HGH - Heartland Group Holdings

[Snow Leopard]

What you are telling me is part of the picture PT. But no bank would be foolish enough to run their actual loan to equity ratio as low as the minimum reserve bank requirements. Otherwise a customer like young Percy could go into Heartland to withdraw $100 to buy a bunch of flowers for his good wife. But he would be kept waiting until Joe Driver from the coin arcade, puts in the morning coin take to make the balancing $100 deposit required to avoid tipping Heartland into administration!

The question is, what level of buffer over and above the reserve bank requirements do management regard as acceptable? ...

Very droll Snoopy, very droll.

No - what I meant was if you look at the latest half year disclosure statement and beagle 19(j) you will see that they sat on 14.46% (as opposed to the not totally comparable 13.76% a year earlier). They seem to like to hang around that sort of value.

Perhaps for our readers out there we ought to spell out what a couple of the various minimum ratios practically mean.

Whilst the Total Capital Ratio (or TCR) is above 10.5% then from the New Zealand Reserve Bank's perspective it is a case of 'No Worries'.

Should the TCR drop below 10.5% but be above 8.0% then HBL must
"limit the aggregate distributions of the bank’s earnings to the percentage limit to distributions that corresponds to the banking groups buffer ratio"
i.e. reduce dividends etc to a maximum of 60%, 40%, 20% and then 0% of earnings as the 8.0% threshold is approached.

But even below 8.0% TCR HBL is still not a bust but would be required to do some recapitalisation - tout suite (that's French for pronto).

Having said all that if they get anywhere near 10.5% then you will see this Tiger leaving by the nearest exit.

Best Wishes
Paper Tiger

[malus]

Having said all that if they get anywhere near 10.5% then you will see this Tiger leaving by the nearest exit.


... so in the words of another immortal cat that would be "exit stage left" I presume!! :p
https://youtu.be/Q3-a4qWCtIg

[percy]

So HBL have $64.1mil of "surplus capital" on the books.
I am not surprised,as they said they had "surplus capital."
Yet all the Australian Banks have been raising capital.
Big difference,

I think the reason HBL's balance sheet and equity ratios are so strong is because the directors/management have such large shareholdings.
The "owners" eye" is certainly proved here.
This together with having to report quarterly to The Reserve Bank of NZ ,adds an extra level of security for both depositors/customers and shareholders.

[Raz]

I think the reason HBL's balance sheet and equity ratios are so strong is because the directors/management have such large shareholdings.
The "owners" eye" is certainly proved here.
This together with having to report quarterly to The Reserve Bank of NZ ,adds an extra level of security for both depositors/customers and shareholders.

Good to know especially given dairy farm sale price has fallen 24% in the past year (excluding any Mortg. and forced sales) and that particular process is really yet to start! Still see more financial distress in the wider rural services sector. How much has HBL portfolio in this wider sector??

[Snoopy]

Refer to the interim report of FY2016 for the latest audited Heartland information. Time has rolled on and the total loan portfolio at the latest balance date (31-12-2015) was: $2,928.621m (Interim Statement of Financial Position)

Home equity release loans, which apparently have separate capital requirements total $422.706m (note 18c).

So the loan portfolio, less home equity release loans, was:

$2,928.621m - $422.706m = $2,505.915m


Before I get hauled up by a real accountant for the above....

This home equity release stuff still does my head in. Normally with a loan as a bank customer, the customer/bank timeline goes like this.

1/ You want stuff.
2/ The bank lends you the money to buy the stuff.
3/ You pay the bank their money back + interest with regular payments.

With HER there is a different sequence of events.

1/ You have stuff, but you want money.
2/ You give a promise of stuff (a claim on your house) to the bank, they give you money.
3/ The bank takes your stuff in proportion to the money that you have taken from them, plus interest.

So technically a HER loan is not a loan in customer terms (financial receivable in bank terms). Because as soon as the bank hands you money they simultaneously gain title to an equivalent amount of offsetting stuff.

However, if you look at how the accounts really work, (Note 43, AR2014) you will see that all the money that the 'rich bank' has to give to you, the homeowner, they don't actually have. Heartland are borrowing the home equity release money from another bank. So perversely, both you and Heartland Bank simultaneously become more indebted when you take out a home equity release loan!

Thus, even though my above treatment of a HER loan as an account receivable looks odd, I believe my treatment of HER loans as 'financial receivables' for Heartland is justified. Because Heartland structures their HER loans by borrowing the money from other banks.

SNOOPY

[trader_jackson]

https://www.nzx.com/companies/HBL/announcements/282552

Certainly no bad news here...

Onwards and upwards to $1.30+

[percy]

Yes as expected a very sound steady result, with the increased profit to meet guidance.
One test I use to see whether a profit is real or not is to compare the tax a company is paying.No lies there.!
Well HBL's tax paid is up 21% from $12,743,000 to $15,445,000.
Equity ratio.Total assets of $3,389,000 are supported by total equity of $486,004 which is 14,34%
We remain "well positioned'.

[Snow Leopard]

Before I get hauled up by a real accountant for the above....

This home equity release stuff still does my head in. Normally with a loan as a bank customer, the customer/bank timeline goes like this.

1/ You want stuff.
2/ The bank lends you the money to buy the stuff.
3/ You pay the bank their money back + interest with regular payments.

With HER there is a different sequence of events.

1/ You have stuff, but you want money.
2/ You give a promise of stuff (a claim on your house) to the bank, they give you money.
3/ The bank takes your stuff in proportion to the money that you have taken from them, plus interest.

So technically a HER loan is not a loan in customer terms (financial receivable in bank terms). Because as soon as the bank hands you money they simultaneously gain title to an equivalent amount of offsetting stuff.

However, if you look at how the accounts really work, (Note 43, AR2014) you will see that all the money that the 'rich bank' has to give to you, the homeowner, they don't actually have. Heartland are borrowing the home equity release money from another bank. So perversely, both you and Heartland Bank simultaneously become more indebted when you take out a home equity release loan!

Thus, even though my above treatment of a HER loan as an account receivable looks odd, I believe my treatment of HER loans as 'financial receivables' for Heartland is justified. Because Heartland structures their HER loans by borrowing the money from other banks.

SNOOPY

Snoopy you must read & understand this >> Money Creation in the Real Economy (http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q1prereleasemoneycreation.pdf) <<

Your two 'different' scenarios are no different on the balance sheet.

Best Wishes
Paper Tiger

[Snow Leopard]

Position of Rural (includes Dairy) Loans for last 4 quarters:

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20160518-Rural.png

Obviously it is not getting better yet.

There is more to the total picture across all sectors (i.e. another $9,284 of individually impaired assets) so read the DS if you are really interested but Rural is currently the 'biggy'.

Best Wishes
Paper Tiger

Consult your doctor as to whether a high dairy diet is good for you.

[winner69]

My mate Cam with good news

@ANZ_cambagrie: ANZ consumer confidence eased 4 points in May but remains elevated at 116.2. Expectations of house price growth hit a new high.


Happy consumers / increased wealth effect leads to more consumer borrowing - hope Heartland gets more than its fair share of this

[trader_jackson]

Several hundreds of thousands of buy orders rolling in for Heartland today I've noticed, with a few hundred thousand reluctant sellers ;)

Not to many NZX 50 stocks offering 10%+ gross dividend that is for sure...

Forsyth update: Expecting profit to come in at $54m (top end of guidance) with a target share price of $1.35

[beetills]

Has anybody got access to INTEREST.CO.NZ website as their is a story on their regarding how HEARTLAND would purchase any new purchase,such as UDC.
Also they mention that the REVERSE MORTGAGE book is picking up.
Theses stories are available to subscribers only.

[Raz]

Position of Rural (includes Dairy) Loans for last 4 quarters:

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20160518-Rural.png

Obviously it is not getting better yet.

There is more to the total picture across all sectors (i.e. another $9,284 of individually impaired assets) so read the DS if you are really interested but Rural is currently the 'biggy'.

Best Wishes
Paper Tiger

Consult your doctor as to whether a high dairy diet is good for you.

Thanks PT, the board falls silent on it....

[percy]

Position of Rural (includes Dairy) Loans for last 4 quarters:

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20160518-Rural.png

Obviously it is not getting better yet.

There is more to the total picture across all sectors (i.e. another $9,284 of individually impaired assets) so read the DS if you are really interested but Rural is currently the 'biggy'.

Best Wishes
Paper Tiger

Consult your doctor as to whether a high dairy diet is good for you.

Paper Tiger.
Not sure you are correct.
It appears I along with two major brokerage houses, whose updated research I read yesterday, do not see what you are seeing.
Both research papers noted the very small % increase in impairements,although one research paper expected the final quarters will be the one to watch.
Both research papers had HBL as a buy,one with a target price of $1.30 ,the other $1.34.
Both were most impressed with HBL's margin and control of costs.

[Raz]

Paper Tiger.
Not sure you are correct.
It appears I along with two major brokerage houses, whose updated research I read yesterday, do not see what you are seeing.
Both research papers noted the very small % increase in impairements,although one research paper expected the final quarters will be the one to watch.
Both research papers had HBL as a buy,one with a target price of $1.30 ,the other $1.34.
Both were most impressed with HBL's margin and control of costs.

Extend and pretend..don't worry the Government helped pump it up and will try to hold it up..election next year:-)

http://www.stuff.co.nz/business/farming/agribusiness/80111541/landcorp-a-poor-investment-but-not-for-sale

[percy]

Extend and pretend..don't worry the Government helped pump it up and will try to hold it up..election next year:-)

http://www.stuff.co.nz/business/farming/agribusiness/80111541/landcorp-a-poor-investment-but-not-for-sale

Thank you for the link,however the two major NZ brokers' research I have quoted ,I think would be more relevant to HBL's prospects.
They do come with a proven record of highest quality research.

[Raz]

You actually have quoted zip , not even mentioned which brokers you refer to:) DYOR

[Joshuatree]

Thanks percy.Just checked my broker Craigs latest research FWIW, they have a buy with the same target price of $1.34.

"Guidance range on track-4Q impairment to decide final outcome.

"Good core loan book growth of 9%

"The dairy slowdowndoes not appear to have a material impact on Rural’s impairment ratio at 0.1%. That said, weexpect a significant uplift in 4Q, hence we’re keeping our FY16 impairment expense unchangedat ~NZ$13m. "

[percy]

You actually have quoted zip , not even mentioned which brokers you refer to:) DYOR

I have quoted enough.
One is NZ's leading wholesale broker,while the other is NZ's leading retail broker.
Yes I always do my own research.The more I do the better the results I get,and I really do have a record of excellent results..

[Raz]

I have quoted enough.
One is NZ's leading wholesale broker,while the other is NZ's leading retail broker.
Yes I always do my own research.The more I do the better the results I get,and I really do have a record of excellent results..

When i get home i shall have a look:-) You really not very precise or generalities is you game to deflect what you don't like? Leading brokers defined as...define excellent results....if you do your own research why not share, we can all read broker reports:-) You will not even say who you quote from. Will also look at PT figure myself and see if i can agree and then come back with a query..seems a more honest approach.

[percy]

When i get home i shall have a look:-) You really not very precise or generalities is you game to deflect what you don't like? Leading brokers defined as...define excellent results....if you do your own research why not share, we can all read broker reports:-) You will not even say who you quote from. Will also look at PT figure myself and see if i can agree and then come back with a query..seems a more honest approach.

I do have an excellent 7 year record of sharing my thoughts with others.
Reading this thread from the start will confirm this.
To other posters..Researching and posting was taking too much of my time,so I now post limited research and more generalities.Conculsions will remain spot on as per usual.

[Leftfield]

I do have an excellent 7 year record of sharing my thoughts with others.
Reading this thread from the start will confirm this.
To other posters..Researching and posting was taking too much of my time,so I now post limited research and more generalities.Conculsions will remain spot on as per usual.

Keep up the good work Percy, I for one appreciate your wisdom.

[Snow Leopard]

Paper Tiger.
Not sure you are correct.
It appears I along with two major brokerage houses, whose updated research I read yesterday, do not see what you are seeing.
Both research papers noted the very small % increase in impairements,although one research paper expected the final quarters will be the one to watch.
Both research papers had HBL as a buy,one with a target price of $1.30 ,the other $1.34.
Both were most impressed with HBL's margin and control of costs.

Percy, I am absolutely mortified that someone of your standing on this forum should even entertain the least glimmer of doubt as to my ability to copy and paste numbers.
I offer this image from the latest Disclosure Statement as proof of my accuracy:http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20160520-Evidence.png
My distress is deep and my partner is going to have cope with the ramifications of this when they get home tonight AND I will almost certainly exceed my weekly recommended alcohol consumption before the day is out.

I have half a mind to never here post ever again.

Exit stage left.

[percy]

And too think I thought your post was because of excess alcohol consumption.
I will have to try to wade through figures when I have a lot clearer mind, as I am of the understanding impairments have not increased more than normal.I can not blame alcohol .

[winner69]

Percy, I am absolutely mortified that someone of your standing on this forum should even entertain the least glimmer of doubt as to my ability to copy and paste numbers.
I offer this image from the latest Disclosure Statement as proof of my accuracy:

8054

My distress is deep and my partner is going to have cope with the ramifications of this when they get home tonight AND I will almost certainly exceed my weekly recommended alcohol consumption before the day is out.

I have half a mind to never here post ever again.

Exit stage left.

Yes, Definitely says $23.5m rural debt is individually impaired as at March 31st - a lot higher than the $1.6m at end of last financial year.

[Snow Leopard]

So I was on the way to the river (or Sungai as we say round here) to throw myself in and end it all, when I got sidetracked by a stall selling Burger Ramly Daging Spesial (where the pattie is wrapped in a fried egg), and by the time I had eaten a few I thought that maybe I should hang around a bit longer as you lot obviously need my help.

There seems to be some confusion between 'Impaired Assets', 'Provision For Impaired Assets' and 'Impaired Asset Expense'.

So go back to my farewell post (http://www.sharetrader.co.nz/showthread.php?8425-HBL-Heartland-Bank-Limited&p=621083&viewfull=1#post621083) and look at the numbers in the Rural Column.

Individually Impaired [Assets] ($23,489) is the total value of loans which are (almost certainly) behind in their repayments and for which Heartland is determining the amount of future expected loss individually for each loan.

Provision for Individually Impaired Assets ($1,180) is the total value that they do not currently expect to recover across all of those Individually Impaired Assets.

Individually Impaired Asset Expense ($1,021) is the net amount (there are complications) of new provisions [for individually impaired assets] in this financial year and this gets knocked off (or if negative, added on) the earnings before the tax is calculated.

To complicate the issue there are collectively impaired assets as well - which are the same but different.

As a light relief from going up and down the columns you can also move left and right across the rows and see that whilst Rural Individually Impaired Assets are $23,489 they are not the same thing as the Total Impaired Asset Expense of $8,652.

Best Wishes
Paper Tiger

PS I hope I have got this right

[percy]

So I was on the way to the river (or Sungai as we say round here) to throw myself in and end it all, when I got sidetracked by a stall selling Burger Ramly Daging Spesial (where the pattie is wrapped in a fried egg), and by the time I had eaten a few I thought that maybe I should hang around a bit longer as you lot obviously need my help.

There seems to be some confusion between 'Impaired Assets', 'Provision For Impaired Assets' and 'Impaired Asset Expense'.

So go back to my farewell post (http://www.sharetrader.co.nz/showthread.php?8425-HBL-Heartland-Bank-Limited&p=621083&viewfull=1#post621083) and look at the numbers in the Rural Column.

Individually Impaired [Assets] ($23,489) is the total value of loans which are (almost certainly) behind in their repayments and for which Heartland is determining the amount of future expected loss individually for each loan.

Provision for Individually Impaired Assets ($1,180) is the total value that they do not currently expect to recover across all of those Individually Impaired Assets.

Individually Impaired Asset Expense ($1,021) is the net amount (there are complications) of new provisions [for individually impaired assets] in this financial year and this gets knocked off (or if negative, added on) the earnings before the tax is calculated.

To complicate the issue there are collectively impaired assets as well - which are the same but different.

As a light relief from going up and down the columns you can also move left and right across the rows and see that whilst Rural Individually Impaired Assets are $23,489 they are not the same thing as the Total Impaired Asset Expense of $8,652.

Best Wishes
Paper Tiger

PS I hope I have got this right


I ended up totally confused,so thank you [as always] for your clarity.
This now ties in with the brokers' research of between $12.9mil and $13.2 mil for Impaired "asset expenses" for FY16 and between $14.2 mil and $15mil for FY17.
So the comment "impairment ratio was surprisingly benign" is correct.
So we can look forward to target NPAT projections of between $52.1 mil and $54 mil for FY16, and between $55.6 mil and $57.4 mil for FY 17.
We remain "well positioned".

[King1212]

So I was on the way to the river (or Sungai as we say round here) to throw myself in and end it all, when I got sidetracked by a stall selling Burger Ramly Daging Spesial (where the pattie is wrapped in a fried egg), and by the time I had eaten a few I thought that maybe I should hang around a bit longer as you lot obviously need my help.

There seems to be some confusion between 'Impaired Assets', 'Provision For Impaired Assets' and 'Impaired Asset Expense'.

So go back to my farewell post (http://www.sharetrader.co.nz/showthread.php?8425-HBL-Heartland-Bank-Limited&p=621083&viewfull=1#post621083) and look at the numbers in the Rural Column.

Individually Impaired [Assets] ($23,489) is the total value of loans which are (almost certainly) behind in their repayments and for which Heartland is determining the amount of future expected loss individually for each loan.

Provision for Individually Impaired Assets ($1,180) is the total value that they do not currently expect to recover across all of those Individually Impaired Assets.

Individually Impaired Asset Expense ($1,021) is the net amount (there are complications) of new provisions [for individually impaired assets] in this financial year and this gets knocked off (or if negative, added on) the earnings before the tax is calculated.

To complicate the issue there are collectively impaired assets as well - which are the same but different.

As a light relief from going up and down the columns you can also move left and right across the rows and see that whilst Rural Individually Impaired Assets are $23,489 they are not the same thing as the Total Impaired Asset Expense of $8,652.

Best Wishes
Paper Tiger

PS I hope I have got this right

i like the daging PT...obviously it enlightened u. Luckily u did not jump...we will miss u PT...tak payah mati lah:t_up:

[winner69]

I ended up totally confused,so thank you [as always] for your clarity.
This now ties in with the brokers' research of between $12.9mil and $13.2 mil for Impaired "asset expenses" for FY16 and between $14.2 mil and $15mil for FY17.
So the comment "impairment ratio was surprisingly benign" is correct.
So we can look forward to target NPAT projections of between $52.1 mil and $54 mil for FY16, and between $55.6 mil and $57.4 mil for FY 17.
We remain "well positioned".

Go back a year and Craigs were forecasting impairments of $9.1m in F16 and $9.7m in F17. So they obviously see impairments being a drag on profit growth

Wonder what they be forecasting impairment expense to be this time next year?

[percy]

Go back a year and Craigs were forecasting impairments of $9.1m in F16 and $9.7m in F17. So they obviously see impairments being a drag on profit growth

Wonder what they be forecasting impairment expense to be this time next year?

Not next year's,but looking closer at this year's;
"Whether full year NPAT will end up at top-end or above guidance range will depend on 4Q impairment provisions [so far benign]".
They also noted the improved asset quality.

[winner69]

Not next year's,but looking closer at this year's;
"Whether full year NPAT will end up at top-end or above guidance range will depend on 4Q impairment provisions [so far benign]".
They also noted the improved asset quality.

"So far benign" ......using the words 'so far' suggests that provisions might not be so benign in the future

What are some antonyms of benign?

[percy]

"So far benign" ......using the words 'so far' suggests that provisions might not be so benign in the future

What are some antonyms of benign?

I rather think the medical definitions are most appropriate;
Malignant;harmful.
Benign;harmless.
4Q will be of interest to diagnose.?

[winner69]

Those impairment numbers show nearly 5% of rural loans are impaired. If dairy is the problem it could suggest about 10% of dairy loans are impaired.

(Read in context that over all receivables impairments are about 1%)

[winner69]

Re: Dairy, I remember at debt briefing last year the CFO when asked about the dairy risk compared to car loans said something along the lines of "well we can always shoot the cows", got a decent chuckle out of the audience

They wouldn't would they - if dairy loans turn to custard some might say 'well we can shoot the CFO'

[Hectorplains]

They wouldn't would they - if dairy loans turn to custard some might say 'well we can shoot the CFO'

...or let them eat custard?

How did you extrapolate from 5% total rural loan impairment that 10% of dairy loans are impaired, W69?

[winner69]

Rural loans are ~$500m (they report rural two different ways but its about that) and have said a while ago dairy loans are ~$240m. So if dairy is all/most of the problem thats where I get the 10% from.

Impairment doesn't mean bad - in Heartland terms it is overdue and manageable (?)

(Might be completely wrong with my assumptions, that's why i used lot of ifs)

[Hectorplains]

Rural loans are ~$500m (they report rural two different ways but its about that) and have said a while ago dairy loans are ~$240m. So if dairy is all/most of the problem thats where I get the 10% from.

Impairment doesn't mean bad - in Heartland terms it is overdue and manageable (?)

(Might be completely wrong with my assumptions, that's why i used lot of ifs)
Cheers w69. Appreciate the explanation. Nice deduction skills!

[percy]

Those impairment numbers show nearly 5% of rural loans are impaired. If dairy is the problem it could suggest about 10% of dairy loans are impaired.

(Read in context that over all receivables impairments are about 1%)

Makes a welcome change to see "Read in context" on this thread.
Although not the latest report,any one who is interested to read how Heartland Bank compares "in context" with other banks in NZ should read KPMG's FIPS Quarterly.The last one available is December 2015,however it is a good place to start.
Google FIPS Quarterly;December 2015 KPMG NZ

[winner69]

Makes a welcome change to see "Read in context" on this thread.
Although not the latest report,any one who is interested to read how Heartland Bank compares "in context" with other banks in NZ should read KPMG's FIPS Quarterly.The last one available is December 2015,however it is a good place to start.
Google FIPS Quarterly;December 2015 KPMG NZ

Yes, those NIMs are impressive relative to the the real banks aren't they

Not really comparing apples to apples though are we percy - like de facto finance company dressed up as a bank, margins should be higher than real banks' margins.

Did you notice that impairments reduced Heartland margin by 0.27% points but sector (real banks) margins were reduced by only 0.11% points.

[percy]

Yes,MIMs are impressive.
Posters often forget HBL is "like a de facto finance company dressed up as a bank,margins should be higher than real banks' margins." The margins are a lot higher correct,and borrowing costs are lower than other finance company's.The the real point Heartland Bank is registered as a bank,and must comply with all the regulations,ratios and reporting The Reserve Bank of NZ require.{added safety for depositors and shareholders}.
Impairment margin will offcourse will be higher,yet "in context" of loan book growth and improved cost ratios they remain acceptable.That said, the next quarter's impairments will mean the difference between HBL achieving top or lower end of NPAT guidance.[Anyalysts are expecting Q4 to be higher,but acceptable].

ps.Not sure whether it was you W69,but whoever recommended the book "The Money Makers" by Eric Rauchway isbn 9780465049691,How Roosevelt and Keynes ended the depression,defeated Fascism,and securd a prosperous peace,a big thank you.ChCh libraries brought it in, and I have just started to read it.Looks as though it is going to be a great read.

[winner69]

UDC half year profits down 4% even though lending grew 7% - increased bad debt mentioned as a cause for lower profits

But remained well positioned

[percy]

UDC half year profits down 4% even though lending grew 7% - increased bad debt mentioned as a cause for lower profits

But remained well positioned

The correlation between HBL and UDC has in the past been strong.Now they look to be going in opposite directions.
Great to see HBL's profits increasing,while UDC's is down.May the trend continue.!!
Do you think HBL may buy UDC "a little cheaper."?????..lol.

[winner69]

The correlation between HBL and UDC has in the past been strong.Now they look to be going in opposite directions.
Great to see HBL's profits increasing,while UDC's is down.May the trend continue.!!
Do you think HBL may buy UDC "a little cheaper."?????..lol.

No, the price going up as the lending book grows. ....and they say they are well positioned to continue that

What was that %age again?

[percy]

No, the price going up as the lending book grows. ....and they say they are well positioned to continue that

What was that %age again?

Core loan book growth 9% for HBL.

[winner69]

https://www.nzx.com/companies/HBL/announcements/282552

Certainly no bad news here...

Onwards and upwards to $1.30+

Slowly getting there

Maybe you need to send out a reminder - ie post that again to give the price a bit of a move along

[trader_jackson]

Slowly getting there

Maybe you need to send out a reminder - ie post that again to give the price a bit of a move along

Yes, continue increase in buy orders, along with continued decrease in sell orders... but I'll hold off for now on 'stating the obvious' to the market ;)

Disclosure: increased holding substantially recently

[smtrader]

why is heartland the only bank offering high % to term deposits?? how is its capital adequacy?

[axe]

why is heartland the only bank offering high % to term deposits?? how is its capital adequacy?


KPMG's latest Financial Institutions Performance Survey (FIPS) quarterly
analysis to December 2015 showed that Heartland grew its net interest margin
and reported the highest net interest margin in the sector. Our net interest
margin for that quarter was 4.44%, compared to the sector average of 2.21%
(as reported in FIPS). When adjusted for impairments, our net interest
margin for that quarter was 4.17%, compared to the sector average of 2.10%
(based on information reported in FIPS).

[axe]

HBL @ 1.22 - depth looking like it might want to break out

[mouse]

Will Percy buy more today?

[winner69]

Will Percy buy more today?

Off course - the price now above the 200MA line - breakout time and best time to buy they say

[percy]

Will Percy buy more today?

No,as I am already "well positioned."
From the chart.
today's share price is well above the;
50 day EMA $1.20
100 day EMA $1.21
200 day EMA $1.21
499 day EMA $1.13.
The MACD and relative strength are also positive.
So yes today would be a good day to add to your holding.

[kizame]

No,as I am already "well positioned."
From the chart.
today's share price is well above the;
50 day EMA $1.20
100 day EMA $1.21
200 day EMA $1.21
499 day EMA $1.13.
The MACD and relative strength are also positive.
So yes today would be a good day to add to your holding.

Unforunately i bought back in today,now I'm going to have to read about being well positioned again and again haha

[percy]

Unforunately i bought back in today,now I'm going to have to read about being well positioned again and again haha

Ha ha..!
Enjoy it.!!!!!!!!!!!!!
The time to be concerned is when I do not say it.!!!!!!!!!
lol.

[percy]

As is often the case, Chris Lee's comments in this week's taking stock are of interest to HBL shareholders.
Go to www.chrislee.co.nz press enter then taking stock.

[beetills]

Chris has always been bullish regarding HBL.

[percy]

Chris has always been bullish regarding HBL.

He has also been "right on the money" with all his HBL posts.

[axe]

As is often the case, Chris Lee's comments in this week's taking stock are of interest to HBL shareholders.
Go to www.chrislee.co.nz (http://www.chrislee.co.nz) press enter then taking stock.

Great read - thanks for sharing. I agree with his points re: kiwibank listing - but I do not think the political will exists (before this election). After is a different story

Although parts are being put into place http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11617755

[Snoopy]

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

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

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

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

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

Now a word on sset loan quality.

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

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

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

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




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

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

Regional Risk

From AR2015 Note 18b, the greatest regional area of credit risk in dollar terms is Auckland, with $830.027m worth of assets. This represents:

$830.027m/ $3,250.468m = 26% of all loans

This is slightly up on FY2014. But I don’t rate that concentration of loans in Auckland as being an issue. Particularly so when ‘Auckland’ is such a varied catch all group.

Industry Group Risk

From AR2015 Note 18c, the greatest 'business group' risk in dollar terms is Agriculture, with $537.286m worth of assets. This represents:

$537.286m/ $3,250.468m = 17% of all loans

This is slightly up on FY2014, when agriculture was

$469.020m/ $2,906.596 = 16% of all loans

Both these figures are quite high and trending in the wrong direction for FY2015. Given that Heartland is nominally a specialist agricultural lender I wouldn't be too concerned. But if agricultural loans go above 20% of the total (or dairy representing about half the agricultural loans above 10%), then I would sound an alarm bell. This situation will need careful watching when the FY2016 result details are released IMO.

Now a word on Asset Loan Quality.

Looking at Note 19d, the Grade 6 monitor assets have come down from $115.76m to $99.849m. Good news!

Next, the sum of the grade 7, 8 and 9 assets is now $26.533m, down from $31.765m. This is a useful improvement.

When these loans appear on the balance sheet, they are netted off against provisions for impaired assets already made. The provision for collectively impaired assets is now $10.201m, up from $6.999m. So a few more losses have been 'taken on the chin'.

The $8m ‘fair value adjustment for present value of future losses’ in FY2014, has reduced to $6.242m in FY2015. This provision relates to the Home Equity Release Loans acquired in FY2014. I cannot explain why this reduction has occurred

Overall, ‘problem assets’ (grade 6, 7, 8 and 9 combined) total $126.382m. This is down 14% on the $147.591m recorded in FY2014.

SNOOPY

[Snoopy]

So HBL have $64.1mil of "surplus capital" on the books.
I am not surprised,as they said they had "surplus capital."


Percy, if you are a high jumper and always set the bar at a height that will make you look good, then you will always look a champion.

PT was of the opinion that any capital over and above the minimum reserve bank requirements should be regarded as 'surplus capital'. But to have this view, I think you would need to be considering HBL from a snapshot perspective, based on what might happen in average market conditions. The resrve bank is concerned with the stability of the banking system, not teh welfare of Heartland shareholders. In an underestimated downturn, it is existing Heartland shareholders who will be first to suffer any 'capital attack'. The reserve bank will not mind if shareholders take 'a bit of a hit', as long as the banking system remains stable.

From a management perspective, Heartland do care about shareholders. So, quite rightly, you might expect them to set the 'surplus capital' hurdle higher. Heartland are IMO, still in a 'build the company' mode. So it would be natural to think that Heartland would run with a little 'surplus capital' on the books to take advantage of any 'bolt on acquisitions' that might come along. It is with this background and context that my "$64.1mil of "surplus capital" on the books" comment was made.

The constraint going forwards is that the there are two 'big fish' on the horizon as potential acquisitions: UDC and MTF. If either of these were purchased it is possible that the size of Heartland would effectively near double overnight. In either case "$64.1mil of "surplus capital" " would fall way short of what was required for such a takeover. And it is possible that all of the $64.1m of surplus capital could be wiped out in a clear the books rural loans writedown. So it looks to me as though the chance of a deeply discounted cash issue in the next few months is high. If I was in the market for HBL shares I would wait for the cash issue! No point iin overpaying today.

SNOOPY

[percy]

So today HBL still have $64mil of "surplus" capital,and strong eps growth..
They also have a supportive shareholder base,who have shown they will advance more capital if the acquisition/s are worthwhile.
They are therefore the envy of all Australasian financial institutions.

[Snow Leopard]

...PT was of the opinion that any capital over and above the minimum reserve bank requirements should be regarded as 'surplus capital'....

Snoopy
The Dog House
Lower New Zealand

Dear Canine

With reference to the above quote from your recent post I refer you to this post: [http://www.sharetrader.co.nz/showthread.php?8425-HBL-Heartland-Bank-Limited&p=620346&viewfull=1#post620346] where the Paper Tiger clearly clarified the meaning of his statement.

Your willful, deliberate & repeated misinterpretation of the Paper Tiger's generous guidance to you through your impossible task of trying to prove that a perfectly sound bank hereafter called Heartland Bank is a bit of a fizzer leaves the Paper Tiger no options.

Therefore you are challenged to a duel at 9am tomorrow (Saturday 28th May 2016) above the fields of Wanaka. The choice of World War I fighter planes is yours.

On behalf of the Paper Tiger
Manfred

PS. The Baroness says thanks for the scone recipe and asks can you use fruit instead of the cow's liver?

[Snoopy]

Snoopy
The Dog House
Lower New Zealand

Dear Canine

With reference to the above quote from your recent post I refer you to this post: [http://www.sharetrader.co.nz/showthread.php?8425-HBL-Heartland-Bank-Limited&p=620346&viewfull=1#post620346] where the Paper Tiger clearly clarified the meaning of his statement.


I read your referred post again PT, saw no clarification and came to the same conclusions as before. Namely:

1/ "Minimum total capital in as per the conditions of registration" is the most restrictive covenant monitored by the Reserve Bank.
2/ "Minimum total capital' as a capital ratio should be 8% plus a 2.5% 'buffer', making a total of 10.5%.
3/ 'Total capital expressed as a percentage of risk weighted exposure' was 14.46% (HY2016) and 13.76% (HY2015), or 'about 14%' in round figures.

Now 14% is well clear of 10.5%. But you PT, expressed no opinion as to whether you considered 14% or 10.5% as an acceptable capital ratio. Where no opinion is expressed between two restrictive figure standards, I assumed that you meant the lower reserve bank figure was the standard you adhere to, and the actual 14% figure (being greater than 10.5%) constitutes 'a pass' by your standards.

Another possible interpretation is that you meant around 14% was your acceptable TCR standard. But if that was the point you were trying to make, then why mention the 10.5% TCR at all?



Your willful, deliberate & repeated misinterpretation of the Paper Tiger's generous guidance to you through your impossible task of trying to prove that a perfectly sound bank hereafter called Heartland Bank is a bit of a fizzer leaves the Paper Tiger no options.


Not saying Heartland is a fizzer. If I held now I would probably keep holding. But since I don't hold, I am looking for the cheapest possible acquisition price I can get. And my sniff tells me that HBL shares might be cheaper around the time of the next capital raising. And make no mistake, if HBL purchase MTF or UDC, there will be a next capital raising!



Therefore you are challenged to a duel at 9am tomorrow (Saturday 28th May 2016) above the fields of Wanaka. The choice of World War I fighter planes is yours.

On behalf of the Paper Tiger
Manfred


9am dogfight in Wanaka means a very early start when I lift off from Peter Jackson's fighter collection in Blenhiem! Ice on the wings, and I just might be caught. Nice try Monsieur Baron Rouge, but I have learned my lesson from Christmas time.

SNOOPY

[percy]

[QUOTE=Snoopy;622457]
Not saying Heartland is a fizzer. If I held now I would probably keep holding. But since I don't hold, I am looking for the cheapest possible acquisition price I can get. And my sniff tells me that HBL shares might be cheaper around the time of the next capital raising. And make no mistake, if HBL purchase MTF or UDC, there will be a next capital raising!

Heartland already have the balance sheet capacity to takeover MTF.
UDC.Heartland would need to raise capital.And yes buying shares at a capital raising is usually a good time.BUT,if HBL were to takeover UDC it would be a "game changer" for HBL,and I would think there would be institutions/funds managers who would rerate HBL,so the chances of buying HBL shares at a discount may not happen.
Go to www.chrislee.co.nz and read "taking stock".If he is right HBL could takeover UDC raising very little capital,which would see HBL rerated straight away.
With directors/management being very large HBL stake holders, neither acquisition will be done unless it is in HBL's interest.They have always stated they do not want to be the biggest bank,just the best.!

[Snoopy]

UDC.Heartland would need to raise capital.And yes buying shares at a capital raising is usually a good time.BUT,if HBL were to takeover UDC it would be a "game changer" for HBL,and I would think there would be institutions/funds managers who would rerate HBL,so the chances of buying HBL shares at a discount may not happen.
Go to www.chrislee.co.nz and read "taking stock".If he is right HBL could takeover UDC raising very little capital,which would see HBL rerated straight away.


Here is the small excerpt from Chris Lees's article relating to a possible takeover of UDC by Heartland.

----

Heartland would achieve the most synergies and would know the market better than any other potential buyer. It might need to raise perhaps $100 million of new capital through a rights issue and a similar sum through a Tier One bond issue, to digest the cost of UDC, which I would guess to be in the area of $400 million.

I reach this figure by beginning with UDC’s sustainable profit, maybe $50 million, and deducting from it the extra profit provided by the ANZ “subsidy” of super-cheap funding and the implicit guarantee.

The real sustainable profit may be $30 million after these deductions.

A multiple of 12-15 might then get you a sale price range of $360 million to $450 million, say $400 as a mid-point.

----

The latest UDC results can be found here:

https://www.udc.co.nz/pdf/UDC_Prospectus_69.pdf

This shows NPAT of $57.05m for UDC

Heartland in FY2015 had selling and administration expenses of $68.403m (Heartland FY2015 report 'Selling & Administration Expenses', note 5). UDC had total operating expenses of $32.278m (UDC prospectus note 4). That is a difference of $36.125m. I would consider that $36.125m as a measure of services provided to UDC, who do not have a branch network, from ANZ.

So taking a tax adjusted figure of those expenses from the declared UDC profit, I get an adjusted independent UDC profit of:

$57.05m - (0.72 x $36.125m) = $31.04m

That is very close to Chis Lee's figure, but using a different way of assessing any implicit 'subsidy' by ANZ.

Using a 'mid point' PE of 13.5 I get a value for UDC of:

13.5 x $31.04m = $425m

Yet NTA at balance date was only $365m. And NTA is the figure that New Zealand's greatest ever banker, Sir John Anderson, used when he sold PGGW Finance to Heartland all those years ago.

So is a sale price of $365m to $425m doable for Heartland? Why does Lee say Heartland only need $100m of capital (and the rest borrowing?) to do this? $100m of new capital looks a little light to me.

SNOOPY

[Snoopy]

Heartland already have the balance sheet capacity to takeover MTF.


A short excerpt from the Chris Lee article regarding MTF

----

The Commerce Commission found against MTF, then the High Court found against MTF, the Court of Appeal found against MTF and now the Supreme Court has confirmed that MTF has no further right of appeal.

The next step is to discover how many thousands of MTF hire purchase clients must be refunded hundreds of dollars.

Over many years, the client numbers could be in tens of thousands.

If there were 20,000 refunds at $250 per borrower, the amount repayable would be $5,000,000.
The scale of the problem may well be greater.

Will that bring MTF’s real value to a figure that makes it a takeover target?

-------

Have not examined the MTF accounts closely, but Lee could be on the money here. Not happy reading for MTF stakeholders, buy HBL would not want to get offside with Turners. Turners could pull their MTF business and divert it to their own in house finance commpanies. Another potential body blow for any MTF buyer?

SNOOPY

[percy]

We certainly live in interesting times.
For fun HBL agree to buy UDC for $400 mil.
A bond issue of $100mil.
An underwritten renounceable rights issue of 2 for 10 at $1.20 [which would raise over $110mil].
What would HBL's sp be, and what would the rights trade at.??
ps Chris Lee may also be a low high jumper.Better being that than a lost marathon runner.lol.
TNR.I think TNR have more to gain from a HBL takeover of MTF than HBL have in losing TNR's business.If Byrne is his usual smart self, he will tie up a rosy deal for TNR.You must remember MTF have recourse on the "originator"should any of their loans go bad.This contingent liability is why shareholders [including TNR] will be keen on a HBL takeover.

[winner69]

We certainly live in interesting times.
For fun HBL agree to buy UDC for $400 mil.
A bond issue of $100mil.
An underwritten renounceable rights issue of 2 for 10 at $1.20 [which would raise over $110mil].
What would HBL's sp be, and what would the rights trade at.??
ps Chris Lee may also be a low high jumper.Better being that than a lost marathon runner.lol.

Nbt and me say $1.60

[percy]

A short excerpt from the Chris Lee article regarding MTF

----

The Commerce Commission found against MTF, then the High Court found against MTF, the Court of Appeal found against MTF and now the Supreme Court has confirmed that MTF has no further right of appeal.

The next step is to discover how many thousands of MTF hire purchase clients must be refunded hundreds of dollars.

Over many years, the client numbers could be in tens of thousands.

If there were 20,000 refunds at $250 per borrower, the amount repayable would be $5,000,000.
The scale of the problem may well be greater.

Will that bring MTF’s real value to a figure that makes it a takeover target?

-------

Have not examined the MTF accounts closely, but Lee could be on the money here. Not happy reading for MTF stakeholders, buy HBL would not want to get offside with Turners. Turners could pull their MTF business and divert it to their own in house finance commpanies. Another potential body blow for any MTF buyer?

SNOOPY

I am sure HBL's legal team have been through the judgement 100 times.
The case was MTF "Sportzone" only. The liability was under $10,000 for the 21 deals over a period of a couple [ or three] years.
So what is the liability? I don't know.It is very vague.Big difference between $10,000 and $5mil.!
Has the CC made its point,and leave it at that?.[I think the point was made years ago when the CC first took MTF to court]

[Snoopy]

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

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

Regional Risk

From AR2015 Note 18b, the greatest regional area of credit risk in dollar terms is Auckland, with $830.027m worth of assets. This represents:

$830.027m/ $3,234.025m = 26% of all loans

This is slightly up on FY2014. But I don’t rate that concentration of loans in Auckland as being an issue. Particularly so when ‘Auckland’ is such a varied catch all group.

Industry Group Risk

From AR2015 Note 18c, the greatest 'business group' risk in dollar terms is Agriculture, with $537.286m worth of assets. This represents:

$537.286m/ $3,234.025m = 17% of all loans

This is slightly up on FY2014, when agriculture was

$469.020m/ $2,891.597 = 16% of all loans

Both these figures are quite high and trending in the wrong direction for FY2015. Given that Heartland is nominally a specialist agricultural lender I wouldn't be too concerned. But if agricultural loans go above 20% of the total (or dairy representing about half the agricultural loans above 10%), then I would sound an alarm bell. This situation will need careful watching when the FY2016 result details are released IMO.

Now a word on Asset Loan Quality.

Looking at Note 19d, the Grade 6 monitor assets have come down from $115.76m to $99.849m. Good news!

Next, the sum of the grade 7, 8 and 9 assets is now $26.533m, down from $31.765m. This is a useful improvement.

When these loans appear on the balance sheet, they are netted off against provisions for impaired assets already made. The provision for collectively impaired assets is now $10.201m, up from $6.999m. So a few more losses have been 'taken on the chin'.

The $8m ‘fair value adjustment for present value of future losses’ in FY2014, has reduced to $6.242m in FY2015. This provision relates to the Home Equity Release Loans acquired in FY2014. I cannot explain why this reduction has occurred

Overall, ‘problem assets’ (grade 6, 7, 8 and 9 combined) total $126.382m. This is down 14% on the $147.591m recorded in FY2014.


Updating these risk calculations based on the last half year reporting date, using figures found here.

http://shareholders.heartland.co.nz/media/1183/heartland-bank-disclosure-statement-dec15.pdf

Our test requirement is:

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

Regional Risk

From reference Note 12b, the greatest regional area of credit risk in dollar terms is Auckland, with $779.242m worth of assets. This represents:

$779.242m/ $3,237.047m = 24% of all loans

This is two percentage point reduction on FY2014. Still high. But I don’t rate that concentration of loans in Auckland as being an issue. Particularly so when ‘Auckland’ is such a varied catch all group.

Industry Group Risk

From reference Note 12c, the greatest 'business group' risk in dollar terms is Agriculture, with $570.735m worth of assets. This represents:

$570.735m/ $3,237.047m = 18% of all loans

This is slightly up on FY2015, when agriculture was

$537.286m/ $3,234.025m = 17% of all loans

These figures are quite high and continue trending in the wrong direction for HY2016. Given that Heartland is nominally a specialist agricultural lender I wouldn't be too concerned. But if agricultural loans go above 20% of the total (or dairy representing about half the agricultural loans above 10%), then I would sound an alarm bell. This situation will need careful watching when the FY2016 result details are released IMO.

Now a word on Asset Loan Quality.

In the half year result, ther is no breakdown of the 'judgement loan' category of lending. Judgement loans consist of business an rural lending, the latter in particular of interest in this climate of dairy industry turmoil. This means that accounting provisions on dairy loans are largely hidden in these half year accounts.

In the half year presentation p14, Rural impairments are up $0.3m to $0.4m, "which remains very low." Total impairments across all loan categories are now $5.6m. I wonder how realistic that rural sector provision is given a very recent Fronterra milk solid payout forecast of $4.20? I would be happier if the rural provisioning at Heartland was higher! But all will be revealed when the greater disclosure on these judgement loans is released at the full year reporting date.

When these loans appear on the balance sheet, they are netted off against provisions for impaired assets already made. The provision for collectively impaired assets is now $12.029m, up from $10.201m at full year balance date. This has risen largely because new provisions have exceeded actual write offs over the last six months.

The $5.599m ‘fair value adjustment for present value of future losses’ in HY2016, is slightly reduced compared to the $6.242m for all of FY2015. This provision relates to the Home Equity Release Loans acquired in FY2014. I believe this provision is a requirement of accounting standards and in the past has overestimated actual losses. So is this an indicator of HBL writing net less home equity release business going forwards? IOW their home equity release portfolio is unwinding as it shrinks, in real terms? I note that the interim presentation p19 states "steady increase in new business" but "high repayment levels".

SNOOPY

[smtrader]

Banks (http://interest.co.nz/node/394)

Institution
Product
Variable floating
6
months
1
year
2
years
3
years
4
years
5
years


https://ci5.googleusercontent.com/proxy/gpPVdfL-Kx-f8XxZ53OrqRm8m8_a1cG0hPQqllgYfwT5hertgoo-gqDITH1Vbp9ENJJaO0uIHYXIV4tPbqzoRApAIM6pQMhoFTre6X 1jDtKE=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/anz-logo.jpg (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
Standard
5.64* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
4.99* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
4.75* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
4.85* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
4.99* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
5.20* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
5.30* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)



Standard
18 months = 4.89* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)Make it yours, get an online indicative approval todayhttps://ci4.googleusercontent.com/proxy/0WeKyDSx2TEIQ1TscNPWGXao1m2larD9ov0qEQkjNy2XKHxP9-cmGqiEvCRtXBBxqrX1wHtL4cnODxu4pCC1YdL3E-QFogoN4sFbRcLQjtzLj_Yae2spwMsEDsRsD8qIPAGVfZ3JwYAH Z9I8P4DQmw=s0-d-e1-ft#http://www.interest.co.nz/sites/default/files/images/interest_financial_indicator-down.gif



Special LVR under 80%


4.25* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
4.35* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)





https://ci6.googleusercontent.com/proxy/1pYrywwD8UF89GUaTc2jwcFV_uhHXK41Eax_G8Y6vQ-6aDxOBYTcUBkBBwqfPN3Q9bpaeH6ncjRxS9Ph4w4Z7B6qM1teY 2SbJ2Cvb8Wtb2gQgoM=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/asb-logo-2.gif (https://www.asb.co.nz/Personal/Home-Loans?utm_source=Interest&utm_medium=ASB%2BLogo%2BMortgage&utm_campaign=Interest.co.nz%0A)
Residential
5.55 (https://www.asb.co.nz/homeloans)
5.09 (https://www.asb.co.nz/homeloans)https://ci4.googleusercontent.com/proxy/0WeKyDSx2TEIQ1TscNPWGXao1m2larD9ov0qEQkjNy2XKHxP9-cmGqiEvCRtXBBxqrX1wHtL4cnODxu4pCC1YdL3E-QFogoN4sFbRcLQjtzLj_Yae2spwMsEDsRsD8qIPAGVfZ3JwYAH Z9I8P4DQmw=s0-d-e1-ft#http://www.interest.co.nz/sites/default/files/images/interest_financial_indicator-down.gif
4.69 (https://www.asb.co.nz/homeloans)
4.75 (https://www.asb.co.nz/homeloans)
4.89 (https://www.asb.co.nz/homeloans)
5.09 (https://www.asb.co.nz/homeloans)
5.29 (https://www.asb.co.nz/homeloans)



Residential
18 months = 4.79 (https://www.asb.co.nz/homeloans)



Special LVR

4.75
4.25 (https://www.asb.co.nz/homeloans)
4.19 (https://www.asb.co.nz/homeloans)
4.39 (https://www.asb.co.nz/homeloans)
4.59 (https://www.asb.co.nz/homeloans)
4.79



Special LVR
18 months = 4.25


BankDirect (http://www.interest.co.nz/directory#bankdirect)
Standard
5.55
5.09
4.69
4.75
4.89

5.29



Standard
18 months = 4.79



Special LVR

4.75 (https://www.bankdirect.co.nz/section74.asp?Category=Loans)
4.25
4.19
4.39

4.79



Special LVR
18 months = 4.25


https://ci4.googleusercontent.com/proxy/VylNZWPMNmvDFNlXd-9fuIglNe8SADLypQFBivJ0Ku4zLmGotQZy4QG3UnrhhYhFCJ24 DNIYrGwPiGc8s_lrfUBOP0DQrxRRGliaT5-7ilsUJK6bLn5M=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/bnz-logo-new-2.png (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages%20%0A%0A)
Special - Classic


4.25 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.19 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.49* (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)





TotalMoney
5.69 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)









Std & Flybuys
5.69 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.99 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.85 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.89 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.99 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.99 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
5.15 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)



Std & Flybuys
18 months = 4.99 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
7 years = 5.55 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)


https://ci6.googleusercontent.com/proxy/ug56_iqcO8H_ahrRhxYrubaN2g74zrMdALlwLQIRQ1254u4kKj FHWENDXDqEplHNEcqGu2zOoVYr_BWOZXumnc7qyjY9HYIxcTrE 0kTQx_aTxT1nuXC9FgqWcRj8YOhD=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/cooperative-bank-logo_1.jpg (https://www.co-operativebank.co.nz/get-a-loan/home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=Logo%20Link&utm_campaign=interest.co.nz%0A%0A)
Residential
5.45* (https://www.co-operativebank.co.nz/home-loans/floating-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=Variable%20Floating&utm_campaign=interest.co.nz)
4.50* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=6%20Month%20mortgage%20rate&utm_campaign=interest.co.nz)
4.25* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=1%20Year%20mortgage%20rate&utm_campaign=interest.co.nz)
4.25* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=2%20Year%20mortgage%20rate&utm_campaign=interest.co.nz)
4.65* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=3%20Year%20mortgage%20rate&utm_campaign=interest.co.nz)
4.89* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=4%20Year%20mortgage%20rate&utm_campaign=interest.co.nz)
4.99* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=5%20Year%20mortgage%20rate&utm_campaign=interest.co.nz)



Residential
18 months = 4.19* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=18%20Month%20mortgage%20rate&utm_campaign=interest.co.nz)We'd love to talk to you about home loan optionshttps://ci4.googleusercontent.com/proxy/0WeKyDSx2TEIQ1TscNPWGXao1m2larD9ov0qEQkjNy2XKHxP9-cmGqiEvCRtXBBxqrX1wHtL4cnODxu4pCC1YdL3E-QFogoN4sFbRcLQjtzLj_Yae2spwMsEDsRsD8qIPAGVfZ3JwYAH Z9I8P4DQmw=s0-d-e1-ft#http://www.interest.co.nz/sites/default/files/images/interest_financial_indicator-down.gif


Heartland Bank (http://www.interest.co.nz/directory#heart)
Residential
6.70
6.90
7.00
7.25
7.85

8.55



Everyday Gold
6.70









Home Equity
7.60








https://ci4.googleusercontent.com/proxy/eDLV-kI6CfIcy1yIngN5iwiX1ZhKeAK5TPqjqKULNfDMo5O_gzbbkgI kwJXInMSGGcD9z87SgMWRV6Zfz9kzm2lpBq7O3OKWiXd1pbh7-7Jba3BU4zrkXRUNeZSo1kg_PuE=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/hsbc-premier-logo-3.jpg%0A%0A (http://www.interest.co.nz/ccount/click.php?id=182)
Premier
5.75 (http://www.interest.co.nz/ccount/click.php?id=182)
4.85 (http://www.interest.co.nz/ccount/click.php?id=182)
4.19 (http://www.interest.co.nz/ccount/click.php?id=182)
4.19 (http://www.interest.co.nz/ccount/click.php?id=182)
4.49 (http://www.interest.co.nz/ccount/click.php?id=182)
4.79 (http://www.interest.co.nz/ccount/click.php?id=182)
4.99 (http://www.interest.co.nz/ccount/click.php?id=182)



Premier
18 months = 4.19* (http://www.interest.co.nz/ccount/click.php?id=182)Premier Special


ICBC (http://www.interest.co.nz/directory#icbc)
Standard
5.60
4.39
4.39
4.69
4.99
5.35
5.45



Standard
18 months = 4.69


https://ci5.googleusercontent.com/proxy/uC6DslvccRoUSdqXjm1t3M7toW4suYD19Ct92Sn9QdO7pUX9dd haEEsS2IDuUfcaUuj0jys9016zeHu8jprLeJUFL0L-AIlSrWZBc6i4ZSVfcw=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/kiwibank6.gif (http://www.interest.co.nz/ccount/click.php?id=197)
Standard
5.45* (http://www.interest.co.nz/ccount/click.php?id=197)
4.85* (http://www.interest.co.nz/ccount/click.php?id=197)
4.70* (http://www.interest.co.nz/ccount/click.php?id=197)
4.75* (http://www.interest.co.nz/ccount/click.php?id=197)
4.75* (http://www.interest.co.nz/ccount/click.php?id=197)
4.90* (http://www.interest.co.nz/ccount/click.php?id=197)
4.99* (http://www.interest.co.nz/ccount/click.php?id=197)



Special


4.29* (http://www.interest.co.nz/ccount/click.php?id=197)
3.99* (http://www.interest.co.nz/ccount/click.php?id=197)

















For how long can HBL keep their RATES THIS HIGH??? it seems pretty ridiculous relative to other banks.

[winner69]

Banks (http://interest.co.nz/node/394)

Institution
Product
Variable floating
6
months
1
year
2
years
3
years
4
years
5
years


https://ci5.googleusercontent.com/proxy/gpPVdfL-Kx-f8XxZ53OrqRm8m8_a1cG0hPQqllgYfwT5hertgoo-gqDITH1Vbp9ENJJaO0uIHYXIV4tPbqzoRApAIM6pQMhoFTre6X 1jDtKE=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/anz-logo.jpg (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
Standard
5.64* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
4.99* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
4.75* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
4.85* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
4.99* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
5.20* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
5.30* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)



Standard
18 months = 4.89* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)Make it yours, get an online indicative approval todayhttps://ci4.googleusercontent.com/proxy/0WeKyDSx2TEIQ1TscNPWGXao1m2larD9ov0qEQkjNy2XKHxP9-cmGqiEvCRtXBBxqrX1wHtL4cnODxu4pCC1YdL3E-QFogoN4sFbRcLQjtzLj_Yae2spwMsEDsRsD8qIPAGVfZ3JwYAH Z9I8P4DQmw=s0-d-e1-ft#http://www.interest.co.nz/sites/default/files/images/interest_financial_indicator-down.gif



Special LVR under 80%


4.25* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)
4.35* (http://ad.doubleclick.net/ddm/trackclk/N7821.153290.ADHUBNZ/B8218625.112482408;dc_trk_aid=285594041;dc_trk_cid =58945881)





https://ci6.googleusercontent.com/proxy/1pYrywwD8UF89GUaTc2jwcFV_uhHXK41Eax_G8Y6vQ-6aDxOBYTcUBkBBwqfPN3Q9bpaeH6ncjRxS9Ph4w4Z7B6qM1teY 2SbJ2Cvb8Wtb2gQgoM=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/asb-logo-2.gif (https://www.asb.co.nz/Personal/Home-Loans?utm_source=Interest&utm_medium=ASB%2BLogo%2BMortgage&utm_campaign=Interest.co.nz%0A)
Residential
5.55 (https://www.asb.co.nz/homeloans)
5.09 (https://www.asb.co.nz/homeloans)https://ci4.googleusercontent.com/proxy/0WeKyDSx2TEIQ1TscNPWGXao1m2larD9ov0qEQkjNy2XKHxP9-cmGqiEvCRtXBBxqrX1wHtL4cnODxu4pCC1YdL3E-QFogoN4sFbRcLQjtzLj_Yae2spwMsEDsRsD8qIPAGVfZ3JwYAH Z9I8P4DQmw=s0-d-e1-ft#http://www.interest.co.nz/sites/default/files/images/interest_financial_indicator-down.gif
4.69 (https://www.asb.co.nz/homeloans)
4.75 (https://www.asb.co.nz/homeloans)
4.89 (https://www.asb.co.nz/homeloans)
5.09 (https://www.asb.co.nz/homeloans)
5.29 (https://www.asb.co.nz/homeloans)



Residential
18 months = 4.79 (https://www.asb.co.nz/homeloans)



Special LVR

4.75
4.25 (https://www.asb.co.nz/homeloans)
4.19 (https://www.asb.co.nz/homeloans)
4.39 (https://www.asb.co.nz/homeloans)
4.59 (https://www.asb.co.nz/homeloans)
4.79



Special LVR
18 months = 4.25


BankDirect (http://www.interest.co.nz/directory#bankdirect)
Standard
5.55
5.09
4.69
4.75
4.89

5.29



Standard
18 months = 4.79



Special LVR

4.75 (https://www.bankdirect.co.nz/section74.asp?Category=Loans)
4.25
4.19
4.39

4.79



Special LVR
18 months = 4.25


https://ci4.googleusercontent.com/proxy/VylNZWPMNmvDFNlXd-9fuIglNe8SADLypQFBivJ0Ku4zLmGotQZy4QG3UnrhhYhFCJ24 DNIYrGwPiGc8s_lrfUBOP0DQrxRRGliaT5-7ilsUJK6bLn5M=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/bnz-logo-new-2.png (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages%20%0A%0A)
Special - Classic


4.25 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.19 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.49* (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)





TotalMoney
5.69 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)









Std & Flybuys
5.69 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.99 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.85 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.89 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.99 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
4.99 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
5.15 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)



Std & Flybuys
18 months = 4.99 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)
7 years = 5.55 (https://www.bnz.co.nz/personal-banking/home-loans?source=interest.co.nz&medium=link&campaign=mortgages)


https://ci6.googleusercontent.com/proxy/ug56_iqcO8H_ahrRhxYrubaN2g74zrMdALlwLQIRQ1254u4kKj FHWENDXDqEplHNEcqGu2zOoVYr_BWOZXumnc7qyjY9HYIxcTrE 0kTQx_aTxT1nuXC9FgqWcRj8YOhD=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/cooperative-bank-logo_1.jpg (https://www.co-operativebank.co.nz/get-a-loan/home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=Logo%20Link&utm_campaign=interest.co.nz%0A%0A)
Residential
5.45* (https://www.co-operativebank.co.nz/home-loans/floating-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=Variable%20Floating&utm_campaign=interest.co.nz)
4.50* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=6%20Month%20mortgage%20rate&utm_campaign=interest.co.nz)
4.25* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=1%20Year%20mortgage%20rate&utm_campaign=interest.co.nz)
4.25* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=2%20Year%20mortgage%20rate&utm_campaign=interest.co.nz)
4.65* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=3%20Year%20mortgage%20rate&utm_campaign=interest.co.nz)
4.89* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=4%20Year%20mortgage%20rate&utm_campaign=interest.co.nz)
4.99* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=5%20Year%20mortgage%20rate&utm_campaign=interest.co.nz)



Residential
18 months = 4.19* (https://www.co-operativebank.co.nz/home-loans/fixed-home-loan?utm_source=interest.co.nz&utm_medium=link&utm_content=18%20Month%20mortgage%20rate&utm_campaign=interest.co.nz)We'd love to talk to you about home loan optionshttps://ci4.googleusercontent.com/proxy/0WeKyDSx2TEIQ1TscNPWGXao1m2larD9ov0qEQkjNy2XKHxP9-cmGqiEvCRtXBBxqrX1wHtL4cnODxu4pCC1YdL3E-QFogoN4sFbRcLQjtzLj_Yae2spwMsEDsRsD8qIPAGVfZ3JwYAH Z9I8P4DQmw=s0-d-e1-ft#http://www.interest.co.nz/sites/default/files/images/interest_financial_indicator-down.gif


Heartland Bank (http://www.interest.co.nz/directory#heart)
Residential
6.70
6.90
7.00
7.25
7.85

8.55



Everyday Gold
6.70









Home Equity
7.60








https://ci4.googleusercontent.com/proxy/eDLV-kI6CfIcy1yIngN5iwiX1ZhKeAK5TPqjqKULNfDMo5O_gzbbkgI kwJXInMSGGcD9z87SgMWRV6Zfz9kzm2lpBq7O3OKWiXd1pbh7-7Jba3BU4zrkXRUNeZSo1kg_PuE=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/hsbc-premier-logo-3.jpg%0A%0A (http://www.interest.co.nz/ccount/click.php?id=182)
Premier
5.75 (http://www.interest.co.nz/ccount/click.php?id=182)
4.85 (http://www.interest.co.nz/ccount/click.php?id=182)
4.19 (http://www.interest.co.nz/ccount/click.php?id=182)
4.19 (http://www.interest.co.nz/ccount/click.php?id=182)
4.49 (http://www.interest.co.nz/ccount/click.php?id=182)
4.79 (http://www.interest.co.nz/ccount/click.php?id=182)
4.99 (http://www.interest.co.nz/ccount/click.php?id=182)



Premier
18 months = 4.19* (http://www.interest.co.nz/ccount/click.php?id=182)Premier Special


ICBC (http://www.interest.co.nz/directory#icbc)
Standard
5.60
4.39
4.39
4.69
4.99
5.35
5.45



Standard
18 months = 4.69


https://ci5.googleusercontent.com/proxy/uC6DslvccRoUSdqXjm1t3M7toW4suYD19Ct92Sn9QdO7pUX9dd haEEsS2IDuUfcaUuj0jys9016zeHu8jprLeJUFL0L-AIlSrWZBc6i4ZSVfcw=s0-d-e1-ft#http://www.interest.co.nz/images/campaign-logo/kiwibank6.gif (http://www.interest.co.nz/ccount/click.php?id=197)
Standard
5.45* (http://www.interest.co.nz/ccount/click.php?id=197)
4.85* (http://www.interest.co.nz/ccount/click.php?id=197)
4.70* (http://www.interest.co.nz/ccount/click.php?id=197)
4.75* (http://www.interest.co.nz/ccount/click.php?id=197)
4.75* (http://www.interest.co.nz/ccount/click.php?id=197)
4.90* (http://www.interest.co.nz/ccount/click.php?id=197)
4.99* (http://www.interest.co.nz/ccount/click.php?id=197)



Special


4.29* (http://www.interest.co.nz/ccount/click.php?id=197)
3.99* (http://www.interest.co.nz/ccount/click.php?id=197)

















For how long can HBL keep their RATES THIS HIGH??? it seems pretty ridiculous relative to other banks.

Residential mortgages not their game so not competing with the other banks

Home equity stuff different ball game

[Snoopy]

Updating these risk calculations based on the last half year reporting date, using figures found here.

http://shareholders.heartland.co.nz/media/1183/heartland-bank-disclosure-statement-dec15.pdf

Our test requirement is:

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

Regional Risk

From reference Note 12b, the greatest regional area of credit risk in dollar terms is Auckland, with $779.242m worth of assets. This represents:

$779.242m/ $3,237.047m = 24% of all loans

This is two percentage point reduction on FY2014. Still high. But I don’t rate that concentration of loans in Auckland as being an issue. Particularly so when ‘Auckland’ is such a varied catch all group.

Industry Group Risk

From reference Note 12c, the greatest 'business group' risk in dollar terms is Agriculture, with $570.735m worth of assets. This represents:

$570.735m/ $3,237.047m = 18% of all loans

This is slightly up on FY2015, when agriculture was

$537.286m/ $3,234.025m = 17% of all loans

These figures are quite high and continue trending in the wrong direction for HY2016. Given that Heartland is nominally a specialist agricultural lender I wouldn't be too concerned. But if agricultural loans go above 20% of the total (or dairy representing about half the agricultural loans above 10%), then I would sound an alarm bell. This situation will need careful watching when the FY2016 result details are released IMO.

Now a word on Asset Loan Quality.

In the half year result, ther is no breakdown of the 'judgement loan' category of lending. Judgement loans consist of business an rural lending, the latter in particular of interest in this climate of dairy industry turmoil. This means that accounting provisions on dairy loans are largely hidden in these half year accounts.

In the half year presentation p14, Rural impairments are up $0.3m to $0.4m, "which remains very low." Total impairments across all loan categories are now $5.6m. I wonder how realistic that rural sector provision is given a very recent Fronterra milk solid payout forecast of $4.20? I would be happier if the rural provisioning at Heartland was higher! But all will be revealed when the greater disclosure on these judgement loans is released at the full year reporting date.

When these loans appear on the balance sheet, they are netted off against provisions for impaired assets already made. The provision for collectively impaired assets is now $12.029m, up from $10.201m at full year balance date. This has risen largely because new provisions have exceeded actual write offs over the last six months.

The $5.599m ‘fair value adjustment for present value of future losses’ in HY2016, is slightly reduced compared to the $6.242m for all of FY2015. This provision relates to the Home Equity Release Loans acquired in FY2014. I believe this provision is a requirement of accounting standards and in the past has overestimated actual losses. So is this an indicator of HBL writing net less home equity release business going forwards? IOW their home equity release portfolio is unwinding as it shrinks, in real terms? I note that the interim presentation p19 states "steady increase in new business" but "high repayent levels".


To complete my six monthly analysis, I am going back a year before the latest half year reporting period.
Updating these risk calculations based on the 31st December 2014 reporting date, using figures found here.


http://www.heartland.co.nz/uploadGallery/Legal/Disclosure_Statements/Heartland%20Bank%20Disclosure%20Statement.pdf


Our test requirement is:

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

Regional Risk

From reference Note 15b, the greatest regional area of credit risk in dollar terms is Auckland, with $712.797m worth of assets. This represents:

$712.797m/ $2,471.156m = 29% of loans

This was five percentage points higher than HY2016! But I don’t rate that concentration of loans in Auckland as being an issue. Particularly so when ‘Auckland’ is such a varied catch all group.

The historical comparison point, FY2014, had Auckland loans at 25% of the total.


Industry Group Risk

From reference Note 15c, the greatest 'business group' risk in dollar terms is Agriculture, with $508.655m worth of assets. This represents:

$508.655m/ $2,471.156m = 21% of all loans

This was significantly up on HY2016, when agriculture was

$570.735m/ $3,237.047m = 18% of all loans

This HY2015 figure was above my 20% hurdle (just as well i didn't do this calculation in period!). Subsequently the Agricultural loan percentage fell. Now it is coming back to concerning levels.

The historical prior period comparison point FY2014, showed agriculture making up 16% of all loans.

Now a word on Asset Loan Quality.

In the half year result, ther is no breakdown of the 'judgement loan' category of lending. Judgement loans consist of business an rural lending, the latter in particular of interest in this climate of dairy industry turmoil. This means that accounting provisions on dairy loans are largely hidden in these half year accounts.

Loans that appear on the balance sheet, they are netted off against provisions for impaired assets already made. The provision for collectively impaired assets was $19.329m, up from $12.029m, at HY2016 balance date . This has risen largely because new provisions have exceeded actual write offs over the last six months.

The $1.401m ‘fair value adjustment for present value of future losses’ at EOHY2015, is slightly reduced compared to the $1.707m at EOFY2014. This provision relates to the Home Equity Release Loans acquired in FY2014. I believe this provision is a requirement of accounting standards and in the past has overestimated actual losses. So is this an indicator of HBL writing net less home equity release business going forwards? IOW their home equity release portfolio is unwinding as it shrinks, in real terms?

SNOOPY

[Snoopy]

One of the issues you need to watch for is the real loan to value ratio's of the average loan to the dairy sector. By real I mean that the values used in the original loan applications will no longer be valid unless they've undertaken fresh valuations in the period between about March 2016 to June 2016 after the huge fall in dairy land, stock and machinery prices in February 2016. I think from a practical perspective its unlikely that a significant part of their dairy loan portfolio would have had fresh valuations unless the loan is actively under review. If HBL are using old valuations their stated loan to value ratio is highly debateable.


I have run my ruler over the available historical data on the size of the rural loan portfolio relative to the size of the total loan book (with provisions on total loans already deducted.)



Snapshot TimeRural Loans (A) Total Loans (B) (A)/(B)


EOFY2012$530.440m$2,197.494m24%


EOFY2013$499.942m$2,557.796m20%


EOHY2014$462.564m$2,344.661m20%


EOFY2014$469.020m$2,891.597m16%


EOHY2015$508.655m$2,471.156m21%


EOFY2015$537.286m$3,234.025m17%


EOHY2016$570.735m$3,237.047m18%



Total dairy exposure was declared to be $218m at EOFY2015, 40.6% of rural exposure (p20 full year result presentation).

You can see that at last reporting date rural loans were at an all time high, in gross terms. Yet in proportional terms they are not. I am wondering if some investors are overconcerned about the size of the rural loan book. One way to mitigate the 'rural loan risk' is to boost business in other areas. This means that whatever happens in rural will have a lesser effect on the Heartalnd business as a whole.

As an example, look at the comparison between the end of periods HY2015 and FY2015. Mostly it was a very significant increase in finance and insurance business, not related to Agriculture, that caused the Agricultural portfolio risk to fall.

SNOOPY

[Snoopy]

A bank requires a certain amount of 'tier capital', which in the case of Heartland is mostly derived from shareholder equity, to operate in a stable way 'day to day'. The legal minimum requirement is set by our Reserve Bank. But generally a "graded bank" doesn't work right down to the fine line of this reserve bank minimum requirement. This subject has been discussed often on this thread. Depending on what amount of equity an investor sees as 'acceptable', determines the answer that investor sees as acceptable.

Most investors will be satisfied with at least one of the answers below:

(1)/ 10.5%: This is the reserve bank minimum requirement of 8% for the 'total capital ratio' of the banking group, plus an obligatory 2.5% 'buffer margin'.
(2)/ 14%: This is the typical figure that Heartland has actually maintained over the last few periods.
(3)/ 17%: This is the figure chosen by Heartland managment when they were setting the size of the capital raising needed to make the Seniors acquisition in FY2014
(4)/ 20%: This is the figure that the banks set for PGGW Finance that was subsequently absorbed into Heartland, before it was sold by its former parent PGG Wrightson. PGW was in some financial distress when it made this sale. But the PGG Finance subsidiary was in no distress, enjoying good support from both borrowers and lenders post GFC.

My own minimum equity requirement falls under heading "(4)". Being the strictest criterion, investors happy with this will automatically be happy with all the other standards (1)-(3). Over the years I seem to have got into different robust arguments with investors who are satisfied with (1), (2) or (3).

Heartland has not managed to meet this standard (4) throughout its existance so far. This is one reason why I have never joined the share register. However, it usually takes more than one "measuring stick" to see if an investment case stacks up.

If, for example, Heartland is consistently more profitable than other banks
then I might consider a standard less than (4) satisfactory, even if it fails my investment criterion (4) above.

Effectively what I am saying here, is that a higher profit margin could justify a greater risk. But how high would such a profit margin have to be? This is a question I have not answer for myself (yet).

SNOOPY

[King1212]

Above posted 20-7-2011.
Over 5 years later ,and no further ahead.
Fail this test,pass this test,sorry got that test wrong,and on and on and on and on.!
Incredible!!!!!!!!!!!..lol.

Snoppy just wished with all his ramping, heartland sp could go lower so he can get in...what he actually try to show us?he missed the boat?

[Hectorplains]

No he actually sunk his canoe trying to catch the boat.
Rumour has it his canoe was overweight, as he built it out of "iron ore." It was named "Snoopy ARI".Luckily it sunk without trace.
Another "fail test."..lol.

You Guys are playing the man not the ball. Nothing in the last three posts but opprobrium.

[Snow Leopard]

I have run my ruler over the avialable historical data on the size of the rural loan portfolio relative to the size of the total loan book (with provisions on total loans already deducted.)...

...As an example, look at the comparison between the end of periods HY2015 and FY2015. Mostly it was a very significant increase in finance and insurance business, not related to Agriculture, that caused the Agricultural portfolio risk to fall.

SNOOPY



Snapshot Time
Rural Loans (A)
Total Loans (B)
(A)/(B)
(B) for ?


EOFY2012
$530.440m
$2,197.494m
24%
Bank Only


EOFY2013
$499.942m
$2,557.796m
20%
All Group


EOHY2014
$462.564m
$2,344.661m
20%
Bank Only


EOFY2014
$492.020m
$2,891.597m
16%
All Group


EOHY2015
$508.655m
$2,471.156m
21%
Bank Only


EOFY2015
$537.286m
$3,234.025m
17%
All Group


EOHY2016
$570.735m
$3,237.047m
18%
Amalgam



I have added an extra column (B) for ? to identify for which part of the Heartland Empire you numbers relate to.

The new 'Amalgam' Heartland Bank numbers are equivalent to the previous All [of] Group numbers (that you read from the Group FY statements] but your Bank Only numbers [which came from the Bank disclosure statements] are a sub-set of the 'All Group', most of the HER stuff being the major difference.

Best Wishes
Paper Tiger

[Raz]

No he actually sunk his canoe trying to catch the boat.
Rumour has it his canoe was overweight, as he built it out of "iron ore." It was named "Snoopy ARI".Luckily it sunk without trace.
Another "fail test."..lol.

Catch your ego on the way out..bring up or debate something of substance.

[percy]

You Guys are playing the man not the ball. Nothing in the last three posts but opprobrium.

Have deleted the post.

[percy]

Catch your ego on the way out..bring up or debate something of substance.

Have deleted the post.

[percy]

This thread has been going for nearly 5 years.
A lot of water under the bridge.
So what has been HBL's performance compared to the Aussie banks over those 5 years.
According to Yahoo Finance the following.
ANZ....-2.48%
CBA.....+58.76%
HBL......+68.92%
NAB......+17.88%
WBC.....+18.06%
Big difference between the best and the worst.!

[percy]

HBL +68%
NZ50 +100% (or there abouts)

Come on W69,be consistent,comparing a gross index with my figures which do not include dividends is misleading.
Not like you.
Possibly you would like to compare like for like for us?

[nextbigthing]

HBL +68%
NZ50 +100% (or there abouts)

Add the extra 32% and it's pretty close to $1.60 (by Christmas) Winner. Spooky eh!

[Joshuatree]

My fave bank looking strong; up through the 30,60,120,180 DMA/ nice.

[K1W1G0LD]

Well the grass is growing and the paint drying nicely now...........................that the SP is catching up.
You have nothing to apologize for on here Percy.

[Snoopy]

Snapshot Time
Rural Loans (A)
Total Loans (B)
(A)/(B)
(B) for ?


EOFY2012
$530.440m
$2,197.494m
24%
Bank Only


EOFY2013
$499.942m
$2,557.796m
20%
All Group


EOHY2014
$462.564m
$2,344.661m
20%
Bank Only


EOFY2014
$492.020m
$2,891.597m
16%
All Group


EOHY2015
$508.655m
$2,471.156m
21%
Bank Only


EOFY2015
$537.286m
$3,234.025m
17%
All Group


EOHY2016
$570.735m
$3,237.047m
18%
Amalgam



I have added an extra column (B) for ? to identify for which part of the Heartland Empire you numbers relate to.

The new 'Amalgam' Heartland Bank numbers are equivalent to the previous All [of] Group numbers (that you read from the Group FY statements] but your Bank Only numbers [which came from the Bank disclosure statements] are a sub-set of the 'All Group', most of the HER stuff being the major difference.


You are right PT. The reason why I was 'mixing and matching' 'All Group' results and 'Bank Only' results needs explaining.

What I wanted was the 'All Group' results. When you buy HBL shares on the market you can only buy 'All Group', so that is what is of interest to shareholders. But prior to HY2016 (a dramatic improvement in disclosing useful information here - well done Heartland), the information in the Heartland interim report I would describe as 'scratchy at best'. As far as breaking down the industry sectors of the loan book they were completely useless. So I extracted the 'bank only' information from the equivalent declaration statement made to the reserve bank co-inciding with the equivalent interim report.

The FY2012 figure is the comparative given in the FY2013 annual report. That one is listed as a group figure.

The Seniors acquisition was made in April 2004. So we can get an idea of any error in my table by looking at the 'bank only' reserve bank declaration for FY2014 (period ending 30th June 2014) and FY2015 (period ending 30th June 2015). These figures are then compared with the group figures declared in the respective annual reports.

http://www.heartland.co.nz/uploadGallery/Legal/Heartland%20Bank%20disclosure%20statement%20Jun14. pdf
(From note 34c)

AND

http://www.heartland.co.nz/uploadGallery/Legal/Disclosure_Statements/Heartland%20Bank%20Disclosure%20Statement%20June%2 02015.pdf
(From note 17c)



Snapshot Time
Rural Loans (A)
Total Loans (B)
(A)/(B)
(B) for ?


EOFY2014
$469.020m
$2,295.195m
20%
Bank Only


EOFY2014
$469.020m
$2,891.597m
16%
All Group


EOFY2015
$537.286m
$2,716.104m
20%
Bank Only


EOFY2015
$537.286m
$3,234.025m
17%
All Group



So let's say the 'bank only' figures are, for the purposes of adjustment, 4% too high. I will make this adjustment to the half year figures and see what that does to the trend picture.

SNOOPY

[Ggcc]

Just left the meeting at Havelock north with CEO and part of management. I got a very positive vibe. Happy shareholder 😊

[Snoopy]

'Take more care in sourcing your data'

Best Wishes
Paper Tiger



Snapshot Time
Rural Loans (A)
Total Loans (B)
(A)/(B)



EOFY2012
$530.440m
$2,197.494m
24%
(B) for All Group


EOFY2013
$499.942m
$2,557.796m
20%
(B) for All Group


EOHY2014
$462.564m
$2,344.661m (*)
16%
(A/B) All Group Adjusted


EOFY2014
$492.020m
$2,891.597m
16%
(B) for All Group


EOHY2015
$508.655m
$2,471.156m (*)
17%
(A/B) All Group Adjusted


EOFY2015
$537.286m
$3,234.025m
17%
(B) for All Group


EOHY2016
$570.735m
$3,237.047m
18%
(B) for Amalgam



(*) indicates figure is a low estimate. (Actual group figure not disclosed by Heartland).

The adjusted figures show that the best thing Heartland did to reduce rural debt portfolio risk was to acquire Seniors!

We can also see with more clarity that since the Seniors acquisition, rural debt risk has been steadily increasing again.

Under section 12d in HYAR2016 Heartland states:

"At 31 December 2015 the banking group did not have any period end or peak end-of-day credit exposures over 10% of equity to individual counter parties (not being members of groups of closely related counter parties) or groups of closely related counterparties (excluding central government of any country with a long-term credit rating of A-or A3 or above."

This is good to know. However, I have a slightly different view from Heartland as regards dairy farm loans. There has been a heavy incentive (the high milk price) for dairy farmers to borrow and invest. Heartland loans are likely to be at the riskier end of the dairy loan spectrum, because they charge higher rates than other banks. So in my judgement, despite these loans being spread around different unconnected farms, these loans should be grouped together for risk assessment purposes.

Dairy exposure has been declared as 8% of the lending book at 31-12-2015 (see text interim result announcement).

0.08 x 3,237,047m = $259m This represents 45% of the $571m listed Agricultural loans, up from 41% six months earlier. One explanation for this is that Heartland are capitalising interest payments in the hope that the dairy situation will improve in the medium term. However, the dairy situation is not improving. So I am expecting a significant jump in dairy loan write downs in the second half years.

Overall dairy loans were not projected as problems at 31-12-2015. But watch this space!

SNOOPY

[SCOTTY]

Just left the meeting at Havelock north with CEO and part of management. I got a very positive vibe. Happy shareholder 😊
Hi Ggcc. Was this some sort of HBL road show?

[Ggcc]

Investors and customers were invited to this event in havelock north. It was more a meet and great with a few words from the director and ceo. They were very positive about things. Yes the rural sector has some concerns, but the business is strong and sound is what the ceo mentioned..... Don't quote me word for word, but I walked away happy. I mentioned to one of the directors about the share price and he believed institutions had somewhat undervalued them. I mentioned them being high risk and he politely denied they were high risk. Again don't quote me word for word, as this is how I recalled the discussion. Always DYOR please.

[trader_jackson]

Investors and customers were invited to this event in havelock north. It was more a meet and great with a few words from the director and ceo. They were very positive about things. Yes the rural sector has some concerns, but the business is strong and sound is what the ceo mentioned..... Don't quote me word for word, but I walked away happy. I mentioned to one of the directors about the share price and he believed institutions had somewhat undervalued them. I mentioned them being high risk and he politely denied they were high risk. Again don't quote me word for word, as this is how I recalled the discussion. Always DYOR please.

I do like to hear things like this, thanks for the update.

SP had a nice rally today... Winner69 it appears they might beat ARV to the $1.30 mark, but I hope it is a close 2nd place for ARV ;):t_up:

(disclosure: topping up at $1.19 is turning out to have been a good idea... so far)

[SCOTTY]

Investors and customers were invited to this event in havelock north. It was more a meet and great with a few words from the director and ceo. They were very positive about things. Yes the rural sector has some concerns, but the business is strong and sound is what the ceo mentioned..... Don't quote me word for word, but I walked away happy. I mentioned to one of the directors about the share price and he believed institutions had somewhat undervalued them. I mentioned them being high risk and he politely denied they were high risk. Again don't quote me word for word, as this is how I recalled the discussion. Always DYOR please.
Thanks very much for sharing that Ggcc. Excellent reporting ��
Cheers

[pierre]

Investors and customers were invited to this event in havelock north. It was more a meet and great with a few words from the director and ceo. They were very positive about things. Yes the rural sector has some concerns, but the business is strong and sound is what the ceo mentioned..... Don't quote me word for word, but I walked away happy. I mentioned to one of the directors about the share price and he believed institutions had somewhat undervalued them. I mentioned them being high risk and he politely denied they were high risk. Again don't quote me word for word, as this is how I recalled the discussion. Always DYOR please.

I attended this event too. HBL holds its Board meetings in various locations around the country and this time it was Hawke's Bay's turn. HBL invited local shareholders, investors and customers to cocktails and canapes following their meeting today. We had brief addresses from chairman Geoff Ricketts and CEO Jeff Greenslade. They both spoke positively about the business and their forecast of $51-$55m NP for the current FY.

Jeff said HBL is positioning itself in quite different spaces from the major banks, is not held back by expensive legacy IT systems and is able to be nimble and use technology to offer customers "what they want, when they want it".

I talked to Jeff after his address and asked him about HBL's exposure to dairy. He said they were focused on helping their clients through the current situation but felt that HBL would be able to weather the storm if the dairy situation did not improve over the next couple of years.
He said that should a dairy farm have to revert to sheep and beef the value of the operation would be around 60% of its dairy value and that with their LVR's HBL would not be too badly impacted. He is comfortable with their current level of provisioning.

I was a little nervous when he said that only profitability would be impacted if the dairy situation gets worse - but the balance sheet would hold up. Jeff said all the major banks were far more exposed than HBL and all were generally focused on supporting their dairy customers.

I noted a few local motor vehicle dealers at the event and one of them told me that while UDC was his main financier he was placing increasing amounts of vehicle finance with HBL.

I guess that the chairman and CEO have to be very careful about what they say at such an event and that they would be unlikely to be spreading negativity. Equally they wouldn't be able to over-estimate the state of affairs so on balance I would say the picture generally looks Ok.

At today's closing price of $1.29 a fully imputed dividend yield of 6.2% means its definitely better to own the bank than to deposit funds with it. If I could use a well-worn phrase - I think we are "well positioned" with HBL.

[Ggcc]

I think you put their words better than mine Pierre. Thanks

[percy]

I think you put their words better than mine Pierre. Thanks

A big thank you to both of you.

[Raz]

I attended this event too. HBL holds its Board meetings in various locations around the country and this time it was Hawke's Bay's turn. HBL invited local shareholders, investors and customers to cocktails and canapes following their meeting today. We had brief addresses from chairman Geoff Ricketts and CEO Jeff Greenslade. They both spoke positively about the business and their forecast of $51-$55m NP for the current FY.

Jeff said HBL is positioning itself in quite different spaces from the major banks, is not held back by expensive legacy IT systems and is able to be nimble and use technology to offer customers "what they want, when they want it".

I talked to Jeff after his address and asked him about HBL's exposure to dairy. He said they were focused on helping their clients through the current situation but felt that HBL would be able to weather the storm if the dairy situation did not improve over the next couple of years.
He said that should a dairy farm have to revert to sheep and beef the value of the operation would be around 60% of its dairy value and that with their LVR's HBL would not be too badly impacted. He is comfortable with their current level of provisioning.

I was a little nervous when he said that only profitability would be impacted if the dairy situation gets worse - but the balance sheet would hold up. Jeff said all the major banks were far more exposed than HBL and all were generally focused on supporting their dairy customers.

I noted a few local motor vehicle dealers at the event and one of them told me that while UDC was his main financier he was placing increasing amounts of vehicle finance with HBL.

I guess that the chairman and CEO have to be very careful about what they say at such an event and that they would be unlikely to be spreading negativity. Equally they wouldn't be able to over-estimate the state of affairs so on balance I would say the picture generally looks Ok.

At today's closing price of $1.29 a fully imputed dividend yield of 6.2% means its definitely better to own the bank than to deposit funds with it. If I could use a well-worn phrase - I think we are "well positioned" with HBL.

I have also been to one of these meetings, near identical by the sound of it...a good summary. I have noticed in the past six weeks all the banks have backed off their agr./dairy sector clients, no one wants to pull the trigger. No idea how long that may continue however makes it harder to assess value when so few sales are going through for farms as well....

[Ggcc]

They did mention where they see the future growth in the company. Which is the now generation. Those who want finance quick and easy will have their way, with the help of technology. I don't know whether he meant harmony, or something within the bank itself. In roughly two minutes we could lend you $50,000.... It was that quick. I love the needing it now generation!! It took me two years of active searching to upgrade my television haha

[Raz]

They did mention where they see the future growth in the company. Which is the now generation. Those who want finance quick and easy will have their way, with the help of technology. I don't know whether he meant harmony, or something within the bank itself. In roughly two minutes we could lend you $50,000.... It was that quick. I love the needing it now generation!! It took me two years of active searching to upgrade my television haha

Yes however doesn't result in low risk lending...need to see the return for that level of risk....

[Snoopy]

I talked to Jeff after his address and asked him about HBL's exposure to dairy. He said they were focused on helping their clients through the current situation....


The above I would suggest is code for 'capitalising interest payments'.



....but felt that HBL would be able to weather the storm if the dairy situation did not improve over the next couple of years.


The above is code for. "We have assumed the dairy situation will improve, when rating our dairy loans".



He said that should a dairy farm have to revert to sheep and beef the value of the operation would be around 60% of its dairy value and that with their LVR's HBL would not be too badly impacted. He is comfortable with their current level of provisioning.

I was a little nervous when he said that only profitability would be impacted if the dairy situation gets worse - but the balance sheet would hold up.


$260m in dairy loans on the books.

20% write off
= $52m
= no profit for FY2016
= no dividend going forwards?

Such a write off would not pose a threat to the ongoing operation of Heartland. But it would get rid of what Heartland call their 'excess capital' from the balance sheet!



Jeff said all the major banks were far more exposed than HBL and all were generally focused on supporting their dairy customers.


What Jeff says above may be true. But from an investor perspective, you cannot buy shares in ANZ (NZ), Westpac (NZ), BNZ or ASB directly. You can buy shares in all of those indirectly by purchasing the Australian parents. But the rural loan risk of buying the Australian parents is far less than buying HNZ, Because the respective NZ operations represent only a small amount of the Australian parent companies' business. From an investor perspective, it is Heartland that has the most rural exposure.

SNOOPY

[Absolute144]

Well, i don't know about how much the banks are actually supporting the farmers. I have a mortgage on a farm and i do believe the government dropped the OCR in part to provide mortgage relief for farmers. Now my mortgage is fully floating - but still, ANZ passed no cut onto me with the latest OCR drop a couple of months ago. They just wanted me to shift to a fixed rate for for less. Currently paying 6.15 %. Wonder what HBL rate is?

[stoploss]

Well, i don't know about how much the banks are actually supporting the farmers. I have a mortgage on a farm and i do believe the government dropped the OCR in part to provide mortgage relief for farmers. Now my mortgage is fully floating - but still, ANZ passed no cut onto me with the latest OCR drop a couple of months ago. They just wanted me to shift to a fixed rate for for less. Currently paying 6.15 %. Wonder what HBL rate is?

Not advice but one and 2 year money is around 4.15/4.25 % for residential mortgages . If the bank is offering you a fixed rate anywhere near there for commercial lending even if the RBNZ ( not govt ) drop interest rates by 1 % which is unlikely IMO . You would still have a better deal on a short term fixed rate , with options in a year or twos time , you could maybe even restructure with a mix of floating and different fixed terms .

[kiora]

Well, i don't know about how much the banks are actually supporting the farmers. I have a mortgage on a farm and i do believe the government dropped the OCR in part to provide mortgage relief for farmers. Now my mortgage is fully floating - but still, ANZ passed no cut onto me with the latest OCR drop a couple of months ago. They just wanted me to shift to a fixed rate for for less. Currently paying 6.15 %. Wonder what HBL rate is?

6.15% a rort !?What term?,D or S& B ?

[Absolute144]

Not advice but one and 2 year money is around 4.15/4.25 % for residential mortgages . If the bank is offering you a fixed rate anywhere near there for commercial lending even if the RBNZ ( not govt ) drop interest rates by 1 % which is unlikely IMO . You would still have a better deal on a short term fixed rate , with options in a year or twos time , you could maybe even restructure with a mix of floating and different fixed terms .

Thanks. I'll look into it.

[Snoopy]

HBL will get to 160 before ARV - a certainty

Be there around full year announcement time ..... unless there a massive rights issue at 110 or something

$400m to take over UDC? There are now 476m Heartland shares on issue. So a 1:2 cash issue at $1 would raise $238m. $200m for the takeover and $38m to bolster the bad debt buffer.

With such a large cash issue, I would be looking to pick up Heartland shares for about $1.05 by purchasing some of those cash issue rights on market. Needless to say $1.28 on the market today looks relatively unattractive to this potential investor.

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%



FY2015 Loan Maturity (Financial Receivables)ExpectedContractedC/E


On Demand$37.012m$37.012m100%


0-6 months$503.452m$664.557m132%


6-12 months$341.392m$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%




This is the most imprtant calculation that most nvestors in finance companies never do. I have rechristened it the 'Meads Test'. The Meads Test is way to find out if dear old Colin says a profitable finance company is 'solid as', whether that company will run out of cash when it comes time to repay your debenture. "Liquidity Buffer Ratio" sounds a bit pompous, so I will adopt the term 'Meads Test' in the future, as I think most investors will relate to that term better.

We are looking at 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%

Heartland provides a nice projection of forward cashflows in note 14 of IRFY2016. But these are contacted cashflows. In practice depositors roll over their Heartland debentures. And when customers repay a Heartland loan, they often take out another loan. So what we as investors need to concentrate on is the expected behaviour of those that take out loans from Heartland and those that loan money to Heartland. Expected behaviour is not written in stone. But we can make an educated guess at this by looking at what happened in prior periods where both 'contracated' behaviour and 'expected' behaviour was tabulated. "Adjustment factors" in the table below:



HY2016 Loan Maturity (Financial Receivables)ContractedCE FactorExpected


On Demand$31.879m1.000$31.879m


0-6 months$618,779m1.32$816.778m


6-12 months$277.017m1.32$345.662m





HY2016 Deposit Maturity (Financial Liabilities)ContractedCE FactorExpected


On Demand$728.056m0.0301$21.914m


0-6 months$1,360.508m0.324$440.805m


6-12 months$498.705m0.364$181.529m



Now I have generated the expected cashflow data over the ensuing twelve months, I can proceeed to make some 'Meads Test' calculations.

SNOOPY

[pierre]

The above I would suggest is code for 'capitalising interest payments'.



The above is code for. "We have assumed the dairy situation will improve, when rating our dairy loans".

SNOOPY

I didn't notice Jeff referring to a Code Book during our conversation, however your interpretation may well be right - or not.

I don't expect they will be writing off $52m in FY16. FY17 could be a different story though if the dairy market doesn't improve sufficiently. Definitely worth watching what happens in that arena and assessing the impact on HBL. The SP could well take a knock if the payout doesn't start tracking upwards or HBL start ramping up provisions for bad or doubtful debts.

However, the business appears to be going well in other areas so maybe there might be some trade-off and we see profit maintained (or thereabouts) but growth stall a little.

[Snoopy]

HNZ LENDINGS vs HNZ DEBENTURES

Customers owe HNZ 'Finance Receivables' of $2,862,070,000. There is no breakdown in note 11 of AR2015 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.


HNZ LENDINGS vs HNZ DEBENTURES

Customers owe HNZ 'Finance Receivables' (Lendings) of $2,928,601,000. If we look at note 14 of IFR2016, we can derive the expected maturity profile of total finance receivables due over the next twelve months. (This is what I did in part 1 of this calculation.) Adding the totals for the ensuing twelve months gives:



On Demand0-6 Months6-12 MonthsTotal


Expected Receivables Due$31.879m + $816.788m + $365.662m = $1,214.329m


less Expected Deposits for Repayment$21.914m + $440.821m + $181.893m = $644.628m


equals Net Expected Cash Into Business$9.965m$375.967m$183.769m$569.701m {B}



If more money is expected 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 and debenture holders being repaid. That is the case here: good news for debenture holders.

It is important to note that this calculation is based on the loan book position at balance date. New loans taken out since balance date are not included. Neither are brand new customer debentures invested with Heartland since balance date. So these figures are not a forecast of what will happen. But they are are forecast of what will happen if all customer loan and deposit activity ceased at last balance date. This means the figures are best suited for comparing with previous periods, rather than being forecasts of what will happen in their own right.

SNOOPY

[Jantar]

.......

$260m in dairy loans on the books.

20% write off
= $52m
= no profit for FY2016
= no dividend going forwards?

Such a write off would not pose a threat to the ongoing operation of Heartland. But it would get rid of what Heartland call their 'excess capital' from the balance sheet!
........
SNOOPY

Snoopy, I normally value your analysis, but I do believe that this time your are being overly pessimistic. What you are effectively allowing for here is for almost every single dairy loan to fail.

I will admit to making a few assumptions and not going back through the annual report in detail, but I base this claim as follows.

Assumption 1: The average dairy loan is at an LVR of 20%. So that a $260M in loans is covered by $325 in farm values, or each $1m of loan is covered by $1.25 M of security.
Assumption 2: From Pierre's quote "He said that should a dairy farm have to revert to sheep and beef the value of the operation would be around 60% of its dairy value and that with their LVR's HBL would not be too badly impacted. He is comfortable with their current level of provisioning." This means that for each $1,000,000 of loan that defaults and is foreclosed, the amount recovered is 60% of $1.25M or $0.75M. That means that for every $1M defaulted the potential write off is $0.25M.

So for a write off of $52M that would mean $208 M of defaults, or 80% of all dairy farms that HBL have loans to.

Do you really think that 80% of Dairy farms will fail?

[Beagle]

FWIW the reserve bank said some time back that with four years of low dairy pay-outs banks could suffer up to a 14% loss on their loan book. Looks like 3 years is locked and loaded and there's no sign of even the faintest light at the end of the tunnel. Including downstream effects on other loans to affected industries my thinking is around 14% x $400m = $56m or 12 cents per share, spread over many years so the most likely effect is as a material handbrake on profit growth going forward. What if the dairy downturn lasts longer than 4 years and $4 kg is the new normal...that's the nightmare scenario and losses could significantly exceed the RB's assumptions if land values fall by more than half. Seeing as virtually all the other banks are significantly increasing their impairments investors might like to ask themselves why they think HBL will be immune to this fundamental change of the tide in this sector.
(Disc: Don't hold, not looking to buy cheaper, not to be considered professional advice or a recommendation and I am sure many holders will still consider the bank is well positioned).

[kiora]

Snoopy, I normally value your analysis, but I do believe that this time your are being overly pessimistic. What you are effectively allowing for here is for almost every single dairy loan to fail.

I will admit to making a few assumptions and not going back through the annual report in detail, but I base this claim as follows.

Assumption 1: The average dairy loan is at an LVR of 20%. So that a $260M in loans is covered by $325 in farm values, or each $1m of loan is covered by $1.25 M of security.
Assumption 2: From Pierre's quote "He said that should a dairy farm have to revert to sheep and beef the value of the operation would be around 60% of its dairy value and that with their LVR's HBL would not be too badly impacted. He is comfortable with their current level of provisioning." This means that for each $1,000,000 of loan that defaults and is foreclosed, the amount recovered is 60% of $1.25M or $0.75M. That means that for every $1M defaulted the potential write off is $0.25M.

So for a write off of $52M that would mean $208 M of defaults, or 80% of all dairy farms that HBL have loans to.

Do you really think that 80% of Dairy farms will fail?

Assumption LVR 20%??? Can this be confirmed anywhere?What are HBL loans to dairy farmers secured over?Land(valuations down 14%+),stock(down 25+%),machinery(down x%)

[Jantar]

Assumption LVR 20%??? Can this be confirmed anywhere?...
If I could confirm it, then it wouldn't be an assumption. :confused:

[smtrader]

Does anyone know why the bank shares, (HBL, WBC, ANZ) all took a dive by about 2-3%??

[Snoopy]

Snoopy, I normally value your analysis, but I do believe that this time your are being overly pessimistic. What you are effectively allowing for here is for almost every single dairy loan to fail.

I will admit to making a few assumptions and not going back through the annual report in detail, but I base this claim as follows.

Assumption 1: The average dairy loan is at an LVR of 20%. So that a $260M in loans is covered by $325 in farm values, or each $1m of loan is covered by $1.25 M of security.
Assumption 2: From Pierre's quote "He said that should a dairy farm have to revert to sheep and beef the value of the operation would be around 60% of its dairy value and that with their LVR's HBL would not be too badly impacted. He is comfortable with their current level of provisioning." This means that for each $1,000,000 of loan that defaults and is foreclosed, the amount recovered is 60% of $1.25M or $0.75M. That means that for every $1M defaulted the potential write off is $0.25M.

So for a write off of $52M that would mean $208 M of defaults, or 80% of all dairy farms that HBL have loans to.

Do you really think that 80% of Dairy farms will fail?

I was not quite as rigorous in my 'agricultural value' calculation as you Jantar. The main point I was trying to make was that the dairy downturn could have an effect , the order of one year's profit. Thinking about it further, I am more inclined towrads Rogers view that the total effect will be spread out over many years. Thus it will be an ongoing crimp on profits rather than one devastating blow.

Specifically, I was thinking 'cows' rather than 'land' when I made my comments. Someone posted how high the Heartland loan rates are in a comparison chart the other day. So I am thinking that Heartland is a dairy lender of last resort. The kind of lender who would lend to an unsecured sharemilker with low equity, rather than a land owning farmer. The before/after comparison then I had in mind was the drop in value a dairy cow suffers when it changes from a 'producer of milk' to 'two walking sides of beef waiting to be killed'.

Then there is the issue of working with 'average' LVRs. There could be some, relatively well heeled, land owning farmers who need seasonal bridging finance. These are not the farming loans at risk, but they would pull down the 'average' LVR. Taken individually, there is no such thing as an 'average' farmer. It is those on the high side of average (in leverage terms) that I would be most concerned for.

Finally there are the downstram effects that I did not consider. The crop farmer who has bought a combine harvester to make sileage to sell to dairy farmers. The little enginerring business that has borrowed money to help to maintain on farm dairy machinery. These are 'ripple effects' that I had in mind, but didn't soecifically allow for in my crude one line analysis.

Do I think that 80% of dairy farms will fail? No.
Do I think that Heartland could lose money across all customer sectors as a ripple effect equivalent to 80% of all of Heartland's dairy loans going down? I think it's possible!

SNOOPY

[Snow Leopard]

....
Assumption 1: The average dairy loan is at an LVR of 20%. So that a $260M in loans is covered by $325 in farm values, or each $1m of loan is covered by $1.25 M of security.
...

That is a Loan to Value Ratio (LVR) of 0.8 (80%).

Last figures I can recall from HBL was sixty something percent, but not going to bother with finding the precise figure or when that was.

Best Wishes
Paper Tiger

[Snoopy]

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)/(Expected Current Net Loan Maturity 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.
--------


Expected Current Net loan Maturity Outstanding $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 Current Loans Outstanding)
= {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.


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

In the numerator of the equation, we have borrowings.

HNZ BORROWINGS



1/ Term deposits lodged with Heartland.$2,174.553m


2/ Bank Borrowings$377.605m


3/ Securitized Borrowings total$258.819m


4/ Subordinated Bonds$3.381m


Total Borrowings of (see note 7, IRFY2016)$2,814.358m



Note 7 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 in relation to the 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 2017, 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 7 on the securitized borrowing facilities is as follows:

-------



Total HY2016Total FY2015Facility Maturity Date HY2015


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


less Current level of drawings against this facility$258.819m$258.630m


equals Borrowing Headroom$91.181m {A}$91.370m



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

-------

Summing up:

(Total Current Money to Draw On)/(Expected Current Net Loan Maturity Outstanding)
= {A}/{B (from post Liquidity Buffer Ratio HY2016 (Part 2) }
= $91.4m / $569.701m
= 16.0% > 10%

=> Pass Short term liquidity test




HY2016FY2015


Amount lent to Customers (Receivables)$2,928.601m (+2.3%)$2,862.070m


Total Borrowings$2,814.338m (-0.4%)$2,825.245m


Amount borrowed from Customers (Debentures and Deposits)$2,174.533m (+3.7%)$2,097.458m



Securitized borrowing facilities are nearly constant over the six month comparative period. External Bank borrowings have reduced by $88.174m. Heartland have reduced their current period risk profile by:

1/ Having a potentially much smaller mismatch between borrowings and receivables.
2/ Sourcing more borrowed funds from Heartland bank customers, replacing borrowings from third party external banks.

SNOOPY

[Beagle]

That is a Loan to Value Ratio (LVR) of 0.8 (80%).

Last figures I can recall from HBL was sixty something percent, but not going to bother with finding the precise figure or when that was.

Best Wishes
Paper Tiger

Probably wise not too seeing as land values have fallen 24% in the last year, (much worse for stock and plant and machinery and also consider that those valuations would have been anything but fresh and current as at 30 June 2015.

Snoopy - What I learned from the GFC and finance companies is that many will refinance as many impaired loans as they can possibly get away with just before balance date to "wash" their receivables ledger and make it as clean as possible for balance date muster.

[Snow Leopard]

...Last figures I can recall from HBL was sixty something percent, but not going to bother with finding the precise figure or when that was....

Was looking for something else when I spotted this from the commentary accompanying the last half year results:


Given continued market interest in the dairy sector in New Zealand, Heartland advises that its direct exposure to dairy farmers is 8% of its total lending book as at 31 December 2015. The average loan to value ratio (LVR) for Heartland’s dairy exposures is 59%. However, it is important to note that LVRs are only one of the indicators of loan quality. Heartland remains cautious of market conditions and continues to monitor the dairy sector with close attention. Dairy customers are being supported through this challenging period.

So even I am wrong occasionally :scared:.

Best Wishes
Paper Tiger

[Jantar]

That is a Loan to Value Ratio (LVR) of 0.8 (80%).

Last figures I can recall from HBL was sixty something percent, but not going to bother with finding the precise figure or when that was.

Best Wishes
Paper Tiger

Ooops. True .... 20% is borrowers equity for 80% LVR. However the 59% figure you found makes HBL's position even better.

[trader_jackson]

HBL +68%
NZ50 +100% (or there abouts)

From Today's presentation
Total Shareholder Return for last 3 years:
Heartland TSR: 179%
NZX 50 TSR: 89%

[percy]

An excellent presentation..
A must read for any one who owns or is thinking of buying HBL shares.

[Beagle]

Doesn't rave about how the pretty chart looks from just over a year ago --- oops but somebody had to say that

this bit in outlook re dairy loans - In this event, Heartland’s profitability would reduce. However, Heartland would remain profitable, and we don’t expect that there would be any impact on Heartland’s capital

That is code for yes we are going to incur some decent losses but have no idea how much (and hoping like hell)

Finally owning up to the very real possibility that they're going to get a decent haircut from this sector.

I for one was well aware they're calling it at 59% LVR last balance date but when you consider the dairy farm index is down 24% in the last year that makes it 59 / 0.76 = LVR 77.63% and that assumes (which isn't the case) that all those valuations they're working their 59% on were current as of a year ago. I think earlier analysis using 80% LVR is about where its really at, probably worse than that seeing as some of the loans are over stock which is down further and plant and machinery which has even less value in a forced sale situation..

[Snoopy]

Finally owning up to the very real possibility that they're going to get a decent haircut from this sector.

I for one was well aware they're calling it at 59% LVR last balance date but when you consider the dairy farm index is down 24% in the last year that makes it 59 / 0.76 = LVR 77.63% and that assumes (which isn't the case) that all those valuations they're working their 59% on were current as of a year ago. I think earlier analysis using 80% LVR is about where its really at, probably worse than that seeing as some of the loans are over stock which is down further and plant and machinery which has even less value in a forced sale situation..

Slide 16 in today's presentation announces a Rural Portfolio total value of of $505m. If you look back at the interim report at 31st December 2015, the rural loan book was $571m. $65m is a very large drop in just five months. It could be:

1/ Just a seasonal effect (EOFY2015 30-06-2015 had a rural loan balance of $537m for comparison) OR
2/ Maybe Heartland have wound up some of their 'good' rural loans to keep the total rural portfolio size under control.

Nothing wrong with doing eoither 1 or 2. But neither will make bad rural loans go away.

The other possibility is

3/ Up to $65m worth of rural lending has been written off in the last five months.

The truth is probably a combination of 1/, 2/ and 3/. But to know for sure we will have to wait for the fine detail of the full year accounts.

SNOOPY

[trader_jackson]

Dairy loans and Heartland in the media
http://www.sharechat.co.nz/article/22cbc640/heartland-bank-warns-dairy-farm-values-could-fall-40-percent-from-peak.html?utm_medium=email&utm_campaign=Heartland%20Bank%20warns%20dairy%20fa rm%20values%20could%20fall%2040%20percent%20from%2 0peak&utm_content=Heartland%20Bank%20warns%20dairy%20far m%20values%20could%20fall%2040%20percent%20from%20 peak+CID_4ea4c22bd2eabe0109435cc5ccab4a22&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle22cbc640heartl and-bank-warns-dairy-farm-values-could-fall-40-percent-from-peakhtml

Hey t_j the article says share price DOWN so far this year

the days are long but the years are short ;)

[Beagle]

Hey Snoops and W69. Latest REINZ dairy stat's down 24% for the year to April 2016 but didn't it fall by a significant amount in the previous year as well ? Can you remember ?
HBL says dairy sales values peak to trough could fall by 40% but maybe taking into account that some of their lending is on stock plant and machinery and the fall in dairy values in the previous year if one were to mark to market their security values as at 30 June 2016 they're down 40% already ? That would make a bit of a nonsense of their historical claim of 59% LVR wouldn't it ! Sometimes management only acknowledge they're going to get a haircut when the hear the shearer's combs start buzzing and I think this is one of those occasions.

[luigi]

Dairy loans and Heartland in the media
http://www.sharechat.co.nz/article/22cbc640/heartland-bank-warns-dairy-farm-values-could-fall-40-percent-from-peak.html?utm_medium=email&utm_campaign=Heartland%20Bank%20warns%20dairy%20fa rm%20values%20could%20fall%2040%20percent%20from%2 0peak&utm_content=Heartland%20Bank%20warns%20dairy%20far m%20values%20could%20fall%2040%20percent%20from%20 peak+CID_4ea4c22bd2eabe0109435cc5ccab4a22&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle22cbc640heartl and-bank-warns-dairy-farm-values-could-fall-40-percent-from-peakhtml

Hey t_j the article says share price DOWN so far this year

Down 5% from 1.32 on 1 Jan.

[percy]

Slide 16 in today's presentation announces a Rural Portfolio total value of of $505m. If you look back at the interim report at 31st December 2015, the rural loan book was $571m. $65m is a very large drop in just five months. It could be:

1/ Just a seasonal effect (EOFY2015 30-06-2015 had a rural loan balance of $537m for compariosn) OR
2/ Maybe Heartland have wound up some of their 'good' rural loans to keep the total rural portfolio size under control.

Nothing wrong with doing eoither 1 or 2. But neither will make bad rural loans go away.

The other possibility is

3/ Up to $65m worth of rural lending has been written off in the last five months.

The truth is probably a combination of 1/, 2/ and 3/. But to know for sure we will have to wait for the fine detail of the full year accounts.

SNOOPY

For the record;
"due to the repayment of some large loans".
Source,Share broker's research 18th May 2016.

[Snoopy]

The main point I was trying to make was that the dairy downturn could have an effect , the order of one year's profit. Thinking about it further, I am more inclined towrads Rogers view that the total effect will be spread out over many years. Thus it will be an ongoing crimp on profits rather than one devastating blow.

Specifically, I was thinking 'cows' rather than 'land' when I made my comments.


Putting some numbers on this from a stuff article, dated 15-03-2016:

http://www.stuff.co.nz/business/farming/advice/77702630/Cows-for-sale-but-no-one-is-buying

"Dairy cow prices have gone from highs of $2200 when there was a record payout to half that value and it is eating into sharemilker equity."

<snip>

"Worthington said cow prices depended on demand and supply and there were too many cows and heifers for sale."

" "There is no demand for stock at the moment. The price might go up in two years, and there will be a shortage of cows then." "

"Farm adviser Gary Massicks​, from Feilding, said some cows were listed for sale at $1600."

" "But you talk to stock agents, and they are not selling. The reality is cows are worth their slaughter price plus $100, often $1100 or $1200." "

That is a 45% decline in value from the peak. Ouch!

SNOOPY

[winner69]

If that Rachel Stewart gets her way and number ofvdairybcows are reduced by 80% thy might not get much for the cows anyway

Maybe the Heartland CFO knows a lot more than letting on when he said 'we can always shoot the cows ' (recent quote fron Sharetrader poster subway)

[Snoopy]

Hey snoops

I couldn't find your $571m in the interim report ut this probably explains why you think a big number.


Note 12(c) IRHY2016, "Concentration of credit risk by industry sector"

Agriculture: $570.735m



Have a look at Note 1 of the last disclosure statement - rural is $505m

They have 2 ways of categorising segments - one by sales channel / other the other more aligned as to the use of loan (category risk they call it)

Just a trap for young players - lesson being nothing is obvious


I am no more successful than you Winner. Can't find your Note 1, although not sure of document you are referencing. At this stage I am going with Percy's explanation: "some big loans repaid."

If Heartland can keep their overall Agricultural portfolio contained I am satisfied. If calling in some big loans means a longer rope can be given to some of our more indebted farmers then I am all for that. Good blokes and blokesses our farmers. If Heartland can see some farmers through this downturn that other banks would put to the auctioneers hammer, then I say good on them. Give 'em a chance and those farmers will pay their dues in the end!

SNOOPY

[percy]

40 years ago Westpac could have bankrupted me.
They did not.
Unfortunately for them, they still have me as a customer.

[winner69]

Note 12(c) IRHY2016, "Concentration of credit risk by industry sector"

Agriculture: $570.735m


SNOOPY

Same report (December)-

Note 1 Segment Analysis

Under Rural - Total Assets $504.614m (pretty close to $505m)

Move on 3 months to March Disclosure Statement the amount has increased to $507.365m

(Note; this assumes that total assets in this analysis is in the main financial receivables)

Your $65m I think has come about from not comparing apples with apples?

[Snow Leopard]

Interesting that Heartland are suggesting that the floor value for a dairy farm is defined by the sheep/beef market.

You have to hope that the downside risk for sheep & beef is minimal.

Best Wishes
Paper Tiger

[kiora]

Yikes 24% drop in dairy farm prices - i didn't believe it so looked it up

Yes the Dairy Farm Index is down by 24.1% from a year ago

Yes,BUT what % of the value ratio is land?

[Snoopy]

Ooops. True .... 20% is borrowers equity for 80% LVR. However the 59% figure you found makes HBL's position even better.


I owe Jantar a more calculated answer than I gave him. So let's say the current LVR ratio is 60% (round figures) and update Jantar's previous calculation based on this. I will use the same $260m of dairy loans on the books as before.

A 60% LVR meas that the market value of assets for which the loan was taken out at the time of loan application was:

$260m / 0.60 = $433m

Or on a smaller normalised (loans broken into $1m slice) scale:

$1m / 0.60 = $1.67m

Now lets assume these assets are dairy cows and their value has fallen 45% (see my recently quoted Stuff article) from when the loan was taken out.

This means the value of $1m cows when the loan was taken out is now:

$1.67m x (1-0.45) = $0.9185m

So if the loan is called in and the cows sold the bank will lose:

$1m - $0.9185m = $81,500 for each million loaned.

Now, lets assume that 1/3 of that $260m dairy loan total was for cows and the rest was for land and other stuff.

$260m x 1/3 = $87m

So the total Heartland loss on dairy cows would be.

$87m x 0.0815 = $7m

This is not nice, but a far cry from the $52m that I originally claimed. This is positive proof that I was scaremongering - right?

SNOOPY

[Snoopy]

So the total Heartland loss on dairy cows would be.

$87m x 0.0815 = $7m

This is not nice, but a far cry from the $52m that I originally claimed. This is positive proof that I was scaremongering - right?



Now lets take the same input information and formulate this problem in a slightly different way. The $260m in dairy loans remain, but are split like this.

1/$86.7m has been lent on cows with an 80% LVR.
2/$86.7m has been lent on land with a 60% LVR
3/$86.7m has been soent on bridging loans to well capitalised farmers with a 40% LVR.

So the loan money has been split between three broad asset classes which added together average out as a 60% LVR over the whole loan book, exactly the same overall LVR asw in Part 1. But what happens to our hapless sharemilker this time?

In part 2, each $1m in loan money represents:

$1m / 0.8 = $1.25m of dairy cows

Now lets assume, as in Part 1, the dairy cows have fallen in value 45% (see my recently quoted Stuff article) from when the loan was taken out.

This means the value of $1m cows when the loan was taken out is now:

$1.25m x (1-0.45) = $0.6875m

So if the loan is called in and the cows sold the bank will lose:

$1m - $0.6875m = $312,500 for each million loaned.

So the total Heartland loss on dairy cows would be.

$86.7m x 0.3125 = $27m

Note that this loss is nearly four times greater than that calculated in Part 1 for what is ostensibly the same loan book! Granted it is still far short of the $52m I claimed. But what about the downstream effects?

What about the crop farmer down the road who bought a combine harvester on tick to harvest silage for his dairy farmer brother down the road? The dairy farmer is no longer buying so our crop farmer, another Heartland Argi customer, has gone bust as well. I make this point becasue it shows how an apparent $27m could balloon much further for Heartland. Some might say a multiplier factor of 2 , bringing the money lost to $54m might be conservative.

SNOOPY

[percy]

I owe Jantar a more calculated answer than I gave him. So let's say the current LVR ratio is 60% (round figures) and update Jantar's previous calculation based on this. I will use the same $260m of dairy loans on the books as before.

A 60% LVR meas that the market value of assets for which the loan was taken out at the time of loan application was:

$260m / 0.60 = $433m

Or on a smaller normalised (loans broken into $1m slice) scale:

$1m / 0.60 = $1.67m

Now lets assume these assets are dairy cows and their value has fallen 45% (see my recently quoted Stuff article) from when the loan was taken out.

This means the value of $1m cows when the loan was taken out is now:

$1.67m x (1-0.45) = $0.9185m

So if the loan is called in and the cows sold the bank will lose:

$1m - $0.9185m = $81,500 for each million loaned.

Now, lets assume that 1/3 of that $260m dairy loan total was for cows and the rest was for land and other stuff.

$260m x 1/3 = $87m

So the total Heartland loss on dairy cows would be.

$87m x 0.0815 = $7m

This is not nice, but a far cry from the $52m that I originally claimed. This is positive proof that I was scaremongering - right?

SNOOPY

From Heartland's presentation :"We don't expect there would be any impact on Heartland's capital."
So any loss of interest would go through profit and loss a/c.
I did love on page 4, dividend;"Consensus forecast 9 cps for FY2017 [fully imputed]equivalent to 7.5 yield and 10.4% gross."
They would never have put that there if they did not intend to achieve it.
The growing online products means Heartland do not have to expand their branch networks.I note TNR are doing the same.Both are positioning themselves closer to their customers.Huge growth area for "the nimble footed".

[SCOTTY]

From Heartland's presentation :"We don't expect there would be any impact on Heartland's capital."
So any loss of interest would go through profit and loss a/c.
I did love on page 4, dividend;"Consensus forecast 9 cps for FY2017 [fully imputed]equivalent to 7.5 yield and 10.4% gross."
They would never have put that there if they did not intend to achieve it.
The growing online products means Heartland do not have to expand their branch networks.I note TNR are doing the same.Both are positioning themselves closer to their customers.Huge growth area for "the nimble footed".
Good to read your positive posts Percy. It makes a change to the constant bagging of HBL - in particular to the exposure to the dairy industry which is a small risk in relation to the business in total. There are so many good things going on which are constantly being ignored. Very sad. :)

[percy]

Good to read your positive posts Percy. It makes a change to the constant bagging of HBL - in particular to the exposure to the dairy industry which is a small risk in relation to the business in total. There are so many good things going on which are constantly being ignored. Very sad. :)

I now laugh at the constant bagging of HBL.
I upset a few people bringing up Snoopy's first post on this thread.Was thinking to myself it would be fun in a year's time to bring up a few of his,and others' latest.!!! lol.
Consensus with regard to HBL's 9 cent fully imputed dividend for FY 2017, shows how HBL,and leading brokers' analysts view HBL's prospects.
In a word "positive."

[Snoopy]

From Heartland's presentation :"We don't expect there would be any impact on Heartland's capital."
So any loss of interest would go through profit and loss a/c.


If you prefer the 'maths trick' way of looking at the results (I don't but I will go with it to make my point), it is easy to rework with just one small change to tie into the Heartland presentation.

------

A 60% LVR meas that the market value of assets for which the loan was taken out at the time of loan application was:

$260m / 0.60 = $433m

Or on a smaller normalised (loans broken into $1m slice) scale:

$1m / 0.60 = $1.67m

Now lets assume these assets are dairy cows and their value has fallen 40% (see my recently quoted Stuff article) from when the loan was taken out.

This means the value of $1m cows when the loan was taken out is now:

$1.67m x (1-0.4) = $1.00m

So if the loan is called in and the cows sold the bank will lose:

$1m - $1.0m = $0 for each million loaned.

Now, lets assume that 1/3 of that $260m dairy loan total was for cows and the rest was for land and other stuff.

$260m x 1/3 = $87m

So the total Heartland loss on dairy cows (capital) would be.

$87m x 0 = $0m

-----

The change I have made is that I have assumed the cows were bought at $2,000 a head, not $2,200. So the cow price has fallen 40%, not 45%. That small change is enough to arrest any losses by Heartland.

I am showing you this because I want you see that these rural loans are at a very delicate stage. As it stands now, if Heartland were to wind up all their livestock loans, the sharemilkers would be left jobless and penniless. But Heartland and their shareholders would be OK (on paper). In practice, Heartland management would never take such a hard nosed approach. It would destroy their reputation as a 'friendly lender'. And any chance of riding the next rural profitability wave would be gone.

But we are at the stage where even a small decrease in cow value (5%) will suddenly cause a many million dollar writedown in Heartland group equity ($7m). Everything is finely balanced. I am not saying their current presentation is wrong. But very small changes in the market, could make their forward forecast thoughts out of date in a matter of days.

SNOOPY

[percy]

Snoopy time for you to look at banks who have a large exposure to dairying ,mining,Australian retail,Australian and Auckland property,and see whether you can come up with some accurate figures,as your figures for the bank with exposure to only one of these areas [if fact the smallest at 8% compared with others well over 10% and in one case over 12% from memory], leaves a lot to be desired.
At present time your HBL figures are a little over the place.Ranging from $0 post 7665,$7mil post 7660,and $27 to 54mil in post 7661.
I think we would agree there is a big difference between $0 and $54mil.

[Snoopy]

Interesting that Heartland are suggesting that the floor value for a dairy farm is defined by the sheep/beef market.

You have to hope that the downside risk for sheep & beef is minimal.

Best Wishes
Paper Tiger

PT, as a loyal Heartland shareholder, I expect you to have more confidence than this. PR Form 7058 (below) I hope will restore your confidence.

-------

The downside for XXXXXX is minimal! NZ are the most cost effective clever farmers in the world blessed with a bounteous benign climate. The markets for our products are large and the reward potentially huge. We are currently riding an insatiable wave of overseas demand. What could possibly go wrong?

Note: Replace XXXXXX with 'wool', 'aquaculture', 'goats' , 'ostriches', 'dairy', 'sheep & beef' depending on which farming era you wish to use this form to promote.

-------

SNOOPY

[Snoopy]

At present time your HBL figures are a little over the place.Ranging from $0 post 7665,$7mil post 7660,and $27 to 54mil in post 7661.
I think we would agree there is a big difference between $0 and $54mil.


At last you get it Percy. Yes my results are all over the place. Small variations in forecast inputs produce big variations in forecast outputs. Thus current proclamations by Heartland management are inherently uncertain.

SNOOPY

[Snoopy]

Same report (December)-

Note 1 Segment Analysis

Under Rural - Total Assets $504.614m (pretty close to $505m)

Move on 3 months to March Disclosure Statement the amount has increased to $507.365m

(Note; this assumes that total assets in this analysis is in the main financial receivables)

Your $65m I think has come about from not comparing apples with apples?

You could be right Winner. The trouble is 'rural' is a flexible term. So if Heartland are using the term 'rural' consitently between the presentation and the interim report then there is very little change. Not sure where this leaves the large loans being repaid that Percy talked about.

SNOOPY

[percy]

At last you get it Percy. Yes my results are all over the place. Small variations in forecast inputs produce big variations in forecast outputs. Thus current proclamations by Heartland management are inherently uncertain.

SNOOPY

When HBL's annual result is announced in late August,I think we will all look back and see that this latest presentation, was clearer than we think.
Provisions,impairments etc .The next quarter's will be the most telling,yet rereading the presentation, you will note Heartland's management are not unduly concerned. In fact they are telling us they are continuing the strong progress they made over the past few years.New products,new channels for delivery,including online,means increasing business.Was not that long ago 9 cents eps seemed "pie in the sky",and now they will be paying 9 cents dividend.!!,Incredible.
We must keep in mind dates.HBL's year finishes 30th June 2016.The presentation was dated 18th May 2016.Only 6 weeks before year end.So they have already had 6 weeks trading in this last quarter.They would have a clear picture what the next 6 weeks will bring.
I have often stated on this thread HBL achieve what they say they will do.I see no reason to change that statement.

[Snoopy]

In the table on page 4 the 'impaired asset expense' has increased to $5.102m (HY2015, ended 31st December 2014) up from from $3.325m in the corresponding prior period (HY2014) and $5.895m in the full year to 30th June 2014 (FY2014). By simple subtraction the bad debt expense for the period 1st January 2014 to 30th June 2014 (2HY2014) was $5.895m - $5.102m = $0.793m.

In formation of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 12 from IRHY2015

Bad debts are outlined as follows:

At least 90 days past due $30.652m
Individually impaired $25.984m
Restructured assets $4.012m

Allowance for impairment ($19.870)m
PV of Future Losses Adjustment ($6.919)m

Total Stressed Loans (impairments deducted) $33.469m

Gross Financial Receivables $2,749.232m
Total Finance Receivables $2,722.443m

Stressed Loan Percentage (impairment removed)= $33.469 m/ $2,722.443m = 1.59%


In the table under note 6 of AR2015, the 'impaired asset expense' has increased to $12.105m (FY2015, ended 30th June 2015) up from from $5.895m in the corresponding prior period (FY2014). The HY2015 impaired asset expense was $5.102m. By simple subtraction the bad debt expense for the period 1st January 2015 to 30th June 2015 (2HY2015) was $12.105m -$5.102m = $7.003m.

In formation of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 11 from AR2015

Bad debts are outlined as follows:

At least 90 days past due $34.975m
Individually impaired $25.622m
Restructured assets $3.881m

Allowance for impairment ($25.412)m
PV of Future Losses Adjustment ($6.242)m

Total Stressed Loans (impairments deducted) $32.824m

Gross Financial Receivables $2,893.724m
Total Finance Receivables $2,862.070m

Stressed Loan Percentage (impairment removed) = $32.824 m/ $2,862.070m = 1.15%

SNOOPY

[Snoopy]

In the table under note 6 of AR2015, the 'impaired asset expense' has increased to $12.105m (FY2015, ended 30th June 2014) up from from $5.895m in the corresponding prior period (FY2014). The HY2015 impaired asset expense was $5.102m. By simple subtraction the bad debt expense for the period 1st January 2015 to 30th June 2015 (2HY2015) was $12.105m -$5.102m = $7.003m.

Information of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 11 from AR2015

Bad debts are outlined as follows:

At least 90 days past due $34.975m
Individually impaired $25.622m
Restructured assets $3.881m

Allowance for impairment ($25.412)m
PV of Future Losses Adjustment ($6.242)m

Total Stressed Loans (impairments deducted) $32.824m

Gross Financial Receivables $2,893.724m
Total Finance Receivables $2,862.070m

Stressed Loan Percentage (impairment removed)= $32.824 m/ $2,862.070m = 1.15%



In the table under note 4 of IRHY2016, the 'impaired asset expense' has increased to $5.610m (HY2016, ended 31st Dec 2015) up from from $5.102m in the corresponding prior period (HY2015). By simple subtraction the bad debt expense for the immediate period 1st January 2015 to 30th June 2015 (2HY2015) was $12.105m -$5.102m = $7.003m.

Information of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 6 from IRHY2016.

Bad debts are outlined as follows:

At least 90 days past due $21.207m
Individually impaired $27.179m
Restructured assets $3.235m

Allowance for impairment ($16.875)m
PV of Future Losses Adjustment ($5.599)m

Total Stressed Loans (impairments deducted) $29.147m

Gross Financial Receivables $2,951.075m
Total Finance Receivables $2,928.621m

Stressed Loan Percentage (impairment removed)= $29.147 m/ $2,928,601m = 1.00%

SNOOPY

[percy]

Maybe Heartland's presentation paints a clearer picture which is easier to understand.
page 8,Key Financial/Operational Metrics;
................................2012...........201 3..........2014...........2015
Dad debt ratio..............0.5%.........0.4%...........0.3 %...........0.2%.......clearly reducing.
Net Interest margin........4%............4.2%...........4.2%... .......4.4%.....Increasing and the envy of the Australian banks..[twice as much].
eps..............................4cents..........6 cents........9cents..........10cents..Again very positive real growth.
ROE.............................4.2%............6. 5%..........9%..............10.4%.Excellent progress.
Cost to income ratio.......0.5%............0.4%.........0.3%..... ......0.2%.certainly reducing costs.

[forest]

Percy nice clear overview of HBL progress.

HBL was established when the economics for the industry were very difficult. They know how to get over a hurdle. All the worries for the impaired loans are over done in my view.
HBL business model is lending out money. An expected cost of this is some impairment of loans like all other banks.
Some years the impairments will be a little higher than others but it is important to look at the bigger picture and that is very nicely laid out in the presentation.

[percy]

Percy nice clear overview of HBL progress.

HBL was established when the economics for the industry were very difficult. They know how to get over a hurdle. All the worries for the impaired loans are over done in my view.
HBL business model is lending out money. An expected cost of this is some impairment of loans like all other banks.
Some years the impairments will be a little higher than others but it is important to look at the bigger picture and that is very nicely laid out in the presentation.

Totally agree.
What I find telling is the fact Net interest margin is increasing while Bad debt ratio is decreasing.
Yes like all banks HBL will incur impairments,as part of being in the banking business ,however when we read in the Dairy update of the presentation HBL state"We don't expect that there would be any impact on Heartland's capital",we can see how wrong many posters here have been.
What this statement tells us, is rather than taking a "hair cut" on dairying loans,they may get a "light trim" on lost interest.Huge difference.

[percy]

But Heartland have this much touted excess hair so even a 'light trim' could cut a reasonable amount off - and litter the hairdresser's floor and making them wonder why did I let it grow so long.

End result maybe somewhere between having excess hair and being bald. Short back and sides sounds reasonable

The huge Net Interest Margin means Heartland have "the best head of hair" of all the banks.
And it keeps growing a lot quicker than the other banks,.
So a "light trim" now and again keeps it nicely in place.
Though they do stand out in the banking crowd with their full head of hair,but it suits them..
I like them like that...lol.

[percy]

I wonder how Heartlands crop of hair compares to other finance companies. seeing they are really one in drag

Well 19,000 of their 38,000 depositors have been with them 10 years or more,so I guess they like HBL's full head of hair too.
Remember one thing W69,and it is worth not forgetting.Heartland Bank are a registered Bank,while none of the finance companies are.This means extra security for shareholders and for depositors', who accept a lower interest rate, knowing Heartland Bank must comply, and are monitored by The Reserve Bank of New Zealand.I think they too would like Heartland Bank having a growing full head of hair.

[nextbigthing]

But Heartland have this much touted excess hair so even a 'light trim' could cut a reasonable amount off - and litter the hairdresser's floor and making them wonder why did I let it grow so long.

End result maybe somewhere between having excess hair and being bald. Short back and sides sounds reasonable

Heartland could always cut some of this excess hair and sell it off to bald finance companies as wigs to help make them look a little prettier.

[Snoopy]

Well 19,000 of their 38,000 depositors have been with them 10 years or more,so I guess they like HBL's full head of hair too.


I saw a quote to that effect in the Heartland presentation with some amusement. Heartland didn't even exist ten years ago, not in anything like their current form. So how can Heartland claim ten year loyalty from customers?

I have been a 'loyal' Westpac customer for well over twenty years. But IIRC it was 'Trusteebank Canterbury' that I joined, not Westpac! I don't feel 'loyal' to Westpac, and keep thinking of moving my current account from there. My bank term deposit investments moved some years ago to Kiwibank and TSB!



Remember one thing W69,and it is worth not forgetting.Heartland Bank are a registered Bank,while none of the finance companies are.This means extra security for shareholders and for depositors', who accept a lower interest rate, knowing Heartland Bank must comply, and are monitored by The Reserve Bank of New Zealand.I think they too would like Heartland Bank having a growing full head of hair.


The above is true, and probably is a useful advantage to Heartland. This advantage may indeed mean that depositors are willing to accept a lower rate of interest than if Heartland was not a bank. And I think we can agree that this is good for shareholders. However, I think it pays to remember the 'banking advantage' for Heartland shareholders is that they can get away with paying that lower interest rate to depositors. And that flows through to a higher interest margin. This advantage is possible some would say because they are a registered bank. But from a position of competitiveness, this is ONE advantage, not TWO. Being a bank may cause Heartland to have an advantage. But it is not a SEPARATE advantage in its own right.

SNOOPY

[Snoopy]

I wonder how Heartlands crop of hair compares to other finance companies. seeing they are really one in drag


This is a great question. The problem is that all finance companies, and I include in that definition finance companies wearing bank suits, are a bit different. An obvious comparison is Heartland vs UDC. But as a potential investor, you can only buy shares in UDC through buying the ultimate ANZ parent in Australia which is a very different beast.

Another obvious comparison is HBL vs Turners Group. The problem there is that TNR now contains the old TUA auctions business which is very different to anything inside HBL. So this is why I have spent some time on the TNR thread, pulling the 'finance' part out of TNR using the segmented information provided in the TNR report. 'TNR Finance' provides a better measuring stick.

When I do a comparison between companies, I like to compare common 'stuff'. With finance companies I consider the basic building blocks of 'stuff' to be 'loans'. The underlying 'resource' that allows a finance company to operate I consider to be EBIT. The more EBIT a finance company can make, relative to the size of their loan book, the more 'naturally profitable' they are. So I consider the driving engine of any finance company to be:

EBIT/ (average loan book size)

Unfortunately in the real world both 'I' and 'T' need to be paid. So the amount of underlying parent bank debt can reduce the strength of this earnings engine.

Now if all loans were equal, then this is the only statistic any analyst would need. But as we know all loans are not equal. 'Haircuts' need to be taken from time to time. Indeed any finance company that does not build 'haircuts' into their normal business model is kidding themselves.

I consider a useful measure of 'possible haircutting' to be:

'impaired loans' / 'shareholder equity'

This is becasue it is ultimately we shareholders who have to pay for these 'haircuts'. And the greater the bad loans in relation to our shareholder equity, the more at risk we shareholders are.

So there we have in essence my way of answering Winners question.

1/ Look at the Earnings Capacity from the loan book on a 'normalised' basis.
2/ Balance this against the likelihood of shareholders having to take haircuts on bad loans.

Putting it all into practice is another step. I wish things could be simpler. But unfortunately, this is as simple as things are liable to get :-(

SNOOPY

[percy]

I saw a quote to that effect in the Heartland presentation with some amusement. Heartland didn't even exist ten years ago, not in anything like their current form. So how can Heartland claim ten year loyalty from customers?

I have been a 'loyal' Westpac customer for well over twenty years. But IIRC it was 'Trusteebank Canterbury' that I joined, not Westpac! I don't feel 'loyal' to Westpac, and keep thinking of moving my current account from there. My bank term deposit investments moved some years ago to Kiwibank and TSB!



The above is true, and probably is a useful advantage to Heartland. This advantage may indeed mean that depositors are willing to accept a lower rate of interest than if Heartland was not a bank. And I think we can agree that this is good for shareholders. However, I think it pays to remember the 'banking advantage' for Heartland shareholders is that they can get away with paying that lower interest rate to depositors. And that flows through to a higher interest margin. This advantage is possible some would say because they are a registered bank. But from a position of competitiveness, this is ONE advantage, not TWO. Being a bank may cause Heartland to have an advantage. But it is not a SEPARATE advantage in its own right.

SNOOPY

Snoopy >
Heartland Bank can claim their roots right back to 1875 when CBS was formed.Also SCB was formed in 1923,and Marac 1952.
I think you are being silly.
As for advantage,I am sorry you have lost me.
Being silly again?

[percy]

This post was in reply to a post that has since been deleted.
Are you implying The Reserve Bank of New Zealand were wrong to grant Heartland a banking licence and have not monitored HBL's financial statements,therefore not doing their job?
Are you also implying Heartland Bank are telling lies?

[Joshuatree]

Implying Implying ; hintng; suggesting HBL is a finance company and not a bank; rubbished HBL before with HUNFREDS of posts(fact) and then brought HBL (fact); using the WE word again speaking for the 3000. Admits he or friends/family were burnt by finance companies back when many collapsed so attacks HBL frequently with the common theme its a dodgy finance company and not a bank even let alone a good one. been banned before for this obsessive behaviour. If he was reasonable ; no problem.

[Beagle]

Post was a simple look at write-downs that Marac took, $85m, during the last period when they faced a serious stress test on part of their loan book, (commercial property loans 2009). Some people seem hyper sensitive to looking at history, want to put words in my mouth and don't seem to want to learn anything from it...go figure...

[K1W1G0LD]

There seem to be 2 things going on here , The canine is writing a book , not a very good one and using all the other posters to do his proofreading for him ........not gonna fly , never get off the ground too many errors and far too long winded .
w69 doing his impression of trying to like HBL....but does'nt really (that finance company thing again) , seems fixated on that, needs to move on .
And Dodgy The Egomeister , loves sticking his oar in and ruffling feathers etc............like I said before there's gurus and then there's real Guru's (Like Phaedrus ,sadly missed) . Did i say 2 things ,i threw an extra one in for good measure .
From what I can see HBL are doing a great job of being a BANK with a difference under trying economic conditions and credit too them , under the current management they'll only get better.

[King1212]

There seem to be 2 things going on here , The canine is writing a book , not a very good one and using all the other posters to do his proofreading for him ........not gonna fly , never get off the ground too many errors and far too long winded .
w69 doing his impression of trying to like HBL....but does'nt really (that finance company thing again) , seems fixated on that, needs to move on .
And Dodgy The Egomeister , loves sticking his oar in and ruffling feathers etc............like I said before there's gurus and then there's real Guru's (Like Phaedrus ,sadly missed) . Did i say 2 things ,i threw an extra one in for good measure .
From what I can see HBL are doing a great job of being a BANK with a difference under trying economic conditions and credit too them , under the current management they'll only get better.

Honestly, don't know what they were talking about...figures, debts, ex finance company n etc. but guess what..HBL net profit is around 50 m plus n 9 cents dividend in year 2017...that is what matter n certainly HBL will get better from now on...

[Marilyn Munroe]

Snoopy >
Heartland Bank can claim their roots right back to 1875 when CBS was formed.

In the interest of accuracy you refer to the Ashburton Permanent Building Society. CBS was the entity made up of the merged Permanent, it's home town twin the Ashburton Loan and Building Society and the Sydenham Money Club.

At the time of the most recent merger the provincial accountants who ran CBS decided that they wanted to step it up to play with the big boys. Why they chose to marry up with MARAC and its problem step children of George Kerr, PGC, and the MARAC property loans is a mystery which is still unexplained.

Heartland is a bit of an outlier in the finance world. A second tier bank run from Auckland with two retail branches in its Canterbury heartland.

Boop boop de do
Marilyn

[percy]

In the interest of accuracy you refer to the Ashburton Permanent Building Society. CBS was the entity made up of the merged Permanent, it's home town twin the Ashburton Loan and Building Society and the Sydenham Money Club.

At the time of the most recent merger the provincial accountants who ran CBS decided that they wanted to step it up to play with the big boys. Why they chose to marry up with MARAC and its problem step children of George Kerr, PGC, and the MARAC property loans is a mystery which is still unexplained.

Heartland is a bit of an outlier in the finance world. A second tier bank run from Auckland with two retail branches in its Canterbury heartland.

Boop boop de do
Marilyn

You may be best to take this up with Heartland Bank directly, as their presentation of 2-6-2016, page 5 headed "Evolution of Heartland" clearly has what I posted.
Your unhappiness with CSB joining up with Marac and SCBS remains,however I don't see it worth dwelling on.
As for branches ,I feel HBL positioning themselves in online platforms will serve them better than costly branches.

[Arbroath]

I just wanted to reiterate that at $1.25 Heartland is trading on a 10% gross yield for FY17 at the consensus of 9cps in dividends. Not bad for a company doing niche lending at twice the margins the major banks achieve. Of course you will see some bad debts as 4.4% lending margins don't come without risk but the management here are doing a good job and I for one am a happy holder and will add if it retreats sub $1.20.

[Snow Leopard]

The history of any company, its antecedents and major events, is important to the extent that it helps one to understand the present situation of the company, the journey so far and how this may affect the likely future performance.

An obvious for instance of this is how the corporate memory of the Ansett Collapse has influenced Air New Zealand to make the recent poor decisions that are the current Virgin Australia Disaster.

Looking forward the current situation with the dairy industry will obviously have a greater effect on the short & possibly medium term profitability of Heartland Bank the longer it lasts, as will the decisions and impairments that are made in other areas of lending.

However the Bank is well capitalised, the management are well aware of the situation, being open and communicating their updated assessments as the process unfolds.

It is probable that it will survive. :mellow:

I will reiterate the important of remembering that dairy is just one string in the Banks bow and at different times different sectors have their ups and down.

This is what being a Bank is all about, spreading and managing risk for the benefit of their shareholders and creditors.

Best Wishes
Paper Tiger

PS I presume you have all been 4% for a one year term-deposit as well?

[pierre]

PS I presume you have all been offered 4% for a one year term-deposit as well?

Hope you didn't mind me adding the missing word PT - and yes I was offered the 4% rate too. Great timing, as my company has a $500k trust fund TD maturing with ANZ today that we wish to reinvest. The best ANZ will do (after being advised of the Heartland offer) is 3.55%.

That will be based on the credit ratings I guess - ANZ's Fitch rating is AA- while Heartland are BBB (stable).

We do deposit our own Call funds with Heartland but will probably leave the TD with ANZ as that money is not ours. Not worried at all about Heartland -but a deposit with ANZ is probably easier to explain should the necessity arise.

[Snow Leopard]

...

PS I presume you have all seen 4% for a one year term-deposit as well?

I have trouble with the difference between 'b' and 's' - they are on the same keyboard.

Best Wishes
Paper Tiger

[pierre]

I have trouble with the difference between 'b' and 's' - they are on the same keyboard.

Best Wishes
Paper Tiger

I can understand your difficulty - but fortunately most people know what is meant if you place those two letters together.

[Bobdn]

Hope you didn't mind me adding the missing word PT - and yes I was offered the 4% rate too. Great timing, as my company has a $500k trust fund TD maturing with ANZ today that we wish to reinvest. The best ANZ will do (after being advised of the Heartland offer) is 3.55%.

That will be based on the credit ratings I guess - ANZ's Fitch rating is AA- while Heartland are BBB (stable).

We do deposit our own Call funds with Heartland but will probably leave the TD with ANZ as that money is not ours. Not worried at all about Heartland -but a deposit with ANZ is probably easier to explain should the necessity arise.

Yes, easier to explain that the approximate probabilityof default over 5years with Heartland is 1 in 30 (according to its credit rating) but with ANZ it's just 1 in 300.

I have HBL and ANZ but will be keeping my money in ANZ. No need to own HBL and give them what little cash I have, at least not until its credit rating increases.

[K1W1G0LD]

The history of any company, its antecedents and major events, is important to the extent that it helps one to understand the present situation of the company, the journey so far and how this may affect the likely future performance.

An obvious for instance of this is how the corporate memory of the Ansett Collapse has influenced Air New Zealand to make the recent poor decisions that are the current Virgin Australia Disaster.

Looking forward the current situation with the dairy industry will obviously have a greater effect on the short & possibly medium term profitability of Heartland Bank the longer it lasts, as will the decisions and impairments that are made in other areas of lending.

However the Bank is well capitalised, the management are well aware of the situation, being open and communicating their updated assessments as the process unfolds.

It is probable that it will survive. :mellow:

I will reiterate the important of remembering that dairy is just one string in the Banks bow and at different times different sectors have their ups and down.

This is what being a Bank is all about, spreading and managing risk for the benefit of their shareholders and creditors.

Best Wishes
Paper Tiger

PS I presume you have all been 4% for a one year term-deposit as well?

I applaud you PT for not naming it a finance company in really small letters even though its origins are apparent to us all.

[Snoopy]

The canine is writing a book , not a very good one and using all the other posters to do his proofreading for him ........not gonna fly , never get off the ground too many errors and far too long winded .


There is a difference between a forum and a book publishing site!

The stuff I write on this site is the sort of stuff I formerly would have written on a dog eared bit of paper, then filed it away to relook at come next results time. These kind of notes are by their nature error prone, either in mathematics or judgement. Yet by filing these notes away and coming back to them later you can often get a better view of the 'big picture'. And sometimes, when posted here, fellow contributors can point these errors out, they can be corrected, and a better view of the big picture emerges.

There is an alternative. I could keep all my notes in my self constructed ivory tower. Pour over them with candles at midnight, until months later I publish my self congratulated 'magnum opus' result. At that point the errors are found and I come crashing down with my ziggurat, the spire of which promptly impails me through my rear end. I then limp off into the sunset never to seen or heard from again. Now I am sure there are some on this forum who would relish such a happening. Yes it would be entertaining. But it wouldn't help anyone understand Heartland any better!

Don't be too quick to dish the mistakes. One usually learns a lot more from one's mistakes than from one's correctness. It is the end result that matters. The path taken to get there has many divides and many dead end corners.

As for being long winded, the best analysis of any situation is to make it as simple as possible, but no simpler. I generally work by starting out with a few more complex ideas, different ways of measuring the things I deem that need measuring. Then I hone the procedures to make them simpler. Don't think analysing a bank can be reduced to rehashing a couple of quotes from the results presentation.

SNOOPY

[janner]

There is a difference between a forum and a book publishing site!

The stuff I write on this site is the sort of stuff I formerly would have written on a dog eared bit of paper, then filed it away to relook at come next results time. These kind of notes are by their nature error prone, either in mathematics or judgement. Yet by filing these notes away and coming back to them later you can often get a better view of the 'big picture'. And sometimes, when posted here, fellow contributors can point these errors out, they can be corrected, and a better view of the big picture emerges.

There is an alternative. I could keep all my notes in my self constructed ivory tower. Pour over them with candles at midnight, until months later I publish my self congratulated 'magnum opus' result. At that point the errors are found and I come crashing down with my ziggurat, the spire of which promptly impails me through my rear end. I then limp off into the sunset never to seen or heard from again. Now I am sure there are some on this forum who would relish such a happening. Yes it would be entertaining. But it wouldn't help anyone understand Heartland any better!

Don't be too quick to dish the mistakes. One usually learns a lot more from one's mistakes than from one's correctness. It is the end result that matters. The path taken to get there has many divides and many dead end corners.

As for being long winded, the best analysis of any situation is to make it as simple as possible, but no simpler. I generally work by starting out with a few more complex ideas, different ways of measuring the things I deem that need measuring. Then I hone the procedures to make them simpler. Don't think analysing a bank can be reduced to rehashing a couple of quotes from the results presentation.

SNOOPY

Better aspire than the spire .. Aye Squire..

Appreciate those notes ..

[Joshuatree]

Keep the dear Diary going Snoop; it all adds to the fascinating Mashup on S/T.

[couta1]

Snoopy, your 2nd to last paragraph speaks volumes about you in a good way, humility is a very attractive attribute.

[percy]

These kind of notes are by their nature error prone, either in mathematics or judgement.


SNOOPY

They certainly have been.Nearly 5 years now on this thread.Go back to your first post on this thread and ask yourself are you any further ahead?
May pay to stick to Heartland's presentations, as we know their mathematics and judgement are sound.

[Baa_Baa]

Don't stop posting Snoopy, the ostriches can put you on ignore if it offends them. Personally I think your posts are amongst the select few who shed light on investments and company's financial health, and I appreciate the iterative disclosure, the discovery of the facts, by analysis and discussion. Certainly better than blind belief in the spewage spin many company's choose to disgorge. And a word on your generosity in sharing your analysis, it is appreciated by many, I'm sure. It seems the small number of cheerleaders who choose to bite on every shred of possibility that all is not what it might seem to be, without the wherewithal to post a conflicting analysis posit of their own work, are not the audience who appreciate your good work.

[NZSilver]

Auckland-based lender, Heartland Bank told investors dairy farm values could drop as much as 40% from peak to trough if the downturn continues. Exposure to dairy farmers make up 8% of the bank’s total lending book and 17% of its net receivable and its average loan-to-value ratio for dairy loans is 59%. Heartland executives said the majority of dairy farms could convert to sheep or beef farms if dairy prices stayed low or got worse as the dairy farms values would effectively be underwritten by the value of sheep or beef farms. The presentation was published to NZX with Heartland Bank shares remaining at NZ$1.27, having dropped 3.8% since the start of the year.

[percy]

I find it reassuring that Heartland Bank have spoken openly about their 8% exposure to dairying,while the Australian Banks who have a lot larger % exposure [above 10% and possibly 12%] have remained silent.

[macduffy]

I find it reassuring that Heartland Bank have spoken openly about their exposure to dairying,while the Australian Banks who have a lot larger % exposure [above 10% and possibly 12%] have remained silent.

True, percy, but that's in the NZ-only context. Their exposure on a group basis is much lower, it's the mining sector that's worrying them!

[trader_jackson]

True, percy, but that's in the NZ-only context. Their exposure on a group basis is much lower, it's the mining sector that's worrying them!

I believe the mining sector exposure is about 3-5% of the major aussie banks books... so like Dairy in NZ, I don't know why everyone is jumping up and down so much about a sector (ie Dairy for HBL, mining for aussie banks) with exposure of mid single digit percentages... of course some isolated impairments and losses may be in order, but I doubt HBL or ANZ will be plunging into losses anytime soon

[percy]

True, percy, but that's in the NZ-only context. Their exposure on a group basis is much lower, it's the mining sector that's worrying them!

Yes,mining,manufacturing,retail,residential property.
I expect NZ dairying is insignificant,but ANZ's $11billion can not be easily dismissed.
May be I have it wrong and ANZ's $11billion exposure may be NZ Rural,including dairying.
I note The Queensland Government is blaming their $3 billion deficit to the mining down turn.

[percy]

I believe the mining sector exposure is about 3-5% of the major aussie banks books... so like Dairy in NZ, I don't know why everyone is jumping up and down so much about a sector (ie Dairy for HBL, mining for aussie banks) with exposure of mid single digit percentages... of course some impairments and losses may be in order, but I doubt HBL or ANZ will be plunging into losses anytime soon

I think you are correct and you are inline with Paper Tiger's sensible post.#7681.

[Snoopy]

Looking forward the current situation with the dairy industry will obviously have a greater effect on the short & possibly medium term profitability of Heartland Bank the longer it lasts, as will the decisions and impairments that are made in other areas of lending.

However the Bank is well capitalised, the management are well aware of the situation, being open and communicating their updated assessments as the process unfolds.

It is probable that it will survive. :mellow:

I will reiterate the important of remembering that dairy is just one string in the Banks bow and at different times different sectors have their ups and down.

This is what being a Bank is all about, spreading and managing risk for the benefit of their shareholders and creditors.


I do note the smilie in PT's post. But I don't recall anyone on this forum suggesting Heartland is at risk of demise. The questions from me for today are about:

1/ Risk that might slow the development of Heartland ( i.e. maybe should be accored a lower PE ratio than some think).
2/ Whether Heartland is really value when measured against alternative peer investments.

SNOOPY

[Snoopy]

A bank will always have some loans that cause real concern. Indeed the impairment provisions in the accounts are there to allow for just such a contingency. But sometimes these accounting contingencies are not enough. Sure there are the annual adjustments to impairment to allow an annual 'stock take' of risk. But these do not cover every possible loan problem. This is why I have concluded that further risk assessment is warranted.


Here is the information behind today's Heartland 'Question of the day'.



Date'Stressed' Loans on the books (X)
Net Financial Receivables (Impairments deducted) (Y)
(X)/(Y) Impaired Asset Expense (V)Write Off (W)
Gross Financial Receivables (Z)
(V)/(Z)
(W)/(Z)


EOHY2012$87.728m$2,075.211m4.23%$1.854m$12.138m+$1 .685m$2,104.591m0.18%*1.32%*


EOFY2012$90.489m$2,078.276m4.35%$3.788m$14.636m+$3 .180m$2,105.702m0.18%0.85%


EOHY2013$80.383m$2,044.793m3.93%$5.254m$4.079m+$0. 745m$2,072.270m0.50%*0.46%*


EOFY2013$48.975m$2,010.393m2.43%$17.313m$6.679m+$1 .981m$2,060.867m0.84%0.42%


EOHY2014$42.498m$1,905.850m2.23%$3.325m$17.523m+$1 .523m$1,940.064m0.34%*1.96%*


EOFY2014$41.354m$2,566.039m1.59%$2.570m$35.258m+$3 .260m$2,631.754m0.03%1.46%


EOHY2015$33.469m$2,722.433m1.23%$5.102m$0.423m+$1. 003m$2,749.232m0.38%*0.10%*


EOFY2015$32.824m$2,862.070m1.15%$7.003m$1.555m+$1. 910m$2,893.724m0.24%0.12%


EOHY2016$29.147m$2,928.601m1.00%$5.610m$11.086m+$3 .186m$2,951.075m0.38%*0.96%*



{Note * ratios are annualised because they relate to impairments and write offs over a six month period only}

First a couple of definitions based on how Heartland present their books.

An fullyimpaired loan is something that in the judgement of Heartland has zero balance sheet value. It was 'written off' during the period covered by the accounts.

Heartland in their breakdown of the 'Asset Quality of Financial Receivables' list the following three mutually exclusive problem loan categories.

a/ Loans at least 90 days past due.
b/ Loans individually impaired.
c/ Restructured assets.

I find this slightly confusing. But the 'loans individually impaired' does not mean that those loans are written off , despite them being listed as impaired. If I interpret the accounts correctly, it means that these loans are partially written off, and accounted for in the 'Provision for Impairment' (a separate listing category, d/).

My definition of a 'stressed loan' total can be calculated as follows:

'Stressed Loan Total' = (a)+(b)+(c)-(d)

The column (W) lists the actual dollar amount in bad debts written off over that period.

SNOOPY

[Snoopy]

Here is the information behind today's Heartland 'Question of the day'.

<snip>


The ratio of:

'Stressed Loans' / ' Size of Net Loan Book'

presents a very favourable picture. Investors can see that the 'stressed loans' in dollar terms are steadily reducing as the total net loan book size is increasing. Put simply four years ago evey hundred dollars of loan on the books was associted with just over $4 of 'stressed debt'. Today every hundred dollars of loan on the books was associated with just $1 of 'stressed debt'. It is a wonderful story. And 'the fans' would say it is entirely due to management taking hold of what was a 'rag tag' of lending institutions and blending them together into the slick Heartland operation we see today. The smooth progression looks almost too good to be true, with a seemless unbroken descent towards loan portfolio perfection. But sometimes when things look too good to be true, that is because they are!

Contrast this trend to Heartland's actual debt write off record, normalised in the last column. This last column is not 'spinnable' by management. When a debt actually goes bad, the payments stop coming in and the underlying asset is sold for recovery purposes, there can be no doubt that that asset is bad.

The 'impaired asset expense' is actually quite lumpy. The biggest lump was during the period 2HY2013. That $17m written down was connected with the problem property portfolio. Take out that 'outlier', and the latest three half yearly write downs are high in historical terms. Not high enough to be a problem: Writing off 20% of a $30m stressed loan book is not going to cripple a company like Heartland. But the divergence between the trends of the X/Y and V/Z ratios is stark.

OK, I'm coming out with it. I think this evidence here that the 'Stressed Loans' picture is being massaged for the benefit of making management look good. A further hint of this is the much higher percentage of stresssed loan provisions on the books of UDC, a comparable lender. I don't think this is a problem for Heartland now. But I am wondering how an ever lower level of stressed loan provisions, in absolute and relative terms, can be justified when the actual loan 'impaired asset expenses' at Heartland follow no such trend!

SNOOPY

[Snow Leopard]

...
An impaired loan is something that in the judgement of Heartland has zero balance sheet value. It was 'written off' during the period covered by the accounts.
...

Wrong. This definition is unique to yourself and helps cause the confusion that follows.

So your first step must be to reboot, determine the correct definition and then proceed to analysis.

Best Wishes
Paper Tiger

[clips]

Honestly, don't know what they were talking about...figures, debts, ex finance company n etc. but guess what..HBL net profit is around 50 m plus n 9 cents dividend in year 2017...that is what matter n certainly HBL will get better from now on...

good call....

[macduffy]

Spot on there, Tiger.

Impaired loans aren't necessarily expected to be total losses, just judged not to be recoverable at full balance sheet value.

[percy]

Wrong. This definition is unique to yourself and helps cause the confusion that follows.

So your first step must be to reboot, determine the correct definition and then proceed to analysis.

Best Wishes
Paper Tiger

I hope no one minds me having a bit of a chuckle to myself.!!!

[K1W1G0LD]

There is a difference between a forum and a book publishing site!

The stuff I write on this site is the sort of stuff I formerly would have written on a dog eared bit of paper, then filed it away to relook at come next results time. These kind of notes are by their nature error prone, either in mathematics or judgement. Yet by filing these notes away and coming back to them later you can often get a better view of the 'big picture'. And sometimes, when posted here, fellow contributors can point these errors out, they can be corrected, and a better view of the big picture emerges.

There is an alternative. I could keep all my notes in my self constructed ivory tower. Pour over them with candles at midnight, until months later I publish my self congratulated 'magnum opus' result. At that point the errors are found and I come crashing down with my ziggurat, the spire of which promptly impails me through my rear end. I then limp off into the sunset never to seen or heard from again. Now I am sure there are some on this forum who would relish such a happening. Yes it would be entertaining. But it wouldn't help anyone understand Heartland any better!

Don't be too quick to dish the mistakes. One usually learns a lot more from one's mistakes than from one's correctness. It is the end result that matters. The path taken to get there has many divides and many dead end corners.

As for being long winded, the best analysis of any situation is to make it as simple as possible, but no simpler. I generally work by starting out with a few more complex ideas, different ways of measuring the things I deem that need measuring. Then I hone the procedures to make them simpler. Don't think analysing a bank can be reduced to rehashing a couple of quotes from the results presentation.

SNOOPY

Snoopy, I suspected that If i got a reply it would be a long one and as my attention span is rather short I fell asleep whilst reading it . But never mind we live in a democracy and freedom of speech is paramount, if slightly taxing at times.
cheers kiwigold

[Snoopy]

Wrong. This definition is unique to yourself and helps cause the confusion that follows.

So your first step must be to reboot, determine the correct definition and then proceed to analysis.


I have decided to avoid a pointless argument and accept macduffys point (equivalent to your implied point) and change what I have written regarding 'impairment' in my post "Do the accounts tell a consistent story? (background)" .

Of course this makes absolutely no difference to the overall point I was making in the post, and all conclusions and implications remain. Since I know PT:

1/ that you are smart enough to know this. AND
2/ you have made no argument aginst the points I brought up in discussion part of the post,

I take this to mean you accept the point I was making.

SNOOPY

[Snoopy]

Snoopy, I suspected that If i got a reply it would be a long one and as my attention span is rather short I fell asleep whilst reading it . But never mind we live in a democracy and freedom of speech is paramount, if slightly taxing at times.
cheers kiwigold

Am curious! Y is yr attn spn so sht?

SNOOPY

[K1W1G0LD]

Am curious! Y is yr attn spn so sht?

SNOOPY

Would you mind repeating that.............................................. ........................??

[Snow Leopard]

I have decided to avoid a pointless argument and accept macduffys point (equivalent to your implied point) and change what I have written regarding 'impairment' in my post "Do the accounts tell a consistent story? (background)" .

Of course this makes absolutely no difference to the overall point I was making in the post, and all conclusions and implications remain. Since I know PT:

1/ that you are smart enough to know this. AND
2/ you have made no argument aginst the points I brought up in discussion part of the post,

I take this to mean you accept the point I was making.

SNOOPY

I say Snoopy old chap, you rather seem to have got hold of the wrong end of the stick completely!

What I was getting at, and I thought I was being dashed polite with my phraseology so to speak, anyway, what I was getting at is that those opening two chapters of your "Do the accounts tell a consistent story" novel, well the plot is a rather off-course right from the get-go.

If I was you, and obviously I am not, after all there can only be one Snoopy much the same as there is only one Paper Tiger Esquire, feline of leisure and connoisseur of accounts, but just to assume for a moment that I had been running the old pinkies over the typewriter and come up with something running off the track even before getting to the first corner like that, well, I would put the whole thing in a sack with a large rock and heaved the whole bally thing into the first spot of deep water I could find.
The pond in the woods would be best, if the head gardener got wind of a manuscript chucking session at the lily pond there would be an early rose pruning session, can't understand for a moment why Lady Constance keeps the man, absolutely no sense of humour when it comes to goings on in the formal gardens.

After indulging in that fine bit of sack throwing, enough exercise for a day for anyone, then I would find some nice spot where nature was doing its thing, you know the leaves rustling in the breeze while the birds sit on the boughs merrily trilling away, do a bit of the old research on back issues of Heartland form books as well as one of those investment encyclopedia tomes to help get the grey matter round the tricky parts and I wager you sixpence that I would be off and running like the favourite in the three thirty with a much more realistic little treatise.
Guaranteed best seller, One that any publisher would be so keen to take on that they would advance the train fare home.

Pretty sure I just heard the dinner gong and here I am still in my second best outdoor tweeds, I must dash off and swap them for the evening penguin suit, tootle-pip and

Best Wishes
Paper Tiger

PS Lady Constance sends her regards and wonders if you are coming up to Blandings this Summer?

PPS Do drop us a telegram either way.

[Baa_Baa]

Jolly amusing all this what, who to believe or take seriously! Lol, the one on the cannabis, or the one on the can of piss, or the one taking the piss, or the one who is already pissed, or perhaps the one who is pissed off, or the one who is off piste? Hmm.

:) Entertaining nevertheless. :)

[Joshuatree]

Heehee.Thumbs up all around for the good sporting humour ; Jeeves ghostwriting, wit and word playing with a little learning thrown in. :t_up::D. A welcome break from the earnest self enrichment dry as a dusty gulch endeavours that is the norm/form in this unfortunate occupation which i have ended up in.

[percy]

Well I think Snoopy's book is going to be a world first.
A runaway best seller.
Unique.
A business story,along the lines of a murder mystery ,but where the readers have to tell the author who dunit.!!..

[beetills]

Unsolicited offer of 1.40 coming from Acasta Ltd payable over 10 years.HBL have set up an alternate plan.Not being very clued up,means i will take some time for me to digest

[King1212]

Unsolicited offer of 1.40 coming from Acasta Ltd payable over 10 years.HBL have set up an alternate plan.Not being very clued up,means i will take some time for me to digest

Can anyone please explain more about today announcement? THanks

[winner69]

Can anyone please explain more about today announcement? THanks

Just an offer to help sell small holdings <10,000 shares without paying brokerage etc

To counter some ratbag who is trying to 'steal' these shares off unsuspecting shareholders

You wouldn't have sold yours anyway

Nothing more / nothing less

Some would say Heartland again just doing the decent thing

[King1212]

Just an offer to help sell small holdings <10,000 shares without paying brokerage etc

To counter some ratbag who is trying to 'steal' these shares off unsuspecting shareholders

You wouldn't have sold yours anyway




Nothing more / nothing less

Some would say Heartland again just doing the decent thing


Cherrs Winner69. Has small holding but it is for my son higher education fund. so will keep it long term. Thanks

[Jantar]

let me think on this unsolicited offer. $1.40 paid over 10 years, that's $0.14 per year. For which I lose $0.08 per year in missed dividends, and no longer own the shares.

Do I want to sell my HBL shares for $0.80 and take 10 years to receive that money?
Ummmmmm. Give me 10 years to think about it. :mad ;:

[winner69]

Cherrs Winner69. Has small holding but it is for my son higher education fund. so will keep it long term. Thanks

Should have said nobody is compelled to do anything

Apparently quite a few get in a tiz when they receive letters like the one from Acasta and feel compelled to sign it and return it instead of throwing it away.

[iceman]

Beware:

HBL
09/06/2016 08:30
GENERAL
NOT PRICE SENSITIVE
REL: 0830 HRS Heartland Bank Limited

GENERAL: HBL: Warning on Unsolicited Offers from Acasta Limited

NZX Release

Warning on Unsolicited Offers from Acasta Limited

9 June 2016

Heartland Bank Limited (Heartland) (NZX: HBL) has received a notice from
Acasta Limited (Acasta) that it intends to make unsolicited offers to
purchase Heartland shares from certain Heartland shareholders.

If you were to accept that offer, you would be swapping your Heartland shares
for an unsecured debt from Acasta which would be payable over 10 years from
30 June 2017. No information has been provided to us about Acasta's ability
to fund such a debt obligation and you would be running the risk that Acasta
may default in payment during the 10 year period.

The offer by Acasta is at a price ($1.40 per share) which on its face is
above the current market price of Heartland's shares (which was $1.28 at the
close of trading on 8 June 2016). However, in the detailed terms and
conditions of the offer, the total amount of the offer is proposed to be paid
in 10 instalments over 10 years from 30 June 2017, which has the effect of
making the offer only worth approximately $1.07 per share.

Shareholders who accept the offer from Acasta will not be entitled to any
dividends during the 10 year period - they will be foregone to Acasta. By
way of example, if the offer was made this time last year and you accepted
that offer, you would not have received Heartland's last two fully imputed
dividends totalling 8c per share. For further information on what this means
for you, we recommend you consult your financial adviser.

The sole director and ultimate shareholder of Acasta is John Armour who has
been involved in similar unsolicited offers to shareholders of Heartland and
other NZX-listed issuers.
Should any shareholder receive an unsolicited offer, Heartland strongly
recommends seeking independent financial advice and checking the current
market price for Heartland shares at www.nzx.com/companies/Heartland.

In view of the limited tools available to regulators to protect shareholders
from these unsolicited offers, Heartland has also established a Share Sale
Plan (Plan) offering shareholders who hold not more than 10,000 Heartland
shares (Eligible Shareholders) the opportunity to sell their shares at the
then current market price. If an Eligible Shareholder chooses to participate
in the Plan, Heartland will facilitate the on-market sale of their Heartland
shares through a broker and will pay the brokerage fees associated with the
trade. A copy of the Share Sale Plan Document will be mailed to Eligible
Shareholders, and will be available on Heartland's website
http://shareholders.heartland.co.nz/.

Should you receive an unsolicited offer from Acasta and are contemplating the
sale of your Heartland shares, Heartland strongly recommends that you
consider taking advantage of the Plan if you are an Eligible Shareholder.
Participation in the Plan will ensure you receive a market price on the day
of sale for your Heartland shares. As noted above, the value of the offer by
Acasta is substantially below the current market price, so it is almost
certain that you would receive more money selling your Heartland shares under
the Plan.

Heartland is also sending the attached letter to shareholders today.

If you would like confirmation as to whether any other correspondence
received is an official Heartland communication, or whether an offer to buy
your shares has the support of your Board, you can contact Heartland's
company secretary by email (Anna-Lisa.Strain@heartland.co.nz) or by phone (09
927 9151).

- Ends -

[beetills]

Anybody able to enlighten me on who JOHN ARMOUR is aside from being sole director of Acasta Ltd

[percy]

Anybody able to enlighten me on who JOHN ARMOUR is aside from being sole director of Acasta Ltd

He is an Australian Low-ball share offer "specialist".

[trader_jackson]

I think Heartland are "well positioned" ;), and the price offered (and the terms!) do not even remotely take into account HBL's potential

[Snow Leopard]

Embedded in my copy of the article of the Sky/Vodafone marriage in the Herald this morning was an advert for Heartland Bank (usually it is some airline or other):

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/HeartlandBankUsa.png

which I clicked on, and then I choked on my morning bowl of milk and tuna as I realised that they may be more than one Heartland Bank in the world!

Heartland Bank: "Where Banking Feels Good" (http://www.heartlandbank.com/) :p


Best Wishes
Paper Tiger

[Leftfield]

Embedded in my copy of the article of the Sky/Vodafone marriage in the Herald this morning was an advert for Heartland Bank (usually it is some airline or other):

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/HeartlandBankUsa.png

which I clicked on, and then I choked on my morning bowl of milk and tuna as I realised that they may be more than one Heartland Bank in the world!

Heartland Bank: "Where Banking Feels Good" (http://www.heartlandbank.com/) :p


Best Wishes
Paper Tiger

If I had milk and tuna for breakfast, I would be choking too.

[King1212]

If I had milk and tuna for breakfast, I would be choking too.

hahahaha....hilarious....

[Snow Leopard]

Position of Rural (includes Dairy) Loans for last 4 quarters:

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20160518-Rural.png

Obviously it is not getting better yet.

There is more to the total picture across all sectors (i.e. another $9,284 of individually impaired assets) so read the DS if you are really interested but Rural is currently the 'biggy'.

Best Wishes
Paper Tiger

Consult your doctor as to whether a high dairy diet is good for you.

Whilst the table of impaired and overdue loans is useful in providing an indication of the state of the Rural (but we guess mostly Dairy) sector the underlined section was really a pretty stupid thing to post.

[Snow Leopard]

Percy, I am absolutely mortified that someone of your standing on this forum should even entertain the least glimmer of doubt as to my ability to copy and paste numbers.
I offer this image from the latest Disclosure Statement as proof of my accuracy:http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20160520-Evidence.png
My distress is deep and my partner is going to have cope with the ramifications of this when they get home tonight AND I will almost certainly exceed my weekly recommended alcohol consumption before the day is out.

I have half a mind to never here post ever again.

Exit stage left.

Because what is important is not the size of the impaired loan but how many dollars loss you are going to suffer on the loan.
A $2.959M loss is definitely bigger than a $1.180M loss even if $23.5M is much, much bigger than $5.1M.

[Snow Leopard]

Here is the information behind today's Heartland 'Question of the day'.



Date
'Stressed' Loans on the books (X)
Net Financial Receivables (Impairments deducted) (Y)
(X)/(Y)
Impaired Asset Expense


EOHY2012
$87.728m
$2,075.211m
4.23%
$1.854m


EOFY2012
$90.489m
$2,078.276m
4.35%
$3.788m


EOHY2013
$80.383m
$2,044.793m
3.93%
$5.254m


EOFY2013
$48.975m
$2,010.393m
2.43%
$17.313m


EOHY2014
$42.498m
$1,905.850m
2.23%
$3.325m


EOFY2014
$41.354m
$2,607.393m
1.59%
$0.793m


EOHY2015
$33.469m
$2,722.433m
1.23%
$5.102m


EOFY2015
$32.824m
$2,862.070m
1.15%
$7.003m


EOHY2016
$29.147m
$2,928.601m
1.00%
$5.610m



First a couple of definitions based on how Heartland present their books.

An fullyimpaired loan is something that in the judgement of Heartland has zero balance sheet value. It was 'written off' during the period covered by the accounts.

Heartland in their breakdown of the 'Asset Quality of Financial Receivables' list the following three mutually exclusive problem loan categories.

a/ Loans at least 90 days past due.
b/ Loans individually impaired.
c/ Restructured assets.

I find this slightly confusing. But the 'loans individually impaired' does not mean that those loans are written off , despite them being listed as impaired. If I interpret the accounts correctly, it means that these loans are partially written off, and accounted for in the 'Provision for Impairment' (a separate listing category, d/).

My definition of a 'stressed loan' total can be calculated as follows:

'Stressed Loan Total' = (a)+(b)+(c)-(d)

The last column lists the actual dollar amount in bad debts written off over that half year period.

SNOOPY

If there are any useful metrics that can be pulled from this sort of data then the important one is the ratio of 'Total Provision for Impaired Assets' to 'Gross Financial Receivables'.
That is to say how much you are going to lose related to how much you lent.
It may provide interest to some to compare 'Total Impaired Assets' to 'Gross Financial Receivables'.
There is insufficient years of history to attempt to trending the data.

[Snow Leopard]

The ratio of:

'Stressed Loans' / ' Size of Net Loan Book'

presents a very favourable picture. Investors can see that the 'streesed loans' in dollar terms are steadily reducing as the total net loan book size is increasing. Put simply four years ago evey hundred dollars of loan on the books was associted with just over $4 of 'stressed debt'. Today evey hundred dollars of loan on the books was associted with just $1 of 'stressed debt'. It is a wonderful story. And 'the fans' would say it is entirely due to management taking hold of what was a 'rag tag' of lending institutions and blending them together into the slick Heartland operation we see today. The smooth progression looks almost too good to be true, with a seemless unbroken descent towards loan portfolio perfection. But sometimes when things look too good to be true, that is because they are!

Contrast this trend to Heartland actual debt write off record, the last column. This last column is not 'spinnable' by management. When a debt actually goes bad, the payments stop coming in and the underlying asset is sold for recovery purposes, there can be no doubt that that asset is bad.

The 'impaired asset expense' is actually quite lumpy. The biggest lump was during the period 2HY2013. That $17m wrote down was connected with the problem property portfolio. Take out that 'outlier', and the latest three half yearly write downs are high in historical terms. Not high enough to be a problem: Writing off 20% of a $30m stressed loan book is not going to cripple a company like Heartland. But the divergence between the trends of the last two columns is stark.

OK, I'm coming out with it. I think this evidence here that the 'Stressed Loans' picture is being massaged for the benefit of making management look good. A further hint of this is the much higher percentage of stresssed loan provisions on the books of UDC, a comparable lender. I don't think this is a problem for Heartland now. But I am wondering how an ever lower level of stressed loan provisions, in absolute and relative terms, can be justified when the actual loan write offs at Heartland follow no such trend!

SNOOPY
Best pass over this completely.

[Snow Leopard]

What should really matter, to be blunt, is too make as much real profit as possible without it all blowing up.
So the aim is not to minimise the provision for impaired assets/impaired asset expense per se but to achieve the greatest sustainable difference between interest earned and impaired asset expense.
Or to put it simply maximise the reward to risk ratio/minimise the risk to reward ratio.

[Snow Leopard]

And so far Heartland have been doing an excellent job of achieving this and appear to have what it takes to continue.

Time to drink the tea, clean the teeth and put the tablet away.

Best Wishes
Paper Tiger

[Snow Leopard]

As usual, Do Your Own Research.

[Leftfield]

And so far Heartland have been doing an excellent job of achieving this and appear to have what it takes to continue.

Time to drink the tea, clean the teeth and put the tablet away.

Best Wishes
Paper Tiger

I hope you slept well PT, and trust that Snoopy just might agree with you on point 5&6.

I'm only a small holder of HBL yet I appreciate you both running your experienced eyes over their figures. What I like about HBL is its willingness to explore non-traditional lending opportunities and niche markets, and as table 3 shows, they seem to be doing their best to minimise the risk on their loan books.

[percy]

Maybe Heartland's presentation paints a clearer picture which is easier to understand.
page 8,Key Financial/Operational Metrics;
................................2012...........201 3..........2014...........2015
Dad debt ratio..............0.5%.........0.4%...........0.3 %...........0.2%.......clearly reducing.
Net Interest margin........4%............4.2%...........4.2%... .......4.4%.....Increasing and the envy of the Australian banks..[twice as much].
eps..............................4cents..........6 cents........9cents..........10cents..Again very positive real growth.
ROE.............................4.2%............6. 5%..........9%..............10.4%.Excellent progress.
Cost to income ratio.......0.5%............0.4%.........0.3%..... ......0.2%.certainly reducing costs.

Paper Tiger.At the end of the day some/a lot of impairements,past dues and overdues finally become bad debts.And as you rightly point out the
ratio of bad debts to total loans is what we must watch.The above table clearly shows they are reducing.,as is the cost to income ratio.With Heartland Bank developing more online products, such as "open for business", and more online channels, the cost to income ratio will further decrease,while the net interest margin will further increase.
The Key Financial/Operational Metrics prove Heartland Bank are oncourse to be the best bank,not the biggest.

[trader_jackson]

Yes, I also appreciate the above metrics very much... and on that basis, I think it is fair to say, Heartland are "well positioned" ;)

[Snoopy]

If there are any useful metrics that can be pulled from this sort of data then the important one is the ratio of 'Total Provision for Impaired Assets' to 'Gross Financial Receivables'.
That is to say how much you are going to lose related to how much you lent.
It may provide interest to some to compare 'Total Impaired Assets' to 'Gross Financial Receivables'.


The 'Total Provision for Impaired Assets' is already regarded as lost, from a bank management perspective. This is not to say that everything accounted for in the impairment provision will be lost. For example TNR in their last half yearly result wrote back part of their impairment provision. But it does mean that Heartland are managing their business assuming, for now, that the 'Total Provision for Impaired Assets' is lost.

'Gross Financial Receivables' is a figure of receivables before the impairment provisions are deducted. I would argue that because Heartland are managing their receivables assuming the 'Total Provision for Impaired Assets' is already dead money, the most useful figure for comparisons is the 'Total Financial Recivables' (with impairments already deducted). Personally I find the phrase 'Total Financial Recivables' ambiguous. So I have chosen to call 'Total Financial Recivables' 'Net Financial Receivables' ('Net' implies something has been subtracted from a higher total). This is why I have used 'Net Financial Receivables' for my calculated comparisons.

A problem is bank balance dates provide a snapshot of what is happening. But a 'snapshot of impaired assets' is just that. Impaired assets are dynamic and changing. From an investment perspective I want to know what will happen in the future.

Generally loans do not go bad overnight. A loan is always good when it is first agreed to. Then something might happen that causes the bank to 'monitor' that loan. An inkling that the loan has become 'substandard' might lead to it being seen as 'doubtful'. Things become more serious when 'doubtful' turns to 'at risk of loss' and finally the worst loans actually 'default'.

The 'default' loans always make headlines. But from a bank managment perspective it is the 'doubtful' and 'at risk of loss' loans that IMO are the best indicators of the risk going forwards. If a loan is already in default there is very little bank management can do at that late stage! This is why I am much more interested in the 'stressed' loan balance' that is left on the books rather than the 'impairment' already off the books. 'Stressed loan' is not a definitive accounting term. But from a Heartland perspective I define a stressed loans as (see note 19 of AR2015):

(At least 90 days past Due)
plus (Individually Impaired)
plus (Restructured Assets)
less (Provision for Impairment)

Consequently I believe my previously published comparison chart is the best way to assess the 'stressed loan' situation.



There is insufficient years of history to attempt to trending the data.


Four years worth of data is not ideal. I prefer to work on data that at least covers a business cycle, and that means a minimum of five years. But four years worth of data, with Heartland in some semblence of the form it is in today, is all we have. So that is all we can work with. I don't think there is sufficient 'lack of data' to just ignore it and give up.

SNOOPY

[Snoopy]

What should really matter, to be blunt, is too make as much real profit as possible without it all blowing up.
So the aim is not to minimise the provision for impaired assets/impaired asset expense per se but to achieve the greatest sustainable difference between interest earned and impaired asset expense.
Or to put it simply maximise the reward to risk ratio/minimise the risk to reward ratio.


I think that PT has put succinctly the issue I have been waffling around on this thread for some time now.

The choice of the phrase 'real profit' is particularly insightful and something I agree with. So what is 'real profit'?

'Real profit' is in practice lumpy. But banks can see individual large loans and classes of small loans going bad before those loans actually go bad. So banks create impairment provisions. Impairment provisions allow a bank to smooth profits over different time periods. Ultimately all such smoothing comes out in the wash. Impairment provisions are not something I have a problem with in general.

But what happens if the annual top up of the 'impairment bucket' is more than matched by the 'actual loss' drain hole at the bottom? Eventually your impairment loan bucket will be empty. And if the 'impairment bucket' bcomes empty, that means that your 'declared profit'', with impairment provisions carefully deducted, was not 'real'.

In this case though, I am not considering the 'impairment bucket' directly. I am considering the 'stressed loan bucket' which I am claiming is the best indicator of what will happen to the actual 'impairment bucket' in the future.

The nub of the issue: My table of the 'stressed asset trend' vs 'impaired loan expense' does not show an empty bucket. But it does show the hole in the bottom of the bucket is leaking at a rate that is not being matched by the annual 'top ups'.

The next task then, is to quantify the 'net leak' so we can arrive at Heartland's 'real profit'.

SNOOPY

[trader_jackson]

Well HBL won the race against ARV, $1.30 and increasing ;)... but in my book "everyone's a winner" :t_up: (lately...)

[pierre]

All the musings about metrics on ST are clearly stimulating the market. SP up to 129....and plenty of buyers wanting more shares than sellers appear keen to part with. Might even close at 130 today.

Keep up the good work Snoopy, Percy, TJ, PT et al!

[percy]

Today I sold some of my "low conviction" Australian shares, and have recycled some of the funds into my" high conviction" Heartland Bank.
Paid $1.30 for HBL,which will bring my average cost well up.HBL was already my largest holding..

[winner69]

Hey nextbigthing Heartland back to $1.30 again.

Of course it will push on to $1.60 this time, won't it?

Most have forgotten it was $1.40 odd just over a year ago - so a bit if a way to go yet before we can call them a real winner - but a good recovery story eh

[K1W1G0LD]

Jeez , 2 Authors on one thread, at this rate HBL thread could soon be looking like a best selling Blockbuster , but that's all good and so is the SP.

[Snow Leopard]

Maybe Heartland's presentation paints a clearer picture which is easier to understand.
page 8,Key Financial/Operational Metrics;
................................2012...........201 3..........2014...........2015
Dad debt ratio..............0.5%.........0.4%...........0.3 %...........0.2%...

Yes, I meant to ask you about this metric at the time as I have not met it before.

Is it the ratio of loans made to fathers to put their offspring through college?

Best Wishes
Paper Tiger

[Snow Leopard]

The 'Total Provision for Impaired Assets' is already regarded as lost...
...Consequently I believe my previously published comparison chart is the best way to assess the 'stressed loan' situation....


I think that PT has put succinctly the issue I have been waffling around on this thread for some time now....
...The next task then, is to quantify the 'net leak' so we can arrive at Heartland's 'real profit'.

SNOOPY

Snoopy I really, really feel that you are barking up the wrong tree so to speak and that your understanding of this area is sufficiently deficient that you can not see that it is askew.

Please, please do some research into the area of impairment for financial assets before embarking on the Heartland, or anybody else's accounts.

You know my PM link.

But it is 'up to you' as my parents would say.

Best Wishes
Paper Tiger

[Snow Leopard]

Jeez , 2 Authors on one thread, at this rate HBL thread could soon be looking like a best selling Blockbuster , but that's all good and so is the SP.

We need an editor and you have been press-ganged.

Best Wishes
Paper Tiger

[K1W1G0LD]

We need an editor and you have been press-ganged.

Best Wishes
Paper Tiger

You can't press gang a Pirate PT , I'll have my emissary Sheik D'yerbouti contact you regarding the details.

[percy]

Yes, I meant to ask you about this metric at the time as I have not met it before.

Is it the ratio of loans made to fathers to put their offspring through college?

Best Wishes
Paper Tiger
No they are Dad debts,which will be recovered when Dad needs to go into care, which the son will have to pay for.
The Bad debts would be the ones made to daughters' husbands,who are also total write offs.lol.

[Jantar]

.......
The Bad debts would be the ones made to daughters' husbands,who are also total write offs.lol.
And all fathers know about those. :p

[percy]

And all fathers know about those. :p

Yes.
Maybe just too many stories to share here.!!..lol.

[Joshuatree]

I Have Been In You (https://www.youtube.com/watch?v=4WLgebpkhyA) Sheik Yerbouti; after all its FRIDAY:)

[K1W1G0LD]

I Have Been In You (https://www.youtube.com/watch?v=4WLgebpkhyA) Sheik Yerbouti; after all its FRIDAY:)

Sterling sleuthing Mr Tree , the jobs yours.......................................

[davflaws]

An it sure was fine!

[nextbigthing]

Hey nextbigthing Heartland back to $1.30 again.

Of course it will push on to $1.60 this time, won't it?

Most have forgotten it was $1.40 odd just over a year ago - so a bit if a way to go yet before we can call them a real winner - but a good recovery story eh

To be honest I'm surprised it's not already there Winner. But then again maybe I need to stop being greedy, word on the street is $1.60 by Christmas, not by mid winter Christmas.

[trader_jackson]

... word on the street is $1.60 by Christmas...

You could be onto something here... on a day of weakness, HBL steps forward :t_up:

[rocketship]

To be honest I'm surprised it's not already there Winner. But then again maybe I need to stop being greedy, word on the street is $1.60 by Christmas, not by mid winter Christmas.

Well Acasta Limited thinks so too. Just received an unsolicited offer by them to buy all my shares at $1.40! The catch is, they will pay it in 10 instalments over 10 years (simply 10% every year until its paid), I'll of course lose the right to any dividends over this period, as I no longer own the shares and by the way there is something called inflation that I 'should' consider also.

Anyone else received this once in a lifetime offer?! :t_down:

[Cricketfan]

Well Acasta Limited thinks so too. Just received an unsolicited offer by them to buy all my shares at $1.40! The catch is, they will pay it in 10 instalments over 10 years (simply 10% every year until its paid), I'll of course lose the right to any dividends over this period, as I no longer own the shares and by the way there is something called inflation that I 'should' consider also.

Anyone else received this once in a lifetime offer?! :t_down:

I don't understand - why would anyone accept such an offer? I mean, I guess they're targetting people who aren't that well-informed, but even so, it's not like a quick cash offer or anything that would tempt someone who's desperate.

[K1W1G0LD]

I don't understand - why would anyone accept such an offer? I mean, I guess they're targetting people who aren't that well-informed, but even so, it's not like a quick cash offer or anything that would tempt someone who's desperate.

They're preying on the naive and ill informed (read gullible) small shareholder. Throw it in the bin.

[trader_jackson]

Well Acasta Limited thinks so too. Just received an unsolicited offer by them to buy all my shares at $1.40! The catch is, they will pay it in 10 instalments over 10 years (simply 10% every year until its paid), I'll of course lose the right to any dividends over this period, as I no longer own the shares and by the way there is something called inflation that I 'should' consider also.

Anyone else received this once in a lifetime offer?! :t_down:

This has already been quite well mentioned/discussed on the forum, I believe someone worked it out to be $1.07 in "today's" prices... they are hoping several hundred uninformed heartland shareholders who may only hold a couple hundred or couple thousand shares will sell and thing "gee I thought they were 90 cents, $1.40 sounds great!!!" Not sure how many small shareholders will fall for it, especially with the 10 year installments and the fact you won't get any dividends... and we're at $1.40 right now! :t_up: (if you include next 2 dividend payment estimates which I think will amount to around 9 cents)

[Deej5]

Ah but what a cunning plan! We give them our shares and they pay you back with the dividends you would have received.

[Cricketfan]

they are hoping several hundred uninformed heartland shareholders who may only hold a couple hundred or couple thousand shares will sell and thing "gee I thought they were 90 cents, $1.40 sounds great!!!"

I know there are some realllly stupid and gullible people around, but surely even the most gullible person would check the current market price before selling anything? The only thing I can think of is that they're hoping people will miss the 10-year thing - I didn't receive the offer, was it in small print or something?

[trader_jackson]

https://www.nzx.com/companies/HBL/announcements/283700

More information for those who are interested

[nextbigthing]

Well Acasta Limited thinks so too. Just received an unsolicited offer by them to buy all my shares at $1.40! The catch is, they will pay it in 10 instalments over 10 years (simply 10% every year until its paid), I'll of course lose the right to any dividends over this period, as I no longer own the shares and by the way there is something called inflation that I 'should' consider also.

Anyone else received this once in a lifetime offer?! :t_down:

I like the idea that was thrown around last time there was a low ball offer like this - everybody takes the postage paid envelope and fills it with newspaper, completely unrelated paperwork or pictures of cats etc and sends it back. That way they end up with a very large postage bill and a lot of time wasted sorting these letters, hopefully convincing them not to bother doing it again. Or better yet, fill the form out with completely wrong details sending them on a completely unproductive wild goose chase.

[iceman]

I like the idea that was thrown around last time there was a low ball offer like this - everybody takes the postage paid envelope and fills it with newspaper, completely unrelated paperwork or pictures of cats etc and sends it back. That way they end up with a very large postage bill and a lot of time wasted sorting these letters, hopefully convincing them not to bother doing it again. Or better yet, fill the form out with completely wrong details sending them on a completely unproductive wild goose chase.

Agree on that strategy NB. Sadly there are some SH that fall for these scams and these guys have been making millions by running them. It is a shame it can not be stopped somehow but so fa publicly shaming them and responding to them with rubbish to increase their work and costs, is all we can do.

[Germaine]

Hi guys, is anyone an interest.co.nz member and has access to this subscriber-only article they could share on the web somehow? Thanks!

http://www.interest.co.nz/business/81660/heartland-bank-cfo-details-how-any-big-purchase-such-udc-could-be-funded-says-reverse

[Cricketfan]

Agree on that strategy NB. Sadly there are some SH that fall for these scams and these guys have been making millions by running them. It is a shame it can not be stopped somehow but so fa publicly shaming them and responding to them with rubbish to increase their work and costs, is all we can do.

I got the offer letter the other day. The information is clearly stated in the letter, so it doesn't seem like a scam. I honestly don't know why anyone would accept the offer though, it clearly states the difference between the offer price and market price (at time of printing), and the fact that it will be paid over 10 years. It's a cheeky offer, but there's nothing deceptive about it. Possibly it's a very basic intelligence test, and those that accept it fail?