HGH - Heartland Group Holdings

[percy]

Will HBL get to 2 bucks before EBO gets to 20 bucks

Neck to neck,stride by stride.
The finish maybe too close to call.
Have to wait for the photo.

[JeremyALD]

I've only been trading for a year but this is certainly my best performing stock. Bought in at $1.18 and it's been up ever since with little to no turbulence (unlike my AIR holding!). Thanks Percy and Roger for helping me ignore Snoopy's pessimism in this one :D Winner your faith in $1.60 by Christmas last year also helped!

[silu]

Yeah I can't believe I had so much cash sitting in an account earning 3.5% p.a. when investing in HBL was a way more lucrative option.

[trader_jackson]

I am probably going to regret this post, but today was the day I sold out of HBL.

At just after 2pm today my sell order was executed at $1.71.

In about 20 months, I had made a very good return, and have enjoyed being on the Heartland train during this period, but I believe, in the short term, there is now more chance of the share price going down, than what there is of it going up.

I also will likely (ie not 100% sure yet) require funds for another upcoming IPO ;), which, depending on the price, I believe will give a higher return than HBL, at least in the short term.

It is likely one day I will be back on the HBL train, and I will be watching with interest.
It is likely I may also consider SUM other investments as well.

[percy]

I am probably going to regret this post, but today was the day I sold out of HBL.

At just after 2pm today my sell order was executed at $1.71.

In about 20 months, I had made a very good return, and have enjoyed being on the Heartland train during this period, but I believe, in the short term, there is now more chance of the share price going down, than what there is of it going up.

I also will likely (ie not 100% sure yet) require funds for another upcoming IPO ;), which, depending on the price, I believe will give a higher return than HBL, at least in the short term.

It is likely one day I will be back on the HBL train, and I will be watching with interest.
It is likely I may also consider SUM other investments as well.

You did well.

[Beagle]

Why its worth more.
1. We cannot ignore the fact that HBL has grown its EPS faster in recent years than the Aussie banks.
2. This trend is set to continue, see below therefore a PE premium is warranted compared to its peer group.
3. The following are the forecast PE's for its peer group for FY17, FY18 and FY19 followed by average analyst expected EPS growth in percentage terms bolded from FY17 to FY19 All data off average analysis forecast off 4 traders
Bendigo BEN 13.2, 13.1, 13.3, EPS growth expected -1%
NAB 13.6, 13.4, 13 4%
WBC 14.5, 14, 13.6 6%
ANZ 13.4, 13.2 12.5 7%
Bank of Queensland BOQ 12.9, 12.6 12.3 4.5%
HBL 13.8 12.6 11.9 14%

The average FY19 PE which takes into account average forecasted growth to FY19 is 12.77

4. Even if you make the case, (which I don't) that HBL will only enjoy two more years of abnormal growth before reverting to the very modest rates the Australian banks are "enjoying" for HBL to be trading at the average of its peer group the SP is likely to outperform its peer group by 12.77 / 11.9 = 7.3% over the next two years.

5. Even now based on average estimated 2017 earnings the peer group is trading at an average PE of 13.56 and HBL at 13.8 represents only a tiny premium which taking into account its historical growth outperformance and projected stronger growth and I think the current market PE premium is not properly recognizing this superior growth.

6. I think given the distinct possibility that HBL's growth will continue to outperform its peers post FY19 I think that a minimum further 7.3% rerating will happen over the foreseeable future, probably this year.

7. Relative to its peer group I therefore value HBL at 1.64 + 7.3% = $1.76.

8. I think you can easily make the case that relative to its peer group given its considerably stronger historical and projected growth a PE premium of 1 on FY17 projected earnings is warranted.
Average FY 17 PE for Aussie banks excl HBL is 13.52.
HBL's current PE 13.8 HBL should be trading on a FY17 PE premium of at least 1 = 14.52 14.52 / 13.8 = 5.2% increase from here = $1.73

9. Investment case summary: I therefore think fair value for HBL is between $1.73 and $1.76 on an ex dividend basis and note it currently trades on a theoretical ex dividend price of $1.60.5 ($1.64- 0.035) so we have another ~ 10% rerating to go and then from there the price should continue to drift up in line with the 14% earnings growth to FY 19. My 2 year target price is therefore 1.76 x 1.14 = $2.01 and in the meantime based on 8.5 cps in annual fully imputed dividends we will be enjoying a gross dividend yield of 7.36% (8.5 / 160.5) / 0.72.
Disc: Hold and fully subscribed to dividend reinvestment plan.

Since posting this on 16 March 2017 the basket of 5 comparative banks I follow in Australia has increased by 3.8% and I therefore have lifted my valuation which h is based on my assessment of a fair PE relative to the Aussie banks by a commensurate amount $1.76 x 1.038 = $1.83. When it gets to $1.83 I'll reassess again.

[kizame]

I am probably going to regret this post, but today was the day I sold out of HBL.

At just after 2pm today my sell order was executed at $1.71.

In about 20 months, I had made a very good return, and have enjoyed being on the Heartland train during this period, but I believe, in the short term, there is now more chance of the share price going down, than what there is of it going up.

I also will likely (ie not 100% sure yet) require funds for another upcoming IPO ;), which, depending on the price, I believe will give a higher return than HBL, at least in the short term.

It is likely one day I will be back on the HBL train, and I will be watching with interest.
It is likely I may also consider SUM other investments as well.

You sold out on the new high,but if it's one lesson I have learnt, it is ride the trend until it isn't.

But good on you,you did well.

[winner69]

The amazing run and rerating of Heartland continues

A rerating of ginormous proportions - I would hazard a guess we have never been seen such a rerating before of a finance stock on the NZX (or even the ASX or maybe even the whole world)

Price Book multiple is many analysts preferred multiple.


Since last June Heartland Book Value has increased by a miserly 4% odd but the share price has increased more than 40%. Heartland on a PB currently of about 1.6. What it looks like on a chart is below.

If Heartland was still trading on the same multiple as last June it's share price would be only 120 - thats 50 cents of rerating for you.

And if you run with Roger's number heaps more to go. Maybe he should put up the PB ratios of BOQ and BEN for starters (probably better to compare than against the big 4)

Just as Percy as said repeatedly for years and years Heartland is truly a world class bank. The market is finally beginning to redognise how good it really is.

Wow - exciting times - almost euphoric

[Beagle]

I don't think its a book value story mate. Its EPS and EPS growth both historical and forecast that's driving the SP together with a brighter outlook for the N.Z. economy after the dairy recovery.
PB only tells part of the story. Net interest margin that HBL enjoys relative to its peers tells another compelling part of the story.
I am happy with my analysis and think relative to its peers $1.83 is good value, (I think their superior EPS growth both historical and projected is worth more than a PE premium of 1 but $1.83 is with just a PE premium of 1 so that's fairly conservative considering their strong relative growth progress and outlook).

For what its worth Price to Book Value off 4 traders is as follows, (I have not checked these back to their respective balance sheets to double check their workings)
BOQ 1.27
BEN 1.06
HBL 1.48
NAB 1.71
WBC 1.91
ANZ 1.54
Sector average 1.5.

Fair enough selling for TJ and if he's redirecting funds to SUM he'll do very well. Others of us have a fulsome allocation to SUM already and have cash sitting at call at a miserly 1.5% call account rate with ANZ securities....makes a 5% net yield or ~ 7% gross assuming full imputation credits and 8.5 cps in total this year + dividend growth in future years still look like a compelling case to hold.
You could say we are well positioned :)

[Baa_Baa]

Getting the popcorn ready, this should be fun.

- Put that through the winner-mincer and we get ... wait, wait, ... "overpriced, sell and take profits"

- Through the percy-mincer and we get ... waiting, ... "we are well positioned".

- Through the roger-mincer and ... waiting, ... "ignore the analysts, I'm right, it's going higher, and higher".

Just for a sanity check:

- Through the Joshua mincer and ... hmmm ... sorry, can't repeat that here, something about "sell into the ramp", whatever that means.

:)

Just having a bit of fun.

[percy]

Heartland Bank is not hindered by a large branch network.
From their recent result.;"The shift to a digital distribution model is a cost effective way for Heartland to broaden its reach."
From retailers such as HLG and BGR, we see bricks and mortal growth of 5% to 7%,while their on line growth is around 29% to 35%.
Maybe the market is realising Heartland's potential "digital" growth will far exceed any other bank.
This together with their higher net interest margin,will see solid eps growth.
I think the market is seeing Heartland delivers on what they say they will do.
For many of us long term holders, seeing the market waking up to Heartland has come as a bit of a surprise.Admittely a very pleasant and profitable one.

[Snow Leopard]

It is well overpriced, full stop.


Best Wishes
Paper Tiger

[kizame]

It is well overpriced, full stop.


Best Wishes
Paper Tiger

And... ride the trend until it isn't.

[Beagle]

It is well overpriced, full stop.


Best Wishes
Paper Tiger

By what analysis pray tell ? All the talk on CNBC by analysts specializing in financials is that a rising interest rate environment is good for banks.
We're seeing a solid re-rating of banks in Australia with for example BEN and BOQ both up circa 1.5% today alone. HBL simply following a general rerating of the sector.

[janner]

And... ride the trend until it isn't.

Common sense really ..

Disc. Happy holder.

[Snow Leopard]

Down 4c in two days.

Is that because I said it was overpriced :blush:

or
because you guys have stopped talking about it :huh: ?

Best Wishes
Paper Tiger

PS I hope you are all keeping safe there in NZ :scared:.

[Joshuatree]

How does the financial system work - Duration: 2:42. Bruce Tonkin 863,434 views (https://www.youtube.com/watch?v=M_3T-Af57Pg)

Hugely exaggerated on the news for most of us PT.Why i even saw our city on the BBC channel and the reporter was talking up a puddle in the background. Have been some power cuts and a few roads blocked.Meanwhile some entertaining relief from Clarke and dawes above.

[trader_jackson]

Down 4c in two days.

Is that because I said it was overpriced :blush:

or
because you guys have stopped talking about it :huh: ?

Best Wishes
Paper Tiger

PS I hope you are all keeping safe there in NZ :scared:.

Likely a bit of both... I TNRed some of my Heartland capital into bonds after it became apparent yesterday it was unlikely I will be able to take part in the bonanza that will be Oceania's listing.

But I still firmly believe Heartland are "well positioned"

[Snoopy]

$A20m as Tier 2 capital raise completed, just announced to NZX.

Cost of funds.
Margin to Aussie bank bill swap rate 4.15%
90 day Australian BBSW currently 1.785% as at 6/4/ 2017
Cost of capital funds presently 5.935%, reset quarterly
10 year term. Unsecured bonds not listed. Ranks at Tier 2 capital.
Good exchange rate to convert these capital funds to $Kiwi at present. Very competitive funding cost for Tier 2 capital raise in my opinion.

I find it annoying when a company announces something to the NZX, but then does not replicate that announcement on their website. The Heartland Australian Notes are detailed here:

https://www.nzx.com/files/attachments/256337.pdf

But this level of detail disclosure is apparently no business of Heartland shareholders. One detail that caught my eye was that there is no plan to list these "Australian notes", even on any Australian exchange. Is that why the ASX website contains no information on them?

The above document contains the rider that is should be read only in consultation with the '31st March Information Memorandum'. But as to where interested parties might find that, I have no clue. Is anyone out there a better detective than I am?

SNOOPY

[Beagle]

I find it annoying when a company announces something to the NZX, but then does not replicate that announcement on their website. The Heartland Australian Notes are detailed here:

https://www.nzx.com/files/attachments/256337.pdf

But this level of detail is apparently no business of Heatand shareholders.

Sorry Snoopy, I don't follow your line of thinking. Its was released as an attachment to the NZX announcement, I for one have already read it, done some research on what the Australian BBSW floating rate is and posted the approx. cost of funds in an earlier post, just under 6% for tier 2 capital. What's the problem ? the information is available for anyone interested and I've already stated I think its a good deal for HBL shareholders. Maybe they'll update their website at some stage but I am sure you will have already noticed from the terms thereof, (not listed and minimum transfer amount $A500,000), these notes were never intended to be freely transacted at a retail level. I would think the information memorandum would simply be an expansion of the term sheet issued to those parties interested in the issue.
Perhaps e.mail the company secretary if you want to drill down any more. Term sheet speaks for itself as far as I am concerned. I have zero interest in holding tier 2 capital at 6% and the minimum size might "slightly" compromise my ability to hold a diversified portfolio anyway :)

[Snoopy]

Sorry Snoopy, I don't follow your line of thinking. Its was released as an attachment to the NZX announcement, I for one have already read it, done some research on what the Australian BBSW floating rate is and posted the approx. cost of funds in an earlier post, just under 6% for tier 2 capital. What's the problem ? the information is available for anyone interested and I've already stated I think its a good deal for HBL shareholders. Maybe they'll update their website at some stage but I am sure you will have already noticed from the terms thereof, (not listed and minimum transfer amount $A500,000), these notes were never intended to be freely transacted at a retail level.

When Turners issued their TNRHA bonds, a lot of extra information that was not generally available to TNR shareholders accompanied that release. I am assuming (perhaps wrongly) that the 31st March 2017 Heartland Bond Information Memorandum may contain similarly useful insights about Heartland. I imagine that those Aussie investors prepared to stump up the thick end of $A500,000+, for example, might want to know some more details ( e.g. existing debt maturity profile, bank borrowing headroom ) of Heartland's other borrowings, than the very thin sketch delivered in the two page summary disclosure?

SNOOPY

[percy]

Another strong finish for the week, by HBL, with the share price at $1.68.
The 100 day EMA is $1.56.
The 200 day EMA is $1.52.
The support level which I thought was $1.55,then $1.60,now appears to be $1.66.
Positive.

[Beagle]

Since posting this on 16 March 2017 the basket of 5 comparative banks I follow in Australia has increased by 3.8% and I therefore have lifted my valuation which h is based on my assessment of a fair PE relative to the Aussie banks by a commensurate amount $1.76 x 1.038 = $1.83. When it gets to $1.83 I'll reassess again. Only a matter of when it gets to $1.83, not if, in my opinion.
Natural organic growth will get it there sooner or later and in the meantime we enjoy about 7% dividend yield gross inclusive of imputation credits while we wait which is far better than the return on money in the bank or money invested in any other bank's shares..
You could say we are well position aye Percy :)

[percy]

Only a matter of when it gets to $1.83, not if, in my opinion.
Natural organic growth will get it there sooner or later and in the meantime we enjoy about 7% dividend yield gross inclusive of imputation credits while we wait which is far better than the return on money in the bank or money invested in any other bank's shares..
You could say we are well position aye Percy :)
Aye we certainly are.!!!! [and loving it].

[janner]

You could say we are well position aye Percy :)

What took you so long Roger ???... :-))))))

[Snoopy]

a/ Problem: Want for depositors money?
a/ Solution: Offer depositors a more attractive interest rate to attract more funds.

b/ Problem: Not enough short term loans on the books to utilise all depositors funds?
b/ Solution: Offer loans on more attractive terms.

So, in summary there is a 'work around' available for whatever liquidity problem looks to be appearing on the horizon.


My above quote is the 'glib solution' for liquidity problems of banks. The problem with the above solutions are that when a bank has a liquidity problem it is an unusual or rare event. There is no 'provision for low liquidity' in the accounts as there is a 'provision for impaired loans'. Liquidity events are largely unforeseeable because they so unusual.

But one thing is for certain. In a real liquidity crisis , there will not be run of depositors rushing to put new debentures in the bank no matter how high the interest rate offered. The sad fact is that the 'glib solutions' which look perfectly reasonable when a bank is not in crisis will completely fail when it is.

The only real protection from a liquidity crisis are the 'sideways solutions':

1/ to have a 'parent bank' willing to supply lines of credit while the crisis blows over.
2/ to have new share capital issued at a heavily discounted price to new and existing shareholders.

The only indicator that is regularly measured at annual accounts time is 'bank borrowing headroom'. Unfortunately for Heartland shareholders 'borrowing headroom' is not (fully) given in the annual report. So it is up to shareholders to make an 'educated guess' as to what that borrowing headroom might be.

SNOOPY

[Beagle]

What took you so long Roger ???... :-))))))

LOL I've enjoyed most of the ride since ~ 80 cents over the last ~ 3 years. Sat out ~ 2 years when the dairy risks were too much for my liking but that only cost me ~ 18 cents of the total gain and I did pretty well with those funds when reallocated elsewhere. I guess you could say I've cherry picked the good times :) Plenty more growth and good times to come so no there's no need for cherry picking now :t_up:

[Joshuatree]

Not forgetting the years of 100's negative rants/attacks on HBL comparing it to failed finance companies and times in the bin because of it .If you call all that negativity cherry picking then readers beware agendas.
Needed to put some balance in what many of us experienced on the HBL threads. Good that you finally came round and have enjoyed some gains but nothing like manyof us have.

[Beagle]

Let it go mate, the risks were very real. Carrying resentment around like that isn't good for your health.

[Snoopy]

Here is my interpretation of the bank liquidity test.

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

And here is the Tiger's interpretation of the question and the answer.



Here is the Tiger take on the important question that Snoopy is trying to answer.

If has a result of some people actually believing Snoopy's posts that if 10% of the money on loan to Heartland is [attempted to be] withdrawn at the earliest contractual moment can Heartland actually pay them.

The answer to that would appear to be (from reading the accounts) a pretty definite YES.


It looks to me that the Tiger is equating:

"10% of the money on loan" to
"10% of the Expected Net Current Loans Outstanding"

and

"Total Current Money to draw on. " equates to
"Withdrawable funds at the earliest contractual moment."

Now you could certainly argue that being able to withdraw 10% of the money on loan at the earliest contractual moment is one measure of liquidity. But what I was measuring is not that, or anything close to it.

When I measure "Expected Net Current Loans Outstanding" I am measuring:

1/ net current receivables expected to be cashed up minus
2/ current deposits expected to be reinvested.

For FY2016 this equated to $1,069.471m (my post 9218 on this thread)

But 10% of the current money on loan at EOFY2016 (ARFY2016 Note 20) equated to:

0.1 x ($718.587m+ $892.944m + $837.444m) =$244.9m

So straight away you can see that PT and I are talking about a very different quantum of money.

Note that $244.9m is well covered by the expected cash inflow of $1,069.471m over the next twelve months. So PT is satisfied. But I need to note that his calculation, appropriate or not, is a complete 'straw man' exercise from my point of view, as it does not address the original test question that I posed at all.

My concern was with a 'borrowing headroom' available from the parent bank, which PT does not consider in any way. This is not to say that I am right and PT is wrong. I mention this just to make clear that PT and I are looking at different things.

The declared borrowing headroom is $65.571m (my post 9218) from the Australian parent banks plus an undisclosed amount from the NZ parent banks.
Borrowing headroom can be used both to repay depositors and as temporary balance sheet capital to support new loans. My test was to see if this banking headroom is sufficient to cover 10% of an expected projected mismatch in cashflow, when confidence in the bank is at a low (i.e. no favourable equity raising is possible).

The answer to this question, for the very first time in Heartland's history was that there was insufficient declared bank borrowing headroom to cover a meagre 10% of this gap. I presented this finding as a reason to be vigilant, rather than a portent of doom. There is no reason right now to suspect the beginnings of a liquidity crisis are there.

SNOOPY

[Beagle]

My above quote is the 'glib solution' for liquidity problems of banks. The problem with the above solutions are that when a bank has a liquidity problem it is an unusual or rare event. There is no 'provision for low liquidity' in the accounts as there is a 'provision for impaired loans'. Liquidity events are largely unforeseeable because they so unusual.

But one thing is for certain. In a real liquidity crisis , there will not be run of depositors rushing to put new debentures in the bank no matter how high the interest rate offered. The sad fact is that the 'glib solutions' which look perfectly reasonable when a bank is not in crisis will completely fail when it is.

The only real protection from a liquidity crisis are the 'sideways solutions':

1/ to have a 'parent bank' willing to supply lines of credit while the crisis blows over.
2/ to have new share capital issued at a heavily discounted price to new and existing shareholders.

The only indicator that is regularly measured at annual accounts time is 'bank borrowing headroom'. Unfortunately for Heartland shareholders 'borrowing headroom' is not (fully) given in the annual report. So it is up to shareholders to make an 'educated guess' as to what that borrowing headroom might be.

SNOOPY

It is slightly unusual that they continue to pay 3% for on call funds which is quite a significant divergence from what most of the Australian owned banks pay. This leaves them a little exposed in terms of liqudity to hot on call money in my opinion.

[Joshuatree]

Let it go mate, the risks were very real. Carrying resentment around like that isn't good for your health.

No resentment at all; just how the experience was on the other reality side.

[Beagle]

No resentment at all; just how the experience was on the other reality side.

Or more correctly, how you perceived it. Perhaps more importantly the SP ostensibly did nothing for two years because the market perceived the risks to the balance sheet and profitability from the near dairy collapse were indeed very real. I maintain all the N.Z. banks dodged a serious bullet here. One more year of ultra low dairy payout and the results could have been extremely ugly for the sector and for all banks involved.
In the end Heartland's approach of carrying some farmers through this worked mainly because Heartland got lucky with the dairy recovery.
Sometimes hope is a strategy that works, other times...
Believe it or not and I know you won't, some posters thanked me for highlighting the serious risks, albeit in, perhaps with the benefit of hindsight, a too dogmatic way.

[Joshuatree]

Many of us experienced it and you ended up in the bin more than once. The threads are there in their 100's. I needed to present the other side to that post to give balance.Live and learn do we all.

Sold a few today as i needed to rebalance a little as HBL was getting just too big a % of my portfolio.

[Snoopy]

HNZ LENDINGS vs HNZ DEBENTURES

Customers owe HNZ 'Finance Receivables' of $3,113,957,000. There is no breakdown in AR2016 (note 11) as to what loans are current or longer terms. However, if we look at note 20, we can derive the expected maturity profile of total finance receivables due over the next twelve months.



On Demand0-6 Months6-12 MonthsTotal


Expected Receivables Due$84.154m + $961.274m + $639.962m = $1,685.390m


less Expected Deposits for Repayment$21.630m + $289.314m + $304.975m = $615.919m


equals Net Expected Cash Into Business$62.524m$671.960m$334.987m$1,069.471m {B}



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


HNZ LENDINGS vs HNZ DEBENTURES

Customers owe HNZ 'Finance Receivables' (Lendings) of $3,334,800,000. If we look at note 14 of IFR2017, we can derive the expected maturity profile of total finance receivables due over the next twelve months. (This is what I did in part 1 of this calculation.) Adding the totals for the ensuing twelve months gives:



On Demand0-6 Months6-12 MonthsTotal


Expected Receivables Due$69.655m + $1,058.738m + $710.751m = $1,839.144m


less Expected Deposits for Repayment$22.713m + $339.288m + $323.666m = $685.667m


equals Net Expected Cash Into Business$46.942m$719.450m$387.085m$1,153.477m {B}



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

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

Compared to six months ago, the expected liquidity imbalance has improved overall. But the 0-6 month period has blown out, signalling a possible 'wall of cash' to be returned to Heartland between December 2016 and June 2017.

SNOOPY

[Snoopy]

It is slightly unusual that they continue to pay 3% for on call funds which is quite a significant divergence from what most of the Australian owned banks pay. This leaves them a little exposed in terms of liquidity to hot "on call money" in my opinion.

At last balance date, 31-12-2016, Heartland had $754.583m of 'on call' borrowings in the "call deposit" account.





Position at EOHY2017On Demand0-6 Months6-12 MonthsTotal


Expected Receivables Due$69.655m + $1,058.738m + $710.751m = $1,839.144m


less Expected Deposits for Repayment$22.713m + $339.288m + $523.666m = $885.667m


equals Net Expected Cash Into Business$46.942m$719.450m$187.085m$953.477m {B}





According to my 'expected' modelling, only 3% of the $754.583m total is likely to be requested 'on demand' ($22.713m). But 'expected' modelling is based on 'normal' customer behaviour. And 'competitor response' can lead to anything but normal behaviour.

So what would happen if say, the likes of ANZ were to increase their on call interest rates again to 2.5%? That is still less than Heartland's 3%. But ANZ has a much higher credit rating than Heartland. So I would bet such an ANZ move could see an exodus of funds from Heartland. Nevertheless, $719.450m of 'Heartland' net current term funds are expected to be repaid in the six month period ended 30th June 2017. So even if Heartland lost 90% of their on call funds:

0.9 x $754.583m = $679.125m

$679.125m is still less than $719.450m. So it looks like a severe (90%) withdrawal of customers "on call deposits" could be manageable by Heartland from a cashflow liquidity perspective.

SNOOPY

[percy]

Liquidity.
Each bank has a treasury dept that matches maturity with funding.
If they have too much liquidity short term. they lower their short term deposit rates.
If they are short 18 months out they raise their deposit rate for that time.
That is why often one bank has a higher rate say one year out than others.
Trying to read too much into banks' liquidity is usually a waste of time.
I leave it to others to waste their time.

[Beagle]

Snoopy with all due respect mate I think what Percy has said above sums the situation up. They tweak deposit rates as and when they see fit to manage liquidity, it really is as simple as that. I don't think customers are as focused on credit ratings as you might perhaps imagine. Most people do business with a bank based on the fact that they believe they can trust them to prudently manage their money and give them competitive terms. Heartland is an investment grade credit rated bank and probably more likely to have an upgrade at some stage in the foreseeable future than a downgrade in my opinion.
I plan to open a call account with them when I get some spare time.

[iceman]

I think this Consumer survey reinforces what you're saying Roger http://www.stuff.co.nz/business/money/91854156/we-love-kiwiowned-banks-consumer-nz-survey-shows

Nobody loves Heartland though :-(

[percy]

I think this Consumer survey reinforces what you're saying Roger http://www.stuff.co.nz/business/money/91854156/we-love-kiwiowned-banks-consumer-nz-survey-shows

Nobody loves Heartland though :-(

Not so.!!!!!!
All [except one] on this thread love them.!!!
Going by their "organic" growth we are not alone.!

[percy]

Many of us experienced it and you ended up in the bin more than once. The threads are there in their 100's. I needed to present the other side to that post to give balance.Live and learn do we all.

Sold a few today as i needed to rebalance a little as HBL was getting just too big a % of my portfolio.
My life is so much better with my out of balance portfolio.More profitable too.!!..lol.

[kizame]

I think this Consumer survey reinforces what you're saying Roger http://www.stuff.co.nz/business/money/91854156/we-love-kiwiowned-banks-consumer-nz-survey-shows

Nobody loves Heartland though :-(

Lets not forget HBL is not an average persons bank,where they deposit their wages and withdraw daily needs,not what they are aiming for at the moment I think.
So few consumers would really know a lot about them. Not a traditional street corner bank, yet.

[kizame]

I can't understand why you would re-balance out of a great performing stock,enhances returns and all.

[iceman]

Lets not forget HBL is not an average persons bank,where they deposit their wages and withdraw daily needs,not what they are aiming for at the moment I think.
So few consumers would really know a lot about them. Not a traditional street corner bank, yet.

My comment was firmly tounge in cheek. I've been in love with this organisation since it was BSH and don' t regret one minute of it :-)

[Snoopy]

Time to update the "Liquidity Buffer ratio" for FY2016.

When dear old Colin told us all those years ago that a certain finance company was 'solid as' with reference to investing debenture money, the end result was that this cash became tied up in illiquid property developments. So although the company had enough money to pay out their debenture holders 'on paper' and appeared to be operating profitably, the debenture holders could not get their cash back. The 'Meads Test' (as christened by Snoopy) is one method of finding out if a finance sector company really is 'solid as'. The basic date I need to check this out has already been calculated (see above). So let's get going.

To check out the balance between monies borrowed and monies lent and matching up those maturity dates using a one year time horizon. The equation we are looking to satisfy is:

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

On the numerator of the equation, we have borrowings.

HNZ BORROWINGS



1/ Term deposits lodged with Heartland.$2,282.876m


2/ Bank Borrowings$429.304m


3/ Securitized Borrowings total$284.429m


4/ Subordinated Bonds$3.378m


Total Borrowings of (see note 13)$2,999.987m



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

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

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



Total FY2016Total FY2015Facility Maturity Date FY2016


Securitized bank facilities total all in relation to the Heartland ABCP Trust 1 $350.000m $350.000m1st February 2017 (*)


less Current level of drawings against this facility$284.429m$258.630m


equals Borrowing Headroom$65.571m {A}$91.370m



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


HNZ LENDINGS vs HNZ DEBENTURES

Customers owe HNZ 'Finance Receivables' of $3,113,957,000. There is no breakdown in AR2016 (note 11) as to what loans are current or longer terms. However, if we look at note 20, we can derive the expected maturity profile of total finance receivables due over the next twelve months.



On Demand0-6 Months6-12 MonthsTotal


Expected Receivables Due$84.154m + $961.274m + $639.962m = $1,685.390m


less Expected Deposits for Repayment$21.630m + $289.314m + $304.975m = $615.919m


equals Net Expected Cash Into Business$62.524m$671.960m$334.987m$1,069.471m {B}



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

Summing up:

(Total Current Money to Draw On)/(Expected Net Current Loans Outstanding)
= $65.571m / $1,069.471m
= 6.1% < 10%

=> Fail Short term liquidity test

On the surface this is an odd result. The expected cashflow outstanding is hugely positive, much greater than the pcp. So how can I fail Heartland on this liquidity test? One answer is that getting more net money in than in previous years could mean that Heartland might have difficulty applying that money into new loans.



FY2016FY2015


Amount lent to Customers (Receivables)$3,113.957m (+8.8%)$2,862.070m


Total Borrowings$2,999.987m (+6.2%)$2,825.245m


Amount borrowed from Customers (Debentures and Deposits)$2,282.876m (+8.8%)$2,097.458m



Securitized borrowing facilities have gone up by $25.799m over the same annual comparative period, while the $350m borrowing ceiling remains the same. So Heartland have upped their current period risk profile yet again by having a smaller declared available loan buffer to cover any mismatch between maturing borrowings and maturing receivables.


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

In the numerator of the equation, we have borrowings.

HNZ BORROWINGS



1/ Term deposits lodged with Heartland.$2,512.629m


2/ Bank Borrowings$454.317m


3/ Securitized Borrowings total$276.696m


4/ Subordinated Bonds$3.379m


Total Borrowings of (see note 7, IRFY2017)$3,247.021m



Note 7 does not contain a clear breakdown of current and longer-term borrowing amounts and their maturity dates.

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

The information given in note 7 on the securitized borrowing facilities is as follows:

-------



Total HY2017Total FY2016Facility Maturity Date HY2017


Securitized bank facilities total all in relation to the Heartland ABCP Trust 1 $350.000m $350.000m3rd August 2017 (*)


less Current level of drawings against this facility$276.696m$284.429m


equals Borrowing Headroom$73.304m {A}$65.571m



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

-------

Summing up:

(Total Current Money to Draw On)/(Expected Current Net Loan Maturity Outstanding)
= {A}/{B (from post Liquidity Buffer Ratio HY2017 (Part 2) }
= $73.304m / $1153.477m
= 6.4% < 10%

=> Fail Short term liquidity test




HY2017FY2016


Amount lent to Customers (Receivables)$3,334.800m (+7.1%)$3,113.957m


Total Borrowings$3,247.021m (+8.2%)$2,999.987m


Amount borrowed from Customers (Debentures and Deposits)$2,512.679m (+10.1%)$2,282.876m



a/ Securitized borrowing facilities are $7.773m lower over the six month comparative period.
b/ External Bank borrowings have increased by $25.013m.
c/ $20m has been raised in part one of a cash issue.

Heartland have reduced their current period liquidity risk profile by:

1/ Increasing the debentures and parent bank borrowings at a faster rate than the receivables.
2/ Increasing the borrowed funds from Heartland bank customers, at a faster rate than the increase of all borrowings.

SNOOPY

[Joshuatree]

I can't understand why you would re-balance out of a great performing stock,enhances returns and all.

I don't expect you too. Except to say we all have our unique investment criteria situs, risk situs, reward situs etc.And experiences. I like to think I've learnt from my mistakes and experiences but i still make mistakes ;more in my spekky trading portfolio but i allow for that.

"Everyone has a plan until they get punched in the mouth" Mike Tyson

[Snow Leopard]

Read HY2017 Section 14 Liquidity Risk - use the numbers provided instead of making up something from fairyland.

Worst Case On Demand 13.94% [($69.67+$49.29)/($754.58+$99.06)]

Worst Case 6 months 45.86% [$871.74/$1,900.80]*

Worst Case 12 months 50.54% [$1,410.19/$2,789.99]*

*The only one that has any real meaning is the On Demand.

TTFN
Paper Tiger

[Snoopy]

Read HY2017 Section 14 Liquidity Risk - use the numbers provided instead of making up something from fairyland.

Worst Case On Demand 13.94% [($69.67+$49.29)/($754.58+$99.06)]

Worst Case 6 months 45.86% [$871.74/$1,900.80]*

Worst Case 12 months 50.54% [$1,410.19/$2,789.99]*

*The only one that has any real meaning is the On Demand.

TTFN
Paper Tiger

PT, the numerator of your second two ratios 'Worst Case 6 months' and 'Worst Case 12 months' does not contain the $42.29m 'undrawn committed bank facilities'. However you did include this $42.29m in your 'Worst Case on Demand' ratio. Is there a reason for treating the 'Worst Case on Demand' ratio differently in this respect?

SNOOPY

[Snoopy]

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

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

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

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

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




Read HY2017 Section 14 Liquidity Risk - use the numbers provided instead of making up something from fairyland.


I think that I will continue to follow the advice of the first PT, and not the second PT. That means I take the printed 'contacted' figures and transform them into 'expected' figures. Whether that is using 'fairyland numbers' is a matter of opinion.

But since note 14 also says:
"The banking group does not manage its liquidity risk on a contractual liquidity basis."

I would argue there is a good case for transforming the contracted figures into something else.

SNOOPY

[Snoopy]

Worst Case On Demand 13.94% [($69.67+$49.29)/($754.58+$99.06)]



The above figure is calculated from figures in IRFY2017 note 14, using the formula:

-----

[(Cash & Cash Equivalents) + (Undrawn Committed Bank facilities)]

'divided by'

[(On Demand Debentures) + (Unrecognised Loan Commitments)]

------

However the 'undrawn committed bank facilities' of $49.294m listed in note 14 do not correspond to the 'borrowing headroom' derived from 'note 7'.

$350.000 - $284.429m = $65.571m

I wonder what the explanation for that little inconsistency is?

SNOOPY

[Snow Leopard]

PT, the numerator of your second two ratios 'Worst Case 6 months' and 'Worst Case 12 months' does not contain the $42.29m 'undrawn committed bank facilities'. However you did include this $42.29m in your 'Worst Case on Demand' ratio. Is there a reason for treating the 'Worst Case on Demand' ratio differently in this respect?

SNOOPY

Because it is repayable within the year. [Says so]

As I said before the On Demand is really the only meaniful number.

BW
Paper Tiger

[Snow Leopard]

I think that I will continue to follow the advice of the first PT, and not the second PT. That means I take the printed 'contacted' figures and transform them into 'expected' figures. Whether that is using 'fairyland numbers' is a matter of opinion.

But since note 14 also says:
"The banking group does not manage its liquidity risk on a contractual liquidity basis."

I would argue there is a good case for transforming the contracted figures into something else.

SNOOPY

The 'first' PT was advising you that you were using the numbers incorrectly,

and

the 'second' PT Iis advising you that you are [still] using the numbers incorrectly,

and the 'first' and 'second' are actually the 'I have lost count' and 'I have lost count plus one'

Perhaps if you paid attention to what is actually written and made sensible deductions this thread would have less posts on it.

If the bank managed their liquidity risk on a contractual basis they would have about $800M of cash & equivalents On Demand (jokingly known as Shoe Box banking).

Heave Ho.
Paper Tiger

[Snow Leopard]

...I wonder what the explanation for that little inconsistency is?

SNOOPY

No comment :)

Release the lines, haul in the sheets, and avoid that tanker.

Till the next port
Paper Tiger

[percy]

No comment :)

Release the lines, haul in the sheets, and avoid that tanker.

Till the next port
Paper Tiger

I don't think he has made the first port yet.
Still lost at sea.?

[Snoopy]

No comment :)

Release the lines, haul in the sheets, and avoid that tanker.

Till the next port
Paper Tiger

'B'anker is spelt with a 'B'. And you shouldn't be drinking on the job either. :-)

SNOOPY

[Snoopy]

If the bank managed their liquidity risk on a contractual basis they would have about $800M of cash & equivalents On Demand (jokingly known as Shoe Box banking).




Heartland HY2017 Liquidity 'On Demand' (Contractual): Refer Note 14


Cash & Cash Equivalents$69.655m


plus Unrecognised loan commitments$99.061m


less Borrowings($754.583m)


add Undrawn Committed Banking Facilities$49.294m


Net Cashflow($576.573m)



Looks like a shortage of cash to me. However, it is all moot because as we know:

"The banking group does not manage its liquidity risk on a contractual liquidity basis." (The 'expected demand' is the figure that banks use).

SNOOPY

[Snoopy]

Because it is repayable within the year. [Says so]


One year from balance date is 30th June 2017. From note 14:

"Undrawn committed bank facilities of $49.3 million are available to be drawn down on demand via the ABCP Trust. To the extent drawn, $49.3 million is contractually repayable in 6-12 months' time upon facility expiry."

Yet we also know that (note 7):

"The banking group has securitised bank facilities of $350 million (December 2015: $350 million; June 2016: $350 million) {$350m - $276.696m = $73.304m undrawn loan headroom remaining} drawn on in relation to the ABCP Trust, which matures on 3 August 2017."

So it would seem that although 'loan reference 1' and 'loan reference 2' are both drawn on the ABCP trust, they are both different loans because the borrowing capacities are different and the maturity dates are different. Could that 'securitized loan' have been shuffled off balance sheet?

SNOOPY

[Snow Leopard]

Heartland HY2017 Liquidity 'On Demand' (Contractual): Refer Note 14


Cash & Cash Equivalents
$69.655m


plus Unrecognised loan commitments
$99.061m


less Borrowings
($754.583m)


add Undrawn Committed Banking Facilities
$49.294m


Net Cashflow
($576.573m)


...

I am completely baffled that despite these numbers being 'grouped' correctly for you by your friendly local Tiger you then go and re-arrange them in an apparently random manner and come up with a complete load of utter junk as a result.

The loan commitments and borrowings live together. Think about the cashflow (as you term it) and it is obvious.

By the way, Cash & equivalents and the Undrawn Committed also live together on the other side of the statement, in case you are tempted to do something novel with your creative accounts.


Best Wishes
Paper Tiger

[Snow Leopard]

One year from balance date is 30th June 2017. From note 14:

"Undrawn committed bank facilities of $49.3 million are available to be drawn down on demand via the ABCP Trust. To the extent drawn, $49.3 million is contractually repayable in 6-12 months' time upon facility expiry."

Yet we also know that (note 7):

"The banking group has securitised bank facilities of $350 million (December 2015: $350 million; June 2016: $350 million) {$350m - $276.696m = $73.304m undrawn loan headroom remaining} drawn on in relation to the ABCP Trust, which matures on 3 August 2017."

So it would seem that although 'loan reference 1' and 'loan reference 2' are both drawn on the ABCP trust, they are both different loans because the borrowing capacities are different and the maturity dates are different. Could that 'securitized loan' have been shuffled off balance sheet?

SNOOPY

My bafflement continues. :confused:

There are a number of Snoopositions [Snoopy suppositions] here.
If you can cure yourself of those, there may be hope for you.


Best Wishes
Paper Tiger

[Hint: Think carefully about the ABCP Trust financials]

[Snoopy]

I am completely baffled that despite these numbers being 'grouped' correctly for you by your friendly local Tiger


I see your three ratios with 'On Demand', '0-6 months', '0-12 months' ratios between 'contracted' receivables maturing' and contracted 'debenture equivalents' set to be repaid. However, I do not understand the objective of grouping the data in this way (because 'contracted cashflows' are not used by the bank in their own liquidity assessments - the bank uses 'expected cashflows'). Therefore I can make no assessment as to the 'correctness' of these ratios.



you then go and re-arrange them in an apparently random manner and come up with a complete load of utter junk as a result.


Hardly random. My "Heartland HY2017 Liquidity 'On Demand' (Contractual)" table is just a reproduction of the 'On Demand' column in Note 14 of IFR2017 on Liquidity quoted line by line.

Perhaps the slightly 'dodgy bit' is my treatment of the on call borrowing headroom. This money facility could be used to pay out debenture holders who want their money back (this is what I have assumed in my table). But the same money could also be used to support the establishment of new financial receivables. In that instance the $49.294m would turn into a negative number in my table. However on a contractual basis, with money due to be returned to debenture holders grossly exceeding the maturity of the financial receivables, I think using that facility to pay out debenture holders is the more likely possibility.



The loan commitments and borrowings live together. Think about the cashflow (as you term it) and it is obvious.


That point I can fully agree with



By the way, Cash & equivalents and the Undrawn Committed also live together on the other side of the statement, in case you are tempted to do something novel with your creative accounts.


So you are saying that I am 'double counting' in my addition because the 'Cash & Cash Equivalents' includes the 'Undrawn Committed Bank Facilities"?

SNOOPY

[Snoopy]

Hint: Think carefully about the ABCP Trust financials


A web search uncovered some information about ABCP trust financials.

From: http://www.thaipr.net/finance/718556

"Heartland ABCP Trust 1 is a single-seller, ABCP program sponsored by the New Zealand-based Heartland Bank Ltd. The ABCP is backed by hire purchase agreements, finance leases, and loans secured by motor vehicles and equipment and originated by MARAC, a division of Heartland Bank Ltd."

"We are affirming our 'A-1+ (sf)' rating on the ABCP issued by New Zealand Permanent Trustees Ltd. as trustee of Heartland ABCP Trust 1 after a restructure of the trust."

This comment was attached to the top of what looks like an Oz market news release (my italics):

------

"MELBOURNE (S&P Global Ratings) Aug. 16, 2016--S&P Global Ratings today said it has affirmed its 'A-1+ (sf)' rating on the asset-backed commercial paper (ABCP) issued by New Zealand Permanent Trustees Ltd. as trustee of the Heartland ABCP Trust 1. The rating affirmation follows a restructure of the trust."

That is interesting. "Heartland ABCP Trust 1" now has a higher credit rating than Heartland Bank!

"Heartland ABCP Trust 1 is a single-seller, ABCP program sponsored by the New Zealand-based Heartland Bank Ltd. (Heartland). The ABCP is backed by hire purchase agreements, finance leases, and loans secured by motor vehicles and equipment and originated by MARAC, a division of Heartland Bank Ltd."

"The restructuring of the Trust involved the replacement of Heartland as Trust Manager with AMAL New Zealand Ltd. (with certain functions delegated to Heartland) and a change in the beneficiary of the Trust, with the intention of ensuring that the Trust would not be considered an associated person of Heartland."

-----

Now I am more confused than ever. If "Heartland ABCP Trust 1" is no longer considered "an associated person of Heartland" (Note HY2017 is the first reporting period after the "Heartland ABCP Trust 1" restructuring), why are the

"Undrawn committed bank facilities of $49.3 million are available to be drawn down on demand."

for Heartland ABCP Trust 1, still part of Heartland's accounts?

SNOOPY

[Snow Leopard]

Snoops:

Think of a water bottle with a capacity of 1000ml.
You put 900ml of water in it,
then you drink 600ml from it.

If you have a sudden demand for water then you can drink nearly 300ml, being the water left and allowing for that little bit that sloshes around but you can never get out again and not 400ml right?

Now apply that thought process to the ABCP Trust.

But do not overthink it.

Best Wishes
Paper Tiger

[Snow Leopard]

I see your three ratios with 'On Demand', '0-6 months', '0-12 months' ratios...
...So you are saying that I am 'double counting' in my addition because the 'Cash & Cash Equivalents' includes the 'Undrawn Committed Bank Facilities"?

SNOOPY

When I was young and lived in Cote d'Ivoire my sole source of English language TV was CNN. Apart from the legendary Dave the Dog advert there was also another one where some guy in the USA watching the Sun going down phones his friend half way round the world who is watching the same Sun rising.

We are currently in the same boat.

Well, I am in the boat, and you are at the dog end of the Earth.

Anyway, so you have dug yourself into a deep hole and I keep sending you ladders so that you can climb out.
After a good nights sleep I awake to find that you have converted the ladder into another digging implement and are that little bit closer to the center of the earth.

So going back to basics - assume everything you think you know on this subject is wrong - then you will be right. Especially drop the abuse of the term cash flow.

Because HBL says "The banking group does not manage its liquidity risk on a contractual liquidity basis" this does not mean you ignore the figures from the contractual table and make something up instead.

Anyway I am sure you will continue to make a dog's breakfast of your analysis and I will chase the sunrise.

Must cast off
Paper Tiger

[Baa_Baa]

While Paper Tiger and Snoopy slug it out, one wonders what makes Paper Tiger so confident that he/she is the bona fide guru of bank finance analysis that is perfectly correct in every way at all times, while on the other hand as implied frequently, Snoopy doesn't have a clue.

Personally, I enjoy reading both viewpoints, albeit not the snide and facetious comments that come from one side of the analysis, but still cannot decide on which analysis has any merit. If I knew as much about valuing a bank as either of these characters do, I would probably not be sharing it on the internet but using it to make a gazillion on the sharemarket. Maybe even buy a bank!

For avid readers of this bank financial analysis soap opera, it might be time for the actors to front up with some credentials. By that I don't mean that the recidivist sideline bully's wade in (albeit they will be tempted) to slight the history of the discussion and analysis, moreover why should anyone believe anything either of them are saying right now, and going forward?

[percy]

Baa Baa.
One has a history of being 100% correct.
The other has a history of being 100% wrong.
Follow who ever you want.Fact or fiction.
I tend to follow those who are right.
It works out a lot more profitable.
We have had nearly 6 years of this thread,so it is easy to back test,and see who is correct.

[Snow Leopard]

While Paper Tiger and Snoopy slug it out, one wonders what makes Paper Tiger so confident that he/she is the bona fide guru of bank finance analysis that is perfectly correct in every way at all times, while on the other hand as implied frequently, Snoopy doesn't have a clue.

Personally, I enjoy reading both viewpoints, albeit not the snide and facetious comments that come from one side of the analysis, but still cannot decide on which analysis has any merit. If I knew as much about valuing a bank as either of these characters do, I would probably not be sharing it on the internet but using it to make a gazillion on the sharemarket. Maybe even buy a bank!

For avid readers of this bank financial analysis soap opera, it might be time for the actors to front up with some credentials. By that I don't mean that the recidivist sideline bully's wade in (albeit they will be tempted) to slight the history of the discussion and analysis, moreover why should anyone believe anything either of them are saying right now, and going forward?

I will have you know that not only have I been into a bank on several occasions but I have spoken to people who work in banks and I also have a piggy bank, called Perky.

And you, do you have any qualifications that allows you to make authoritative comments on squiggly lines?

Best Wishes
Paper Tiger

[Snoopy]

For avid readers of this bank financial analysis soap opera, it might be time for the actors to front up with some credentials. By that I don't mean that the recidivist sideline bully's wade in (albeit they will be tempted) to slight the history of the discussion and analysis, moreover why should anyone believe anything either of them are saying right now, and going forward?


Baa-Baa, I guess I could make up any credentials on an anonymous forum but would you believe them? For this reason I prefer to let my posts do the talking. I do not claim to be the great banking guru who always gets everything right. But if my posts gradually get 'righter', as a result of further reading or forum banter, then that is enough. And I do try to reference where I get my base information from so that others are free to check it.

My interest in financial institutions stems from being a long term shareholder in both ANZ and Westpac. My general observation that banks do well in both good times and bad, meant my analysis and scrutiny of these two investments became lazy. It was the GFC in general , and its effect on the NZ Finance industry in particular that got me thinking that I should make a real effort to understand my banking investments better. Shortly afterwards a company that I held shares in, PGG Wrightson, sold their 'golden goose' finance division to the newly minted Heartland Bank (as it would become). It was this transaction that drew me to Heartland as a good testing ground for better understanding banks.

When PGG Wrightson as a group became 'short of capital', the banking syndicate at the time drew up various 'solvency tests' that the PGG Wrightson Finance Division should satisfy. It is these tests, nothing that I have made up myself, that I am applying to Heartland bank to test its robustness. Some have said that these tests are inappropriate, or at least have the wrong hurdles for Heartland to jump over. The people who say this may have some valid points, and I have changed the 'hurdle heights' for some tests.

It may appear that PT and I spar on opposite sides of a boxing ring. But in fact we agree on many things. To take the latest 'spat' on bank liquidity as an example, I am reasonably satisfied that Heartland is OK and I don't think that PT has any liquidity issues either. It is true that I have 'failed' Heartland on the liquidity test at FY2016 and HY2017. But these failures, on what has become a mechanical calculation process, I feel are likely from a lack of disclosure on extra borrowings that may be available from Heartland's parent banks, rather than a fundamental liquidity weakness within Heartland itself. If I can find this extra information, and it is enough for Heartland to pass my liquidity test, then I will move on. If not though, then I will keep 'banging away' until the information door opens!

SNOOPY

[Snow Leopard]

For those of you that are actually interested in banking I suggest you watch the movie 'It's A Wonderful Life' which shows what I am going to be talking about in action. But I do warn you now to make sure you have your hanky handy for the weepy bit.

For percy and other HBL groupies then it is best that you not read this post at all.

For Snoopy we are going to stick to On Demand only, OK?

----------

So what is the worst thing that can happen to a bank?

Well has you have asked I will tell you that it is probably a loss of confidence in the bank such that everybody wants their money out of it as soon as possible:

A run on the bank.

At 31st December 2016 people had the contractual right to walk into a bank, or up to an ATM, or connect to the website etc and suck $754.6M dollars out of HBL.

To make it worse HBL have promised to loan another $99.1M to people who may still insist they hand over the cash so that they can buy that new boat.

That is $853.7M that HBL would have to provide pronto - can they do it?

NO.


There is ready money they can lay their hands on consisting of $69.7M of cash and cash equivalents and another $49.3M that the ABCP Trust 'Water Bottle (see a previous post) can provide for a grand total of $119.0M.

So they could actually meet 13.9% of the demand. That is the liquidity ratio.


Now what is much more likely to happen? What has they say, is expected?

Well people take money out and people put money in and some days there may be a few million more out than in and other days a few million more in than out and each day will be different.


But expect the unexpected.

So they have the facilities in place to cope with a sudden 'biggish' run.

Best Wishes
Paper Tiger

[Snoopy]

For Snoopy we are going to stick to On Demand only, OK?

----------

At 31st December 2016 people had the contractual right to walk into a bank, or up to an ATM, or connect to the website etc and suck $754.6M dollars out of HBL.

To make it worse HBL have promised to loan another $99.1M to people who may still insist they hand over the cash so that they can buy that new boat.

That is $853.7M that HBL would have to provide pronto - can they do it?

NO.


There is ready money they can lay their hands on consisting of $69.7M of cash and cash equivalents and another $49.3M that the ABCP Trust 'Water Bottle (see a previous post) can provide for a grand total of $119.0M.






Heartland HY2017 Liquidity 'On Demand' (Contractual): Refer Note 14 -{Snoopy Version}


Cash & Cash Equivalents$69.655m


plus Unrecognised loan commitments$99.061m


less Borrowings Contracted for Repayment($754.583m)


add Undrawn Committed Banking Facilities$49.294m


Worst Case Contracted Net Cashflow($576.573m)





Heartland HY2017 Liquidity 'On Demand' (Contractual): Refer Note 14 -{Tiger Version}


Borrowings Contracted for Repayment($754.583m)


less Unrecognised loan commitments($99.061m)


add Cash & Cash Equivalents$69.655m


add Undrawn Committed Banking Facilities$49.294m


Worst Case Contracted Net Cashflow($734.695m)





I am completely baffled that despite these numbers being 'grouped' correctly for you by your friendly local Tiger you then go and re-arrange them in an apparently random manner and come up with a complete load of utter junk as a result.


Right, so at last we can pin point the view of the secretive Tiger and we find that the 'complete load of utter junk' actually contains only one line different to what the Tiger was proposing. That line represents 'Unrecognised loan commitments'. PT has assumed this means loan commitments where the nod and the wink has been given. But the paperwork is still in the system so the loans have not yet appeared on the books. This could be the correct interpretation. But there are other possible interpretations.

One other interpretation is that these loans are already made. But they are on the books of ABCP trust, not on the Heartland books directly. We know ABCP Trust is no longer an 'associated person' of Heartland Bank, and has managed to get a higher credit rating than Heartland Bank. The higher credit rating would not be possible if ABCP Trust was still legally controlled by Heartland. IOW the 'unrecognised loans' are 'off balance sheet' as far as Heartland's accounting reporting standards are concerned. Yet these loans still form part of an overall Heartland picture. This is my interpretaion of what is printed in IR2017 Note 14. And if this is the correct way of interpreting that table, then my 'complete load of utter junk' is entirely reflective of the true situation and it is actually the Tiger version that is a ... I'd better stop there if I don't want a flame war.



Now what is much more likely to happen? What has they say, is expected?

Well people take money out and people put money in and some days there may be a few million more out than in and other days a few million more in than out and each day will be different.


Now we find that the Tiger suggested that the 'expected' cashflows' are quite different to the 'contracted cashflows'. I agree with the Tiger on this. Yet the 'expected cashflows' can be extrapolated from the 'contracted cashflows' using assumptions based on past behaviour of customers.

The Tiger suggests that studying 'contracted cashflows' is the way to study liquidity becasue anything more than that is just data corruption. I do have some sympathy with keeping just to the base contractual data. But we know it is virtually certain that:

1/ most debenture funds will be reinvested AND
2/ some loans will be repaid early.

So any data we generate from 'contracted cashflows' will almost certainly be meaningless in the real world. Meaningless in absolute value, but possibly still useful in comparing the state of the books at two different snapshots in time.

The way I have converted 'contracted cashflows' to 'expected cashflows' is not ideal. That is because I have used conversion factors based only on one year of data (FY2014) published by Heartland. Extrapolating what will happen in all other years from what happened in just one year is not good modelling practice. Nevertheless if you regard the FY2014 year as representative, and I do, then I think calculating the 'behavioural data' is an exercise worth doing. I stand by using my 'behavioural data'. And if PT disagrees with that then I respect his position. But it doesn't make me wrong.

SNOOPY

[Snow Leopard]

There must have lived in dread of you at the puppy farm, Snoopy!

I will see if I can get a photo of a dog peeing on the statute of Captain Cook for you if I ever make it into harbour at Whitby.

Best Wishes
Paper Tiger

[macduffy]

It certainly makes senses to expect the unexpected, tiger. But if something did occur, such as a loss of confidence in a bank followed by a "run" on that bank as its depositors withdrew their money, then the contagion effect on the wider inter-connected banking/financial system would compel a govt to either support the bank or arrange for its "marriage" to a competitor. It could be argued that HBL, as a smaller player, would be easier to handle in such circumstances than its bigger competitors, if such an unexpected happening should occur - remember United Building Society? - but of course sharholders wouldn't see it in those terms!

All hypothetical, of course.

[Arbroath]

PT & Snoopy

no disrespect but this discussion between the both of you is intensely boring and blocking up the thread. Banks are very simple businesses. I am an ex-banker of 20 years.

All banks are insolvent at any point in time if all contractual claims against them are presented at the same point in time as no bank has sufficient liquidity except a central bank which just creates more to escape a crisis etc. Looking at Heartland what matters most is the quality of the management as the senior team of 5-6 people will be making the judgement calls that determine the overall risk and direction of the business. The macro environment Heartland operate in and managements ability to operate the business well are the determinants, not a discussion on Heartlands liquidity. The RBNZ know a lot more about there liquidity than we do as shareholders (not saying that is how it should be). Rather than focus on a liquidity discussion with no real point to it can you turn your considerable analytical skills to looking at Heartlands future prospects, it's return on an increasing capital base, future needs for more capital etc and how those issues might affect its investment prospects.

Heartland has has been a great investment for 4-5 years but my view would be the future outlook is not so compelling.

[percy]

Although I agree with you about banks' liquidity I think Heartland's future outlook is compelling,as their business model of "digital" products, delivered via internet channels, is now in place and gaining traction,as is shown by their online growth successes in "open for business" and seniors applying for RELs online.Further products have now been developed.
I think the market has woken up to Heartland's strong growth,good management,and that is the reason for Heartland's strong share price.
As far as PT's and Snoopy's continuing discussion,I would point out PT should be thanked, for the time and effort he has spent correcting Snoopy's long winded mistake ridden posts.
I would not waste my time.

[RupertBear]

PT & Snoopy

no disrespect but this discussion between the both of you is intensely boring and blocking up the thread. Banks are very simple businesses. I am an ex-banker of 20 years.

All banks are insolvent at any point in time if all contractual claims against them are presented at the same point in time as no bank has sufficient liquidity except a central bank which just creates more to escape a crisis etc. Looking at Heartland what matters most is the quality of the management as the senior team of 5-6 people will be making the judgement calls that determine the overall risk and direction of the business. The macro environment Heartland operate in and managements ability to operate the business well are the determinants, not a discussion on Heartlands liquidity. The RBNZ know a lot more about there liquidity than we do as shareholders (not saying that is how it should be). Rather than focus on a liquidity discussion with no real point to it can you turn your considerable analytical skills to looking at Heartlands future prospects, it's return on an increasing capital base, future needs for more capital etc and how those issues might affect its investment prospects.

Heartland has has been a great investment for 4-5 years but my view would be the future outlook is not so compelling.

Persnally I quite enjoy the banter although I do skip throught Snoopys posts as I have no idea what they actually mean! :confused: I absolutely love PTs posts on all sharetrader threads, he/she is so clever. I really enjoy the quirky presentations and I totally respect his/her opinion. :D

[kizame]

PT & Snoopy

no disrespect but this discussion between the both of you is intensely boring and blocking up the thread. Banks are very simple businesses. I am an ex-banker of 20 years.

All banks are insolvent at any point in time if all contractual claims against them are presented at the same point in time as no bank has sufficient liquidity except a central bank which just creates more to escape a crisis etc. Looking at Heartland what matters most is the quality of the management as the senior team of 5-6 people will be making the judgement calls that determine the overall risk and direction of the business. The macro environment Heartland operate in and managements ability to operate the business well are the determinants, not a discussion on Heartlands liquidity. The RBNZ know a lot more about there liquidity than we do as shareholders (not saying that is how it should be). Rather than focus on a liquidity discussion with no real point to it can you turn your considerable analytical skills to looking at Heartlands future prospects, it's return on an increasing capital base, future needs for more capital etc and how those issues might affect its investment prospects.

Heartland has has been a great investment for 4-5 years but my view would be the future outlook is not so compelling.

I absolutely agree! It would be really interesting for everyone if they turned their considerable skills to forecasting the companies' prospects,much more interesting imop. It's great that they have such an interest,but maybe steer it towards the future of the company,even if it's negative v positive.

[Snoopy]

I absolutely agree! It would be really interesting for everyone if they turned their considerable skills to forecasting the companies' prospects, much more interesting imop. It's great that they have such an interest,but maybe steer it towards the future of the company,even if it's negative v positive.


I have given my view on Heartland's prospects going forwards in some detail over the last few months. I am not going to repeat it. But I have put together this 'Summary Post' in which I will reference and draw together my outlook for Heartland going forwards. My valuation is derived from actual Heartland results, with all the strengths and weaknesses that flow from that data stream implies.

First Decision: Decide how you will value Heartland. Is it a growth company or a dividend paying cyclical? I have argued it is the latter. (refer my post 8495 "Buffett Point 3: Return on Equity"). The key point here is that whether you look at a representative multi-year average (9%) or just last year (10.7%) the historic return on shareholder equity is quite low. Well below par when compared with other banks. This is a flag for growth, if it occurs, being unpredictable.

In the real world such an artificial deliniation between 'growth' and 'cyclical' is not black and white. So for those companies that are 'mainly cyclical' but with a 'small overlaid growth outlook' you can pretend the company is 'only cyclical' and add onto that a premium for growth later.

There has been much talk here about the 'digital strategy' driving Heartland's growth forward. But actually all the banks are doing this. So it is not clear to me that Heartland will gain any relative advantage by 'going digital'. Comments on other 'banking environment' factors that could affect Heartland going forwards can be found here (my post 8616 "Dark Clouds mass over the Heartland").

The upshot of all this is that I value Heartland on the basis of a "Dividend Capitalised Valuation". Why 'dividend' and not 'profit'? Growing a bank is a capital intensive business. The best people to know what part of the profits should be paid out as 'dividends' and what part of the profits should be retained for future growth are the directors. The directors declare the dividend. Furthermore the directors can look through short term cash flow issues and maintain their dividend through a bad year, if they know the future prospects of the business are good.

To make such a valuation you need three things:

1/ Base Data to Work From (my post 8633 "The Data: FY2016 Perspective")
2/ A 'discount factor' to apply to the base data (my post 8629 "Preamble: The Discount Rate Factor")
3/ The Result of the Calculation (my post 8635 "The Calculation: FY2016 Perspective" ).

My fair valuation for Heartland Bank averaged over the business cycle comes out as $1.42, with no growth over the business cycle assumed.

SNOOPY

[h2so4]

Persnally I quite enjoy the banter although I do skip throught Snoopys posts as I have no idea what they actually mean! :confused: I absolutely love PTs posts on all sharetrader threads, he/she is so clever. I really enjoy the quirky presentations and I totally respect his/her opinion. :D

Yes I hope one day PT achieves his dream and upgrades to a Tornado or A Class.:)

[Snoopy]

My fair valuation for Heartland Bank averaged over the business cycle comes out as $1.42, with no growth over the business cycle assumed.


I need to further explain what the above sentence means.

1/ By 'Averaged', I mean covering a 5-6 year business cycle. Typically over such a business cycle, one might expect the actual share price to wander above and below that average. My 'rule of thumb' for a cyclical is that you might expect the share price to rise around 20% from this average at the 'earnings peak', and drop around 20% from this average at the 'earnings trough'. This corresponds to my 'expected' Heartland share price range as follows:



Bottom of Business CycleAverageTop of Business Cycle


$1.14$1.42$1.70



The market has HBL nudging $1.70 now. So with all time low interest rates poised to rise, I am saying 'now' is the peak of the Heartland banking profit cycle. I could say Heartland is now 'overvalued' taking an overall business cycle view. But it is no more overvalued than plenty of other shares out there, and certainly not "grossly overvalued". So if I held, I wouldn't necessarily be running for the exit gate just yet.

2/ My valuation is made on 'dividends per share'. This is important because Heartland may issue new shares to make an acquisition. But my valuation would not increase under such a scenario unless the 'dividend per share' increased. This is why being 'earnings per share accretive' , and by implication 'dividend per share accretive', is so important when a new acquisition is made.

3/ It is natural for Heartland to rise in share price around dividend time. So coming up to a say, a 5c dividend, I would expect the Heartland share price to creep to $1.70 + 5c = $1.75 (exceeding the top of my maximum share price range) at the top of the business cycle, just before the dividend was paid.

4/ Whether one should apply a 'modest growth premium' to my cyclical valuation is the next decision. Some would say I should. But as a counterweight to that, I have some doubts as to whether the Heartland results declared recently have realistically provided for future debt imparment. (see my post 7774 "Where did the money go? (second edition)" and the accompanying discussion (my post 7776 "A tale of VW'). Effectively I am saying that the growth in Heartland profits will eventually be undone by the serial underprovisioning for impaired loans that has happened to date.

SNOOPY

[Valuegrowth]

It should break 52 week high but it may have pull back when market becomes weak. I also expect some sort of competition in the banking and insurance industry in the coming years thorough out the world not limited to New Zealand. Strong ones should outperform weak ones.

Do you think its ROE will improve in the coming years from current 11.4%?

Kind regards

[JeremyALD]

I need to further explain what the above sentence means.

1/ By 'Averaged', I mean covering a 5-6 year business cycle. Typically over such a business cycle, one might expect the actual share price to wander above and below that average. My 'rule of thumb' for a cyclical is that you might expect the share price to rise around 20% from this average at the 'earnings peak', and drop around 20% from this average at the 'earnings trough'. This corresponds to my 'expected' Heartland share price range as follows:



Bottom of Business CycleAverageTop of Business Cycle


$1.14$1.42$1.70



The market has HBL nudging $1.70 now. So with all time low interest rates poised to rise, I am saying 'now' is the peak of the Heartland banking profit cycle. I could say Heartland is now 'overvalued' taking an overall business cycle view. But it is no more overvalued than plenty of other shares out there, and certainly not "grossly overvalued". So if I held, I wouldn't necessarily be running for the exit gate just yet.

2/ My valuation is made on 'dividends per share'. This is important because Heartland may issue new shares to make an acquisition. But my valuation would not increase under such a scenario unless the 'dividend per share' increased. This is why being 'earnings per share accretive' , and by implication 'dividend per share accretive', is so important when a new acquisition is made.

3/ It is natural for Heartland to rise in share price around dividend time. So coming up to a say, a 5c dividend, I would expect the Heartland share price to creep to $1.70 + 5c = $1.75 (exceeding the top of my maximum share price range) at the top of the business cycle, just before the dividend was paid.

4/ Whether one should apply a 'modest growth premium' to my cyclical valuation is the next decision. Some would say I should. But as a counterweight to that, I have some doubts as to whether the Heartland results declared recently have realistically provided for future debt imparment. (see my post 7774 "Where did the money go? (second edition)" and the accompanying discussion (my post 776 "A tale of VW'). Effectively I am saying that the growth in Heartland profits will eventually be undone by the serial underprovisioning for impaired loans that has happened to date.

SNOOPY

I still have an issue with how wide your range is $1.14 to $1.70 are about 50% apart! It'd be hard to be wrong.

[percy]

The share price is currently $1.71...,
which means he is still wrong.!!..lol.

[Snoopy]

Do you think its ROE will improve in the coming years from current 11.4%?


There is a tendency to think of Heartland as a small nimble bank able to capitalise on new opportunities faster than their competitors. The 'digital strategy' has great potential to cut costs from parts of the system and boost ROE. But how stable is the 'core business base' that is the springboard for Heartland's new initiatives? I discuss this in my post 8524 "Strong Market Position Discussion : FY2016". The question becomes will the new initiatives create enough improvement to cope with some legacy business decline, as well as satisfying shareholder needs for growth? I discuss this in my post 8532 "Strong Market Position FY2016: Further Discussion and Conclusion".

My prediction was for a total loan book growth of $3.7m. Not much when the total loan book size was $628m (actually <1%)! While there is a good chance Heartland may do better than this, a prudent investor would not invest on the basis of all ducks lining up. I don't see a compelling case for reinvesting any of my ANZ and WBC funds into Heartland.

SNOOPY

[Snoopy]

I still have an issue with how wide your range is $1.14 to $1.70 are about 50% apart! It'd be hard to be wrong.


My price range looks at the expected price deviations you might expect over a 5 to 6 year period trading on the market. This is why it is so broad. I can narrow my range down by looking at where the price might be 66% of the time if you like. That would be a 10% deviation around the average (another rule of thumb).



Bottom of Business CycleAverageTop of Business Cycle


66% Percentile Price Range$1.28$1.42$1.56


95% Percentile Price Range$1.14$1.42$1.70



As a share investor, my aim would be to increase my holding when a share is in the bottom half of its trading range and reduce my holding when trading in the top half of the trading range.

Of course:
1/ Just because a share is in the top half of the trading range, that doesn't mean the price can't go higher.
2/ Just because a share is in the bottom half of the trading range, that doesn't mean the price can't go lower.

I am not going to pretend I can pick short term price flucuations. I am trying to take an overall longer term wider view. Not pick an optimim price for a particular trade, but buy in at a price that should provide superior returns in the medium to long term. As for what the share price is doing 'right now', I really don't care.

SNOOPY

[Snoopy]

The share price is currently $1.71...,
which means he is still wrong.!!..lol.


No it just means the price has gone into my 96% percentile range, up from the 95% percentile range. A 1c variation in share price is immaterial and well within what might be expected of 'market noise'. It is not worthy of comment, and I sentence myself to one lashing for doing so.

SNOOPY

[Snoopy]

I still have an issue with how wide your range is $1.14 to $1.70 are about 50% apart! It'd be hard to be wrong.


My $1.42 can probably be best thought of as the price I might pay for shares if there was no public market for Heartland shares and the whole group was privately owned. Bring on a public market for shares. Then any share becomes subject to the daily vicissitudes of interest rates, what happens to other banks, and even the rantings of Donald Trump. So if you see Heartland trading at $1.70 (the price as I write this) this could be because:

1/ there is underlying net growth that I have not incorporated in my modelling. OR
2/ in a time of very low interest rates, new shareholders are prepared to accept a lower yield than myself, because someone want's an instantaneous yield 'now', whereas I am after a business cycle yield in a climate where dividends can both rise and fall over time.

In my judgement, there are no public announcements yet that suggests the reason is 1/

On the second point 2/, I refer to my post 8629 "Preamble: The Discount Rate Factor". This shows I am working on an 'acceptable' gross yield of 7.5% at my $1.42 valuation. If someone else is prepared to accept 6.5% then the fair value share price changes as follows:

$1.42 x (7.5/6.5) = $1.64

Perhaps they are willing to accept a 6% gross yield? In that case the share price such an investor might pay becomes:

$1.42 x (7.5/6.0) = $1.78

None of these share prices predictions are 'right' or 'wrong'. They are simply reflective of the gross yield the investors of the day are prepared to accept. I won't accept a gross yield, on average, of less than 7.5% given the inherent risks of a second tier financial company. So my mean business cycle valuation won't be changing from $1.42. It follows that I have absolutely no interest in acquiring shares at $1.70, even if I think in the short term the share price might go higher. In casino terms that would be akin to 'betting against the house' as the odds stack up more and more against you. It doesn't preclude a short term win. But in the medium to long term, it is a losing strategy.

SNOOPY

[Beagle]

They're good value compared to their peers Snoopy. I'm sticking with my peer group comparison of $1.83 although note that BOQ and BEN have had some nice moves up last week so might have to review that when HBL gets to $1.83.

[Snoopy]

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%)





An update on how the half year has shaped up to the previous full year result. The information below has been extracted from the half year report for FY2017.

https://shareholders.heartland.co.nz/media/1320/heartland-bank-2017-interim-report-final.pdf

Our test requirement is:

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

Regional Risk

From reference Note 12b, the greatest regional area of credit risk in dollar terms is Auckland, with $838.352m worth of assets. This represents:

$838.352m/ $3,718.790m = 23% of all loans

So 'normal service has resumed' with the former concentartion champion, 'Rest of the North Island' back down to :

$822.142m/ $3,718.790m = 22% of all loans.

Auckland at 23% of all loans is high, yet still below historical concentration levels. 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. Does 'Auckland' capture the Harmony investment stake too? Anyone know?

Industry Group Risk

From reference Note 12c, the greatest 'business group' risk in dollar terms is Agriculture, with $712.072m worth of assets. This represents:

$712.072m/ $3,718.710m = 19% of all loans

This is slightly up on FY2016, when agriculture was

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

These figures are quite high and continue trending in the wrong direction for HY2017. 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. How much compounding interest without any cash payments can Heartland take on the books? A 13% jump in the value of that rural portfolio in just 6 months is not insignificant. This situation will need careful watching when the FY2017 result details are released IMO.

SNOOPY

[Snoopy]

They're good value compared to their peers Snoopy. I'm sticking with my peer group comparison of $1.83 although note that BOQ and BEN have had some nice moves up last week so might have to review that when HBL gets to $1.83.

This sounds like 'greater fool' investing to me. There is no need to evaluate the true worth of the investment if 'the rising trend' means there is always someone else to sell to. No doubt there is significant money to be made when an investment goes from being 'plain overvalued' to 'incrementally overvalued'. The trick to making money is to make sure you don't become the 'greatest fool'. Good luck.

SNOOPY

[Valuegrowth]

Thank you so much Snoopy for your time and information. I really appreciate. Good luck!
There is a tendency to think of Heartland as a small nimble bank able to capitalise on new opportunities faster than their competitors. The 'digital strategy' has great potenmtial to cut costs from parts of the sytem and boost ROE. But how stable is the 'core business base' that is the springboard for Heartland's new initiatives? I discuss this in my post 8524 "Strong Market Position Discussion : FY2016". The question becomes will the new initiatives create enough improvement to cope with some legacy business decline, as well as satisfying shareholder needs for growth? I discuss this in my post 8532 "Strong Market Position FY2016: Further Discussion and Conclusion".

My prediction was for a total loan book growth of $3.7m. Not much when the total loan book size was $628m (actually <1%)! While there is a good chance Heartland may do better than this, a prudent investor woudl not invest on the basis of all ducks lining up. I don't see a compelling case for reinvesting any of my ANZ and WBC funds into Heartland.

SNOOPY

[Arbroath]

This sounds like 'greater fool' investing to me. There is no need to evaluate the true worth of the investment if 'the rising trend' means there is always someone else to sell to. No doubt there is significant money to be made when an investment goes from being 'plain overvalued' to 'incrementally overvalued'. The trick to making money is to make sure you don't become the 'greatest fool'. Good luck.

SNOOPY

i sold 30% of my holding at $1.68 and then watched them trade to $1.71 within his minutes. Still got the other 70% but think the valuation is getting stretched so will likely sell more if they show more strength.

[Baa_Baa]

i sold 30% of my holding at $1.68 and then watched them trade to $1.71 within his minutes. Still got the other 70% but think the valuation is getting stretched so will likely sell more if they show more strength.

Some will actually listen to an ex-banker, others will not. Whoever wins have bragging rights which they will surely exercise when it suits them. Thanks for sharing.

[Beagle]

This sounds like 'greater fool' investing to me. There is no need to evaluate the true worth of the investment if 'the rising trend' means there is always someone else to sell to. No doubt there is significant money to be made when an investment goes from being 'plain overvalued' to 'incrementally overvalued'. The trick to making money is to make sure you don't become the 'greatest fool'. Good luck.

SNOOPY

It's an earnings growth story Snoopy. Sooner or later it'll hit $1.83 with organic earnings growth. With a circa 7% gross dividend yield I am happy to take a patient approach now that dairy has recovered. You can't completely discount the possibility of a credit rating upgrade at some stage either which might lower the cost of their funding somewhat.
An awful lot of quality stocks on the NZX are currently trading within a yard or two of a fairly fulsome price...might as well own the ones that pay a decent dividend yield then :)

[Snoopy]

It's an earnings growth story Snoopy. Sooner or later it'll hit $1.83 with organic earnings growth.


Spoken as though the core position is solid and incremental growth is a given. I think incremental growth is a given (switched on management look to have a credible growth strategy). But I am not so sure how solid that core of earnings really is.



With a circa 7% gross dividend yield I am happy to take a patient approach now that dairy has recovered.


Heartland keep booking profits on their dairy loans, but has dairy really recovered? Agricultural loans were $628.202m at last full year balance date (30-06-2016) and six months later 31-12-2016) had grown to $712.072m, a rise of 10.4% in just six months. How much interest was actually repaid over that period and how much was capitalised and booked as profit?

From the HY2017 interim report
"Trading conditions for Heartland’s dairy customers improved over the course of the reporting period, with farmers enjoying increases in payments from dairy companies. Dairy customers have generally responded (but with some exceptions? Snoopy edit) well to the difficult trading conditions over the past two years, with most customers managing to significantly lower their operating costs, and where necessary, to consolidate their financial position."

That last bit in bold reads like the bank has taken out their whip.



You can't completely discount the possibility of a credit rating upgrade at some stage either which might lower the cost of their funding somewhat.
An awful lot of quality stocks on the NZX are currently trading within a yard or two of a fairly fulsome price...might as well own the ones that pay a decent dividend yield then


Yes a credit rating upgrade wouldn't surprise me, particularly when Heartlands own ABCP Trust is already on an A+ rating. And yes the dividend while it lasts will support the share price. As I said in another post" the risk profile gross return you are a shareholder might expect, will determine the share price you are prepared to pay.

SNOOPY

[Snoopy]

Rather than focus on a liquidity discussion with no real point to it can you turn your considerable analytical skills to looking at Heartlands future prospects, it's return on an increasing capital base, future needs for more capital etc and how those issues might affect its investment prospects.


Heartland is not shy about raising new capital. Subsequent to EOHY2017 they have raised a lot more new capital with an issue of $20m in new shares in New Zealand and the issue of $A20m of capital notes in Australia. But leading up to the latest reporting point, it is apparent that the balance sheet is already being worked harder. The following information is taken from IFR2017 and AR2016.



Snapshot TimeShareholder Equity {A}Finance Receivables {B}{A}/{B}


EOFY2015$480.125m$2,862.070m16.8%


EOHY2016$485.688m$2,928.621m16.4%


EOFY2016$498.341m$3,113.957m16.0%


EOHY2017$528.002m$3,334.800m15.8%



IFR2017 contained the following guidance on future capital use:

"Moving forward Heartland intends to take a more dynamic approach to capital management, in the same way that the larger banks operate, holding a more efficient level of capital and approaching the market to access capital through multiple issuances that are timed and sized to meet its capital needs."

Looks like lots of opportunities to buy discounted shares and/or bonds will be available to shareholders in the future. That should be enough warning for any shareholder today to wait for some of those new cheaper shares if they wish to increase their holding, rather than pay 'top dollar' on the market.

SNOOPY

[Beagle]

Spoken as though the core position is solid and incremental growth is a given. I think incremental growth is a given (switched on management look to have a credible growth strategy). But I am not so sure how solid that core of earnings really is.Their history of earnings growth has been very sound. Consensus for Fy17 is 12 cps.

Heartland keep booking profits on their dairy loans, but has dairy really recovered? Agricultural loans were $628.202m at last full year balance date (30-06-2016) and six months later 31-12-2016) had grown to $712.072m, a rise of 10.4% in just six months. How much interest was actually repaid over that period and how much was capitalised and booked as profit?All banks have been supporting their customers through the difficult times. I expect most banks will now be expecting their dairy farmers to start paying their loans in a normal manner or sell up.

From the HY2017 interim report
"Trading conditions for Heartland’s dairy customers improved over the course of the reporting period, with farmers enjoying increases in payments from dairy companies. Dairy customers have generally responded (but with some exceptions? Snoopy edit) well to the difficult trading conditions over the past two years, with most customers managing to significantly lower their operating costs, and where necessary, to consolidate their financial position."

That last bit in bold reads like the bank has taken out their whip. All the banks have been applying pressure mate. They've had too.

Yes a credit rating upgrade wouldn't surprise me, particularly when Heartlands own ABCP Trust is already on an A+ rating. And yes the dividend while it lasts will support the share price. As I said in another post" the risk profile gross return you are a shareholder might expect, will determine the share price you are prepared to pay.
SNOOPYNo reason I can see why the dividend story shouldn't continue. Just keep tapping keen new investors for fresh capital Tier 1 and Tier 2 to fund organic growth and pay out about 70% of net profit as fully imputed dividends. I can't see any issue with the continuity of that. Everyone loves a good growth story.

[Snoopy]

From IFR2017




a/ Securitized borrowing facilities are $7.773m lower over the six month comparative period.
b/ External Bank borrowings have increased by $25.013m.
c/ $20m has been raised in part one of a cash issue.

Heartland have reduced their current period liquidity risk profile by:

1/ Increasing the debentures and parent bank borrowings at a faster rate than the receivables.
2/ Increasing the borrowed funds from Heartland bank customers, at a faster rate than the increase of all borrowings.


One last word on liquidity. The 'sideways solution' of having more capital is one way to fix a liquidity problem. However in the case of Heartland, having more capital does not appear to be a fix.






Snapshot TimeShareholder Equity {A}Finance Receivables {B}{A}/{B}


EOFY2015$480.125m$2,862.070m16.8%


EOHY2016$485.688m$2,928.621m16.4%


EOFY2016$498.341m$3,113.957m16.0%


EOHY2017$528.002m$3,334.800m15.8%





Heartland are using their new capital for growth, rather than improving liquidity. So here is an instance of 'new capital' actually increasing the company risk.

SNOOPY

[Snoopy]

No reason I can see why the dividend story shouldn't continue. Just keep tapping keen new investors for fresh capital Tier 1 and Tier 2 to fund organic growth and pay out about 70% of net profit as fully imputed dividends. I can't see any issue with the continuity of that. Everyone loves a good growth story.






Financial YearCapital Notes Issued during FYNew Shares Issued during FYTotal Shares on the Books EOFYNet Money Raised During FY
Dividends PaidROE


20130 m0 m388.704m$0m$13.951m7.2%


20140 m75,562 m463.266m$64.774m$19.930m8.0%


20150 m6,624 m469.980m$9.163m$30.188m9.9%


20160 m6,579 m476.469m$6.798m$37.690m10.7%


2017$22.000m (f)30.973m+512.902+ m$45.277m+$39.485m (f)tbc


Total Cash Raised$22.000$126.012m +


Total Cash Returned$141.244m



(f) indicates forecast result.


Make that $148 paid in by stakeholders for every $141 paid out to shareholders (if you go by the historical record so far). Even 100% 'Retained earnings' it would seem is not enough in the case of Heartland.

Heartland, NZ's first cash flow negative bank? Perhaps it would have been sustainable if no dividends had ever been paid?

SNOOPY

[Beagle]

You're over-thinking it. Current year EPS is forecast at 12 cps. Current year dividends are forecast at ~ 8.5 cps :sleep:

[iceman]

No reason I can see why the dividend story shouldn't continue. Just keep tapping keen new investors for fresh capital Tier 1 and Tier 2 to fund organic growth and pay out about 70% of net profit as fully imputed dividends. I can't see any issue with the continuity of that. Everyone loves a good growth story.

I would like to see them offer 4-5% discount for DRP. Reckon very little cash would flow out in dividends then and lot of the growth could be financed "internally" and it would be effortless and cheap "raising of capital" !!

[winner69]

You're over-thinking it. Current year EPS is forecast at 12 cps. Current year dividends are forecast at ~ 8.5 cps :sleep:

EPS 12 cents is more than $62m

Jeff wouldn't want it to be that much over guidance would he (proactively managed)

But then we know current guidance is a load of rubbish anyway ' a disgrace really

[winner69]

Last guidance especially 50m to 60m wasn't it

Must be a profit upgrade coming in next week or two if 62m plus is what's it's going to be

They've known all along

[Snoopy]

You're over-thinking it. Current year EPS is forecast at 12 cps. Current year dividends are forecast at ~ 8.5 cps :sleep:


If you ignore all the dividend money reinvested as part of the dividend reinvestment plan, you may be right.



EPS 12 cents is more than $62m

Jeff wouldn't want it to be that much over guidance would he (proactively managed)

But then we know current guidance is a load of rubbish anyway ' a disgrace really


A good cost cutting saving is on offer for Jeff here. Get rid of the PR department, and sack all those accountants tied up 'looking forwards'. Sharetrader provides much better forecasts, and it's all for free ;-)

SNOOPY

[Snoopy]

Just to confuse readers, I will start in the middle of the story and ask them to look at column V and column W.

Column V is a measure of what management decide they want to do to adjust the size of the impaired balance bucket, to keep things running smoothly.

Column W is a measure over the same period of what is leaking out of the impaired balance bucket, actual loans written off over that period.

We can expect Column W to be far more lumpy that Column V. This is because actual right offs and the timing of those would not be expected to follow a regular pattern. OTOH taking a longer timeframe and a portfolio view of the loans, we might expect the proportion of loans that become impaired to converge around a steady figure. The impairment provisions are there to bring everything back to this management predicted 'steady state':

Smaller adjustments are needed on average, than actual write offs over the same period.

So if this is what we might expect, what do the numbers actually tell us?

On a half yearly period basis, what I see is pretty much what I expect. But the two totals tell a different story.

Over time I would expect the impairment expenses (what is adding to the bucket) and the write off expenses (what is leaking out of the bucket) to balance out. That doesn't seem to be happening here though. This sort of imbalance can happen over the short to medium term with a healthy total impairment provision (big bucket size). However, over the longer term even the biggest bucket will run dry.

Normalising the results tell a similar story. In proportional terms too, a lot more is flowing out of the impairment bucket than is flowing into it. There are at least a couple of different ways to explain this:

1/ The quality of loans could be getting ever increasingly better.
2/ The annual loan provisioning on average is being underdone, and consequently profit on average is being overstated.

Depending on whether you are a 'fan' or not, that will decide which explanation you choose to accept.




Date'Stressed' Loans on the books (X)
Net Financial Receivables (Impairments deducted) (Y)
(X)/(Y) Impaired Asset Expense (V)Write Off (W)
Gross Financial Receivables (Z)
(V)/(Z)
(W)/(Z)


EOHY2012$87.728m$2,075.211m4.23%$3.788m$13.823m$2, 104.591m0.18%0.66%


EO2HY2012$90.489m$2,078.276m4.35%$1.854m$3.993m$2, 105.702m0.09%0.19%


EOHY2013$80.383m$2,044.793m3.93%$5.254m$4.824m$2,0 72.270m0.25%0.23%


EO2HY2013$48.975m$2,010.393m2.43%$17.313m$3.836m$2 ,060.867m0.84%0.19%


EOHY2014$42.498m$1,905.850m2.23%$3.325m$19.036m$1, 940.064m0.17%0.98%


EO2HY2014$41.354m$2,566.039m1.59%$2.570m$19.582m$2 ,631.754m0.10%0.74%


EOHY2015$33.469m$2,722.433m1.23%$5.102m$1.456m$2,7 49.232m0.19%0.05%


EO2HY2015$32.824m$2,862.070m1.15%$7.003m$2.119m$2, 893.724m0.24%0.07%


EOHY2016$29.147m$2,928.601m1.00%$5.610m$14.282m$2, 951.075m0.19%0.48%


EO2HY2016$32.864m$3,113.957m1.06%$7.891m$4.381m$3, 140.105m0.25%0.14%


EOHY2017$28.646m$3,334.800m0.86%$6.892m$6.552m$3,3 61.934m0.21%0.19%


Total$66.602m$93.884m


Average0.25%0.37%




Ello ello ello. Wot goes on ear? The key point is to think about the progression of a loan going bad.

1/ At first a problem loan might come to management's attention.
2/ Next the loan may become partially impaired or fully impaired.
3/ Finally, when all hope is lost, the loan -or part of the loan- is written off.

Of course the above sequence is a simplification of the spectrum of real possibilities. A loan that comes to management's attention may end up coming right. Part of a loan may end up being written off while another part recovers and yet another part remians in the 'problem' bin. There are many paths a particular loan may take.

I have defined a 'stressed loan' ( > 90 days overdue (collective loans) OR individually impaired OR Restructured Assets) in the above table as a loan (or part of a loan) that has 'come to management's attention' (by being classified in the accounts as described) , but is not impaired. I have finished the calculation of the 'Stressed loans' as I have defined them, by subtracting out the impaired portion. The important thing is that there is no overlap between the loans or portions of loans in the 'stressed loan box' and the 'impaired loan box' in the table above, the way I have defined them.

While one cannot project the path of any particular loan that has come to management's attention, overall one might expect the trend in 'stressed loans' to be broadly indicative of the trend in 'impaired loans'. This might not be true, and what I have just said is an assumption. It is possible that a loan jumps from 'OK' to suddenly becoming impaired. But if management were that unaware that such a loan could end up being a problem - their credit control system was really that poor - would you want to invest with them? Put another way, if you thought Heartland was an investment worth considering, you would hope that Heartland management had a good handle on how loans coming to management's attention might behave as a collective group. That means I think the assumption that there should a correlation between 'stressed loans' and 'impaired loans' is reasonable.

The 'Stressed Loan' trend plotted over 11 half year periods is a beautifully decreasing curve (as a percentage of the unimpaired loan book). However, there is no such equivalent decreasing curve when comparing to the 'write offs' or 'impairments' over the same 11 half year time periods. I wonder why there are so many less 'stressed loans' now, in percentage terms, compared to the number 'write offs' and 'impairment provisions' in percentage terms that management are making? Is this consistent with management being on top of things?

SNOOPY

[percy]

Disclosure.
I sold 8.47% of my HBL holding last night and this morning at $1.69,as I may need the funds.
It still leaves me overweighted.I rather enjoy being overweighted,and if things work out, HBL will not be the only share I am nicely overweighted with.
Watch this space as good things take time.!!...lol.

[janner]

Disclosure.
I sold 8.47% of my HBL holding last night and this morning at $1.69,as I may need the funds.
It still leaves me overweighted.I rather enjoy being overweighted,and if things work out, HBL will not be the only share I am nicely overweighted with.
Watch this space as good things take time.!!...lol.

You have spooked the market perc. Dropped already.

[percy]

You have spooked the market perc. Dropped already.

Think the market has recovered, as it realises I have retained 91.53% of my holding.!!..lol.

[winner69]

Because Column V will be quite high this year no profit upgrade likely (proactively provisioning it's called). $60m it will be

But I reckon the market per se will demand to see a decent return on the extra capital used so Jeff will relent and Column V might be a lower number and $62m/$63m might be it

Don't you love this Column V

[Joshuatree]

Disclosure.
I sold 8.47% of my HBL holding last night and this morning at $1.69,as I may need the funds.
It still leaves me overweighted.I rather enjoy being overweighted,and if things work out, HBL will not be the only share I am nicely overweighted with.
Watch this space as good things take time.!!...lol.

I understand if its an age issue for you percy or even an aged care issue lol:D

[percy]

I understand if its an age issue for you percy or even an aged care issue lol:D

No .................no..............no............... .lol.

[Snoopy]

Because Column V will be quite high this year no profit upgrade likely (proactively provisioning it's called). $60m it will be

But I reckon the market per se will demand to see a decent return on the extra capital used so Jeff will relent and Column V might be a lower number and $62m/$63m might be it

Don't you love this Column V


Winner is referring to one aspect of 'the art of profit manipulation', which is one way to interpret the table in my post 9372.

Put succinctly Column 'V' is the 'Impaired Asset Provision' going into the problem loan bucket. Column 'W' is the 'Impaired Asset Expense' leaking out of the problem loan bucket. In any particular six monthly period, there is no reason these two should be exactly the same. Over time though, one might expect the 'Impaired Asset Provision' to 'fully feed' the 'Impaired Asset Expense'. If it didn't, then the impaired assets on the books would eventually disappear. And it is unrealistic to think that a bank would have no impaired assets on the books at all.

"1st April 2014: Seniors 'Reverse Mortgage' Business Acquired." This is the date I recognise as the birth of the 'modern' Heartland we see today. It is probably unfair to compare the 'modern' Heartland with the Heartland that was born with all sorts of legacy property portfolio issues. So I have cut down my table to just show the half year time periods from 1st July 2014 onwards (HY2015 onwards).



Date'Stressed' Loans on the books (X)
Net Financial Receivables (Impairments deducted) (Y)
(X)/(Y) Impaired Asset Expense (V)Write Off (W)
Gross Financial Receivables (Z)
(V)/(Z)
(W)/(Z)


EOHY2015$33.469m$2,722.433m1.23%$5.102m$1.456m$2,7 49.232m0.19%0.05%


EO2HY2015$32.824m$2,862.070m1.15%$7.003m$2.119m$2, 893.724m0.24%0.07%


EOHY2016$29.147m$2,928.601m1.00%$5.610m$14.282m$2, 951.075m0.19%0.48%


EO2HY2016$32.864m$3,113.957m1.06%$7.891m$4.381m$3, 140.105m0.25%0.14%


EOHY2017$33.050m$3,334.800m0.99%$6.892m$6.552m$3,3 61.934m0.21%0.19%


Total$32.498m$28.790m


Average0.22%0.19%



This shows a better picture with 'V' and 'W' more in balance. There is still a solid trend for X (the Stressed Loans of the Books) coming down. But this could be becasue we have a particularly favourable market for borrowers at the moment. Could it be that there are genuinely less stressed loans out there? Does that mean that my complaining about the divergence between the trends of 'Stressed Loans' and 'Impairment Provisions' over time is merely a product of benign market conditions? So there is nothing to worry about?

SNOOPY

[winner69]

I think Column V is a nice way of putting things that finance / insurance companies do to 'manage' results

Better than using emotive words with make such practices sound dodgy

[Ggcc]

Anyone have an idea why the sp has gone up 5 cents so far on no news?

[couta1]

Anyone have an idea why the sp has gone up 5 cents so far on no news? More buyers than sellers.;)

[Beagle]

Anyone have an idea why the sp has gone up 5 cents so far on no news?
I wonder if they're about to announce upgraded profit guidance ?

[lawson]

I'm wondering if they're benefiting from inflows of money outflowing from the big 4 banks. After all they have a good dividend and they are NZ owned and won't be impacted by todays Australian budget announcement of a new tax on Australian banks - expected to pull 6 billion from the big 4 over the next 4 years.

[percy]

Certainly beats selling books.?!.lol.
$2.00 this year.?

[JeremyALD]

Snoppy might have to redo his forecasts LOL

[Beagle]

I'm wondering if they're benefiting from inflows of money outflowing from the big 4 banks. After all they have a good dividend and they are NZ owned and won't be impacted by todays Australian budget announcement of a new tax on Australian banks - expected to pull 6 billion from the big 4 over the next 4 years.

Ouch that's got to hurt those like Snoopy with a love of Australian banks, got a link or more detail.

[couta1]

I'm wondering if they're benefiting from inflows of money outflowing from the big 4 banks. After all they have a good dividend and they are NZ owned and won't be impacted by todays Australian budget announcement of a new tax on Australian banks - expected to pull 6 billion from the big 4 over the next 4 years. Nearly all my money when it's not in the market now resides in the Heartland direct call Acct, was a substantial amount a couple of weeks ago.

[lawson]

Ouch that's got to hurt those like Snoopy with a love of Australian banks, got a link or more detail.

The AFR led with this and the banks are down between 2 and 3% today

Budget 2017: Scott Morrison plans to impose a tax on bank liabilities

Australia's big four banks are bracing themselves for a new tax onbalance sheet liabilities in the 2017 federal budget which is said toraise $6 billion over four years.In a move reminiscent of Labor's mining tax, Treasurer ScottMorrison is planning to impose a tax on the aggregate liabilities ofthe major banks, according to banking sources.The sources said Treasury Secretary John Fraser will call the big four bank chiefexecutives on Tuesday night at 6.30pm before Mr Morrison delivers the bad news.The tax will come directly out of retained profits, which is of great concern to thebanks because this is a source of capital for finance to small business.

Mr Morrison could defend the tax by pointing to the strong profitability of the big fourwhich make about $30 billion.There are numerous ways of taxing banks. The most popular has been a financialtransactions tax, also known as a Tobin tax in honour of a Nobel Prize winningeconomist James Tobin. Tobin taxes are in place in about a dozen countries includingFrance, Hong Kong, South Africa, Italy and the United Kingdom.But Morrison has opted for the same system used in the United Kingdom. This is a taxon liabilities for banks which have aggregate liabilities in excess of £20 billion. The UKtax is being phased out from 0.21 per cent to zero over the next five years.In the UK the liabilities tax was favoured after the global financial crisis because it wasnot reliant on bank profits. The UK also introduced a corporations tax surcharge.It is too early to say how the banks will react to the liabilities tax but it is possible theywill follow the lead of the mining companies and conduct a public campaign to fightit.But that would be a high risk option given the poor community attitudes towardbanks revealed in surveys supporting a royal commission into banking.The most obvious option for the banks to show their displeasure would be to pass onthe tax to borrowers.

[percy]

Nearly all my money when it's not in the market now resides in the Heartland direct call Acct, was a substantial amount a couple of weeks ago.

Word must have hit the street, that HBL had plenty of money to lend.!.lol.

[Beagle]

The AFR led with this and the banks are down between 2 and 3% today

Budget 2017: Scott Morrison plans to impose a tax on bank liabilities

Australia's big four banks are bracing themselves for a new tax onbalance sheet liabilities in the 2017 federal budget which is said toraise $6 billion over four years.In a move reminiscent of Labor's mining tax, Treasurer ScottMorrison is planning to impose a tax on the aggregate liabilities ofthe major banks, according to banking sources.The sources said Treasury Secretary John Fraser will call the big four bank chiefexecutives on Tuesday night at 6.30pm before Mr Morrison delivers the bad news.The tax will come directly out of retained profits, which is of great concern to thebanks because this is a source of capital for finance to small business.

Mr Morrison could defend the tax by pointing to the strong profitability of the big fourwhich make about $30 billion.There are numerous ways of taxing banks. The most popular has been a financialtransactions tax, also known as a Tobin tax in honour of a Nobel Prize winningeconomist James Tobin. Tobin taxes are in place in about a dozen countries includingFrance, Hong Kong, South Africa, Italy and the United Kingdom.But Morrison has opted for the same system used in the United Kingdom. This is a taxon liabilities for banks which have aggregate liabilities in excess of £20 billion. The UKtax is being phased out from 0.21 per cent to zero over the next five years.In the UK the liabilities tax was favoured after the global financial crisis because it wasnot reliant on bank profits. The UK also introduced a corporations tax surcharge.It is too early to say how the banks will react to the liabilities tax but it is possible theywill follow the lead of the mining companies and conduct a public campaign to fightit.But that would be a high risk option given the poor community attitudes towardbanks revealed in surveys supporting a royal commission into banking.The most obvious option for the banks to show their displeasure would be to pass onthe tax to borrowers.

Thank you for the heads-up. Passing the cost on to the borrowers, thereby making the big 4 Aussie banks less competitive relative to smaller N.Z. owned banks like Heartland I suppose. Seems a bizarre backward punitive tax to me...some strange political maneuverings coming from Australia lately.

[Beagle]

Nearly all my money when it's not in the market now resides in the Heartland direct call Acct, was a substantial amount a couple of weeks ago.

Mate you must have had a dump truck full because its affected their call rate, now down to 2.75%.

[couta1]

Mate you must have had a dump truck full because its affected their call rate, now down to 2.75%. I didn't notice that, thanks for the info, still a lot better than 1.25 % with ANZ Securities and that will drop. PS-Yes it was a good sized load.

[Ggcc]

More buyers than sellers.;)
Thanks for the help on that. I could have spent ages figuring that one out. 😂

[Southern_Belle]

More buyers than sellers.;)somebody knows something......there has been more buyers chandeliers for quite a while.

Time will tell.

Fortunate to be well positioned Percy

[kizame]

somebody knows something......there has been more buyers chandeliers for quite a while.

Time will tell.

Fortunate to be well positioned Percy

Yep, I know from experience,that their profit will come in at upper end of guidance,their divvy will get a lift,and there will be no new news to report.
No surprises there. Just a bull market in good stocks.

[percy]

We live in interesting times.
Have just been on ANZ Securities site and compared ANZ with HBL over the past 2 years.
Both started at zero.Surprise surprise ANZ is down 7.5% while HBL is up 30%.
WBC remains on Zero and again HBL is up 30%/

Disc ,Hold HBL,but not ANZ.or WBC..

pps Had fun this morning with my Visa Card being declined, at both Pak'n Save and Budget tyres.
First visit to my bank,Ordered a new card as old one was very worn.
Second visit to my bank.Visa network down.
In the meantime Eftpos network was working.

[Joshuatree]

Maybe stuff your mattress with cash so that when you wake up at night and the first thing that comes to your mind is "Am i well positioned?" wriggle, grin ,go back to sleep.:D:sleep:

[Beagle]

We live in interesting times.
Have just been on ANZ Securities site and compared ANZ with HBL over the past 2 years.
Both started at zero.Surprise surprise ANZ is down 7.5% while HBL is up 30%.
WBC remains on Zero and again HBL is up 30%/

Disc ,Hold HBL,but not ANZ.or WBC..

pps Had fun this morning with my Visa Card being declined, at both Pak'n Save and Budget tyres.
First visit to my bank,Ordered a new card as old one was very worn.
Second visit to my bank.Visa network down.
In the meantime Eftpos network was working.

ANZ and WBC under the pump again today. Feel just a little sorry, (would feel more sorry except I and several others have debated with him at great length about the superior earnings growth of HBL relative to the big Aussie 4) for the other hound. Talk about being thrown a curved ball with that new punitive bank tax ! Ouch !
http://www.smh.com.au/business/federal-budget/federal-budget-2017-banks-have-target-on-their-chests-20170509-gw13yr.html Australian Government obviously really desperate for more revenue.
Meanwhile over this side of the Tasman I see our Govt's books are in good shape and tracking much better than expected. http://www.stuff.co.nz/business/92417603/surplus-track-jumps-to-15-billion-as-government-prepares-may-25-budget Disc: Patiently waiting for the profit upgrade and next fully imputed dividend. Fully subscribed to dividend reinvestment scheme.

[Meister]

As much as I like heartland, this price is starting to seem a little crazy. I am still holding, but am no longer sure I should be. Hard stock to sell though, anybody else sharing this feeling?

[Beagle]

A while back I posted a comparative analysis of HBL v the 6 Aussie banks. I arrived at a fair price of $1.83. I won't sell anything that's tracking and growing well unless its at least 10% above my assessment of fair value. I think the tax change against the Aussie banks gives HBL more of a competitive advantage in N.Z. and in Australia with their reverse equity mortgages. That extra competitive advantage has to be worth something on the SP. The market says the net present value of all this future competitive advantage its 10 cents, (as that's what's been added to the SP since this occurred). I won't argue with the market so my preliminary revised assessment of fair value is now $1.93, call it $2.00 shall we Percy :D

[percy]

A while back I posted a comparative analysis of HBL v the 6 Aussie banks. I arrived at a fair price of $1.83. I won't sell anything that's tracking and growing well unless its at least 10% above my assessment of fair value. I think the tax change against the Aussie banks gives HBL more of a competitive advantage in N.Z. and in Australia with their reverse equity mortgages. That extra competitive advantage has to be worth something on the SP. The market says the net present value of all this future competitive advantage its 10 cents, (as that's what's been added to the SP since this occurred). I won't argue with the market so my preliminary revised assessment of fair value is now $1.93, call it $2.00 shall we Percy :D

I don't know what to call it?
I am like a stunned Rabbit caught in the hunter's spot light.!
$1.79-$1.80,Absolutely fabulous...

[Beagle]

I don't know what to call it?
I am like a stunned Rabbit caught in the hunter's spot light.!
$1.79-$1.80,Absolutely fabulous...

Easier than selling books or counting beans that's for sure :)

[percy]

Easier than selling books or counting beans that's for sure :)

Yes makes "honest" endeavors seem very hard work,for modest returns,however they are what provided us with the capital to invest.
Sort of keeps my feet on the ground.

[trader_jackson]

Wow, winner69, Heartland has been winning so much these past few days... ?

Been a fantastic few days for Heartland, today even had good volumes, despite another 5 cent rise.

Surely tomorrow is the day Jeff comes out with his 60 - 65m profit forecast (ie an upgrade), and we all know if this is the case it will be 64.8m ;)
And once Jeff has said these magic words, he will become the man running a billion dollar company (market cap at $934 million right now)

Congratulations to all the holders, and may the odds be ever in your favor.

Disclosure: Not holding

[Southern_Belle]

Thanks for the help on that. I could have spent ages figuring that one out. 😂Sorry ... predictive text

[Xerof]

somebody knows something......there has been more buyers chandeliers for quite a while.

I agree, far more bulbs than sellers recently :p

[Food4Thought]

I agree, far more bulbs than sellers recently :p


I think people are looking for their next best opportunity and have finally cottoned on to HBL having a lot more potential... Especially if NZ becomes the Switzerland of the South Pacific (probably won't happen/hopefully won't happen). I am loving it (Not an add. No I don't like McDonalds, ever)

[kizame]

Interesting to note,and probably nothing in it but...
WBC and ANZ shareprices have corrected by quite a bit,whilst HBL and TNR have increased on good volume over the last few days.
Coincidence...

[kizame]

HBL is too expensive right now,although it has hit my targeted price of 180 on technicals,it's getting a bit frothy for a bank unless there is something out of the ordinary to report,but don't hold your breath there...

[Beagle]

Innovative approach. Very clever thinking in my opinion... at a time when interest rates are very low elderly folks may need a regular top up in their monthly income.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11853559

[JeremyALD]

Well it was a hard call this morning but I've sold out of HBL at $1.79. time will tell whether that was the right decision but at the current price it seems a little overvalued. I'll look at buying in again around $1.65 (if it ever gets that low). It's been a great ride :)

[Jantar]

Well it was a hard call this morning but I've sold out of HBL at $1.79. time will tell whether that was the right decision but at the current price it seems a little overvalued. I'll look at buying in again around $1.65 (if it ever gets that low). It's been a great ride :)
I also believe the SP is abit overheated. I have decided to hedge my bets a bit and sold 1/3 of my holding at $1.80. I'm quite happy to enjoy the ride with the rest.

[couta1]

I also believe the SP is abit overheated. I have decided to hedge my bets a bit and sold 1/3 of my holding at $1.80. I'm quite happy to enjoy the ride with the rest. Most of the market looks overheated except the likes of the retirement sector and boring power and infrastructure companies, some are way too bubbly, just ripe for a good wack downwards.

[Beagle]

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11853339
In a single word this is "draconian" ! HBL have been handed a significant and probably permanent competitive advantage against the Australian banks and the market has decided that's worth something in terms of the net present value of all that future competitive advantage as reflected in the SP rise. In post #9411 I included an article that referenced strong growth in their high margin lucrative reverse equity business and a new approach to this form of lending...join the dots... its not about FY17 profit, its about profit growth further out...happy holder.

[percy]

Disclosure.
I sold 8.47% of my HBL holding last night and this morning at $1.69,as I may need the funds.
It still leaves me overweighted.I rather enjoy being overweighted,and if things work out, HBL will not be the only share I am nicely overweighted with.
Watch this space as good things take time.!!...lol.
In fact I did need the funds for my "special" project.
However. I sold another 4.23% last night at $1.79.just to boost my cash reserves.
Also helps reduce my average cost.

[Sideshow Bob]

Not sure if old news or new news:

http://meatexportnz.co.nz/2017/05/11/online-livestock-trader-links-up-with-heartland-bank/

[percy]

Not sure if old news or new news:

http://meatexportnz.co.nz/2017/05/11/online-livestock-trader-links-up-with-heartland-bank/

Thanks for the link.
An interesting article.

[winner69]

Wow, winner69, Heartland has been winning so much these past few days... ?

Been a fantastic few days for Heartland, today even had good volumes, despite another 5 cent rise.

Surely tomorrow is the day Jeff comes out with his 60 - 65m profit forecast (ie an upgrade), and we all know if this is the case it will be 64.8m ;)
And once Jeff has said these magic words, he will become the man running a billion dollar company (market cap at $934 million right now)

Congratulations to all the holders, and may the odds be ever in your favor.

Disclosure: Not holding

Won't be 64.8 this year

Column V will ensure something just over 60

This gives them scope for F18 guidance of 65 to 70

Wonder what 'real' profit actually is? And what might happen if Column V doesn't have enough in it to help out if the **** hits the fan in the next recession.

But only worry about the short term - no worries

Surprised so many faithful selling though

[Gunny]

I got back in at 1.56 fairly recently and plan to stick with in. If it gets down will likely add.

Gunny

[Arbroath]

I've sold out now at ave $1.76. Good luck to all holders. I think it is still a good company but just too rich on valuation for me and there will be other opportunities out there

[suse]

I think HBL needs to up its game for new depositors. I've been waiting on the phone twice now for over 6 minutes to set up my internet banking, and have left a message for them to return my call - 45 mins and waiting. Not exactly winning me over at this stage to get the lump of cash I want to deposit and as a shareholder I'm definitely unimpressed.

[winner69]

I think HBL needs to up its game for new depositors. I've been waiting on the phone twice now for over 6 minutes to set up my internet banking, and have left a message for them to return my call - 45 mins and waiting. Not exactly winning me over at this stage to get the lump of cash I want to deposit and as a shareholder I'm definitely unimpressed.

.....and when you are up and running have fun doing transactional stuff on a mobile device

They are leading the way in digital things I'm told

But you should know that owning the bank is better than putting money in anyway

[Baa_Baa]

.....and when you are up and running have fun doing transactional stuff on a mobile device

They are leading the way in digital things I'm told

But you should know that owning the bank is better than putting money in anyway

That's right, about investing in the bank not depositing in the bank, much better return albeit a bit more risky to capital fluctuations. Way better than a term deposit or a savings account, so far.

As far as online banking is concerned, all the banks have it and none of them are differentiated in any significant way from each other. Pretty much of a muchness is basic online banking across the sector, for web & mobile. It's pretty much the price of entry to the market, a baseline service, all say they are innovating but none are delivering in any serious way and most are laggards in conjoining payments, to banking, to accounting.

Where Heartland are making a difference in digital, is outside traditional transactional banking, in the riskier plays which thus far are still experimental but working out ok in the current upbeat economic circumstances.

[winner69]

BAA - When one tries to do transactional stuff on a mobile it generally doesn't work and Heartland staff tell you to wait until you can access a desktop


That's why I was telling suse he would have some fun doing transactional stuff.

[Baa_Baa]

BAA - When one tries to do transactional stuff on a mobile it generally doesn't work and Heartland staff tell you to wait until you can access a desktop


That's why I was telling suse he would have some fun doing transactional stuff.

Well that's not good, so their web banking and their mobile banking don't have the same basic functions, or one works better than the other? I have ANZ, Westpac and ASB, and all of theirs work fine on mobile app and the browser but none are really very inspiring, some of their mobile offerings are aligned (look and feel) to their web online, but none are particularly innovative in terms of new functionality.

I think we're in a plateau period for the banks, putting out second/third generation online (web/mobile) banking experience, but as I said it's all pretty basic stuff that really just replaces what we used do in the branch offices. Good, but basic transactional stuff. If Heartland are still catching up here, I don't see that as a particularly big issue, but inconvenient for their retail customers.

Where the next-gen stuff is going for core-banking - the three-pillars of banking (deposits, lending, payments) is much more interesting and useful, linking payments to core-banking to accounting, and aligning to sector specifics, seamlessly.

This is being led by the online accounting, not the banks. Funny really that online accounting is eating the lunch of the banks that didn't realise it was lunchtime, and soon it will be too late and be dinner time. But that's another subject.

Unfortunately this online banking stuff is a big investment for the banks, usually over the top of antiquated cumbersome and rigid core banking systems, and although all of the banks have a big online (Digital) story, some bigger than others, none of the banks are delivering innovation yet in this space.

Heartland I suspect is actually a laggard in core banking on web and mobile, they're just too small to justify the expense required to lead or even closely follow the market. That said, they do have and are very progressive in non-core online banking products / services outside transactional banking. Albeit experimental.

[winner69]

Bugger - no profit upgrade in latest announcement. Did say upper end but we had already worked that out eh

Column V must be looking healthy

[winner69]

Q3 profit up 16% on last year (YTD up 13%)

Lets assume $60m for FY - implies Q4 profits only up 3% on last year - that's pretty miserable eh

Why maintain a low figure of $57m in their guidance - that implies a 16% fall in profit for the quarter v last year. What a nonsense - we are not idiots are we

Column V getting a good workout I reckon

[Beagle]

What was their profit in Q4 last year W69 ? Add 16% to that as clearly momentum is building and take off a million or two for a final clean up of doubtful dairy loans and Bob's your uncle !
Speaking of dairy, I see we've had yet another increase in the auction overnight. I think we're out of the woods now.

[percy]

We remain "well positioned," with eps increasing in the 9 months from 8cps to 9cps.
Very strong cash flow.

[winner69]

What was their profit in Q4 last year W69 ? Add 16% to that as clearly momentum is building and take off a million or two for a final clean up of doubtful dairy loans and Bob's your uncle !
Speaking of dairy, I see we've had yet another increase in the auction overnight. I think we're out of the woods now.

Q4 LY was $14.6m but that included $4.9m of bad debt expense (Column V adjustment eh)

See the bad debt expense so far this year is up 25% on last year.

[IAK]

Nice article on Heartland Bank.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11857621

[Beagle]

Gosh...I had to go back 4 pages to dig out the Heartland thread, very quiet, what's going on Percy :)
http://www.stuff.co.nz/business/93026444/lower-credit-rating-means-more-costs-for-smaller-banks

[winner69]

Gosh...I had to go back 4 pages to dig out the Heartland thread, very quiet, what's going on Percy :)
http://www.stuff.co.nz/business/93026444/lower-credit-rating-means-more-costs-for-smaller-banks

Just have higher margin business and make heaps eh

Don't seem to need much cash at moment going from current deposit rates - some ven lower than the big four.

Suppose you new call account gave them enough for a while

[percy]

Gosh...I had to go back 4 pages to dig out the Heartland thread, very quiet, what's going on Percy :)
http://www.stuff.co.nz/business/93026444/lower-credit-rating-means-more-costs-for-smaller-banks

Nothing to say or report...........................however that may well change after I have heard Jeff Greenslade and Chris Flood present at Hobson Wealth on Wednesday night.
After last year's presentation I brought more.
Very profitable move .

Watch this space....lol.

[artemis]

Sharp downturn in bank home lending. If banks have $$$ looking for a home, will they be looking to other lending opportunities. (Yes of course!) More to the point, will they be looking at Heartland's key sectors and offering better deals to secure. And how much of a risk is it to HBL.

Percy, worth asking at next week's presentation?

https://www.interest.co.nz/news/87947/latest-reserve-bank-data-shows-new-lending-falling-significantly-same-month-year-ago-new

[Snow Leopard]

Gosh...I had to go back 4 pages to dig out the Heartland thread, very quiet, what's going on Percy :)
http://www.stuff.co.nz/business/93026444/lower-credit-rating-means-more-costs-for-smaller-banks


PT & Snoopy

no disrespect but this discussion between the both of you is intensely boring and blocking up the thread. Banks are very simple businesses. I am an ex-banker of 20 years....


Well I am still reeling from the irony of being called boring by a banker!

Best Wishes
Paper Tiger

[janner]

Well I am still reeling from the irony of being called boring by a banker!

Best Wishes
Paper Tiger

Hahahaaaaa... Touche !!

[Beagle]

Just had a look at all the charts of the Australian banks I follow. Every one of them I follow including the smaller banks like BOQ and BEN have been slammed since the Australian Govt announced their new tax on deposits. Market very unhappy with this new policy...meanwhile HBL sails along unaffected :) Australian Govt books in a real pickle...wonder if this is just the start of a broader and deeper reach of new taxation on Australian corporates or whether the initial tax rate is just the thin edge of the wedge to get the banks used to being stung before they really sink the boot in ? Either way, it appears HBL shareholders are "well positioned"

[BlackPeter]

Just had a look at all the charts of the Australian banks I follow. Every one of them I follow including the smaller banks like BOQ and BEN have been slammed since the Australian Govt announced their new tax on deposits. Market very unhappy with this new policy...meanwhile HBL sails along unaffected :) Australian Govt books in a real pickle...wonder if this is just the start of a broader and deeper reach of new taxation on Australian corporates or whether the initial tax rate is just the thin edge of the wedge to get the banks used to being stung before they really sink the boot in ? Either way, it appears HBL shareholders are "well positioned"

Yep, there are some falling knives in the Australian bank sector.

I assume however that the new Australian bank tax was just the trigger for an overdue correction (or the straw breaking the camels back): Overexposure to property speculation (Melbourne apartment buildings), some concerns about the state of the overall Australian real estate market and a resource market which (after early recovery) seems now to move again backwards. Add to that all the empty houses after they deported the remaining 600k Kiwis ... the once lucky country is not that lucky anymore.

[percy]

Sharp downturn in bank home lending. If banks have $$$ looking for a home, will they be looking to other lending opportunities. (Yes of course!) More to the point, will they be looking at Heartland's key sectors and offering better deals to secure. And how much of a risk is it to HBL.

Percy, worth asking at next week's presentation?

https://www.interest.co.nz/news/87947/latest-reserve-bank-data-shows-new-lending-falling-significantly-same-month-year-ago-new
Basically this came up tonight when Chris Flood answered a question about Land Rover offering low or no interest loans on Land Rovers.
He said they lent money to Land Rover at one interest rate [normal] who lent it to their customers at a lower interest rate.Land Rover covered this on their normal new vehicle profit margin.Working this out with Land Rover was something Heartland could do, while the "big" banks would struggle, and give away as too hard..
An interesting comment was from Jeff Greenslade who said they were looking at reducing the size of loans,ie fewer very large loans and more smaller loans to reduce risk.
You will also appreciate Jeff Greenslade comment "changing all the time.".Seems to enjoy it.
"Open for business" in Australia will initially be run from NZ.
Part of the success of "open for business" [and I take it for other HBL products] is certainty.Being a small business owner I can understand this.A small business wants "certainty" the fiunds/finance is there, before committing themselves to a job, or an opportune stock purchase.
Pleasing to see Jeff Greenslade and Chris Flood so relaxed,and both had that easy way about them that successful business managers have.
Thank you Hobson Wealth, and I was pleased the presentation attracted a full house.

[Joshuatree]

Great,thanks for sharing percy.Happy holder.

[iceman]

Thanks for the interesting update Percy.

[stoploss]

Percy I hope this isn't like people that tried to avoid risk in finance companies and instead of putting 100 K into Hanover , split it into 10 parcels of 10 K ......we all know the result of that risk strategy .
Anyway a new car pretty good security , most people seem to want to make that payment over a lot of others in my experience

"An interesting comment was from Jeff Greenslade who said they were looking at reducing the size of loans,ie fewer very large loans and more smaller loans to reduce risk."

[percy]

Percy I hope this isn't like people that tried to avoid risk in finance companies and instead of putting 100 K into Hanover , split it into 10 parcels of 10 K ......we all know the result of that risk strategy .
Anyway a new car pretty good security , most people seem to want to make that payment over a lot of others in my experience

"An interesting comment was from Jeff Greenslade who said they were looking at reducing the size of loans,ie fewer very large loans and more smaller loans to reduce risk."

It took me by surprise.Usually we hear talk of "larger loans to higher nett worth clients" from financial intos.So to hear less large loans, and more small loans to reduce risk, was a pleasant change.
And yes I remember years ago Scales sold fish etc to one Russian,who would not pay them.The next year they sold to 100 Russians.............yes you guessed.............who would not pay them.It was in Hubbard control years.!!
Yes HBL seems to be a lot different from large banks.Livestock loans,car loans and even Reverse Equity Loans, range from just a few months to under 7 to 10 years.
Something else I found interesting was when HBL was formed they had a staff of 350,and to be fair pretty, backward legacy systems.Today the head count is still the same number,yet they are now at the forefront of digital products and systems.
Hate this saying;They have upskilled their workforce.
With their latest skills they can play around with their online/digital advertising and see straight away what works,straight away.l

[Beagle]

They have a good program on now financing new Jaguar's on a one third deposit, one third next year and one third the year after that at 1.9%. Real interest rate is of course much higher but the Jaguar distributor is paying for that through retail margin on their cars. You could invest in a new Jaguar Percy, finance it through HBL and you'd be lining your own pockets. Call it a gold plated dividend reinvestment scheme :D http://www.jaguar.co.nz/
F Type R Supercharged V8 4WD with 550 horsepower would be my pick :t_up:

[percy]

I would not get home from Archibalds without lossing my licence.! 550 horsepower I would be wheel spinning in ever gear.
I also decided against the Bugatti Chiron,because the 19,000 Euro for a set of tyres seemed a bit much.
So what to do? The Nissan only has 115,000 Klms on the clock and still goes well.On trade me I see a 2016 Nissan Pulsar ST 1.8L petrol with only 6,400 Klms on the clock for $19,990,which appeals to me, as the whole car is cheaper than a new set of Bugatti Chiron tyres.!!I guess the insurance and running costs would be a little cheaper too.!
In fact I could buy myself a Nissan,and one each for the two daughters, and still have change left over, passing up the great opportunity of being a Jag driver.I don't think a baseball sun hatted Percy would ever be accepted into The Jaguar Drivers Club.!lol

[couta1]

They have a good program on now financing new Jaguar's on a one third deposit, one third next year and one third the year after that at 1.9%. Real interest rate is of course much higher but the Jaguar distributor is paying for that through retail margin on their cars. You could invest in a new Jaguar Percy, finance it through HBL and you'd be lining your own pockets. Call it a gold plated dividend reinvestment scheme :D http://www.jaguar.co.nz/
F Type R Supercharged V8 4WD with 550 horsepower would be my pick :t_up: I've got one to sell you mate with no supercharger yet still putting out 650 ponies. No fancy stuff like Air con, electric windows, or even a heater(The motor puts out enough heat) it will just sound better than the above, oh and you will be noticed driving through town.:cool:

[stoploss]

I've got one to sell you mate with no supercharger yet still putting out 650 ponies. No fancy stuff like Air con, electric windows, or even a heater(The motor puts out enough heat) it will just sound better than the above, oh and you will be noticed driving through town.:cool:

I feel a "sharetrader " roadtrip coming up ....

[percy]

I feel a "sharetrader " roadtrip coming up ....

From one gas station to the next.650 ponies!!?????????????

[stoploss]

[QUOTE=percy;668568]From one gas station to the next.650 ponies!!?????????????[/QUOTE

I know what its like to feed 390 , must be plenty of Z shares in the portfolio to hedge that one up Couta !!!

[couta1]

[QUOTE=percy;668568]From one gas station to the next.650 ponies!!?????????????[/QUOTE

I know what its like to feed 390 , must be plenty of Z shares in the portfolio to hedge that one up Couta !!! Nah, BP 98 Octane all the way, she averages 4.5k/ litre on a long trip at a reasonable speed.

[Snow Leopard]

I would not get home from Archibalds without lossing my licence.! 550 horsepower I would be wheel spinning in ever gear.
I also decided against the Bugatti Chiron,because the 19,000 Euro for a set of tyres seemed a bit much.
So what to do? The Nissan only has 115,000 Klms on the clock and still goes well.On trade me I see a 2016 Nissan Pulsar ST 1.8L petrol with only 6,400 Klms on the clock for $19,990,which appeals to me, as the whole car is cheaper than a new set of Bugatti Chiron tyres.!!I guess the insurance and running costs would be a little cheaper too.!
In fact I could buy myself a Nissan,and one each for the two daughters, and still have change left over, passing up the great opportunity of being a Jag driver.I don't think a baseball sun hatted Percy would ever be accepted into The Jaguar Drivers Club.!lol

29 :ohmy: years ago when I developed electronic systems for cars, if you had asked me what my job was I would have answered

"Driving a Jaguar with the windows down, the cruise control engaged and playing Steve Hackett's Spectral Mornings on the Stereo".


https://www.youtube.com/watch?v=sYSV5iiSajw

The highlight was being detained by the police on suspicion of having stolen the car.

Good to see the froth coming off the HBL share price.

Best Wishes
Paper Tiger

[percy]

What is it about HBL that attracts all us old boy racers/hoons?
I always think how lucky I was my great hoon car was a 1953 Morris Minor about 30 to 40 horse power?.Nearly put it on its roof one time.!Doubt it would have done 100 kmh.
I imagen if I was a hoon today with a Toyota Supra or Nissan GTR I would have been dead before I was 20.
ps PT The police would not have gone near you, had you been playing Barry Manilow.!!..lol.

[Beagle]

Wondering if someone would be so kind as to do me a small favor. Do you know if Heartland does reverse equity mortgages on retirement village units, (i.e. license to occupy units) ? Who would be the best person at Heartland to contact and discuss this option, please feel free to PM me or post here, whichever you feel more inclined to do.

[percy]

I would doubt it.
Heartland Bank,456 Lake Road, Takapuna,ph.489 5264 would be your nearest branch.
Or otherwise ring deputy CEO,Chris Flood, who will direct you to the right person. ph.927 9139..m 027 226 6508.

[Beagle]

I would doubt it.
Heartland Bank,456 Lake Road, Takapuna,ph.489 5264 would be your nearest branch.
Or otherwise ring deputy CEO,Chris Flood, who will direct you to the right person. ph.927 9139..m 027 226 6508.

Thanks Percy.

[Beagle]

I would doubt it.
Heartland Bank,456 Lake Road, Takapuna,ph.489 5264 would be your nearest branch.
Or otherwise ring deputy CEO,Chris Flood, who will direct you to the right person. ph.927 9139..m 027 226 6508.

You were right to doubt it Percy. I've looked into this and discussed with them. Turns out HBL do not fund reverse equity loans on retirement village units.
I think they're missing a real opportunity here but that's their decision.

[percy]

You were right to doubt it Percy. I've looked into this and discussed with them. Turns out HBL do not fund reverse equity loans on retirement village units.
I think they're missing a real opportunity here but that's their decision.

A number of years ago my mother was living in Maroochydore.Her partner left her his house to live in,and it could be sold to buy her a unit in a retirement village...All ok,but legally she could not use that money to buy "a right to occupy",which meant she could not buy a retirement unit..She had to use her funds,together with an advance from my brother.
I would also doubt Heartland Bank would lend you money to buy HBL shares, with only the HBL shares as security.
You may have to try Geneva..!!!!...lol.

[kiwico]

Turns out HBL do not fund reverse equity loans on retirement village units.
I think they're missing a real opportunity here but that's their decision.

I think it's understandable. My understanding of a REM is that the interest builds up and up given there is no repayment but the maximum that can be taken is the value of the home. The home value potentially increasing allows for a margin. [I note that the HBL version of this may differ.]

As we've seen from other posters the resident of a retirement village does not have access to the gains in value of a unit. Instead they will be returned circa 70% of their original cost of the unit. There is also all the complications of the Retirement Villages Code of Practice 2008 and the additional protections for residents introduced in 2013.

For example, will they allow REMs on body corporate units or company share properties? I would image not but I see these as more likely to be REM appropriate than a retirement unit subject to the Retirement Villages Code of Practice.

[Beagle]

Just unpacking this a bit. Suppose Joe Bloggs paid $1m for an upmarket license to occupy and on average its expected Joe will live there for 10 years based on 78 year average age of entry and normal life expectancy tables.
Company XYZ guarantees that there's no capital loss so you're looking at a guaranteed residual value of not less than $700K.
Joe is asset rich but cash poor and with ultra low interest rates struggles to fund the $130 per week occupancy fee.
Why is annual outgoings of $6,760 not a bankable proposition in these circumstances ? Total drawdown is $67,600 and even with compound interest clicking away every month the eventual loan balance is going to be a very low ratio relative to the $700K. (According to my system $130 week compounded for ten years at 10% gives a total loan outstanding in ten years of just under $113K, very comfortably covered by a $700K realization of license to occupy sale.)

Seeing as reverse equity funders won't fund this at their normal expensive margin, maybe there's an opportunity for the retirement company to internally fund the capitalization of weekly fees ? (at a commercial interest rate of course) especially as they're the ones with the legal title to the land and eventually in receipt of the resale proceeds ? Nice little profitable sideline ? Fact is some retirees are really struggling with ultra low interest rates on their term deposit money and would welcome the lifestyle improvement that would come from not having to meet weekly village fees.

Some people have no kids and others have ratbag kids and some people couldn't care less that their kids wouldn't inherit as much if opex was capitalized. An opportunity here for a retirement company with the balance sheet strength to fund it themselves ? or in association with the companies own bankers to create a market niche. HBL are missing a real opportunity here, in my opinion.

[Jay]

Agree Mr Beagle, the company themselves would be able to do this more easily, but would it be tricky for another financial instituton to do this as "I" do not own the property, therefore cannot Mortgage it so to speak

[t.rexjr]

Agree Mr Beagle, the company themselves would be able to do this more easily, but would it be tricky for another financial instituton to do this as "I" do not own the property, therefore cannot Mortgage it so to speak

I have a mortgage over a house I do not own. The house is the security. Difference being I guess is that there are no additional borrowings against the house.

[kiwico]

Re REMs on retirement villages there is the added issue should the unit be damaged beyond repair. In such a scenario I understand the resident is returned their entire original capital sum unless the village operator is able to rehouse the resident in the same or another owned village to the resident's satisfaction. This was an outcome from the revision of the code of practice changes in 2013 following the Canterbury earthquakes.

If there was a REM on the unit the resident may no longer have enough funds for the capital sum required for a unit in another village. [Sorry to have such a glass half empty approach on this.]

[kiwico]

More info about the Retirement Villages Code of Practice 2008 is available here (http://www.mbie.govt.nz/info-services/housing-property/retirement-villages/code-of-practice-2008). [solely for the purpose of looking at REMs potentially offered by HBL - not trying to contaminate the HBL thread with info about SUM other companies...]

[BlackPeter]

I have a mortgage over a house I do not own. The house is the security. Difference being I guess is that there are no additional borrowings against the house.

Yes, but the title holder for your mortgaged house had to agree with this mortgage.

In the case of retirement villas - the title is hold by the retirement village provider and they are unlikely to have a separate title for each unit. This means any mortgage would be against the balance sheet of the retirement village. Sounds impractical and very messy on a per unit basis - and why would they want to do that anyway?

However - I do like the proposal of our new-born "Beagle". The retirement village providers could easily provide this "loan" by themselves (and deduct the repayment plus interest from any otherwise refundable capital return at the end of the contract) - or they could work out a deal with HBL to secure this loan facility (not per unit, but as a total of the complete facility) against the balance sheet of the retirement village. Obviously - the conditions would need to benefit both SUM (in this case), HBL and the (asset rich but cash stripped) retiree, but I think this should be possible.

[Jay]

Yes, but the title holder for your mortgaged house had to agree with this mortgage.

In the case of retirement villas - the title is hold by the retirement village provider and they are unlikely to have a separate title for each unit. This means any mortgage would be against the balance sheet of the retirement village. Sounds impractical and very messy on a per unit basis - and why would they want to do that anyway? .
t.rexjr, I too have a mortgage over a property I do not own, but as BP says the owner would have to agree and yes BP it would get messy


However - I do like the proposal of our new-born "Beagle". The retirement village providers could easily provide this "loan" by themselves (and deduct the repayment plus interest from any otherwise refundable capital return at the end of the contract) - or they could work out a deal with HBL to secure this loan facility (not per unit, but as a total of the complete facility) against the balance sheet of the retirement village. Obviously - the conditions would need to benefit both SUM (in this case), HBL and the (asset rich but cash stripped) retiree, but I think this should be possible.

Like the proposal by the Beagle as well, while not helping the cashflow immediately, would still be a nice earner. Not sure why Heartland seems to be the only one left holding the baby (REMs), no other larger Bank now offers these, too hard basket for a limited market?? I would think the market may grow over the next 5-10 years, a lot of near retirees with homes worth $1M+ but short of actual cash, as they say you cannot eat your house.

[Beagle]

More info about the Retirement Villages Code of Practice 2008 is available here (http://www.mbie.govt.nz/info-services/housing-property/retirement-villages/code-of-practice-2008). [solely for the purpose of looking at REMs potentially offered by HBL - not trying to contaminate the HBL thread with info about SUM other companies...]
"Contaminate" such a strong word...just putting the idea out there for goodness sake.
Thank you for the link but FYI The official reason given for not lending was "Unfortunately we are unable to lend on Retirement villages due to the 2006 Retirement Village Act".
Some companies have the balance sheet strength to look into fund this proposal from their own banking resources while obviously some others don't.

[percy]

t.rexjr, . Not sure why Heartland seems to be the only one left holding the baby (REMs), no other larger Bank now offers these, too hard basket for a limited market?? I would think the market may grow over the next 5-10 years, a lot of near retirees with homes worth $1M+ but short of actual cash, as they say you cannot eat your house.

Another reputable bank offering RELs would certainly help both HBL and the sector.

[kiwico]

"Contaminate" such a strong word...just putting the idea out there for goodness sake.

I was referring only to my comments not yours - I have always valued your input.

[Beagle]

I was referring only to my comments not yours - I have always valued your input.
Thanks for that, apologies for getting the wrong end of the stick.

[winner69]

Saw this when doing something else - 49% of digital nomads are 35 or older and that's a sizable opportunity for Australian banks

NZ much the same (maybe even more so). Future looking good for a nimble finance company like Heartland

[percy]

Saw this when doing something else - 49% of digital nomads are 35 or older and that's a sizable opportunity for Australian banks

NZ much the same (maybe even more so). Future looking good for a nimble finance company like Heartland

Agree.
Certainly is looking extremely good for Heartland Bank.
I am pleased to see HBL's share price, has not been contaminated by the problems the Australian Banks face.
Makes a pleasant change.

[Beagle]

Agree.
Certainly is looking extremely good for Heartland Bank.
I am pleased to see HBL's share price, has not been contaminated by the problems the Australian Banks face.
Makes a pleasant change.

Come on mate....I am seriously getting withdrawal symptoms...I haven't read the famous phrase, you know the one:) for several days now.

[percy]

May I direct you to THL.Tourism Holdings thread.
9.26 am this morning post #1882 especially for you.lol.

[davflaws]

Come on mate....I am seriously getting withdrawal symptoms...I haven't read the famous phrase, you know the one:) for several days now.
"Curse you Red Baron!"??

[iceman]

So HAN Group is one of the conglomerates caught up in an investigation by China Banking Regulatory Commission, alongside the huge Anbang Insurance Group and 3 others. They are concerned about their "leverage situations and risks" as all of them have been growing fast through debt funded acquisitions. HAN Group is supposed to settle its $660 million purchase of UDC from ANZ later in the year.
Has this the potential for the sale not to go through and HBL becoming a possible suitor again ?

[percy]

So HAN Group is one of the conglomerates caught up in an investigation by China Banking Regulatory Commission, alongside the huge Anbang Insurance Group and 3 others. They are concerned about their "leverage situations and risks" as all of them have been growing fast through debt funded acquisitions. HAN Group is supposed to settle its $660 million purchase of UDC from ANZ later in the year.
Has this the potential for the sale not to go through and HBL becoming a possible suitor again ?

We live in interesting times?

[Benny1]

So HAN Group is one of the conglomerates caught up in an investigation by China Banking Regulatory Commission, alongside the huge Anbang Insurance Group and 3 others. They are concerned about their "leverage situations and risks" as all of them have been growing fast through debt funded acquisitions. HAN Group is supposed to settle its $660 million purchase of UDC from ANZ later in the year.
Has this the potential for the sale not to go through and HBL becoming a possible suitor again ?

Didn't AIR NZ sell most of their Virgin shares to them? Air NZ will definitively not want them back! lol.

[Beagle]

Didn't AIR NZ sell most of their Virgin shares to them? Air NZ will definitively not want them back! lol.
Talk about a hospital pass... lol.

[peat]

pretty sure you guys are referring to HNA Group

http://www.hnagroup.com/en/

They took a stake in Virgin around the time that Air NZ sold to Nanshan Group


"In May Virgin Australia announced Chinese-owned HNA Group would take a 13 per cent stake through the issue of new shares at A30c a share each, raising A$159m"

I dont think Nanshan and HNA are related, but its a complicated web out there............. I dont know for sure

[winner69]

Are Heartland into cryptocurrencies like Bitcoin?

Niche / digital related

[percy]

Are Heartland into cryptocurrencies like Bitcoin?

Niche / digital related

No.
Think they may leave it to Co-Op and others.

[IAK]

Why's that W69? Has your computer locked up and you need to pay the ransom in bitcoin lol.
Are Heartland into cryptocurrencies like Bitcoin?

Niche / digital related

[kizame]

Why's that W69? Has your computer locked up and you need to pay the ransom in bitcoin lol.

Haha given the price of bitcoin that would be one expensive ransom.

[JeremyALD]

I've been pondering how HBL have gone up so much in SP over the last year and above my target price of $1.65. Their original forcast of 57 - 60 million has not changed significantly and things have seemed to be business as usual. The NZ economy is strong but I'm wondering what has justified such a sharp increase in HBL SP past $1.50 or so especially. Is it just that the market hadn't previously considered HBL but now are starting to believe it's growth story?

[iceman]

I've been pondering how HBL have gone up so much in SP over the last year and above my target price of $1.65. Their original forcast of 57 - 60 million has not changed significantly and things have seemed to be business as usual. The NZ economy is strong but I'm wondering what has justified such a sharp increase in HBL SP past $1.50 or so especially. Is it just that the market hadn't previously considered HBL but now are starting to believe it's growth story?

I have been a SH in this company since it was called Building Society Holdings with a ticker of BSH. Every now ad then since then, I have seen posts worded nearly identical to this one. Meanwhile Percy, myself, Scotty and a few others just remain well positioned

[janner]

Still well positioned aye percy ?? :-)))))))))))))))

[stoploss]

I've been pondering how HBL have gone up so much in SP over the last year and above my target price of $1.65. Their original forcast of 57 - 60 million has not changed significantly and things have seemed to be business as usual. The NZ economy is strong but I'm wondering what has justified such a sharp increase in HBL SP past $1.50 or so especially. Is it just that the market hadn't previously considered HBL but now are starting to believe it's growth story?

I think you answered your own question "the NZ economy is strong " , in good times the banks make a lot of money .....

[Beagle]

I've been pondering how HBL have gone up so much in SP over the last year and above my target price of $1.65. Their original forcast of 57 - 60 million has not changed significantly and things have seemed to be business as usual. The NZ economy is strong but I'm wondering what has justified such a sharp increase in HBL SP past $1.50 or so especially. Is it just that the market hadn't previously considered HBL but now are starting to believe it's growth story?

Risk has dissipated to a material extent with the advent of the dairy recovery and that along with reasonable GDP growth and the possibility of EPS accretive acquisitions has driven the stock to where it is today. Fair value and a good hold in my opinion. Can't let this opportunity pass without mentioning that shareholders are well positioned :)

[percy]

The last HBL presentation I went to was on 31st May, where Greenslade and Flood were very confident the result to 31st June would continue their record of beating brokers' forecasts.
Well now we are past the year's end, and will have to wait for the result announcement to find out whether HBL are at the top end of their forecast,or above up.
I see June new motor vehicle registrations were an all time record,so NZ Ltd remains in good shape.At Greymouth Top 10 last night there were 10 Maui/Britz camper vans.So Tourism is in good shape too. NZ Ltd outlook remains positive.
The solid ground work Heartland Bank laid,is now producing very real organic growth.The momentum is there,so we have every right to look forward to the coming year with confidence.
All Heartland Bank's niche sectors are growing.
We therefore remain "well positioned.".........lol.

[winner69]

I've been pondering how HBL have gone up so much in SP over the last year and above my target price of $1.65. Their original forcast of 57 - 60 million has not changed significantly and things have seemed to be business as usual. The NZ economy is strong but I'm wondering what has justified such a sharp increase in HBL SP past $1.50 or so especially. Is it just that the market hadn't previously considered HBL but now are starting to believe it's growth story?

You answered your own question jeremy - the market is believing its growth story.

As you know there are two components to the market price - company performance and multiples (snetiment / what punters are prepared for that performance)

Comparing HBL share price to its book value is a great example. Two to three years ago in June 15 HBL was trading between 1.1 and 1.3 book value .... and now it is trading at over 1.6 time book value (in spite of paying out quite a large percentage of earnings as dividends and issuing quite a lot of new shares). See the chart below

A big rerating / change in sentiment eh ......that is the market believing the Heartland story

The market obviously believes the story more than you do when you came up with your $1.65. ou haven't misjudged Heartlands performance it's just the market and you have different views.

Soon it's going to be $2.00 plus I'm told - good eh

[Joshuatree]

Informative post until the last line but thats W69 for ya.:)

[winner69]

Informative post until the last line but thats W69 for ya.:)

....was trying to be positive mate ...could have said it's way overvalued and really only worth $1.50 so be careful

[Joshuatree]

Ok so which is it W69 ?.Was that a throw away line and who told you and do you believe this person? You could have said anything, agreed.Thats w69 for ya:sleep:

[winner69]

Ok so which is it W69 ?.Was that a throw away line and who told you and do you believe this person? You could have said anything, agreed.Thats w69 for ya:sleep:

You asked, I'll take the bait and answer,

Read it on Sharetrader. Been said a few times. I'm sure that even Percy was amongst them and of course I respect everything he says.

Asking inane questions, that's jt for ya :sleep:

[percy]

You answered your own question jeremy - the market is believing its growth story.

As you know there are two components to the market price - company performance and multiples (snetiment / what punters are prepared for that performance)

Comparing HBL share price to its book value is a great example. Two to three years ago in June 15 HBL was trading between 1.1 and 1.3 book value .... and now it is trading at over 1.6 time book value (in spite of paying out quite a large percentage of earnings as dividends and issuing quite a lot of new shares). See the chart below

A big rerating / change in sentiment eh ......that is the market believing the Heartland story

The market obviously believes the story more than you do when you came up with your $1.65. ou haven't misjudged Heartlands performance it's just the market and you have different views.

Soon it's going to be $2.00 plus I'm told - good eh

Yes very soon.....
A while back I posted the date and time HBL would hit $2.00.
I have no reason to alter that post.[even if I could find it] ,lol..

[Joshuatree]

You asked, I'll take the bait and answer,

Read it on Sharetrader. Been said a few times. I'm sure that even Percy was amongst them and of course I respect everything he says.

Asking inane questions, that's jt for ya :sleep:

:)Like your positivity, happy holder here. Hope you're onboard too.

[winner69]

:)Like your positivity, happy holder here. Hope you're onboard too.

Yep, about time for a decent ramp up

Percy mentioned year end has passed and an update might be coming soon

Off course FY will.be above guidance - how about $62m profit (which also leaves a fair bit for a rainy day)

Jeff known that for a while .....too shy too tell us

[Lewylewylewy]

Interesting article on sharechat.co.nz today about nz banks. I wonder if that news will be widespread enough to cause a drop, or if the drop will happen at next profit announcement. Either way, might be some good buying opportunities coming up.

[Bjauck]

Interesting article on sharechat.co.nz today about nz banks. I wonder if that news will be widespread enough to cause a drop, or if the drop will happen at next profit announcement. Either way, might be some good buying opportunities coming up.

Is this the article http://www.sharechat.co.nz/article/fcf63b42/nz-bank-profits-fall-in-first-quarter-as-minnows-chase-market-share-over-margin.html ?

SP is down by 1c atm. The article seemed to indicate that the smaller banks have increased their market share in a total loan market that has increased by over 1% in the past quarter. This may compensate for reduced margins. On the whole, I would think that the article is positive from HBL's standpoint.

[percy]

I have not been able to bring up KPMG's quarterly FIPS,however Heartland's announcement on 17/5/2017, stated their net profit for the 9 months ended 31st March was up 13%.
They also stated "NPAT for year ending 30th June 2017 to be at the upper end of the previously advised range of $57mil to $60mil."

[Beagle]

I have not been able to bring up KPMG's quarterly FIPS,however Heartland's announcement on 17/5/2017, stated their net profit for the 9 months ended 31st March was up 13%.
They also stated "NPAT for year ending 30th June 2017 to be at the upper end of the previously advised range of $57mil to $60mil." There's a mistake in your post mate, you forgot to mention we are well positioned :D

[percy]

Thank you.
Yes we certainly remain "well positioned."

[silu]

Article of interest:

Heartland Bank goes live on Oracle core banking platform as Kiwibank struggles
https://www.reseller.co.nz/article/623485/heartland-bank-goes-live-oracle-core-banking-platform-kiwibank-struggles/

[winner69]

A guidance upgrade in next week or two?

Probably not - will manage result to $0.1m over previous guidance.

One day something will spark the step up $2 plus.

[silu]

Would they give a guidance update 4 weeks before FY announcement?

[winner69]

Article of interest:

Heartland Bank goes live on Oracle core banking platform as Kiwibank struggles
https://www.reseller.co.nz/article/623485/heartland-bank-goes-live-oracle-core-banking-platform-kiwibank-struggles/

New core system seems to have designed for people who speak a different language than me ......wouldn't call it user friendly

[percy]

A guidance upgrade in next week or two?

Probably not - will manage result to $0.1m over previous guidance.

One day something will spark the step up $2 plus.

One year ago HBL's share price was $1.29......Today $1.80 an increase of 39.5%.
Six months ago HBL's share price was $1.52.....Today $1.80 an increase of 18.4%
To go from $1.80 to $2.00 we need a very modest increase of 11.1%..Piece of cake.!

[pierre]

New core system seems to have designed for people who speak a different language than me ......wouldn't call it user friendly

I agree. The new web site is not at all intuitive and quite difficult to navigate. They might have come in within budget - but a bit more spent on some customer research to get feedback on their proposed changes would have been a good idea.

A few weeks back I spoke to one of their customer service reps to get some help with an issue and he said that his team was finally getting to grips with the new site. If they're working with it all day and it's taken them months to get their heads around it - what hope is there for us poor customers?

The ANZ Bank web site is streets ahead in user friendliness - God knows why Heartland had to make theirs so difficult.

[percy]

On its way to $2.00 the HBL share price will be $1.96 at 4.35 pm on Thursday 21st of September this year.
Unfortunately, we may then have to until mid morning on the 31st of January 2018. for it to go through $2.00.

ps I really don't mind waiting.

Above posted 08-03-2017 post #8896
Getting there.!!!...

[RGR367]

One year ago HBL's share price was $1.29......Today $1.80 an increase of 39.5%.
Six months ago HBL's share price was $1.52.....Today $1.80 an increase of 18.4%
To go from $1.80 to $2.00 we need a very modest increase of 11.1%..Piece of cake.!

Yeah, there's no doubting it will get there ($2.00) in no time. Lucky are we all that we bought in or got hyped in really low :cool: Thanks for all that made us believe.

[winner69]

Would they give a guidance update 4 weeks before FY announcement?

Would if it was a boomer of a result

But no doubt they'll manage it to $60.1m

[percy]

Would if it was a boomer of a result

But no doubt they'll manage it to $60.1m

So few things in life are certain.
Nice to know Heartland Bank is one of the few.!.lol.

[janner]

Would if it was a boomer of a result

Not looking for a " Boomer " of a result.. Just an onwards and upwards one..

As it has always been in the past..

Disc. STILL. A happy holder from day one..

[winner69]

Must be heaps in the bottom drawer awaiting for the inevitable rainy day

Percy, what was that quote of yours about Kerry Packer and rainy days - it was quite funny

[percy]

Must be heaps in the bottom drawer awaiting for the inevitable rainy day

Percy, what was that quote of yours about Kerry Packer and rainy days - it was quite funny

I would expect not all the new channels/new products will be successful.When I last spoke to Chris Flood, he did tell me new channels/new products right offs, were lower than budgeted,however I agree with you, there will be heaps in the bottom draw.
Now the Kerry Packer quote ,when he took over another Sydney newspaper business,and was talking with its accountant went something like this.
KP."What's this money in this account"?
a/c."It's our rainy day fund Mr.Packer."
KP."Look out the window son.it's pissing down."

[winner69]

I would expect not all the new channels/new products will be successful.When I last spoke to Chris Flood, he did tell me new channels/new products right offs, were lower than budgeted,however I agree with you, there will be heaps in the bottom draw.
Now the Kerry Packer quote ,when he took over another Sydney newspaper business,and was talking with its accountant went something like this.
KP."What's this money in this account"?
a/c."It's our rainy day fund Mr.Packer."
KP."Look out the window son.it's pissing down."

Good one

So Kerry was really saying rainy day money in the bottom drawer should really be in shareholders pockets .....hmmmmm

[Beagle]

https://www.heartland.co.nz/Uploads/Documents%20and%20Forms/Heartland%20Account%20Application%20Form%20-%20Individuals.pdf

I decided I've had enough of the "so called" Bank of New Zealand with their pitiful 0.1% on call accounts....so I finally got around to doing something about it. Was pain free, took me less than 10 minutes at home to fill out the forms and get copies of relevant identification documents. Heartland staff at Newmarket were very courteous, professional and friendly and all done in less than 10 minutes there. Heartland will be happy to pay you 2.75% at call. Ideal for those that want full flexibility with their finances and a fair return on call.