HGH - Heartland Group Holdings

[CJ]

Just to reprise Tim Hunter's quote:

"As a new bank, Heartland has been given more onerous capital requirements by the Reserve Bank than the established players. Its tier-one capital ratio - basically the equity as a percentage of risk-weighted assets - must exceed 12 per cent, while the requirement for ANZ and Westpac is 6 per cent."

What this means is that if Heartland singles out $12,000 of capital, then they can sign up a loan of $100,000 tied to that capital.
If ANZ or Westpac singles out $12,000 of capital, then they can sign up a loan of $200,000 tied to exactly the same dollar amount of company capital.

If that isn't a restriction on Heartland's core activities vis a vis other banks, I don't know what is. No matter how you spin it, the Heartland banking licence does not give Heartand the same privileges as banking licences awarded to ANZ and Westpac!My understanding is that, while the banks are currently only required to hold 6%, they will be required to have a minimum 12% once fully implemented - this could potentially lead to a lending crunch. However, that is not expected to constraint lending as they already have over 12% capital.

Can you confirm/dispute this. I will try and find an article on it tonight.

Edit: found this (haven't read it yet): http://www.interest.co.nz/news/56611/some-new-zealand-banks-might-have-beef-their-capital-holdings-meet-reserve-banks-basel-ii

[percy]

Tim Hunter may not have expressed himself in an optimal way. But there is nothing wrong in his article. You should not be so quick to disparage it.

SNOOPY

Well you certainly got it all wrong going on about a learners licence.
I think Tim Hunter writes very good articles as a rule.
However as I most probably understand HNZ better than he does,I thought it was a lazy article,poorly put together, with the muck up with net/gross yields adding to the confussion.

[winner69]

See F&P Finance reported a 20% increase in profit to $20m

And that $20m profit was made on $112m of equity .... that seems like an ROE of 18%

Something for HNZ to emulate eh

If HNZ interested in them the price just went up

[mouse]

My understanding is that, while the banks are currently only required to hold 6%, they will be required to have a minimum 12% once fully implemented - this could potentially lead to a lending crunch. However, that is not expected to constraint lending as they already have over 12% capital.

Can you confirm/dispute this. I will try and find an article on it tonight.

Edit: found this (haven't read it yet): http://www.interest.co.nz/news/56611/some-new-zealand-banks-might-have-beef-their-capital-holdings-meet-reserve-banks-basel-ii
I am interested in the new 12% cover for bank lending. What really interests me is, where is the 12% minimum equity to be held? Australia or NZ? All of us need to find out, since if the cash is held 'overseas' then it can vaporise in the heat of Oz. So, where is the cash??? And should not Heartland, SBS, Kiwi Bank etc., NZ owned Banks, considered to be more secure as a result of being NZ Banks? Comments please.

[forest]

Back to a point Snoopy made the other day about Reserve Bank Governor Graham Wheeler raising interest rates to cool the property market.

Stuff have an article about how Wheeler is really trying to target "first home buyers", and will essentially force banks into lower loan value ratios for property owners. He will do this through the 12% lower equity limit for banks. ASB would be a prime target here.

http://www.stuff.co.nz/business/money/8920537/Speed-limit-coming-for-loans

This of course has a much smaller to zero impact on Heartland into the future, as they don't really loan out money for first home buyers - its not a market they are targeting. There are no central bank requirements or limits I'm aware of for funding combine harvesters, trucks or livestock.

Wheeler will like the idea of LVRs more than rates rises because he won't necessarily want to target the rest of the economy with higher interest payments when the overall economy is still fragile and growth could be choked by a rates rise.

What do other punters on Sharetrader think?

I think Wheeler has the right approach, 12% obviously will make the banks more stable and therefor the whole country economy, it helps home owners not to get carried away and mortgage their properties to the hill. And if finance for property is a little limited then property prices should not rise as fast as it would other wise and therefor home owners should still find it just as easy/hard to finance a place.
All good I think.

[percy]

See F&P Finance reported a 20% increase in profit to $20m

And that $20m profit was made on $112m of equity .... that seems like an ROE of 18%

Something for HNZ to emulate eh

If HNZ interested in them the price just went up

ROE of 18% is excellent.
We have talked about ROE a long time ago on this thread.I think I compared Aussie banks ROE,and worked out 15% plus was the norm.
HNZ have first of all got to get over 10%,[which is one of their stated objectives as per Jeff Greenslade at last AGM].
They will achieve this,then I expect them to aim for 15% plus.
Longer term I expect they will be aiming for 18% .[plus?]
Then you could say we are "cooking with gas !".
Plenty for you to think about while planting your native trees.!!! lol.

[Snoopy]

My understanding is that, while the banks are currently only required to hold 6%, they will be required to have a minimum 12% once fully implemented - this could potentially lead to a lending crunch. However, that is not expected to constraint lending as they already have over 12% capital.

Can you confirm/dispute this. I will try and find an article on it tonight.

Edit: found this (haven't read it yet): http://www.interest.co.nz/news/56611/some-new-zealand-banks-might-have-beef-their-capital-holdings-meet-reserve-banks-basel-ii


I have read your referenced article CJ, talking about the implementation of Basel III capital requirements. At the moment it is an international target that the NZ reserve bank intends to adopt on January 1st, while other countries may take up to nine years to implement the same thing.

I am not clear how this relates to the capital ratios that the reserve bank has apparently dictated for Heartland. Are they saying that Heartland is such a new bank that they are bringing in this requirement for them in advance of 1st January 2014? Or are they saying that because Heartland is a new bank, that in itself is a reason to stick them with higher capital adequacy requirements? As I see it, it would make sense to couple the amount of back up capital that must be held with they credit rating of the bank being evaluated, not the newness of the bank. Of course compared to other banks, the Heartland credit rating is barely investment grade BBB-.

The worst case scenario is that Heartland is subject to a 'new bank' premium of 6%. That mean that come 1st January when the 12% tier one capital requirement is brought in, Heartland will require 12% + 6% = 18% tier one capital on the balance sheet.

Could it really get that bad for Heartland?

SNOOPY

PS The sting in the comparative tail is that ANZ and WBC are Australian banks. The Australian parents are not subject to NZ Reserve Bank rules!

[CJ]

I have read your referenced article CJ, talking about the implementation of Basel III capital requirements. I have now read the article and it didn't really say what I thought it would.

The issue is that currently HNZ has to have 6% more capital than other banks. I am not sure why (googling at the moment) but I assume that over the next few years, either the other banks will be required to hold more capital like HNZ or HNZ will be allowed to hold less - either way, the difference will close over time. Will post when I find more.

EDIT1: reading this http://www.imf.org/external/pubs/ft/wp/2013/wp1307.pdf the big 4 have over 10% Teir 1 capital (pg6).

[Snoopy]

PS The sting in the comparative tail is that ANZ and WBC are Australian banks. The Australian parents are not subject to NZ Reserve Bank rules!


Further to the above comment, this is from the reserve bank glossary on what it means to be a 'locally incorporated" bank:

-----
Locally incorporated
Registered banks of a certain size (e.g.,if they have retail deposits of a value of $200 million or more) are required by the Reserve Bank to be incorporated as New Zealand companies.
This is referred to as local incorporation and it means that the full suite of New Zealand company law applies to them. In contrast, companies incorporated overseas and doing
business in New Zealand are known as “overseas companies”. Overseas companies are primarily governed by overseas law and exempt from various aspects of New Zealand company law.
-----

Now, what I believe this means is that the likes of ANZ and Westpac have been forced to set up NZ based business units that are subject to NZ Reserve bank laws. However, when you buy shares in Westpac or ANZ you are buying shares in the Australian parent, even if those shares are listed on the NZX. So as far as depositors and lenders of ANZ and WBC are concerned in New Zealand, their banks are subject to NZ laws, and RBNZ oversight. But as far as NZ shareholders of ANZ or Westpac are concerned, they are subject to Australian law and Australian reserve bank oversight.

Clear as mud?

SNOOPY

[CJ]

Clear as mud?As investors, we invest in the Parent company which for the likes of ANZ and Westpac, is incorporated in Australia. That company will have a 100% owned subsidiary in NZ which is fully subject to the RBNZ rules including capital requirements.

From memory, there was one major bank operating through a branch structure (ie. Australian incorporated company operation in NZ) which it wasn't very happy with so I think it change the rules.

[Snoopy]

From memory, there was one major bank operating through a branch structure (ie. Australian incorporated company operation in NZ) which it wasn't very happy with so I think it change the rules.


Westpac IIRC.

SNOOPY

[percy]

CJ or Snoopy;
Save yourselves a lot of time,phone CFO Craig Stephen at HNZ [09 927 9025] and get the correct answers.
ps.Tell him Percy is tickled pink with the sp.

[percy]

He's Head of Treasury. Not CFO. :-)

But definitely the right man to talk to.

Thanks Sparky.;Head of Treasury.

[Balance]

CJ or Snoopy;
Save yourselves a lot of time,phone CFO Craig Stephen at HNZ [09 927 9025] and get the correct answers.
ps.Tell him Percy is tickled pink with the sp.

That is cruel on Snoopy, Percy.

The last time I saw Snoopy, he was pink in the face from HNZ's relentless rise to 90 cents at least.

All predictable - save for Snoopy.

[percy]

That is cruel on Snoopy, Percy.

The last time I saw Snoopy, he was pink in the face from HNZ's relentless rise to 90 cents at least.

All predictable - save for Snoopy.

I laugh that every time he posts a negative post the share price goes up.!! Great that he was pink in the face,while I am tickled pink.lol.
With sellers at 86 cents to 90 cents with only 89,521 shares for sale, I think the hungry buyers wanting 721,359 shares at 81 cents to 85 cents may have to dig a bit deeper.

[Minerbarejet]

posted 11-07-2013, 01:02 PM ... (belgie bought a few more before posting :) )
gratz good call belgie.:t_up:

[percy]

posted 11-07-2013, 01:02 PM ... (belgie bought a few more before posting :) )

Great call,well done.!
Finnished tonight at 87 cents.

[Master98]

gratz good call belgie.:t_up:
I sold my half holding 20k shares at 80c when HNZ downgrade, the funds be used to buy few more MRP at $2.23, still 20k HNZ shares on hold, do hope i made the right decision.
Good luck to everyone.

[pierre]

Nice - NTA of 90 approaching fast - but no need to slow down or stop when we get there!

[pierre]

Exactly my point Belge - I don't see the need for anyone to read 90 as the speed limit!

Have only been a holder for less than 9 months and already showing 30% cap growth plus divs - no complaints from moi!

[Sideshow Bob]

Was planning buying in Friday but got tied up at work. Been watching the shareprice go up ever since.........

[percy]

Was planning buying in Friday but got tied up at work. Been watching the shareprice go up ever since.........

Just 22,000 for sale at 87 cents.

[iceman]

posted 11-07-2013, 01:02 PM ... (belgie bought a few more before posting :) )

Well done Belgie. I wish I had some spare cash to top up but am very well positioned with HNZ having bought in heavily a long time ago. I agree with your other post and I see no reason why this share will stop at 90c. I believe we will see it closer to $1 withing not too long a time frame (late 2014).
Those buying in now or those of us having bought much cheaper than current prices have and will enjoy strong growth for some time yet, which will then be followed by nice steady flow of fully imputed dividends. I am very content with HNZ being the biggest in my portfolio, not so happy currnetly with my 2nd biggest DIL :eek2:

[mouse]

Get used to it as both are on going.We find ourselves "well positioned."
Pretty accurate, Percy.

[777]

can anyone tell me what %of shares PGW owns in HNZ and what they paid for them. thanks

PGG Wrightson Limited
13,333,333
3.430%

Straight from their website annual report.

Price paid ????

[Master98]

PGG Wrightson Limited
13,333,333
3.430%

Straight from their website annual report.

Price paid ????
PGW paid $10m for those shares as part of agreement of sale the PGWF.

[blobbles]

Anyone get a low ball offer? What did it say and are Washington Securities high?

http://www.stuff.co.nz/business/industries/8934086/Heartland-latest-low-ball-target

Sell my shares that have risen by 60% in a year for the price I bought them for? Yes please!

Do they think we are idiots?

[Bjauck]

These sort of low-ball offers come from "bottom-feeders" and are aimed at "widows and orphans" who may be unsophisticated when it comes to financial affairs. Most companies who become aware that their registries are being mined for addresses, send a letter to shareholders warning them about the possibility that an offer may be made for their shares at well below market price.

[blobbles]

Oh right Bjauck. I was wondering how they frame the case for buying the shares. Do they just lie about the share price? Or do they tell you that the company is about to go under or in dire financial trouble or something?

[CJ]

Oh right Bjauck. I was wondering how they frame the case for buying the shares. Do they just lie about the share price? Or do they tell you that the company is about to go under or in dire financial trouble or something?I think they play the no commission card so for very small holdings, it could actually be worth it. They cant mislead and have to put the market value of the share in the letter as well from memory.

[pierre]

I've received offers of this kind for other companies that I hold. They're usually quite formally worded and would look pretty convincing to the uninitiated.

They usually emphasise the no commission offer which would appeal to some smaller holders - but the offer price is always way below market. Even though they do have to quote the current market price it's usually in another part of the document - well away from their low-ball offer.

The payment terms are usually unattractive too - often some time after the transfer is effected so the seller is left as an unsecured creditor in the event that the dosh doesn't arrive.

I always send the offer forms back with a suitably worded inscription such as "crap" or ****ers" - and always in in an unstamped envelope - my little protest at their thieving ways.

[blobbles]

Cool, thanks guys, just wondering what these things looked like, how they made the case for getting you to get rid of your shares for peanuts. Nice one Pierre for giving them some harsh words!

[K1W1G0LD]

Here's some positive news for Heartland in comparison to other NZ Banks , cut from the Herald this AM.


New Zealand banks boosted their combined profit to almost $1 billion in the March quarter, but an ultra-competitive lending environment appears to be favouring big players, like ANZ, over smaller operators such as TSB and Kiwibank, according to new research.

and it goes on to say.........

Five of the nine banks surveyed - ANZ, Westpac, ASB, BNZ and Heartland Bank - enjoyed a rise in profit in the March quarter.

The Co-operative Bank had flat profit, while TSB, SBS Bank (formerly Southland Building Society) and Kiwibank all saw decreases in their bottom-line, according to the survey.

So Heartland seem to be doing well and other Kiwi owned banks less so.

[iceman]

And I thought this comment from the Stuff website on the same issue, was very interesting:

" Net interest margins, which represent the premium added to money before it is lent, fell 4 basis points to 2.24 per cent.
Cheapest by far were Kiwibank (1.78 per cent margin) and TSB Bank (1.98 per cent), while the newest bank, Heartland, occupied the other extreme at 4.21 per cent.

The big four Australian-owned banks all had margins ranging between 2.15 and 2.35 per cent. "

[percy]

I prefer to watch FPF and UBC as indicators, rather than the banks to get a fix where Heartland is going.
I feel it is more a finance company with a bank licence, than a bank that does finance company business.
However, we do have the safeguard of it having to comply with Reserve Bank banking regulations.

[CJ]

Slightly of topic but the new Co-op Bank TV ad is a good one. Another Record Bank profit

[percy]

Slightly of topic but the new Co-op Bank TV ad is a good one. Another Record Bank profit

There is a thread for Co-op Bank.

[winner69]

There is a thread for Co-op Bank.

Come on Percy - remember hnz and coop complement each other

When coop does good things some of it runs off on hnz

Cj likes the coop ad so lets hope many others do as well ....gives all punters the warm fuzzies about these small banks

[percy]

Come on Percy - remember hnz and coop complement each other

When coop does good things some of it runs off on hnz

Cj likes the coop ad so lets hope many others do as well ....gives all punters the warm fuzzies about these small banks

I agree with you,however was only trying to help CJ.

[mouse]

I prefer to watch FPF and UBC as indicators, rather than the banks to get a fix where Heartland is going.
I feel it is more a finance company with a bank licence, than a bank that does finance company business.
However, we do have the safeguard of it having to comply with Reserve Bank banking regulations.
Amen.:):):):)

[Under Surveillance]

I prefer to watch FPF and UBC as indicators, rather than the banks to get a fix where Heartland is going.
What indicators are you looking for from the University of British Columbia, percy? Surely you are not expecting Heartland to expand its operations to Canada any time soon? Does UBC have a finance company, or some other business, relevant to Heartland?

[percy]

Very good question.May have to go back to the tea leaves.!!!
Would uDc fit the bill.!! lol.
ps. The tea leaves are still giving a very strong buy signals.!

[False Profit]

Changes to Heartland New Zealand Limited and Heartland Bank Limited Board


24 July 2013

Heartland New Zealand Limited (“HNZ”) (NZX: HNZ) announces a number of proposed changes to the Boards of HNZ and its subsidiary Heartland Bank Limited (“Heartland Bank”). The objectives of the proposed changes are to:



comply with standard Reserve Bank guidelines by increasing the number of independent directors on the Heartland Bank Board (while maintaining adequate cross-representation on these Boards); and
extend the depth of banking experience of the Heartland Bank Board.

The proposed changes are as follows:



A new independent director, Nicola Greer, will be appointed to the Board of Heartland Bank. This appointment is expected to be completed on 26 July 2013.

Ms Greer has extensive experience in the banking and finance sector, both in New Zealand and overseas. Her career to date includes senior positions at ANZ Bank (New Zealand and Australia), Citibank and Goldman Sachs International where she worked in the financial markets and asset and liability management. Ms Greer holds a Master of Commerce with First Class Honours in Management Science (Operations Research).
Following the release of financial results for the year ended 30 June 2013 (currently anticipated for the last week of August 2013):

The current Chairman of HNZ, Bruce Irvine, will resign from the HNZ Board. Geoffrey Ricketts will succeed Bruce Irvine as the Chairman of HNZ and also continue as a director of Heartland Bank Limited. Mr Irvine will continue as Chairman of the Board of Heartland Bank.
Christopher Mace and Gary Leech will each continue as directors of HNZ and resign from the Board of Heartland Bank.




The appointment of Nicola Greer, together with the recent appointment of Richard Wilks, will strengthen the banking expertise of the Heartland Bank Board. Richard Wilks was appointed to the Heartland Bank Board in February 2013 and previously held senior leadership roles with ANZ National Bank, Standard Chartered Bank and Citibank.

Set out in the attached Appendix is a full list of the members of each Board once all changes take effect.

[winner69]

Good to see a (another?) female on the board ....punters love to see a bit diversity on boards these day

Nicola could get the (old) guys to look at things from a different perspective eh

[percy]

Good to see a (another?) female on the board ....punters love to see a bit diversity on boards these day

Nicola could get the (old) guys to look at things from a different perspective eh

The companies I have/ had shares in who have a woman director or chair have been good performers.Alison Paterson's record at ABA was outstanding.Sarah Ottrey at EBO and SCY is excellent.
It is just the ex politicans either male/female or otherwise we must be careful to avoid.

[Snoopy]

comply with standard Reserve Bank guidelines by increasing the number of independent directors on the Heartland Bank Board (while maintaining adequate cross-representation on these Boards); and extend the depth of banking experience of the Heartland Bank Board.

<snip>
A new independent director, Nicola Greer, will be appointed to the Board of Heartland Bank. This appointment is expected to be completed on 26 July 2013.

Ms Greer has extensive experience in the banking and finance sector, both in New Zealand and overseas. Her career to date includes senior positions at ANZ Bank (New Zealand and Australia), Citibank and Goldman Sachs International where she worked in the financial markets and asset and liability management. Ms Greer holds a Master of Commerce with First Class Honours in Management Science (Operations Research).


I must say there are many HNZ shareholders here who are very trusting and loyal. Sort of like 'company's best friends'. I'll bet if I peered in the side window at this years AGM there you would all be, sitting in the front row, little tails wagging in anticipation of your complimentary lapdog biscuit at the end of the meeting.

A full banking licence is announced, but hey one of the fine print lines says HNZ need twice as much capital on the books to take the same risks as other banks. And oh yes the board of the bank hasn't been strong enough but a few more people with industry experience should satisfy the reserve bank requirements when they finally take their seats. Let's just hope those on the bank board in the meantime haven't made a hash of things....

I wonder when this learner licence period for HNZ will end?

SNOOPY

[winner69]

....... bet if I peered in the side window at this years AGM there you would all be, sitting in the front row, little tails wagging in anticipation of your complimentary lapdog biscuit at the end of the meeting.]

I try to get somebody to do a cartoon of this amazing picture you paint snoops

What would you suggest as a caption

[percy]

I try to get somebody to do a cartoon of this amazing picture you paint snoops

What would you suggest as a caption

Again may I remind Snoopy of my offer to take him to this year's agm.[In the hope he may learn.,and be able to post a factual comment about HNZ]
All of us who attended last years agm have certainly profited by taking advantage of what we learnt.Good information ,is the key to successful share investing.
Winner69.May I extend my offer of free transport to Ashburton and back to you also.Have not heard when the agm is yet.

[mouse]

I must say there are many HNZ shareholders here who are very trusting and loyal. Sort of like 'company's best friends'. I'll bet if I peered in the side window at this years AGM there you would all be, sitting in the front row, little tails wagging in anticipation of your complimentary lapdog biscuit at the end of the meeting.

A full banking licence is announced, but hey one of the fine print lines says HNZ need twice as much capital on the books to take the same risks as other banks. And oh yes the board of the bank hasn't been strong enough but a few more people with industry experience should satisfy the reserve bank requirements when they finally take their seats. Let's just hope those on the bank board in the meantime haven't made a hash of things....

I wonder when this learner licence period for HNZ will end?

SNOOPY
Good comment, Snoopy. Shareholders have to keep their noses to the ground to detect the right scents. The point about Heartland having to have twice as much capital as other banks is possibly due to the lending we do. Not bricks and mortar, or even weatherboards, but machinery. Cars. Cows. Which may now be lower risk loans than earthquake property on the Southern Fault Line. We have seen in Christchurch how lack of insurance can Can the value of property. That Can experience could be spreading to Wellington.
I prefer a couple of Hot Sausage Rolls after the AGM.

[zigzag]

I try to get somebody to do a cartoon of this amazing picture you paint snoops

What would you suggest as a caption

For someone who calls himself Snoopy, you should be careful who you call puppies. We might call you Daddy. What a bitch.

[K1W1G0LD]

For someone who calls himself Snoopy, you should be careful who you call puppies. We might call you Daddy. What a bitch.

Touche.........................haha love it!

[K1W1G0LD]

For someone who calls himself Snoopy, you should be careful who you call puppies. We might call you Daddy. What a bitch.

Zigzag , looks like you've upset the BOF society dude, you'll be persona non grata if your not careful.
Cheers kiwigold

[zigzag]

Zigzag , looks like you've upset the BOF society dude, you'll be persona non grata if your not careful.
Cheers kiwigold

Nothing like a bit of irreverence. Doubt anyone will be upset. Anyway, Snoopy is only a Beagle, and ZigZag is not my real name.

[biker]

I must say there are many HNZ shareholders here who are very trusting and loyal. Sort of like 'company's best friends'. I'll bet if I peered in the side window at this years AGM there you would all be, sitting in the front row, little tails wagging in anticipation of your complimentary lapdog biscuit at the end of the meeting.

A full banking licence is announced, but hey one of the fine print lines says HNZ need twice as much capital on the books to take the same risks as other banks. And oh yes the board of the bank hasn't been strong enough but a few more people with industry experience should satisfy the reserve bank requirements when they finally take their seats. Let's just hope those on the bank board in the meantime haven't made a hash of things....

I wonder when this learner licence period for HNZ will end?

SNOOPY

Great post Snoopy! And I would be there if I could.

[mouse]

Suggestions please on how the Fonterra saga will play out.
My view is a reduction next year in the payout to farmers, following on from this year of drought.
Which will result in farmers needing a bit of finance.

[winner69]

Better word the letter very well else the small shareholders might get the impression they are not wanted

There's an awful man who wants to steak your shares but we know you don't really want to sell them but anyway let us buy them anyway a a fair ( but hugely discounted) price because we are good guys. Wil they wonder if they are being conned again? What's the trap?

Might be a proactive exercise but just doesn't seem to send the right message to shareholders.

[winner69]

Good god ....documents hardly plain English are they?

[Banksie]

Better word the letter very well else the small shareholders might get the impression they are not wanted

There's an awful man who wants to steak your shares but we know you don't really want to sell them but anyway let us buy them anyway a a fair ( but hugely discounted) price because we are good guys. Wil they wonder if they are being conned again? What's the trap?

Might be a proactive exercise but just doesn't seem to send the right message to shareholders.

I think the letter is worded rather well, and no they are not buying them at a hugely discounted price.


The price per Share which you will receive for your Shares will be determined by dividing the total proceeds of the Shares sold under the Plan on the day on which your Shares are sold by the total number of Shares sold under the Plan on that day.

HNZ are not buying the shares. Rather they are pooling them and placing them on the market so the shareholder avoids brokerage fees.

[winner69]

Yeah I got that bit but after being bombarded with unsolicited offers to steal your shares here is another unsolicited offer to take the shares off your hands ...at market price.

The hugely undervalued comment was winding Percy up.

So mrs jones thinks she needs to accept this unsolicited offer because it has come from the company and is heaps mor official looking and gets hnz to broker the sale of them. In a few months time they go to 1 dollar ....mrs jones will not be happy will she ...when selling wasn't even on her mind.

[CJ]

Very Noble but the maximum of 10,000 seems a bit high. Brokerage costs are reasonably efficient at that level.

[Banksie]

I guess it is hard to word the offer, without it being seen as investment advice. Hopefully one of the journo's picks this up and spins the appropriate slant on it.

[CJ]

Max of 10,000 not min though right? So those with small holdings will benefit.Yes.

Minimum holding requirement is 500 per NZX rules (can be force to sell if under that) so that should clearly be covered.

At current shareprice (86c) if they had set the maximum at 5000 shares, that would be $4,300. That is probably the right level.

Setting it at 10,000 means those who hold upto $8,600 worth. That can be sold for less than $60 (ASB telephone rate) and even lower if they have an internet broking account.

They have set the limit now so no point arguing where they should have set it (sorry for bringing up). Overall it is a positive thing and should clean up the bottom part of the register a bit.

I wonder why they have done it though - they aren't the first company to be targeted and no other company that has been has offered a similar scheme.

I also wonder since have obviously gone to some cost in doing this, whether they should have done a compulsory sale for those with less than 500 shares at the same time. (that would probably send the wrong message so can see why they didn't but from a practical perspective, is a missed opportunity).

Disc: Holding (10,000 shares incidentally)

[artemis]

Possibly Heartland is taking advantage of an opportunity to reduce the number of small shareholders, which no doubt cost the company.

[percy]

Will hats off to HNZ,being proactive and doing the right thing to help small shareholders receive full value for their shares.
Good on you HNZ.

[winner69]

Will hats off to HNZ,being proactive and doing the right thing to help small shareholders receive full value for their shares.
Good on you HNZ.

I thought full value was way north of 85 cents

Oh bugger another 100 trees to plant as punishment for being cheeky

[Minerbarejet]

Will hats off to HNZ,being proactive and doing the right thing to help small shareholders receive full value for their shares.
Good on you HNZ.
Suppose they have quite a few small holders on the books from the PGC (wash your mouth out with soap) business where 2000 shares ended up 500 odd of two companies which added together ended up a lot less. Stuck with the Heartland though. Wrote the other one off.

[iceman]

I commend Heartland for doing this. I think they are genuinely trying to protect smaller holders from these vultures. Unfortunately I think it will not work unless they send offers to the postal addresses of the affected shareholders as they are unlikely to be reading NZX announcements. If they were, they wouldn't be considering selling into the offers.
But furthermore, I think Heartland is the first listed company subjected to these offers, that actually stands up and sends a signal to the vultures that they are not going to get away with it without a fight, something the FMA should be doing with much more vigour.

[CJ]

It will be interesting to see how many accept. I assume they will be sold on-market so it could have an impact on the shareprice. Could be a bit of selling pressure:


As at June 30, 2012, some 4,747 shareholders owning 4.2 percent of the company held parcels smaller than 10,000 shares, according to Heartland's annual report. At today's price of 86 cents, that's about
$14.2 million of shares, and implies broking fees of some $140,000 at $30 per transaction.

Head of treasury and strategy Craig Stephen said about 4.6 percent was held in the qualifying parcels.
Average turnover is under $200k per day.

[Minerbarejet]

Prelude to a capital raising via a nicely discounted rights issue? Here's hoping...Now you have me going around in circles. A share buyback as a prelude to capital raising? Isnt that just taking from peter etc. Dilution v undilution. One way of cleaning up the register I suppose and stopping shares being accumulated cheaply from the uninformed but a lot of paperwork one would have thought.

[CJ]

Now you have me going around in circles. A share buyback as a prelude to capital raising? Isnt that just taking from peter etc. Dilution v undilution. One way of cleaning up the register I suppose and stopping shares being accumulated cheaply from the uninformed but a lot of paperwork one would have thought.
It is not a share buy back. As Banksie pointed earlier up the thread:

HNZ are not buying the shares. Rather they are pooling them and placing them on the market so the shareholder avoids brokerage fees.

[Minerbarejet]

It is not a share buy back. As Banksie pointed earlier up the thread:
Sorry all - just discovered it myself - my missed ache

[winner69]

Nearly 5000 unsolicited envelopes going out .....and nz post is complaining about less things being posted

[percy]

I thought full value was way north of 85 cents

Oh bugger another 100 trees to plant as punishment for being cheeky

Just seen all those logs sitting on the wharfe at Shakespear Bay,Picton.Was thinking winner69 great grand- parents must have done a lot of tree planting.
85 cents today,$1.25 sometime [soon].
Then we are "up and away".! lol.

[Under Surveillance]

I find it interesting that the plan notice declares the period for participation by eligible willing sellers to be 12 August to 31 October. And that the plan document provides a cooling off period of 10 days between receipt of a punter's request to sell and the selling being undertaken. If HNZ is to pay a final dividend, the participation period will see some of the shares to be sold becoming cum dividend and/or going ex dividend and some of those going ex dividend will be subject to the dividend reinvestment plan. The plan document seems to be silent as to how these interim events are to be coped with. Let alone a rights issue.

It would be absurd should an eligible participant sell all of a modest holding, only to receive a handful of shares through the DRP because the sale took place after the shares went XD.

[False Profit]

I was going to wait for the price to hit 90c but, being one of the small investors this is aimed at, I might take the them up ion their buy back offer.

Broker fees are a DISGRACE!!!!!!!!!!!!!!!!!!!!!!!!!!!! (Lands on knees screaming whilst raising arms to rapidly spiraling away camera).

[Banksie]

Yesterday's closing price was 0.85, broker fees at ASB are $30 - so if you have 600 shares or less you should take them up on the offer...any more and you are better off waiting for the price to hit 0.90c

[percy]

Or you should buy more and enjoy the ride.;)

Best advice I have ever read on Sharetrader.!

[percy]

Somehow I doubt that :)

Time will prove just how correct your post was/is.!!! lol.

[mouse]

A dollar by the end of the year looks possible!

[percy]

I think possible is the wrong word.
Surely the correct word you were looking to use is "PROBABLE"!!!! lol.
And we will look forward to a divie as well.
Nice people at HNZ doing wonderful things.!!!

[janner]

A dollar is Possible mouse.. Percy is probably correct. Although I personally will not be disappointed if it only gets to 0.99 by years end.

For now..

Expecting and will receive, greater things in Y14. :-)))

[Snoopy]

Nice people at HNZ doing wonderful things.!!!


Well perhaps, but all will be revealed on Monday August 25th.

In the meantime though, I thought you might be interested in the part of FY2013 report for Heartland that has already been released. You have to do a bit of sniffing around to find it, which is where being a beagle is very useful.

In the PGW accounts for the year, go to the segmental results section (p12) and look at the referred to break down of 'Other Agriservices' (p13). There you will find a heading 'Finance Commissions'. That is the kickback payment from Heartland for all of the rural loan business that PGW has funneled Heartlands way.

At first glance it looks good, with $660k of commissions paid to PGW in FY2013 verses only $591k for FY2012. However, you have to bear in mind that this commission arrangement only started on 1st September during FY2012, which was when PGW finance business was acquired by Heartland. Thus the $591k only covered 10 months. On an annualized basis, using a factor of 12/10, I calculate the comparable figure for FY2012 as $709k. If that figure is accurate it indicates that Heartland's rural loan book has probably declined by 7% over the year. I would argue that given what the rural community went through this year, a 7% decline in the loan book isn't a bad result. However, it does indicate to me that here is absolutely no hurry to accumulate Heartland shares until we see by how much the business overall did shrink on a 'like for like' basis.

Shrinkage is not always bad. I will be very interested to read by how much those bad property loans have declined. Once everything has been through the Auditors wash, we will finally know how tight overall that Heartland business t-shirt has become for the shareholders.

SNOOPY

[Joshuatree]

Bye the bye im a happy shareholder; i will be happier when i actually see a customer in Heartlands in Tauranga which i walk past re every 2nd day.

[tim23]

Reckon they will surprise nicely when they report, I'm expecting re-rating toward $1.00 yield will support that price.

[percy]

I am not expecting a great deal this year,however next year will be a cracker.I am looking forward to the agm where /when I think we will be updated on their $36 -$37mil projected profit for year ended 30/6/2014 .
The agm is being held at The Addington Raceway at 3pm on Friday 1st November 2013.

[percy]

There shouldn't be a big surprise.

Heartland have already given guidance to the market a couple of months ago.

https://nzx.com/companies/HNZ/announcements/237032

NPAT of $7m, which is after the non cash writedowns in non core property assets.

It is 2014 where HNZ is anticipated to outperform, with NPAT anticipated around $34-37m.

What might provide a nice bonus for shareholders is the share buy-back they foreshadowed at the end of that statement.

Nom nom nom, I love buybacks.

Thank you again Percy, for outlining the benefits of this company. Wish I bought a couple of weeks earlier, would have picked it up 10% cheaper.

Not too late to buy more.!!!! Paper Tiger [and me] think $1.25 has a nice ring to it.!!! lol.

[percy]

My intrinsic value calcs suggest in excess of that for FY2014. As high as $1.48.

Think I will go with your valuation.!!!!!

[winner69]

Small shareholders will need big letter boxes .....all that mail pleading to take their shares off their hands.

I love it

Funny if they send them all back full of excrement ....isn't that the response we suggested

One paper quoted hnz man as saying whimp has made more than 1/2 mill from these activities

[percy]

Small shareholders will need big letter boxes .....all that mail pleading to take their shares off their hands.

I love it

Funny if they send them all back full of excrement ....isn't that the response we suggested

One paper quoted hnz man as saying whimp has made more than 1/2 mill from these activities

The last time I checked the top 100 HNZ shareholder list [was about 6 or 9 months ago] Bernard Wimp held 2,000,000 shares.
So he has made big money on HNZ alone.

[percy]

Annoys me no end that he has hoovered up so many shares from unsophisticated shareholders.

Hopefully Heartland's offer to help/organise the sale at market price of small shareholders shares,will be taken up by other companies,so the Bernard Wimps of this world will be put out of business,or find it a lot harder to get away with their distasteful practices.

[RTM]

Percy and all, .....Heartland must run a pretty tight ship. Results as per below on Monday and no trades today !
Sign of good governance there I think.
Waiting with interest.
Cheer, RTM

Heartland New Zealand Limited (Heartland) (NZX:HNZ) intends to release its Preliminary Announcement in respect of its Full Year Results for the year ended 30 June 2013 prior to market opening on Monday, 26 August 2013.

[winner69]

The stars are aligned .... I think I saw a full moon as well ......everything is well positioned for a stunning result

The quick punt using the TAB money last time it all looked good only produced a little return .... It wasn't that stunning .....but this time it's all different eh

So 20k last Friday ......stunning result and will sell at over 90 later this week .....a nice boost the TAB play money coming up methinks ....might even pay for for the Melbourne Cup trip this year

[winner69]

Yippee ...ahead of expectations .....we are more than well positioned ....we are on fire

C'mon now .......well in excess of 90 please this week ......maybe a buck

[winner69]

Talking of hnz Percy ... I am still pissed off that your mate has not responded to 3 emails now. Never mind ....I know my place in the world ....a nobody ....but at least I thought he would have got his lackey to send. Stock standard reply

Hope not indicative of overall customer service ...starts at the top eh

[winner69]

Hey what's up ....the beloved and much touted NTA is going backwards ...now only 85 cents

Wasn't it Snoopy who said they were downsizing?

[noodles]

Winner, if it was in line with expectations then the market has more than likely factored that in to the current share price as the market is forward looking (most of the time!). That being said, you need to now look at the forecasts he company has put out. I think HNZ deserves at least a revaluation to at least 90 cents as that is NTA, but the market can remain irrational much longer than you can stay liquid ;)


NTA have dropped below current shareprice as a result of the writedowns. From a financial result and forecast result point of view, there is no new information in the release. Boring really. I'd be surprised if the shareprice reacts to this release. Perhaps the dividend is a surprise?

I'll let Snoopy dissect the balance sheet.

[iceman]

NTA have dropped below current shareprice as a result of the writedowns. From a financial result and forecast result point of view, there is no new information in the release. Boring really. I'd be surprised if the shareprice reacts to this release. Perhaps the dividend is a surprise?

I'll let Snoopy dissect the balance sheet.

Haven;t had a chance to thoroughly study the announcement yet but think you are right noodles, boring is the word. But that's exactly what we expect from HNZ, boring steady as she goes and at first glance, it looks like that's exactly what we are seeing and future looking good. I was expecting 2c divi so 2.5c, fully imputed and a surprising 2.5% discount on DRP is great news.

[bonne vie]

Just read the results and I can imagine how wide Percy's smile is. Great result for core business. Full year profit $6.9m in line with expectation and Adjusted NPAT $24.4 at the higher end of guidance $21 - $24m.

[noodles]

2.5% discount on DRP is great news.
I may have to fill out those forms!

[winner69]

Page 19 not boring ......2014 profit going from $24m this year to $37m nest year

Future looking moosie.

That's a 54% increase ....go do an intrinsic valuation on that guys

Hnz on fire .....BUY BUY BUY

[noodles]

Page 19 not boring ......2014 profit going from $24m this year to $37m nest year

Future looking moosie.

That's a 54% increase ....go do an intrinsic valuation on that guys

Hnz on fire .....BUY BUY BUY

Calm down and read the 5 June announcement.

[winner69]

lol, you better hope it is abnormal and there is a spike then. HNZ is a long-term hold, not a DIL or XRO where it is going to spike suddenly. Not saying it won't, it has happened before, but chances are more unlikely than likely.

I'm guessing you are short-term here eh Winner?

as I said the TAB punting money moosie .....out by Friday with the profits ..... Maybe today if have to cut the losses

[winner69]

Calm down and read the 5 June announcement.

Bugger ...so things are not any brighter than back in June

[iceman]

Just read the results and I can imagine how wide Percy's smile is. Great result for core business. Full year profit $6.9m in line with expectation and Adjusted NPAT $24.4 at the higher end of guidance $21 - $24m.

Yes I think Percy will be as pleased as the rest of us to see a 20% plus growth in Net Operating Income from both Rural and Business sector lending while home mortgages have been reduced. They continue to be clearly focused on the higher margin business as they've said they would and are achieving good results. No surprise announcement really which is what we expect from HNZ. I am very pleased with this result and will definitely partake in the DRP

[JohnnyTheHorse]

I stand by my intrinsic value of $1.48 from the other day . I think this is grossly undervalued at the moment. People are playing safe harbour with HNZ based on NTA, which is understandable due to the property lemons in the non-core book. But I think this is suitably accounted for.

What is your 5 year growth figure Sparky? I just looked at next years guidance... The growth rate doesn't need to be very high for this stock to be seriously undervalued.

Disc: Not holding, thinking I should be though.

[Under Surveillance]

Haven;t had a chance to thoroughly study the announcement yet but think you are right noodles, boring is the word. But that's exactly what we expect from HNZ, boring steady as she goes and at first glance, it looks like that's exactly what we are seeing and future looking good. I was expecting 2c divi so 2.5c, fully imputed and a surprising 2.5% discount on DRP is great news.

The DRP isn't applying to the 2.5c dividend.

[RTM]

The DRP isn't applying to the 2.5c dividend.

I don't understand why not ? See below from the announcement.

"The directors of Heartland have resolved to pay a final dividend for the full year ended 30 June 2013 of 2.5 cents per share. This dividend will be paid on 4 October 2013 to shareholders on Heartland’s register as at 5.00pm on 20 September 2013 (the Record Date). This dividend will be fully imputed.

The Dividend Reinvestment Plan announced on 23 April 2013 (DRP) will be available, and a discount of 2.5% will apply (that is, the strike price under the DRP will be 97.5% of the volume weighted average sale price of Heartland shares over the 5 trading days following the Record Date)(7). Participation in the DRP is entirely optional, and shareholders wishing to participate should make a participation election in one of the ways specified in the DRP offer document. The last date of receipt for a participation election from a shareholder who wishes to participate in the DRP is 20 September 2013."

[Under Surveillance]

The DRP isn't applying to the 2.5c dividend.
The board decided this on 26 February 2013. That is if you believe Appendix 7, and the revised version of Appendix 7, both issued today. Perhaps there will be a further-revised version still to come? Very slack.

[blakecb]

A further announcement has now clarified this - the DRP does apply.

[Under Surveillance]

The DRP isn't applying to the 2.5c dividend.

Sorry, I retract that, the second Appendix 7 was issued to make it clear that the DRP does apply.

[SCOTTY]

I particularly like the earnings guidence for next year of NPAT $34 - 37m. This = earnings of 8.7 - 9.5cps. Say @ a PE of 12 a share price of $1.04 - $1.14 would be expected. Pick your own PE :D

[CJ]

Pick your own PE :DThe 4 Pillars in Australia are all trading in the range of PE 14.49-16.9.

Not saying HNZ should be the same.

[percy]

The result confirms all is on course:
"The on-going growth of core assets,coupled with a continuing reduction in cost of funds,has positioned Heartland to deliver sustainable profitability in future years."
I think that statement sums it up correctly.

[percy]

The 4 Pillars in Australia are all trading in the range of PE 14.49-16.9.

Not saying HNZ should be the same.

Projected profit is an increase of 37% to 49%.Add to that dividends and comparing Heartland to The 4 Pillars in Australia may be under selling/valueing HNZ?!
Say earnings are at the top end 9.5cents and PE of 18 = SP of $1.71.
"We are well positioned," !!!!!

[CJ]

The 4 Pillars in Australia are all trading in the range of PE 14.49-16.9.

Not saying HNZ should be the same.


Projected profit is an increase of 37% to 49%.Add to that dividends and comparing Heartland to The 4 Pillars in Australia may be under selling/valueing HNZ?!Exactly - as I said, not saying they should be the same ;)

Just keep your price forecasts quiet as I am thinking of topping up. ;)

[percy]

Exactly - as I said, not saying they should be the same ;)

Just keep your price forecasts quiet as I am thinking of topping up. ;)

Sorry about that.!!!
Trying to remember how to work out the PEG.Then the better ratio is the PEG including divie.PEG + divie
Sure you can work them out for me,once you have done your buying..
Just hold off until I have picked up 10,000 at 87cents.Thank you.
Is it 18[pe] divided by growth 37 [or49] + 5 [divie]\
ie 18 divided by 42 = .42.
or 18 divided by 54 =.33.???

[percy]

You can go ahead now CJ.Thanks for holding back.Brought 10,000 @87cents.Also been onto Link market services and elected full dividend reinvestment for my total holding. Did it on line.Wife likes the cash,so she will not go for it.

[Snoopy]

Updating for the full year result FY2012

EBIT (high estimate) = $205.148m-$65.547m= $139.601m

Interest expense is listed as $121.502m.

So (EBIT)/(Interest Expense)= ($139.602)/($121.502)= 1.15 < 1.20

Result: FAIL TEST but an improvement from the HY2012 position.


Results are out so time to have another look at those Heartland banking covenants.

Updating for the full year result FY2013. The EBIT figure is not in the financial statements. So I will use 'interest income' as an indicator for EBIT, once I have taken out the selling and administration costs

EBIT (high estimate) = $206.349m-$70.347m= $136.002m

Interest expense is listed as $110.895m.

So (EBIT)/(Interest Expense)= ($136.002)/($110.895)= 1.22 > 1.20

Result: PASS TEST, a significant improvement from the FY2012 position.

SNOOPY

[noodles]

I stand by my intrinsic value of $1.48 from the other day . I think this is grossly undervalued at the moment. People are playing safe harbour with HNZ based on NTA, which is understandable due to the property lemons in the non-core book. But I think this is suitably accounted for.

Totally agree. It is the future earnings that should be driving the share price. The company has given nice forecasts for FY14. I believe a re-rating has yet to occur on this stock based on those future earnings. HNZ is one of the few NZX stocks that show some VALUE and GROWTH. (others I like are SKL, CMO, TUR)

DYOR

[Snoopy]

The underlying debt of the company according to the full year statement of financial position is: $33,802,000m.

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

$2,348.69m - ($2,078.28m +$55.50m + $24.22) = $190.09m

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

$190.09m - $23.00m = $167.09m

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

$33.8m/$167.09m= 20.2% < 90%

Result: PASS TEST

I note that the relative debt has increased since the half year reporting date. However it is still well within acceptable levels. I would the debt position to worsen during the year because of all the deferred branch transformation expenditure that was shunted into the FY2013 year. It will pay to keep an eye on this figure.


The underlying debt of the company according to the full year statement of financial position is: $33.673m+ $2.859m = $36.532m

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

$2,504.627m - ($2,010.376m +$58.287m + $165.223m) = $270.741m

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

$270.741m - $22.963m = $247.778m

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

$36.532m/$247.778m= 14.7% < 90%

Result: PASS TEST

The position has improved significantly over the last year. Looks like the debt position has not worsened during the year because of all the deferred branch transformation expenditure that was shunted into the FY2013 year as I feared.

[RTM]

So we are all happy with the result, and the ShareChat site heads up as below.
Go figure !


Heartland FY profit slides 71 percent to $6.9 mln on charges to take distressed assets in-house.

http://www.sharechat.co.nz/article/3c82e500/heartland-fy-profit-slides-71-percent-to-6-9-mln-on-charges-to-take-distressed-assets-in-house.html?utm_medium=email&utm_campaign=Heartland+FY+profit+slides+71+percent +to+69+mln+on+charges+to+take+distressed+assets+in-house&utm_content=Heartland+FY+profit+slides+71+percent+ to+69+mln+on+charges+to+take+distressed+assets+in-house+CID_133261a97226b22b9a685934ce469bab&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle3c82e500heartl and-fy-profit-slides-71-percent-to-6-9-mln-on-charges-to-take-distressed-assets-in-househtml

[winner69]

So we are all happy with the result, and the ShareChat site heads up as below.
Go figure !


Heartland FY profit slides 71 percent to $6.9 mln on charges to take distressed assets in-house.

http://www.sharechat.co.nz/article/3c82e500/heartland-fy-profit-slides-71-percent-to-6-9-mln-on-charges-to-take-distressed-assets-in-house.html?utm_medium=email&utm_campaign=Heartland+FY+profit+slides+71+percent +to+69+mln+on+charges+to+take+distressed+assets+in-house&utm_content=Heartland+FY+profit+slides+71+percent+ to+69+mln+on+charges+to+take+distressed+assets+in-house+CID_133261a97226b22b9a685934ce469bab&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle3c82e500heartl and-fy-profit-slides-71-percent-to-6-9-mln-on-charges-to-take-distressed-assets-in-househtml

It's true though isn't it?

[RTM]

Yep...can't argue with that !
Just an "interesting" headline and focus on a great report.

[iceman]

Yep...can't argue with that !
Just an "interesting" headline and focus on a great report.

Just typical of the business commentary we too often get in the media. The headlines far too often do not represent the issue they are reporting on, just like this headline tells us very little about the real contents of the announcement. They had the same headline in the NZ Herald. Just lazy media.

[Snoopy]

Customer concentration is of course an indirect measure of potential risk. Of more interest perhaps is real risk.

Interesting reading from Note 32C in the Full Year 2012 accounts.

There is a large jump in Grade 6 categorized loans. Grade 6 is the 'monitor' category up from $93.269m to $183.814m. Grade 6 is the jargon used by Heartland when a loan is on the cusp of going bad. Obviously these loans have not gone bad at this point, and that should be emphasized. Nevertheless if even half of those loans did go bad it would wipe out a whole years profits. This is something that should make Heartland shareholders cautious. A call for new capital from shareholders is now officially an 'on the horizon possibility', even though Heartland have only said so indirectly in this obtuse way.


Now we come to the most important page of the results announcement, our once a year window into asset quality. Looks like the reporting format has been changed, which makes year on year comparisons difficult. However, I read the total of the Grade 6 'monitor' assets to have increased from $185.315m to $198.370m. This is not a very good position to be in. I note on that same table there is a provision for collectively impaired assets of $15.961m which is up from $8.032m in FY2012. But that provision increase is not enough to cover the accompanying increase in 'monitor' assets.

Meanwhile the sum of Grade 7,8 and 9 assets is now $67.313m down from $80.927m, which is a positive. Overall though 'problem assets' (sum of grade 6,7,8 and 9) have increased slightly. I will have to take some time to think through how all this relates to the overall equity position of HNZ. But I was hoping for a bigger improvement in the doubtful loan book than this. I don't think I will be putting any money into HNZ based on this debt book result alone.

SNOOPY

[CJ]

So we are all happy with the result, and the ShareChat site heads up as below.
Go figure !


Heartland FY profit slides 71 percent to $6.9 mln on charges to take distressed assets in-house.

http://www.sharechat.co.nz/article/3c82e500/heartland-fy-profit-slides-71-percent-to-6-9-mln-on-charges-to-take-distressed-assets-in-house.html?utm_medium=email&utm_campaign=Heartland+FY+profit+slides+71+percent +to+69+mln+on+charges+to+take+distressed+assets+in-house&utm_content=Heartland+FY+profit+slides+71+percent+ to+69+mln+on+charges+to+take+distressed+assets+in-house+CID_133261a97226b22b9a685934ce469bab&utm_source=Email%20marketing%20software&utm_term=httpwwwsharechatconzarticle3c82e500heartl and-fy-profit-slides-71-percent-to-6-9-mln-on-charges-to-take-distressed-assets-in-househtml


It's true though isn't it?Yes - but that was all announced months ago. The new news from today is that it beat expectations and nexts years forecast is even higher. Why focus on the past, especially when all that is built into the share price.

[RTM]

Yes.
All of the above is what I was getting at.

[winner69]

An outfit called businessdesk.co.nz seem to produce these articles

Appear on shah at as well as the NBR

Spose everybody shares the stuff around

[winner69]

The Herald had the same story and headline

Stuff at least had a fairfax reporter write something
. Heartland Bank profit takes a hit


http://www.stuff.co.nz/business/industries/financial-results/9087463/Heartland-Bank-profit-takes-a-hit

[percy]

The Herald had the same story and headline

Stuff at least had a fairfax reporter write something
. Heartland Bank profit takes a hit


http://www.stuff.co.nz/business/industries/financial-results/9087463/Heartland-Bank-profit-takes-a-hit

Not doing themselves or their readers any favours.
Bernard Whimp and other low-ballers will love the headlines.
Stuff reporting of the last agm was also a disgrace.
Makes me realise just how important sharetrader is for us all to get a full and better understanding of Heartland.

[The Grinch]

:rolleyes: The reporters say "Stay away from the forums" the forums say "You'll never understand by reading the papers".... I don't know what to think... if these shananigans continue I'll be forced to DYOR :crying:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11113397 "Don't do this"

[percy]

:rolleyes: The reporters say "Stay away from the forums" the forums say "You'll never understand by reading the papers".... I don't know what to think... if these shananigans continue I'll be forced to DYOR :crying:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11113397 "Don't do this"

Yes DYOR is the only way.Read,read,read to learn.Go to agms ,ask questions,ring the company if you want to know something.
I personally have learnt a great deal from sharetrader.I have not learnt a great deal from stuff's poor coverage of agms or results.Often they are days old and more than likely have wrong facts.

[macduffy]

I wouldn't get too upset by today's press coverage. Market reaction demonstrates that most investors aren't fooled by superficial reporting.

[percy]

I wouldn't get too upset by today's press coverage. Market reaction demonstrates that most investors aren't fooled by superficial reporting.

Love that word "superficial",says it all.!!!

[RTM]

But what would someone wanting to open a bank account think ? Would that headline stick in there mind ?

[Under Surveillance]

I wouldn't get too upset by today's press coverage. Market reaction demonstrates that most investors aren't fooled by superficial reporting.
According to the Dominion-Post this morning, Heartland isn't to report its annual result until Wednesday. They've no idea when things are to happen, and are ignorant and superficial in covering them when they do.

[The Grinch]

:) Thats me having a joke percy - I have met yourself, Karen (who is fantastic) and a few others out there at lunch a while back, Tauranga - that Karen was nice enough to arrange. Wouldn't make an investment based on what I read in the paper or what some mad hatter writes on a forum but they do act as (particularly in the case of sharetrader) a good point for further research. Myself I quite like sharetrader and generally find that once your a familiar viewer who has substance and who is more inclined to post for the sake of it.

Anyways apologies, promise my next post will contain content that furthers the HNZ value buy debate.

[Snow Leopard]

Now we come to the most important page of the results announcement, our once a year window into asset quality. Looks like the reporting format has been changed, which makes year on year comparisons difficult. However, I read the total of the Grade 6 'monitor' assets to have increased from $185.315m to $198.370m. This is not a very good position to be in. I note on that same table there is a provision for collectively impaired assets of $15.961m which is up from $8.032m in FY2012. But that provision increase is not enough to cover the accompanying increase in 'monitor' assets.

Meanwhile the sum of Grade 7,8 and 9 assets is now $67.313m down from $80.927m, which is a positive. Overall though 'problem assets' (sum of grade 6,7,8 and 9) have increased slightly. I will have to take some time to think through how all this relates to the overall equity position of HNZ. But I was hoping for a bigger improvement in the doubtful loan book than this. I don't think I will be putting any money into HNZ based on this debt book result alone.

SNOOPY

Somewhere in KPMG accountants are crying all over their abacus.
"What is the matter?" they are asked.

"Snoopy did not understand the Credit risk stuff in last years HNZ report, so we rejigged it a bit this year to help him and even added some extra notes in the Provision for impairment sub-section. We were sure he would get it this year. But look he has posted this. We don't know what else we can do!"

Best Wishes
Paper Tiger

[percy]

:) Thats me having a joke percy - I have met yourself, Karen (who is fantastic) and a few others out there at lunch a while back, Tauranga - that Karen was nice enough to arrange. Wouldn't make an investment based on what I read in the paper or what some mad hatter writes on a forum but they do act as (particularly in the case of sharetrader) a good point for further research. Myself I quite like sharetrader and generally find that once your a familiar viewer who has substance and who is more inclined to post for the sake of it.

Anyways apologies, promise my next post will contain content that furthers the HNZ value buy debate.

Missed the joke on first read.See where you are coming from on second read.Sorry I did not pick up straight away.Been trying to do too many things today.Thanks for pointing that out.You live in a lovely place.

[percy]

We can wish Snoopy well with his other investments.

We can?
Yeah Right.!!!!!! lol.

[Lizard]

:rolleyes: The reporters say "Stay away from the forums" the forums say "You'll never understand by reading the papers".... I don't know what to think... if these shananigans continue I'll be forced to DYOR :crying:

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11113397 "Don't do this"

I think you should post that link on Off-topic discussions or Investment Strategies... we could all have a lot of fun with it!! :)

[winner69]

Originally Posted by The Grinch View Post

The reporters say "Stay away from the forums" the forums say "You'll never understand by reading the papers".... I don't know what to think... if these shananigans continue I'll be forced to DYOR

http://www.nzherald.co.nz/business/n...ectid=11113397 "Don't do this"



I think you should post that link on Off-topic discussions or Investment Strategies... we could all have a lot of fun with it!! :)

Must sign up (but probably have to pay to get his advice) to that guys (author) website

OMG watched one video and it just sounded like moosie .... support here and then support there and weekly setups and support here that held and support somewhere else that didn't and support went somewhere else but heck am I bullish on this etc etc etc

You missed your station in life moosie .... I can imagine you raving on like this guy

http://www.tradewithprecision.com/market_outlook_nick_mcdonald

[Joshuatree]

Bye the bye i walk past Heartland Tauranga re every 2nd day at different times and i have NEVER seen a customer in there. Im still a happy shareholder btw.

[bonne vie]

Bye the bye i walk past Heartland Tauranga re every 2nd day at different times and i have NEVER seen a customer in there. Im still a happy shareholder btw.

That could be a very good sign - if it means the lenders are out at the customers premises arranging finance and mitigating a risks you do can not always pick up at an in the bank premises/on phone meeting. Also could point to great on line services on the transactional side which lowers costs.

[Hoop]

.......OMG watched one video and it just sounded like moosie .... support here and then support there and weekly setups and support here that held and support somewhere else that didn't and support went somewhere else but heck am I bullish on this etc etc etc

You missed your station in life moosie .... I can imagine you raving on like this guy

http://www.tradewithprecision.com/market_outlook_nick_mcdonald

sheeeesh........That guy Nick.....I tried to count how many times he said bullish but I ran out of fingers and toes ..dammmm.....

Couldn't figure out what he was saying....Hmmm ...must be a townie...........

[Minerbarejet]

Bye the bye i walk past Heartland Tauranga re every 2nd day at different times and i have NEVER seen a customer in there. Im still a happy shareholder btw.
try going every third day.:)

[Minerbarejet]

Bye the bye i walk past Heartland Tauranga re every 2nd day at different times and i have NEVER seen a customer in there. Im still a happy shareholder btw.If it is any consolation we have a Rabobank in town - I am the only person I have seen in there over many years apart from one somewhat disoriented and vague employee who emerged from a room deep in the bowels to confront the intruder. Look how successful they have been.:)

[percy]

Headline in today's The Press;"Heartland eyes bright 2014."
A balanced article after that.
Even local broker Grant Williamson's comments were on the money.
Well done.[makes a nice change The Press and Williamson].

[Snoopy]

Somewhere in KPMG accountants are crying all over their abacus.
"What is the matter?" they are asked.

"Snoopy did not understand the Credit risk stuff in last years HNZ report, so we rejigged it a bit this year to help him and even added some extra notes in the Provision for impairment sub-section. We were sure he would get it this year. But look he has posted this. We don't know what else we can do!"


Oh I "get it" very well Paper Tiger. There has been a $24.3m charge taken in FY2013 against the bad property loans to allegedly put these to bed. Yet despite this, the value of loans in the 'monitor category and worse' is now:

$198.370m + $18.034m + $21.518m + $27.761m = $265.683m

Last year the number of loans in the 'monitor' and above category was

$185.315m + $53.360m + $14.096m + $13.471m = $266.242m

In other words those 'monitor+' debts have barely moved, despite all the restructuring. It is true that less of those debts are now in the higher risk 'substandard', 'doubtful' and 'at risk of loss categories'. But if that is really true, can you please explain why the provision for bad debts has jumped from $8.032m last year to $15.961m this year? Of course I don't expect you to be able to answer that question. But if I was a shareholder I would certainly ask that question of management at the AGM. However my vision of the upcoming AGM is largely unchanged. The lap dog shareholders will still be there wagging their little tails in the front row, while in the second row as somewhat larger animal swings their orange and black tail in sympathetic harmony.

SNOOPY

[Snoopy]

Just to reprise Tim Hunter's quote:

"As a new bank, Heartland has been given more onerous capital requirements by the Reserve Bank than the established players. Its tier-one capital ratio - basically the equity as a percentage of risk-weighted assets - must exceed 12 per cent, while the requirement for ANZ and Westpac is 6 per cent."

What this means is that if Heartland singles out $12,000 of capital, then they can sign up a loan of $100,000 tied to that capital.
If ANZ or Westpac singles out $12,000 of capital, then they can sign up a loan of $200,000 tied to exactly the same dollar amount of company capital.

If that isn't a restriction on Heartland's core activities vis a vis other banks, I don't know what is. No matter how you spin it, the Heartland banking licence does not give Heartand the same privileges as banking licences awarded to ANZ and Westpac!


I see the capital raising program at Heartland has started in earnest. The Dividend Reinvestment Plan on the larger than expected dividend, should add to the sweat margin that Heartland has and will certainly be good for the company going forwards. Of course existing shareholders who don't take up the DRP will have their relative shareholding diluted, but that is one way to derisk your portfolio if you are overweight in Heartland shares.

The Heartland dividends past and present may be a good way to placate shareholders many of whom have come onto the register via the PGC train wreck. But have the 1.5c special and 2c interim dividend paid during FY2013 really benefited them? Since over the same period the net asset backing per share has reduced from 88c to 85c I would argue no. All the dividend has done is indirectly given shareholders their own capital back, but I guess calling it a dividend is enough to keep some shareholders happy. Mind you the IRD will be happy because they gained a tax rake off along the way at the expense of the company!

SNOOPY

[iceman]

It is very rare that such a large positive consensus is struck on this site.

You spoke too early snapiti. Should have waited for Snoopy's welcome comments first !

[CJ]

Mind you the IRD will be happy because they gained a tax rake off along the way at the expense of the company!The dividends were/are fully imputed so no extra tax.

Note: there would be a little as imputation is only 28% compared to the top rate of 33%.

[blakecb]

It is very rare that such a large positive consensus is struck on this site.
Bought in yesterday @ 87cps.


I agree, nice to see FA and TA in harmony. I too have bought in @87cps.

[Snow Leopard]

Oh I "get it" very well Paper Tiger. There has been a $24.3m charge taken in FY2013 against the bad property loans to allegedly put these to bed. Yet despite this, the value of loans in the 'monitor category and worse' is now:

$198.370m + $18.034m + $21.518m + $27.761m = $265.683m

Last year the number of loans in the 'monitor' and above category was

$185.315m + $53.360m + $14.096m + $13.471m = $266.242m

In other words those 'monitor+' debts have barely moved, despite all the restructuring. It is true that less of those debts are now in the higher risk 'substandard', 'doubtful' and 'at risk of loss categories'. But if that is really true, can you please explain why the provision for bad debts has jumped from $8.032m last year to $15.961m this year? Of course I don't expect you to be able to answer that question. But if I was a shareholder I would certainly ask that question of management at the AGM. However my vision of the upcoming AGM is largely unchanged. The lap dog shareholders will still be there wagging their little tails in the front row, while in the second row as somewhat larger animal swings their orange and black tail in sympathetic harmony.

SNOOPY

Let us try.
One of the ways that HNZ divides it's financial assets is into two broad portfolios:

The Judgement Portfolio: where loans are assessed into one of 9 different risk ratings: 1 having the least risk of the loan going bad and 9 the most. Provision for risk impairment for each of 1-8 is based on a % of loan value (based on years of experience), each loan in 9 is individually assessed (Impaired loans from this portfolio are called Collective Impaired Assets);

The Behavioural Portfolio: where each loan is risk assessed individually (Impaired loans from this portfolio are called Individually Impaired Assets).


Reading Note 37(e) of the accounts shows that the Total Provision for Impaired Assets as jumped from $27M4 in 2012 to $50M5 in 2013, net +$23M1, and that this is almost entirely from Property divided between an increase of $9M3 in the Judgement Portfolio (Collective Impaired Assets) and $14M3 (Individually Impaired Assets).

Now remember how in the Judgement Portfolio as the category number gets higher the perceived risk % rises and the greater the impairment provision, so although the gross amount of loans across 6-9 is essentially unchanged the increase in the 2 highest risks categories results in an higher overall impairment provision.

Best Wishes
Paper Tiger

Disc: Will not be at the AGM.

[Snoopy]

Time to reevaluate liquidity.

HNZ has total borrowings of $1,939,489,000, made up principally of term deposits lodged with Heartland.

Note 24 is meant to give a breakdown of these borrowings. Once again there is no breakdown given of current and longer-term borrowings

The information given on the securitized facilities is as follows

"The Group has securitisation facilities in relation to the Trusts totalling $450.0 million. On 27 February 2012, the Group entered into an agreement with its securitisation facility provider to extend the maturity date of Heartland ABCP Trust 1 $300 million securitisation facility to 6 February 2013. On 19 December 2011, the Group entered into an agreement to increase CBS Warehouse A Trust securitisation facility by $100 million to $175 million. $25 million of this increase matured on 1 April 2012. The maturity date of the remaining $150 million CBS Warehouse A Trust securitisation facility is 22 July 2013."

IOW all activity relates to a time-frame no more than one year out in the future.

The amount of securitized holdings has increased when I would have expected it to decrease now that HNZ has fully rolled out of the government deposit guarantee scheme.

"The Group has bank facilities totalling $650.0 million (2011: $475.0 million)."

That increase is good for future flexibility.

This money has been on loaned to customers who want loans. These customers owe HNZ 'Finance Receivables' of $2,078,276,000. Again there is no breakdown as to what loans are current and longer term (note 16).

Given:

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

then my analysis comes to a full stop (again).

The only thing I do note is that the amount borrowed as debentures and deposits from customers has gone down (by $6.022m) and the amount lent to customers has gone up (by $3.065m). Given that bank facilities have gone up by $175m over the same period this isn't an issue.


Time to look at the Liquidity Buffer ratio for 2013

HNZ has total borrowings of $2,134,285,000, made up principally of term deposits lodged with Heartland (see Statement of Financial Position).

Note 26 is meant to give a breakdown of these borrowings. Once again there is no breakdown given of current and longer-term borrowings

The information given on the securitized facilities is as follows:

-------

Bank borrowings and deposits (which include NZDX bonds) rank equally and are unsecured. The group has securitised bank facilities totalling $500m, all in relation to the trusts. Heartland ABCP Trust 1 (ABCP Trust) has a maturing facility of $400m maturing 5th February 2014, and CBS Warehouse A Trust (CBS Trust) has a securitisation facility of $100m maturing on 22nd January 2014 These facilities are drawn by $259m (2012: $264m).

Investors in ABCP Trust rank equally with each other and are secured over securitized assets of that trust. Investors in CBS Trust rank equally with each other and are secured over securitized assets of that trust

--------

Once again all Securtised asset activity relates to a time-frame no more than one year out in the future, in this case just 6 months. Not much time then until everything is up for renegotiation.
The amount of securitized holdings has decreased a little (by $5m), but in context presents a fairly steady as she goes picture..

The Group's bank facilities are down from $650.0 million to $500.0 million, yet these now seem to be completely undrawn with last years $50m loan paid back. That all adds up to a net borrowing capacity down by $100m year on year.

This money has been on loaned to customers who want loans. These customers owe HNZ 'Finance Receivables' of $2,010,376,000. Again there is no breakdown as to what loans are current and longer term (note 18).

Given:

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

then my analysis comes to a full stop (again).

The only thing I do note is that the amount borrowed as debentures and deposits from customers has gone up (by $194.796m) and the amount lent to customers has gone down (by $0.679m). That means Heartland is a shrinking company, not a growing company as some here believe. Of course shrinking is not such a bad thing if it is the bad loans that are being shrunk! Bank facilities have gone down by $100m over the same annual comparative period. So Heartland having shifted tactics and are using more funds borrowed from customers to make up the alternative bank funding shortfall.

Some of the build up in funds may be due to the reserve bank conditions imposed when Heartland became a bank of course. Anyone know for sure?

SNOOPY

[K1W1G0LD]

Well, you could ask them. They're pretty good in answering questions.

Thats a savage response Mr Clown, we all know that beagles can't talk !

[Snoopy]

Once again there is no mention of Tier 1 or Tier 2 in the Heartland FY2012 report.

The 'best case' scenario is that all loans are Tier 1. $1,939.29m of loans are outstanding. 20% of that figure is:

0.2 x $1,939.29m = $387.9m

Heartland has total equity of $374.8m which is insufficient no matter what the tier classification of the loans.

Result: FAIL TEST

However the numbers are moving in the right direction. Heartland are certainly doing the right thing by retaining their earnings and not paying out a dividend.
Ironically the small reduction in the size of their loan book is helping too.

However the fact that the overall business is downsizing does mean less customer activity. Those shareholders looking for a step change in earnings are likely to be disappointed IMO.


Once again there is no mention of Tier 1 or Tier 2 in the Heartland FY2012 report.

The 'best case' scenario is that all loans are Tier 1. $2,097.553m of loans are outstanding. 20% of that figure is:

0.2 x $2,097.553m = $419.5m

Heartland has total equity of $370.5m which is well below the 20% of loan target no matter what the tier classification of the loans.

Result: FAIL TEST

Heartland have increased their lending and reduced their capital by paying out dividends, hence the poor result on this test. Last year I started a barrage of derision by suggesting a capital raising was looking likely when Heartland failed this same test. Over that FY2013 year Heartland obtained their banking licence (good, although they don't have the same freedom as other banks as regards capital ratios), decided to lend more against tier 2 assets (bad from this statistic's point of view, which is not to say tier 2 loans aren't profitable). Furthermore during the year the so called Basel 3 requirements, designed to shore up the stability of banks and requiring banks to carry more capital have been implemented (bad for this statistic).

I don't wish to speculate again on the overall likelihood of a cash issue to shore up HNZ in FY2014. All I will say is that given what has happened over FY2013, and looking at the trend in this statistic, such a cash issue to shareholders or a third party placement of HNZ shares is looking much more likely now.

SNOOPY

[Snoopy]

Well, you could ask them. They're pretty good in answering questions.


Yes I could, but it isn't my capital on the line. And I have other financial statistics to calculate before my analysis of FY2013 for HNZ is complete.

SNOOPY

[Snoopy]

Updating this number for the full year

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

Using numbers from the Heartland FY2012

= $374.8m/$2348.1m = 16.0%

This is a slight improvement on the half year position, achieved by both shrinking the loan book and not paying out any dividend from profits.



Updating this number for the full year

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

Using numbers from the Heartland FY2013

= $370.542m/$2504.627m = 14.6%

This is a significant deterioration on the FY2012 position. Not surprising as borrowings from debenture customers have increased, which results in a larger total asset position and dividend payments have weakened the balance sheet by shrinking equity. Unfortunately I believe that if HNZ is going to grow as they proclaim, they simply can't do it by shrinking their share capital base.

SNOOPY

[CJ]

This is a significant deterioration on the FY2012 position. YOu could also say this is an improvement as they are working their money harder. I understand Banks would prefer the lowest % possible that the RBNZ will allow.

[winner69]

The 'shrinking equity' is mainly due to only making $6m for shareholders in the last year (those writedowns that dont really matter the culprit) and paying out more than that in dividends. Yes equity declined eh Snoopy but who cares anyway - its only a number on piece of paper and the HERO products will improve the situation anyway.

So the equity ratio implies a leverage of 7 to 1 ..... compared to the Big Four and other banks this is bllody good ...... but in old fashioned terms really high. But if everybody plays the highly leverage game so does Heartland.

And declining equity is good ... it helps ROE

[Snoopy]

The 'shrinking equity' is mainly due to only making $6m for shareholders in the last year (those writedowns that dont really matter the culprit) and paying out more than that in dividends. Yes equity declined eh Snoopy but who cares anyway - its only a number on piece of paper and the HERO products will improve the situation anyway.

So the equity ratio implies a leverage of 7 to 1 ..... compared to the Big Four and other banks this is bloody good ...... but in old fashioned terms really high. But if everybody plays the highly leverage game so does Heartland.

And declining equity is good ... it helps ROE

The last time the finance sector played this high leverage game, virtually every finance company in New Zealand collapsed, including that bastion of virtue, South Canterbury Finance that no-one ever thought would go down. Heartland itself arose out of the near collapse of PGC, and the property portfolio problems that Heartland carry today come from that era.

However it couldn't happen again could it? I mean property is such a bargain, it really doesn't matter how much you borrow against that does it? And of course farmers have so much equity in their farms now, they can just raise their big four bank loan a notch for the seasonal finance. No need to go to a second tier lender like Heartland! But as you say Winner, everyone is playing the game so that is proof positive it is all OK.

But what is that Wheeler bloke on about down in Wellington? Some sort of Reserve player, who should have stayed in the pavilion with his head down? Do you suppose he is just drinking bad coffee?

SNOOPY

[Snow Leopard]

Once again there is no mention of Tier 1 or Tier 2 in the Heartland FY2012 report.

The 'best case' scenario is that all loans are Tier 1. $2,097.553m of loans are outstanding. 20% of that figure is:

0.2 x $2,097.553m = $419.5m

Heartland has total equity of $370.5m which is well below the 20% of loan target no matter what the tier classification of the loans.

Result: FAIL TEST

Heartland have increased their lending and reduced their capital by paying out dividends, hence the poor result on this test. Last year I started a barrage of derision by suggesting a capital raising was looking likely when Heartland failed this same test. Over that FY2013 year Heartland obtained their banking licence (good, although they don't have the same freedom as other banks as regards capital ratios), decided to lend more against tier 2 assets (bad from this statistic's point of view, which is not to say tier 2 loans aren't profitable). Furthermore during the year the so called Basel 3 requirements, designed to shore up the stability of banks and requiring banks to carry more capital have been implemented (bad for this statistic).

I don't wish to speculate again on the overall likelihood of a cash issue to shore up HNZ in FY2014. All I will say is that given what has happened over FY2013, and looking at the trend in this statistic, such a cash issue to shareholders or a third party placement of HNZ shares is looking much more likely now.

SNOOPY

I see 'Tier 1' and 'Tier 2' and 'Basel 3' but am otherwise confused by what you are trying to prove here. You seem a 'little confused' on this sort of stuff.

At 30 Jun 2013 Heartland Bank has:
A risk weighted exposure (to loans and things) of $2,359,613,000 which requires $283,154,000 of Tier 1 Capital (12%) under the Conditions of Registration;
An actual Tier 1 Capital of $324,642,000 which provides a capital ratio of 13.76% (2012 was 14.54% so a step back here).

Just for fun I am not going to tell you from which of the full year results documents I extracted this figure from.

Best Wishes
Paper Tiger

[baller18]

have u been accumulating moosie? It would be "too cheap" right now for you! lol

[baller18]

have u been accumulating moosie? It would be "too cheap" right now for you! lol
opps wrong post, this is suppose to be for Dil, sorry guys

[hilskin]

Some big numbers being traded today off market.

[RTM]

Percy.....are you selling out ?

84
13,183,333
12:00 SP

[777]

That will be PGW then.

And the buyer would be?

[percy]

Percy.....are you selling out ?

84
13,183,333
12:00 SP

Just need to move the decimal point a few places to the left to get my holding.A good few places in fact.!! lol.
Yes Sparky it looks as though PGW have gone.Looking forward to seeing who brought them?GG?

[percy]

With any luck - its a share buyback! Probably an institution. Possibly a broker underwriting and then releasing to clients (less likely).

The known overhang is now gone. Looking forward to HNZ rocking and rolling now.

We are dangerously well positioned!!

[blakecb]

How do you think it will affect both HNZ and PGW share prices?

For HNZ I imagine it will come down to who the buyer is.

[RTM]

On a slightly related issue (how I came to Heartland) PGC has released some results.
Compared with 2012....it certainly all seems positive. However, I am not a financial person !
Still have the pain of those in my portfolio. Just to remind me.

[Snow Leopard]

Time to look at the Liquidity Buffer ratio for 2013

HNZ has total borrowings of $2,134,285,000, made up principally of term deposits lodged with Heartland (see Statement of Financial Position).

Note 26 is meant to give a breakdown of these borrowings. Once again there is no breakdown given of current and longer-term borrowings...

...This money has been on loaned to customers who want loans. These customers owe HNZ 'Finance Receivables' of $2,010,376,000. Again there is no breakdown as to what loans are current and longer term (note 18).

Given:

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

then my analysis comes to a full stop (again)....

SNOOPY

Perhaps you should read Note 38 of the 2013 Full Year Accounts?

Best Wishes
Paper Tiger

[swillisam]

On the money there Paper Tiger.


38 Liquidity risk

Contractual liquidity profile of financial assets and liabilities
The following tables show the cash flows on the Group's financial liabilities and unrecognised loan commitments on the basis of their earliest
possible contractual maturity

In short the net position shows a large amount of liabilities falling due in the next 12 months and then a positive forecast thereafter.

[Snow Leopard]

On the money there Paper Tiger.

In short the net position shows a large amount of liabilities falling due in the next 12 months and then a positive forecast thereafter.

That is the contractual profile.

We have to hope that the expected maturity profile is closer to reality otherwise Snoopy will be right and HNZ will be asking us to buy new shares soon.

Best Wishes
Paper Tiger

[Snoopy]

At 30 Jun 2013 Heartland Bank has:
A risk weighted exposure (to loans and things) of $2,359,613,000 which requires $283,154,000 of Tier 1 Capital (12%) under the Conditions of Registration;
An actual Tier 1 Capital of $324,642,000 which provides a capital ratio of 13.76% (2012 was 14.54% so a step back here).

Just for fun I am not going to tell you from which of the full year results documents I extracted this figure from.


After reading my own post I can see why you might find it confusing, yes. I think I need to back track a bit to explain where I am coming from with all this stuff. I still class myself as a learner when it comes to analyzing banks. The base line for my analysis is the quite comprehensive report which came out when PGW sold, er I mean gave away, their finance division to Heartland. There was a very comprehensive document put out by First NZ Capital and UBS on the subject. The ratios I am calculating are theirs, not things that I have dreamed up.

Now you might argue that Heartland as a whole is so different to PGW Finance, that whatever ratios I am using are too conservative. I would have some sympathy with that view. However, given that all this was worked out in the shadow of the financial crisis, the banking consortium behind PGW was very focused on not losing their capital. And guess what, so am I. So I intend to continue looking at my ratios as I am doing, but with these caveats in mind.

PT, you say that Heartlands conditions of bank registration require a risk weighted exposure (to loans and things) of $2,359,613,000 which requires $283,154,000 of Tier 1 Capital (12%).

However, in practice any bank would not allow itself to get near these 'minimum capital requirements' under conditions of normal operation. The question is then, what margin of safety should the bank allow itself when working around these minimum capital. requirements? My margin of safety is to say that there must be 20% of tier 1 capital to back up their risk weighted loan exposure. And that margin of safety is not made up by me. It is made up by parent banks wanting to be darn sure they will get their capital back!

As CJ has noted doing more lending on less capital boosts ROE, another important performance indicator. My point is that boosting lending on fixed capital is actually a two sided coin, the high side being a greater return for shareholders the under side being more risk to shareholders should some loans go bad.

However there is never any talk on the forum about this underside risk. The talk here is all about growing the loan book boosting dividends and working the capital hard. I am amazed at the short memories of investors as regards this. Because it is exactly this kind of thinking that caused the virtual collapse of the finance sector in New Zealand five short years ago.

SNOOPY

[Snoopy]

I see 'Tier 1' and 'Tier 2' and 'Basel 3' but am otherwise confused by what you are trying to prove here. You seem a 'little confused' on this sort of stuff.


Some more clarification here. 'Tier 1' and 'Tier 2' capital are terms used to measure the quality of capital contained within a bank. Shareholders equity is Tier 1. I was using the terms Tier 1 and Tier 2 with respect to loans, which is probably a bit naughty in this context. However, the general point I would make is that the quality and quantity of capital contained within a bank must be matched to the quality and quantity of the loans that the bank makes out.

In the First NZ Capital / UBS Report the exact terminology is:

Minimum Equity Contribution:

Tier 1 Risk Share Lending: > 20%

Tier 2 Risk Share Lending: > 30%

As for Basel 3, the reason I mentioned that is because since the First NZ Capital UBS report I am using came out, there has been a trend to tighten international banking standards. Thus all things being equal you might expect the Risk Share lending requirements I have outlined to have tightened further. Or perhaps you could argue that Basel 3 is really just the international boys catching up with what the banking syndicates in New Zealand were already doing? I don't know what the effect of Basel 3 is in New Zealand and more specifically within Heartland. I only mentioned it as a point of discussion.

SNOOPY

[Snoopy]

That is the contractual profile.

We have to hope that the expected maturity profile is closer to reality otherwise Snoopy will be right and HNZ will be asking us to buy new shares soon.

Best Wishes
Paper Tiger

More to the point if it really is PGW that has sold down their holding this will be why. There is no way that PGW can afford to subscribe more capital to Heartland should that become necessary. So best to sell out now at a small profit before the other shareholders recognize Heartland's coming capital crunch!

SNOOPY

PS As a PGW shareholder I would be happy with the 3.5% discount taken on the market price to get away such a significant HNZ share parcel.

[Snoopy]

Perhaps you should read Note 38 of the 2013 Full Year Accounts?

Best Wishes
Paper Tiger

Fair call PT. I hadn't got as far as note 38.

The one year maturity profile looks challenging for FY2013.

But it also looked challenging in FY2012. A wall of $520.467m of contracted net withdrawals, with $460.492m of undrawn bank and loan commitments to cover them in the event of the worst happening. They came through that one OK.

Returning to the twelve month maturity profile for FY2013, I get $781.094m of contacted net withdrawals, with only $346.702m of undrawn bank and loan commitments to cover them.

Crikey, you wouldn't want anything to go wrong, like some sort of global instability, while HNZ are renegotiating their maturing securitized debt over the next 6 months or so would you! That is a cashflow hole of $400m! You HNZ shareholders are certainly a brave lot. Hang onto your (hard) hats!

SNOOPY

[Snow Leopard]

Snoopy and All

You should relax a bit.

Almost? all banks have net withdrawals on the contractual profile for periods upto one year.

What UBS meant by "Tier 1 Risk Share Lending: > 20%" I do not know and can not find a copy of the report to find out.

However in an ideal world HNZ would have a Tier 1 Capital Ratio of greater 14.5% but 20% would be excessive.

At 30 Jun 13 HNZ was:
Tier 1 CR: 13.8% (min 12%)
Total CR: 13.8% (min 12%)

by comparison at 30 Jun 13 ANZ (NZ) was:
Tier 1 CR: 10.7% (min 6%)
Total CR: 12.4% (min 8%)

So although HNZ would breach it conditions earlier in a crunch it is as 'robust' as the next bank (ANZ).

Best Wishes
Paper Tiger

[Xerof]

Snoopdog mate,

I don't own these either, and haven't looked at the report in any detail, but mate, you need to look for their 'retention' rates on rollover, which will provide some comfort to you. Banks/finance coys are always keeping an eye on this number, and can raise it or lower it by adjusting the interest rate carded. Shortfalls are easily covered by incoming new deposits, typically. (Augmented by standby facilities sitting undrawn)

Of course, things can and do go wrong, as we saw in the GFC......without the Crown guarantees, everything would have fallen over within weeks, not years, but thats another story

on the other side of the Balance Sheet, it would be fair to say also that very little of loans to customers will be repaid, other than those items structured as table loans. The big exception is personal finance/ car/ hire purchase, where it is actually quite difficult to keep new lending up with natural loan attrition, to maintain the size of the loan book

[Snow Leopard]

With a few million shares shuffling around today this could result in a step change in On Balance Volume which is so loved by some TA practitioners.

If the closing price is down then this will be a step down and a sign that the 'Smart Money' is getting out.
If the closing price is up then this will be a step up and the 'Smart Money' is buying in.
Otherwise if we close at 87c it will not affect the OBV and no smart money is doing anything.

Best Wishes
Paper Tiger

Note: Beware of hidden sarcasm.

[percy]

I thought you and Sparky The Clown were the "Smart Money". lol.

[Snoopy]

Snoopdog mate,

I don't own these either, and haven't looked at the report in any detail, but mate, you need to look for their 'retention' rates on rollover, which will provide some comfort to you. Banks/finance coys are always keeping an eye on this number, and can raise it or lower it by adjusting the interest rate carded. Shortfalls are easily covered by incoming new deposits, typically. (Augmented by standby facilities sitting undrawn)


I don't wish to sound too critical of Heartland Xerof. Actually I think they are managing their situation quite well. However, even a well executed strategy has risks and I think they are becoming apparent here.

The upside of paying out all those dividends is that the confidence of their shareholder base is increasing. Look how confident Percy has become in HNZ! The dividends will be helping keep the share price up too, which will be important if a capital raising is needed.

However, there are no free lunches here. Sure they HNZ can boost their cash reserves by touting for new term deposits at attractive interest rates. But paying above market rates will impact profits. And with $100m in securitzed debt maturing on 24th January 2014 and the other $400m of securitized debt maturing on 5th February 2014 (note 26) and with a $500m cashflow hole showing up in the next six months (note 38). Well lets just say the timing could be better.

Global interest rates look like they might go higher too, so how will that affect the amount that HNZ can borrow from their 'parent' bankers? Shareholder equity is shrinking. This next six months for Heartland will be a defining period in the company's history I feel

SNOOPY

[percy]

To understand Heartland liquidity better one needs to understand Heartland better.The simple way to explain it is; Heartland borrows long and lends short.ie the opposite to most finance companies, who borrow short and lend long.
Heartland is working with their clients who need seasonal loans,livestock loans,small business who need short term finance and factoring.
Long term housing loans they put through Kiwi bank.
Xerofs post, as usual, went a long way to spell this out.He was also right on the money with retention rates.
Heartland have a history of achieving what they say they will do.It was not long ago that I posted I thought Heartland would make $30mil for year ended 31/6/2014.Heartland have come out saying they are looking to make $34 to $37mil.
Who do I believe? Snoopy,whose record is 100% wrong on this thread.?
Or Heartland whose record is 100% correct.?
No contest.! I will go with the "smart money" and listen to what Heartland say.

[Snow Leopard]

....And with $100m in securitzed debt maturing on 24th January 2014 and the other $400m of securitized debt maturing on 5th February 2014 (note 26) and with a $500m cashflow hole showing up in the next six months (note 38)....
SNOOPY

Snoopy, Snoopy, Snoopy, you have to turn off the negative waves and start reading this stuff more carefully.

The Note 26 footnote tells you that the $100M + $400M is only drawn down to $259M so that is the amount to be repaid.
You also imply that that the '$500m cashflow hole' is in addition, but it includes the $259M.

You do not appear to understand that the contract profile is a worst cash scenario where no new deposits at all come in (and no new loans made), and while the maturity profile is only a best guess based on experience it is by far the most realistic, and there will (probably) be no cashflow hole.

Go read the disclosure statements for the likes of ANZ, etc and you will see that all the banks operate like this.

Best Wishes
Paper Tiger

[Hoop]

With a few million shares shuffling around today this could result in a step change in On Balance Volume which is so loved by some TA practitioners.

If the closing price is down then this will be a step down and a sign that the 'Smart Money' is getting out.
If the closing price is up then this will be a step up and the 'Smart Money' is buying in.
Otherwise if we close at 87c it will not affect the OBV and no smart money is doing anything.

Best Wishes
Paper Tiger

Note: Beware of hidden sarcasm.

Fair comment PT .... sarcasm included....Yes its true the OBV has flaws....

PT...you might have noticed that for some charts I post on ST includes many volume/price charts indicators...I do this when I suspect some large investors are slowly building up/selling down on appropriate days using the price changes to hide their activities......OK...Its human nature that they would want the best price possible.... and dumping stock all at once when there is no urgency to do so is a no brainer and often doesn't achieve the best results, neither does buying it all at once....

The downsides ...1.. sudden activity warps the price/demand curve and 2... the whole wide world gets to find out what you are up too ....So using the "slowly slowly catchy Monkey" strategy is an attempt to stay invisible and slow enough so not make a mistake to affect pricing or buyer seller demand to the point that it starts sparking off buy/sell signals ... This strategy can fool the OBV and various price measurement indicators but its harder to stay invisible from the TA technicians using a wide range of money flow price/volume type indicators.

Also, if when using the OBV and you notice its trend diverging from the share price trend, an experienced TA will attempt to confirm the OBV divergence by using a couple of other price/volume indicators....then play TA detective to attempt to discover why...

Also...if it is widely advertised by the media that all TA people use OBV then us sneaky TA Technicians can catch out those more sneakier manipulators who think all eyes are on OBV...:D Cat and mouse games...Lots of fun...eh?

If you are using a free charting program and short of indicator options using Chaikin Money Flow is probably a better indicator to use than OBV so too arguably is the Money Flow Index and Volume Accumulator (accumulation/distribution) indicator ..however sadly on many free version charting programs many of the better indicators such as Chaikin are not included....

......but all is not lost on the simple TA front as OBV overall performs reasonably well...:) and it is doing a slow rise on the HNZ chart

[janner]

A wink is as good as a nod to a blind man Hoop.. :-))

Appreciate your comments..

[percy]

A wink is as good as a nod to a blind man Hoop.. :-))

Appreciate your comments..

Loved the quote.!!!!

[SCOTTY]

I would be more interested to know who bought and sold the 13.44m shares traded yesterday?

[Minerbarejet]

I would be more interested to know who bought and sold the 13.44m shares traded yesterday?I suspect Moosie bought them off Sorenson but could be wrong.:)

[Snoopy]

The Note 26 footnote tells you that the $100M + $400M is only drawn down to $259M so that is the amount to be repaid.


I see the note PT, but I don't get it.

If you have a securitized banking facility, I understood that this was your own debt repackaged as a saleable entity that was onsold to a third party. So if the ABCP trust has a facility of $400m and the CBS Warehouse Trust has a facility of $100m , what you are saying is that the actual amount of debt sold into those trusts was actually far less than that ($259m)? Why would any buyer of securitized assets purchase an unknown variable amount of debt? How would they know what to pay for a debt package of indeterminate size?

SNOOPY

[macduffy]

I see the note PT, but I don't get it.

If you have a securitized banking facility, I understood that this was your own debt repackaged as a saleable entity that was onsold to a third party. So if the ABCP trust has a facility of $400m and the CBS Warehouse Trust has a facility of $100m , what you are saying is that the actual amount of debt sold into those trusts was actually far less than that ($259m)? Why would any buyer of securitized assets purchase an unknown variable amount of debt? How would they know what to pay for a debt package of indeterminate size?

SNOOPY

HNZ would be paying a fee for the right to sell the securitized assets, at an agreed price, within an agreed period. Rather like securing an overdraft facility in that an establishment fee is paid whether or not the borrower ever utilises the overdraft.

[Snow Leopard]

I see the note PT, but I don't get it.

If you have a securitized banking facility, I understood that this was your own debt repackaged as a saleable entity that was onsold to a third party. So if the ABCP trust has a facility of $400m and the CBS Warehouse Trust has a facility of $100m , what you are saying is that the actual amount of debt sold into those trusts was actually far less than that ($259m)? Why would any buyer of securitized assets purchase an unknown variable amount of debt? How would they know what to pay for a debt package of indeterminate size?

SNOOPY

I do not know and I guess in this instance I do not particularly care that I am in ignorance.
But can I read the accounts and that is what it says, I am willing to accept that they are correct.

I see that PGW selling down yesterday has caused a few minor ripples. Wish I had had a buy order in at $0.84.

Best Wishes
Paper Tiger

[Snoopy]

Looking into the credit worthiness of Heartland I pulled up this from the Reserve bank website on explaining credit ratings:

http://www.reservebank.govt.nz/regulation_and_supervision/banks/3498179.pdf

Probability of default is listed at 1 in 30 over 5 years for BBB rated bank. BB is a 1 in 10 default chance, so maybe BBB- the Heartland rating is about 1 in 20?

Interested to see that the Co-operative bank also has a BBB- rating now.

http://www.reservebank.govt.nz/regulation_and_supervision/banks/prudential_requirements/credit_ratings/

I thought they were lower than that!

SNOOPY

[winner69]

Well that punt with the TAB money was a waste of time .....HNZ not seen as a star by an irrational market. Put the cash back in the TAB ..bugger the ABs not playing this week and the Warriors are playing the drug runners so that's too dangerous so might have a play around with Djokavich in th tennis

Well the brokers got a few dollars out of it anyway

One day HNZ might just get exciting

[percy]

Well that punt with the TAB money was a waste of time .....HNZ not seen as a star by an irrational market. Put the cash back in the TAB ..bugger the ABs not playing this week and the Warriors are playing the drug runners so that's too dangerous so might have a play around with Djokavich in th tennis

Well the brokers got a few dollars out of it anyway

One day HNZ might just get exciting

Found the right web page for you;www.thedogs.co.nz

[Xerof]

I see a hound called heartland starts in race 5

not really percy, but couldn't resist

[nextbigthing]

I see a hound called heartland starts in race 5


Please stop it, Snoopy's getting excited.

[percy]

I see a hound called heartland starts in race 5

not really percy, but couldn't resist

Yeah right!!!
Good one! lol.

[winner69]

I see a hound called heartland starts in race 5

not really percy, but couldn't resist

Thanks guys .... dogs are not my game

Interesting site - there was a hound called Percy's Dream a while .... bit slow so was retired which is another way of saying euthanized or just put out of its misery (owners misery that is)

Couldn't find a Heartland but what a great idea .... Heartland could race a greyhound .... call it Heartland Bank (pity it couldn't race in green cause they don't have green jackets for dogs) ..... let it win 20 races in a row .... be in TV a lot ..... and when it got famous it ne on National News .... and have a fan club ..... cheap advertising I reckon

And Jeff could be the trainer

[Minerbarejet]

Thanks guys .... dogs are not my game

Interesting site - there was a hound called Percy's Dream a while .... bit slow so was retired which is another way of saying euthanized or just put out of its misery (owners misery that is)

Couldn't find a Heartland but what a great idea .... Heartland could race a greyhound .... call it Heartland Bank (pity it couldn't race in green cause they don't have green jackets for dogs) ..... let it win 20 races in a row .... be in TV a lot ..... and when it got famous it ne on National News .... and have a fan club ..... cheap advertising I reckon

And Jeff could be the trainer
OMG now we have really gone to the dogs

[Xerof]

W69, champ, are you smoking those dog biscuits again.......

[RTM]

Quite happy if Heartland never gets exciting. I hope it gets so boring and predictable we don't need to discuss it here.




Well that punt with the TAB money was a waste of time .....HNZ not seen as a star by an irrational market. Put the cash back in the TAB ..bugger the ABs not playing this week and the Warriors are playing the drug runners so that's too dangerous so might have a play around with Djokavich in th tennis

Well the brokers got a few dollars out of it anyway

One day HNZ might just get exciting

[Snoopy]

Snoopy and All

You should relax a bit.

Almost? all banks have net withdrawals on the contractual profile for periods upto one year.

What UBS meant by "Tier 1 Risk Share Lending: > 20%" I do not know and can not find a copy of the report to find out.

However in an ideal world HNZ would have a Tier 1 Capital Ratio of greater 14.5% but 20% would be excessive.

At 30 Jun 13 HNZ was:
Tier 1 CR: 13.8% (min 12%)
Total CR: 13.8% (min 12%)

by comparison at 30 Jun 13 ANZ (NZ) was:
Tier 1 CR: 10.7% (min 6%)
Total CR: 12.4% (min 8%)

So although HNZ would breach it conditions earlier in a crunch it is as 'robust' as the next bank (ANZ).


I would say the relative health of HNZ verses ANZ (NZ) for example shows that Heartland is superficially more 'robust' in absolute terms all things being equal. However, the Reserve Bank is telling us all things are not equal, because they have set different requirements of Tier 1 capital to be held by HNZ and ANZ (NZ).

HNZs 13.8% of Tier 1 capital is only 1.8 percentage points above the 12% requirement.

ANZ (NZ)'s 10.7% Tier 1 capital is 4.7 percentage points above the 6% requirement.

Thus in their present position, I would class ANZ (NZ) as over 2.5 times as robust as HNZ.

SNOOPY

[Snoopy]

HNZ would be paying a fee for the right to sell the securitized assets, at an agreed price, within an agreed period. Rather like securing an overdraft facility in that an establishment fee is paid whether or not the borrower ever utilises the overdraft.


In the light of no-one else offering an explanation, yours is the most plausible Macduffy. Did you see this note on the two securitsed trusts in the outlook statement?

"(3) Heartland Trust and CBS Canterbury Charitable Trust were deconsolidated on 1 July 2012."

What does it mean?

SNOOPY

[percy]

Sharetrader AM update for Saturday 31 August 2013; Scoop business,
PGG Wightson sells Heartland stake for $11.3m to cut debt.
"through a brokerage"
A large placement at a discount can put a bit of a damperer on a stock in the short term,said James Smalley,a director of Hamilton Hindin Greene.
Funny none of us heard anything about it.!!

[percy]

Well, we predicted the selldown Percy. I'm surprised it didn't happen sooner.

The Heartland/PGW relationship will continue along as per normal. Nothing will change there, even though the shares have been been sold down.

If anything, the shares are more likely to move up in the medium term now that the overhang has ended.

I agree with you that having that overhang out of the way is positive,and like you thought it would happen awhile ago.
Just surprised that none of us heard about it.You deal with Forbar and FCNZ,I deal with Craigs,while others here are with ASB,DD,and Macquaries.Can't believe it was HHG,so who did the deal?

[Snoopy]

Perhaps you should read Note 38 of the 2013 Full Year Accounts?

Best Wishes
Paper Tiger

Note 38 refers to the forecast cashflows over selected future time periods, assuming no new deposits taken in or lending. When they produced an unfavourable picture you suggested that the no new deposits scenario was not realistic, and in practice the almighty cashflow hole over the next year would not occur. So really we are back to my original premise, before I saw those cashflow statements. Namely that there is not enough information in the accounts to really know whether in reality cashflow will be a problem or not.

I guess there are several depositors on the books who may have their money in a 'cash' account or on ninety day terms. These accounts are payable on maturity (90 days) or instantly (cash). But in actuality the vast majority of customers may just roll over their 90 day investments or just leave their cash there. Thus the theoretical worst case scenario is practically not realistic.

What would be helpful is if we knew the retention rate of these shorter term accounts. I remember before amalgamation PGW Finance were very relaxed about publishing these and I think the rollover rate was around 80%. What a pity the combined Heartland does not do the same. But let's use this 80% reinvestment rate as a rule of thumb and see how the cash deficit looks over the next year:

Expected Cash Reinvested = ( 0.8*0.8*0.8*0.8*$452.201m + 0.8*0.8*$859.386 + 0.8*$387.333 )
= $185.221 + $550.007 + $309.866 = $1045.094m

That takes care of the $780.094m projected cash deficit. But is the 80% retention rate really realistic?

Undrawn bank facilities of $240m are still there too, as an extra back up.

Of course there is still the remaining shareholders equity of $370.542m too. But if the bank wants to grow they really need to keep that and add to it.

SNOOPY

[percy]

A stake like that may not have been gobbled up by retail clients. It may have been an institution who bought it lock stock and barrel.

That would make sense.
We wait with interest to see who ?
In the meantime we say "a warm welcome to you." [who ever you are] !!!

[Snoopy]

let's use this 80% reinvestment rate as a rule of thumb and see how the cash deficit looks over the next year:

Expected Cash Reinvested = ( 0.8*0.8*0.8*0.8*$452.201m + 0.8*0.8*$859.386 + 0.8*$387.333 )
= $185.221 + $550.007 + $309.866 = $1045.094m

That takes care of the $780.094m projected cash deficit. But is the 80% retention rate really realistic?


The best answer to my question is to stress test my assumptions and assume only a 60% reinvestment rate.

Expected Cash Reinvested = ( 0.6*0.6*0.6*0.6*$452.201m + 0.6*0.6*$859.386m + 0.6*$387.333m )
= $58.605m + $309.379m + $232.400m = $600.384m

That leaves us with a $180m shortfall on the $780m projected cash deficit. That could be covered by the $240m in undrawn bank loans. But I doubt if a company of Heartland's size could cope with an undrawn bank ceiling of only $60m. I would guess a significant cash issue to shareholders might be required under this scenario.

SNOOPY

[macduffy]

[QUOTE=Snoopy;425208]In the light of no-one else offering an explanation, yours is the most plausible Macduffy. Did you see this note on the two securitsed trusts in the outlook statement?

"(3) Heartland Trust and CBS Canterbury Charitable Trust were deconsolidated on 1 July 2012."

What does it mean?


I assume that it means that the accounts of the two trusts were removed/extracted from HNZ's consolidated accounts. Without knowing the circumstances here I would think that control of the trusts has been removed from HNZ, possibly to put them onto an independent footing. Closer followers of HNZ would have a better idea of the reason?

[Snoopy]

Snoopy write:In the light of no-one else offering an explanation, yours is the most plausible Macduffy. Did you see this note on the two securitsed trusts in the outlook statement?

"(3) Heartland Trust and CBS Canterbury Charitable Trust were deconsolidated on 1 July 2012."

What does it mean?

-------
I assume that it means that the accounts of the two trusts were removed/extracted from HNZ's consolidated accounts. Without knowing the circumstances here I would think that control of the trusts has been removed from HNZ, possibly to put them onto an independent footing. Closer followers of HNZ would have a better idea of the reason?

I wonder if the deconsolidation is prelude to winding up these trusts when they become due for repayment early in 2014?

SNOOPY

[Snow Leopard]

Note 38 refers to the forecast cashflows over selected future time periods, assuming no new deposits taken in or lending. When they produced an unfavourable picture you suggested that the no new deposits scenario was not realistic...

Did you read ALL of Note 38?

Snoopy I realise that you are determined to prove that Heartland is a risky investment and yes there does exist the possibility that circumstances arise that stress HNZ to the point where shareholders (and depositors) take a hit, but if your take a more even approach I am sure that you will better improve your financial analysis skills.

Best Wishes
Paper Tiger

[Snoopy]

Snoopy I realise that you are determined to prove that Heartland is a risky investment and yes there does exist the possibility that circumstances arise that stress HNZ to the point where shareholders (and depositors) take a hit, but if your take a more even approach I am sure that you will better improve your financial analysis skills.

Best Wishes
Paper Tiger

I am not determined to prove anything about HNZ Paper Tiger. Indeed as of last week, I don't even have an indirect interest in HNZ, now that the company I do hold shares in, PGW, has sold down their HNZ holding. So I have no interest at all in what happens to HNZ as of right now because I am completely out of it. What I do know is that five years ago many investors in finance companies lost a huge amount on the property market and that in turn wrecked the fortunes of most debenture holders and shareholders of the finance companies in NZ. I also know that outside of Auckland there has been no underlying improvement in lending risk to the residential property market since those days. So any company that has a large amount of their loan portfolio tied into property should be treated with a large degree of skepticism.

What I am interested in finding out is whether this years HNZ results can justify the hype, just as I would stress test any of my potential investments. I made the decision not to make an investment in HNZ last year because of the lack of clarity with the bad property portfolio. This turned out to be a good decision because despite the special vehicle property writedowns at HNZ, the gross extent of the 'monitor +' loans has hardly changed. The provision for bad debts has gone up though, and that will at least cushion the headline profit figure of any future writedowns. As to whether HNZ is a good investment from here going forwards, well that is what I am currently finding out.

SNOOPY

[Snoopy]

Did you read ALL of Note 38?


What you are suggesting is that I use the Expected Maturity Profile of Financial Assets and Liabilities, not the Contractual Liquidity Profile of Assets and Liabilities? Well my Contractual Liability Profile with certain reinvestment assumptions should be somewhere near the 'Expected Liability Profile', but let's see.

From note 38, HNZ Expected Cash Reinvested (12 month forward view) = $4.522m + $342.029m + $231.600m = $805.229

Compare that with the figures I calculated of $1,045.494 ( 80% reinvestment rate ) or $600.384m ( 60% reinvestment rate ). Since the actual figure is in the middle of my guesses, one might conclude that the actual reinvestment rate of debentures that are due within one year is somewhere near 70% (likely closer to 75%) . Of course that is simplifying a lot of data. But is nevertheless a useful insight of the overall debenture reinvestment rate at Heartland.

SNOOPY

[winner69]

Would the pretty charts on Slide 13 of their results presentation help you Snoopy?

[Snoopy]

Of course that is simplifying a lot of data. But is nevertheless a useful insight of the overall debenture reinvestment rate at Heartland.


Back to note 38.

Next job is to look at the difference in the contracted 'finance receivables' and the expected 'finance receivables' over the next twelve months. That should give a measure of the new (or re-signed up) business that Heartland is expecting over the next twelve months.

Contracted: 0 + $562.696m + $283.289m = $845.985m

Expected: 0 + $520.198m + $421.900m = $942.098m

So Heartland is planning to sign up some $100m of new short term loans over the year. Interesting.

SNOOPY

[Snoopy]

Would the pretty charts on Slide 13 of their results presentation help you Snoopy?

Thanks for pointing that out Winner. Yes interesting information there, although those graphical answers do not directly address the specific questions that I am asking.

What is with slide 15? It shows the retail deposit book building up steadily until a sudden trend reversal in May 2013. Why after so many months of growth are retail deposits going down?

SNOOPY

[winner69]

Thanks for pointing that out Winner. Yes interesting information there, although those graphical answers do not directly address the specific questions that I am asking.

What is with slide 15? It shows the retail deposit book building up steadily until a sudden trend reversal in May 2013. Why after so many months of growth are retail deposits going down?

SNOOPY

I noticed that the other day but didn't want to upset Percy et al by pointing it out.

Could be shareholders not taking up the special rates ..... No not that

Maybe Coop Bank is the preferred small BANK for NZ depositors ....never never so not that

Maybe part of the overall downsizing strategy?

Interesting chart though .... Reasonable dip though ....but one needs proper glasses to see it ...not the rose tinted ones

[percy]

Maybe Xerof's post No. 2345 contains the answer.
If not phone Craig Stephen on [09] 9279310 and save yourselves [and us] a lot of time.

[winner69]

Snoopy - maybe depositors money not needed because business not borrowing much more than last year.

From an NBR article (sorry guys for typing it out)


The latest update of credit data from the central bank shows borrowing for business, agriculture and non-mortgage consumer activity is falling.

While running nowhere near the unsustainable annual increases in debt in the middle of the last decade, most sectors have returned to credit growth broadly in line with, or slightly below, the annual rise in nominal GDP.

But that is now falling away. For the year to July, business lending rose only 0.4% - well below the nominal GDP increase of more than 4%, and, on the face of it, inconsistent with business investment intentions.

At the start of the year annual business credit growth was 2.3%: modest by historical standards but prudent under the circumstances.

With overseas trade data showing imports of capital goods such as machinery and plant are still running comparatively highly, this suggests – and it is only a suggestion at this stage – businesses may be funding more capital investment out of their cashflow rather than out of increased debt.

The only sector not dropping its borrowing is housing.

[percy]

Well it looks as though the "sale price" shares have all gone.Buyers at 87cents.
To whoever brought at 84cents.Well done.My last purchase was at 87cents.

[Snoopy]

Snoopy - maybe depositors money not needed because business not borrowing much more than last year.

From an NBR article (sorry guys for typing it out)


The latest update of credit data from the central bank shows borrowing for business, agriculture and non-mortgage consumer activity is falling.

<snip>

The only sector not dropping its borrowing is housing.


I can't get this persistent ghost of those bad property assets out of my head

From page 20 of the Heartland presentation.

Non core property loans are classified in three buckets:

a/ Performing / Hold: (loans or assets that are performing and will continue to be held)
b/ Accelerated Exit: (loans and assets to be exited within a 12-18 month time)
c/ Extend: (loans that will be converted over time to real estate, improved or positioned better for sale, and exited over a five year period.)

But I have to ask what has HNZ actually done to recover these property loans? Sure they have taken a substantial write down, and reclassified them into different 'buckets'. But doesn't that just mean they will accept a lower price when ultimately these assets are disposed of? It doesn't mean that they have actually sold any.

This could explain why the 'Monitor +' asset total has not really decreased. Some of the worst assets have come back into the monitor (watching brief) category, because of a change in book price. But the problem of ultimately getting them off the books has hardly been addressed, above admitting they will have to go for a lower price than the former 'book value'.

I have been and visited some of these subdivisions around Frankton. Are they unrealistically still being held on the books as 'development opportunities' when really they will probably end up as paddocks being grazed by goats. How many more millions will have to come off the HNZ books should that scenario eventuate?

SNOOPY

[percy]

Snoopy - I agree this company is not right for you.

May not be right for some one who has ghosts in his head,however it is perfect for the lovely clear headed people who have just purchased 105928 shares at 88cents.Will prove to be a lucky number for them.

[winner69]

Snoopy - the guy who did this study is a bit of a guru, even if he does work for the OECD.

Quite interesting study about the things to look for to see if banks are likely to default. He uses a term 'distance to default' and looks at indicators that affect this.

Interesting the Basel Tier 1 ratio found no support as a predictor of default risk but other leverage rationun-weighted leverage ratios did. Also house prices are a predictor of default.

A bit of a heavy read and pretty academic but quite interesting. You can see where our Mr Wheeler might be coming from as well.

Doesn't help analyse HNZ specifically but could point you in the direction of where to really look.

http://www.oecd.org/daf/fin/BanksBusinessModels.pdf

[Snoopy]

Back to note 38.

Next job is to look at the difference in the contracted 'finance receivables' and the expected 'finance receivables' over the next twelve months. That should give a measure of the new (or re-signed up) business that Heartland is expecting over the next twelve months.

Contracted: 0 + $562.696m + $283.289m = $845.985m

Expected: 0 + $520.198m + $421.900m = $942.098m

So Heartland is planning to sign up some $100m of new short term loans over the year. Interesting.


It occurred to me after writing this that Heartland has indirectly told us what the dividend will be in FY2014. So time to work it out.

From Note 38 again:

Contracted forward receivables are as follows at balance date 30-06-2013: $2,205.929m.

Estimated forward receivable maturity profile is: $1,986.615m

So overall the loan book is expected to shrink during the year by around 10% because some receivables will be repaid before the contracted period ends. This in turn means the bank will be able to hold less capital as the loan book shrinks. Thus all of the earnings will be available as dividends. Have I got that right?

HNZ may be the incredible shrinking bank. But maybe most of that shrinkage will find its way to shareholders in the form of dividend cheques?

SNOOPY

[swillisam]

Interesting, director changing his shareholding by 540,838 shares

https://www.nzx.com/companies/HNZ/announcements/240608

[CJ]

Interesting, director changing his shareholding by 540,838 shares

https://www.nzx.com/companies/HNZ/announcements/240608He obviously hasn't been reading Snoopys posts.


It occurred to me after writing this that no one is listening to you? :)

Sorry shouldn't be cruel to animals.

[CJ]

If a director is buying near on $500k of HNZ on market then I would say holders are.... Well positioned!But what about the Basel Teir 1 ratio?

[percy]

If a director is buying near on $500k of HNZ on market then I would say holders are.... Well positioned!

My thoughts exactly.!!! lol.

[Snow Leopard]

It occurred to me after writing this that Heartland has indirectly told us what the dividend will be in FY2014. So time to work it out.

From Note 38 again:

Contracted forward receivables are as follows at balance date 30-06-2013: $2,205.929m.

Estimated forward receivable maturity profile is: $1,986.615m

So overall the loan book is expected to shrink during the year by around 10% because some receivables will be repaid before the contracted period ends. This in turn means the bank will be able to hold less capital as the loan book shrinks. Thus all of the earnings will be available as dividends. Have I got that right?

HNZ may be the incredible shrinking bank. But maybe most of that shrinkage will find its way to shareholders in the form of dividend cheques?

SNOOPY

Oh, Good Grief!

Best Wishes
Charlie Brown

[janner]

It occurred to me after writing this that ?

SNOOPY

With all of this nit picking.. !!

How high up in the IRD are you SNOOPY :-))

[Snoopy]

If a director is buying near on $500k of HNZ on market then I would say holders are.... Well positioned!


Michael Danton Jonas, director has 623,445 options under the Heartland LTI Net Share Settled Options Plan. Consideration paid nil. Also 1,496,268 share options acquired by Jeffrey Kenneth Greenslade CEO, again for no money. Various other senior members of staff also declaring their interest in options acquired for no money.

Ah OK got it now. Gregory Raymond Tomlinson paid $454,302.92 for 540,838 shares. That works out as 84c cents each. An insider gets first dibs at the PGW sell down?

SNOOPY

[percy]

Well , no one was going to offer them to an outsider who has ghosts in his head.!!!!

[Xerof]

Ah OK got it now. Gregory Raymond Tomlinson paid $454,302.92 for 540,838 shares

Remember Snoopdog, he is one of the guys who Cur sweet-talked into underwriting this at 75 or 65 cents in the issue they did at the time of the split from PGC. It promptly collapsed to the high 30's early 40's, but give him credit, he could see a good deal when Cur was forced to exit to cover his other dealings deep inside PGC, at the behest of FMA, at the turning point, around 50c if I recall.

This latest (rather modest) top-up, is an averaging up exercise to take advantage of another (less stressed, but stressed nevertheless) related seller.

fair to say he hasn't damaged his average cost with this purchase, but has provided a good message to the market (director buying)

[Snoopy]

Remember Snoopdog, he is one of the guys who Cur sweet-talked into underwriting this at 75 or 65 cents in the issue they did at the time of the split from PGC. It promptly collapsed to the high 30's early 40's, but give him credit, he could see a good deal when Cur was forced to exit to cover his other dealings deep inside PGC, at the behest of FMA, at the turning point, around 50c if I recall.

This latest (rather modest) top-up, is an averaging up exercise to take advantage of another (less stressed, but stressed nevertheless) related seller.

fair to say he hasn't damaged his average cost with this purchase, but has provided a good message to the market (director buying)

Ah thanks for the investment history of Gregory Raymond Tomlinson as regards Heartland, Xerof. It looks like Gregory has done his homework.

SNOOPY

[percy]

Ah thanks for the investment history of Gregory Raymond Tomlinson as regards Heartland, Xerof. It looks like Gregory has done his homework.

SNOOPY

Learn from him.!

[winner69]

Percy - I see your mate Craig has resigned (or been replaced and not happy)

[percy]

Percy - I see your mate Craig has resigned (or been replaced and not happy)

I will miss him,as I found him easy to talk to.
A very intelligent man.

[K1W1G0LD]

Looks like Snoopys strategy of sabotage by subterfuge is working , sellers queuing up and now Craig Stephens resigned.

[percy]

Looks like Snoopys strategy of sabotage by subterfuge is working , sellers queuing up and now Craig Stephens resigned.

On the sell side. 140,000 @ 86 cents
83,793 @ 87 cents.
On the buy side. 328,966 @ 85 cents.
260,585 @ 84 cents.
Would appear buyers far exceed sellers , so Snoopy fails the test. [yet again.!!]

[janner]

On the sell side. 140,000 @ 86 cents
83,793 @ 87 cents.
On the buy side. 328,966 @ 85 cents.
260,585 @ 84 cents.
Would appear buyers far exceed sellers , so Snoopy fails the test. [yet again.!!]

Correct percy.. 589,551 Slathering ..

[Xerof]

Isn't he an Economist by background and education? On the other hand,he may not be......

[winner69]

Isn't he an Economist by background and education? On the other hand,he may not be......

Who Stephens or Snoopy?

[Xerof]

Stephens

Snoopy is a canine, which is a step above economists.......

hows the Mynosebag coming along?

[Xerof]

Very good!

Queue jokes about one handed economists...

Man walking along a road in the countryside comes across a shepherd and a huge flock of sheep. Tells the shepherd, "I will bet you $100 against one of your sheep that I can tell you the exact number in this flock." The shepherd thinks it over; it's a big flock so he takes the bet. "973," says the man. The shepherd is astonished, because that is exactly right. Says "OK, I'm a man of my word, take an animal." Man picks one up and begins to walk away.


"Wait," cries the shepherd, "Let me have a chance to get even. Double or nothing that I can guess your exact occupation." Man says sure. "You are an economist for a government think tank," says the shepherd. "Amazing!" responds the man, "You are exactly right! But tell me, how did you deduce that?"


"Well," says the shepherd, "put down my dog Snoopy and I will tell you."

[winner69]

Stephens

Snoopy is a canine, which is a step above economists.......

hows the Mynosebag coming along?

The one for the horse or for that other substance?

Nadia's bag doesn't come until Sunday

[winner69]

WOW WOW. *****
5 STARS ...... WOW

Must be hard up sending out an announcement like that .....must be worried about th shareholders .....and thought they needed to give them the warm fuzzies for the weekend

Jeez ...they weren't even the only one to get ***** in that class ..... Two others as well

Never mind .... If it keeps everybody happy its ok

Great endorsement though .....better than snoopy's ** eh

[percy]

Well done Heartland.
Good people doing a great job.
A very proud shareholder loves what you are achieving,!