologies to Snoopy) :)

[stoploss]

Yeah that's part of what I was referring too, thanks for posting mate. Here's another article that quite explicitly expresses the forward view that loan provisioning is in for a huge increase if dairy stays low
http://www.interest.co.nz/rural-news/77267/rabobank-nz-warns-potential-impact-it-dairy-prices-staying-low-extended-period
Those obsessed with life in the rear view mirror and who accept recent loan provisioning at face value can't see a problem whereas those who spend time trying to look around the corner ahead see trouble coming...two different perspectives. No telling people looking backwards they need to change their point of view I suppose... Must be that auditor training, like a beagle at the airport sniffing out problems ahead, (with apologies to Snoopy) :)

I think Heartland have had a good look at the loans and made the right provisioning .
Dairy on the up , all good ....
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11553380

[Beagle]

http://www.interest.co.nz/rural-news/78943/questions-remain-about-whether-latest-revival-dairy-prices-will-be-enough-enable

Maybe not enough to enable Fonterra to meet its $4.60 forecast and that's still well adrift of the mid five dollar range experts seem to agree is what's necessary for farmers to break even.

How many more years can banks keep supporting loss making dairy farmers by lending them more and more money to stay afloat ? (Good question to ask your directors at the forthcoming annual meeting).

[stoploss]

http://www.interest.co.nz/rural-news/78943/questions-remain-about-whether-latest-revival-dairy-prices-will-be-enough-enable

Maybe not enough to enable Fonterra to meet its $4.60 forecast and that's still well adrift of the mid five dollar range experts seem to agree is what's necessary for farmers to break even.

How many more years can banks keep supporting loss making dairy farmers by lending them more and more money to stay afloat ? (Good question to ask your directors at the forthcoming annual meeting).

That guy flip flops a lot , just remember they invented economists to make weather forecasters look good.

http://www.interest.co.nz/rural-news/77987/anz-economists-see-further-impetus-milk-price-forecasts-move-above-5-less-urgency

[winner69]

Paper Tiger the other day
Interestingly 90+ day overdue loans on rural as gone from $17,904K to $11,704 in the last three months, possibly as a result of some/many them being reclassified given that Heartland are supporting dairy in these difficult times.


Ah so - I get it know

You take an overdue/problem loan and repackage it up as something new under the guise of support - it becomes a 'new loan' so no longer overdue (even though the borrower still owes heaps)

Tricky

[Beagle]

That guy flip flops a lot , just remember they invented economists to make weather forecasters look good.

http://www.interest.co.nz/rural-news/77987/anz-economists-see-further-impetus-milk-price-forecasts-move-above-5-less-urgency

To be fair that was some time back after four successive GDT gains and many were starting to feel more optimistic. Reality has bitten since and we are still far short of what's required for farmers to break even.


Ah so - I get it now

You take an overdue/problem loan and repackage it up as something new under the guise of support - it becomes a 'new loan' so no longer overdue (even though the borrower still owes heaps)

Tricky

I'm sure you know finance companies and banks have been using this creative accounting method since Adam was a boy and its most especially useful during harsh times like the recent GFC. Good of you to point out to others though and as you know this earns them nice fat refinancing and admin fees too so makes the books look better in more ways than one...until such time as they can't repay their loan that is. Harmoney clip the ticket for (IIRC), a hefty 6% fee on their refinancing, perhaps something of a conflict of interest with investors looking for easier loan admin and loans running their full term ?

[beetills]

Ben Russell C.E.O of Rabobank to join HEARTLAND according to Interest .co.nz.Head of Rural Banking

[Joshuatree]

Good spotting beetlls

Rabobank NZ CEO departs for Heartland Bank (http://www.interest.co.nz/rural-news/78938/ceo-ben-russell-leaves-rabobank-nz-succeeded-interim-ceo-crawford-taylor)

[percy]

Heartland seem to be able to attract top talent.
Not just talented investors.!!!!.lol.

[Beagle]

Hmmm, a good thing ? Extract from the link I provided at post #6783 regarding Rabobank
latest General Disclosure Statement.

"Since 30 June 2015 dairy commodity prices have fallen sharply from already low levels. Farm gate milk prices are now at their lowest levels since 2002. Loans to dairy farmers make up more than 50% of the Bank's overall ($9.314 billion) loan portfolio. Very low prices for an extended period would increase dairy farm loan defaults and the potential for higher loan loss provisions in the Bank's dairy portfolio," Rabobank says.

Pretty interesting style of leadership that ended up with that sort of concentrated sector risk, I would have thought. Did he jump or was he pushed ? Rabobank mentioning his departure in a one liner within a regular disclosure statement suggests quite strongly to me whether he was pushed or otherwise his departure wasn't on amicable terms.

The net result from so much sector risk concentration... so far... http://www.interest.co.nz/rural-news/67591/rabobank-nzs-september-quarter-profit-falls-10-loan-impairments-rise-income-falls
I hope for investors sake he's kept on a tighter leash that when he was at Rabobank.

[winner69]

Just noticed the Head of Rural Banking is no longer on the web-site - can't see an NZX announcement - did I miss something ?

Found a replacement already they have

McD posted his observation Oct 27th ....hmmm

[Joshuatree]

Stranger than fiction :huh:

[winner69]

Stranger than fiction :huh:

Really weird eh mate?

[winner69]

Sorry to see Mark go,but let's welcome Richard.
Richard Lorraway comes to the position with 25 years banking experience,lately with Kiwi Bank.

The timing of that appointment was also interesting

[kizame]

Hmmm, a good thing ? Extract from the link I provided at post #6783 regarding Rabobank

Pretty interesting style of leadership that ended up with that sort of concentrated sector risk, I would have thought. Did he jump or was he pushed ? Rabobank mentioning his departure in a one liner within a regular disclosure statement suggests quite strongly to me whether he was pushed or otherwise his departure wasn't on amicable terms.

The net result from so much sector risk concentration... so far... http://www.interest.co.nz/rural-news/67591/rabobank-nzs-september-quarter-profit-falls-10-loan-impairments-rise-income-falls
I hope for investors sake he's kept on a tighter leash that when he was at Rabobank.

Rabobank is essentially a bank specialising in rural lending. The fact he was with the bank since 1989 suggests he was pretty much with them from about the time they moved into NZ.
That would suggest to me that about 4.6 billion of rural lending,(total at the present time) plus loans paid off,bridging finance etc. has been done whilst he was either at the helm or in a reasonably high position, to have the experience to grow the portfolio at Heartland.

Every lending institution that lends to dairy is going to have some form of writedown to varying degrees because of the downturn,and more so a specialist lender, I think HNZ have seen the potential for growth in this sector and are looking ahead,and taking the experience he brings.
Growing the rural lending book is a massive opportunity,and he has the experience.
I have every confidence in HNZ's management,and the decisions they make.

[Snow Leopard]

Hmmm, a good thing ? Extract from the link I provided at post #6783 regarding Rabobank

Pretty interesting style of leadership that ended up with that sort of concentrated sector risk, I would have thought. Did he jump or was he pushed ? Rabobank mentioning his departure in a one liner within a regular disclosure statement suggests quite strongly to me whether he was pushed or otherwise his departure wasn't on amicable terms.

The net result from so much sector risk concentration... so far... http://www.interest.co.nz/rural-news/67591/rabobank-nzs-september-quarter-profit-falls-10-loan-impairments-rise-income-falls
I hope for investors sake he's kept on a tighter leash that when he was at Rabobank.

As such a forward looking chap I thought you would have noticed that your link is two years old.
Must be the ex-auditor in you.

And if you can ever find some verification for your "...most of the other banks that are being conservative and really ramping up dairy sector loan provisioning..." post be sure to let us know

Best Wishes
Paper Tiger

[Joshuatree]

Lol ,love it and all true.Many hundreds of one eyed repetitively ,negatively slanted posts for all to see ,from a non holder.Why,what good does it do for this forum?

[gv1]

To bring a balance perspective on stock. People looking to invest can make informed decision.

[Beagle]

Lol ,love it and all true.Many hundreds of one eyed repetitively ,negatively slanted posts for all to see ,from a non holder.Why,what good does it do for this forum?

This is what I dislike about finance companies and am keen to warn others about and have. Much like back in the days of the GFC HNZ are lending willy-nilly to consumers, often with poor or no security and its all in the name of profit growth so the bankers can collect their juicy bonus. Trouble is when the real pressure comes on, like it is with Dairy at the moment they then make big sector write-off's and then try and claim its an extraordinary item and not part of their normal operating profit. Now who was ultimately responsible for this $83 million write-off, the poor manager who had a breakdown or your esteemed leader currently running HNZ ?

http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10624635 Does a tiger change its stripes ? Another old link just for your benefit PT. Does history repeat ?

Speaking of Tiger's, I was tired yesterday PT and didn't notice it was an old link. W69 already kindly provided you with a link regarding the BNZ's provisioning which is the only bank currently compling with the new accounting standard regarding this matter but there have been other announcements and there will be plenty coming...surely I don't have to spoon feed a tiger ?

You guys trust the team if you like but the track record is there for all too see.

Hope the rural lending manager that left / was dismissed / was shunted sideways, didn't suffer the same fate as that poor bloke in the link :eek2: Dairy farmers with huge debt have described the current environment as "like going through a meat grinder"...I suppose its not a dissimilar experience being a rural lending manager at present.

Joshuatree -If you find my posts get under your skin there's always the ignore button. Nobody's got a gun to your head making you read them. That said, with the posting of this link (which a friend of mine kindly sent me last evening), which graphically illustrates what happens when a problem sector of debt has to be "marked to market" I feel my job is done.

[Joshuatree]

I'm sorry but just does not wash with me. You may have lost a lot of dough with dodgy finance companies back during the GFC ; a lot of people did it was a travesty. But to call HNZ bank the same is disingenuous./false. Ive been in HNZ since re 70c and have done very well and rate management very highly as they have carved a niche out amongst the big guys, remarkable in fact.This continual negative opinionated ranting . One has to ask why?Is it Ego; I'm always right and everyone else is wrong?. Is it to save people money ?No, look at the AIR example where folks are still being encouraged in like two previous high points where it was suggested to "back up the truck" and they are still down; have lost money.Are you a qualified financial adviser? If so please disclose this; if not why act like one?. Its all the continual subjective , biased posts at any op to discredit HNZ which is harmful to these threads; lets have more objective posting, far better for all.Other wise it just comes across as a poor attempt at match fixing and not a good healthy debate re the pros and cons of a stock. Enough is enough.

[Beagle]

Much of the current unsecured and deferred payment consumer lending that HNZ are doing, as previously posted reminds me very much of the poor practices many of the finance companies engaged in during the GFC and we all know how that turned out for most of them. Does a leopard change its spot's and who was running Marac when they had to take their huge write-off ?...just as well they merged to become part of HNZ otherwise that could have been another finance company down the drain. Sometimes to see the big picture you have to look further back in the past, back before you got in at 70 cents. Best to discuss AIR on the appropriate thread. Happy to leave it at that.

[winner69]

JT wants more "objective posting" and a "good healthy debate re the pros and cons of a stock"

I currently have some HNZ. I like to keep tabs on what the company is doing and how its run.

Recent changes in Senior Management are interesting.

On one hand punters say Heartland have taken on board 'talented' people from Kiwibank and Rabobank as Chief Risk Officer and in Rural Lending. Good moves in that context.

On the other hand the recruit from Kiwibank must have had some accountability re this
http://www.stuff.co.nz/business/73441633/State-owned-Kiwibank-censured-over-anti-money-laundering-failings


The guy from Rabobank seems to have taken a step back in his career for "various personal and professional reasons".

Just a couple of observations, which i find interesting. In an objective way they go into the bank of information as part of a solid fundamental analysis of Heartland and actioned accordingly.

[Marilyn Munroe]

Much of the current unsecured and deferred payment consumer lending that HNZ are doing, as previously posted reminds me very much of the poor practices many of the finance companies engaged in during the GFC and we all know how that turned out for most of them. Does a leopard change its spot's and who was running Marac when they had to take their huge write-off ?...just as well they merged to become part of HNZ otherwise that could have been another finance company down the drain. Sometimes to see the big picture you have to look further back in the past, back before you got in at 70 cents. Best to discuss AIR on the appropriate thread. Happy to leave it at that.

I have posted this opinion on the thread brfore but I dont mind repeating myself.

In my opinion the purpose of the merger which set up Heartland was to hide MARAC's lending beneath the skirts of CBS Canterburys balance sheet.

Boop boop de do
Marilyn

[winner69]

I'm sorry but just does not wash with me. You may have lost a lot of dough with dodgy finance companies back during the GFC ; a lot of people did it was a travesty. But to call HNZ bank the same is disingenuous./false. Ive been in HNZ since re 70c and have done very well and rate management very highly as they have carved a niche out amongst the big guys, remarkable in fact.This continual negative opinionated ranting . One has to ask why?Is it Ego; I'm always right and everyone else is wrong?. Is it to save people money ?No, look at the AIR example where folks are still being encouraged in like two previous high points where it was suggested to "back up the truck" and they are still down; have lost money.Are you a qualified financial adviser? If so please disclose this; if not why act like one?. Its all the continual subjective , biased posts at any op to discredit HNZ which is harmful to these threads; lets have more objective posting, far better for all.Other wise it just comes across as a poor attempt at match fixing and not a good healthy debate re the pros and cons of a stock. Enough is enough.

You be happy now - I see Roger BANNED

He entitled to his view (not anymore unfortunately) just as you are ....even if those views differ

Enough is enough

[horus1]

well, I am still picking them up /. Overweight and I believe they have delivered what they have promised. A difficult market to buy on as seems high.

[winner69]

well, I am still picking them up /. Overweight and I believe they have delivered what they have promised. A difficult market to buy on as seems high.

No harm buying now horus1. This years earnings will be $55m (even if it is really closer to $60m) and the divie will be pretty good. The share price might even be near $1.60 mid next year in the excitement when punters extrapolate out to F17

If the proverbial is going to hit the fan it won't be obvious until late next year - so keep an eye in the chart and when it starts to look a bad sad hits the time to cash up.

Now - could be back the truck up time - wont be as cheap for while

[tim23]

You be happy now - I see Roger BANNED

He entitled to his view (not anymore unfortunately) just as you are ....even if those views differ

Enough is enough
I'm sure Roger can do his own bidding?

[winner69]

I have posted this opinion on the thread brfore but I dont mind repeating myself.

In my opinion the purpose of the merger which set up Heartland was to hide MARAC's lending beneath the skirts of CBS Canterburys balance sheet.

Boop boop de do
Marilyn

Marilyn, your opinion is probably spot on. The next part of the plan was to dress up as bank for credibility sakes

But still a finance company in disguise

Doing well at the moment

[winner69]

1Q statements lack a lot of the detail of full year and only cover the bank, which is not yet all of HNZ.

But they have a net impairment expense of
$3,306K (with rural being $399K)
as opposed to this time last year when it was
$1,838K (with rural being $10K)

Interestingly 90+ day overdue loans on rural as gone from $17,904K to $11,704 in the last three months, possibly as a result of some/many them being reclassified given that Heartland are supporting dairy in these difficult times.

Whilst I think winner69 and his $60M is just winner69 being winner69 I am going to suggest that the $55M end of guidance is looking very achievable at the moment.

And so hot from the Paper Tiger Institute of Obscure Numbers:

Current value: $1.373
30-Jun-16 value: $1.428
30-Nov-16 value: $1.465

Assuming nothing special whatsoever happens. (i.e. No Tier2, no buybacks, no MTF, No smoking...)

Best Wishes
Paper Tiger

So we could sort of say that Sharetrader guidance is $55m (your very achievable number) to $60m (extrapolation of Q1 plus a fraction more). We are after all the only ones who have come up with a number different from the mid point $53m

Easy to remember is $55m to $60m as well.

We will have to wait until after H1 comes out before Heartland raises their guidance -- next week at the ASM it will be the usual confirmation of current guidance

How come you been 'unbanned' so quickly when apparently Roger won't be back until next year, if he decides to bother come back at all,

[winner69]

1Q statements lack a lot of the detail of full year and only cover the bank, which is not yet all of HNZ.

But they have a net impairment expense of
$3,306K (with rural being $399K)
as opposed to this time last year when it was
$1,838K (with rural being $10K)

Interestingly 90+ day overdue loans on rural as gone from $17,904K to $11,704 in the last three months, possibly as a result of some/many them being reclassified given that Heartland are supporting dairy in these difficult times.

Whilst I think winner69 and his $60M is just winner69 being winner69 I am going to suggest that the $55M end of guidance is looking very achievable at the moment.

And so hot from the Paper Tiger Institute of Obscure Numbers:

Current value: $1.373
30-Jun-16 value: $1.428
30-Nov-16 value: $1.465

Assuming nothing special whatsoever happens. (i.e. No Tier2, no buybacks, no MTF, No smoking...)

Best Wishes
Paper Tiger

So we could sort of say that Sharetrader guidance is $55m (your very achievable number) to $60m (extrapolation of Q1 plus a fraction more). We are after all the only ones who have come up with a number different from the mid point $53m

Easy to remember is $55m to $60m as well.

We will have to wait until after H1 comes out before Heartland raises their guidance -- next week at the ASM I will be the usual confirmation of current guidance

Hey Paper Tiger, how come you been 'unbanned' so quickly when apparently Roger won't be back until next year, if he decides to bother come back at all,

[K1W1G0LD]

Heartland no.1 in a class of 2 here.Despite Reserve bank reservations and new Regs.

http://www.stuff.co.nz/business/money/74689855/reserve-bank-reveals-new-rules-as-demand-for-granny-mortgages-doubles.


Quote: "Heartland has the lion's share of the half-billion dollar market, after buying out Sentinel last year".

[K1W1G0LD]

We all knew they were #1

Main point is 118% increase in loans

When the TV ads came out earlier this year Nicholas at HNZ couldn't contain himself when he told me they were so busy handling the response and that inquiries had more than doubled (I did post that)

So most inquiries converted into loans -- good eh

Yes , good to see them doing well in this one W69.

[winner69]

Heartland no.1 in a class of 2 here.Despite Reserve bank reservations and new Regs.

http://www.stuff.co.nz/business/money/74689855/reserve-bank-reveals-new-rules-as-demand-for-granny-mortgages-doubles.


Quote: "Heartland has the lion's share of the half-billion dollar market, after buying out Sentinel last year".

We all knew they were #1 kiwi

Main point is 118% increase in loans

When the TV ads came out earlier this year Nicholas at HNZ couldn't contain himself when he told me they were so busy handling the response and that inquiries had more than doubled (I did post that)

So most inquiries converted into loans -- good eh

Lets count the profits for now .... The capital requirements is not a real issue.

[percy]

Heartland no.1 in a class of 2 here.Despite Reserve bank reservations and new Regs.

http://www.stuff.co.nz/business/money/74689855/reserve-bank-reveals-new-rules-as-demand-for-granny-mortgages-doubles.


Quote: "Heartland has the lion's share of the half-billion dollar market, after buying out Sentinel last year".

Thank you for the link.
The brokers' research I have read on HNZ have all had concerns whether HNZ are gaining traction with RELs.
I think HNZ were disappointed themselves with the modest uptakes.
I always have posted that I thought HNZ were right to be in this sector, and the sector had great growth potential with NZders love of property, and an ageing population.
I knew they were working hard to promote RELs,and these latest excellent results are a very welcome surprise.
I think the momentum with REL growth will continue ,and this momentum will give HNZ more confidence to update their forecasts.
Brokers will view this momentum traction of RELs favourably,and I think they will upgrade their forecasts too.

[K1W1G0LD]

This is not a product I would be comfortable with Percy, but it seems more and more kiwi's are.
Yes, lets hope this success flows through in improved forecasts.

[winner69]

So we could sort of say that Sharetrader guidance is $55m (your very achievable number) to $60m (extrapolation of Q1 plus a fraction more). We are after all the only ones who have come up with a number different from the mid point $53m

Easy to remember is $55m to $60m as well.

We will have to wait until after H1 comes out before Heartland raises their guidance -- next week at the ASM it will be the usual confirmation of current guidance

How come you been 'unbanned' so quickly when apparently Roger won't be back until next year, if he decides to bother come back at all,

Update: Shsretrader FY16 earnings guidance for Heartland remains at $55m-$60m but now the top end is more likely than before.

Reason for change:

1- Bullish remarks from Percy - "I think the momentum with REL growth will continue ,and this momentum will give HNZ more confidence to update their forecasts."

2- Kiwigold hoping it will lead to improved forecasts (C'mon kiwi, hope is not a strategy - it will lead to better earnings and better forecasts)

[percy]

K1W1GOLD.
I would be surprised if any sharetraders would be comfortable with an REL.No need for one.
Yet it is a product that suits, and will suit more and more people who have all their capital tied up in their home,which they neither want to sell or move out of.They just don't want to downsize or move into a retirement village.Wise, or stubborn old buggers, I will leave it to you to decide.We must remember it is their life,their capital and their choice.
Scotty did point out some time ago that property prices were increasing at a higher rate than the interest rate HNZ are charging on RELs.A very interesting exercise to do the figures if you can find time.Try it over a 10 year time frame.
The 90 year old traveller I admire,and she is the type of person who is finding a REL suits her.
Times change,my parents would neither have let me buy a car on HP.

[iceman]

There is mention of some people taking temporary loans to renovate their houses before the move out and into retirement homes. While these would be fairly short term loans I think there is lots of people out there that would be well advised to do this. Many have lived in their homes for decades with little or no work other than normal maintenance. The properties when sold, look dated and fetch low prices. That is one small example of an opportunity for REL's that I had not really thought about. Bought a rental property myself a couple of years ago from a lovely old couple that were moving into a retirement home. The would have increased the property value quite significantly by modest renovations and a loan like this would have been perfect.

But you are right Percy that times have and are changing very fast and it is getting more and more common that people live a long healthy enjoyable lives in retirement. It costs money and people are increasingly comfortable with using their assets themselves to support an enjoyable lifestyle, rather than leave them for offsprings. Good on them I say.

[Southern_Belle]

K1W1GOLD.
I would be surprised if any sharetraders would be comfortable with an REL.No need for one.
Yet it is a product that suits, and will suit more and more people who have all their capital tied up in their home,which they neither want to sell or move out of.They just don't want to downsize or move into a retirement village.Wise, or stubborn old buggers, I will leave it to you to decide.We must remember it is their life,their capital and their choice.
Scotty did point out some time ago that property prices were increasing at a higher rate than the interest rate HNZ are charging on RELs.A very interesting exercise to do the figures if you can find time.Try it over a 10 year time frame.
The 90 year old traveller I admire,and she is the type of person who is finding a REL suits her.
Times change,my parents would neither have let me buy a car on HP.Agreed that times are a changing Percy. My fathers financial advice to me "before you spend a dollar, earn two."

The "stubborn old buggers" like my father, had their financial outlook shaped by the depression, world wars, the need to be frugal and passing inheritance to the next generation. They are a dying breed and increasingly, people are prepared to pay a premium for quality and spend the kids inheritance to provide that quality.

If a REL allows them to do this then why not pay a premium. By the time they calculate the fees associated with downsizing (legal, estate agents, moving costs) and the costs of a retirement village, they are likely to be better off staying put & paying for the privilege.

REL's, in my opinion will become the norm and HNZ and their shareholders will be well positioned".

[tim23]

I've said before but will repeat market underestimating value of RELs and Harmoney stake.

[trader_jackson]

I agree, Harmoney is and will continue to be a very valuable (and profitable) asset of HNZ's

[winner69]

I agree, Harmoney is and will continue to be a very valuable (and profitable) asset of HNZ's

Valuable because of whatever the market 'values' Harmoney at at any point in time OR because of the significant amount of loans they make through the platform (a de facto shop front) ....or both?

What you think?

[winner69]

Heartland once said the difference between heartland total profit and Heartland Bank profit was the HER business (Quarterly Heartland Bank disclosures)

If that is the case than HER profitability has been $1.5m in Q1 (LY $1.2m)

The again they said they might 'migrate' some HER business into Heartland Bank. HER profits might be a bit more?

Whatever probably contributing the best part of $8m/$9m to HNZ earnings

[winner69]

Heartland once said the difference between heartland total profit and Heartland Bank profit was the HER business (Quarterly Heartland Bank disclosures)

If that is the case than HER profitability has been $1.5m in Q1 (LY $1.2m)

The again they said they might 'migrate' some HER business into Heartland Bank. HER profits might be a bit more?

Whatever probably contributing the best part of $8m/$9m to HNZ earnings

You would hope that $8m/$9m HER earnings is the bare minimum

After all they did pay $89m for the business 18 months ago and it was going to be EPS accretive eh

[winner69]

I agree, Harmoney is and will continue to be a very valuable (and profitable) asset of HNZ's

Whatever Harmoney was 'valued' at last week one would think that it is worth a bit/lot less after this

http://www.interest.co.nz/business/78987/p2p-lender-harmoney-adjusts-fee-structure-against-backdrop-commerce-commission

Lower fees less income for Harmoney = valuation less?

And is this a step to appease the Com Com as the inquiry still seems 'active'?

[Joshuatree]

Sorry ,change of subject.Hey a great plug on National Radio for reverse mortgages today by Mary Holm saying she would prob take one out when she is 85(she plans a long life), and mentioned Heartland selling them.:t_up:

[winner69]

Heartland growth plans; grow rural book albeit at slower growth than last year.

This then is bit of good news - Rabobank senses an improvement in farmer sentiment based largely on perceptions of an impending lift in dairy prices to a sustainable level

http://www.interest.co.nz/rural-news/79022/farmer-confidence-still-low

That'll give their talented / somebody else's cast off new Rural Lending Guy a bit of a boost

[winner69]

Heartland says "Key drivers of growth for Heartland are GDP and employment

More very good news today on that front -

@ANZ_cambagrie: ANZ Truckometer Heavy Traffic Index up 0.7% in Nov, third increase in a row. Suggests solid Q3 GDP growth and potentially an even better Q4.


FY16 earnings heading $60m - guidance of $51m to $55m rubbish

[Joshuatree]

Hey a great plug on National Radio for reverse mortgages today by Mary Holm saying she would prob take one out when she is 85(she plans a long life), and mentioned Heartland selling them.:t_up:

I think thats an interesting thing. Mary Holm is a columnist in the NZ Herald and has a website "your guide to safe and savvy investing"; also on RadioNZ for one. She is followed by many. It shows to me that Reverse mortgages are slowly being accepted in our society and that the negative turn off connotations are waning; they have their place and will become a "norm" for many ;esp those with Houses that have apprec iated so much.

[artemis]

Reverse mortgages work well for folk with nobody they want to leave their assets to. Better to spend up than live frugally so the dog's home gets the assets.

[axe]

Axe thinks if you have the financial intelligence to reach retirement age without having a mortgage and owning your home then you probably have enough financial intelligence to decide whether a reverse equity loan is for you. Otherwise you can find advice here..... http://www.afa.org.nz/

Naysayers seem to harp on about "oh but with that interest rate blah blah blah after 30 years the loan will become 1million blah blah outrageous!!!" but they never seem to think that the house may appreciate in value over the 30 years.

[pierre]

Naysayers seem to harp on about "oh but with that interest rate blah blah blah after 30 years the loan will become 1million blah blah outrageous!!!" but they never seem to think that the house may appreciate in value over the 30 years.

Right on Axe! Fortunately Heartland knows what it's doing with this kind of lending (as you do too) so we don't really need to take much notice of those who haven't the wit to understand how it works.

While it's probably highly unlikely, it is possible that property values could decline over 30 years rather than increase. In that case though I'm pretty sure there would be blood on the floor in plenty of banks and other businesses, not just at Heartland.

[Baa_Baa]

Axe thinks if you have the financial intelligence to reach retirement age without having a mortgage and owning your home then you probably have enough financial intelligence to decide whether a reverse equity loan is for you. Otherwise you can find advice here..... http://www.afa.org.nz/

Naysayers seem to harp on about "oh but with that interest rate blah blah blah after 30 years the loan will become 1million blah blah outrageous!!!" but they never seem to think that the house may appreciate in value over the 30 years.

Your hypothesis fails to consider a surviving partner (wife or husband) who has never had anything to do with the family finances but is left with property, often the family home.

This in my observation is more commonly a wife left with the family home who in your estimation is correctly more than likely financially lacking 'intelligence' but must somehow and at some stage make the horrible decision to abandon the family home that they have put their lives into, for the sake of a new roof over their head and perhaps the care and attention they deserve until their time comes.

Axe .. gross generalisations and assertions related to financial intelligence related to property assets of the aged, and their options should they have access to informed advice, may be well intentioned but they are ill-informed.

[axe]

Your hypothesis fails to consider a surviving partner (wife or husband) who has never had anything to do with the family finances but is left with property, often the family home.

This in my observation is more commonly a wife left with the family home who in your estimation is correctly more than likely financially lacking 'intelligence' but must somehow and at some stage make the horrible decision to abandon the family home that they have put their lives into, for the sake of a new roof over their head and perhaps the care and attention they deserve until their time comes.

Axe .. gross generalisations and assertions related to financial intelligence related to property assets of the aged, and their options should they have access to informed advice, may be well intentioned but they are ill-informed.

BAA - You seem to be making make a sexist observation that a women is likely to be lacking in financial intelligence.

I did not make a comment that anyone was lacking financial intelligence. Those were your words.

In the process of trying to inform me that my generalization is incorrect you make an (observation) generalization of your own.......


You also completely missed the point of my post. People can make their own decisions and take advice when and where and if they want.

[iceman]

I think we need to remember that the home equity loans or reverse mortgages are very low LVRs.
A couple that are both 70 years old can borrow a maximum of 25% of their home value, according to the calculator on the HNZ website.

It would have to be absolutely exceptional circumstances for anyone to have to
"abandon their homes" Baa Baa, whether a man or a woman :p.
By the way Axe I think you´re being a bit harsh on BaaBaa. I didn´t read his post as sexist and don´t think that was his intention at all.

I am sure Heartland fully understands the risks related to these loans.
I don´t have any doubt that these types of loans are well suited for many people and I believe they will become increasingly popular. HNZ has first mover advantage here and from all accounts, appear to be doing a good job with it.

If you read their website and the info on these loans, I get the feeling that HNZ is doing this responsibly and educating people on the pros and cons of them.

[Joshuatree]

Read more » (http://sendy.tarawera.co.nz/l/QQMrKma8h6MjbHw96gBRew/SJIHbzlcktcSdaONlkE9DQ/UNgr1i763txl7rcY763RIhMdZA) Looks like the squeeze is on for motor vehicle finance and new car margins.

[percy]

Read more » (http://sendy.tarawera.co.nz/l/QQMrKma8h6MjbHw96gBRew/SJIHbzlcktcSdaONlkE9DQ/UNgr1i763txl7rcY763RIhMdZA) Looks like the squeeze is on for motor vehicle finance and new car margins.

Therefore Heartland, by virtue of being a bank, and enjoying lower cost of funding remain "well positioned."
I also take from the article "new car" dealers are having to carry larger stocks of cars.
This will put pressure on their banking arrangments,and will most probably mean they will look to sell their MTF shares,which will improve their chances of more funding from their bank.ie cash for their MTF shares and free themselves of the recourse loan liabilities they have with MTF..

[winner69]

Therefore Heartland, by virtue of being a bank, and enjoying lower cost of funding remain "well positioned."
..

I wonder how often Jeff will say 'well positioned' tomorrow

Business people being so clever you would think they would come up with something different and a find a new buzz word for being 'well positioned'.

Well positioned is past its use by date and is hearing it so often is getting rather tiresome

[percy]

SIGNIFICANT..!!
used once,=hold
used twice=Buy
Used thrice= Strong buy.
Used four or more times=sell your house and buy,buy,buy,buy.

[Crackity]

I wonder how often Jeff will say 'well positioned' tomorrow

Business people being so clever you would think they would come up with something different and a find a new buzz word for being 'well positioned'.

Well positioned is past its use by date and is hearing it so often is getting rather tiresome

interestingly this is from The Economist ( economist.com ) in their dictionary of business terms....

and before I get accused of going off topic - geez - heartland are up to $1.33 ;)

EuphemismsAvoid, where possible, euphemisms and circumlocutions, especially those promoted by interest-groups keen to please their clients or organisations anxious to avoid embarrassment. This does not mean that good writers should be insensitive of giving offence: on the contrary, if you are to be persuasive, you would do well to be courteous. But a good writer owes something to plain speech, the English language and the truth, as well as to manners. Political correctness (http://www.economist.com/style-guide/political-correctness) can go.
So, in most contexts, offending behaviour is probably criminal behaviour. Female teenagers are girls, not women. Living with mobility impairment probably means wheelchair-bound. Developing countries are often stagnating or even regressing (try poor) countries. The underprivileged may be disadvantaged, but are more likely just poor (the very concept of underprivilege is absurd, since it implies that some people receive less than their fair share of something that is by definition an advantage or prerogative).
Enron's document-management policy simply meant shredding. The Pentagon's practice of enhanced interrogation is torture, just as its practice of extraordinary rendition is probably torture contracted out to foreigners. France's proposed solidarity contribution on airline tickets is a tax. The IMF's relational capitalism is nepotism or corruption. The British solicitor-general's evidential deficiency was no evidence, and George Bush's reputational problem just means he is mistrusted.
It is sometimes useful to talk of human-rights abuses but often the sentence can be rephrased more pithily and accurately. The army is accused of committing numerous human-rights abuses probably means The army is accused of torture and murder. Decommissioning weapons means disarming. A high-net-worth individual is a rich man or rich woman. Zero-per-cent financing means an interest-free loan.

[winner69]

Crackity - one thing going for Heartland is that they competently matrix economically sound human capital .....starting at the top

[Crackity]

Crackity - one thing going for Heartland is that they competently matrix economically sound human capital .....starting at the top

lol - as long as there is no downsizing or transitioning or repurposing mentioned then everything will be just hunky dory....:)

and to stay on thread HNZ now $1.32....

[Joshuatree]

Therefore Heartland, by virtue of being a bank, and enjoying lower cost of funding remain "well positioned."
I also take from the article "new car" dealers are having to carry larger stocks of cars.
This will put pressure on their banking arrangments,and will most probably mean they will look to sell their MTF shares,which will improve their chances of more funding from their bank.ie cash for their MTF shares and free themselves of the recourse loan liabilities they have with MTF..

That could be great for HNZ if it pans out,yes. More comp in the motor finance sector not so good , Nissan being one mkt share grower.

Motor vehicle lenders were also facing increased competition, with a number of new players entering the market and seeking to gain share with attractive deals.On the positive side the report said participants in the motor vehicle financing sector continued to show good improvements in impairment asset expenses.
It outlined that after just over two years of operating, Nissan Financial Services has gained a 1.19 per cent share of New Zealand's non-banking lending market.

[winner69]

lol - as long as there is no downsizing or transitioning or repurposing mentioned then everything will be just hunky dory....:)

and to stay on thread HNZ now $1.32....

I would think that if Heartland came out and said they were repurposing tomorrow most would agree they are well positioned to do successfully achieve that.

OMG what have I said - well positioned has become an addiction - any way HNZ share price now $1.32

[percy]

I would think that if Heartland came out and said they were repurposing tomorrow most would agree they are well positioned to do successfully achieve that.

OMG what have I said - well positioned has become an addiction - any way HNZ share price now $1.32

The sp has already repurposed to $1.33 and possibly "poised" to hit $1.34 again today..

[winner69]

Crackity - according to one language expert "well positioned" really means (hopeful, but a bit scared)

So everytime Jeff says "well positioned" tomorrow he really is hoping like hell that things will done out OK

[Crackity]

Crackity - according to one language expert "well positioned" really means (hopeful, but a bit scared)

So everytime Jeff says "well positioned" tomorrow he really is hoping like hell that things will done out OK

what could possibly go wrong Winner? Traditionally finance companies in NZ have done OK haven't they? ;)

[winner69]

Heartland FY results preso had this statement - Heartland is well positioned to support its dairy customers in the forthcoming year

If "well positioned" does mean "hopeful, but a bit scared" it really means they are scared off these rural loansand they are hoping for a reasonable outcome.

Never really thought about what "well positioned" really meant in this funny world of buzz words etc but that language expert's definition seems to make perfect sense.

[Crackity]

Heartland FY results preso had this statement - Heartland is well positioned to support its dairy customers in the forthcoming year

If "well positioned" does mean "hopeful, but a bit scared" it really means they are scared off these rural loansand they are hoping for a reasonable outcome.

Never really thought about what "well positioned" really meant in this funny world of buzz words etc but that language expert's definition seems to make perfect sense.

definitely time for a Winnie the Pooh quote -

When you are a Bear of Very Little Brain, and you Think of Things, you find sometimes that a Thing which seemed very Thingish inside you is quite different when it gets out into the open and has other people looking at it.


Now where on earth did that friendly tiger chappie get to?

and see HNZ finished at $1.33 - not much happening there today;)

[percy]

Well the agm presentations read well.
On a steady growth trajectory.

[Joshuatree]

Join the dots for me please percy. I don't want a share reduction or the cash.I will have to pay my broker to get back to my same holding; whats the point??? Thanks in advance.

[winner69]

Join the dots for me please percy. I don't want a share reduction or the cash.I will have to pay my broker to get back to my same holding; whats the point??? Thanks in advance.

If you 'reinvest' the cash return you will have a greater share of the pie as they say

[SCOTTY]

If you 'reinvest' the cash return you will have a greater share of the pie as they say

Yes, well put W69

[h2so4]

Reading the CEOs address. I get the feeling HNZ have their niche finance sectors all sown up. It takes me back to the days working in Christchurch when Marac had more chattel securities than any other finance company.

[percy]

Yes they are making those niches very profitable,and developing them further..
I watched the webcast of the meeting. Just great not having to waste the whole day flying up and back for it.Saved enough to buy another 150 shares! All resolutions passed,and strategy for 2016 outlined.Looks to me 2016 will be another year of achievement.

[Joshuatree]

If you 'reinvest' the cash return you will have a greater share of the pie as they say

Thanks. brokers will be happy I'm a trifle annoyed at having to pay a broker $60 top up. Everything else is pretty damn good.I will say it again its been quite remarkable the creation and rise of HNZ finding its niche's amongst the gargantiums; and flourishing.:t_up:

[SCOTTY]

Yes they are making those niches very profitable,and developing them further..
I watched the webcast of the meeting. Just great not having to waste the whole day flying up and back for it.Saved enough to buy another 150 shares! All resolutions passed,and strategy for 2016 outlined.Looks to me 2016 will be another year of achievement.
The webcast is as good as being there and can fast forward the large number of very stupid questions and comments from the floor. Do miss the quiet after meeting chat with Board and staff with the drinks and nibbles following the meeting. Often a good time to get some valuable titbits and opinions when everyone is more relaxed and forthcoming. -:)

[winner69]

Not all questions/comments were stupid Scotty

That shareholder near the end who stated his dismay at the composition of the Board was very insightful. After all the talk of niche and disruptive things he is right - a Board made up mainly of old fuddy duddies is a worry. Where were the younger (more switched on?) members and he correctly pointed out the woeful gender breakdown of the Board.

Sad thing was no response from Chairman, except rolling his eyes and probably thinking who let that person into the room.

Obviously not on Heartlands agenda to address such issues ...and that's maybe inhibiting them in doing even better.

[Arbitrage]

The Chairman actually handled the meeting quite well and did accept the comment about the age and gender make up of the board. The results of the voting showed the considerable shareholder support behind the board and staff. There were also a number of shareholders who made positive comments to the meeting. A major problem was that the grey brigade got to the food first after the meeting and hoovered it up before the rest of us who were chatting to the board and staff could get there. I guess it makes up for the low interest rates on cash deposits.
However, the overall impression was of a well run company still in a growth stage. Risk of lending for these niche products was not really discussed and I was left wondering what would happen if there was another gfc...

[SCOTTY]

Not all questions/comments were stupid Scotty

That shareholder near the end who stated his dismay at the composition of the Board was very insightful. After all the talk of niche and disruptive things he is right - a Board made up mainly of old fuddy duddies is a worry. Where were the younger (more switched on?) members and he correctly pointed out the woeful gender breakdown of the Board.

Sad thing was no response from Chairman, except rolling his eyes and probably thinking who let that person into the room.

Obviously not on Heartlands agenda to address such issues ...and that's maybe inhibiting them in doing even better.
Yes. Have to agree with you there.

[Bobdn]

Not all questions/comments were stupid Scotty

That shareholder near the end who stated his dismay at the composition of the Board was very insightful. After all the talk of niche and disruptive things he is right - a Board made up mainly of old fuddy duddies is a worry. Where were the younger (more switched on?) members and he correctly pointed out the woeful gender breakdown of the Board.

Sad thing was no response from Chairman, except rolling his eyes and probably thinking who let that person into the room.

Obviously not on Heartlands agenda to address such issues ...and that's maybe inhibiting them in doing even better.

Gee, I value experience on my boards and quite happy to see old "fuddy duddies" as you call them. We all need to be mindful of ageism just as much as the other "isms" even if it doesn't happen to be the cause de jour for all the "cool kids".

[winner69]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11559906


I would hazard a guess that a very large chunk of the $162 lent has been funded by the reported large funders (inc Heartland).

Heartland using Harmoney as just another shop front - probably on much different terms than those true in the spirit of the game p2p lenders.

Some of the stories about the borrowers on Harmoney thread send shivers up your spie. Cynically one gets the feeling that the big funders get first dibs of the loans?

Whatever articles like the one linked not good publicity for Harmoney.

[winner69]

Gee, I value experience on my boards and quite happy to see old "fuddy duddies" as you call them. We all need to be mindful of ageism just as much as the other "isms" even if it doesn't happen to be the cause de jour for all the "cool kids".

I think the shareholder said 'aged grey haired men'. I aplogogise for using 'old fuddy duddies'

On a positive note I see that the new Chief Strategy Advisor is one Laura Byrne whose CV seems to read well.

A bit more gender balance in the Management Team at least (3 out of 11 is a start)

[iceman]

ColmarBrunton recently surveyed 1500 baby boomers with regard to preparedness for retirement. One interesting point from the results was that 42% said they planned to rely on equity from their property to get the through retirement. Now that is a big potential market for reverse mortgages !

[beetills]

Anyone on here think that GFL could be a target for Heartland or am i thinking to far out of the box.

[Bjauck]

ColmarBrunton recently surveyed 1500 baby boomers with regard to preparedness for retirement. One interesting point from the results was that 42% said they planned to rely on equity from their property to get the through retirement. Now that is a big potential market for reverse mortgages !
NZers are really dependent on their real estate for their store of wealth. Unlike in the US or UK (for example) the government has not encouraged diversification into financial investments by creating a tax concessionary non-pension investment scheme. Even Kiwisaver investments are taxed. Those with larger incomes have no tax-concessionary encouragement to contribute more than the minimum to get the $521 credit.

So, as an alternative to earning taxable income from financial investments bought with after-tax income, people buy an expensive house that they can only just afford, from which they derive non-taxable accommodation value and non-taxable capital appreciation. Then when retired, they become income poor but (real estate) wealthy so they are more likely to feel pressure to downsize or move into a retirement village or turn to Home Equity Release.

[artemis]

ColmarBrunton recently surveyed 1500 baby boomers with regard to preparedness for retirement. One interesting point from the results was that 42% said they planned to rely on equity from their property to get the through retirement. Now that is a big potential market for reverse mortgages !

I wonder how many of those surveyed had decent financial nous.And how many are looking at the number of zeros on their rating valuations and dreaming.

The main target market for reverse mortgages, IMO, is the household with no offspring. If there are offspring, then they will surely want to protect their property inheritance. Especially if they are reasonably well off or financially literate. There are other options.

[Bjauck]

I wonder how many of those surveyed had decent financial nous.And how many are looking at the number of zeros on their rating valuations and dreaming.

The main target market for reverse mortgages, IMO, is the household with no offspring. If there are offspring, then they will surely want to protect their property inheritance. Especially if they are reasonably well off or financially literate. There are other options. In addition to the lack of concessionary financial investment schemes, the tax system encourages people to put their money and wealth into owner-occupied housing. Also, childless or not, many boomers would have seen the average return from the equity invested in (leveraged) real estate exceed that from most other investments and without such a great boom-bust cycle as with equities for example.

[winner69]

Reserve Bank still are a bit worried about dairy loans
http://www.sharechat.co.nz/article/dcffa773/reserve-bank-estimates-nz-dairy-sector-may-default-on-2-to-14-of-loans.html?utm_medium=email&utm_campaign=Reserve%20Bank%20estimates%20NZ%20dai ry%20sector%20may%20default%20on%202-to-14%20of%20loans&utm_content=Reserve%20Bank%20estimates%20NZ%20dair y%20sector%20may%20default%20on%202-to-14%20of%20loans+CID_e32a9947ec77f988b7ef64d56753c4 ca&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticledcffa773reserv e-bank-estimates-nz-dairy-sector-may-default-on-2-to-14-of-loanshtml

Exposure for Heartland (even though exposure to dairy is 'low') is that dairy bad debts ccould affect profits by $4m to $28m

Factor into your thinking as you see fit.

[percy]

From The Managing Director's [Mr.Jeff Greenslade] address to the HNZ AGM on 11/12/2015;
Rural Division.
"We remain well-positioned to support our dairy farmer customers and we currently have no expectation of losses as a result of the current dairy prices."
ps.I thought it was you W69 who asked the question about diversity,but in hindsight you would have asked it Maori!!>> lol.

[Crackity]

Reserve Bank still are a bit worried about dairy loans
http://www.sharechat.co.nz/article/dcffa773/reserve-bank-estimates-nz-dairy-sector-may-default-on-2-to-14-of-loans.html?utm_medium=email&utm_campaign=Reserve%20Bank%20estimates%20NZ%20dai ry%20sector%20may%20default%20on%202-to-14%20of%20loans&utm_content=Reserve%20Bank%20estimates%20NZ%20dair y%20sector%20may%20default%20on%202-to-14%20of%20loans+CID_e32a9947ec77f988b7ef64d56753c4 ca&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticledcffa773reserv e-bank-estimates-nz-dairy-sector-may-default-on-2-to-14-of-loanshtml

Exposure for Heartland (even though exposure to dairy is 'low') is that dairy bad debts ccould affect profits by $4m to $28m

Factor into your thinking as you see fit.

possibly relevant to HNZ eh Winner? Some of our posters ( ex / banned or current) may have said a bit more? ;)


The Reserve Bank has estimated the cash-flow shortfall for the average dairy farmer is likely to be more than $1 per kilogram of milk solids this season and that banks could see defaults on between 2 and 14 per cent of dairy sector loans.

In an updated assessment of dairy sector vulnerabilities, the central bank said low global milk prices are placing dairy farmers under significant cash flow pressures with most farmers expected to have cash losses in the current season, compounding weak returns from the previous season.



and I'm picking you got the 2 million to 28 million possible profit hit from

The results suggest that losses are manageable for
the banking system as a whole, despite dairy lending now accounting for 10 percent of all bank lending. Loss rates for the banking system
are estimated to be 2 percent of the system’s dairy portfolio under
the base scenario, and 14 percent under the severe scenario. These losses amount to around 2 to 18 percent of total before-tax profits of the five largest dairy lenders over a typical four year period (and a similar percentage of initial capital) suggesting that they are manageable for the system as a whole. It is also likely that capital ratios would come under pressure due to increases in risk-weighted assets.

[winner69]

ps.I thought it was you W69 who asked the question about diversity,but in hindsight you would have asked it Maori!!>> lol.

It was by far the best question/comment from shareholders wasn't it.And sadly not even one iota of response from the Chairman.

Rest of of the questions/comments were pretty shallow though, except for the guy who asked some questions about MTF

[percy]

The guy who asked the questions about MTF I thought was either an originator or a car dealer, as he knew what he was talking about.Interesting was Jeff Greenslade saying if they went further with MTF, then the "recourse" of loans would be a matter of negotiation.Would appear a lot of water has yet to flow under that bridge.
At a ChCh HNZ agm poster Mouse asked the chairman for each director seeking re-election to speak.Chairman Ricketts quickly cut him off by saying :"we don't do it that way here." Very rude,so it was with a certain amount of delight I noted Ricketts made mention that the Share Holders Assn would like to hear from directors seeking re-election.Ricketts noted in future they would do this,but as they had 8, instead of the usual 2 being re-eclected today. they would not do it for this meeting.
I must admit Chairman Ricketts keeps good control of meetings. He has a wealth of experience, and I note he is also a director of Suncorp in Australia.Holds a lot of shares too,so has skin in the game,as do the other directors.

[winner69]

From The Managing Director's [Mr.Jeff Greenslade] address to the HNZ AGM on 11/12/2015;
Rural Division.
"We remain well-positioned to support our dairy farmer customers and we currently have no expectation of losses as a result of the current dairy prices."
.

OK, I get the last part of that statement - we don't expect to have losses

But what does 'well positioned to support our dairy farmer customers' really mean? Maybe makes more sense if he just leftboutvthe well positioned bit and said 'we are supporting ..'

Or maybe ' well positioned to support' means we have plenty of shareholder cash to support them - like prop them up

Interesting that the Commerce Commissions are in a round about way saying that the fonterra loans should be really be a cost to the farmers and not a freebie. Wonder where that might go over time.

[percy]

OK, I get the last part of that statement - we don't expect to have losses

But what does 'well positioned to support our dairy farmer customers' really mean? Maybe makes more sense if he just leftboutvthe well positioned bit and said 'we are supporting ..'

Or maybe ' well positioned to support' means we have plenty of shareholder cash to support them - like prop them up

Interesting that the Commerce Commissions are in a round about way saying that the fonterra loans should be really be a cost to the farmers and not a freebie. Wonder where that might go over time.

I am sure Jeff put in the "well positioned" just for you and me, knowing full well how much pleasure we get from the phrase.
Yet the "we don't expect to have losses" is very clear.!
I sorry I am in two minds about Fonterra helping out at risk dairy farmers.Some excellent arguments for,and an equal number against.
I am however very keen for Heartland to help their at risk customers. Farmers have long memories, and will never forget the Bank that helped them when they needed help.I should point out Westpac helped me out some 40 years ago,and I have not forgotten that,yet.!

[forest]

[QUOTE=winner69;601205]OK, I get the last part of that statement - we don't expect to have losses

But what does 'well positioned to support our dairy farmer customers' really mean?

Dairy farmers/share milkers are as you realise a small part of the rural loan book.
Of the few who finding it difficult to repay the loans back as per contract or pay interest as per contract HNZ has a close look
at their financial situation.
If a new client would have applied for the level of dept as the defaulting client (similar dept application, history of earnings, equity etc)
and the new client would likely be approved for that loan. Then the existing client would be offered an concession, likely an extended term.
In this case the loan wont be in default.
However if a new client would not be able to secure a loan under similar circumstances the loan is considered in default.

I can see the logic of this approach.

[Joshuatree]

Thanks Forest; so thats supporting our current farmer clients with concessions to see them through the cycle and El Nino but not new entrants ?.How long this weak dairy pricing cycle lasts is the question i guess?

Just a reminder that HNZ changes ticker at the end of year to HBL. cheers JT

[Yoda]

Bol bands are at a bit of a squeeze.. And seems to have topped out. Anyone got a crystal ball or an educated guess?

[percy]

Bol bands are at a bit of a squeeze.. And seems to have topped out. Anyone got a crystal ball or an educated guess?

HNZ has been known to track sideways at times.
Resistance appears to be $1.34,while support is $1.30.
Break out will show which way the sp is headed.
I would guess [very uneducated] the high dividend yield,and HNZ's capacity to pay increasing dividends, will attract dividend seekers, and therefore the breakout will be on the upside,but I don't know when.

[janner]

Agreed perc..

That is why I sold half.. Giving me all left for FREE..

It was not at the best price possible.. ( Quite low in fact ).

To be honest..

The jump in HNZ's price has been more than I have been able to achieve if I had left it there..

How ever !!. I think that the new purchases will in the end Confirm that it was a good move..

There are many other companies that are " WELL POSITIONED "..

We dirty old men are very susceptible to falling in love with Bright Young Things.. !!..

HNZ is now possibly BLOSSOMING..

Ripe for Jasper !!!..

[percy]

[QUOTE=janner;601601]Agreed perc..



We dirty old men are very susceptible to falling in love with Bright Young Things.. !!..

HNZ is now possibly BLOSSOMING..

I am still very much in love with the beautiful Mrs Ebos.After nearly 30 years she just gets more beautiful every year.
With her lovely dark hair,high cheekbones,and almond eyes ,I think bright young thing Miss HNZ ,will also develop into another out standing beauty.
Why go out for hamburgers when you can have prime steak at home.? lol.

[SCOTTY]

As from today, Heartland New Zealand (HNZ) becomes Heartland Bank Limited (HBL)

[Jantar]

When I logged on to ANZ Securities this morning, my portfolio value had dropped a few thousand $$$ from yesterday. It took me a minute to realize why. :sleep:

[777]

When I logged on to ANZ Securities this morning, my portfolio value had dropped a few thousand $$$ from yesterday. It took me a minute to realize why. :sleep:

Should auto correct at 10.23am.

[mouse]

Agreed perc..

Ripe for Jasper !!!..

Hopefully Jasper will wait a couple of years at least. She is still a bit young and needs to have a mature price. Jaspers are pretty unprincipled though, so beware.

[iceman]

What say you winner69 :confused:
http://www.stuff.co.nz/business/better-business/75651325/diversity-policies-do-little-except-cause-resentment-among-white-men-study

[winner69]

What say you winner69 :confused:
http://www.stuff.co.nz/business/better-business/75651325/diversity-policies-do-little-except-cause-resentment-among-white-men-study

Diversity policies do little except cause resentment (among white men)

Because (as the article says)

...it blinds white men to racism and sexism at work

And this is the Heartland thread so seems appropriate (and on topic)

PS- iceman, you didn't quote the whole article heading

[iceman]

Diversity policies do little except cause resentment (among white men)

Because (as the article says)

...it blinds white men to racism and sexism at work

And this is the Heartland thread so seems appropriate (and on topic)

PS- iceman, you didn't quote the whole article heading

It is on this thread as you have made several references about lack of diversity at HNZ/HBL on this thread.

[percy]

What say you winner69 :confused:
http://www.stuff.co.nz/business/better-business/75651325/diversity-policies-do-little-except-cause-resentment-among-white-men-study

Thanks for the link Iceman.
Does show the argument for diversity for diversity's sake, does have it downsides.
Heartland's ability to attract the best people for the job still appears to be the best option.

[SCOTTY]

Good to see that HBL is the top pick for 2016 Share Comp so far.

[winner69]

Billionaire George Soros says ​global markets are facing a crisis and investors need to be very cautious

Bank shares being smashed globally - looks like Heartland no exception. Jeez down to $1.25 intra-day

Underlying performance might still be OK but multiples shrinking hurts investors - that's why George says be very cautious

[winner69]

Maybe Mr Ricketts had a feeling the share price was going to drop to $1.20 before the capital return as per his talk at the AGM

[mouse]

This is a link to a Daily Telegraph article.

http://www.telegraph.co.uk/finance/property/house-prices/12087971/UK-house-price-crash-looms-as-global-asset-prices-unravel.html?WT.mc_id=e_DM78672&WT.tsrc=email&etype=Edi_FAM_New&utm_source=email&utm_medium=Edi_FAM_New_2016_01_11&utm_campaign=DM78672

Any comments & ideas?

[Joshuatree]

Interesting article in the latest Market Analysis about Soros and Chicken little and how often he gets it wrong as well as talking up his own book.
mouse that article is making me take notice and having good read thanks.

[kizame]

The stock markets have already topped out,will be interesting to see where it goes from here.
AND its election year in the states in November,always an uncertain time.
But property (residential) does need to do a whole lot of consolidating.

[Joshuatree]

Sounds like London in England parallels with Auck NZ.New measures have been put in place in both cities to slow house buying and house price increase down and make them less attractive to Chines investors etc. Both cities are no where remotely near matching house builds to immigrant numbers.The rest of both countries have not risen anything like them. Think we are all agreed we are having a correction atm triggered by Chinas dropping Growth figs but this article wants to spread panic.

"The current mkt expectation is for (USA)int rate to rise 4 more times to about 1.5pc by the end of the year"
i think slowly slowly gently gently were the dovish intentions of Janet Yelman(sp)

Has the cost of mortgages really soared by 50% in the USA ,a bit sensationalist. Folks are paying more int but last i read it didn't add huge $ to the bill. I fact the whole article is just that with little real detail. I think the writer is trying to win Article of the year again.

[blockhead]

Is it just ANZ or are other sites showing no sales of HBL for last 2 days ?

[Hectorplains]

Is it just ANZ or are other sites showing no sales of HBL for last 2 days ?

The NZX interactive chart has trades of 145K+ yesterday for them.

[blockhead]

I just discovered it makes a difference HNZ or HBL, HBL shows sales history, HNZ doesn't.

Blocky needs to get with the latest tickers !

[iceman]

I just discovered it makes a difference HNZ or HBL, HBL shows sales history, HNZ doesn't.

Blocky needs to get with the latest tickers !

Yes this was a strange one. It did update automatically in the Portfolio but not on the Watchlist. So after deleting HNZ from Watchlist and entering HBL, all is honky dory

[winner69]

Heartland says "Key drivers of growth for Heartland are GDP and employment"

Great news then

@ANZ_cambagrie: Bumper December Truckometer (Heavy Traffic Index +2.6%) suggests NZ Q4 GDP may be well north of 1% q/q. https://t.co/n896N2egcY

Heartland share price bit slack of late

If Jeff right about what drives heartland profit they should be rolling in it.

C'mon boys - get things firing on all cylinders

[kizame]

Heartland says "Key drivers of growth for Heartland are GDP and employment"

Great news then

@ANZ_cambagrie: Bumper December Truckometer (Heavy Traffic Index +2.6%) suggests NZ Q4 GDP may be well north of 1% q/q. https://t.co/n896N2egcY

Heartland share price bit slack of late

If Jeff right about what drives heartland profit they should be rolling in it.

C'mon boys - get things firing on all cylinders

Calm down winner, share price is a bit slack of late cos of the markets,crikey you expect a bit much mate.And in fact the shareprice has held up pretty well considering.
I'm sure they feel your pressure to perform and will follow with a great result.

[Jantar]

Join the dots for me please percy. I don't want a share reduction or the cash.I will have to pay my broker to get back to my same holding; whats the point??? Thanks in advance.
I have been trying to see whether it is worth increasing my holding before the share buy back or after. At the SHM it was shown that the value of shares would not change, just the number that one would hold. There is quite a bit of information not given that will require some assumptions, but I have done a quick analysis to see what might happen to the share price after the buy back.

The asumptions I have made are:
The tier 2 capital raising will achieve the full oversubscription of $75M
The interest payable will be 5% and that interest will be tax deductible for NPAT calcs
Issued shares will increase prior to buyback in line with the DRP on a similar ratio to the previous year.
NTA (per share) for 2016 will increase due to the retained earnings from 2015
Without the Tier 2 capital the 2016 NPAT would have been close to $53M

The results I obtained are



2015



2016





Buyback



Shares issued

473646830


437308000



Tier 2



$75M



Reduce NPAT by



$2.8M



NPAT

48


50



NTA

0.895


0.923



EPS

0.103


0.114



Div

0.075


0.085










This suggests that the share price is likely to increase from my assumed $1.30 to $1.47 by the end of FY 2016

[winner69]

I have been trying to see whether it is worth increasing my holding before the share buy back or after. At the SHM it was shown that the value of shares would not change, just the number that one would hold. There is quite a bit of information not given that will require some assumptions, but I have done a quick analysis to see what might happen to the share price after the buy back.

The asumptions I have made are:
The tier 2 capital raising will achieve the full oversubscription of $75M
The interest payable will be 5% and that interest will be tax deductible for NPAT calcs
Issued shares will increase prior to buyback in line with the DRP on a similar ratio to the previous year.
NTA (per share) for 2016 will increase due to the retained earnings from 2015
Without the Tier 2 capital the 2016 NPAT would have been close to $53M

The results I obtained are



2015



2016





Buyback



Shares issued

473646830


437308000



Tier 2



$75M



Reduce NPAT by



$2.8M



NPAT

48


50



NTA

0.895


0.923



EPS

0.103


0.114



Div

0.075


0.085










This suggests that the share price is likely to increase from my assumed $1.30 to $1.47 by the end of FY 2016

In theory you are correct - based on your assumption that the PE ratio stays the same. (Higher eps at same PE = higher share price)

But also in theory the PE should reduce because of the new capital (bonds) from an shareholders perspective their investment is more risky.


In practice the answer will likely be somewhere in between .....but we'll never know what the answer is because other things (maybe a profit upgrade) will always happen.

If you are convinced of your workings shouldn't you buy before the buy-back because the price might 'adjust' quickly .....but then again the impact of the buyback might already be factored into today's price (as per one of Rogers post shortly after the buy back was announced)

[Jantar]

..... If you are convinced of your workings shouldn't you buy before the buy-back because the price might 'adjust' quickly .....but then again the impact of the buyback might already be factored into today's price (as per one of Rogers post shortly after the buy back was announced)
That is also what I conclude. Better to buy before rather than after.

[Harvey Specter]

The value will be the same before and after because the market will have/has factored it in. If there was an arbitrage, as you are trying to work out, someone with more time and money on their hands would have already figured it out, traded it and removed the arbitrage (assumes fully efficient markets which isn't the case).

[Jantar]

The value will be the same before and after because the market will have/has factored it in. If there was an arbitrage, as you are trying to work out, someone with more time and money on their hands would have already figured it out, traded it and removed the arbitrage (assumes fully efficient markets which isn't the case).
Just my opinion, but I don't think it could be fully factored in until after the interim dividend is announced.

Even if you are correct, and it has already been fully factored in then it would still be better to buy before rather than after in order to get the full impact of the interim dividend and the tax free buy back.

[winner69]

Heartland says "Key drivers of growth for Heartland are GDP and employment"

Great news then -

New Zealand workers became more optimistic about their job prospects in the December quarter, with employees feeling more secure and expecting future pay rises.

Should ave led to more consumer borrowing

I be very disappointed if Heartland doesn't raise the F16 guidance when H1 announced

Otherwise the guys have been taking it too easy and resting on their laurels

[kizame]

Heartland says "Key drivers of growth for Heartland are GDP and employment"

Great news then -

New Zealand workers became more optimistic about their job prospects in the December quarter, with employees feeling more secure and expecting future pay rises.

Should ave led to more consumer borrowing

I be very disappointed if Heartland doesn't raise the F16 guidance when H1 announced

Otherwise the guys have been taking it too easy and resting on their laurels

No they won't raise it. They are conservative and would have been able to see where the economy was headed short-medium term.
If I was them it would be far better to surprise on the upside than to try to quench your insatiable need for reassurance.

Resting on there Laurels? I don't think so.

[winner69]

No they won't raise it. They are conservative and would have been able to see where the economy was headed short-medium term.
If I was them it would be far better to surprise on the upside than to try to quench your insatiable need for reassurance.

Resting on there Laurels? I don't think so.

Trouble is kizame, they manage to the expectations they set

Wonder what is possible if they stretched hemselves?

Just my observation

[kizame]

Trouble is kizame, they manage to the expectations they set

Wonder what is possible if they stretched hemselves?

Just my observation

But this is a bank/finance company,and to stretch themselves? I wouldn't be comfortable with that,you need a measure of conservatism to hold credability and longevity in the marketplace,they need that.
That could mean taking on dubious loans,taking risk with aquisitions otherwise passed over.

Nup I like what they are doing and the way they are doing it. We all get impatient for growth,but sometimes we just need to reign those horses in. It works out better in the end.

[Yeshiva]

I will be very cynical and say that if a financial services is told to stretch its targets, then it will do so and meet them, but probably kick up a horde of unintended consequences. The best case is that the company engages in questionable accounting practices to show the prerequisite level of sales. The worst case? They might actually be making sales to all the wrong kinds of people.

There are heaps of tales stemming from the GFC of finance companies and banks that brought in stretch targets for selling mortgages, with all sorts of perverse outcomes. Theres even a nice new Oscar-contention movie thats out on this very topic.

[axe]

http://www.3news.co.nz/nznews/ipo-struggle-expected-for-nzx-this-year-2016011813#axzz3xZeL55in

Will this mean there will be a good appetite in the market if HBL goes ahead with the bonds???

[Raz]

But this is a bank/finance company,and to stretch themselves? I wouldn't be comfortable with that,you need a measure of conservatism to hold credability and longevity in the marketplace,they need that.
That could mean taking on dubious loans,taking risk with aquisitions otherwise passed over.

Nup I like what they are doing and the way they are doing it. We all get impatient for growth,but sometimes we just need to reign those horses in. It works out better in the end.

Agree wrong party of cycle for that..they have their share of risk already.

[winner69]

Agree wrong party of cycle for that..they have their share of risk already.

Interesting comment re risk

Not an admission that Heartland lending is moving up the risk scale is it?

[winner69]

From Cameron Bagrie - @ANZ_cambagrie: Expect fonterra to have to lower 15/16 dairy payout to lower end of our $4.25-4.50 kg/ms est (from their est of 4.60). Price action weak

Not good news - one would think that now most dairy loans (even the 'supported' ones) are more stressed than they were before Xmas

[Snow Leopard]

Well it had to happen sometime - I sold a Heartland share (or two).

I have finished a sell down of 35% of my HBL holding but currently I am intending to keep the remaining 65%.

Whether it or SCL is now the biggest holding in my NZ portfolio will literally depend on the market price.

Best Wishes
Paper Tiger

[percy]

I sold 20% of my HBL holding last Thursday,and half my SKL holding last Wednesday..
Still 75% higher than my next largest holding EBO,which is about two and a half times the size of my next largest holdings which are about the same size,AWK,SCL and TIL.
I was about 98% fully invested,and are now about 90% fully invested.
Feel I am "well positioned">!!!..lol.

[winner69]

No wonder Heartland share price tanking - at least two loyal shareholders selling and reducing their holdings.

[nextbigthing]

I sold 20% of my HBL holding last Thursday

How long have you got under the NZX rules to file the SSH notice?

We might see a nice little rise now the sell pressure has gone.

[jetski1999]

sold out completely, thank you HBL for funding my mortgage free home, sometimes banks can work for you when buying a house LOL

[percy]

[QUOTE=nextbigthing;604169]How long have you got under the NZX rules to file the SSH notice?

Being such a small fish in a large ocean I will never have to file a SSH notice.
Being a small player does have advantages when you want to buy or sell.
You can be gone before anyone notices you were there.!..lol.
I think the selling pressure is again HBL suffering the association of being a bank,when the Aussie Banks remain under pressure.

[kizame]

Nice one guys,out tomorrow too as its breached my stop-loss. Be back again one day.

[percy]

sold out completely, thank you HBL for funding my mortgage free home, sometimes banks can work for you when buying a house LOL

Good for you.
Well done.
Don't know what to do with my profits,but it is great to have realised some...
Guess the wife and daughters will come up with some ideas.!!! lol.

[percy]

Nice one guys,out tomorrow too as its breached my stop-loss. Be back again one day.

Well I am still 80% there.!!!

[kizame]

Well I am still 80% there.!!!

Still a great company Percy, you will do well of course,but my rules so no for now.
And your 80% still cranks that divvie.

[percy]

Still a great company Percy, you will do well of course,but my rules so no for now.
And your 80% still cranks that divvie.

Yes, and using TPMOM [The Percy Method of Mathematics] selling HBL shares at current prices lowers the average cost of my HBL holding.
This lower average cost is getting very low,which has a dramatic effect on the yield I am now receiving on the capital invested.I can live with this effect.In fact I am rather comfortable with it...lol.

[winner69]

Jeez - seems like a mass exodus.

Rats leaving a sinking ship - I hope not.

Heartland losing the aura of invincibility

I better be a sheepie and join the exodus

[winner69]

Stop your selling guys, things are getting bad.

jeez, if i become a sheepie and join you in the rush to the exits then you will see some action.

[kizame]

Stop your selling guys, things are getting bad.

jeez, if i become a sheepie and join you in the rush to the exits then you will see some action.

It's not about being sheep!

As I said before still a great company but why hang on to shares that are falling.
Hit my stop loss, I'm out,if I didn't have my rules...

You obviously have a different plan,thats great, you stick with it I'm sure you will do just fine.

[SCOTTY]

I must be a goat. I'm not selling :)

[winner69]

Heartland say drivers of growth and employment levels.

Really good news then as per Cameron Bagrie tweet -

@ANZ_cambagrie: Business NZ performance of manufacturing index very healthy. Another gauge of economic growth in NZ. NZ manuf defying struggles globally

Heartland been pushing the SME segment hard lately - a segment apparently doing well.

Heartland must be making more than that $53m guidance.

[NZSilver]

Short term it may be breaking supports, could see it head to 1.12-1.18 range therefore maybe a good time to top up for the long term.

[winner69]

Cam just keeps coming out with good news

@ANZ_cambagrie: ANZ consumer confidence figures for Jan show stability at good levels. NZ consumers not reacting to global unease. Good sign of domestic pep

Consumers happy, consumer borrowing up - all good for Heartland

Jeff better have a good story next month

[Raz]

You really place weight on consumer confidence surveys...??!!

[winner69]

You really place weight on consumer confidence surveys...??!!

Why shouldn't one?

Anyway its just of the things lately (consumer confidence, manufacturing activity, trucking activity, retail sales and son on) that the NZ economy is doing very well - could even see GDP growth close to 4% by this time.

Wouldn't believe it would you listening to economic commentators who hog the media.

Hesrtland keep saying growth is dependent on GDP growth and employment levels - so why not track them.

[Raz]

Why shouldn't one?

Anyway its just of the things lately (consumer confidence, manufacturing activity, trucking activity, retail sales and son on) that the NZ economy is doing very well - could even see GDP growth close to 4% by this time.

Wouldn't believe it would you listening to economic commentators who hog the media.

Hesrtland keep saying growth is dependent on GDP growth and employment levels - so why not track them.

Confidence surveys are shown time and again to have no correlation to economic activity, certainly specific groups cherry pick good or bad news, make sure you are getting the whole picture though, if you listen to media it oscillates from good to bad news stories...certain sectors of the NZ economy are not doing well. Want to place any money on that overall 4% GP growth rate?

[winner69]

Raz - Westpac keep publishing this chart. They obviously think that there is a relationship between consumer confidence and GDP growth worth showing.

[Raz]

Raz - Westpac keep publishing this chart. They obviously think that there is a relationship between consumer confidence and GDP growth worth showing.

They may... however their profession and consensus research does not back that up.

If you actually have a chat with their chief economist he will suggest our GDP growth has basically converged towards population growth. Thats why we currently have migration at current levels....although again is that the whole story:-)

Just noted your other query and yes risk seems elevated to win clients in the last 12 months.

[winner69]

They may... however their profession and consensus research does not back that up.

If you actually have a chat with their chief economist he will suggest our GDP growth has basically converged towards population growth. Thats why we currently have migration at current levels....although again is that the whole story:-)

Just noted your other query and yes risk seems elevated to win clients in the last 12 months.

Yes raz, with population growth ~2% latest GDP figure just under 3% not that flash.

You acquaintance of Dominic? He changed a lot over the last year from a pretty gung ho type to him and his team seeing negatives in nearly every economic update and crying out for OCR cuts. His masters must have an ulterior motive.

Anyway back on topic. With way above average population growth one would think that Heartland would have heaps more new customers. Good for growth.

[Snoopy]

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

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

0.2 x $2,564.266m = $512.9m

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

Result: FAIL TEST

PS Other posters have protested at my 20% of equity to back up the loan measuring stick in the past. 20% is not too far away from the 17% which by implication is judged acceptable by management under the watchful eye of Reserve Bank chairman Graeme Wheeler. The Reserve Bank further qualifies their views that a company of Heartlands credit rating still has a 1 in 30 chance of going broke in any year. I prefer to think in business cycles and 30 years will contain around five of those. So you could restate the Reserve Bank's view as saying that HNZ has a one in five chance of going broke at the bottom of the business cycle.

For me that investment risk is too high. So I am sticking to my 20% equity requirement, even if the Reserve Bank will settle for less.


I am a little overdue with this 'annual update, but better late than never.

Heartland has announced its intention for Heartland Bank to complete an issue of Tier 2 capital issue in FY2016, provided that market conditions remain favourable. An issue of Tier 2 capital would (in the absence of any other use) allow Heartland to return capital by way of a share buy back which would have a positive impact on ROE and EPS. This statement implies that at EOFY2015 30th June 2015) , all capital within Heartland was Tier 1 capital. It is nice to get confirmation of this, because this has been my assumption for several years. The awkward thing about this new Tier 2 capital is that it will make next years equivalent calculation more difficult!

$2,879.134m of loans are outstanding. 20% of that figure is:

0.2 x $2,879.134m = $575.8m

Heartland has total equity of $480.1m which is still below the 20% of loan target.

Result: FAIL TEST

Putting a number on it, the actual capital to loan ratio is:

$480.125m / $2,879.134m = 16.6%

This is down from the 17.6% of last year and now nearer the 17% equity that Heartland had when Governor Wheeler originally approved Heartland as a bank. Wheeler has of course slackened Heartland's requirement for capital since then. But the raw figure is not very encoraging, if progress is what you were seeking.

SNOOPY

[Snoopy]

The underlying debt of the company (borrowings removed) according to the full year (FY2014) statement of financial position is:

$39.375m + $0.431m = $39.806m

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

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

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

$145.798m - $47.421m = $98.327m

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

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

Result: PASS TEST


The underlying debt of the company (borrowings removed) according to the full year (FY2015) statement of financial position is:

$46.020m + $7.869m = $53.889m

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 'Investment Properties' (the rump of the problem property portfolio) and the unspecified 'Investments' (held on behalf of policy beneficiaries) from that total:

$3,359.259m - ($2,862.070m +$24.513m + $329.338m) = $143.348m

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

$143.348m - $51.119m = $92.229m

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

$53.889m/$92.229m= 58.4% < 90%

Result: PASS TEST

SNOOPY

[Snoopy]

Updating for the full year result FY2014:

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

EBIT (high estimate) = $210.297m - $64.739m= $145.558m

Interest expense is listed as $101.221m.

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

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


Updating for the full year result FY2015:

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

EBIT (high estimate) = $260.488m - $68.403m= $192.085m

Interest expense is listed as $126.041m.

So (EBIT)/(Interest Expense)= ($192.085)/($126.041)= 1.52 > 1.20

Result: PASS TEST

More progress here. A steady improvement from the FY2014 figure of 1.44

SNOOPY

[Snoopy]

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

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

On one side of the equation, we have borrowings.

HNZ BORROWINGS

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

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

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

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

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

-------

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

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

--------

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

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

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

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

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

$400m - $226.6m = $173.4m

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


HNZ LENDINGS

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

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

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

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

Thus the net expected maturity of receivables is:

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

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

=> Pass Short term liquidity test

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

$715.2m - $597.0m = $118.2m

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

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



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

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

On one side of the equation, we have borrowings.

HNZ BORROWINGS

HNZ has total borrowings of $2,825.245m (see note 13). This is made up of:

1/ Term deposits ($2,097.458m) lodged with Heartland.
2/ $465.779m of Bank Borrowings.
3/ Securitized Borrowings total: $258.630m
4/ Subordinated Bonds: $3.378m

Note 13 does not contain a clear breakdown of current and longer-term borrowing amounts and their maturity dates.

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

The information given in note 13 on the securitized borrowing facilities is as follows:

-------

The group has securitized bank facilities totalling $350m, all in relation to the Heartland ABCP Trust 1. (ABCP Trust) has a maturing facility of $400m maturing 3rd February 2016. I do not expect any problem in rolling this facility over for another year.

The current level of drawings against this facility is not highlighted. (c.f. FY2014: $229m).

--------

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

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

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

The maximum amount that can be borrowed under securitized arrangements has dropped too since FY2014, from $400m to $350m. The net result of this is that the borrowing headroom available using securitized bonds is now:

$350.0m - $258.6m = $91.4m

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


HNZ LENDINGS

Customers owe HNZ 'Finance Receivables' of $2,862,070,000. There is no breakdown in note 11 as to what loans are current or longer terms. However, if we look at note 20, we can see the expected maturity profile of total finance receivables due over the next twelve months.

$37.012m + $664.567m + $450.638m = $1,152.2175m

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

$748.332m + $1,219.450m + $686.159m = $2,653.941m

Thus the net expected maturity of receivables is:

$1,152.2175m - $2,653.941m = -$1,501.724m

If more money is coming in from customer loans being repaid, than is having to be repaid to the debenture holders, then this is a good thing for liquidity. However, that is not the case here. There is possibly a need to renegotiate/increase corporate borrowings to supplement debenture repayments.

=> Fail Short term liquidity test

I do note is that the amount borrowed as ‘debentures and deposits’ (borrowings) from customers has gone up by $300.8m (+11.9%) and the amount lent to customers (receivables) has gone up by $254.7m (+9.7%).

Securitized borrowing facilities have gone down by $50m over the same annual comparative period. So Heartland have upped their current period risk profile by having a smaller buffer to cover a growing mismatch between borrowings and receivables.

SNOOPY

[Snow Leopard]

You will be able to do this all over again in about one month Snoopy.

Best rest up, so you all refreshed for your next dive into the Heartland depths.

Best Wishes
Paper Tiger

[K1W1G0LD]

Well done Snoopy , your pass rate is getting better . I presume that is because your accuracy is improving!?;)

[Snow Leopard]

...Customers owe HNZ 'Finance Receivables' of $2,862,070,000. There is no breakdown in note 11 as to what loans are current or longer terms. However, if we look at note 20, we can see the expected maturity profile of total finance receivables due over the next twelve months.

$37.012m + $664.567m + $450.638m = $1,152.2175m

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

$748.332m + $1,219.450m + $686.159m = $2,653.941m

Thus the net expected maturity of receivables is:

$1,152.2175m - $2,653.941m = -$1,501.724m

...

Can I just point out that the figures you use are not the expected maturity numbers but the contractual maturity figures.

So for instance that $748.332m was probably sitting in peoples current accounts, on call savings accounts, etc.
So while people will demand some of that money now, by going to a hole in the wall and getting cash out or paying for the weeks supply of dog food with their debit card, they will not want it all. And on the flip side of this is that people also put their wages and dividend payments back in.

With both term deposits and loans, there is the expectation that people will take up new ones.

All banks work this way and fail your test on the contractual profile (you passed Heartland last year because you did use the expected numbers).

This contractual profile becomes important if there is a significant loss of confidence in the bank and everybody wants their money out asap.

Best Wishes
Paper Tiger

[Snoopy]

Can I just point out that the figures you use are not the expected maturity numbers but the contractual maturity figures.


Fair point PT, 'contractual maturities' is a better term to use than 'expected maturities' in the context of the data that I used. As you point out, the important thing is that an alternative method of funding becomes available. And the rollover of deposits is a way of alternative funding.

95% of the time none of this matters, in practice. Deposits roll over, loans roll over and the finance company goes about its finance business. However, there are times when 'rollover' is not a given.

------

EDIT
I have just noticed that in AR2014, Note 39, Heartland provides both 'contractual maturites' and 'expected maturities'. Last year I used 'expected maturities' for my calculation. However in AR2015, the equivalent Note 20, only 'contracted maturities' are given. The 'expected maturities' have been quietly dropped from company reporting procedures! This is very annoying, becasue as you point out PT 'expected maturities' is actually much more useful information than 'contractual maturites'!

From AR2014
"Expected maturities of financial assets are based on management's best estimate having regard to current market conditions and past experience."
"Historical deposit reinvestment levels have been applied to borrowings. Other financial liabilities reflect contractual maturities."

So maybe I can calculate my own 'expected maturities' for FY2015?

------

There are times when a company that deals in finances is making good profits and to the casual observer is 'solid as'. Yet if confidence wains, be that because:

1/ The underlying assets being financed have to be sold at a loss, OR
2/ The company cannot attract enough depositors becasue of a run on funds. Suddenly loans have to be wound up to pay depositors back.

In these circumstances, a profitable 'solid as' company can collapse, which is exactly what happened to the likes of Hanover. It is very unlikely that an apparently healthy company in finance will publish accounts showing it is on the brink of collapse because of mismanagement. Nevertheless investors can look at the published results and compare today's results with prior period results. If there are any problems, this is where shareholders will get the first hint of them!



So for instance that $748.332m was probably sitting in peoples current accounts, on call savings accounts, etc.

So while people will demand some of that money now, by going to a hole in the wall and getting cash out or paying for the weeks supply of dog food with their debit card, they will not want it all. And on the flip side of this is that people also put their wages and dividend payments back in.

With both term deposits and loans, there is the expectation that people will take up new ones.


Possibly. I know that Heartland have been promoting their call accounts quite steadily, to both consumers and businesses. I notice comparing 'contractual liabilities' 'on demand' FY2015 to FY2014, the amount has increased from $629.125m to $748.332m - an increase of 19%.

Last year the 'expected maturities' at call were only $18.922m. This was only:

$18.922m/$629.125m = only 3% of on call assets!

This year, because 'expected maturities' are not reported, there is no equivalent figure.

SNOOPY

[Snoopy]

Updating this number for the full year FY2014

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

Using numbers from the Heartland FY2014

= $452.622m/ $3016.888m = 15.0%

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

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

$394.82 - $370.543 = $24.290m

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

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




Updating this number for the full year FY2015

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

Using numbers from the Heartland FY2015

= $480.125m/ $3359.259m = 14.3%

The customer loan base has increased a little faster than the company equity. This means the balance sheet is being worked a little harder. This isn't a problem if the risk of loans becoming distressed is going down.

Unlike FY2014, there was no major external acquisition. The most significant increase in share capital over the year was therefore from (reference "Statement of Changes in Equity")

1/ Retained Earnings: $48.538m - $30.188m = $18.350m
2/ Dividend Reinvestment Plan: $7.621m
3/ Share Based Payments: $1.491m
4/ Treasury Shares Sold: $0.041m

Total $27.503m

This is slightly more than the the new capital generated within the existing Heartland in FY2014 ($24.290m)


SNOOPY

[Snoopy]

Can I just point out that the figures you use are not the expected maturity numbers but the contractual maturity figures.


When looking at company liquidity, it is useful to have an estimate of how depositors are expected to behave in the coming year, rather than just looking at the maturiity dates of their cash funds/debentures.

Over FY2014 Heartland managment provided this information. But from FY2015 they do not. Below I have tabulated the 'expected' and 'contractual' depositor behaviour.



FY2013 Deposit Maturity (Financial Liabilities)ExpectedContractedE/C


On Demand$4.522m$452.201m1.00%


0-6 months$413.371m$881.306m46.9%


6-12 months$235.172m$648.567m36.2%





FY2014 Deposit Maturity (Financial Liabilities)ExpectedContractedE/C


On Demand$18.922m$629.125m3.01%


0-6 months$242.431m$748.129m32.4%


6-12 months$195.682m$538.050m36.4%



Of particular interest is the very small redemption rate from the on demand account, across both teh FY2013 and FY2014 years.

During FY2013 Heartland was still establishing a 'depositors profile'. So in my judgement the best indicative figures we have for FY2015 come from FY2014. My table of expected depositor behaviour for FY2015 follows:



FY2015 Deposit Maturity (Financial Liabilities)ExpectedContractedE/C


On Demand$22.450m$748.332m3.01%


0-6 months$395.102m$1213.450m32.4%


6-12 months$249.762m$686.159m36.4%



SNOOPY

[Snoopy]

Can I just point out that the figures you use are not the expected maturity numbers but the contractual maturity figures.




FY2013 Loan Maturity (Financial Liabilities)ExpectedContractedE/C


On Demand$185.782m$185.782m100%


0-6 months$611.342m$628.167m97.3%


6-12 months$542.352m$387.031m140%





FY2014 Loan Maturity (Financial Receivables)ExpectedContractedE/C


On Demand$50.254m$50.254m100%


0-6 months$629.445m$477.190m132%


6-12 months$483.727m$367.564m132%



Of particular interest is the very significant early cashing up of loans, (except for loans that are already payable on demand).

During FY2013, Heartland was still liquidating the problem property portfolio. So in my judgement the best indicative figures we have for an FY2015 forecast come from FY2014. My table of calculated expected customer loan initiator behaviour for FY2015 follows:



FY2015 Loan Maturity (Financial Receivables)ExpectedContractedE/C


On Demand$37.012m$37.012m100%


0-6 months$877.215m$664.557m132%


6-12 months$594.842m$450.638m132%




SNOOPY

[Snoopy]

As PT pointed out, my liquidity calculation used contractual cashflows not expected cashflows. This will likely give an incorrect result by assuming nothing is rolled over. Heartland no longer publishes 'expected' cashflows. This means I need to take an educated guess to derive them. I have previously posted my educated guesses on expected loan agreement maturities and debenture and call deposit maturities for FY2015. I repeat this information below:



My table of calculated expected customer loan initiator behaviour for FY2015 follows:



FY2015 Loan Maturity (Financial Receivables)ExpectedContractedE/C


On Demand$37.012m$37.012m100%


0-6 months$877.215m$664.557m132%


6-12 months$594.842m$450.638m132%






My table of expected depositor behaviour for FY2015 follows:



FY2015 Deposit Maturity (Financial Liabilities)ExpectedContractedE/C


On Demand$22.450m$748.332m3.01%


0-6 months$395.102m$1213.450m32.4%


6-12 months$249.762m$686.159m36.4%




Time to update the Liquidity Buffer ratio for FY2015, the balance between monies borrowed and monies lent and matching up those maturity dates using a one year time horizon. The equation we are looking to satisfy is:

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

On the numerator of the equation, we have borrowings.

HNZ BORROWINGS



1/ Term deposits lodged with Heartland.$2,097.458m


2/ Bank Borrowings$465.779m


3/ Securitized Borrowings total$258.630m


4/ Subordinated Bonds$3.378m


Total Borrowings of (see note 13)$2,825.245m



Note 13 does not contain a clear breakdown of current and longer-term borrowing amounts and their maturity dates.

Banking facilities are provided by CBA Australia but for both Australia and New Zealand. These facilities are, I believe, in relation to the recently acquired reverse mortgage portfolio. These banking facilities are secured over the homes on which the reverse mortgages have been taken out. These loans have a maturity date of 30th September 2019. That means they are classed as ‘long term’ for accounting purposes. Heartland can’t rely on CBA Australia as a source of short-term funds.

The information given in note 13 on the securitized borrowing facilities is as follows:

-------



Total FY2015Total FY2014Facility Maturity Date FY2015


Securitized bank facilities total all in relation to the Heartland ABCP Trust 1 $350.000m $400.000m3rd February 2016 (*)


less Current level of drawings against this facility$258.630m$228.623m


equals Borrowing Headroom$91.370m {A}$171.377m



(*) I do not expect any problem in rolling this facility over for another year.
--------

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

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

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

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



HNZ LENDINGS

Customers owe HNZ 'Finance Receivables' of $2,862,070,000. There is no breakdown in note 11 as to what loans are current or longer terms. However, if we look at note 20, we can derive the expected maturity profile of total finance receivables due over the next twelve months.



On Demand0-6 Months6-12 MonthsTotal


Expected Receivables Due$37.012m + $877.215m + $594.842m = $1,509.069m


less Expected Deposits for Repayment$22.450m + $395.102m + $249.762m = $667.314m


equals Net Expected Cash Into Business$14.562m$482.112m$345.080m$841.755m {B}



If more money is coming in from customer loans being repaid, than is having to be repaid to the debenture holders, then this is a good thing for liquidity. That now is the case here.

Summing up:

(Total Current Money to Draw On)/(Net Expected Cashflow into Business)
= {A} / {B}
= $91.370m / $841.755m
= 10.8% > 10%

=> Pass Short term liquidity test (reversing the result of my most likely incorrect first iteration)



FY2015FY2014


Amount lent to Customers (Receivables)$2,862.070m (+9.7%)$2,607.393m


Total Borrowings$2,825.245m (+11.9%)$2,524.460m


Amount borrowed from Customers (Debentures and Deposits)$2,097.458m (+20.8%)$1,736.751m



Securitized borrowing facilities have gone down by $50m ($400m to $350m) over the same annual comparative period. So Heartland have upped their current period risk profile by having a smaller declared available loan buffer to cover any mismatch between maturing borrowings and maturing receivables.

SNOOPY

[trader_jackson]

Ho ho ho ho ho - Merry Christmas!

SNOOPY

So onward and upward to $1.60?? :t_up:

[percy]

It is the function of all banks that their treasury department match redemptions and deposits.
Should a bank have too much liquidity they often don't want too many depositor's renewals,so will offer a very much lower deposit rate.
Similarly should they find they are going to be "a little short" in a year's time,or whenever, they will offer a higher deposit rate.
This is the reason why bank deposit rates vary so much,for various lengths of deposits.
Therefore I would not read too much into any bank's liquidity, as they all seem to be ahead of the market.
One of the big advantages HBL have over the other banks is they recycle their funds quickly.Car loans etc are for a lot shorter period of time than a house mortgage,say 3 years against 20 years,while seasonal loans are for a very short period..
Our friends at TNR are similar.

[Snoopy]

It is the function of all banks that their treasury department match redemptions and deposits.
Should a bank have too much liquidity they often don't want too many depositor's renewals,so will offer a very much lower deposit rate.
Similarly should they find they are going to be "a little short" in a year's time,or whenever, they will offer a higher deposit rate.
This is the reason why bank deposit rates vary so much,for various lengths of deposits.
Therefore I would not read too much into any bank's liquidity, as they all seem to be ahead of the market.


Wise words Percy, and fine for 95% of investors 95% of the time. If companies in the finance business always did what they say they would do then there would be no need to worry about liquidity. However I feel we are still living in the shadow of the great New Zealand Finance Company collapse. So if I can produce data that backs up your wise words, then as a (potential) shareholder I will sleep more easily.

"What happens if confidence is questioned?" is the question I am posing. In this case there looks to be enough securitized borrowing liquidity to see Heartland through. That is the most satisfactory result we can hope for in studying the accounts as published.



One of the big advantages HBL have over the other banks is they recycle their funds quickly.Car loans etc are for a lot shorter period of time than a house mortgage,say 3 years against 20 years,while seasonal loans are for a very short period..
Our friends at TNR are similar.

You are assuming the house loans go full term. Just because a loan is taken out on 20 year terms, that doesn't mean it won't be cashed up and recycled after 3 years.

SNOOPY

[percy]

All banks operating in NZ must answer to The Reserve Bank of NZ,and report quarterly to them.
This adds a very high level of safety/security to NZders.Borrowers,lenders and shareholders.
So the first reaction to watch for in the event on a run on any bank in NZ would The Reserve Bank's.
We can all guess what that would be.
I think also 3 year can loans are often don't go the full term.
So for you 1 year car loans verses 8 year mortgages.

[winner69]

From my mate Cam -
@ANZ_cambagrie: Fonterra lowers payout to $4.15 from $4.60. No surprises with downgrade but marginally larger than expected (we were at 4.25).

$4.15 is awfully low and a big drop from $4,60 - only one step away from being $3 something

Spose those $300m of dairy loans just became even more riskier - and Heartlands generous 'support' to distressed farmers will need to last longer

Hope this doesn't impact the $52m earnings forecast. Just hoping Heartlands guesses are better than Fonterras

[Marilyn Munroe]

Spose those $300m of dairy loans just became even more riskier - and Heartlands generous 'support' to distressed farmers will need to last longer



Those share-milkers who mistimed their entry will be having a bad day.

Boop boop de do
Marilyn

[axe]

Those share-milkers who mistimed their entry will be having a bad day.

Boop boop de do
Marilyn

Have you been talking to any share-milkers lately? I had interesting chat to one the other day. He said production was up. Most farmers seem to be very aware of how cyclical their industry is. As with any industry during this part of the cycle they will be looking to drive efficiencies and defer non essential CAPEX.

[Marilyn Munroe]

Have you been talking to any share-milkers lately? I had interesting chat to one the other day. He said production was up. Most farmers seem to be very aware of how cyclical their industry is. As with any industry during this part of the cycle they will be looking to drive efficiencies and defer non essential CAPEX.

No but I had an interesting conversation with a dairy farmer who purchased astutely during the recent "white gold" era. He reckoned he could make money all the way down to $3.00/Kg.

You are right most will make it through, but history of rural slumps shows us there are some who do not remain in the industry.

Boop boop de do
Marilyn

[winner69]

Heartland keen on this P2P stuff with their tie up with Harmoney. They did mention a while ago that they had put more than $50m through that platform. Obviously more now. Probably new business for them so a driver of growth.

Harmoney website and what punters are saying on the Harmoney thread looks like returns are between 12% to 15% (RAR). Not too shabby

But some of the stories told on the Harmoney thread are a bit of a worry. Does seem to be a lot of dodgy stuff and a lot of non-performing loans. One hopes that Heartland is cherry picking the 'better' ones are less exposed to the loans for say to buy tickets and flights too rock concert. Future bad debts keptvtona minimum I hope.

Harmoney a Heartland shop front - hardly P2P lending is it

[Toasty]

Heartland keen on this P2P stuff with their tie up with Harmoney. They did mention a while ago that they had put more than $50m through that platform. Obviously more now. Probably new business for them so a driver of growth.

Harmoney website and what punters are saying on the Harmoney thread looks like returns are between 12% to 15% (RAR). Not too shabby

But some of the stories told on the Harmoney thread are a bit of a worry. Does seem to be a lot of dodgy stuff and a lot of non-performing loans. One hopes that Heartland is cherry picking the 'better' ones are less exposed to the loans for say to buy tickets and flights too rock concert. Future bad debts keptvtona minimum I hope.

Harmoney a Heartland shop front - hardly P2P lending is it

I haven't read that thread. My Harmoney portfolio is running at 17.07% against the 12.66% average. Pretty happy so far after 12 months. No defaults at this point.

I allocate every $25 note individually and read whatever sob story the applicant has put up. I also stay away from smaller towns and go for people in the main centres, plus a few other judgements on their time oat employment etc.

[winner69]

Heartland can't be immune from this problem. They no doubt asking some dairy customers to sell up as well

Hopefully an update at H1 results

Bankers warn more forced NZ dairy farm sales likely following payout drop
.
http://www.sharechat.co.nz/article/a57a1013/bankers-warn-more-forced-nz-dairy-farm-sales-likely-following-payout-drop.html

[winner69]

My mate Cam says

@ANZ_cambagrie: Net migration inflow of 5.5k in dec. not as strong as nov and oct but still strong. Record number of tourists in December

Hope that a lot of the 120,000 odd new migrants in 215 opened accounts and did business with Hesrtland

[winner69]

Shareprice down 9% from recent highs

[Yeshiva]

Shareprice down 9% from recent highs

Which means what exactly?

[winner69]

Which means what exactly?

Underperformance

Since hitting $1.35 Heartland down 9% while NZX50 up 1%

[Raz]

a number of dairy properties on marginal land for sale, some will never be economic based on realistic forward price ranges, this is going to go on a lot longer than people expect, a med -debt farmer going into a second season of these lower prices will take five years to turn it around...don't see any bank waiting that long and that is assuming prices recover next season which is doubtful... expect all banks to increase their provisions..

P to P is a bad move IMHO..way too influenced by where we are at in the economic cycle plus main trading bank 0% credit card deals for 12 month gobble up consumer finance of any quality real quick.

dis. Now not holding

[Yeshiva]

Underperformance

Since hitting $1.35 Heartland down 9% while NZX50 up 1%

The share price is underperforming or the company is underperforming?

[winner69]

The share price is underperforming or the company is underperforming?

The share price underperforming the NZX50

Company underperforming - you tell me.

[axe]

We will find out before the end of feb. The capital return did use 1.20 as an example. Market must be reading into this. They should have used 1.60 right????

[Beagle]

a number of dairy properties on marginal land for sale, some will never be economic based on realistic forward price ranges, this is going to go on a lot longer than people expect, a med -debt farmer going into a second season of these lower prices will take five years to turn it around...don't see any bank waiting that long and that is assuming prices recover next season which is doubtful... expect all banks to increase their provisions..

P to P is a bad move IMHO..way too influenced by where we are at in the economic cycle plus main trading bank 0% credit card deals for 12 month gobble up consumer finance of any quality real quick.dis. Now not holding

More on how some cunning people are using the 0% credit card deals to their advantage here...astute people with large undrawn credit card limits are very "well positioned"
http://www.sharetrader.co.nz/showthread.php?10498-Playing-the-Credit-Card-interest-free-game

[winner69]

We will find out before the end of feb. The capital return did use 1.20 as an example. Market must be reading into this. They should have used 1.60 right????

Maybe they were being optimistic even with that $1.20

Did I just see $1.21 - jeez sinking like a lead balloon

Aren't things going to plan or something in Heartland land?

[winner69]

Jeez, thought it was going to close at $1.20 but a bit of a recovery in the final wash up

Must be a few nervous nellies out there

[winner69]

Snoopy on the ANZ thread has done a lot of work analysing UDC and to some extent comparing it to Heartland.

The last paragraph of his last post is interesting and relevant to this thread -


snoopy - Of course we all know that UDC isn't a 'real' finance company, even to the extent that they don't have to keep the Reserve Bank updated on their financial position. As long as the parent ANZ New Zealand (who have full control of the UDC purse strings) keeps their own disclosure up to date, the UDC are off the radar as far as the Reserve Bank of NZ is concerned. In practice UDC are simply a 'marketing arm' of the ANZ. If anything that might make UDC potentially more 'reckless' than fully independently owned finance companies. That's because they know that ANZ Bank will bail them out if they get into trouble. So I think it is interesting that in practice UDC are less reckless with their lending policies (hold a lower relative provision for credit impairment on the balance sheet) than Heartland.

Hope Snoops doesn't mind me posting it here but his work does deserve some consideration.

[K1W1G0LD]

Jeez, thought it was going to close at $1.20 but a bit of a recovery in the final wash up

Must be a few nervous nellies out there

And on HERE.

[trader_jackson]

And on HERE.

I'm not nervous, unlike NZ Oil and Gas, management of HNZ know what they are doing. People are just taking a 'breather', once another set great results come out, we'll see the ladder to the $1.40's come out again.

[Snow Leopard]

This was going to be a simple post along the lines that the share price has taken a sharp turn southwards since they changed their name to have the word Bank in it and thus, obviously, this was a bad thing to have done.

But then I noticed this...


Snoopy on the ANZ thread has done a lot of work analysing UDC and to some extent comparing it to Heartland.

The last paragraph of his last post is interesting and relevant to this thread -


...Of course we all know that UDC isn't a 'real' finance company, even to the extent that they don't have to keep the Reserve Bank updated on their financial position. As long as the parent ANZ New Zealand (who have full control of the UDC purse strings) keeps their own disclosure up to date, the UDC are off the radar as far as the Reserve Bank of NZ is concerned. In practice UDC are simply a 'marketing arm' of the ANZ. If anything that might make UDC potentially more 'reckless' than fully independently owned finance companies. That's because they know that ANZ Bank will bail them out if they get into trouble. So I think it is interesting that in practice UDC are less reckless with their lending policies (hold a lower relative provision for credit impairment on the balance sheet) than Heartland.

SNOOPY

Hope Snoops doesn't mind me posting it here but his work does deserve some consideration.

So I have read all of Snoopy's original post and checked his figures and have no complaints there (though if anybody does want a good discussion of what are applicable inclusions and exclusions - do not phone me)...

But...

If UDC have a 1.43% impairment provision and Heartland have a 1.09% impairment provision then I do not see how the emphasised conclusion can be drawn from the data.

Best Wishes
Paper Tiger

[Baa_Baa]

I'm not nervous, unlike NZ Oil and Gas, management of HNZ know what they are doing. People are just taking a 'breather', once another set great results come out, we'll see the ladder to the $1.40's come out again.

Hopefully you're right with that, HBL (ex HNZ) is below some peoples exit price, even back to April 2015. It can be a long time between drinks if you're waiting for the 'next announcement'. That hasn't worked for quite some time now, in terms of SP capital appreciation.

[winner69]

I'm not nervous, unlike NZ Oil and Gas, management of HNZ know what they are doing. People are just taking a 'breather', once another set great results come out, we'll see the ladder to the $1.40's come out again.

A 10% correction when NZX50 is up slightly is some breather t_j - and it's even down from 52 weeks ago according to the NZX website.

Maybe PT observation that the share price has taken a sharp turn southwards since they put the word BANK in their name has some credence. Sentiment works in funny ways.

You grumpy with NZO or something bringing them up randomly on this thread?

[percy]

This was going to be a simple post along the lines that the share price has taken a sharp turn southwards since they changed their name to have the word Bank in it and thus, obviously, this was a bad thing to have done.

But then I noticed this...



So I have read all of Snoopy's original post and checked his figures and have no complaints there (though if anybody does want a good discussion of what are applicable inclusions and exclusions - do not phone me)...

But...

If UDC have a 1.43% impairment provision and Heartland have a 1.09% impairment provision then I do not see how the emphasised conclusion can be drawn from the data.

Best Wishes
Paper Tiger

Neither do I...lol.

[winner69]

Global dairy prices down again. Milk powder down 10% and below 2000, Fonterra say its needed to get back to 3000 to meet their old forecast of $4.60. Not looking too good for next year (2017) as well

Heartland $300m plus dairy loans more 'risky' today than last week. No way in the world can Jeff tell me that it's all honky dory. The loan restructure team out in full force I reckon turning problem loans into 'current' loans.

NZ dairy prices drop sharply at GlobalDairyTrade auction
http://www.stuff.co.nz/business/farming/dairy/76491017/nz-dairy-prices-drop-sharply-at-globaldairytrade-auction

[Yeshiva]

Global dairy prices down again. Milk powder down 10% and below 2000, Fonterra say its needed to get back to 3000 to meet their old forecast of $4.60. Not looking too good for next year (2017) as well

Heartland $300m plus dairy loans more 'risky' today than last week. No way in the world can Jeff tell me that it's all honky dory. The loan restructure team out in full force I reckon turning problem loans into 'current' loans.

NZ dairy prices drop sharply at GlobalDairyTrade auction
http://www.stuff.co.nz/business/farming/dairy/76491017/nz-dairy-prices-drop-sharply-at-globaldairytrade-auction


What $300m plus of dairy loans? Page 10 of Heartland's latest annual report says they have "exposure to dairy" of $218m, with a LVR of 61%. This comprises 7.6% of their total book. Could you kindly let me know where the $300m plus figure comes from?

Also, HBL have more than enough capital to plan a purchase of Motor Trade Finance, or failing that, a share buyback. So there's heaps of cash in the till even if they need to increase provisioning for bad dairy loans.

Interestingly, a quick google search for "Heartland Bank NZ dairy" brings up this recent article on Reuters, where Heartland note that weak dairy prices will potentially last until 2017, but they will continue to do business with farmers.

http://www.reuters.com/article/newzealand-banks-idUSL3N15B24I

Is there any evidence at all for your phrase "The loan restructure team out in full force I reckon turning problem loans into 'current' loans"?. As the philosophers retort goes - "that which can be asserted without evidence can be dismissed without evidence".

[NZSilver]

She's going to get cheap!

[winner69]

What $300m plus of dairy loans? Page 10 of Heartland's latest annual report says they have "exposure to dairy" of $218m, with a LVR of 61%. This comprises 7.6% of their total book. Could you kindly let me know where the $300m plus figure comes from?

Also, HBL have more than enough capital to plan a purchase of Motor Trade Finance, or failing that, a share buyback. So there's heaps of cash in the till even if they need to increase provisioning for bad dairy loans.

Interestingly, a quick google search for "Heartland Bank NZ dairy" brings up this recent article on Reuters, where Heartland note that weak dairy prices will potentially last until 2017, but they will continue to do business with farmers.

http://www.reuters.com/article/newzealand-banks-idUSL3N15B24I

Is there any evidence at all for your phrase "The loan restructure team out in full force I reckon turning problem loans into 'current' loans"?. As the philosophers retort goes - "that which can be asserted without evidence can be dismissed without evidence".

Yes yeshiva, $217m net 6 at June. My mistake - very remiss of me. Wonder what it is now?

Not implying they go broke but saying some time it is possibie that dairy loans going bad will be a drag on profitability. Even $5m extra is significant. No impact in F16 I guess but F17 could bea different story.

Loan restructuring (ie support) turns old loans into new loans - that's what happens in the finance world. Only conjecture that Heartland are actualy doing this but ....

Good philosophical stuff at the end. There's also the saying that the art of good listening is hearing what isn't being said

[stoploss]

Global dairy prices down again. Milk powder down 10% and below 2000, Fonterra say its needed to get back to 3000 to meet their old forecast of $4.60. Not looking too good for next year (2017) as well

Heartland $300m plus dairy loans more 'risky' today than last week. No way in the world can Jeff tell me that it's all honky dory. The loan restructure team out in full force I reckon turning problem loans into 'current' loans.

NZ dairy prices drop sharply at GlobalDairyTrade auction
http://www.stuff.co.nz/business/farming/dairy/76491017/nz-dairy-prices-drop-sharply-at-globaldairytrade-auction

They will only be getting out of control when you see Dairy farmers/ loans appearing on Harmony.

DISC:Hold

[Yeshiva]

Yes yeshiva, $217m net 6 at June. My mistake - very remiss of me. Wonder what it is now?

Not implying they go broke but saying some time it is possibie that dairy loans going bad will be a drag on profitability. Even $5m extra is significant. No impact in F16 I guess but F17 could bea different story.

Loan restructuring (ie support) turns old loans into new loans - that's what happens in the finance world. Only conjecture that Heartland are actualy doing this but ....

Good philosophical stuff at the end. There's also the saying that the art of good listening is hearing what isn't being said

A wise Rabbi once said to lie on your stomach at night to avoid temptation. Equally, one should think before speaking so as to avoid foolishness, unless it your purpose to be deliberately foolish.

Since conjecture is welcome on this thread in the absence of discussing facts about Heartland's business, it is my conjecture that the percentage of HBL's dairy related loans compared to its total book may hold steady or decrease. That is, the $217m figure does one of three things:
- It grows at the same rate as HBL's overall book
- It grows at a lesser rate compared to HBL's overall book, thus slowly shrinking as a percentage
- The dollar figure stays the same or drops in real terms, which will show a faster drop in percentage relating to the overall book.

For the figure to increase, it means that not only would HBL be signing up lots of new dairy related business, but it would need to be doing so at an even faster rate than the rest of its book growth, which strikes me as unlikely. Possible, but unlikely.

I only mention this because there appears to be a lot of fixation on HBL's dairy exposure. To me, this looks a lot like Chicken Little behaviour. I would be looking more closely at the areas that HBL signalled as strong growth, being reverse mortgages and SME working capital, plus also automotive lending. I would also ensure I did not conflate dairy lending with all agricultural lending, because it seems stone fruit and pip fruit exporters are doing well at the moment.

[winner69]

A wise Rabbi once said to lie on your stomach at night to avoid temptation. Equally, one should think before speaking so as to avoid foolishness, unless it your purpose to be deliberately foolish.

Since conjecture is welcome on this thread in the absence of discussing facts about Heartland's business, it is my conjecture that the percentage of HBL's dairy related loans compared to its total book may hold steady or decrease. That is, the $217m figure does one of three things:
- It grows at the same rate as HBL's overall book
- It grows at a lesser rate compared to HBL's overall book, thus slowly shrinking as a percentage
- The dollar figure stays the same or drops in real terms, which will show a faster drop in percentage relating to the overall book.

For the figure to increase, it means that not only would HBL be signing up lots of new dairy related business, but it would need to be doing so at an even faster rate than the rest of its book growth, which strikes me as unlikely. Possible, but unlikely.

I only mention this because there appears to be a lot of fixation on HBL's dairy exposure. To me, this looks a lot like Chicken Little behaviour. I would be looking more closely at the areas that HBL signalled as strong growth, being reverse mortgages and SME working capital, plus also automotive lending. I would also ensure I did not conflate dairy lending with all agricultural lending, because it seems stone fruit and pip fruit exporters are doing well at the moment.

Nothing to argue about there yeshiva

But isn't the point that exposure to ~$200m (or whatever the number is) of dairy loans during hard times for many dairy farmers raises the possibility of increased levels of bad debts - which would be a drag on future Heartland earnings.

That is all I am pointing out, nothing else. A risk I assess as a shareholder and its future impact on its share price,

[Yeshiva]

hot off the press - record new car sales. One might raise conjecture this is better rather than worse news for Heartland.

http://www.scoop.co.nz/stories/BU1602/S00082/nz-new-car-sales-hit-record-in-january-on-commercial-demand.htm

[winner69]

hot off the press - record new car sales. One might raise conjecture this is better rather than worse news for Heartland.

http://www.scoop.co.nz/stories/BU1602/S00082/nz-new-car-sales-hit-record-in-january-on-commercial-demand.htm

Yes good news, esp as most related to commercial vehicles - can we speculate that they got a decent share of any lending involved?

Hope so

Employment data out in next few minutes - prob show increased numbers in workforce and hopefully some wage inflation. That be good news as well

[Snoopy]

So I have read all of Snoopy's original post and checked his figures and have no complaints there (though if anybody does want a good discussion of what are applicable inclusions and exclusions - do not phone me)...

But...

If UDC have a 1.43% impairment provision and Heartland have a 1.09% impairment provision then I do not see how the emphasised conclusion can be drawn from the data.

Best Wishes
Paper Tiger


Neither do I...lol.

I have to admit I couldn't quite understand the post you both referred to either. This is a bit of a worry considering it was I that wrote it!

So perhaps I should back track a bit, to a more easily understood piece of kiwi culture: "the possum theory of risk".

The possum theory of risk goes like this.

Scenario 1: You are driving along in your car and you see no possums, either the reflections of their eyeballs, or flattened on the road. Does this mean there was no risk, or does it mean that you just didn't see the possums?

Scenario 2: You are driving along the road and you see lots of possum eyeball reflections at different stages, but you don't hit any. Do you see those possums as they scramble to the edge of the road for safety? Or are they frozen in the middle of the road caught in the headlights?

Scenario 3: You are driving along the road, you see a few possum eyeballs and you hit a few possums. You might say that a dead possum is written off. But as a fresh kill, do you stop, put it in the back of the wagon and skin and boil up the carcass to at least get some return from the beast? And are you really a reckless driver for hitting so many possums? Or are you a supreme driver for only hitting one or two possums when there are so many out there?

If this is all to cryptic for some of you, substitute 'bank manager' for driver, 'vulnerable loan' for possum, and 'impaired loan' for road kill possum and see where you get with the analogy !

SNOOPY

[Beagle]

Given heightened market interest in the dairy sector in New Zealand, Heartland advised the market that its exposure to dairy is $218.0m which equates to 7.6% of its total lending book. The average loan to value ratio (LVR) for Heartland’s dairy exposures is 61%. However, it is important to note that LVRs are only one of the indicators of loan quality. Heartland expects a continuation of lower than historical higher milk pay-out levels, followed by a slow recovery. This will lead to an increase in farmers making operating losses. Heartland is well positioned to provide support for its dairy customers in the forthcoming year. Extract from 2015 annual report

Yeshiva - In fairness to Winner69 and the likely direction of the dairy loan book I think its pretty clear providing ongoing support to loss making dairy farmers means the size of the loan book heads north. Whether that's at a rate faster than their overall loan book remains to be seen. HBL are on safe ground predicting a "slow" recovery in dairy prices, (slow is such a loose term it could be defined as anything from months to many more years). How many more years do you think they should support loss making dairy farmers ?

[winner69]

Heartland says "Key drivers of growth for Heartland are GDP and employment"

Great news then -

unemployment rate falls to 5.3% (most gurus were expecting an increase). Lowest rate since 2009. And wage index up 1.5%

Can we conjecture this leads to more household borrowing ---- through Heartland of course

[winner69]

She's going to get cheap!

How cheap nzsilver?

[Snow Leopard]

{20-Jan-2016} Well it had to happen sometime - I sold a Heartland share (or two).

I have finished a sell down of 35% of my HBL holding but currently I am intending to keep the remaining 65%.

Whether it or SCL is now the biggest holding in my NZ portfolio will literally depend on the market price.

Best Wishes
Paper Tiger

Beginning to think that the best thing to buy with the proceeds of my Heartland sell-down is Heartland !

Best Wishes
Paper Tiger

[percy]

Beginning to think that the best thing to buy with the proceeds of my Heartland sell-down is Heartland !

Best Wishes
Paper Tiger

You are not alone.!.....lol.

[Cool Bear]

Beginning to think that the best thing to buy with the proceeds of my Heartland sell-down is Heartland !

Best Wishes
Paper Tiger
Yes, but is it time to? it is still red everywhere. Must be the Lunar New Year celebrations.

[NZSilver]

How cheap nzsilver?

Less than $1.10

[trader_jackson]

http://www.sharechat.co.nz/article/e84ce897/harmoney-raises-8-8-mln-in-preference-share-issue-halves-threshold-to-go-public.html

Am I reading this right? potential for IPO for Harmoney? Could Heartland 'cash in'?

[Yeshiva]

http://www.sharechat.co.nz/article/e84ce897/harmoney-raises-8-8-mln-in-preference-share-issue-halves-threshold-to-go-public.html

Am I reading this right? potential for IPO for Harmoney? Could Heartland 'cash in'?

they don't strike me as traders interested in a quick flick. But an IPO might boost the carrying value of the holding sufficiently that it impacts nicely on HBLs balance sheet.

[Yeshiva]

Earnings due 23 Feb.

https://www.nzx.com/companies/HBL/announcements/277271

can we surmise that an earnings date announcement without any mention of changes to earnings means they are on track with previous forecasts/guidance/utterings?

[winner69]

Earnings due 23 Feb.

https://www.nzx.com/companies/HBL/announcements/277271

can we surmise that an earnings date announcement without any mention of changes to earnings means they are on track with previous forecasts/guidance/utterings?

Of course ......but then nearly all such announcements don't usually provide 'guidance'

[winner69]

Next week can you guys do your buying/topping up at the end of the day instead of first thing.

Price seems to need good buying support at end of day. (Rice seems to drift down as the day goes on) and closes at days low

This weeks close at $1.18 is lowest weekly close since October

And now 13% down on its recent highs - ouch

[winner69]

Earnings due 23 Feb.

https://www.nzx.com/companies/HBL/announcements/277271

can we surmise that an earnings date announcement without any mention of changes to earnings means they are on track with previous forecasts/guidance/utterings?

I reckon they will report H1 earnings as $25.8m which includes the $1m of non-recurring restructure costs they mentioned

Sets up a boomer H2 and I expect them to report $28.9m (+17%) for that half bringing FY to be $54.7m (+14%)

That's an eps of 11.5 cents on current number of shares so PE currently just over 10. Maybe the rerating down that often happens when capital restructuring takes place (more debt / less equity means higher risk for shareholders) is already underway in anticipation of the capital return.

I hope to be pleasantly surprised but doubt I will.

[nextbigthing]

The original announcement that got retracted was far more interesting than its replacement.

'Heartland Bank Limited (NZX: HBL) advises that it intends to announce its financial results for the six month period ending 31 December 2015 on Tuesday 23 February 2016. A results presentation will be held in the MTF Vehicle Finance offices'.*





*DYOR

[winner69]

The original announcement that got retracted was far more interesting than its replacement.

'Heartland Bank Limited (NZX: HBL) advises that it intends to announce its financial results for the six month period ending 31 December 2015 on Tuesday 23 February 2016. A results presentation will be held in the MTF Vehicle Finance offices'.*

*DYOR



Interesting insight nbt

[trader_jackson]

The original announcement that got retracted was far more interesting than its replacement.

'Heartland Bank Limited (NZX: HBL) advises that it intends to announce its financial results for the six month period ending 31 December 2015 on Tuesday 23 February 2016. A results presentation will be held in the MTF Vehicle Finance offices'.*





*DYOR







I cannot seem to find this new announcement!

[winner69]

I cannot seem to find this new announcement!

Nbt said that announcement was retracted - and replaced by the one that is now up on the NZX site

[Beagle]

Next week can you guys do your buying/topping up at the end of the day instead of first thing.

Price seems to need good buying support at end of day. (Rice seems to drift down as the day goes on) and closes at days low

This weeks close at $1.18 is lowest weekly close since October

And now 13% down on its recent highs - ouch

Mate up to this point Its actually done well relative to most of the major Aussie banks. Have a look at the charts of ANZ, WBC and NAB since August 2015 :eek2:...tells quite an interesting story about the banking sector as a whole.