HGH - Heartland Group Holdings

[percy]

Well, looks like Dairy farmers will be increasingly "well positioned"... you'd like to think HBL would jump as well with this great news

Just checking HBL's and ANZ's charts I notice HBL had a golden cross in early July,while ANZ's was mid October.
ANZ offcourse have the largest exposure to Dairying,while HBL has very little.Maybe the market is realising this?
For any one who does not know a golden cross.It is regarded as a strong buy signal.It occurs when a short term moving average moves ahead of a long term moving average.I use the 100 day EMA and the 200 day EMA.
No further talk about UDC.
I am now looking forward to HBL's agm on Tuesday afternoon 22nd November at Rydes,Latimer Square,ChCh,where they will update us on where they are, and where they are heading.

[Beagle]

The dairy recovery is very good news for shareholders and for other banks and the economy in general, a very pleasing auction result. I hope future auction prices keep heading upwards.

[JeremyALD]

Yep - HBL needs all the help it can get to keep the inflated share price up

This'll help

Inflated? You've been saying all year the share price should be around $1.60

[winner69]

Inflated? You've been saying all year the share price should be around $1.60

Inflated on fundamentals - sentiment another thing

HBL might even become hyper-inflated ....that be good

[BlackPeter]

Inflated on fundamentals - sentiment another thing

HBL might even become hyper-inflated ....that be good

Why do you think HBL is fundamentally inflated? Forward PE of 12.4 combined with a CAGR of 10% does not look too shabby to me ...

[SCOTTY]

Why do you think HBL is fundamentally inflated? Forward PE of 12.4 combined with a CAGR of 10% does not look too shabby to me ...

Not forgetting the fully imputed yield of 5.7%. :)

[winner69]

Some guy called Andrew posted this as a comment after a article on interest.co.nz


up1
I was talking with my bank manager yesterday, very gloomy about all farm sectors for this year. Going to be a very difficult one to get through.



Milk prices up but production is down 9% and then this morning on the radio heard beef farmers finding it tough now.

No worries though - Heartland exposure to rural not significant

[BlackPeter]

Some guy called Andrew posted this as a comment after a article on interest.co.nz


up1
I was talking with my bank manager yesterday, very gloomy about all farm sectors for this year. Going to be a very difficult one to get through.



Milk prices up but production is down 9% and then this morning on the radio heard beef farmers finding it tough now.

No worries though - Heartland exposure to rural not significant

Hmm - our parrot knows a little bird lady and told me that her owner claims that his girl friend knows an agricultural expert who says that this season will be just amazing. Just kidding.

What however is true is that we are sitting in the middle of the Canterbury plains, and I need to think some years back to remember a season with that much spring growth. Must be good for all sorts of produce - and obviously for grass. This in combination with an improved milk price can be only good for farmers.

Obviously - you recognise a good year in agriculture at the level of farmers complaints. The more energy they have left to put into complaining, the better things are. I am sure HBL's 7% dairy exposure is likely to flourish :t_up:

[percy]

I drove down to Wanaka last week.On the way I saw Rooney's massive Rangitata dams were full.
From ChCh to Wanaka the farms were in great shape.
I also recently attended a PGW presentation.Yes irrigation sales are slow,meat/beef doing well,and horticulture is going gang busters.Steady retail sales.
Always in the rural sector someone is struggling,while others are doing well.It is usually the ones doing well who want to borrow money to expand,so I see it as business as usual for Heartland.
At Ebos's agm chairman, Mark Waller, spoke about how stable governments in NZ, Clark/Key, had made it possible for NZ to catch up with Australia,whose economy has suffered so much, with so many Prime Ministers.This stability in NZ is set to continue for some time,which means Heartland Bank will continue to flourish.

[winner69]

Hey Paper Tiger

Did you notice that a few more free bonus shares were issued today

Don't get grumpy now

[Joshuatree]

Usual weird sniping for and mainly against posts by w69. Whats up with you w69 with your cynical negative sniping style. Really am trying to understand what your agenda is here. are you a holder / whats your beef here with HBL because you sure do not sound like a happy holder of HBL if indeed you are. Some transparency would be appreciated. Disclose : I've been holding HBL a while a cornerstone stock atp . A double bagger plus:)

[Snow Leopard]

Usual weird sniping for and mainly against posts by w69. Whats up with you w69 with your cynical negative sniping style. Really am trying to understand what your agenda is here. are you a holder / whats your beef here with HBL because you sure do not sound like a happy holder of HBL if indeed you are. Some transparency would be appreciated. Disclose : I've been holding HBL a while a cornerstone stock atp . A double bagger plus:)

Very Trump like response from you there Joshuatree.

Read this post (http://www.sharetrader.co.nz/showthread.php?8425-HBL-Heartland-Bank-Limited&p=637318&highlight=#post637318) and this post (http://www.sharetrader.co.nz/showthread.php?8425-HBL-Heartland-Bank-Limited&p=637345&highlight=#post637345), and then try and understand.

Best Wishes
Paper Tiger

Disc: hold HBL

[janner]

Usual weird sniping for and mainly against posts by w69. Whats up with you w69 with your cynical negative sniping style. Really am trying to understand what your agenda is here. are you a holder / whats your beef here with HBL because you sure do not sound like a happy holder of HBL if indeed you are. Some transparency would be appreciated. Disclose : I've been holding HBL a while a cornerstone stock atp . A double bagger plus:)

I have a feeling that they just enjoy poking the borax at each other..

[trader_jackson]

Great fundamentals remain in place, and therefore so does the $1.60 by Christmas ;)

In fact, what about that $2.70 someone mentioned around a month ago? ;)

[winner69]

Jt - I tip my cap to Heartland Bank most days

[Snow Leopard]

Looks like you should tip it into the washing machine :scared:.

Best Wishes
Paper Tiger

[winner69]

Looks like you should tip it into the washing machine :scared:.

Best Wishes
Paper Tiger


OK

Better still I'll ask Jeff to send me another one ....a nice new one.

[winner69]

OK

Better still I'll ask Jeff to send me another one ....a nice new one.

While I'm at it I'll get him to bring caps to the ASM .....and make sure he gives one to percy and janner in particular

[percy]

While I'm at it I'll get him to bring caps to the ASM .....and make sure he gives one to percy and janner in particular

Wonderful.
Hope Janner gets back from Dnepropetrovsk for the ASM,[and cap].

[Joshuatree]

Jt - I tip my cap to Heartland Bank most days

sorry if i came on too strong.I have no problem with a critique at all; maybe i don't get your humour.But you often seem to have a foot in the for and against camp simultaneously so i find it unclear whether you are a non/ holder/seller/buyer/short term trader. Or the s/p hasn't moved to your estimates/projections?. Nice hat btw:)

[winner69]

Any webcast of the annual shindig this year?

I want to see if Mr Chair has prepped his response to any shareholder question re Board diversity -- instead of last years effort of standing in stunned silence at the temerity of any shareholder asking such a question.

[winner69]

I voted for Resolutions 1,2,3 and 5 but against Resolution 4

[winner69]

Is this good or bad or just a non-event for Heartland

https://www.nzx.com/files/attachments/248029.pdf

[beetills]

Personally i have always considered lending on cars to be very risky.I'm no economic expert but if i read it correctly this will encourage sales people to do what they do best.....SELL.
I could be wrong.

[percy]

Is this good or bad or just a non-event for Heartland

https://www.nzx.com/files/attachments/248029.pdf

A significant event for Turners/MTF,and yes not good for Heartland.

i

[BlackPeter]

Is this good or bad or just a non-event for Heartland

https://www.nzx.com/files/attachments/248029.pdf

Well, the market certainly sees it as good news for TNR, and so they should ;)

[beetills]

I for one don't care if Heartland get out of lending on vehicles altogether.
Plenty of other avenues to explore.

[percy]

Personally i have always considered lending on cars to be very risky.I'm no economic expert but if i read it correctly this will encourage sales people to do what they do best.....SELL.
I could be wrong.
You are wrong.
The fact is HBL have very few car loans go wrong.
People need their car to get to work.
Lending on vehicles has been very good sector for Marac [Heartland Bank] for years.

[Beagle]

All set for some major support of Heartland, albeit probably short term. They were advertising 3.6% per annum for 3 month term deposit which was much higher than any other bank but it was reduced to 3.1% yesterday. The very nice lady on the phone said she would keep the original rate open for me for the rest of the week. Can't see any problems short term for Heartland now that dairy has stabilised so it seems like a reasonable safe harbour with their excellent capitalisation ratio. You good folks can enjoy the profit from my very conservative short term investment approach.

[BlackPeter]

I voted for Resolutions 1,2,3 and 5 but against Resolution 4

Hmm - just preparing for the AGM and wondering myself what to do about the proposed rise in the director fee pool.

Admittedly - HBL's director fees are above average (they say upper 75% quartile) and now lifted to $100.000 per director (more for the chair), but on the other hand - they are not outrageous, director fees have not been raised for some years - and so far share holders got quite good value out of the board and the company.

Personally more concerned when ineffective boards try to push up their salaries (and there are plenty of examples for that). Maybe its a case of sharing the gain in shareholder value instead of annoying good people doing good work?

What do others think?

[trader_jackson]

Is this good or bad or just a non-event for Heartland

https://www.nzx.com/files/attachments/248029.pdf

I'd like to think they are exploring much bigger and better options these days ;)

[winner69]

You are wrong.
The fact is HBL have very few car loans go wrong.
People need their car to get to work.
Lending on vehicles has been very good sector for Marac [Heartland Bank] for years.

Agree percy

Car loan payments comes before mortgage in the short term eh

[percy]

Hmm - just preparing for the AGM and wondering myself what to do about the proposed rise in the director fee pool.

Admittedly - HBL's director fees are above average (they say upper 75% quartile) and now lifted to $100.000 per director (more for the chair), but on the other hand - they are not outrageous, director fees have not been raised for some years - and so far share holders got quite good value out of the board and the company.

Personally more concerned when ineffective boards try to push up their salaries (and there are plenty of examples for that). Maybe its a case of sharing the gain in shareholder value instead of annoying good people doing good work?

What do others think?

I will unfortunatly vote in favour,because they have certainly added value to the business,but really I think it is in directors' own best interest to be on the board, even if they received no pay, as Tomlinson,Ricketts ,Irvine and Greenslade are substantial shareholders.
Look forward to catching up with you.
After the meeting I will be between the bar and the kitchen.[well positioned.]

[percy]

Agree percy

Car loan payments comes before mortgage in the short term eh

Exactly......Before the mortgage.
No car,no work,no work, no dough,no dough,big problems.

[winner69]

Q1 $14.3m

Heartland managing profit very well I reckon

$14.3m times 4 equals FY guidance of $57m

But upper end FY17 guidance of $60m is 10% up on FY16 .....and Q1 is 21% up

So $60m easy peasy - 100% certain

[percy]

Q1 $14.3m

Heartland managing profit very well I reckon

$14.3m times 4 equals FY guidance of $57m

But upper end FY17 guidance of $60m is 10% up on FY16 .....and Q1 is 21% up

So $60m easy peasy - 100% certain

Yes,easy peasy.!!

[trader_jackson]

Forward PE of not even 12.5?

Growth rates in the double digits?

Gross Dividend yield of nearly 8%?

The only question left now is why the share price isn't above $1.60...
;)

[Snow Leopard]

Squeeze the borrowers + squeeze the savers + squeeze the staff = More new hats for shareholders
[Get less interest, pay out even less interest and cut expenses].

Nice to see Overdue and Impaired loans cleaning up (overall) nicely.
All those doubtful dairies gone away, one way :) or another :(.

Best Wishes
Paper Tiger

Disc: :t_up:

[janner]

Forward PE of not even 12.5?

Growth rates in the double digits?

Gross Dividend yield of nearly 8%?

The only question left now is why the share price isn't above $1.60...
;)

Because the canny are not buying in large quantity :-)))

Disc. Holder from their beginning.

[Snow Leopard]

AGM digital paperwork available [click me (https://nzx.com/companies/HBL/announcements/293071)]

Read, enjoy and then go buy more.

Best Wishes
Paper Tiger

Disc: Fully digitized.

[RGR367]

Forward PE of not even 12.5?

Growth rates in the double digits?

Gross Dividend yield of nearly 8%?

The only question left now is why the share price isn't above $1.60...
;)

Because the Market just sold me some more @151 :D But worry not, it will be well above your price soon :t_up:

[beetills]

How many more sleeps till Xmas and is it coming early for holders.

[winner69]

Hmm - just preparing for the AGM and wondering myself what to do about the proposed rise in the director fee pool.

Admittedly - HBL's director fees are above average (they say upper 75% quartile) and now lifted to $100.000 per director (more for the chair), but on the other hand - they are not outrageous, director fees have not been raised for some years - and so far share holders got quite good value out of the board and the company.

Personally more concerned when ineffective boards try to push up their salaries (and there are plenty of examples for that). Maybe its a case of sharing the gain in shareholder value instead of annoying good people doing good work?

What do others think?

11% voted against increased directors fees

Prob wimp instos just tiked the for box without even thinking about it

[percy]

AGM thoughts.
The Chairman,Geoff Ricketts again controlled the meeting well, and he and other directors seemed to be very relaxed and comfortable taking questions from the floor.
The directors standing for re-eclection,Bruce Irvine,John Harvey,and Vanessa Stoddart all spoke well.Vanessa Stoddart won Canterbury shareholders over with her choice of a black and red top.!!A director who will make a worthwhile contribution.Seems as though all directors share a sense of pride with what Heartland Bank has achieved, and a sense of excitement with what Heartland will achieve.
The excess capital has been well used to expand the loan book,while equity ratio remains strong at 12.5%.
The chairman is happy with Heartland's credit rating,yet like us all would like to see it higher.
New channels of delivering Heartland's new customer focussed digital products are working well.
The Reserve Mortgages business too is growing strongly,both here and in Australia.To be ahead of possible Australian regulator changes HBL are in the process of appointing an Australian director.
The chairman pointed out how banks [and other businesses] have to adapt to younger clients.Not only the channels they supply product,but the way they treat their customers.HBL try to be customer focussed,by treating the customer fairly.They want HBL's culture to be right through the business,customers,staff and shareholders.
The annual report will still have Maori usuage as "Maori is an official language of NZ."
Acquistions.They are still looking and will only buy if it is eps accretive,
UDC.HBL have expressed their interest,but have not heard back from ANZ.Yes,it would be a great fit.I have the feeling they expect UDC will either end up in Australian or Chinese hands.
Overall.Heartland Bank has now established themselves,know where they are ,and where they want to be,and how they are going to get there.
Another shareholder reminded me I promised him a slap up meal when HBL's share price hit $3.00.!! Sounded to me as though he thought it would not be too many years away.Must admit I agree with him.
Yes the extra wines went down a treat.As always place yourself between the bar and the kitchen.It really works.!!!!

[trader_jackson]

Your thoughts are much appreciated percy, as always... nice to know they are 'exploring much bigger and better options these days' (as mentioned on 15 November)

Forget what I said on 11 November about the share price getting to $2.70, I like the sound of $3.00 even more!

After reading your thoughts, presentations, etc, I am now even more confused...
Forward PE of not even 12.5?

Growth rates in the double digits?

Gross Dividend yield of nearly 8%?

Share price goes down and gets even further away from $1.60???

[percy]

Your thoughts are much appreciated percy, as always... nice to know they are 'exploring much bigger and better options these days' (as mentioned on 15 November)

Forget what I said on 11 November about the share price getting to $2.70, I like the sound of $3.00 even more!

After reading your thoughts, presentations, etc, I am now even more confused...
Forward PE of not even 12.5?

Growth rates in the double digits?

Gross Dividend yield of nearly 8%?

Share price goes down and gets even further away from $1.60???

TJ.
Just between us ;from recent broker's research;
"Heartland has higher near term earnings growth than its Australian peers."
So the rerating will occur[sometime].In the meantime we are "well positioned."

[hamish]

Forsyth Barr are not believers ....

"HBL is experiencing robust asset growth across its core portfolios, however above market growth is indicative of additional risk taking. The impairment cycle has turned and the retail funding environment is increasingly competitive. We rate HBL as underperform"

[Lewylewylewy]

What are they considering as risks?

[iceman]

Thanks Percy for a good summary. Was reading NBR article on HBL meeting and they say HBL sees future growth with millennials and residential mortgages. The latter was a surprise to me. Is this the case or is NBR confusing it with reverse mortgages ?

[SCOTTY]

Thanks Percy for a good summary. Was reading NBR article on HBL meeting and they say HBL sees future growth with millennials and residential mortgages. The latter was a surprise to me. Is this the case or is NBR confusing it with reverse mortgages ?

NBR confused with reverse mortgages where HBL see good growth potential. They are definitely not interested in any other mortgage market.

[percy]

Thanks Percy for a good summary. Was reading NBR article on HBL meeting and they say HBL sees future growth with millennials and residential mortgages. The latter was a surprise to me. Is this the case or is NBR confusing it with reverse mortgages ?

Future growth is millennials,therefore digital porducts via phones/online channels.
Yes they are confusing residential with reserve mortgages.

[Joshuatree]

"reserve mortgages". is that like getting a mortgage to buy a Reserve :) Penfolds Grange 2010 $700 - Reviewed Classic, Great Grange‎ (https://www.googleadservices.com/pagead/aclk?sa=L&ai=DChcSEwiCpYCt_53QAhUOBrwKHVoXDnQYABAO&ohost=www.google.co.nz&cid=CAESIeD2UVzQc_lRLKPZdW7S1TgH5AENKr-eO9V3WObPITnHcA&sig=AOD64_2qABuTSOskF-HUuzmV2C1CkQovSw&q=&ved=0ahUKEwiogP2s_53QAhXKn5QKHcyTA9cQ0QwIOQ&adurl=)

Thanks percy for sharing.

[beetills]

Interest .co.nz reporting that ANZ are in final negotiations with a chineses firm HNA to sell UDC.
If true what next for HBL

[winner69]

"reserve mortgages". is that like getting a mortgage to buy a Reserve :) Penfolds Grange 2010 $700 - Reviewed Classic, Great Grange‎ (https://www.googleadservices.com/pagead/aclk?sa=L&ai=DChcSEwiCpYCt_53QAhUOBrwKHVoXDnQYABAO&ohost=www.google.co.nz&cid=CAESIeD2UVzQc_lRLKPZdW7S1TgH5AENKr-eO9V3WObPITnHcA&sig=AOD64_2qABuTSOskF-HUuzmV2C1CkQovSw&q=&ved=0ahUKEwiogP2s_53QAhXKn5QKHcyTA9cQ0QwIOQ&adurl=)

Thanks percy for sharing.

I got given a bottle of that stuff a while ago

Couldn't bring myself to drink it (I could see my parents looking down on me and frowning at such extravagances) so I gave it away

Keep the nice wooden box though - quite useful

[percy]

Interest .co.nz reporting that ANZ are in final negotiations with a chineses firm HNA to sell UDC.
If true what next for HBL

I expect it is true,and a number of things will most probably happen.
1] A lot of UDC staff will want to join Heartland.
2] Some UDC customers will move to Heartland bank.
3] Heartland will most probably do a bond issue to help fund their strong organic growth.
What will be of interest will be the price/ratios ANZ sell UDC for.

[ziggy415]

Interest .co.nz reporting that ANZ are in final negotiations with a chineses firm HNA to sell UDC.
If true what next for HBL
if udc is good fit for hbl....does that make hbl a good fit hna.......Percy...$3 is my target but its going to be my retirement day....so no takeover offers from the chinese just yet plz

[percy]

if udc is good fit for hbl....does that make hbl a good fit hna.......Percy...$3 is my target but its going to be my retirement day....so no takeover offers from the chinese just yet plz

Great knowing you will be able to retire in under 5 years time.
$3 in three years could be on.!!!..lol.
And yes UDC valuations may help HBL's sp get to your $3 target quicker.!

[ziggy415]

Future growth is millennials,therefore digital porducts via phones/online channels.
Yes they are confusing residential with reserve mortgages.
how do you value reverse mortgages....if hbl sell say 20 million of reverse mortgages this year and no payments are due till recipients pass away and no recipients die for 3 years hbl get no return on their investment for 3 years......do returns start to snowball the longer these loans have been issued.....have to admit these type of loans have been taken up by more people than i ever thought would....must be more asset rich cash poor people out there than i thought......if an Auckland granny had sold her house 10 years ago she probably missed out on $500'000 of capital gains but a revers mortgage would cost her estate a fith of that and she stays in her house so it makes sense i guess

[777]

how do you value reverse mortgages....if hbl sell say 20 million of reverse mortgages this year and no payments are due till recipients pass away and no recipients die for 3 years hbl get no return on their investment for 3 years......do returns start to snowball the longer these loans have been issued.....have to admit these type of loans have been taken up by more people than i ever thought would....must be more asset rich cash poor people out there than i thought......if an Auckland granny had sold her house 10 years ago she probably missed out on $500'000 of capital gains but a revers mortgage would cost her estate a fith of that and she stays in her house so it makes sense i guess

Return is the interest accruing on the reverse mortgage. Compounding as well.

[winner69]

Percy's mate Simon leaving next March - a new CFO hopefully on board my then

Done a sterling job that Simon. Maybe Percy or somebody else on here should organise a small collection for Simon and give him a parting gift. i'll throw in 10 bucks if somebody organises it and writes the nice letter.

Also in the announcement -


Earlier this year we launched the first of our online origination platforms, Open for Business. We are currently developing platforms to originate livestock loans, deposits, residential mortgages as well as intermediary specific solutions. We see the emerging technology for digital platforms giving us the opportunity to be not only the fastest at originating loans but also the cheapest. This is just the beginning of our digital transformation and in appointing a new CFO we will seek a candidate who has the proven ability to lead in an environment characterised by disruption and innovation..


Jeez - a farmer being able to borrow more without getting off the quad bike. That's progress

Also hope these initiatives enable us mere mortals to do elementary banking transactions on a mobile device one day

[winner69]

Last sentence of quote above - seek a candidate who has the proven ability to lead in an environment characterised by disruption and innovation.

They need to apply that thinking to new Board members - missed an opportunity in recent times

[percy]

Yes Simon Owen did a great job.Always an easy pleasant person to talk to.
The present board have a lot to be proud about.I guess having so much invested in Heartland Bank themselves, gives them the owner's eye.

[ziggy415]

Last sentence of quote above - seek a candidate who has the proven ability to lead in an environment characterised by disruption and innovation.

They need to apply that thinking to new Board members - missed an opportunity in recent times
resdential mortgage suprised me and what is meant by "data sourcing"

[winner69]

resdential mortgage suprised me and what is meant by "data sourcing"

Maybe getting as much (personal?) data as they can on people so they can bombard them with offers they can't refuse.

Like build up a profile on people over 55 and when the algorithm says 'Joe Henry is down to his last few thou and from the amount he's spent down at Bunnings he must really love his home so Joe is a prime candidate for a reverse mortgage' they send in the A-team to sign up the deal

How much does some businesses already know about you ziggy - heaps I bet

[BlackPeter]

Last sentence of quote above - seek a candidate who has the proven ability to lead in an environment characterised by disruption and innovation.

They need to apply that thinking to new Board members - missed an opportunity in recent times

Why are you saying that? Vanessa Stoddart might well be part of this new thinking ... she certainly is used to working in an environment of innovation and disruptions. She certainly understands commercial Internet and mobile applications. If we look at some of the other companies she is involved in - I think that as well NZR as well as the Warehouse walk a quite sensible (and profitable) balance between conserving and innovating.

[beetills]

JOHN KEY for CFO.

[Joshuatree]

Not honest enough; far too teflon like.

[BlackPeter]

JOHN KEY for CFO.

Not sure he would be interested ... he might be aiming a bit higher.

[percy]

I will not invest in a company which has an ex politician on the board.
Doug Graham,Ruth Richardson,Jenny Shipley,Philip Burdon etc have scared me off them.!

[SCOTTY]

I will not invest in a company which has an ex politician on the board.
Doug Graham,Ruth Richardson,Jenny Shipley,Philip Burdon etc have scared me off them.!

I would agree however John Key would be the exception for me. Unlike other ex politicians he has the business smarts and would only be interested in success. He wouldn't have to grab the first offer but would wait for a winner only to come his way. His self made personal wealth speaks for itself. :)

[winner69]

Time for a name change for our finance company / bank

The Press is calling Crusher Collins Mrs Heartland - OMG

[percy]

Time for a name change for our finance company / bank

The Press is calling Crusher Collins Mrs Heartland - OMG

Not nice at all.!!!

[stoploss]

I will not invest in a company which has an ex politician on the board.
Doug Graham,Ruth Richardson,Jenny Shipley,Philip Burdon etc have scared me off them.!

Probably wasn't good business to lend around 20 % of the loan book to one party so another on the list for you Percy ?
https://www.nbr.co.nz/article/trustees-executors-profit-surges-ck-111984

[Marilyn Munroe]

JOHN KEY for CFO.

There is another bank more closely aligned with Mr Keys hip pocket, the Bank of America

John would be wise to decline a B of A CFO gig. If the Federal Reserve were to disgorge the rubbish B of A pushed through the discount window and got paid face value for then both he and B of A would be in deep deep trouble.

Boop boop de do
Marilyn

[macduffy]

If the AFR is to be believed HBL won't be buying UDC Finance.

"ANZ is set to ink deal with China's HNA ( to buy UDC)."

[trader_jackson]

If the AFR is to be believed HBL won't be buying UDC Finance.

"ANZ is set to ink deal with China's HNA ( to buy UDC)."

AFR are usually 'pretty correct' unfortunately (or fortunately?), if these are true, it is quite likely they would have paid anyting, and easily fronted up with all the cash, and ANZ would have liked both these things.
Would be a shame to see another financial services company be brought out by foreigners, but it is what it is

[percy]

AFR are usually 'pretty correct' unfortunately (or fortunately?), if these are true, it is quite likely they would have paid anyting, and easily fronted up with all the cash, and ANZ would have liked both these things.
Would be a shame to see another financial services company be brought out by foreigners, but it is what it is

Not unexpected.
I look forward to finding out the price and multiples UDC gets sold for.

[winner69]

AFR are usually 'pretty correct' unfortunately (or fortunately?), if these are true, it is quite likely they would have paid anyting, and easily fronted up with all the cash, and ANZ would have liked both these things.
Would be a shame to see another financial services company be brought out by foreigners, but it is what it is

Buying UDC was never really likely was it

As long as the current good economic times continue organic growth will see us through

[janner]

Buying UDC was never really likely was it

As long as the current good economic times continue organic growth will see us through

Still picking $1.60 by Christmas ???

I think not Winner. However it is still the backbone of my holdings :-))

[Snow Leopard]

Definitely better that Heartland consume a few small fish than try and swallow one big one.

Best Wishes
Paper Tiger

[janner]

Definitely better that Heartland consume a few small fish than try and swallow one big one.

Best Wishes
Paper Tiger

Spot on PT. The people in charge appear to be demonstrating that..

Onward and Upward...

[Snow Leopard]

Spot on PT....

Sigh, How many times do we have to go through this?

Stripes is Tigers

Spots is Leopards/Cheetahs/etc.


Best Wishes
Paper Tiger

[Joshuatree]

https://youtu.be/-Lqj6tSdiqY?t=3 Yeah Janner.Is that you up the tree;)

[janner]

https://youtu.be/-Lqj6tSdiqY?t=3 Yeah Janner.Is that you up the tree;)

Trees are for monkeys JT..

HBL has not made a monkey out of me yet :-))))))))))))

[kizame]

I think a move to 1.80 for this stock is quite likely in the first quarter of next yr.
It is now in it's second consolidation triangle. The first larger triangle breakout implied a price of 1.80,the second triangle backs that up.IMOP

[Leftfield]

Heartland to raise up to $30 mill......

https://nzx.com/companies/HBL/announcements/294112

[RTM]

Heartland to raise up to $30 mill......

https://nzx.com/companies/HBL/announcements/294112
And it wasn't so long ago if my memory is correct that they were considering returning capital to shareholders. If I am correct, things change quickly.

[Antipodean]

And it wasn't so long ago if my memory is correct that they were considering returning capital to shareholders. If I am correct, things change quickly.
You are correct there were recent discussions around capital return. I wonder what kind of digital strategy requires $30m of funding?

[RTM]

You are correct there were recent discussions around capital return. I wonder what kind of digital strategy requires $30m of funding?

The police one required considerably more ! Hope its not going down that track

[winner69]

So paying out a large chunk of profit in divies hasn't been so smart?

These reverse mortgages need cash up front - no repayments for yonks ......the more successful this part of the business one must expect more capital to be raised on a regular basis

[Bjauck]

So paying out a large chunk of profit in divies hasn't been so smart?

These reverse mortgages need cash up front - no repayments for yonks ......the more successful this part of the business one must expect more capital to be raised on a regular basis

At least the shareholders could make use of the attached imputation credits. Since they had been considering a capital repayment, their plans must have evolved dynamically. With the share price at a pretty decent level, at least they won't have to issue too many shares to get their capital requirement. It seems that the management are making most of opportunities. We will have to see how the market accepts it.

[Arbitrage]

At least the company is exploring growth opportunities and giving the shareholders a chance to go with it and profit. I would rather this than a capital return...

[percy]

And it wasn't so long ago if my memory is correct that they were considering returning capital to shareholders. If I am correct, things change quickly.

I did point out in my post #8311 AGM thoughts;
"the excess capital has been well used to expand the loan book",while the equity ratio remains at 12.5%."
The $30mil cap raise is being used to fund more growth.
I would expect Heartland Bank will look to do a $50mil to $100mil bond issue as well next year.
Getting such strong organic growth is very positive.

[trader_jackson]

Although I did think a capital raising would take place, I believed it would be for a very different purposed...

But not to worry, very smart what HBL have done these past few years... paid a very nice dividend, while growing well... both factors have, not surprisingly, pushed up the share price.

HBL now recognizes the need to raise a little more capital to further turbo charge growth (well turbo growth in comparison to 'regular' banks), while not having to issue as many shares to raise $30m if it had done so a year or two ago.

I will not be surprised to see the $10m available to 'everyone else' oversubscribed...

Disclosure: I know I for sure have some capital on hand ready to deploy, with a particular focus on companies that have "growth + dividend", and HBL is a prime example of this (along with the top performing stock in the retirement sector this year so far ;))... so yes I will be taking part in the cap raise

[Beagle]

While they have reaffirmed guidance they have neglected to state the obvious that on an expanded capital base guidance in terms of earnings per share has effectively been reduced !
Interesting approach seeing as a year ago they talked about issuing tier 2 capital and repaying tier 1 capital which would have increased eps.

Now they're still talking about a tier 2 issue at a later date, well over a year ago from first "feeling out" the market...come on for goodness sake come clean, why not do a tier 2 issue now when interest rates are arguably at their lowest in 50 years ? Their approach on the face of it from an eps basis appears to be counter intuitive. Could it just be possible that after all this time there is not sufficient market appetite for a tier 2 issue ?

[winner69]

While they have reaffirmed guidance they have neglected to state the obvious that on an expanded capital base guidance in terms of earnings per share has effectively been reduced !
Interesting approach seeing as a year ago they talked about issuing tier 2 capital and repaying tier 1 capital which would have increased eps.

Now they're still talking about a tier 2 issue at a later date, well over a year ago from first "feeling out" the market...come on for goodness sake come clean, why not do a tier 2 issue now when interest rates are arguably at their lowest in 50 years ? Their approach on the face of it from an eps basis appears to be counter intuitive. Could it just be possible that after all this time there is not sufficient market appetite for a tier 2 issue ?

The Cooperative Bank recently raised $30m by way of Subordinated Notes - easy peasy from all accounts

Obviously Heartland think shareholder money is cheaper

[macduffy]

The Cooperative Bank recently raised $30m by way of Subordinated Notes - easy peasy from all accounts

Obviously Heartland think shareholder money is cheaper

Either that, or it may be that Heartland's need, either now or prospectively, will be for tier 1 capital.

[winner69]

Either that, or it may be that Heartland's need, either now or prospectively, will be for tier 1 capital.

No doubt they will ......as the lending base its bigger and bigger

Paid far too much out in divies over the last few years I reckon - should have retained more earnings to fund growth?

[winner69]

While they have reaffirmed guidance they have neglected to state the obvious that on an expanded capital base guidance in terms of earnings per share has effectively been reduced !
Interesting approach seeing as a year ago they talked about issuing tier 2 capital and repaying tier 1 capital which would have increased eps.

Now they're still talking about a tier 2 issue at a later date, well over a year ago from first "feeling out" the market...come on for goodness sake come clean, why not do a tier 2 issue now when interest rates are arguably at their lowest in 50 years ? Their approach on the face of it from an eps basis appears to be counter intuitive. Could it just be possible that after all this time there is not sufficient market appetite for a tier 2 issue ?

All this talk of acquisitions over the last year or so has just been hot air

Sounds good though

[Hectorplains]

I will not be surprised to see the $10m available to 'everyone else' oversubscribed...

Disclosure: I know I for sure have some capital on hand ready to deploy, with a particular focus on companies that have "growth + dividend", and HBL is a prime example of this (along with the top performing stock in the retirement sector this year so far ;))... so yes I will be taking part in the cap raise

Recent evidence of post capital raising for a company's share price is not flash. I'd consider selling now and buying back in later as a better play.

[janner]

Paid far too much out in divies over the last few years I reckon - should have retained more earnings to fund growth?

DRP allows for those that wish to invest further .. Raising capital albeit quite small.

Allowing those who look for or need dividends to collect.

Disc. Holder

[trader_jackson]

Raised 20m at $1.46... must be very strong demand (not surprisingly)

[janner]

Raised 20m at $1.46... must be very strong demand (not surprisingly)

Exactly.. Win. Win for all concerned ..


Disc. Happy holder ( with DRP ).

[horus1]

I bought some . Scaled back by 30-40%. Very happy holder.

[iceman]

Raised 20m at $1.46... must be very strong demand (not surprisingly)

It will be disappointing of we the small SH don't get offered to partake at $1.46 as well ! No details on that yet except to say it will be at a discount to SP at the time

[Beagle]

All this talk of acquisitions over the last year or so has just been hot air

Sounds good though

I suppose he has to say something and look like the he's looking at something to justify that huge seven figure bankers package. The other day I was reading my granddaughter the story of the boy who cried wolf once too often... Last nights story was of the three little pigs. I suppose the capital raise is a good idea to ensure the lurking big bad wolf, (GFC MK2 if it happens), doesn't blow the house down but tier 2 would have made sense from an eps perspective.

[Bjauck]

I think a tier 1 is a prudent move and the option still remains for a tier 2 raising. SP only down 2% so far, so it seems to have had a good reception. I hope that loyal shareholders should be offered a spp at the same price or at a 5% discount, whichever is lower at the time.

[Not too Flash]

With over 10,000 shareholders $10m means only $1,000 each if all subscribe. The $15,000 maximum will be well watered down for the loyal shareholders....

[winner69]

With over 10,000 shareholders $10m means only $1,000 each if all subscribe. The $15,000 maximum will be well watered down for the loyal shareholders....

Some special / selected shareholders have already contributed

The SPP is just a goodwill exercise - you know that

[Bjauck]

With over 10,000 shareholders $10m means only $1,000 each if all subscribe. The $15,000 maximum will be well watered down for the loyal shareholders.... Plus having your cash tied up before getting a refund....Smaller loyal shareholders are used to being fed the scraps from the big table. Still I guess it's good if new shareholders have been brought onto the register.

[Onion]

Some of the chatter on here seems to assume the money raised is related to capital ratios and lending opportunities. While maintaining the ratios is probably part of the equation the announcement told you exactly what the money raised will be used for:


This growth has also been driven by Heartland’s investment in, and alignment of, resources to support digital origination across the wider business, and the increasing use of data analytics to more precisely target our customers. Those factors have opened up real opportunities for Heartland to further differentiate itself from its competitors.

The technology needed to run a bank in a digital world is expensive and requires constant refinement. Heartland are wise to invest is the technology -- otherwise they will be left behind. In particular because they will always have limited brick and mortar presence it is good to see they are investing in their technological presence.

Analytics (data science, examining trends, patterns, finding the most lucrative loans, customers, etc.) is a discipline in real growth mode -- again it is wise for Heartland to be investing in their capability.

[winner69]

Some of the chatter on here seems to assume the money raised is related to capital ratios and lending opportunities. While maintaining the ratios is probably part of the equation the announcement told you exactly what the money raised will be used for:



The technology needed to run a bank in a digital world is expensive and requires constant refinement. Heartland are wise to invest is the technology -- otherwise they will be left behind. In particular because they will always have limited brick and mortar presence it is good to see they are investing in their technological presence.

Analytics (data science, examining trends, patterns, finding the most lucrative loans, customers, etc.) is a discipline in real growth mode -- again it is wise for Heartland to be investing in their capability.

Hope they work out how let a customer do some straight forward banking transactions on a mobile device without any hassles

[Bjauck]

A raising for all the right reasons...and the market response so far reflects that.

[Onion]

Hope they work out how let a customer do some straight forward banking transactions on a mobile device without any hassles

Totally agree. My dealings with them as a customer have been a bit clunky for sure. A good customer experience (yes, mobile included) is essential.

[Harvey Specter]

With over 10,000 shareholders $10m means only $1,000 each if all subscribe. The $15,000 maximum will be well watered down for the loyal shareholders....Serious questions: I don't understand why they needed to do an institutional placement as they could easily have filled the $30m via existing shareholders by way of SPP. They are still going through the time and expense of a SPP.

Is it just kickbacks to the broking community or is there a 'proper' reason to do so. [This question applies to most SPP which are normally heavily scaled]

[macduffy]

I'm always a bit sceptical about the phrase "loyal shareholders". Don't we (practically) all invest for our own benefit - and remain "loyal" to a company only so long as it performs for us?

[Joshuatree]

Yeah, i own a chunk of this Company and they work very well FOR me; loyalty rhymes with royalty (divvys) Heheh:t_up:

[trader_jackson]

Great NBR article (although behind a paywall), mentioned that they wanted to get more institutional holders throughout NZ and Australia (those with deeper pockets for when HBL has a game changing acquisition?) and also made a good comparison to ATM where they made a $43m placement, but only 'gave' $3m via SPP.... Good to see HBL rewarding their loyal, and increasing retail shareholder base (like myself) :t_up:.

The most interesting comment for me was this:
“The size of the equity raise is reasonably modest with it being a total of up to $30 million. There may be some shareholders who would like to participate at a higher level and, hopefully, if the growth continues, there may be the opportunity for them to do that in the future.”

Draw your own conclusions from Ms Byrne's comments ;)

[Bjauck]

I'm always a bit sceptical about the phrase "loyal shareholders". Don't we (practically) all invest for our own benefit - and remain "loyal" to a company only so long as it performs for us? Every person has their price?

Is loyalty with investing when an investor takes a longer-term view and is prepared to make a commitment and hold through any short-term oscillations? Or, When an investor was in from the early days, preparing to take a risk in order to allow a business to develop, whilst others waited to see if success actually was forthcoming?

[Bjauck]

Great NBR article (although behind a paywall), mentioned that they wanted to get more institutional holders throughout NZ and Australia (those with deeper pockets for when HBL has a game changing acquisition?) and also made a good comparison to ATM where they made a $43m placement, but only 'gave' $3m via SPP.... Good to see HBL rewarding their loyal, and increasing retail shareholder base (like myself) :t_up:... It's good for them to increase the depth of the shareholder base in NZ and Oz. As well, I am all for efforts to make NZ into more of a shareholding democracy where as wide a cross-section of people as possible own a stake in NZ-based companies.

[macduffy]

Every person has their price?

Is loyalty with investing when an investor takes a longer-term view and is prepared to make a commitment and hold through any short-term oscillations? Or, When an investor was in from the early days, preparing to take a risk in order to allow a business to develop, whilst others waited to see if success actually was forthcoming?

In both those instances the investor is acting in his/her own long term interests in the expectation of eventual gain. I see "loyalty" as being a bit more than that - an element of acting with a degree of altruism without regard for self-interest. So a bit pedantic perhaps, on my part?

[Bjauck]

In both those instances the investor is acting in his/her own long term interests in the expectation of eventual gain. I see "loyalty" as being a bit more than that - an element of acting with a degree of altruism without regard for self-interest. So a bit pedantic perhaps, on my part? It is a question of degree and the manner by which the benefit is derived. There are degrees of loyalty and mutual benefit. I understand your point. I think loyalty is mutually beneficial and I am not sure that loyalty is synonymous with altruism. Although with 'altruism" there may still still be a satisfaction in some form derived by the "donor?"

[Beagle]

As many investors will recall I have been very negative on HBL for the last two years as risks around dairy loan write-off's reached very high level's.
I now believe the risk has passed so I tried to value the company this morning. I see about 11.75-12.00 cps for FY17, mid point of forecast suggests 12 cps on existing shares but they have just issued new ones so on a weighted average issued shares basis I would err towards the bottom of that range.

Turning now to what's a fair PE, I think 12.5 is about right for this company taking into account the historical PE it has traded at, PE's for its peer group, its good capital adequacy ratio and sound previous and expected future growth so the hound sees fair value at 11.75 x 12.5 = $1.47 - $1.50. I have a modest bid in at that $1.47 and am happy to buy at the bottom end of my perception of fair value.

I think HBL and other banks got very lucky with the dairy recovery. It could well have turned out very ugly for the entire dairy sector and the banks, thankfully it didn't.

[horus1]

Thanks ,Roger. Good analysis . Got some at 1.46 and happy to add more at that price thru the spp next year. With interest rates rising in the USA and here at seems to me the banks will do better. Overweight in HBL.

[Snow Leopard]

For Heartland Bank I do not believe the overall risk of write-offs has materially changed much over the last few years and there is a probability that going forward write-offs will increase (or indeed, decrease) as a proportion of lending.

You need to look at the entire game board to get a decent perspective.

Being somewhat conserative in my expectations of what will be achieved over the next few years I have a present right here right now value for this Bank of a mere $1.386.


Meanwhile it is the biggest single holding in my NZX portfolio, and long may it be so.

Best Wishes
Paper Tiger

[Beagle]

For Heartland Bank I do not believe the overall risk of write-offs has materially changed much over the last few years and there is a probability that going forward write-offs will increase (or indeed, decrease) as a proportion of lending.

You need to look at the entire game board to get a decent perspective.

Being somewhat conserative in my expectations of what will be achieved over the next few years I have a present right here right now value for this Bank of a mere $1.386.


Meanwhile it is the biggest single holding in my NZX portfolio, and long may it be so.

Best Wishes
Paper Tiger

This piqued the hound's curiosity. If one's fair value at present is only $1.386 and the SP is $1.50 what other reason to hold other than to be what ostensibly amounts to a dividend hound ?

[winner69]

That 160 by Christmas looks a long shot now

Bugger .... maybe by Christmas 2017

[Snow Leopard]

This piqued the hound's curiosity. If one's fair value at present is only $1.386 and the SP is $1.50 what other reason to hold other than to be what ostensibly amounts to a dividend hound ?

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20161215_2.png

Best Wishes
Paper Tiger

[Beagle]

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20161215_2.png

Best Wishes
Paper Tiger

I see. That said it's right on the 100 day MA line and a line break to bring it back to the hounds bid price, ($1.47), will probably constitute a breech of the 100 day MA and were that sustained for 3 days that would be a technical sell for me.
Hmmmmmmmmmmmmmmm. (Dog scratches head and decides its time for bed) Definitely something to reconsider, (my bid), tomorrow.

[Jantar]

I see. That said it's right on the 100 day MA line and a line break to bring it back to the hounds bid price, ($1.47), will probably constitute a breech of the 100 day MA and were that sustained for 3 days that would be a technical sell for me.
Hmmmmmmmmmmmmmmm. (Dog scratches head and decides its time for bed) Definitely something to reconsider, (my bid), tomorrow.

Here is the ANZ chart with the 120 day MA. https://www.anzsecurities.co.nz/DirectTrade/dynamic/superchart.aspx
Personally I think you are safe with your $1.47 bid. I put in one the same when HBL announced their share placement, but it didn't get hit, and now I don't think it will get hit. On that basis I cancelled my bid today and instead decided to catch the IFT falling knife. Hopefully I did catch it by the handle and not the blade. :p

[percy]

Nice seeing "our Gregory" topping up his holding, by $2mil, in the recent placement.
He now holds 49,585,119 shares.

[janner]

Follow the money. :-))

[percy]

Looks as though Heartland Bank attracted the Aussie director they wanted.
Welcome to Ellie Comerford,whose CV looks impeccable.

[iceman]

Looks as though Heartland Bank attracted the Aussie director they wanted.
Welcome to Ellie Comerford,whose CV looks impeccable.

Agree Percy. Looks like a good strong addition to the board and I am sure our mate winner69 will be particularly pleased to see this from the announcement :

" Ellie is committed to promoting diversity, in particular gender diversity,
and is a member of Chief Executive Women, an Australian organisation focused
on increasing women's representation in senior leadership. Under her
leadership, Genworth received a citation as WGEA's 2015 Employer of Choice
for gender equality. "

[Snow Leopard]

So we have acquired two female directors in the last few months. I think that this is a good thing.

But have we managed to get rid of any of the men ?

Best Wishes
Paper Tiger

[winner69]

So we have acquired two female directors in the last few months. I think that this is a good thing.

But have we managed to get rid of any of the men ?

Best Wishes
Paper Tiger

No, no

Maybe a tigress but never a tiger

[Beagle]

Agree Percy. Looks like a good strong addition to the board and I am sure our mate winner69 will be particularly pleased to see this from the announcement :

" Ellie is committed to promoting diversity, in particular gender diversity,
and is a member of Chief Executive Women, an Australian organisation focused
on increasing women's representation in senior leadership. Under her
leadership, Genworth received a citation as WGEA's 2015 Employer of Choice
for gender equality. "

Got to be happy with that eh Winner. :)

[winner69]

Got to be happy with that eh Winner. :)

Its a start

Diversity goes beyond gender

Diversity of thinking is what it's about - ethnicity has a large part to play .....and that page in Maori doesn't cover for shortcomings

Just as important is a younger generation presence / mindset - pictures in Our People on the website don't give this a tick.

[Lewylewylewy]

I don't understand the relevance / benefit of board members specific type of genetalia. Why is it good to have women on the board, specifically?

[davflaws]

I don't understand the relevance / benefit of board members specific type of genetalia. Why is it good to have women on the board, specifically?

Because the differences between men and women go an awful lot deeper and wider than the differences in their genitalia.

Women think and feel differently, and experience the world in a way that is different from the way that men experience it. When men had all the social and economic power, made all the decisions, and controlled (or tried to control) almost every aspect of life, women's experience could safely be ignored. But over the last hundred or so years, women have gained increasing independence and now control their own lives to a degree that my grandmother would never have dreamed of. They control more than half of consumer spending, and form a huge and growing proportion of the workforce. Their influence in senior management continues to increase.

Even the "most able" women in senior management and governance have different perspectives from the men around them, and since they are "more like" nearly half the workforce, more than half the consumers, and an increasing proportion of the senior management than the men around them, their perspective and approach is essential.

And don't get me started on the importance of ethnic and cultural diversity!

[BlackPeter]

I don't understand the relevance / benefit of board members specific type of genetalia. Why is it good to have women on the board, specifically?

You must be kidding - are you? I guess your question is as sensible as asking why is it good to have men on the board, specifically? Must be some reason given that there are that many - oh right, its men picking others like them.

And this is the problem - nothing special about women, but in case you haven't noticed yet - there are differences (beyond the genitalia). Different approaches to problem solving, different key strengths. And this is the key - higher diversity on a company board makes the company more successful. Different view points help to better analyse and solve problems, rather than having everybody looking from the same angle and coming up with the same old remedies.

https://www.2020wob.com/learn/why-gender-diversity-matters

http://www.catalyst.org/media/companies-more-women-board-directors-experience-higher-financial-performance-according-latest

[winner69]

And don't get me started on the importance of ethnic and cultural diversity!

Go on, don't hold back

These are areas where Heartland need to improve

A condescending page in Maori twice a year in reports don't cut it

[percy]

"Skin in the game" is the most attribute I look at first when I look at a company's directors.
The "owner's eye" means the business will be well directed.
ALF,EBO,GXH,HLG,MFT,FRE,MHI,RYM,SKL,TNR come to mind..
Diversity is important,but "skin in the game" comes first for me,and the directors of HBL have a lot of it on the line.
I look forward to the latest two directors buying shares in HBL.

[Beagle]

Agree with Percy on this one. Nothing to motivate directors and management more than a decent amount of skin in the game. My view on the diversity thing is that first and foremost Directors must have vast experience and very high level's of business acumen and governance ability, diversity is a secondary consideration to that and appointments should be made based primarily on merit.

[Marilyn Munroe]

A headline about Heartland in the local throwaway Selwyn & Ashburton Outlook;

"Bank to ditch Ashburton's teller service."

The local stalwarts of CBS Canterbury whose deposits were used as ammunition to defend MARAC's dodgy lending are now to be cast aside.

Boop boop de do
Marilyn

[percy]

Yes and at the same time improving digital products, and online deliveries of those products.In a rapidly changing banking industry HBL are at the forefront,driven by customer demand.
And yes CSB shareholders have certainly benefitted by having shares in NZ's only listed bank.

[Lola]

"Skin in the game" is the most attribute I look at first when I look at a company's directors.
The "owner's eye" means the business will be well directed.
ALF,EBO,GXH,HLG,MFT,FRE,MHI,RYM,SKL,TNR come to mind..
Diversity is important,but "skin in the game" comes first for me,and the directors of HBL have a lot of it on the line.
I look forward to the latest two directors buying shares in HBL.

You forgot PIL

[winner69]

Overnight GDT auction sees a 'surprising' drop in prices

Whole Milk Powder down a whopping 7.7% - on top of a fall in auction just before Christmas

Will the correlation between dairy prices and HBL share price continue?

Maybe a few dairy farmers dialling in from the quad bike as they check on the herd today to instantly restructure their loans. Amazing thing this digit technology .......except if one wants to do a simple banking transaction on ones mobile device.

[percy]

Overnight GDT auction sees a 'surprising' drop in prices

Whole Milk Powder down a whopping 7.7% - on top of a fall in auction just before Christmas

Will the correlation between dairy prices and HBL share price continue?

Maybe a few dairy farmers dialling in from the quad bike as they check on the herd today to instantly restructure their loans. Amazing thing this digit technology .......except if one wants to do a simple banking transaction on ones mobile device.

Funny thing about the correlation between dairy prices and HBL's share price.
Anyone following charts,volumes,market sentiment,Sharetrader noise levels,and the moon cycles, could convince themselves they have read the market correctly.
While those who know the fundamentals,ie HBL have an insignificant exposure to dairying, could be said to have been wrong in the short term,but correct in the long term.
I remain in the second group,happy in backing my own research.It really works.!

[janner]

Funny thing about the correlation between dairy prices and HBL's share price.
Anyone following charts,volumes,market sentiment,Sharetrader noise levels,and the moon cycles, could convince themselves they have read the market correctly.
While those who know the fundamentals,ie HBL have an insignificant exposure to dairying, could be said to have been wrong in the short term,but correct in the long term.
I remain in the second group,happy in backing my own research.It really works.!

You and me both perc...

My biggest worry with HBL... ???

Where do I get the money from for their next issue.. ???

[janner]

Toast and cat food for another few months...

I hope my Great Grand children will appreciate my suffering ..

Yeah Right :-))))

[percy]

Toast and cat food for another few months...

I hope my Great Grand children will appreciate my suffering ..

Yeah Right :-))))

We need to change our attitudes.
We need to aim to die broke.!
My daughters are doing their best to make that happen.!!!...lol.
Would not worry too much about the next issue.Another one of those oversubscribed SPP deals,which depending on terms ,and funds I may leave.
Only positive is it raises the nta.

[Beagle]

Overnight GDT auction sees a 'surprising' drop in prices

Whole Milk Powder down a whopping 7.7% - on top of a fall in auction just before Christmas

Will the correlation between dairy prices and HBL share price continue?

Maybe a few dairy farmers dialling in from the quad bike as they check on the herd today to instantly restructure their loans. Amazing thing this digit technology .......except if one wants to do a simple banking transaction on ones mobile device.

Your previous charts overlaying SP against dairy prices have shown a surprisingly strong correlation given this sector only accounts for 8% of their lending. This most recent decline isn't itself a concern but if its the start of a new trend down than that would be a worry. The SP chart doesn't make a convincing case for investment right at the minute but I have it on my watchlist. They will face increasing competition for deposit money this year but seem to have embarked on a curious strategy of blowing the other banks out of the water with their call account interest rates. This will win them many fair weather depositor friends what happens to that mountain of call account money if there's a GFC MK2 ?

[percy]

Your previous charts overlaying SP against dairy prices have shown a surprising strong correlation given this sector only accounts for 8% of their lending. This most recent decline isn't itself a concern but if its the start of a new trend down than that would be a worry. The SP chart doesn't make a convincing case for investment right at the minute but I have it on my watchlist. They will face increasing competition for deposit money this year but seem to have embarked on a curious strategy of blowing the other banks out of the water with their call account interest rates. This will win them many fair weather depositor friends what happens to that mountain of call account money if there's a GFC MK2 ?

Come on Roger put one and one together.!
Clues,SPP and bond issue.??

[Beagle]

Come on Roger put one and one together.!
Clues,SPP and bond issue.??

Could get 1000 shares in my name, the wife's name, our joint names, each of the dog's names, joint dog's name, the granddaughters name, her cats name, my company name, our family trust name and then apply for maximum cheap shares for each in the SPP to get a discount :D :D Is that the hint you're giving me mate :D (lot of paperwork required is it worth it ????????)

[percy]

Could get 1000 shares in my name, the wife's name, our joint names, each of the dog's names, joint dog's name, the granddaughters name, her cats name, my company name, our family trust name and then apply for maximum cheap shares for each in the SPP to get a discount :D :D Is that the hint you're giving me mate :D (lot of paperwork required is it worth it ????????)

Some would say it is worth it.
I would not bother,as I hate sending off say $15,000 for me and $15,000 for the wife only to get $3,000 worth each.So sending off $90,000 to receive $18,000 worth of shares is absurb to me.Better to wait for a low dairy/milk auction?>!! ..lol.
No I was meaning Heartland Bank have been very astute with their funding since listing,so the high call rate would be for a reason/s.You just have to think what those reasons are.

[Beagle]

Some would say it is worth it.
I would not bother,as I hate sending off say $15,000 for me and $15,000 for the wife only to get $3,000 worth each.So sending off $90,000 to receive $18,000 worth of shares is absurb to me.Better to wait for a low dairy/milk auction?>!! ..lol.
No I was meaning Heartland Bank have been very astute with their funding since listing,so the high call rate would be for a reason/s.You just have to think what those reasons are.

Fair enough mate. Agree...far too much paperwork especially at this time of year !

[winner69]

percy once said that HBL shareprice possibly indicates what might happen to WMP prices. No doubt said in jest but he may be right

HBL has been down trending for a couple of months (since the 160 in October) ..... and now WMP prices are trending down (even with a declining NZD helping out)

Anyway probably all this is just interesting aside but then something really stupid like what's happening to dairy prices affects the overall sentiment of the market - and any company whose name suggests they are in to rural stuff is affected.

[percy]

percy once said that HBL shareprice possibly indicates what might happen to WMP prices. No doubt said in jest but he may be right

HBL has been down trending for a couple of months (since the 160 in October) ..... and now WMP prices are trending down (even with a declining NZD helping out)

Anyway probably all this is just interesting aside but then something really stupid like what's happening to dairy prices affects the overall sentiment of the market - and any company whose name suggests they are in to rural stuff is affected.

Well I look forward to one of your charts showing dairy prices affecting the NZ $.
Then we can prove HBL's share price is the best indicator of where the NZ $ is going.!!! Every thing follows HBL.lol.
As Sir Michael Caine would say;"not a lot of people know that,"

[winner69]

Well I look forward to one of your charts showing dairy prices affecting the NZ $.
Then we can prove HBL's share price is the best indicator of where the NZ $ is going.!!! Every thing follows HBL.lol.
As Sir Michael Caine would say;"not a lot of people know that,"

No point in doing that percy - only a modest correlation between dairy prices and NZD:USD cross.

What surprises most people is that there is no correlation between dairy prices and GDP growth (actually slightly negative)

What happens to dairy prices (ie farm incomes) doesn't really impact the economy ...... but spookily seems to impact the HBL share price

[percy]

No point in doing that percy - only a modest correlation between dairy prices and NZD:USD cross.

What surprises most people is that there is no correlation between dairy prices and GDP growth (actually slightly negative)

What happens to dairy prices (ie farm incomes) doesn't really impact the economy ...... but spookily seems to impact the HBL share price
I live and learn.
Always thought NZ $ followed dairy prices as dairying made up approx 24% of NZ exports.Dairy prices drop, NZ$ drops.Dairy prices rise. NZ $ rises.

[Beagle]

TSB Bank, (credit rating A-) in the market offering 3.75% for 9 month money, (thinking of depositing one of my bones with them), "trumping", (I dislike that word now for some strange reason), HBL's, (credit rating BBB) former market leading offer. HBL to trump TSB bank tomorrow and offer 3.8-3.9% ? I know these sort of deposit rates bore most people to tears, and fully understand why but the fact remains that the term deposit space is getting more competitive. Just as well HBL have the best net interest margins in the banking industry by miles.

[winner69]

I live and learn.
Always thought NZ $ followed dairy prices as dairying made up approx 24% of NZ exports.Dairy prices drop, NZ$ drops.Dairy prices rise. NZ $ rises.

You in good company percy - Reserve Bank Governer Wheeler seems to think so as well. One of the reasons he has got things wrong lately.

Since 2013 there's actually been a moderately negative correlation between changes in the NZD and changes in dairy prices - interesting eh

[winner69]

HBL share price down today - on a day when NZX seems to be doing well

Hope it recovers by 5pm

[trader_jackson]

HBL share price down today - on a day when NZX seems to be doing well

Hope it recovers by 5pm

No wories.

It's already recovered from its 'blip'... everyone to busy buying Arvida you think? (another "growth + dividend" company)

[percy]

HBL share price down today - on a day when NZX seems to be doing well

Hope it recovers by 5pm

And so it came to pass, HBL's share price ended the day up 0.7%.
Considering there is a SPP coming up in February ,today's $1.51 finish is rather pleasing.

[winner69]

Hey percy, UDC sold 1.6 times book value

Heartland trading close to that at the moment .....hmmm

[Beagle]

What PE multiple was it sold at mate ?

Lazy hound decided to dig it out himself http://www.scoop.co.nz/stories/BU1612/S00329/udc-finance-posts-record-net-profit.htm
$58.5m, solf for $660m = historical FY16 PE of only 11.2 (UDC a very good business with a very long track record).

Heartland trading at $1.50 of a forecast FY17 forward PE of 12.5 ! (assuming 12.0 cps earnings), mid point of forecast range.

Conclusion - Heartland fully priced at the current level.

[winner69]

What PE multiple was it sold at mate ?

Looks like 11.1 times 2016 NPAT from numbers on ANZ fact sheet

[percy]

Hey percy, UDC sold 1.6 times net assets

Heartland trading close to that at the moment .....hmmm

hmmmmmmmmmmm,yes.
I think $660 mil is a good price for ANZ to have received.
Will be interesting comparing the growth UDC, under Chinese ownership,achieves, against Heartland's over the next year or two.
I would think "momentum" is on Heartland's side,therefore Heartland would appear to be either "fair" value or slightly undervalued,going on just times net assets.
A year ago, the acquisition of UDC and/or MTF seemed to be te only way Heartland would achieve growth.
This has been proved incorrect,as Heartland have achieved very strong organic growth.This very strong growth is set to continue, as Heartland's strategy of digital products delivered online gains more traction.

[Beagle]

Looks like 11.1 times 2016 NPAT from numbers on ANZ fact sheet

Interestingly according to ANZ securities at $1.51 Heartland trading on a FY16 PE multiple of 13.97 times EPS of 10.81.
11.1 x 10.81 = only $1.20. Hmmmmm

[Snoopy]

Interestingly according to ANZ securities at $1.51 Heartland trading on a FY16 PE multiple of 13.97 times EPS of 10.81.
11.1 x 10.81 = only $1.20. Hmmmmm

Can I translate this into words that everyone can understand?

The party is over.

Heartland: Sell, sell, sell!

SNOOPY

[percy]

Can I translate this into words that everyone can understand?

The party is over.

Heartland: Sell, sell, sell!

SNOOPY

Very funny.At least your record of being 100% wrong on this thread remains intact...lol.
The reality is the market values growth.
Especially organic growth.
Look for UDC staff looking for jobs at Heartland Bank,
And I would expect a great number of UDC's clients will follow them.
I would not deposit or lend money to a Chinese outfit.Would you?
BuyBuy Buy HBL.NZ's only listed bank,showing sustainable growth.!!

[percy]

I think Heartland will have to get their bond issue under way pretty smartly to fund the UDC clients moving over to them.

[horus1]

I have a lot of heartland. They are a bank not a finance co and without ANZ as an implied gaurantor cannot have as good a PE as Heartland. Therefore I would say Heartland are undervalued. I will pick up more in the SPP.

[Xerof]

I think Heartland will have to get their bond issue under way pretty smartly to fund the UDC clients moving over to them.

Hehe, I like it

[Beagle]

I think Heartland will have to get their bond issue under way pretty smartly to fund the UDC clients moving over to them.

I reckon less than 10% would know in due course about the change and of those probably only 10% would care, so maybe 1 in 100 would switch. Their finance deal will probably remain the same so genuine question, why should or would they care ? Plenty of cheap Chinese money sloshing around, maybe their rates get more competitive and they steal market share from Heartland ? If you'd just invested $660m mate wouldn't you be looking to grow the business ?

[macduffy]

I reckon less than 10% would know in due course about the change

You're probably correct in that many won't care who's financing them but they'll certainly know about it - regulations and all that!

[Beagle]

You're probably correct in that many won't care who's financing them but they'll certainly know about it - regulations and all that!

Yes as you suggest they'll have to write to all their customers to inform them of the change and probably 90% of those will throw the letter in the bin as soon as they read the highlighted bit right at the top that nothing changes about their financing arrangements. The vast majority of the other 10% that stop to have something of a think about it won't care either for the same reason.

Of course the new owners will dress the change up highlighting new opportunities for existing customers like perhaps expanded credit lines...as mentioned above, nobody invests $660m and doesn't try and grow the business.

[Snoopy]

Yes as you suggest they'll have to write to all their customers to inform them of the change and probably 90% of those will throw the letter in the bin as soon as they read the highlighted bit right at the top that nothing changes about their financing arrangements. The vast majority of the other 10% that stop to have something of a think about it won't care either for the same reason.

Of course the new owners will dress the change up highlighting new opportunities for existing customers like perhaps expanded credit lines...as mentioned above, nobody invests $660m and doesn't try and grow the business.


I wonder how HNA will grow the UDC business? When ANZ owned UDC, you could always walk into an ANZ bank branch to gain information. But HNA has no footprint in NZ that I know of.

SNOOPY

[percy]

I wonder how HNA will grow the UDC business? When ANZ owned UDC, you could always walk into an ANZ bank branch to gain information. But HNA has no footprint in NZ that I know of.

SNOOPY

Maybe they could buy Kiwi Bank and do it through that branch network.?..
From what posters say no body would mind or care if they did .!??????????
I think Kiwis would snuggle up to Panda Bear Bank.

[Beagle]

I wonder how HNA will grow the UDC business? When ANZ owned UDC, you could always walk into an ANZ bank branch to gain information. But HNA has no footprint in NZ that I know of.

SNOOPY

Dunno mate. Can't partner up with ANZ that's for sure...or maybe they can, perhaps that's part of the deal ?...or maybe they go bark up a different bank affiliation tree ?

[percy]

Dunno mate. Can't partner up with ANZ that's for sure...or maybe they can, perhaps that's part of the deal ?...or maybe they go bark up a different bank affiliation tree ?

Merge,takeover Heartland?

[Beagle]

Merge,takeover Heartland?

LOL I love your enthusiasm mate :)

[JeremyALD]

It's amazing how long this share has been stuck between $1.47 and $1.55. Even when the nzx got smashed in Q4 it was stable, EXCEPT when Donald trump won the election and it dropped down to $1.34 for that one afternoon!!! God that day would of been amazing buying. Instant return on investment the next day lol.

[Beagle]

Looks like 11.1 times 2016 NPAT from numbers on ANZ fact sheet

I did some digging and find it interesting that low PE number considering UDC's profit had grown 13% in 2013, 20% in 2014, 11% in 2015 and 3% in 2016. Average growth rate 11.75% not dissimilar to Heartland is it mate ?

[percy]

Bit like buying a car.
Those without an engine come a little cheaper.
No network,not a goer.
What you can quarantee is the ANZ will want to distance themselves from it.
Gone and soon forgotten.

[Bjauck]

UDC switched from being owned by one foreign company to another even more foreign company....Situation normal snafu. Presumably they think it will provide a return. Probably not the end of the World for them if it slowly winds down -worth a gamble for them, maybe HBL will get it cheaper in a few years time?

[percy]

UDC switched from being owned by one foreign company to another even more foreign company....Situation normal snafu. Presumably they think it will provide a return. Probably not the end of the World for them if it slowly winds down -worth a gamble for them, maybe HBL will get it cheaper in a few years time?

I think HBL will be looking forward to a Boxing Day half price sale.!

[macduffy]

Getting a bit away from HBL here but the Chinese group is a big conglomerate - check out their airline and tourism interests - with an operation in Sydney. Perhaps it signals a desire to expand its finance business in this part of the world? if so, HBL shareholders may get that takeover offer!

[percy]

Getting a bit away from HBL here but the Chinese group is a big conglomerate - check out their airline and tourism interests - with an operation in Sydney. Perhaps it signals a desire to expand its finance business in this part of the world? if so, HBL shareholders may get that takeover offer!

Would be a perfect fit.

[iceman]

It's amazing how long this share has been stuck between $1.47 and $1.55. Even when the nzx got smashed in Q4 it was stable, EXCEPT when Donald trump won the election and it dropped down to $1.34 for that one afternoon!!! God that day would of been amazing buying. Instant return on investment the next day lol.

Not the first time. I just looked up my holding. Since start of financial year 1 April 2015 it has had a capital gain of 23% and dividends of 9.3%. Nothing to be sneezed at !!

[percy]

According to Yahoo, HBL has shown the following returns,which do not include dividends.
1 year 16.15%
2 year 34.82%
5 year 221.28%

[iceman]

According to Yahoo, HBL has shown the following returns,which do not include dividends.
1 year 16.15%
2 year 34.82%
5 year 221.28%

NZX says 23% for last 52 weeks https://www.nzx.com/markets/NZSX/securities/HBL

[percy]

Whatever the motivation(s) underlying the quest for a banking licence, I think the outcome - either way - will have a big impact on the fortunes of HNZ. The more so if it comes sooner, not later.
I suppose the NTA is reassuring, hadn't really thought about it. Until HNZ puts decent and sustained profits together and pays solid dividends the NTA has an academic quality? HNZ is trading at 0.55 times NTA. With decent profits and dividends, or increasing promise of same, the HNZ price will move towards the 1.8 times NTA of ANZ and the 2.0 times NTA of WBC. Getting there will take much more time than Mainland cheese, and a few more old boys on the Mainland commercials will have popped their clogs along the way, but loyal HNZ holders will wallow in good port and vintage tasty.

Interesting how some posters have very good foresight.
Was posted nearly 5 years ago,on18-02-2012

[percy]

NZX says 23% for last 52 weeks https://www.nzx.com/markets/NZSX/securities/HBL
One is right I hope?
I was really looking at the 5 year return.
Just using the calculator to work out what my holding will be worth in 5 years time, should history be repeated.
Very handsome.!!..lol.

[Snow Leopard]

Capital only and Capital + Dividend(*) returns for HBL (formerly HNZ) for the yearly periods to 11-Jan.

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20170111.png

Best Wishes
Paper Tiger

(*) Cap&Div prices are dividend adjusted prices using the definitive Tiger Method.

[janner]

One is right I hope?
I was really looking at the 5 year return.
Just using the calculator to work out what my holding will be worth in 5 years time, should history be repeated.
Very handsome.!!..lol.

Did you include the DRP in your calculations ?????

[janner]

Are we all counting chickens before they hatch ???

[percy]

Capital only and Capital + Dividend(*) returns for HBL (formerly HNZ) for the yearly periods to 11-Jan.

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20170111.png

Best Wishes
Paper Tiger

(*) Cap&Div prices are dividend adjusted prices using the definitive Tiger Method.

Thanks Paper Tiger,
"Stripe on".
What a fantastic record.
No wonder Janner,Iceman you,and I are extremely happy investors.
And yet we still remain "well positioned." while the knockers have big wounds to lick.!, I quess hounds are used to doing that.!!!.lol.

[Bjauck]

Interesting how some posters have very good foresight.
Was posted nearly 5 years ago,on18-02-2012 Under Surveillance should take a bow - assuming they can still clatter their clogs down the cobbles! I wonder if they are still a holder and enjoyed the (not to be repeated?) revaluation of HNZ/HBL.
Disc: A holder since 2012

[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/ $3,250.468m = 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.


Industry Group Risk

From AR2016 note 18c, the greatest 'business group' risk in dollar terms is agriculture, with $628.202m worth of assets. This represents an increase of $90.916m over the previous year.

$628.202m/ $3,461.292m = 18% of all loans


Regional Risk

From AR2016 note 18b, the greatest regional area of credit risk in dollar terms is 'Rest of the North Island' , with $888.080m worth of assets. This represents:

$880.080m/ $3,461.392m = 25% of all loans

The 'Rest of North Island' loans (which excludes Auckland and Wellington) have risen 12.5% in numerical terms over the year, outstripping the growth of the previous largest region Auckland which only grew by 2% in gross loan amounts (Auckland still covers 24.5% of all loans) . This is a significant change for all other years where Auckland has been the largest market. Given 'Agriculture' loans have grown by 17% over the year, this 'growth' could reflect the compounding of agricultural interest charges into existing loans. According to AR2016 p7, dairy represent 7% of Heartland's total loan book.

0.07 x $3,461.392m = $242m

At an interest rate of 8%, assuming no interest was actually paid, this would increase the value of the Heartland loan book by:

$242m x 0.08 = $19.3m

Since the actual agricultural loan balance increased by $90.9m, we can assume that more net new agricultural loans were taken out, rather than just rolling over the dairy loan book. This is very much a contrast to traditional market leader ANZ.NZ who kept their total rural loan book static over the similar period. Looked at just in agricultural terms, you could say that Heartland are compounding their own problems for the future. But because the loan book in total has grown, reducing Heartland's relative reliance on Auckland is probably a positive.

The multi-year picture is shown below:




20122013201420152016


Largest Regional MarketAuckland (30%)Auckland (30%)Auckland (25%)Auckland (26%)Rest of North Island (25%)


Largest Industry Group MarketAgriculture (24%)Agriculture (21%)Agriculture (16%)Agriculture (17%)Agriculture (18%)



SNOOPY

[winner69]

Latest Global Dairy Trade results are non-event

Bit like the HBL share price

As such the correlation remains

[percy]

Capital only and Capital + Dividend(*) returns for HBL (formerly HNZ) for the yearly periods to 11-Jan.

http://i7.photobucket.com/albums/y269/TheTigerWithNoName/SharetraderImages/NZX-HBL/NZX-HBL-20170111.png

Best Wishes
Paper Tiger

(*) Cap&Div prices are dividend adjusted prices using the definitive Tiger Method.

Capital plus dividends for 5 years = 317.13%
Works out at an incredible 5.2855% a month,and yet W69 is still thinks HBL's sp is a non-event?

[winner69]

Capital plus dividends for 5 years = 317.13%
Works out at an incredible 5.2855% a month,and yet W69 is still thinks HBL's sp is a non-event?

HBL was $1.41 early February 2015 - nearly 2 years ago

Today $1.51 so 10 cents gain ... and 16 cents divie since

Hardly 5.2855% a month -

Your 5.2855% is actually 2.4089% per month compounding

[percy]

HBL was $1.41 early February 2015 - nearly 2 years ago

Today $1.51 so 10 cents gain ... and 16 cents divie since

Hardly 5.2855% a month -

Your 5.2855% is actually 2.4089% per month compounding

Thank you W69.
2.4089% compound monthly means I am growing wealthier by the month.!!!
Looks as though I am "well positioned" to enjoy yet another year of compounding growth.

[winner69]

Thank you W69.
2.4089% compound monthly means I am growing wealthier by the month.!!!
And am enjoying it too.!!

Have grown ..... past returns are no guarantee of future returns

I would guess that past 5 year Heartland returns will never never be repeated

But $1.60 beckons so no worries

[percy]

Have grown ..... past returns are no guarantee of future returns

I would guess that past 5 year Heartland returns will never never be repeated

But $1.60 beckons so no worries

Yes I have certainly enjoyed past returns.
Yet my beautiful HBL dividends are now based on the current sp.
What a wonderful bank.
And I guess we will pass through $1.60 on our way to $2.
Something other than increasing dividends to look forward to.
Us shareholders remain "well positioned".

[Under Surveillance]

Under Surveillance should take a bow - assuming they can still clatter their clogs down the cobbles! I wonder if they are still a holder and enjoyed the (not to be repeated?) revaluation of HNZ/HBL.
Disc: A holder since 2012
Thanks to you, and to Percy, for the compliments. Yes, I'm still above ground, and still holding.

[Snoopy]

Updating for the full year result FY2015:

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

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

Interest expense is listed as $126.041m.

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

Result: PASS TEST

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


Updating for the full year result FY2016:

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

EBIT (high estimate) = $265.475m - $68.872m= $196.603m

Interest expense is listed as $118.815m.

So (EBIT)/(Interest Expense)= ($196.603m)/($118.815)= 1.65 > 1.20

Result: PASS TEST

The historical picture of this ratio is tabulated below. Despite the shakey start, the trend is very pleasing.



FY2012FY2013FY2014FY2015FY2016Target

[
EBIT/ Interest Expense1.151.221.441.521.65>1.2



SNOOPY

[Snoopy]

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

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

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

0.2 x $2,879.134m = $575.8m

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

Result: FAIL TEST

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

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

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


The promised capital note issue never happened. So once again this calculation is straightforward with all 'Tier 1 and Tier 2 capital' being shareholder equity.

Total Heartland Equity at balance date was $498.341m,

Total Heartland liabilities at balance date were $3,048.840m

So: Equity / Total Liabilities
= $498.341m / $3,048.840m = 16.3% < 17% (*)

Result: FAIL TEST

Note that I have changed my equity target for Heartland to the 17% equity (down from my 20% target) that Heartland had when Governor Wheeler originally approved Heartland as a bank. I had previously used 20% as the figure appropiriate for a more marginal finance company without a strong history. Even so, Heartland has did not have the amount of equity on the books to support a loan book of the current size in my judgement. However the December 2016 equity raising has no doubt addressed this issue for now.

The historical picture of this ratio is tabulated below.



FY2012FY2013FY2014FY2015FY2016Target

[
Total Tier Capital/ Loan Book19.3%17.7%17.6%16.6%16.4%>17%



SNOOPY

[Snow Leopard]

Once a pretty dodgy finance company always a pretty dodgy bank then Snoopy !

You were right to never invest in it.

Best Wishes
Paper Tiger

[Snoopy]

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

$46.020m + $7.869m = $53.889m

-----

To calculate the total underlying company assets we have to (at least) subtract the finance receivables from the total company assets. I would argue that you should also subtract the 'Investment Properties' (the rump of the problem property portfolio) and the unspecified 'Investments' (held on behalf of policy beneficiaries) from that total:

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

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

$143.348m - $51.119m = $92.229m

------


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

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

Result: PASS TEST


The underlying debt of the company (debentures and other loan supporting borrowings removed) is the first factor in an attempt to assess the underlying shareholder owned skeleton upon which all the recivables that are loaned ultimately sit.

According to the full year (FY2016) statement of financial position the debt excluding borrowings is:

$42.099m + $6.754m = $48.853m (1)

-----

To calculate the total underlying company assets we have to (at least) subtract the finance receivables from the total company assets. I would argue that you should also subtract the 'Investment Properties' (the rump of the problem property portfolio) and the unspecified 'Investments' (held on behalf of policy beneficiaries) from that total:

$3,571.181m - ($3,113.957m +$8.384mm + $236.435m) = $188.405m (2)

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

$188.405m - $57.755m = $130.650m

----


Now we have the information needed to calculate the 'underlying company debt' (skeletal picture) net of all Heartland's lending activities:

$48.853m/$130.650m= 37.4% < 90%

Result: PASS TEST

The historical picture of this ratio is tabulated below.



FY2012FY2013FY2014FY2015FY2016Target

[
Underlying Gearing Ratio20.2%14.7%40.5%58.4%37.4%< 90%



SNOOPY

[percy]

Once a pretty dodgy finance company always a pretty dodgy bank then Snoopy !

You were right to never invest in it.

Best Wishes
Paper Tiger
Classic post.Made my day.
Trouble was he believed his own posts.!
I used to say he was 100% wrong on this thread.
Works out [with dividends] over 5 years he has been 317.13% wrong.!!.

[Snoopy]

Updating this number for the full year FY2015.

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

Using numbers from the Heartland FY2015

= $480.125m/ $3359.259m = 14.3%

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

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

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

Total $27.503m

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



Updating this number for the full year FY2016. The equity ratio is an assessment of the balance sheet risk of the total company, with all finance receivables and the supporting borrowings (whether they be from debenture holders or parent supporting banks) included.

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

Using numbers from the Heartland AR2016

= $498.341m/ $3547.181m = 14.1%

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

The significant increase in share capital over the year was therefore from (reference "Statement of Changes in Equity")



1/ Retained Earnings: $49.108m - $37.690m = $11.418m


2/ Dividend Reinvestment Plan: $7.300m


3/ Share Based Payments to staff: $1.888m


4/ Treasury Shares Bought: $2.390m


Total $22.996m



This is a reduction in the new capital generated within the existing Heartland in FY2015 ($27.503m)


The historical picture of this ratio is tabulated below.




FY2012FY2013FY2014FY2015FY2016Target

[
Equity Ratio16.0%14.6%15.0%14.3%14.1% -




SNOOPY

[iceman]

We have a new CFO. Great experience as an auditor from Ernst & Young before going to AIR where he has been for 25 years, most recently as Deputy CFO.

[JeremyALD]

We have a new CFO. Great experience as an auditor from Ernst & Young before going to AIR where he has been for 25 years, most recently as Deputy CFO.

HBL hires a lot of good staff with experience. They recently took some top credit managers from Kiwibank and reshaped their Risk division. They are a bank with a future and a vision.

Really looking forward to watching their growth over the next few years, especially with a strong NZ economy.

[Snoopy]

Once a pretty dodgy finance company always a pretty dodgy bank then Snoopy !

You were right to never invest in it.


I didn't lose any debenture money in NZ's "great finance company collapse" around the global financial crisis, because I didn't invest any money in finance company debentures PT. I am surprised how short people's memory is in relation to finance companies, even ones that choose to mitigate risk for marketing purposes by rebranding themselves as banks. Of course I would have invested in Heartland with perfect hindsight. But you cannot invest to capture past profits that are already on the balance sheet. You can only invest looking forwards taking into account risk. The trick is to balance 'likely return' against 'likely risk'.

You crow about your profits from Heartland. But there are several times over the last few years that these profits were far from certain.

1/ If you look at the EBIT to Interest Expense Ratio when Heartland was formed my post (8477) you can see that their position was very marginal back in FY2012/FY2013. The threat of a recapitalisation that would provide breathing room at a big discount to the current share price back then and since has been omnipresent.

2/ Despite bluster about capital returns over the last couple of years, the real situation required Heartland to make a cash issue of shares late in CY2016. A check of the constantly declining equity ratio (my post 8478) has hinted that eventually a recapitalisation was going to be required. Heartland got the recapitalisation plan away at a very good price. But that good price was never assured before the event.

3/ Legacy Prperty Assets: Go back through FY2013 and FY2014 and it was a surge in the property market that put Heartland on track. This was not forseeable before the event and initially even Heartland offloaded those problem properties to George Kerr as they saw little point of wasting managment time on dead duck legacy assets. As we know those properties were subsequently bought back and the vast majority have been successfully disposed of. But none of this looked certain or even likely back in FY2013.

4/ High Agricultural Exposure (my post 8469): Agriculture by its nature is a volatile industry. ANZ IIRC are by far the largest rural lender in dollar terms. Yet if you look at ANZ.NZ, Agriculture makes up just over 10% of all loans (FY2016) and the Agricultural loan balance was flat in compared to FY2015. Contrast this to Heartland which, although a much smaller lender in gross terms, has 18% of its loan portfolio in Agriculture, and greatly increased this (by 17% of FY2015 gross loans) from FY2015.

So far the signs are that all of the above outlined risks will not have a significant ongoing effect on Heartland results going forward. But you cetainly could not say that at many times in the past. Just because a comnpany overcomes its risks, that doesn't make the company less risky before events unfold.

The problem with retrospective analysis is that too often those doing the analysis leave out risk and assumed the profit path trodden was pre-ordained. This is never the case with any company. So please forgive me if I insist on running the risk ruler over any finance company that I propose to invest in. At the time I was very pleased to not invest in Heartland, given all the risks that abounded. If you as an investor were nevertheless aware of the risks and chose to make your investment in spite of those risks then good on you. Your 'high risk' investment has been rewarded with a 'high return'. If OTOH you invested in Heartland simply because you saw a blip on a chart with no other analysis, then you are a fool who has had a lucky payday. Personally I keep as much luck out of my investment decisions as I can. And if that means being extra careful about risk, and losing some opportunities along the way, then so be it.

SNOOPY

[percy]

Must admit the more research I do the better my luck is.!!
Did a lot of research on HBL,and as it turns out I have been exceedingly lucky.
Must be the quality of my research, rather than the quantity of those unlucky enough to miss the bus.?

[Beagle]

The problem with retrospective analysis is that too often those doing the analysis leave out risk and assumed the profit path trodden was pre-ordained. This is never the case with any company. So please forgive me if I insist on running the risk ruler over any finance company that I invest in. At the time I was very pleased to not invest in Heartland, given all the risks that abounded. If you as an investor were nevertheless aware of the risks and chos eto make your investment in spite of those risks then good on you. Your high risk investment has been rewarded with a high return. If OTOH you invested in Heartland simply because you saw a blip on a chart with no other analysis, then you were a fool that had a lucky payday. Personally I keep as much luck out of my investment decisions as I can.
Snoopy

I'm with you on this one. The outcome was never cast in stone, and never is. Return even with hindsight needs to be measured commensurate with the risk carried and the duration thereof.
My history with HBL has been brief and most times I haven't been prepared to wear the risk. I invested at ~ 85 cents in early 2014 immediately after the credit rating upgrade, (no way they'd downgrade in a hurry and dairy was still doing okay for some of 2014) so at the time of my entry I deemed Heartland to be a low - moderate risk investment. As conditions markedly deteriorated in the dairy industry into early 2015 I exited at ~ $1.30 for an investment of less than a year during mostly favorable times. I got circa 55% capital gain plus dividends and took what I consider to be pretty moderate risk for a short duration.

At times over the last two years it has been apparent that the risks to dairy have been extreme and it is very fortunate that milk prices have recovered, (if they hadn't the effects could have been extremely ugly for the industry and all banks including HBL). I take a similar approach to Snoopy as I won't wear periods of high risk and am prepared to forego potential returns if my risk assessment suggests there's a better risk adjusted return to be had elsewhere. While being out of HBL for about 2 years and missing only ~ 20 cents of capital gain by and large I've achieved better returns with less risk elsewhere.

I'm pleased the industry has recovered, its good for the banks, good for the economy and most of all good for the beleaguered dairy farmers who are doing their best to recover from two truly horrendous years but are now struggling with much higher level's of debt and are also facing the distinct possibility of increasing interest rates.

I think on a risk adjusted basis HBL is now a pretty reasonable hold but I think its pretty clear in the last two years shareholders have carried considerable risk, (whether they acknowledge it or not) and returns in that timeframe have been pretty modest. Maybe they get to $1.60 by Christmas 2017 ?, maybe not ? Dividend yield is pretty good though. Maybe the SP goes up in line with EPS from here, (I think the current PE is at full stretch) so on a 1 year view maybe a 10% capital gain and 8% gross divvy, possible 18% total shareholder return which isn't too shabby.

[Snow Leopard]

I didn't lose any debenture money in NZ's "great finance company collapse" around the global financial crisis, because I didn't invest any money in finance company debentures PT...
...And if that means being extra careful about risk, and losing some opportunities along the way, then so be it.

SNOOPY

http://www.treasurenet.com/forums/attachment.php?attachmentid=235812&stc=1&d=1332398612


2/ Despite bluster about capital returns over the last couple of years, the real situation required Heartland to make a cash issue of shares late in CY2016. Heartland got the recapitalisation plan away at a very good price. But that good price was never assured before the event...

If any one part of that post shows your extreme negative bias which you let colour your conclusions then this is it.

There were and are risks with Heartland, as with any share, but there also rewards.

The risk reward ratio for Heartland has been heavily biased to reward for longer than you have been misunderstanding and misinterpreting their accounts.

Best Wishes
Paper Tiger

[Snow Leopard]

Snoopy

I'm with you on this one....

http://www.treasurenet.com/forums/attachment.php?attachmentid=235812&stc=1&d=1332398612

Best Wishes
Paper Tiger

[Snoopy]

The objective of this post is to consider cashflow, both in and out over the subsequent one year period after reporting date. This will help evaluate the ability of Heartland to repay debentures due for repayment in the 12 months following the end of year account reporting date.

The following information for FY2016 is derived from note 20 in AR2016 on 'Liquidity Risk'.

1/ Contractual information is extracted from the table titled 'Contractual Liquidity Profile of Financial Assets and Liabilities.
2/ Expected information is calculated by multiplying the 'Contracted' risk by the Expected Behaviour Multiple.
3/ The Expected Behaviour Multiple is dervied from Heartlands own results, back in the day they printed both 'Contracted' and 'Expected' behaviour.



Loan MaturityExpected Behaviour MultipleFY2014 Financial Receivables Maturity: Contracted/ ExpectedFY2015 Financial Receivables Maturity: Contracted/ ExpectedFY2016 Financial Receivables Maturity: Contracted/ Expected


On Demand100% $50.254m / $50.254m $37.012m / $37.012m $84.154m / $84.154m


0-6 months132% $477.190m / $629.445m $664.557m / $877.215m $743.389m / $961.274m


6-12 months132% $367.564m / $483.727m $450.638m / $594.842m $484.420m / $639.962m



Note that in the above table, a 'loan maturity' represents an expected inflow of cash from a Heartland bank perspective.



Deposit MaturityExpected Behaviour MultipleFY2014 Financial Liabilities Maturity: Contracted/ ExpectedFY2015 Financial Liabilities Maturity: Contracted/ ExpectedFY2016 Financial Liabilities Maturity: Contracted/ Expected


On Demand3.01% $629.125m / $18.922m $748.332m / $22.450m $718.587m / $21.630m


0-6 months32.4% $748.129m / $242.431m $1,213.450m / $395.102m $892.944m / $289.314m


6-12 months36.4% $538.050m / $195.682m $686.159m / $249.762m $837.844m / $304.975m



Note that in the above table, a 'financial liability (debenture) maturity' represents an expected outflow of cash from a Heartland bank perspective.

If we now take the expected cash inflows and subtract from those the expected cash outflows we can examine the expected net cashflow from a 'one year in advance' perspective.



Deposit MaturityFY2014: 'Expected' combined Loan and Deposit CashflowFY2015: 'Expected' combined Loan and Deposit CashflowFY2016: 'Expected' combined Loan and Deposit Cashflow


On Demand $31.332m $14.562m $62.524m


0-6 months $387.014m $482.113m $691.960m


6-12 months $288.045m $345.080m $334.987m


Total $706.391m $841.755m $1,089.471m



I should note here that 'expected' behaviour from future and existing depositors can be modified. Heartland could put a special offer into the market to attract more deposit money if required, for example. Nevertheless even without this I see little cause for concern if customer behaviour pans out as expected.

From an historical perspective, the 'On Demand' net position outlook for FY2015 looked a little weak. But there has been a lot of promotion in the market regarding Heartland's 'on call' rates over the last year. So it is fair to assume that any potential problem in this area has been well and truly fixed.

SNOOPY

[horus1]

I like heartland. The only listed NZ bank . I have a lot and will be buying more to take to 1m. shares. Banks historically are good investments and the pity is the NZ Govt sold BNZ at a fire sale price so ordinary investors can only invest thru AU unless you buy hbl.l

[percy]

I like heartland. The only listed NZ bank . I have a lot and will be buying more to take to 1m. shares. Banks historically are good investments and the pity is the NZ Govt sold BNZ at a fire sale price so ordinary investors can only invest thru AU unless you buy hbl.l

Good on you horus1.
You are "extremely well positioned."
Some how I feel with the solid ground work in place,the fun is just starting.[this was the impression I gained listening to the directors', seeking re-election to the board, speeches,and talking to other directors at the agm.]

[Snoopy]

The trend below is required to track higher for five years with one setback allowed.




Financial YearNet Sustainable Profit (A)Shares on Issue EOFY (B)eps (A)/(B)


2012$26.606m + 0.72($5.642m + $3.900m) =$30.476m388.704m7.84c


2013$6.912m + 0.72($22.527m+ $5.101m)= $26.804m388.704m6.90c


2014$36.039m463.266m7.78c


2015$48.163m - 0.72(0.588m) = $47.743m469.980m10.2c


2016$54.164m - 0.72(1.136m) = $53.346m476.469m11.2c



Result: Pass Test

One necessary hurdle has been lept over in a quest to see if Heartland is a suitable candidate to apply the Buffet growth model, as espoused in "The Buffettology Workbook" by daughter in law Mary Buffett.

SNOOPY

[percy]

EPS growth,plus dividend growth = one very happy Percy,and all other HBL shareholders..
Even better is the fact the past year's strong growth has been organic.
This strong organic growth is set to continue for the foreseeable future.
Digital products delivered online is proving very successful.

[Snoopy]

The table is required to have an ROE figure of >15% for five years in a row, with one setback allowed.




Financial YearNet Sustainable Profit (A)Shareholder Equity EOFY (B)ROE (A)/(B)


2012$26.606m + 0.72($5.642m + $3.900m) =$30.476m$374.798m8.1%


2013$6.912m + 0.72($22.527m+ $5.101m)= $26.804m$370.542m7.2%


2014$36.039m$452.622m8.0%


2015$48.163m - 0.72(0.588m) = $47.743m$480.125m9.9%


2016$54.164m - 0.72(1.136m) = $53.346m$498.341m10.7%



Result: Fail Test

Pre-empting the grizzlers, the thinking behind this test is that an ROE of 15% is well above the cost of capital of most firms. A lower ROE than this means that it is possible that some of the businesses under the Heartland umbrella are earning a return less than their cost of capital. This means that there is less certainty that capital in the future will be efficiently deployed, and consequently less certainty about the profit oulook. This doesn't mean that one should not invest in Heartland though. It just means that you should use a method other than the 'Buffett Growth Model' to evaluate the business.

SNOOPY

[Snoopy]

1/ If you look at the EBIT to Interest Expense Ratio when Heartland was formed my post (8477) you can see that their position was very marginal back in FY2012/FY2013. The threat of a recapitalisation that would provide breathing room at a big discount to the current share price back then and since has been omnipresent.

2/ Despite bluster about capital returns over the last couple of years, the real situation required Heartland to make a cash issue of shares late in CY2016. A check of the constantly declining equity ratio (my post 8478) has hinted that eventually a recapitalisation was going to be required. Heartland got the recapitalisation plan away at a very good price. But that good price was never assured before the event.




Financial YearNumber of New Shares Issued during FYTotal Shares on the Books EOFYNet Money Raised from Shares Issued During FY


201288.704 m388.704m$54.946m


20130 m388.704m$0m


201475,562 m463.266m$64.774m


20156,624 m469.980m$9.163m


20166,579 m476.469m$6.798m


201713.659+ m499.165+ m$20.0m +


Total Cash Raised$155.681m +



For those who need some more convincing about what I am saying, the table above lays out the 'new capital' that has been poured into Heartland from its formation. Some years the new capital injection was modest, via the dividend reinvestment plan. Most years the capital required was significant. In only one year was no new capital needed. By showing the whole picture, I am hoping to put the bed the idea that, for the ambitions that Heartland has, Heartland has 'excess capital'.

In all years since Heartland has become a bank (FY2013 onwards), Heartland has satisfied Reserve Bank requirements for capital. But having a buffer on the minimum capital required, and having enough capital to allow Heartland to realise their business ambitions are different things. Some of this 'new capital' is being put toward the digital strategy. The effectiveness of this deployment while promising is yet to be seen! Because of the nature of the growing Reverse Mortgage business this is likely to be cashflow negative until a steady stream of these loans starts to mature. So yet more capital will be required for a while. None of this is meant to be a criticisim of Heartland's strategy going forwards. I am merely pointing out the cashflow implications for the near and medium term.

Any readers still believe that Heartland has 'plenty of capital' and won't be requiring more?

SNOOPY

[Snow Leopard]

Snoopy, your posts are bordering on sophistry.

Actually they have crossed the border and well and truly invaded the territory.

Leaving aside all that is apocryphal, or at least wildly inaccurate, and the weird set of criteria by which you measure the performance of the bank, I am now totally at loss as to what point you are actually trying to prove.

Read my words: HBL is a good well run company and has been for at least 5 years.


Whilst not the bargain it was, the current market price is a fair price for HBL.

Best Wishes
Paper Tiger

PS: Dividend reinvestment schemes are not new capital.
PPS: There is a very big difference between requesting new capital to enhance returns and needing new capital to survive.

[iceman]

Snoopy, your posts are bordering on sophistry.

Actually they have crossed the border and well and truly invaded the territory.

Leaving aside all that is apocryphal, or at least wildly inaccurate, and the weird set of criteria by which you measure the performance of the bank, I am now totally at loss as to what point you are actually trying to prove.

Read my words: HBL is a good well run company and has been for at least 5 years.


Whilst not the bargain it was, the current market price is a fair price for HBL.

Best Wishes
Paper Tiger

PS: Dividend reinvestment schemes are not new capital.
PPS: There is a very big difference between requesting new capital to enhance returns and needing new capital to survive.

Very good points PT. Luckily HBL asked us shareholders for funds for acquisitions to further grow the business. Snoopy's comments could be read differently, i.e. that HBL needed capital to survive which is very far from the truth.

[percy]

[/B]

Very good points PT. Luckily HBL asked us shareholders for funds for acquisitions to further grow the business. Snoopy's comments could be read differently, i.e. that HBL needed capital to survive which is very far from the truth.
This is easy for us to see using www.4-traders.com figures.
While HBL have been using funds to grow earnings per share,the Australian banks have used funds just to stay in business.
eps..............2014..................2015....... ......2016
ANZ..............257......................257 ............189.....= minus 26.5%
WBC..............237......................248..... .........218...= minus 8%
CBA...............519......................529.... .........530 =Plus 2.1% Well done CBA.
HBL.................9..........................10. ..............11= Plus 22.2% And that is REAL growth!!!!!!!!!!!!!!!!.

[Snoopy]

PT wrote: "PPS: There is a very big difference between requesting new capital to enhance returns and needing new capital to survive."

Very good points PT. Luckily HBL asked us shareholders for funds for acquisitions to further grow the business. Snoopy's comments could be read differently, i.e. that HBL needed capital to survive which is very far from the truth.

Iceman. What I wrote was:

"In only one year was no new capital needed. By showing the whole picture, I am hoping to put the bed the idea that, for the ambitions that Heartland has, Heartland has 'excess capital'. "

"In all years since Heartland has become a bank (FY2013 onwards), Heartland has satisfied Reserve Bank requirements for capital. But having a buffer on the minimum capital required, and having enough capital to allow Heartland to realise their business ambitions are different things."

This last quote is exactly the same point as PT was making in his 'PPS'. I don't believe anyone reading that could interpret what I wrote as " HBL needed capital to survive "

SNOOPY

[Snoopy]

PS: Dividend reinvestment schemes are not new capital.


PT, if you really believe that, perhaps you might like to explain why back in FY2014 (the last reported year with a substantial increase in new capital and when the drp was operating) as shown in AR2014 (p20 'Statements of Changes in Equity') the new capital (including $48m worth of new shares issued as part of the "Seniors Money International" acquisition) along with $7.231m from the DRP are added up together when summing the 'Total Equity'.

Or in non-technical speak, how it is possible to add two things together to form one total when they are not the same class of thing?

SNOOPY

[Snoopy]

Leaving aside all that is apocryphal, or at least wildly inaccurate, and the weird set of criteria by which you measure the performance of the bank, I am now totally at loss as to what point you are actually trying to prove.


From an investments perspective there are two broad questions to ask:

1/ How well is Heartland performing?
2/ What level of risk is being taken to extract that performance?

To answer 1/ I use my 'Buffet Point' criteria. There is nothing weird or unusual about looking at 'Return on Shareholder Equity' and 'Earnings Per Share' as measures of performance. These are well established measurement yardsticks. However, it does not matter what the performance of the bank is if the risks taken to achieve that performance are so high that shareholders can expect 'an equity bail out' at the next broader financial market hurdle. And this is where all the rest of my tests on 'equity ratios' and 'liquidity' come in.

To directly answer your question I am not trying to 'prove' anything. My aim is to produce the information so that others can take it in and comment (or not) on what they see as any implications.

Ultimately it would be nice to know if Heartland is a good investment prospect or not, as well as have something more than 'gut feel' to back that up.



Read my words: HBL is a good well run company and has been for at least 5 years.


Given Heartland now have five years of solid results under their belt, it would be hard to disagree with that. But what does being a "good well run company" really mean? If the share price suddenly drops, does that mean the company is no longer well run?

SNOOPY

[Snoopy]

Any readers still believe that Heartland has 'plenty of capital' and won't be requiring more?


Because so much water has gone under the bridge, I think it is worthwhile reprising where my ideas about the capital needs for Heartland came from.

------

Standard A: 20%

My interest in Heartland came about because a company that I held shares in, PGG Wrightson, sold their Agricultural Loan book, in the form of PGG Wrightson Finance, to Heartland. PGG Wrightson Finance was never in any trouble and had a good reputation at the time of sale. There were more than enough debenture holders rolling over their investments and new debenture investors to keep things solid. A pre-recapitalisation assessment of PGW outlined what the banks expected of PGGW Finance Limited.

"Minimum Equity Contribution: Tier 1 Risk Share Lending (basic equity capital and disclosed reserves) > 20%",

I figured that if this standard was good enough for the parent banks, then it was good enough for me. So I started applying it to Heartland as a whole.

------

Once PGGW Finance was integrated into a wider Heartland, it would be reasonable to assume that as a portfolio entity the risk of investing in Heartland would be less than the risk of investing in a 'stand alone' PGGW Finance. But how much less? One could take a cue from Reserve Bank Governor Graeme Wheeler, at the time he approved Heartland's 'bank' status.

Standard B/ 17%

Apparently, just before the purchase of the reverse mortgages, Heartland had 'surplus' cash of $28.3m -

(Explanatory Note: Total Heartland cash contribution to this deal was $48.3m, made up of the $28.3m 'surplus cash' on the balance sheet at 31st December 2013 plus $20m yet to be raised from shareholders at the time the half yearly report was published.)

- on the balance sheet. If we look at the 31st December 2013 HY2014 balance sheet, then $178.5m in cash was there. So we can deduce that:

$178.5m - $28.3m = $150.2m

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

$382.5m - $28.3m = $354.2m

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

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

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

Of course, this doees not preclude Wheeler being happier with a lower Tier 1 ratio. Just how much lower he would have been prepared to go, we don't know. But we do know that Heartland themselves 'required' this amount ($354.2m) of capital to operate their normal ongoing business at the time.

----

Standard C/ 8%+2.5% (buffer)

I missed this. But some time between EOFY2014 and EOFY2015, the Minimum Capital Ratio requirements reduced from "12%" to "8% plus a 2.5% buffer" (10.5%). This information can be found under

1/ section 25j of the Heartland June 2015 declaration made to the Reserve Bank.
2/ section 26j of the Heartland June 2016 declaration made to the Reserve Bank.

The "capital conservation buffer is held over and above minimum capital ratio requirements used to absorb losses during periods of financial and economic stress.""

Furthermore "A countercyclical buffer is to be held to be used at RBNZ's discretion, to assist in attaining the Reserve Bank's macro-prudential goal of protecting the banking sector from periods of extraordinary excess aggregate credit growth."

Those explanations speak to me of a 'business as usual' scenario, with no allowance made for extra capital that might be needed for growth initiatives.

---------

Up until the FY2016 results, I have been sticking to 'Standard A/' which, although a high standard to meet, is met by some other finance companies. Five years on, I think Heartland has earned the right to be judged at the slightly more relaxed 'Wheeler' standard (Standard B/).

How does one separate what capital is allocated required to meet 'Minimum Reserve Bank Capital Requirements', and what capital should be allocated to allow 'Future Business Growth'? This is a question that I do not have an answer to. One approach would be to take the 'growth capital' to be the difference between the actial Tier 1 capital ratio and the minimum required under "Standard C." One might call that difference "Latent Growth Capital", waiting to be deployed into a business expansion. Yet if there really was a crisis and this "Latent Growth Capital" had to be put to another use, it could be. Furthermore there would be no difference, as I see it, between the "Latent Growth Capital" waiting to be used and the "Buffer Capital" waiting to be used. They are merely two separate money bins waiting to be drawn on with different labels. Given this, I am not even sure if the concept of "Growth Capital" being distinct from "Reserve Capital" has any meaning.

SNOOPY

[Snow Leopard]

Iceman. What I wrote was:

"In only one year was no new capital needed. By showing the whole picture, I am hoping to put the bed the idea that, for the ambitions that Heartland has, Heartland has 'excess capital'. "

"In all years since Heartland has become a bank (FY2013 onwards), Heartland has satisfied Reserve Bank requirements for capital. But having a buffer on the minimum capital required, and having enough capital to allow Heartland to realise their business ambitions are different things."

This last quote is exactly the same point as PT was making in his 'PPS'. I don't believe anyone reading that could interpret what I wrote as " HBL needed capital to survive "

SNOOPY

You can not cherry pick a little part of your entire post (http://www.sharetrader.co.nz/showthread.php?8425-HBL-Heartland-Bank-Limited&p=652304&viewfull=1#post652304) (including the quote and especially including the embolden parts) and try and wiggle out of it.

The semantics of your posts are unambiguous.


Best Wishes
Paper Tiger

[Snow Leopard]

PT, if you really believe that, perhaps you might like to explain why back in FY2014 (the last reported year with a substantial increase in new capital and when the drp was operating) as shown in AR2014 (p20 'Statements of Changes in Equity') the new capital (including $48m worth of new shares issued as part of the "Seniors Money International" acquisition) along with $7.231m from the DRP are added up together when summing the 'Total Equity'.

Or in non-technical speak, how it is possible to add two things together to form one total when they are not the same class of thing?

SNOOPY

This one is definitely about taxonomy and we need to delve into classes and sub-classes.
Or maybe hierarchies would sit better in your mind?

But in this case we have equity and it's assorted sub classes: share capital, retained earnings and a positive plethora of reserves.

Let us ignore the glib 'if there are the same why are then on different rows then?' reply and let us follow the money.
It is after all, all money.

So where did the dividend reinvestment plan stuff come from?
From the dividends paid !
And where did the dividends paid come from?
From the retained earnings !

Read the table and you will also notice the morphing of many other sub-classes.

So maybe it is a bit of the old semantics as well then!

Best Wishes
Paper Tiger

[Snow Leopard]

From an investments perspective there are two broad questions to ask:

1/ How well is Heartland performing?
2/ What level of risk is being taken to extract that performance?

To answer 1/ I use my 'Buffet Point' criteria. There is nothing weird or unusual about looking at 'Return on Shareholder Equity' and 'Earnings Per Share' as measures of performance. These are well established measurement yardsticks. However, it does not matter what the performance of the bank is if the risks taken to achieve that performance are so high that shareholders can expect 'an equity bail out' at the next broader financial market hurdle. And this is where all the rest of my tests on 'equity ratios' and 'liquidity' come in.

To directly answer your question I am not trying to 'prove' anything. My aim is to produce the information so that others can take it in and comment (or not) on what they see as any implications.

Ultimately it would be nice to know if Heartland is a good investment prospect or not, as well as have something more than 'gut feel' to back that up.



Given Heartland now have five years of solid results under their belt, it would be hard to disagree with that. But what does being a "good well run company" really mean? If the share price suddenly drops, does that mean the company is no longer well run?

SNOOPY

But your tests and/or your interpretation of the results are failing you Snoopy!
Are you sure that you are actually applying the correct tests in the correct way?

If the share price drops, all other things being equal, then you have a better risk/reward ratio for a purchase.

Best Wishes
Paper Tiger

[Snow Leopard]

Because so much water has gone under the bridge...

...Given this, I am not even sure if the concept of "Growth Capital" being distinct from "Reserve Capital" has any meaning.

SNOOPY

There is too much equity, where you are not earning enough rewards;
There is too little equity, where you are taking too much risk;
and there is the Goldilocks zone :t_up:.

But that is just part of the story.

Best Wishes
Paper Tiger

[winner69]

There is too much equity, where you are not earning enough rewards;
There is too little equity, where you are taking too much risk;
and there is the Goldilocks zone :t_up:.

But that is just part of the story.

Best Wishes
Paper Tiger


And all those are subjective

Applying conventional wisdom often leads to trouble

[Snoopy]

This one is definitely about taxonomy and we need to delve into classes and sub-classes.
Or maybe hierarchies would sit better in your mind?

But in this case we have equity and it's assorted sub classes: share capital, retained earnings and a positive plethora of reserves.

Let us ignore the glib 'if there are the same why are then on different rows then?' reply and let us follow the money.
It is after all, all money.

So where did the dividend reinvestment plan stuff come from?
From the dividends paid !
And where did the dividends paid come from?
From the retained earnings !

Read the table and you will also notice the morphing of many other sub-classes.

So maybe it is a bit of the old semantics as well then!


I think you are making things more complicated than they need to be PT.

Of course you are correct in that the proceeds from the dividend reinvestment plan comes from dividends. But the question is not "where does the money comes from"? The question is "what is the money applied to"? And whether the money you invest in a Heartland capital raising is borrowed from the bank, inherited from Aunty Flora, or comes from dividends makes no difference as far as Heartland is concerned. It is all just new capital.

The whole purpose of a Dividend Reinvestment Plan is to raise new capital. If the company you invest in has a DRP and cancels it, this is because the company doesn't need any new capital. And yes this has happened to a couple of companies I invest in over the last couple of years. The fact that the DRP exists is evidence that Heartland would like a steady supply of new capital.

SNOOPY

[Snoopy]

What we are looking for here is the ability to raise margins at above the rate of inflation over some time period longer than two years back to back.



Financial YearNet Sustainable Profit (A)Gross Interest Revenue (B)Net Profit margin (A)/(B)


2012$26.606m + 0.72($5.642m + $3.900m) =$30.476m$205.142m14.9%


2013$6.912m + 0.72($22.527m+ $5.101m)= $26.804m$206.349m13.0%


2014$36.039m$210.297m17.2%


2015$48.163m - 0.72(0.588m) = $47.743m$260.488m18.3%


2016$54.164m - 0.72(1.136m) = $53.346m$265.475m20.1%



Result: Pass Test

SNOOPY

[Snoopy]

What we are looking for here is the ability to raise margins at above the rate of inflation over some time period longer than two years back to back.



Financial YearInterest Income (A)Interest Expense (B)EOFY Finance Receivables (C)Gross Interest margin [(A)-(B)]/(C)]


2012$205.142m$121.502m$2,078.276m4.02%


2013$206.349m$110.895m$2,010.376m4.75%


2014$210.297m$101.221m$2,607.393m4.18%


2015$260.488m$126.041m$2,862.070m4.70%


2016$265.475m$118.815m$3,118.957m4.70%



Result: Pass Test

When examining most companies profitability I like to look at the 'Net Profit Margin', as I have done in "Buffet Point 4a". Being a bank, the 'goods sold' are really money. So I thought that maybe looking at the gross interest margin was more relevant? To some extent it doesn't matter as both tests earn a 'pass' mark for Heartland.

What is interesting is that the 'Net Profit Margin' looks to be improving faster then the 'Gross Interest Margin.' 'Net Profit' takes into account head office and branch costs and advertising expenses. "Gross Interest Expense' does not. The fact that the 'Net Profit Margin' is improving faster then the 'Gross Interest Margin' is an indicator suggests to me that 'successful control of costs' is very much part of Heartland's success in this area.

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.

Above posted 04-06-2016.
And it has now come to pass,7 months later, that guru Snoopy, has finally worked out for himself Heartland Bank's net interest margin is increasing.
Snoopy surely you can do better?

[Snoopy]

Above posted 04-06-2016.
And it has now come to pass,7 months later, that guru Snoopy, has finally worked out for himself Heartland Bank's net interest margin is increasing.
Snoopy surely you can do better?


Your honour, I put up in my defence:

1/ I am not a holder of HLB, so feel that I have the discretion and time to crunch the Heartland numbers at my own pace.
2/ With due respect to your honour, I couldn't help noticing that you published your own FY2015 year perspective on 04-06-2016, some 11 months after the close of the financial year. OTOH I published the FY2016 results seven months after the end of the financial year.

I plead 'guilty', but respectfully suggest that the learned judge join me in the 'sin bin' ;-P.

SNOOPY

[percy]

Your honour, I put up in my defence:

1/ I am not a holder of HLB, so feel that I have the discretion and time to crunch the Heartland numbers at my own pace.
2/ With due respect to your honour, I couldn't help noticing that you published your own FY2015 year perspective on 04-06-2016, some 11 months after the close of the financial year. OTOH I published the FY2016 results seven months after the end of the financial year.

I plead 'guilty', but respectfully suggest that the learned judge join me in the 'sin bin' ;-P.

SNOOPY

Bugger.!
Since I was first in the sin bin, it looks as though I have to buy the beers.!

[Brain]

Snoopy I do enjoy reading your posts and I do learn a lot from them. I am interested to know ( as I am sure many others would also ) which shares do you currently own?

[nextbigthing]

Snoopy I do enjoy reading your posts and I do learn a lot from them. I am interested to know ( as I am sure many others would also ) which shares do you currently own?

None. They're all too risky. :D

[percy]

None. They're all too risky. :D

Had a bit of a chuckle too.!!!..lol.