HGH - Heartland Group Holdings

[Snoopy]

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

I hope you will be declaring all of those five stars that Heartland's current business account has been awarded on your tax return next year Percy.....

SNOOPY

[percy]

I hope you will be declaring all of those five stars that Heartland's current business account has been awarded on your tax return next year Percy.....

SNOOPY

Offcourse.
I have an excellent record of paying my GST and taxes in full, and on time.
Think Te Tari Taake would award me five stars too.
In my business I pay on invoice.

[Snoopy]

Offcourse.
I have an excellent record of paying my GST and taxes in full, and on time.
Think Te Tari Taake would award me five stars too.
In my business I pay on invoice.

I can't claim a record as good as yours Percy. Got an extension for filing my IR3 a couple of years back, because a UK bank where I hold a small account hadn't given me my statement before IRD filing date. Didn't realise the extension to my filing did not include an extension to my first provisional tax payment (all the tax due dates changed that year). I was meant to cobble up some estimate based on my previous years return or something. Anyway all got sorted in the end but was a bit of trap for young (and old) players.

I might have to employ you Percy as my tax consultant this year. Try as a I might, I just couldn't figure out where to declare those stars on my income tax form last year.

SNOOPY

[percy]

[QUOTE=Snoopy;426468].

I might have to employ you Percy as my tax consultant this year. Try as a I might, I just couldn't figure out where to declare those stars on my income tax form last year.

Would be glad to help.!!! lol.

[percy]

Exiting non-core portfolio;
Approx 10% was realised in the first 2 months.HNZ expects to realise over $40mil in the next 10months,reducing the portfolio to $60mil.
So HNZ is doing what they said they would.*****[five stars]

[percy]

I am missing Sparky The Clown already.!!
Heartland see growth coming from the following areas;motor vehicle finance,livestock finance,invoice finance,working capital finance,and rural seasonal finance.

[Snoopy]

Exiting non-core portfolio;
Approx 10% was realised in the first 2 months.HNZ expects to realise over $40mil in the next 10months,reducing the portfolio to $60mil.
So HNZ is doing what they said they would.*****[five stars]

Where are you getting this update from Percy? Can't see anything on the NZX website or Stocknessmonster?

SNOOPY

[pierre]

I discovered today that Heartland are offering a Business Call Account paying 4.25% with interest paid monthly. The account can be operated online and should prove pretty attractive for businesses with short term cash surpluses to gain some interest on their funds.

My current business bank pays 1% for funds on call and to get 4.2% I need to lock the dollars away for two years! Not a practical option.

This would be a great way for Heartland to attract new business customers and give them a database to work on to gradually grow their customer base. I'm opening a Heartland Business Call account as soon as I get all the paperwork sorted. Opening any kind of bank account is a nightmare these days with all the ID hoops you have to jump through.

[percy]

Where are you getting this update from Percy? Can't see anything on the NZX website or Stocknessmonster?

SNOOPY

Craig's research dated 5th September 2013,headed;Heartland,Post-result briefing;looking for growth through bolt-ons.

[percy]

Craig's research dated 5th September 2013,headed;Heartland,Post-result briefing;looking for growth through bolt-ons.

"But wait, there's more" from Craig's research;
"Management expects to deliver 10% ROE this year."
Nice people,doing great things>!
Going for ten stars?!**********

[Bjauck]

I discovered today that Heartland are offering a Business Call Account paying 4.25% with interest paid monthly. The account can be operated online and should prove pretty attractive for businesses with short term cash surpluses to gain some interest on their funds.

My current business bank pays 1% for funds on call and to get 4.2% I need to lock the dollars away for two years! Not a practical option.

This would be a great way for Heartland to attract new business customers and give them a database to work on to gradually grow their customer base. I'm opening a Heartland Business Call account as soon as I get all the paperwork sorted. Opening any kind of bank account is a nightmare these days with all the ID hoops you have to jump through.

The offering to personal clients ain't too shabby either. Heartland offers an on-call cash pie account with interest of 4.1%. This compares to 2.6% I am getting with the ANZ PIE Fund (Call). Ratings agencies have assigned greater risk to Heartland compared with ANZ...however would that justify such a difference in the rates offered?

[winner69]

"But wait, there's more" from Craig's research;
"Management expects to deliver 10% ROE this year."
Nice people,doing great things>!
Going for ten stars?!**********

Craig's a bit slow of the mark ...... I'm sure Snoopy pointed out that on their forecast npat that was going to be close to 10% ROE

But spouse guru analysts can work out from the public info of 37 mill profit and 370 mill equity is about 10%

Hnz **********

Craig's ********************

[winner69]

Wonder if jeff and his management team sit down and have a moa on Friday nights and say 'weren't we dorks making the announcement about 5 stars?

The risk man says hopefully punters won't associate us with a failed finance company that 5 stars in its name

The marketing guru says no a great marketing activity ....free, not like those stupid hoardings that cost us a small fortune at the rugby

But jeff is a good guy and says no it really those people on sharetrader who keeping putting plenty of stars who are the dorks ....we are god people and they don't just get that

[Snoopy]

"But wait, there's more" from Craig's research;
"Management expects to deliver 10% ROE this year."


Here is what I wrote on the Dorchester thread, about Dorchester ROE

-----

Profit forecast for the year ended March 2014 is $6m, with probably 80% of that figure coming from business development and 20% from a reduction in underlying debt. That represents an ROE of:

$6m/ $67.4m = 8.9% or $6m/ ($67.4m-$26.2m) = 14.6% if you take out projected intangible assets at the time of the recapitalization. I am not sure which is the most appropriate figure of the two to use. Any views?

----

The Dorchester CEOs address said they were slightly above budget. So it looks like ROE at Dorchester is tracking along at a similar clip to HNZ, but much better if you only include tangible assets.

Meanwhile over at TUA, my favourite NZ finance company , ROE last year was 23.6%. I expect that to come back a bit this year, but it is still double what Heartland are projecting.

The undeniable fact is that compared to any other finance institution in New Zealand, Heartland compares poorly in terms of ROE. I would give Heartland only 1.5 stars out of 5 on this measure.

SNOOPY

[winner69]

Snoopy

Half stars not allowed

My iPad doesn't do half stars ....only whole stars

So is. * or ** for HNZ

[Xerof]

Snoopy

Half stars not allowed

My iPad doesn't do half stars ....only whole stars

So is. * or ** for HNZ

WOT? I think two and one half is OK

[Snoopy]

The offering to personal clients ain't too shabby either. Heartland offers an on-call cash pie account with interest of 4.1%. This compares to 2.6% I am getting with the ANZ PIE Fund (Call). Ratings agencies have assigned greater risk to Heartland compared with ANZ...however would that justify such a difference in the rates offered?

Heartland needs to raise a lot of new cash in the next 12 months to balance up their loan book. Offering such a high rate is good for customers but bad for shareholders. Heartland must be generous to get the money in the doors, but since that money is effectively already out on loan this must put a squeeze on their FY2014 profits. Heartland have been working hard to derisk their loan portfolio over the last 12 months. So I think it is less likely this year than last that Heartland will get into trouble.

However, there many keen shareholders out there with fat cheque books biting at the bit to put more money into new shares to shore up Heartland bank if required

SNOOPY

[percy]

Craig's a bit slow of the mark ...... I'm sure Snoopy pointed out that on their forecast npat that was going to be close to 10% ROE

But spouse guru analysts can work out from the public info of 37 mill profit and 370 mill equity is about 10%

Hnz **********

Craig's ********************

Well not many have done the numbers.Most have said HNZ still have a low ROE.
Going from 4% to 10% is excellent.Where to from here is the big question? 12% 15% 20% 25%???

[Snoopy]

Well not many have done the numbers.Most have said HNZ still have a low ROE.
Going from 4% to 10% is excellent.Where to from here is the big question? 12% 15% 20% 25%???


There are 388.703m HNZ shares on issue.

The total number of ""Monitor+" loans on the books add to $265.683m. That works out at 68cps. So assuming all of those loans are as bad as Heartland assume, Heartlands equity will be 3/4 wiped out (assuming NTA of 86c now). That means the sky is the limit as far as future ROE is concerned. There is potential here for Heartland to go to the top of the ROE class!

SNOOPY

[percy]

Total number of shares is 388,703,975.You can't even work that out correctly.
No surprises there.!
We have answered your liquidity post earlier.refer zerof's post on treasury function.HNZ have never had problems of liquidity [ie getting through Govt guarantee] and have a very happy band of loyal depositors.Remember HNZ borrow long and lend short ie livestock,seasonal loans ,factoring etc.

[Snow Leopard]

There are 308.703m HNZ shares on issue as far as I can work out.

The total number of ""Monitor+" loans on the books add to $265.683m. That works out at 86cps. So assuming all of those loans are as bad as Heartland assume, Heartlands equity will be totally wiped out (assuming NTA of 86c now). That means the sky is the limit as far as future ROE is concerned. There is potential here for Heartland to go to the top of the ROE class!

SNOOPY

I give up, it has been totally wasted exercise trying to educate you on this sort of stuff.
If I set a test with the one question "What is the value of a NZ $10 bank note" I am not sure you would pass.

So assuming all of those loans are as bad as Heartland assume then they will 'lose' the $15,961,000 that they have "Provisioned for collectively impaired assets" (2013 Full Year Financial Statements 37(d) 1st table), and which is already written out of the assets.

Paper Tiger

[Ginger_steps_]

Hey guys- a little advice for a newbie please? Im not sure if HNZ's buy back notice today applies to me.... I purchased sub 10 000 shares last month. If my shares might be bought by Washington Securities should I have recieved mail contact? Or is anyone with under 10k shares liable to have their shares bought back for 55c? ? That would be gutting! Im guessing ive missed something here but if I havent please let me know if I should take the 86c offer!

[blakecb]

Hey guys- a little advice for a newbie please? Im not sure if HNZ's buy back notice today applies to me.... I purchased sub 10 000 shares last month. If my shares might be bought by Washington Securities should I have recieved mail contact? Or is anyone with under 10k shares liable to have their shares bought back for 55c? ? That would be gutting!

You have to sign over your shares to Washington Securities (send him a form selling your shares to him) and HNZ are telling you not to do that as he (scum) is trying to buy them off you at way below market price. It is a scam to prey on the poor and vulnerable and trick them into selling this guy shares. So you are fine, as long as you don't decide to sell him your shares!

[iceman]

Hey guys- a little advice for a newbie please? Im not sure if HNZ's buy back notice today applies to me.... I purchased sub 10 000 shares last month. If my shares might be bought by Washington Securities should I have recieved mail contact? Or is anyone with under 10k shares liable to have their shares bought back for 55c? ? That would be gutting! Im guessing ive missed something here but if I havent please let me know if I should take the 86c offer!

All you have to do is ignore it all ! Welcome to ST.You've chosen well with buying some HNZ so just happily hold onto them and watch them grow :t_up:

[Ginger_steps_]

You have to sign over your shares to Washington Securities (send him a form selling your shares to him) and HNZ are telling you not to do that as he (scum) is trying to buy them off you at way below market price. It is a scam to prey on the poor and vulnerable and trick them into selling this guy shares. So you are fine, as long as you don't decide to sell him your shares!
Thanks blakecb! I thought it seemed off but they way the notice was worded (coupled with my very limited knowledge) threw me off. Luckily I had your help otherwise I may have been one of the poor suckers. Greatly appreciate it!

[Snoopy]

So assuming all of those loans are as bad as Heartland assume then they will 'lose' the $15,961,000 that they have "Provisioned for collectively impaired assets" (2013 Full Year Financial Statements 37(d) 1st table), and which is already written out of the assets.


All right Paper Tiger, I will say that if you take all the figures in that Heartland FY2013 report at face value then your answer of $15.961m of loans [provided and already written off, category 10 on the judgement scale, is strictly correct. However this is not the point that I was addressing. These judgements change over time. Indeed if you look at the equivalent figure one year earlier you can see that nearly $8m worth of loans were written off during FY2013. You as a shareholder believe that $15.961m is the end of it. I as a non shareholder do not have the same baggage as you do which I think is entrenching your position. What I claim is that there are other clues as to what might happen in that risk table 37d. Risks that you are choosing to ignore.

If you take your table 37d then add up all of the loans in grade 6 and above for FY2013, a summation I have termed 'Monitor +' , being all grade 6 loans and worse, you get:

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

Now do the same exercise on the comparative table set one year earlier

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

The reduction in 'Monitor +' loans after a whole year of working on them is under $1m! That is a plain fact Paper Tiger, that can't be ignored by anyone taking an independent look at table 37d. You need to take stock of what that means.

Despite writing off an additional $8m in bad debts over FY2013, the "monitor +" plus loan position has barely changed. That means over a whole year, rounded down to the nearest million Heartland has made no progress at all at dealing to their problem loan book

Now I admit that grade 8 and 9 loans, those judged the most vulnerable, have reduced over the year. But what does this really mean? It means that someone sitting behind a desk at Heartland has deemed them less risky. This person has a powerful incentive to satisfy his superiors. He is hardly going to keep his job if he reports to his boss that things have not improved. So how do we know if his judgement is right? Ultimately we will find out when this 'non core' land is sold. But since those figures in 37d tell me that at net no land had been sold by balance date, I don't accept that this regrading of monitor + loan status is credible.

Your view is that all bad loans have now been sorted and the net asset backing is 'as quoted'. I am saying that if all of those monitor plus loans go bad then asset backing will reduce by 68c per share, the other extreme position. How about we com[promise and meet in the middle? That would see the real underlying asset backing of HNZ 34cps less than quoted.

SNOOPY

[Snow Leopard]

As I said: I have given up.

Never has the adage "You can not teach an old dog new tricks" been more true.

Best Wishes
Paper Tiger

[percy]

As I said: I have given up.

Never has the adage "You can not teach an old dog new tricks" been more true.

Best Wishes
Paper Tiger

Paper Tiger,
Congratulations for trying so hard.
You did well.!

[K1W1G0LD]

Paper Tiger, your patience and attitude towards others is to be applauded...................................perhap s now normal service will be resumed .............................that is, once the shareprice gets over its present resistance at 86cents.

[SCOTTY]

Paper Tiger,
Congratulations for trying so hard.
You did well.!

Congratulations to both of you Percy and Paper Tiger. What he is smoking? :confused:

[percy]

Whatever it is, thank goodness we do not smoke.!!
You still enjoying a good red?

[SCOTTY]

Whatever it is, thank goodness we do not smoke.!!
You still enjoying a good red?

Yes Percy, the red medicine works for me thanks with driving the only worry :D

[Snoopy]

The half year report last year did not provide the same level of disclosure as the full year report. This has proved to be the case again in HY2013.

Under note 12 and as of 31st December 2012, the percentage of deposits from the Canterbury region has reduced from 42% six months previously down to 36%. Overall I see this as a good thing, even if some market share in Canterbury must continue to be sacrificed to improve the overall term deposit risk profile.

Note 17c re-emphasises that the credit provision as reached with RECL (the real estate credit limit mangement agreement) has been fully utilised. This in turn means any further writedowns will directly hit the HNZ balance sheet.

I get the impression that rebalancing the account risk is still a work in progress.


Significant changes have occurred over the past year. Canterbury loans are down quite a bit from $584m at YE2012 to $532m YE2013 (note 36b YE2013). That should help with the geographic re-balancing of the loan portfolio. It all ties up with the equivalent figures listed in the annual report last year (note 32biii AR2012).

However some of the other figures don't tally so well. Auckland region loans have gone up from $654m (YE2012) to $706m (YE2013) as listed in the 2013 accounts. Yet if you go back to the accounts declared in AR2012, the total Auckland business was only $548m. That is a discrepancy of over $100m. Very strange, yet the Canterbury figures are in agreement between the two reports.

Also noted is a big jump in Heartland loans to the Wellington region. From $120m to $220m (YE2013 note 36b). This gain is leaving aside the mysterious gain from the $102 listed for the Wellington region in the FY2012 report.

I think all of these mismatches may have something to do with the RECL (Real Estate Credit Limited) agreement that was terminated during the year. Suddenly some $200m more loans in total came back on the books. Either that or the management has decided that Heartland really does mean Auckland and Wellington.

The good thing about this is that regional balance is looking better than last year.

SNOOPY

[janner]

Dare I say this.. Sooner or later .. Given the amount of time spent by snoopy on HNZ..

He will be right !.

[percy]

Dare I say this.. Sooner or later .. Given the amount of time spent by snoopy on HNZ..

He will be right !.

Make a nice change.! lol

[Snow Leopard]

Dare I say this.. Sooner or later .. Given the amount of time spent by snoopy on HNZ..

He will be right !.

While Snoopy is fixated on the

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

in the mistaken belief that this represents HNZ's 'bad loans' he has no chance whatsoever.
Perhaps you could send him to my post on the subject (http://www.sharetrader.co.nz/showthread.php?8425-Heartland-New-Zealand-Ltd-(HNZ)&p=424056&viewfull=1#post424056) and tell him to come back when he understands it.

Best Wishes
Paper Tiger

[janner]

" The good thing about this is that regional balance is looking better than last year.

SNOOPY !..

GOOD Gawd !!.. A positive !!.. Pile in folks !!..

[macduffy]

I don't hold HNZ but follow the thread, largely because of my interests in a couple of the big, bad Aussie banks!

I just think that it would be a pity if the concerted rebuttals of the contrary view on HNZ were to stifle discussion in any way. We need to hear all sides of debates.

:cool:

[percy]

I don't hold HNZ but follow the thread, largely because of my interests in a couple of the big, bad Aussie banks!

I just think that it would be a pity if the concerted rebuttals of the contrary view on HNZ were to stifle discussion in any way. We need to hear all sides of debates.

:cool:

The facts are as the record shows.
SNOOPY 100% wrong.
Those taking the contrary view 100% right.
Simple, read the whole thread .>!!!

[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.


All very well PT except for one thing.

You claim that the provision for impaired assets has gone up by a net $23.1m because of the increase in category 8 and 9 Judgement loans from FY2012 to FY2013.

The grade 8 and 9 loans in the judgement portfolio from FY2013 are $21.518m and $27.761m respectively. That adds to $49.279m.
The grade 8 and 9 loans from the judgement portfolio for FY2012 were $14.096m and $13.471m respectively. That adds up to $27.567m

That means the increase of grade 8 and grade 9 loans year on year is $21.712m.

Over the same period the provision on all of those judgement loans has risen from $8.032m to $15.561m. A rise of $7.521m. That means the rise in judgement grade provisions is only around one third of the rise in grade 8 and 9 loans. Of course these grade 8 and grade 9 loans are not guaranteed to go bad. But these provisions are calls based on historical experience. Does HNZ have records that go back to the 1930s to make these 'historical loss experience' judgements from?

SNOOPY

[Snow Leopard]

All very well PT except for one thing.

You claim that the provision for impaired assets has gone up by a net $23.1m because of the increase in category 8 and 9 Judgement loans from FY2012 to FY2013....

Oh no I didn't.

Go read it again.

Best Wishes
Paper Tiger

Hint: 'two broad portfolios'

[Snoopy]

Exiting non-core portfolio;
Approx 10% was realised in the first 2 months.HNZ expects to realise over $40mil in the next 10months,reducing the portfolio to $60mil.
So HNZ is doing what they said they would.*****[five stars]


If you look at page 21 of the shareholder presentation, Heartland were planning to reduce their $107m non-core profit portfolio by 7% by the time July 2014 rolls around. So if come the end of August 10% has already been removed from the books this is good progress. However, there really isn't enough information in this announcement to know if Heartland's non-core property sales are going to plan or not.

1/ Did they on sell the properties at book value or at a discount, or a premium?

2/ Were the properties sold Category 6, 7, 8 or 9? Why is that important? Because there would be pressure from management to get the non core property sell down done, and show progress. Human nature would suggest that to fulfill this the low hanging fruit would. be on sold first. So just because they are ahead of their sell down target now, does not mean they will continue to track in front of their targets.

But let's say the value of outstanding properties on the books is now $90m.

$90m/388m = 23cps

That is still quite a large potential write down still hanging over the shares which at 30th June had an NTA 0f 85c

SNOOPY

[Snoopy]

Canterbury loans are down quite a bit from $584m at YE2012 to $532m YE2013 (note 36b YE2013). That should help with the geographic re-balancing of the loan portfolio. It all ties up with the equivalent figures listed in the annual report last year (note 32biii AR2012).

However some of the other figures don't tally so well. Auckland region loans have gone up from $654m (YE2012) to $706m (YE2013) as listed in the 2013 accounts. Yet if you go back to the accounts declared in AR2012, the total Auckland business was only $548m. That is a discrepancy of over $100m. Very strange, yet the Canterbury figures are in agreement between the two reports.

Also noted is a big jump in Heartland loans to the Wellington region. From $120m to $220m (YE2013 note 36b). This gain is leaving aside the mysterious gain from the $102 listed for the Wellington region in the FY2012 report.

I think all of these mismatches may have something to do with the RECL (Real Estate Credit Limited) agreement that was terminated during the year. Suddenly some $200m more loans in total came back on the books.


FY2012 Report Total Loans by Geographic Region (Note 32iii)

Auckland: $548.451m
Wellington: $101.791m
Rest of NI: $480.287m
Canterbury: $583.848m
Rest of SI: $363.899m

FY2013 Result Filing, FY2012 Comparative figures (Note 36b)

Auckland: $653.517m
Wellington: $120.469m
Rest of NI: $482.342m
Canterbury: $584.086m
Rest of SI: $365.112m

Difference

Auckland: $105.066m
Wellington: $18.678m
Rest of NI: $2.055m
Canterbury: $0.238m
Rest of SI: $1.213m

The difference I would suggest are the loans bought back after the Real Estate Credit Limited (RECL) debt buyback deal. (from Note 36e: For the year ended 30th June 2013, the benefit of the RECL agreement was included in and the analysis of risk gradings and the classification of individually impaired assets")

SNOOPY

[Snoopy]

Difference

Auckland: $105.066m
Wellington: $18.678m
Rest of NI: $2.055m
Canterbury: $0.238m
Rest of SI: $1.213m

The difference I would suggest are the loans bought back after the Real Estate Credit Limited (RECL) debt buyback deal. (from Note 36e: For the year ended 30th June 2012, the benefit of the RECL agreement was included in and the analysis of risk gradings and the classification of individually impaired assets")


Now the second half of the year on year 'reporting' comparison. The 'individually impaired assets'.

From table 32aii on the FY2012 annual report: The credit impairment provision for individually impaired assets

----

Opening $68.537m

Additions $40.376m
Deletions ($53.939)m
Assumed on acquisition $1.871m

Closing gross individually impaired assets $56.825m.

-----

Now we have ostensibly the same information as reprised in the FY2013 report for FY2012 (table 37c)

----

Opening $68.537m

Additions $40.376m
Deletions ($39.323)m
Assumed on acquisition $1.871m
Write Offs ($14.636)m

Closing gross individually impaired assets $56.825m.

-----

As you can see the tables are the same with the exception that with the benefit of one years hindsight $14.636m of what were deleted assets have actually been written off.

SNOOPY

[Snow Leopard]

...As you can see the tables are the same with the exception that with the benefit of one years hindsight $14.836m of what were deleted assets have actually been written off...

4826

Fig 1. From the Heartland New Zealand 2012 Full Year Report

Best Wishes
Paper Tiger

[Snow Leopard]

As this thread seems to be highlighting finding information in company accounts, even those who are not trying to hide something, is a difficult task.
It requires that you read the entire accounts and hunt around for what you are looking for.
That the accountants change the format from year to year does not help.

This is primarily because because accounting is easy, anybody who can do basic maths in their head can do it. (You need to be able to this stuff mentally so that when your calculator tells you that 2 X 3 = 5, you assume that you pressed a wrong button instead of believing it).

So in order to justify working for actual money they feel the need to obfuscate the whole business.
But we can beat them and understand if we put the effort in.

Best Wishes
Paper Tiger

Disc: I know several accountants and they are all nice people who hopefully will never read this post.

[K1W1G0LD]

There is no accounting for the stupidty of some people, that is accounted for by the fact that all of us are different , but by all accounts you would think we would learn from our mistakes. There I hope that clears that all up , it certainly helped me.

[Snoopy]

Difference

Auckland: $105.066m
Wellington: $18.678m
Rest of NI: $2.055m
Canterbury: $0.238m
Rest of SI: $1.213m

The difference I would suggest are the loans bought back after the Real Estate Credit Limited (RECL) debt buyback deal. (from Note 36e: For the year ended 30th June 2012, the benefit of the RECL agreement was included in and the analysis of risk gradings and the classification of individually impaired assets")


The hunt to pin down those more doubtful loans on the books continues. In the FY2013 accounts the retrospective comparative figure for concentration of credit risk by industry sector adds to $2.197billion (note 36c).

Now if we go back to the FY2012 report this same figure is listed in 32bii, but here it only adds to $2.078b. Is the difference due to those retrospectively reabsorbed RECL loans?

From the YE2013 results the industry breakdown of receivables is as follows: (note 36c again)

------

Agriculture $530.440m
Forestry & Fishing $35.698m
Mining $14.325m
Manufacturing $56.304m
Finance & Insurance $134.630m
Wholesale Trade $38.669m
Retail Trade $144.608m
Households $678.508m
Property & Business Services $297.944m
Transport & Storage $57.709m
Other Services $189.208m

(Total $2,078.276m)

------

Now what will happen when we try to extract ostensibly the same figures from the FY2012 report? The full year report for FY2012 as listed under note 32c has different (more) categories. Nevertheless I will try to align those numbers with the FY2013 headings as listed above

------

Agriculture $382.578m
Forestry & Fishing $1.615m + $0.551m = $2.166m
Mining $16.022m
Manufacturing $71.432m +$4.479m = $75.911m
Finance & Insurance $27.013m +$3.157m= $30.170m
Wholesale Trade $42.257m
Retail Trade $117.100m
Households $838.492m
Property & Business Services $195.143m +$154.435m+ $10.016m= $359.594m
Transport & Storage $88.210m
Other Services $44.368m + $28.627m +$23.661m +$12.847m + $16.273m= $125.776m

(Total $2,078.276m)

-----

I am sure I have put some of those reclassified loans into the wrong box, although when classifying loans 'wrong' may be a a matter of opinion. As PT says, it is very frustrating when reporting standards are changed for seemingly no reason from year to year. I however, am always suspicious when I see this, as I wonder what he company hoped to hide by doing so!

SNOOPY

[janner]

So in order to justify working for actual money they feel the need to obfuscate the whole business.
But we can beat them and understand if we put the effort in.

Best Wishes
Paper Tiger

Disc: I know several accountants and they are all nice people who hopefully will never read this post.

So. So. True PT..

Hence my long time drive for an Expenditure Tax.. Not Income Tax..

Income Tax has been added to and subtracted from for years and years..

At last I am able to say... Thinking in the controlling places is changing.. Yes !!.. headway is being made..

Everybody spends.. Even a beggar !!..

[Snow Leopard]

The hunt to pin down those more doubtful loans on the books continues.
Snoopy and the Temple of the Doom?

You have $50M5 of impairments of which $41M5 is Corporate Property [FY2013 37(e)] you quest is complete.


In the FY2013 accounts the retrospective comparative figure for concentration of credit risk by industry sector adds to $2.197billion (note 36c).

Now if we go back to the FY2012 report this same figure is listed in 32bii, but here it only adds to $2.078b. Is the difference due to those retrospectively reabsorbed RECL loans?

The difference of approx $120m does fit well with the size of the RECL stuff at EOY, but this is a pure co-incidence!

36(a) from this years accounts gives the game away:

4827

Fig 2 From the Heartland New Zealand 2013 Full Year Financial Statements.

So whereas in the 2012 Accounts, credit risk exposure covers only Finance receivables this has been extended to all financial assets including cash in banks, bonds etc.
The only question is why were these not included last year, after all they do have some risk attached to them?


the YE2013 results th industry breakdown of receivables is as follows: (note 36c again)...
...OK, I hope I haven't double counted any of those. I am sure I have put some of them in the wrong box. As PT says it is very frustrating when reporting standards are changed for seemingly no reason from year to year. I however, am always suspicious when I see this, as I wonder what he company hoped to hide by doing so!

SNOOPY

You are not going to get anywhere with this approach, honestly.


Let me also say here that HNZ is the largest single investment I ever had in a publicly listed company and as such I have been through these accounts very carefully, if there is something dodgy I want to know about it, quick.

I am happy with the risk/reward ratio they provide, and I am hoping for good long term capital appreciation and dividends.
However this is not a recommendation to invest, or not, without doing your own research.

Best Wishes
Paper Tiger

[baller18]

Let me also say here that HNZ is the largest single investment I ever had in a publicly listed company and as such I have been through these accounts very carefully, if there is something dodgy I want to know about it, quick.


Is HNZ your largest holding tiger?

[Snoopy]

CJ.
Heartland have an agreement with Kiwi bank,where Heartland pass on home mortgages to them.[ I expect they collect a finders fee]
They see ample growth in the areas they want to be in.Home loans is not one of them.
That is not to say they willn't do home loans.
Your statement about them staying niche is right.


I have just reread Heartland profit announcement Percy, and remembered your 12th May post 1724 (quoted above).

"There was a $76.1m increase in the “core” business net finance receivables (Rural, Business and Consumer channels). However, due to a reduction in non-core assets of legacy Property and Retail Mortgages, net finance receivables reduced in total by $67.9m (from $2.1bn at 30 June 2012 to $2.0bn at 30 June 2013)." (my bold emphasis)

I knew that HNZ were quitting legacy property assets, but it had escaped me that they were quitting retail mortgages as well. But I guess your post suggesting retail mortgages were being passed on to Kiwibank with a finders fee is consistent with this. My previous impression was that Heartland were trying to get better balance in their loan book by going after seasonal financing, loaning more to business etc. I hadn't appreciated there was an active plan to exit retail mortgages. Is this still your understanding of Heartland's current outlook?

SNOOPY

[winner69]

Retail mortgages not a HERO product ..not niche enough

[Snoopy]

Let me also say here that HNZ is the largest single investment I ever had in a publicly listed company and as such I have been through these accounts very carefully, if there is something dodgy I want to know about it, quick.

I am happy with the risk/reward ratio they provide, and I am hoping for good long term capital appreciation and dividends.
However this is not a recommendation to invest, or not, without doing your own research.


My interest in Heartland is quite different. I have been a PGW shareholder, and as a consequence PGW finance shareholder, from as long ago as when they sold their 'first' finance division to Rabobank. Realising their mistake PGW created a new finance division which they then gave away to Heartland. As part of that gifting PGW took up a modest holding in Heartland shares. This then went south in value until the rebound over the last year that saw PGW sell out of Heartland at a modest profit.

This means that as of last week, or thereabouts, this is the first time I haven't had a direct or indirect interest in rural sector financing for a long time. My question then is should I perhaps sell some of my holding in existing 'finance' company, Turner's Auctions, and put that money into Heartland? One argument for that is that Heartland are trading near net asset backing and some see that as a good springboard from which Heartland can trade on higher price to NTA ratios as enjoyed by other finance companies and banks (the glass half full argument). The glass half empty argument is that Heartland are already performing at the level of other financial companies, and the relatively high NTA value that the company trades at is because some of those assets are overvalued on the books. Hence my fascination with digging into the quality of Heartland assets that are on the books.

For those who came in late, I hope this gives some context to my postings on Heartland.

SNOOPY

[Snoopy]

Snoopy and the Temple of the Doom?

You have $50M5 of impairments of which $41M5 is Corporate Property [FY2013 37(e)] you quest is complete.


That $41.512m of corporate property provision for impairment that is the large part of the sum of the grand total of $50.491m of the overall provision for impairment is management's assessment at balance sheet time of then current risks based on the then current state of the market.

$15.961m of that total figure can be read, from note 37d, as the provision for collectively impaired assets from the 'Judgement Portfolio' and $34.771m can be read, from note 37c as the impairment from the individually impaired asset portfolio. Those two figures add to $50.732m which is close enough to the previously declared total in 37e for me ($50.491m, note 37e).

For the 'Judgement Assets' the provisions are based on the assigned grade of the loan and done to a formula (except for grade 9 that for those loans are individually assessed). For individually assessed loans the classification process looks to be more 'yay' or 'nay'. My point in all this is that these impairments are variables. They may be captured at balance sheet time but an investor should not regard these figures as 'cast in stone'.

SNOOPY

[percy]

I have just reread Heartland profit announcement Percy, and remembered your 12th May post 1724 (quoted above).

"There was a $76.1m increase in the “core” business net finance receivables (Rural, Business and Consumer channels). However, due to a reduction in non-core assets of legacy Property and Retail Mortgages, net finance receivables reduced in total by $67.9m (from $2.1bn at 30 June 2012 to $2.0bn at 30 June 2013)." (my bold emphasis)

I knew that HNZ were quitting legacy property assets, but it had escaped me that they were quitting retail mortgages as well. But I guess your post suggesting retail mortgages were being passed on to Kiwibank with a finders fee is consistent with this. My previous impression was that Heartland were trying to get better balance in their loan book by going after seasonal financing, loaning more to business etc. I hadn't appreciated there was an active plan to exit retail mortgages. Is this still your understanding of Heartland's current outlook?

SNOOPY

Heartland see their future in areas the big banks are not concentrating on,so retail mortgages they are staying out of.[ie deal with Kiwi Bank].In an earlier post I stated the areas HNZ were concentrating.Livestock,seasonal.factoring are very short term lending.etc.
I have often said one should look at HNZ as a finance company with a banking licence.I think this is the correct way to view HNZ.
I too have TUA shares.Very pleaded with them too.My wife and I have 9 times as much invested in HNZ as we have in TUA.
So you can see where our money is.
We all laughed at HNZ achieving 4% ROE.Greenslade said at last agm they were aiming at 10% plus.I thought they would go from 4% 2013 to say 6.5% 2014 and 10% 2015,so I am very excited that they will achieve it [10%] a year early ie 2014 year ending 30/6/2014.
Heartland have a record of achieving what they set out to do.
To better understand HNZ one must attend the agm,to be held at Addington Raceway at 3pm on Friday 1st November.2013.
I received a lot of PMs thanking me for my posts after last years agm.The presntations are full and are excellent.Even more so when you can be certain they will do what they say they will.Last year I offered to take you to ths year's as I thought it would be in Ashburton again.With it being in ChCh I think you should attend.The business is being improved all the time,and you will get to understand how they are achieving such splendid results.

[percy]

SNOOPY;
Loan book balances ,funding.
First of all HNZ have no funding issues.None.Xerof explained this.
Do not look for issue here as there are none.
Changing balances in lending.This is and will continue to change as HNZ concentrate on more profitable niches.
What we will see is better ROE and EPS figures.
Property loans.Again HNZ have faced up to them.Making huge progress.Arguing over this is a waste of time. Whether they realise the $60mil at 30/6/2114 or $70mil or $50mil will alter the momentum not one bit.I am more interested if/when/ they are opening a Timaru office.I have not entered your discussions with Paper Tiger as you are wasting his and your own time.
What I will be looking to hear at the agm is what the target ROE will be for the year ended 30/6/2015. 12.5% 15 % ?????And what they feel the ROE will be in future years.

[Snoopy]

Heartland see their future in areas the big banks are not concentrating on,so retail mortgages they are staying out of.[ie deal with Kiwi Bank].In an earlier post I stated the areas HNZ were concentrating.Livestock,seasonal.factoring are very short term lending.etc.
I have often said one should look at HNZ as a finance company with a banking licence. I think this is the correct way to view HNZ.


I do find it ironic that now that Heartland have earned themselves the right to be called a bank, and aggregated other financial entities into a more balanced whole, the underlying entity is looking less and less like a bank and more like a finance company, as I believe you have correctly observed Percy!

SNOOPY

[percy]

I do find it ironic that now that Heartland have earned themselves the right to be called a bank, and aggregated other financial entities into a more balanced whole, the underlying entity is looking less and less like a bank and more like a finance company, as I believe you have correctly observed Percy!

SNOOPY

100% RIGHT there SNOOPY.

[Snoopy]

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).


Just starting to digest the very comprehensive Heartland Bank Disclosure Statement that Heartland released with their annual results. Perhaps more important than this are the underlying Reserve bank of New Zealand references on banking both drafted in the first half of FY2013

First there is the 'Connected Exposures Policy'

http://www.rbnz.govt.nz/regulation_and_supervision/banks/banking_supervision_handbook/3272069.pdf

and the 'Capital Adequacy Framework'

http://www.rbnz.govt.nz/regulation_and_supervision/banks/banking_supervision_handbook/3272068.pdf

SNOOPY

[winner69]

I do find it ironic that now that Heartland have earned themselves the right to be called a bank, and aggregated other financial entities into a more balanced whole, the underlying entity is looking less and less like a bank and more like a finance company, as I believe you have correctly observed Percy!

SNOOPY

They were quite open (if saying it aloud and being quoted in the press etc is open) that they only wanted to become a BANK for marketing purposes. In other words give them credibility because banks are less risky than finance companies in the minds of their depositors (and maybe borrowers).

Any other advantages were secondary to the main cause.

Question, what is the difference between a bank and a finance house anyway

[Snoopy]

SNOOPY;
Loan book balances ,funding.
First of all HNZ have no funding issues.None.Xerof explained this.
Do not look for issue here as there are none.


Percy, there is a mismatch in the maturity of term deposits and the underlying loans. PT has batted this away by saying all banks operate in this way. But I put it to you and PT that to say there is no effect from this mismatch is not true.

If you look at section 4.48 of my reference,

http://www.rbnz.govt.nz/regulation_and_supervision/banks/banking_supervision_handbook/3272068.pdf

there is even a formula to calculate the amount of extra capital Heartland must hold because of this.

More information is in the ensuing 4.115 and 4.116 sections

SNOOPY

[percy]

Percy, there is a mismatch in the maturity of term deposits and the underlying loans. PT has batted this away by saying all banks operate in this way. But I put it to you and PT that to say there is no effect from this mismatch is not true.

If you look at section 4.48 of my reference,

http://www.rbnz.govt.nz/regulation_and_supervision/banks/banking_supervision_handbook/3272068.pdf

there is even a formula to calculate the amount of extra capital Heartland must hold because of this.

More information is in the ensuing 4.115 and 4.116 sections

SNOOPY

You can waste Paper Tiger's time,but you are not going to waste mine.Forget it.!

[winner69]

I see Fisher Funds don't seem to have any HNZ shares

[percy]

I see Fisher Funds don't seem to have any HNZ shares

I think we all would agree that is a positive.!!! lol.
Do you have any money with Fisher Funds??!! lol.

[Snow Leopard]

Percy, there is a mismatch in the maturity of term deposits and the underlying loans. PT has batted this away by saying all banks operate in this way. But I put it to you and PT that to say there is no effect from this mismatch is not true.

If you look at section 4.48 of my reference,

http://www.rbnz.govt.nz/regulation_and_supervision/banks/banking_supervision_handbook/3272068.pdf

there is even a formula to calculate the amount of extra capital Heartland must hold because of this.

More information is in the ensuing 4.115 and 4.116 sections

SNOOPY


You can waste Paper Tiger's time,but you are not going to waste mine.Forget it.!

Although I could get slightly annoyed that I keep getting misquoted and that useful information appears to be often ignored. I am basically amused by this whole thing.

http://assets.amuniversal.com/d2d69c8047f1013010fe001dd8b71c47

However like Calvin above I find myself with a dilemma: Do I tell Snoopy that the document he references does not apply to Heartland or do I not bother?

On one of the bits of this planet that I lived on they have an expression:
"He can not see the woods for the trees".

Best Wishes
Paper Tiger

[Minerbarejet]

Good link PT - should I say that or not?

[percy]

Although I could get slightly annoyed that I keep getting misquoted and that useful information appears to be often ignored. I am basically amused by this whole thing.

http://assets.amuniversal.com/d2d69c8047f1013010fe001dd8b71c47

However like Calvin above I find myself with a dilemma: Do I tell Snoopy that the document he references does not apply to Heartland or do I not bother?

On one of the bits of this planet that I lived on they have an expression:
"He can not see the woods for the trees".

Best Wishes
Paper Tiger

Don't bother.!!!
Enjoyed calvin thank you.

[percy]

WARNING; Should you be buying HNZ shares today I think you will miss the 2.5cents dividend.
Check before you buy.Selling check that you receive the dividend.

[CJ]

WARNING; Should you be buying HNZ shares today I think you will miss the 2.5cents dividend.
Check before you buy.Selling check that you receive the dividend.Yip - it has gone ex dividend today. Given the comments/strategies on the dividend thread, it will be interesting to see what the shareprice does.

Edit: on a related note, the strike price for the Drip is set on the average price 5 days after the record date (which will be next weeks trading?):


P is the volume weighted average sale price in New Zealand
dollars (expressed in cents and fractions of cents) for a
Share calculated on all trades of Shares which took place
through the NZX Main Board over the period of 5 trading
days immediately following the Record Date.

Can anyone confirm there is no discount on the strike price.

[percy]

Sorry I can not confirm it,but I am sure there is no discount.

[iceman]

There is a 2.5% discount applicable to the DRP, see below from announcement:

"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. "

[percy]

There is a 2.5% discount applicable to the DRP, see below from announcement:

"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. "

Thanks for that Iceman.
Good value.

[CJ]

There is a 2.5% discount applicable to the DRP, Perfect - Now hopefully ASB appiled for the Drip on my behalf as requested (using a nominee account).

[iceman]

Perfect - Now hopefully ASB appiled for the Drip on my behalf as requested (using a nominee account).

Its really easy to do it on Link Market Services website CJ. I did it there in a couple of minutes after creating a login account with them online.

http://www.linkmarketservices.co.nz/InvestorServices/Online-Services.html

[CJ]

Its really easy to do it on Link Market Services website CJ. I did it there in a couple of minutes after creating a login account with them online.

http://www.linkmarketservices.co.nz/InvestorServices/Online-Services.htmlThanks - but because of the nominee account, ownership is in their name so they have to do - otherwise, I would have done myself. eg. any forms that need signing, I complete, then send to them for signing or for IPO etc, I just email them and they complete the form on my behalf since they sign.

Note: Nominee account is a requirement for margin lending.

[iceman]

Didn't read your first post carefully enough and missed you saying you had a nominee account. Thanks for the explanation.

[iceman]

Percy I see Tainui has appointed Craig Stephen as Chief Investment Officer. I wish him well in his new job.

[percy]

Percy I see Tainui has appointed Craig Stephen as Chief Investment Officer. I wish him well in his new job.

I think Tainui have done well.
Sorry he left HNZ.
Thanks iceman.Can you make the agm?

[iceman]

I think Tainui have done well.
Sorry he left HNZ.
Thanks iceman.Can you make the agm?

Unfortunately I will be overseas

[percy]

I will take my pad and pen to the agm,and try to give you a good account of what is said.
Hopefully there will be plenty of us sharetraders there.

[Under Surveillance]

I think Tainui have done well.
Sorry he left HNZ.
What do you reckon, percy? Did he get the flick from Heartland then pick up the Tainui job, or pick up the Tainui job then hand in his cards at Heartland?

[CJ]

What do you reckon, percy? Did he get the flick from Heartland then pick up the Tainui job, or pick up the Tainui job then hand in his cards at Heartland?You dont pick up a job that quickly. He had it lined up before quitting would be my guess.

[iceman]

Hey guys- a little advice for a newbie please? Im not sure if HNZ's buy back notice today applies to me.... I purchased sub 10 000 shares last month. If my shares might be bought by Washington Securities should I have recieved mail contact? Or is anyone with under 10k shares liable to have their shares bought back for 55c? ? That would be gutting! Im guessing ive missed something here but if I havent please let me know if I should take the 86c offer!

Washington Securities now targeting more than just those holding under 10,000 shares. I received an offer for 73k shares held in one of our accounts today, for the lovely price of $ 0.55 per share. Just a shame they didn't send me a freepost envelope so I could send it back to them empty !

[percy]

You dont pick up a job that quickly. He had it lined up before quitting would be my guess.

Yes I agree with you.

[percy]

Wonder how long it is before we see a" becoming a substantial holder" from Tainui?

[winner69]

Hope mr Stephens hadn't been reading snoopy's posts and realised that it was better to either 1) leave the sinking ship or 2) cursing that somebody had found what they were hiding

He a good bloke anyway - good luck to him

Obviously made the right friends with all the tainui/ PGW / heartland connections

[Under Surveillance]

Obviously made the right friends with all the tainui/ PGW / heartland connections
I think it is Ngai Tahu not Tainui in that dance.

[winner69]

I think it is Ngai Tahu not Tainui in that dance.

Yes - you are right

[percy]

Hope mr Stephens hadn't been reading snoopy's posts and realised that it was better to either 1) leave the sinking ship or 2) cursing that somebody had found what they were hiding

He a good bloke anyway - good luck to him

Obviously made the right friends with all the tainui/ PGW / heartland connections

The only part of your post that you got right was;
He a good bloke anyway- good luck to him.

[iceman]

Wonder how long it is before we see a" becoming a substantial holder" from Tainui?

Washington Securities might beat them to it :t_down:

[percy]

Washington Securities might beat them to it :t_down:

Yeah right.!
I note on the last shareholder's list, that I have seen,loo baller Bernard Whimp has sold his 2,000,000 HNZ.
Unfortunately he would have made a huge profit.

[Snoopy]

36(a) from this years accounts gives the game away:

4827

Fig 2 From the Heartland New Zealand 2013 Full Year Financial Statements.

So whereas in the 2012 Accounts, credit risk exposure covers only Finance receivables this has been extended to all financial assets including cash in banks, bonds etc.
The only question is why were these not included last year, after all they do have some risk attached to them?


Interesting that Heartland are now classifying credit risk of financial assets (including cash in banks and bonds etc.) on a geographical basis too.

If we look at the FY2013 results the comparative geographic credit risk for FY2012 (note 36b) is listed as follows:

-----

Auckland: $653.517m
Wellington: $120.469m
Rest of North Island: $482.342m
Canterbury: $584.086m
Rest of South Island: $365.112m

(Total = $2,205.116m)

-----

Now go back to the FY2012 Full Year report where ostensibly the same information is displayed in Note 32aiii

------

Auckland: $548.451m
Wellington: $101.791m
Rest of North Island: $480.287m
Canterbury: $583.848m
Rest of South Island: $363.899m

(Total = $2,078.276m)

------

That comparison highlights the following differences:

Auckland: $105.066m
Wellington: $18.678m
Rest of North Island: $2.055m
Canterbury: $0.238m
Rest of South Island: $1.213m

------

As PT has highlighted in the quoted post, the difference is because the definition of "Finance receivables" from FY2013 has been extended to all financial assets including cash in banks, bonds etc.

What this actually means is that for FY2013, HNZ have distorted the actual geographic spread of their risk by including financial assets in bank accounts that could reside in any geographic centre they choose. That I think is a backward step for informing shareholders where the real geographic risks lie.

SNOOPY

[Snoopy]

SNOOPY;
Loan book balances ,funding.
First of all HNZ have no funding issues. None. Xerof explained this.
Do not look for issue here as there are none.
Changing balances in lending.This is and will continue to change as HNZ concentrate on more profitable niches.
What we will see is better ROE and EPS figures.
Property loans.Again HNZ have faced up to them.Making huge progress.Arguing over this is a waste of time. Whether they realise the $60mil at 30/6/2114 or $70mil or $50mil will alter the momentum not one bit.


The problem with you and HNZ Percy, is that you now have so much skin in the game of HNZ, that you can no longer discern that anything going on at HNZ is less than 100% perfect. You are correct that the timing and amount of repayment of bad loans will not affect the ongoing new business momentum of HNZ. But that is not the main issue of concern to me anyway. Personally I do not take the projections of HNZ management as given, until they can build a track record through a business cycle, as the likes of TUA have done with their finance division. To me the main issue with HNZ has always been capital liquidity.

If the company falls into a liquidity trap over the next six months, then earnings do not matter. HNZ will be forced to stop trading until it is recapitalised, no matter what the underlying earnings trend.

Back in 2008 there were many finance companies with positive underlying earnings trends. Those finance companies were lending into the exact same markets as Heartland does now. But many shareholders and depositors lost all their capital invested in those companies just the same. The lesson from the GFC for finance companies was that liquidity was king. It still is.

SNOOPY

[Snow Leopard]

PERCY!!!!

That d*** yapping dog is in the yard again!

[percy]

The problem with you and HNZ Percy, is that you now have so much skin in the game of HNZ, that you can no longer discern that anything going on at HNZ is less than 100% perfect. You are correct that the timing and amount of repayment of bad loans will not affect the ongoing new business momentum of HNZ. But that is not the main issue of concern to me anyway. Personally I do not take the projections of HNZ management as given, until they can build a track record through a business cycle, as the likes of TUA have done with their finance division. To me the main issue with HNZ has always been capital liquidity.

If the company falls into a liquidity trap over the next six months, then earnings do not matter. HNZ will be forced to stop trading until it is recapitalised, no matter what the underlying earnings trend.

Back in 2008 there were many finance companies with positive underlying earnings trends. Those finance companies were lending into the exact same markets as Heartland does now. But many shareholders and depositors lost all their capital invested in those companies just the same. The lesson from the GFC for finance companies was that liquidity was king. It still is.

SNOOPY

Yes I agree with you Heartland's track record is 100% perfect.
Yes I have overweighted our portfolios because I see them being undervalued.
Yes I see them achieving over 15% growth rate per annum for the next few years.
Yes I see them increasing their dividends.
Yes I see them expanding their motor vehicle loan book.
Yes I am pleased with the make up of their loan book and think the areas they are expanding into will be worth while.
Yes I am pleased with their sources and spread of funding.There are no liquidity issues.
Yes I am pleased with the extra security and safety supplied to shareholders that HNZ having a banking licence means HNZ has to answer to the Reserve Bank banking requirements.
Yes I expect our HNZ investment to out perform our TUA investment.
No I do not take your concerns seriously.Unfortunately your record on this thread is hopeless.,Time and again you have woken up to this yourself,or else other posters have had to correct you.

[percy]

PERCY!!!!

That d*** yapping dog is in the yard again!

Thinking of putting the hose on him.!!!
Yet we must remember his posts allways have a positive affect on the HNZ share price.!!! lol.

[RTM]

Well....I have a few Heartland as well. I can swing from either very happy on reading Percy's posts...to being quite concerned after reading Snoopy's ones . Must admit, pleased overall to have both perspectives argued. There are risks in everything, I wonder who is more correct, Percy or Snoopy ? Time will tell I guess. I'm not inclined to sell what I have, neither am I inclined to add. I do feel there must be a place in the NZ market for a glorified finance company doing the kind of lending that Heartland does. Right ?
Cheers for the mood swings Snoopy and Percy, might watch a replay of last race to cheers me up. Go TNZ

[percy]

Well....I have a few Heartland as well. I can swing from either very happy on reading Percy's posts...to being quite concerned after reading Snoopy's ones . Must admit, pleased overall to have both perspectives argued. There are risks in everything, I wonder who is more correct, Percy or Snoopy ? Time will tell I guess. I'm not inclined to sell what I have, neither am I inclined to add. I do feel there must be a place in the NZ market for a glorified finance company doing the kind of lending that Heartland does. Right ?
Cheers for the mood swings Snoopy and Percy, might watch a replay of last race to cheers me up. Go TNZ

Being a shareholder in Heartland I think you would be best to rely on your own judgement,dyor.Should cure any mood swings.
Why you should be concerned after reading Snoopy's posts beats me.His record is 100% wrong.
Too much wind on the water too.!!!

[Snoopy]

Well....I have a few Heartland as well. I can swing from either very happy on reading Percy's posts...to being quite concerned after reading Snoopy's ones . Must admit, pleased overall to have both perspectives argued. There are risks in everything, I wonder who is more correct, Percy or Snoopy ? Time will tell I guess. I'm not inclined to sell what I have, neither am I inclined to add. I do feel there must be a place in the NZ market for a glorified finance company doing the kind of lending that Heartland does. Right ?


Yes there is definitely a place for a finance company called Heartland, RTM. The learners banking mask that the Reserve bank has loaned to Heartland should help bring in the much needed new supply of customer deposits. Whether Heartland succeed over the next five years, well let's just say that the next six months will be the most difficult time from a cashflow perspective.

Heartland look to be ahead of their own game plan selling down their troubled non-core profit portfolio. But are they just selling off the easy stuff first? There is no way to know.

Meanwhile governor Wheeler is saying interest rate rises are on the way. That means that Heartland will have to start paying more for new deposits while they are unable to pass on those higher costs into their existing longer term loans. That squeeze effect has to hurt Heartland shareholders in the short term. And we have to remember that Heartland are only just holding onto an investment grade credit rating, and the rating agencies have given them a negative outlook. If Heartland slip just one notch to C+, will they still be able to call themselves a bank?

The question is not who will be 'right' about the fate of Heartland because the fate of Heartland is not predetermined. The question is who is better at assessing the potential risks and rewards and making an informed investment decision based on all possible future outcomes right now. Since Percy doesn't believe there are any risks he has already lost that battle by default. Of course that doesn't mean that Percy won't win the war and sail off into the distance on his Heartland retirement yacht. But just because Captain Percy in his bliss doesn't see any icebergs, that doesn't mean they aren't there.

SNOOPY

[CJ]

Can I just ask those long on HNZ, do you guys see this as a really long term hold for your portfolio or are you looking toward some kind of exit point? For a while the mentality seemed to be that HNZ was significantly undervalued, and clearly a lot of that has been erased with the SP nearly doubling over the last 18 months or so. Thoughts?It may shift from a value play portion to the yeild portion of my portfolio. At the moment, I see it as providing growth and yeild.

Re Team Percy vs Team Snoopy, I feel it is very unlikely the RBNZ would allow them to be paying dividends if their was going to be a capital crunch.

[percy]

I agree that having both sides debated in this thread has been good (thanks to everyone who has contributed). Worth pointing out though, that since I've been following HZX at least, the SP is up about 60% which suggests there are a majority following "Team Percy" ;). TNZ however, well that's a sure thing :)

Can I just ask those long on HNZ, do you guys see this as a really long term hold for your portfolio or are you looking toward some kind of exit point? For a while the mentality seemed to be that HNZ was significantly undervalued, and clearly a lot of that has been erased with the SP nearly doubling over the last 18 months or so. Thoughts?

Very much a very long term hold.
History has shown holding bank stocks to be most rewarding.
I think 5,10,15 years time I will look back and say, thank goodness I brought so many.I see them in the same light as EBO,MFT ,POT,RYM and SUM.
I think they are a never to sell share.Growing share price,growing dividends will reward us well.
Disc.Do not hold MFT.Sold to take up more HNZ.

[percy]

Yes there is definitely a place for a finance company called Heartland, RTM. The learners banking mask that the Reserve bank has loaned to Heartland should help bring in the much needed new supply of customer deposits. Whether Heartland succeed over the next five years, well let's just say that the next six months will be the most difficult time from a cashflow perspective.

Heartland look to be ahead of their own game plan selling down their troubled non-core profit portfolio. But are they just selling off the easy stuff first? There is no way to know.

Meanwhile governor Wheeler is saying interest rate rises are on the way. That means that Heartland will have to start paying more for new deposits while they are unable to pass on those higher costs into their existing longer term loans. That squeeze effect has to hurt Heartland shareholders in the short term. And we have to remember that Heartland are only just holding onto an investment grade credit rating. If Heartland slip just one notch to C+, will they still be able to call themselves a bank?

SNOOPY

Offcourse they are selling off the easy stuff first.
Increase interest rates benefit all banks,finance companies.
As Heartland borrow long,lend short,they are in the strongest position of any bank/finance company .

[K1W1G0LD]

Yes there is definitely a place for a finance company called Heartland, RTM. The learners banking mask that the Reserve bank has loaned to Heartland should help bring in the much needed new supply of customer deposits. Whether Heartland succeed over the next five years, well let's just say that the next six months will be the most difficult time from a cashflow perspective.

Heartland look to be ahead of their own game plan selling down their troubled non-core profit portfolio. But are they just selling off the easy stuff first? There is no way to know.

Meanwhile governor Wheeler is saying interest rate rises are on the way. That means that Heartland will have to start paying more for new deposits while they are unable to pass on those higher costs into their existing longer term loans. That squeeze effect has to hurt Heartland shareholders in the short term. And we have to remember that Heartland are only just holding onto an investment grade credit rating, and the rating agencies have given them a negative outlook. If Heartland slip just one notch to C+, will they still be able to call themselves a bank?

The question is not who will be 'right' about the fate of Heartland because the fate of Heartland is not predetermined. The question is who is better at assessing the potential risks and rewards and making an informed investment decision based on all possible future outcomes right now. Since Percy doesn't believe there are any risks he has already lost that battle by default. Of course that doesn't mean that Percy won't win the war and sail off into the distance on his Heartland retirement yacht. But just because Captain Percy in his bliss doesn't see any icebergs, that doesn't mean they aren't there.

SNOOPY

ICEBERG'S!!

This is'nt the Titanic Snoopy and I can't swim!

[Under Surveillance]

Whether Heartland succeed over the next five years, well let's just say that the next six months will be the most difficult time from a cashflow perspective. SNOOPY
In your assessments of cash flows, and imaginings of the needs for extra capital, what allowance have you made for HNZ shareholders subscribing to the dividend reinvestment programme and its discount?
The payout total for the current dividend is $9.7M. Should holders of one third of HNZ shares subscribe to the DRP, HNZ's share capital will increase by almost 10%.

[percy]

ICEBERG'S!!

This is'nt the Titanic Snoopy and I can't swim!

Last time iceberg's were spotted in NZ waters was a few years ago off Dunedin.
With global warming the danger has greatly demished.!
Wonderful sailing conditions forecast for a good number of years.
With such a strong crew, we welcome any wind shifts, and with the best tacking crew, we will be the fastest to take advantage of them. lol.

[K1W1G0LD]

Last time iceberg's were spotted in NZ waters was a few years ago off Dunedin.
With global warming the danger has greatly demished.!
Wonderful sailing conditions forecast for a good number of years.! lol.

Yes, I agree Percy, I think poor Snoopy is getting really confused now.

[percy]

Yes, I agree Percy, I think poor Snoopy is getting really confused now.

No change to his confusion. Has remained consistent ,since he first posted on this thread.!!!

[iceman]

Can I just ask those long on HNZ, do you guys see this as a really long term hold for your portfolio or are you looking toward some kind of exit point? For a while the mentality seemed to be that HNZ was significantly undervalued, and clearly a lot of that has been erased with the SP nearly doubling over the last 18 months or so. Thoughts?

Definitely a long term hold from me, barring any unforeseen circumstances, such as Snoopy's warnings. Bought a substantial amount for my teenage daughters last year with a 6-7 year investment time frame in mind. They've had great capital growth and I am happy that future dividends will provide a healthy return on their investment. My own shares also invested with a long term view.

Percy I am concerned about your global warming comments after reading this in the latest Time Magazine
"Increase in ice-covered ocean water since last year, leading some scientists to believe that the planet is actually undergoing "global cooling""

Now I wonder if Snoopy may be right about the icebergs :confused:

[percy]

Definitely a long term hold from me, barring any unforeseen circumstances, such as Snoopy's warnings. Bought a substantial amount for my teenage daughters last year with a 6-7 year investment time frame in mind. They've had great capital growth and I am happy that future dividends will provide a healthy return on their investment. My own shares also invested with a long term view.

Percy I am concerned about your global warming comments after reading this in the latest Time Magazine
"Increase in ice-covered ocean water since last year, leading some scientists to believe that the planet is actually undergoing "global cooling""

Now I wonder if Snoopy may be right about the icebergs :confused:

OMG.
Just as well we are sailing to warmer oceans.
lol.

[Snow Leopard]

...well let's just say that the next six months will be the most difficult time from a cashflow perspective....

OK.
So on what 'facts' do you base this assertion?
How is Heartland different in this respect from other NZ banks such as ANZ and Westpac?

Best Wishes
Paper Tiger

[RTM]

I am looking at them as a long term hold. Hopefully a cornerstone of my retirement portfolio as I see them soon paying a regular dividend which will be a nice yield on my average purchase price of around 77c. . Hence my concern with Snoopy's comments.

[Snoopy]

In your assessments of cash flows, and imaginings of the needs for extra capital, what allowance have you made for HNZ shareholders subscribing to the dividend reinvestment programme and its discount?


For those who came in late, we are talking here about Note 38 (liquidity Risk) of the FY2013 results. We are presented with a 'contractual liquidity profile' and an 'expected liquidity profile' for the twelve months going forwards from balance date. For comparative purposes the contracted and expected figures for the previous FY2012 year are given too.

PT has pointed out, after my initial alarmist shock at the bare 'contracted' figures that most banks operate assuming a good percentage of their debentures are rolled over and some new debentures are taken out to replace those permanently withdrawn. However, the change in debenture patterns is not definitively forecastable. A wise investor would stress test these assumptions to work out what would happen if reinvestment rates did not go entirely to plan.

Back to Note 38, and I have looked at the difference between the contracted liabilities and the forecast position of those same liabilities over the 'on call', 0 to 6 months and 6 to 12 months future periods respectively.

$181.879m - -$265.8m = $447.679m
$197.352m - -$253.758m = $451.110m
$307.180m - -$261.536m = $568.716m

That adds to a net gain of $1,467.505m of net new debenture stock expected to roll across the Heartland bank desks for the twelve months beginning 1st July 2013.

Such large numbers are hard to grasp. But if we look at the equivalent forecast figures for FY2012 $1,186.472m of extra one year or less debenture money was expected to roll in. Since FY2013 is done and dusted we know that Heartland made it. And there is no reason to suppose they won't be able to raise a very similar new amount for the coming year. However they are expecting to raise:

$1,467.505m - $1,186.472m = $281.033m

extra over and above what they did last year. If they can do it, then great. If they can't then the difference will have to be made up by shareholders equity. With $370.572m of shareholders equity on the books, that would leave only

$370.572m - $281.033m = $89.539m

of net equity in shareholders pockets

That means NTA drops to one quarter of what it was, and there lies one assessment of the 'downside risk' for shareholders. In reality such a downside position would be intolerable and there would need to be a cash issue to restore the company's capital base.



The payout total for the current dividend is $9.7M. Should holders of one third of HNZ shares subscribe to the DRP, HNZ's share capital will increase by almost 10%.


According to the HNZ balance sheet as at 30th June 2013, total equity was $370.542m. If the total final dividend is $9.7m, and one third of the dividend is paid out, then the amount retained in the company will be 2/3 x $9.7m = $6.5m. That would be a 1.8% increase in capital for HNZ by my calculations. Useful and a step in the right direction, but not a game changing amount.

SNOOPY

[Under Surveillance]

I accept your arithmetic, up to a point. I was talking share capital, not total equity. $6.5M/$192M represents a 3.3% increase in share capital.

[Snoopy]

OK.
So on what 'facts' do you base this assertion?


The information in note 38 of the annual results for FY2013, see my reply to Under Surveillence.



How is Heartland different in this respect from other NZ banks such as ANZ and Westpac?


Differences between Heartland and ANZ/WBC in NZ

1/ Heartland has no Aussie parent that can bail them out.
2/ Heartland is not too big to fail.

SNOOPY

[Snoopy]

I am looking at them as a long term hold. Hopefully a cornerstone of my retirement portfolio as I see them soon paying a regular dividend which will be a nice yield on my average purchase price of around 77c. . Hence my concern with Snoopy's comments.

I wouldn't have too many concerns about having Heartland as part of retirement portfolio. Indeed I may yet buy some HNZ for myself for purely that reason. My concern would be for those who drastically overweight their portfolio in HNZ shares under the assumption it is an absolutely sure thing. It isn't.

SNOOPY

[CJ]

Snoopy - do you have any reason to believe that rollovers and new deposit's would not be forthcoming.

I would argue, without access to any imperical evidence, that they are more likely to increase. As Heartland becomes more well known, which was in part the reason for getting the work "bank" at the end of "Heartland", they should increase. They pay a higher rate than the big 4 banks, in part due to its lower credit rating and in part due to the fact it onlends those funds at a higher rate (ie. less home loans).

No Australian parent - so what - If things got really bad, and bad in Australia two, I beleive they would cut NZ off.
Not to big to fail - I really dont think this is likely to happen, except in extreme circumstances. They are more secure than the finance companies that failed during the GFC so we are taking about an event more extreme than that.

So while there is a risk, I think there is more than enough growth left in the shareprice to compensate for that risk. I think that is, in part, what you are missing. This is not a top 10, blue chip, yeild stock so comparing it against the big 4 is not fair. There is more risk than that, and I accept that. In return I expect higher return which I expect to get.

[percy]

One quick read says your are missed guided, and will look even more foolish when again proven wrong.HNZ have never had funding problems.They came through the Govt Quarantee with excess funds,have paid back MARAC debentures, and their treasury dept have made sure they retain their faithfull depositors.
On sniff of a problem and the Reserve Bank would stop them accepting deposits.Has not happened,and will not happen.

[percy]

I wouldn't have too many concerns about having Heartland as part of retirement portfolio. Indeed I may yet buy some HNZ for myself for purely that reason. My concern would be for those who drastically overweight their portfolio in HNZ shares under the assumption it is an absolutely sure thing. It isn't.

SNOOPY

Only two sure things in life,taxes and death.
Maybe three.HNZ will be a great NZ Bank.
You are doing a great job Snoopy;share price back up to 86cents.
Overweight ;means to me out perform.!

[janner]

Can I just ask those long on HNZ, do you guys see this as a really long term hold for your portfolio or are you looking toward some kind of exit point? For a while the mentality seemed to be that HNZ was significantly undervalued, and clearly a lot of that has been erased with the SP nearly doubling over the last 18 months or so. Thoughts?

In my mid 70's.. HNZ is giving me a good return. As I am still working it is DRP. Can see no reason to sell..

[Snoopy]

Snoopy - do you have any reason to believe that rollovers and new deposit's would not be forthcoming?

I would argue, without access to any empirical evidence, that they are more likely to increase. As Heartland becomes more well known, which was in part the reason for getting the work "bank" at the end of "Heartland", they should increase. They pay a higher rate than the big 4 banks, in part due to its lower credit rating and in part due to the fact it onlends those funds at a higher rate (ie. less home loans).


I am not going to argue this point with you CJ. You may well be right in that tacking the word 'bank' onto the Heartland name late last year was just the master stroke needed to bring in the extra $281m of short term budgeted for debentures over FY2014.

My 'empirical evidence' that this is a stretch target is that Heartland have more or less the same physical footprint as last year, including some obvious holes. I was shocked to find out from Percy that Heartland had no branch in Timaru for example.

So divide the projected increase in short term debentures over the existing short term debenture base: $281m/$1186m means a 23.7% increase in short term deposits from the same store footprint. How many chains of any kind do you know that are budgeting on that kind of increase over a single year? I guess it is possible, but those frontline Heartland staff are going to have to work hard to achieve it.

SNOOPY

[Snoopy]

One quick read says your are misguided, and will look even more foolish when again proven wrong. HNZ have never had funding problems.


No funding problems eh?

What about when Heartland took over the PGW finance loans? Part of the deal was PGW had to subscribe new capital to Heartland to help shore it up before they would take any PGW Finance loans on. Even then Heartland wouldn't take on all the PGW Finance loans without a PGW guarantee on one difficult chunk of loans.

Still given Heartland have only been in existence in their current form for two years, I would argue that is not enough time to build an operational history either good or bad.

It is not great that Heartland have had any funding problems given their history is so short.



They came through the Govt Guarantee with excess funds,have paid back MARAC debentures, and their treasury dept have made sure they retain their faithful depositors.


Yes they have. Total non securitized borrowings are up from $1,738m to $1,883m. That is an increase of 8.3% over the last year. That still makes the 23.8% increase in shorter term borrowings planned in FY2014 look like a stretch though.

SNOOPY

[percy]

Time will keep your 100% being wrong record intact.!
No issues.!

[Snow Leopard]

I wouldn't have too many concerns about having Heartland as part of retirement portfolio. Indeed I may yet buy some HNZ for myself for purely that reason. My concern would be for those who drastically overweight their portfolio in HNZ shares under the assumption it is an absolutely sure thing. It isn't.

SNOOPY

It is good to see your stance on HNZ becoming a little more reasonable Snoopy.


Now you have started throwing around this $218m (originally an un-transposed $281m) of 'planned extra funding' and calling it a 'stretch' and generally giving the impression that this is a necessary but difficult thing to achieve, suggesting the disappearance of most of the companies equity and other doom and gloom.

But...

As your favourite Note 38 itself says:

"The below does not reflect a forward looking view of how the Group expects actual financial assets and liabilities to perform in the future, as it does not include new lending and borrowing."

You can probably understand that I am a bit perplexed by your assertion on this one.
Just how did you manage to jump to this conclusion, Snoopy?

HNZ is doing well and their loan/borrowing balance is not a problem for the foreseeable future.

Best Wishes
Paper Tiger

[Snoopy]

Now you have started throwing around this $281m of 'planned extra funding' and calling it a 'stretch' and generally giving the impression that this is a necessary but difficult thing to achieve, suggesting the disappearance of most of the companies equity and other doom and gloom.

But...

As your favourite Note 38 itself says:

"The below does not reflect a forward looking view of how the Group expects actual financial assets and liabilities to perform in the future, as it does not include new lending and borrowing."

You can probably understand that I am a bit perplexed by your assertion on this one.
Just how did you manage to jump to this conclusion, Snoopy?


The 'contractual liquidity profile' and an 'expected liquidity profile' (note 38) for the twelve months going forwards from 1st July 2013, I have compared with the equivalent profile a year earlier.

You imply PT, that Heartland will be able to reduce lending and/or the debenture money taken on board to match the cashflows desired. Well yes this flexibility does exist, but it also existed last year. And since Heartland are still operating, we can assume this flexibility was used to good effect.

Fast forward to this year and the desired amount of new or extra rolled over debentures has gone up by $281.033m as calculated in post on this thread 2539. Heartland can close this gap in several ways:

1/ Increase the projected rollover rate of existing debentures.
2/ Bring in brand new debenture money to plug the gap.
3/ Reduce the short term loan book below budgeted levels
4/ Have a cash issue for shareholders OR
5/ A combination of two or many of the above.

However, none of these methods eliminates the $281.033m short debenture contracted shortfall in the business plan. 1 to 5 merely represent different ways of tackling it. Loan book reduction is not something I have dwelt on. But I am sure farmers would not want to see their seasonal loans called in before their cashflow arrives. Do you see short term loan book reduction as an alternative? Percy has never liked it when I refer to Heartland as the 'incredible shrinking bank'.

SNOOPY

[percy]

Never liked it because it is not correct.!
What we are seeing is Heartland concentrating on better margin lending.
This is what they have said they would do,and it is what they are doing.!
Listen to what they say they will do,because that is what they will do.
I keep telling you, you are wasting our time and your own time.
Time and results have always/and will always prove you wrong.!

[Snow Leopard]

...You imply PT, that Heartland will be able to reduce lending and/or the debenture money taken on board to match the cashflows desired...

Actually what I implied was that you have completely failed to understand the information in the 'expected maturity profile' part of Note 38, and this despite that they explain what the data represents.

Your assertion is based on the misunderstanding of the data and has no validity at all.
You need to understand how banking works before making such extrapolations, then you will spot the nonsense yourself before posting.

Best Wishes
Paper Tiger

[Xerof]

Snoopdog, banks don't operate in a closed bubble. They are able to go to markets to attract funding in all sorts of ways, using all sorts of market signals. They employ specialist staff to manage these responses and risks. I am sure they have competent people in charge.

You are fretting over this too much for your own good, and if percy has any hair, he is tearing it out.....rapidly, and paper tiger is tearing himself to shreds too.

bury the bone in your back garden and move on.

[Snoopy]

Actually what I implied was that you have completely failed to understand the information in the 'expected maturity profile' part of Note 38, and this despite that they explain what the data represents.

Your assertion is based on the misunderstanding of the data and has no validity at all.
You need to understand how banking works before making such extrapolations, then you will spot the nonsense yourself before posting.


Just to reprise, the figure of $281.033m was calculated, from note 38, as follows:

$1,467.505m - $1,186.472m = $281.033m

Where the first figure in the subtraction is the difference between contracted and expected debentures with a 12 month or less maturity listed in the FY2013 financial notes, being a projection into the FY2014 year. The second figure in the subtraction is the difference between contracted and expected debentures with a 12 month or less maturity listed in the FY2012 financial notes, being a projection into the FY2013 year.

You can't deny the maths. You can only deny the significance. And given I am subtracting one apple from another, you can't deny that the FY2014 business plan asks for this much more money from some source.

SNOOPY

[macduffy]

Sorry, Snoopy, like others I think you're worrying overmuch about HNZ's funding. All banks have to actively manage this side of the business and have ongoing programs to raise/replace deposits, debentures, swaps and hybrid securities of various types. HNZ is no different and will have a Treasury department like the major players. Sure, they don't have the credit rating of the majors and will therefore pay a little more for their funds but there is no suggestion that these markets have become "difficult" for any of the NZ banks, including HNZ.

[percy]

Xerof and macduffy.
Thank you for adding sense [as does Paper Tiger] to this thread.\
I have given up on him.!!!

[Snow Leopard]

Table 38 - definition

The now infamous Table 38 of the Hearland New Zealand 2013 Financial Results presents outputs of two totally hypothetical scenarios applied to both the 2012 and 2013 Financial Years and presumably is required by IFRS or the Reserve Bank of New Zealand.

The Contractual Scenario can be defined as "What happens if all existing loans are repaid and all existing deposits are withdrawn at their earliest contractual dates and no new loans are made and no new deposits are taken"

The Expected Scenario can be defined as "What happens if all existing loan are repaid and all existing deposits withdrawn at the most likely date given what has historical happened and also no new loans are made and no new deposits are taken".


Table 38 - possible interpreted outputs

For the 2013 financial year if we restrict ourselves to that part of the scenarios with a time-frame of 1 year or less we can calculate that:

For the Contractual scenario there is a hypothetical net outflow of $781.1m

For the Expected scenario there is a hypothetical net inflow if $685.5m

And the difference in outcomes for the two hypothetical scenarios is $1,467.6m


If we do the same for the 2012 financial year the equivalent figures are:

For the Contractual scenario there is a hypothetical net outflow of $520.5m

For the Expected scenario there is a hypothetical net inflow if $666.0m

And the difference in outcomes for the two hypothetical scenarios is $1,186.5m


Reality check

It is worth reminding anybody who is still reading this that we are taking about hypothetical scenarios totally divorced from the real world.

It is also worth stating that the large cash outflow of the Contractual scenarios would, in the real world, result in the bank running out of cash, needing recapitialising or worse, and is thus usually regarded as not a good thing.

It is further worth stating that the large cash inflow of the Expected scenarios would result, again in the real world, in the bank having an excess of fairly unproductive cash and is also usually regarded as not a good thing. It could give the cash back to the shareholders though.


Back to the arithmetic

Should we so desire we could subtract the $1,186.5m from the $1,467.6m and come up with the result of $281.1m.

What does this figure represent?

It represents the difference between the difference of part of two hypothetical scenarios for the 2013 financial year and the difference of the same part of the same two hypothetical scenarios for the 2012 financial year.

Now that is a really useful thing to know, isn't it?


So how do you apply this stuff to the real world?

Some of you might suggest that given the expected scenario is more realistic and that it can be transferred to the real world, by adding the new loans and new deposits that are part of the reason the bank exists, and that this new model suggests that the more important issue is not so much the raising of new deposits but the making of new loans, given the excess cash that would build up.

Or what you can do is realise that in the real world it is necessary to make both new loans and new deposits in a prudent manner to be most effective. The balance you need to strike will vary depending upon what happens in the real world and that is a forever changing place.


How do you not apply this stuff to the real world?

One thing that you should not do is take the dollar differences of two hypothetical, non real world scenarios or the dollar difference of the differences of those two hypothetical, non real world scenarios and translate them directly into any form of real world dollar amount.

A particularly foolish thing to do would be to believe that an hypothetical scenario is a companies actual business plan.


Best Wishes & A Relaxing Weekend to All
Paper Tiger

[janner]

Umm !!.. Are you saying ??.. Uhmmm ???

[Snoopy]

Table 38 - definition

The now infamous Table 38 of the Heartland New Zealand 2013 Financial Results presents outputs of two totally hypothetical scenarios applied to both the 2012 and 2013 Financial Years and presumably is required by IFRS or the Reserve Bank of New Zealand.


The above is further explained by Paper Tiger in the post I have quoted from. I know that he/she knows what it means. However, this introductory paragraph might give the impression that table 38 is just historical. This is not so.

I would have said that table 38 presents outputs of two totally hypothetical scenarios applied to both the 2013 and 2014 Financial Years. These are both forecast hypothetical scenarios based on starting points fixed from the end of FY2012 and FY2013 years. But table 38, because it is a forecast, is current and the timeline covered is unfolding in the market right now as I write this post.

SNOOPY

[Snoopy]

Reality check

It is worth reminding anybody who is still reading this that we are taking about hypothetical scenarios totally divorced from the real world.


The above statement is hyperbole that I will not allow to go unchallenged. The first 'contracted' scenario is extreme to be sure and is very unlikely to occur. But it is connected to the real world because it is the 'do nothing' baseline. If all existing borrowing and lending contracts were frozen in time, unable to be altered, and no new deals were done then this extreme 'contracted' scenario would actually happen.

If it was 'totally divorced from the real world' as PT claims, why do you suppose the accounting rules asked for it to be included in the annual results announcements?



It is also worth stating that the large cash outflow of the Contractual scenarios would, in the real world, result in the bank running out of cash, needing recapitialising or worse, and is thus usually regarded as not a good thing.


I agree with the above interpretation.



It is further worth stating that the large cash inflow of the Expected scenarios would result, again in the real world, in the bank having an excess of fairly unproductive cash and is also usually regarded as not a good thing. It could give the cash back to the shareholders though.


I think the term 'expected' scenario with reference to the above is a misleading accounting term. Yes the above is 'expected' if term deposits and the loans they offset are rolled over as though everything is in some kind of investment bubble. But we know for a fact that management are planning for this not to happen. Management do have plans to attract new capital, such as the new 'five star' business call account, and no doubt they have undisclosed plans for more seasonal lending. So am I agreeing with PT here that these 'expected' cashflow projections are, in the real world, next to worthless?

No. We have to remember that Heartland are planning their business options going forwards with all ways to adapt going forwards known and on the MDs desk. By contrast that 'expected' table is a dumb document generated from historical business rollover rates in accordance with prescribed accounting standards. Thus, here is the big point where I disagree with PT. I will explain why, step by step:

-----

1/ Heartland management have an overall plan going forwards that includes a combination of rolling over of existing business contracts and a whole lot of new business contracts. Heartland know where they want to go, but to publish their whole plan in advance would give an unwelcome amount of information away to competitors. Nevertheless accounting rules force them to publish this limited 'expected' projection listed in note 38.

2/ Heartland have a whole other spreadsheet of expected projections of which shareholders do not know the details. This other arm of 'expected' transactions are based on new term deposits and loans, and rollovers that above or below historical norms.

3/ Heartland's business plan going forwards is a combination of 1 and 2 above.
Accounting rules have given shareholders an insight into 1, but nothing in detail has been said to shareholders about 2.

4/ Nevertheless Heartland management know all about 1 and 2. They may have only disclosed information on 1 to shareholders. But this 1 was compiled by management and done so by people with full knowledge of 2.

5/ Expected plan 1 has therefore been drawn up by people in the know about both 1 and 2. 1 and 2 are complimentary parts of the whole business plan going forwards. PT argues that knowing 1 on its own is not that useful. I would agree if 1 and 2 had no connection.

But 1 and 2 are connected and part of a whole business plan going forwards. I would argue that 1 has been drawn up in the full shadow of 2. Even though we know nothing much of plan 2, the content of 2 has been instrumental in defining what happens in plan 1.

My conclusion then is that there is nothing hypothetical or unreal about the expected cashflows listed in note 38 of the FY2013 results, even though they do not give the total cashflow projected future.

PTs last comment that they 'could give the excess cash back to shareholders' contains the unstated assumption that this is the projection of all of the companies future cashflows. The table in note 38 does not include the cashflows from complementary 'plan 2', which will be executed side by side with 'plan 1'.

SNOOPY

[K1W1G0LD]

I'm sorry but the term a**l retentive comes to mind here.

[percy]

I'm sorry but the term a**l retentive comes to mind here.

My thoughts exactly.!!

[winner69]

Went up the hill today (in the rain) ...... Percy Rata doing good but Snoopy Rata is going great guns .... so much so I had to pull the long grass out from around Snoopy Rata .... and put the pulled out stuff around the base as mulch because that's what the DOC ranger once told me to do.

[percy]

Went up the hill today (in the rain) ...... Percy Rata doing good but Snoopy Rata is going great guns .... so much so I had to pull the long grass out from around Snoopy Rata .... and put the pulled out stuff around the base as mulch because that's what the DOC ranger once told me to do.

Pleased he can do something right.
Life is full of surprises.!!!

[winner69]

I'll just give Snoopy Rata the mulch .... go back up tomorrow with one of the special fertiliser pellets for Percy Rata ..... that'll give him a spring boost

[percy]

I'll just give Snoopy Rata the mulch .... go back up tomorrow with one of the special fertiliser pellets for Percy Rata ..... that'll give him a spring boost

The real percy will receive his spring boost on the 1st November at the HNZ agm.His health has been tracking the HNZ share price,so has been great this year.!

[winner69]

Percy .... exciting eh

I have an idea

Seeing Heartland obviously not interested in doing the micro lending bit as part of their 'community'/ social commitment I reckon that you should suggest at the ASM that they get into growing rata trees .... helping Project Crimson

Great marketing ploy to potential term depositors , especially the young, could be along the lines of Invest with Heartland and watch your savings grow like the venerable Rata" ... for every $x in the Rata Special Rate TD we'll plant Y Rata

I'll leave it up to you to bring up at the ASM ... please

[percy]

Don't know if I will be bringing up anything at the AGM.
Last year I learnt so much just listening and watching the presentations.
They spell everything they are doing,simply and fully.
They lay out a clear path as to where they intend to go.
I will listen carefully to see if they mention any intentions of community/social participation.
Am reading "Ready Fire Aim,The Mainfreight Story"by Keith Davies isbn 978177532903.Excellent community/social commitment.

[SCOTTY]

Snoopdog, banks don't operate in a closed bubble. They are able to go to markets to attract funding in all sorts of ways, using all sorts of market signals. They employ specialist staff to manage these responses and risks. I am sure they have competent people in charge.

You are fretting over this too much for your own good, and if percy has any hair, he is tearing it out.....rapidly, and paper tiger is tearing himself to shreds too.

bury the bone in your back garden and move on.

Well said Xerof. Very good advice indeed. :cool:

[Joshuatree]

After months of stealthy sleuthing, being inconspicuous and posing as an ignorant materialistic shopper and casually glancing into heartland tauranga as i readjusted my moustache from chin to lip as i sashayed passed in a crabwise stalky way;.... i am very pleased to report it has paid OFF!.. I h- aa-vv-ee seen customers inside the door for the FIRST time!!!. In fact an elderly couple were pressed against a counter(note sign above counter"we will hold you up". The teller looked relieved and animated.

[percy]

Go in and talk to the staff.
Tell them you are a share holder.
Ask how they do most of their business as you don't see many customers in the bank as you walk past?
Are HNZ a good firm to work for.?
Do they own HNZ shares?

[blakecb]

After months of stealthy sleuthing, being inconspicuous and posing as an ignorant materialistic shopper and casually glancing into heartland tauranga as i readjusted my moustache from chin to lip as i sashayed passed in a crabwise stalky way;.... i am very pleased to report it has paid OFF!.. I h- aa-vv-ee seen customers inside the door for the FIRST time!!!. In fact an elderly couple were pressed against a counter(note sign above counter"we will hold you up". The teller looked relieved and animated.

Last time I checked there were no cows in Tauranga? But yes, good homework set from Percy. Please execute and report back.

[Joshuatree]

Some cows and alot of Retired people. Watching the shareprice is enough homework for me, happy holder here.. Warning i have quirks!

[Minerbarejet]

Percy .... exciting eh

I have an idea

Seeing Heartland obviously not interested in doing the micro lending bit as part of their 'community'/ social commitment I reckon that you should suggest at the ASM that they get into growing rata trees .... helping Project Crimson

Great marketing ploy to potential term depositors , especially the young, could be along the lines of Invest with Heartland and watch your savings grow like the venerable Rata" ... for every $x in the Rata Special Rate TD we'll plant Y Rata

I'll leave it up to you to bring up at the ASM ... please
Good luck getting that ratafied.:)

[percy]

Some cows and alot of Retired people. Watching the shareprice is enough homework for me, happy holder here.. Warning i have quirks!

Lovely part of the country to live.
Don't worry about the home work.Rude of me.Hopefully those of us who will be attending the agm will have plenty to report.

[blakecb]

Lovely part of the country to live.
Don't worry about the home work.Rude of me.Hopefully those of us who will be attending the agm will have plenty to report.

Hmmm Heartland seems to have stalled....what's happened to our positioning percy?

[iceman]

Hmmm Heartland seems to have stalled....what's happened to our positioning percy?

I think its settled quite nicely after going XD with reasonable volume like today, which is the last day counting towards pricing of DRPs. Steady as she goes and I have no doubt Percy still believes we are still "well positioned". 2014 will be our year, hopefully earning 9-10c per share.

[percy]

I think its settled quite nicely after going XD with reasonable volume like today, which is the last day counting towards pricing of DRPs. Steady as she goes and I have no doubt Percy still believes we are still "well positioned". 2014 will be our year, hopefully earning 9-10c per share.

Bit surprised at the volumes going through.
Yes we are certainly "well positioned."
Expect us to more to "poised" at the agm.!!
Holding myself "at the ready" expecting unexpected good news!
And as you point out 2014 will be the year of the big HNZ share trajectory!!!! lol.

[macduffy]

Now, now, percy. If we didn't respect your views so much we might accuse you of a spot of ramping there!

;)

[percy]

Now, now, percy. If we didn't respect your views so much we might accuse you of a spot of ramping there!

;)
Yeah right!!
Can't fool you.!!

[Under Surveillance]

I think its settled quite nicely after going XD with reasonable volume like today, which is the last day counting towards pricing of DRPs. Steady as she goes and I have no doubt Percy still believes we are still "well positioned". 2014 will be our year, hopefully earning 9-10c per share.
By my reckoning, the weighted average price for sales this week is 84.73 cents, and a 2.5% discount gives 82.61 cents as the divisor in calculating the number of shares issued those signed up to the DRP.

[iceman]

By my reckoning, the weighted average price for sales this week is 84.73 cents, and a 2.5% discount gives 82.61 cents as the divisor in calculating the number of shares issued those signed up to the DRP.

Thanks for the calcs US. So that means for every 33 shares held, 1 share is added for those electing 100% DRP. I happily take all I can at that
price :)

[blakecb]

By my reckoning, the weighted average price for sales this week is 84.73 cents, and a 2.5% discount gives 82.61 cents as the divisor in calculating the number of shares issued those signed up to the DRP.


Thanks for the calcs US. So that means for every 33 shares held, 1 share is added for those electing 100% DRP. I happily take all I can at that
price :)

US where did you get the 2.5% discount figure from?

[Under Surveillance]

US where did you get the 2.5% discount figure from?
From the annual result announcement ...
FINAL DIVIDEND
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.

[iceman]

US where did you get the 2.5% discount figure from?

They first announced it in the Full Year profit announcement on 26 August.

[blakecb]

From the annual result announcement ...
FINAL DIVIDEND
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.


They first announced it in the Full Year profit announcement on 26 August.

Thanks guys, my apologies, I had just read the DRP.

[Under Surveillance]

Thanks for the calcs US. So that means for every 33 shares held, 1 share is added for those electing 100% DRP. I happily take all I can at that
price :)

I think you've overlooked the RWT deduction which applies to most retail investors. The herd will get 1 share for roughly each 35.5 elected into the DRP.
(2.5x 1.388) x 0.67 = net dividend 2.325 cps.
82.61/2.325 = 35.53.
Unless I've had a shiraz or 2 too many, that is.

[iceman]

I think you've overlooked the RWT deduction which applies to most retail investors. The herd will get 1 share for roughly each 35.5 elected into the DRP.
(2.5x 1.388) x 0.67 = net dividend 2.325 cps.
82.61/2.325 = 35.53.
Unless I've had a shiraz or 2 too many, that is.

Not sure. My Cab Sav-culator has gone dead :confused:

[iceman]

Good to see Directors Tomlinson's and Mountcastle's vote of confidence by partaking in the DRP. "Well positioned" eh Percy !

[percy]

Good to see Directors Tomlinson's and Mountcastle's vote of confidence by partaking in the DRP. "Well positioned" eh Percy !

Nice people doing good things.
Must agree with you "well positioned."
I am looking forward to the AGM on Friday 1st November.

[andysh]

What's with the volume today, DRP?

[percy]

Big volume yesterday too.
Looks to me as though some one is selling,while someone else is buying.!! lol.
SP is steady.We can't complain that HNZ lacks liquidity.!!!
Have not seen lastest top 100 shareholder list for some time,and other than DRP shareholder notices there have been no substantial shareholder notices,so I can only say that good volumes going through must be positive.

[janner]

discl: Bought some more today on post-divie blues ... :)

A good value purchase IMHO..

[SCOTTY]

discl: Bought some more today on post-divie blues ... :)

About 2m was it Belg? :)

[SCOTTY]

Another 1.5m traded this morning @ 85c. That is close to 5m for the past 3 days with the share price holding up well ex the 2.5c divi.

[noodles]

I note HNZ price has been quite weak this week. Any explanations?

Could it be people fund raising for Meridian? Anything more sinister?

[percy]

Risk-on market, funds are elsewhere. Appears its condolidation time for HNZ. Waiting for the next news segment to bump zee price :)

News will be announced in 14 days time at the agm I expect?! I am holding myself "at the ready."
With me and Forest reporting all the agm updates at the Auckland sharetraders' get together,on 4th November, the upward trajectory will resume at 10 am Tuesday the 5th.I expect fireworks on that day?!

[janner]

News will be announced in 14 days time at the agm I expect?! I am holding myself "at the ready."
With me and Forest reporting all the agm updates at the Auckland sharetraders' get together,on 4th November, the upward trajectory will resume at 10 am Tuesday the 5th.I expect fireworks on that day?!

I am still bathing in a warm glow percy... Do not wish to break out into a cold sweat !!.. Steady Boys .. Steady !!..

Looking forward to the 4th Nov.

[K1W1G0LD]

Looks like "that" overhang of unhappy HNZ shareholders is well and truly in charge of the shareprice at this time and voting with their feet.
I'm not surprised, you can do a lot better elsewhere on the NZX at present.

[percy]

Looks like "that" overhang of unhappy HNZ shareholders is well and truly in charge of the shareprice at this time and voting with their feet.
I'm not surprised, you can do a lot better elsewhere on the NZX at present.

I think Heartland is the best buy on the NZX at present.

[goldfish]

Looking ugly, this is what happens when i try to "invest" the price sits there for months before dropping. Sigh. I think ill stick to trading much more profitable. Ill give it till after agm then cut my losses on this one if price stays down.

[Joshuatree]

If your span of attention is that short goldfish maybe stick to scratchies.:)

[percy]

Looking ugly, this is what happens when i try to "invest" the price sits there for months before dropping. Sigh. I think ill stick to trading much more profitable. Ill give it till after agm then cut my losses on this one if price stays down.

The buy signal is when I sell.As I am more a buyer than seller, the SP could fall further.
A year ago the SP was 69cents.So the SP has gone up 18.8% in a year and I have received two dividends and a special dividend.
Nice people doing great things.
I should point out Sparky The Clown, Paper Tiger and myself value HNZ at over $1.35.
The coming year we will see earnings increase over 40% and we will most probably see the dividend increased.

[janner]

If your span of attention is that short goldfish maybe stick to scratchies.:)

Hahhaaaa.. Well said Jt.

[K1W1G0LD]

81 cents , ok if you're wearing rose tinted glasses I suppose , otherwise not great.

[K1W1G0LD]

Hullo looks like percy has another buy order in , 82.

[percy]

81 cents , ok if you're wearing rose tinted glasses I suppose , otherwise not great.

Oh Buggar.!!! Only up 17.4% plus divies in the past year.!!! SELL.SELL.Don't wait for the bad news at the agm..
Yeah Right.!!! lol.

[goldfish]

The buy signal is when I sell.As I am more a buyer than seller, the SP could fall further.
A year ago the SP was 69cents.So the SP has gone up 18.8% in a year and I have received two dividends and a special dividend.
Nice people doing great things.
I should point out Sparky The Clown, Paper Tiger and myself value HNZ at over $1.35.
The coming year we will see earnings increase over 40% and we will most probably see the dividend increased.

It could be what it was worth a year ago at this rate. Looks like itll be in the 70's before the agm. It doesnt really matter what you value it at, it matters what the market values it at and at the moment the market is disagreeing with you.

[goldfish]

Why not take your 18% plus divvies and then buy back in when support grows again, the writing has been on the wall since went x divvie, or maybe thats just a traders mindset, makes sense to me though, specially if it does drop to the seventys.

[percy]

It could be what it was worth a year ago at this rate. Looks like itll be in the 70's before the agm. It doesnt really matter what you value it at, it matters what the market values it at and at the moment the market is disagreeing with you.

The market usually comes around to agreeing with me.Although sometimes it takes Mr.Market awhile.
I don't mind waiting for him.!!!

[janner]

I would hardly call HNZ a " Traders " stock goldfish.. It is imo a long term hold stock with buying in the dips..

[percy]

Why not take your 18% plus divvies and then buy back in when support grows again, the writing has been on the wall since went x divvie, or maybe thats just a traders mindset, makes sense to me though, specially if it does drop to the seventys.

I do my research before I buy.Should I make a mistake,and/or the company does something I don't like/understand, I will sell.When they come out with better news than I expected, I add to my holding.As most followers of HNZ thread will realise I have been adding to my holding.I am not a trader.
The writing has not on the wall for me as HNZ are trading above their 200 day moving average.
I am also mindful that well run companies, such as Heartland are likely to come out with very positive unexpected announcements,so traders waiting for SP weakness are often caught short.HNZ have stated they may make an acquisition in the motor vehicle sector. I am holding myself at the ready for any such announcement.You could say I am "well positioned."

[percy]

Enjoyed running into a very wealthy astute ChCh investor at EBO agm yesterday.He told me he could not help himself,buying a nice wee HNZ top up at 82cents.No wonder he is very wealthy.!!!

[percy]

Good to see Heartland advertising their new product in this morning's The Press.

"School Fee Finance"- give your child a great start in life.
Heartland pays the fees upfront to the school.
Simple,discreet and convenient.
No doubt we will get an update on this and other products at next week's agm.

[Arbitrage]

The share price has been fairly static for awhile now. Hopefully some positive presentations including some innovative financing ideas such as the "School Fee Finance" at the AGM will give it a boost.

[pierre]

HNZ up 1 cent on this news.

Not quite as exciting as what's going on at PEB - but nice that the Govt thinks HNZ is Ok for their entities to bank with.

[percy]

HNZ up 1 cent on this news.

Not quite as exciting as what's going on at PEB - but nice that the Govt thinks HNZ is Ok for their entities to bank with.

Yes PEB is very exciting.
I see HNZ as a fantastic steady performer.

[blobbles]

This is great news for Heartland, a real vote of confidence from the Government that they are on the right track. Nice one!

[Snoopy]

This is great news for Heartland, a real vote of confidence from the Government that they are on the right track. Nice one!


The problem with school fee loans though is that 'education' cannot be sold by the bank should the loan go bad. Yet overall I would say it is a good initiative, which could be nicley derisked for HNZ shareholders by Heartland raising a bit more capital from them.

SNOOPY

[Snow Leopard]

The problem with school fee loans though is that 'education' cannot be sold by the bank should the loan go bad. Yet overall I would say it is a good initiative, which could be nicley derisked for HNZ shareholders by Heartland raising a bit more capital from them.

SNOOPY

If the loan goes bad they repossess the child.

Best Wishes
Paper Tiger

[percy]

The problem with school fee loans though is that 'education' cannot be sold by the bank should the loan go bad. Yet overall I would say it is a good initiative, which could be nicley derisked for HNZ shareholders by Heartland raising a bit more capital from them.

SNOOPY

Wrong 100%You do not know what security is being pledged.
Again wrong 100%.No need,huge earnings,with huge equity ratio.

[janner]

Would that not be the reason that it is called HEART land Bank..

For Shareholders and depositors with a HEART as well as a little bit of ACUMEN..


The problem with school fee loans though is that 'education' cannot be sold by the bank should the loan go bad. Yet overall I would say it is a good initiative, which could be nicley derisked for HNZ shareholders by Heartland raising a bit more capital from them.

SNOOPY

[Joshuatree]

I like Chris Lees idea today re Kiwi bank and heartland merging. like it a lot.

[janner]

I like Chris Lees idea today re Kiwi bank and heartland merging. like it a lot.

Perish the thought JT..

[janner]

I like Chris Lees idea today re Kiwi bank and heartland merging. like it a lot.

Perish the thought JT..

[percy]

Hmm ... Charts aren't looking so flash. Broken below 100 MA, big trades going through on a falling price in the last 6 weeks. Smart money looking for a better home? Or worse - bailing from a floundering ship?

Not a good look.

Smart money?? Maybe margin calls?
The major shareholders appear to be not selling.
Comparing the latest top 100 shareholder list with one a few weeks ago,the action appears to be nearly all Leveraged Equities driven.One LE a/c has gone from 1,364,257 to 6,678,844 while other LE a/cs have disappeared.
The SP is still up on the more important 200 MA.
I still can't work out where the PGW holding went to.
Not a lot of news from HNZ of late.I expect we will be brought up to date at next Friday's agm.

[Xerof]

Percy, I'm not up to speed with it, but with the larger than normal volume lately, perhaps it is warehoused at a prime broker shop, and being distributed through their client network in bite size parcels

[RTM]

The money for the IPO's recently would need to have come from somewhere. Maybe folk have decided to take some profit from HNZ and redistribute into dividend stocks such as Meridian ?

[goldfish]

Like i said earlier im keenly awaiting the agm, been a long time between news with this one lately.

[percy]

Percy, I'm not up to speed with it, but with the larger than normal volume lately, perhaps it is warehoused at a prime broker shop, and being distributed through their client network in bite size parcels

Thanks Xerof.That makes sense.I note a SP of 600,000 went through this morning at 83.7 which would back up what you say.

[percy]

Like i said earlier im keenly awaiting the agm, been a long time between news with this one lately.

Are you going to the agm?
I think we will have plenty of news.!

[goldfish]

Are you going to the agm?
I think we will have plenty of news.!
No i live in mapua and with work etc its not easy, id like to though. Ill eagerly await your updates instead ;)

[percy]

Maybe margin calls? ... You mean someone offer margin on HNZ? (Do share!) Or others selling HNZ (pretty low liquidity) in a generally rising overall market to cover fallers like DIL? Hmmm ...

Major holders generally do not sell so they don't create price movements - neither do small parcels of 100K or less. The ones in between the big holders (who don't sell often) and the mums and dads are what moves the market ... and there has been selling by this group in the last six weeks.

I quoted Leveraged Equities as being the most movement/active on HNZ share register that I could see.
Leveraged Equities business is margin lending.

[percy]

No i live in mapua and with work etc its not easy, id like to though. Ill eagerly await your updates instead ;)

Lucky you,Mapua would be a fabulous place to live.
I expect I will be giving full updates of the AGM.!! [very full] lol.

[Cool Bear]

Lucky you,Mapua would be a fabulous place to live.
I expect I will be giving full updates of the AGM.!! [very full] lol.
I hope to make it to the AGM and will come and say hello to you. Anyone else here going?

[goldfish]

Nice little rally back up to 86, good to see, low volume though

[Snow Leopard]

Nice little rally back up to 86, good to see, low volume though

887,242 traded at 4:26pm which is already more than twice the average long term volume (as calculated by Tiger's Secret Volume Formula).

My current value for this is $1.147 so I see lots of head room on this one.

Best Wishes
Paper Tiger

[blobbles]

887,242 traded at 4:26pm which is already more than twice the average long term volume (as calculated by Tiger's Secret Volume Formula).

My current value for this is $1.147 so I see lots of head room on this one.

Best Wishes
Paper Tiger


I get much the same valuation ($1.16) at the moment, good to see its gone just above its NTA though! Ahhh well, sit back and enjoy the divies I say :) eventually it will return to its valuation, happy days ahead!

[percy]

887,242 traded at 4:26pm which is already more than twice the average long term volume (as calculated by Tiger's Secret Volume Formula).

My current value for this is $1.147 so I see lots of head room on this one.

Best Wishes
Paper Tiger




We are very close with our valuations.Only vairy by a 1.My valuation /one year target price is $1.47. lol.

[percy]

887,242 traded at 4:26pm which is already more than twice the average long term volume (as calculated by Tiger's Secret Volume Formula).

My current value for this is $1.147 so I see lots of head room on this one.

Best Wishes
Paper Tiger




We are very close with our valuations.Only vairy by a 1.My valuation /one year target price is $1.47. lol.

[noodles]

We are very close with our valuations.Only vairy by a 1.My valuation /one year target price is $1.47. lol.

Percy, Are you one of these computer users that don't know when to click or double-click? Just noticed you double posting.

If so, might be best to keep away from on-line trading:)

As always, love your enthusiasm towards HNZ. Remember, never marry a stock. It won't love you back.

BTW, I think I'm closer to Paper Tiger valuation. Would need to see a bit more a growth story before I reaching your valuation. Still, would love to be proven wrong. HNZ is my largest position.

[noodles]

I have a theory on the recent price weakness. When PGW off-loaded their shares, I'm guessing a lot of them went to so-called "sophisticated investors" for a quick buck. My guess is that a lot of them were buying them because it was at a discount (rather than loving the stock like Percy). Thus when Meridian came along, some were looking for another quick buck and sold their holding. When the price weakened, there were further sellers that didn't want to take a loss on their position. This sent the price to to 81c.

The recent strength has been encouraging. Hopefully, all the weak holders have gone, and we can look forward to some rational exuberance in the price after the AGM.

[percy]

I have a theory on the recent price weakness. When PGW off-loaded their shares, I'm guessing a lot of them went to so-called "sophisticated investors" for a quick buck. My guess is that a lot of them were buying them because it was at a discount (rather than loving the stock like Percy). Thus when Meridian came along, some were looking for another quick buck and sold their holding. When the price weakened, there were further sellers that didn't want to take a loss on their position. This sent the price to to 81c.

The recent strength has been encouraging. Hopefully, all the weak holders have gone, and we can look forward to some rational exuberance in the price after the AGM.

That makes sense.
Love HNZ,or any stock.
No. Very early on I saw HNZ set objectives.As each objective was reached I have added to my holding.I have attended all presentations and meetings.I often start off buying a small holding in a company.I like adding to my holdings as the company performs.
I listen,watch,read and keep a close eye on a number of stocks.
They do the unexpected,as Ebos did buying Masterpet,I try to figure out whether I like the new outlook/acquisition I thought Masterpet was wrong. Then I thought about it and I thought it made sense.Ebos's latest acquisition of Symbion is brilliant.I have added to my EBO holding.
First sign HNZ,EBO,etc do something I think is wrong,then I sell out.
Doing good research means I don't get it wrong very often.

[goldfish]

887,242 traded at 4:26pm which is already more than twice the average long term volume (as calculated by Tiger's Secret Volume Formula).

My current value for this is $1.147 so I see lots of head room on this one.

Best Wishes
Paper Tiger




Yes you are right of course, maybe i have spent to much time looking at pebs and xros volume thinking thats become the norm...;)

[winner69]

It's taken the gurus at s&p a few months to go through all of snoopy's analysis and they have to a large degree agreed with him and said hnz are 'developing' which is better than the previous 'negative' they had before

still the guys at s&p still don't get it do ththey'd n the paper today

[percy]

It's taken the gurus at s&p a few months to go through all of snoopy's analysis and they have to a large degree agreed with him and said hnz are 'developing' which is better than the previous 'negative' they had before

still the guys at s&p still don't get it do ththey'd n the paper today

Thanks winner69.Confirms to me that Snoopy's record [100% wrong] stays intact,while mine remains correct.Matter of fiction verses fact.
"Specifically Heartland is gaining momentum in the process of implementing business strategies to build its business position in distinct markets such as livestock finance,motor vehicle finance,and invoice financing,which are subject to less direct competition and lower contestability than traditional banking market segments."
"Heartland's rating could be raised if Heartland were to successfully further develop its business position in the next six to twelve months."
Very positive.Only negative is S& Ps concern on "NZ's economic vulnerabilities".
Well done Heartland.Nice people doing good things.
Would some kind poster please post the link to the article.

[karen1]

Good morning Percy.

http://www.stuff.co.nz/business/industries/9339545/S-P-revises-outlook-for-Heartland

[swillisam]

http://i.stuff.co.nz/business/industries/9339545/S-P-revises-outlook-for-Heartland

[percy]

Thank you Karen1 and swillisam for posting the link.
Note;Heartland is NZ funded.No overseas borrowing.
Heartland funnel their home mortgage loans to Kiwi Bank.

[K1W1G0LD]

Yawn, hohum, back to puddling around at 84-85 on a day when the market was rising too.
Nevermind, we are well posioned lol!

[gv1]

How far do you think it will run mate?

[gv1]

It's pretty much just guess work for me mate, others on this thread have done far more intensive analysis. I personally think HNZ can see $1 in the short/medium term.
Thanks mate.

[Heffner]

Agreed. If Heartland Bank can stick to their net profit forecast of $34-$37m for FY2014 I value their share at $1.35 for the higher end of the forecast and $1.24 for the lower end. This presents great value in at current prices unless their is a profit dowgrade which **touch wood** doesn't come to fruition.

Disc: Holding

[winner69]

Isn't all to be revealed at 3pm today

Percy will let us know the good news

[Wolf]

Isn't all to be revealed at 3pm today

Percy will let us know the good news
Will the annual report be released online at 3pm as well?

[M.J]

Also, the NTA is back up to 88c, with a quarter of the 'accelerated' non-core property realised. Also, opex is down to 54%, tracking well on the way down to 50%.

[M.J]

Discl: long HNZ

[lowrolling]

There is mention of acquisitions in the slides for the AGM. Did they elaborate on this or did anyone ask any questions regarding prospect acquisitions?

[pierre]

There is mention of acquisitions in the slides for the AGM. Did they elaborate on this or did anyone ask any questions regarding prospect acquisitions?

We're waiting for Percy to finish scoffing the cream buns after the AGM so he can update us on the details of the meeting.

[percy]

According to report they are!!

"Heartland New Zealand, the bank formed from the merger of Canterbury and Southern Cross building societies and Marac Finance, says it's on track to meeting its annual earnings target at the end of the first quarter.

The lender reported profit of $8.5 million in the three months ended Sept. 30, putting it on track to meet annual forecast guidance of between $34 million and $37 million, chief executive Jeff Greenslade told shareholders at today's annual meeting in Christchurch, according to speech notes published on the stock exchange."

Pleasing that the profit guidance is on track.
The two boards is a Reserve Bank requirement.
With Heartland just becoming a bank they are not affected by new Reserve Bank requirements as they meet them.
35% of shareholders have elected dividend reinvestment.
Heartland are exiting low margin loans for better margin loans.
Equity ratio very healthy 15.7%
Heartland loans are for shorter periods than other banks,ie motor vehicle,invoice loans,seasonal loans,livestock.
Good progress is being made on the troublesome property loans.
95% of loans are secured.[Thanks for asking that question Forest]
80% of funding is retail.
This years' increase in earnings will come from lower funding,cost reductions and organic growth.
Future growth will be aided by acquistions,adding to area's Heartland want to grow,such as motor vehicle lending.
A very positive meeting.Excellent future prospects.
"we are well positioned."

[Beagle]

Hi Percy,

Relying on you here, I trust you've done your research :) What's the price earnings ratio for this company if they meet next years forecast earnings ?

[percy]

Hi Percy,

Relying on you here, I trust you've done your research :) What's the price earnings ratio for this company if they meet next years forecast earnings ?

Did my research a long time ago,before I brought,and then brought more as the fundamentals improved.!
Number of shares on issue is 392,554,579.
Projected earnings $34mil == EPS 8.66 cents per share.PE 9.8 at 85cents.
Projected earnings $37mil == EPS 9.42 cents per share.PE 9 at 85cents.
Earnings growth.This year's adjusted earnings $24 mil.Growth rate at project $34mil is 41.67%.Growth rate at projected $37mil is 54.16%.
Dividend yield at 85cents is 7%.This will most probably increase as profit increases.
Decide your own PE considering growth rate.PE 10 gives SP of 90 cents to 95cents. PE 15 gives SP of $1.27 to $1.35 PE 18 gives SP of $1.53 to $1.62.

[CJ]

Decide your own PE considering growth rate.PE 10 gives SP of 90 cents to 95cents. PE 15 gives SP of $1.27 to $1.35 PE 18 gives SP of $1.53 to $1.62.by comparison, the Ozzie banks are about PE = 15

[simla]

Decide your own PE considering growth rate.PE 10 gives SP of 90 cents to 95cents. PE 15 gives SP of $1.27 to $1.35 PE 18 gives SP of $1.53 to $1.62.
Or a growth company could have a PE of 20 or more. Percy, the presentation was cagey on future growth. I got the impression the growth to date was from fixing the company after putting it together but that they had achieved most of that now. Did you gain any feel for how positive they were about future growth prospects therefore?

[percy]

by comparison, the Ozzie banks are about PE = 15

Thanks for that CJ.
Any idea of their projected growth rate??? lol.
I see you live in Auckland.Hope you can make Monday's get together at Horse & Trap,3 Enfield Street,Mt.Eden from 5pm.

[percy]

Or a growth company could have a PE of 20 or more. Percy, the presentation was cagey on future growth. I got the impression the growth to date was from fixing the company after putting it together but that they had achieved most of that now. Did you gain any feel for how positive they were about future growth prospects therefore?

The projected growth to $34mil to $37mil is mainly as you say,fixing the company,and reduced cost of funds.So that is for the year ended 31/7/2014.
For the following year ended 31/7/2015 the earnings growth will come from product,and acquisitions.I do not have any ideas of what that growth will be.I will be looking at the half year,then the full year,and any acquisitions before I can get a reasonable figure to work from.

[simla]

Thanks, Percy. They're a switched on company and I'm a happy holder. Thanks for your work on it.

[iceman]

Thanks Percy for taking the time to summarise your reading of the AGM for us. It is very much appreciated by this happy holder !

[goldfish]

Indeed, thanks for the info percy... Lets hope the good news translates into a sp rise sometime.

[janner]

Indeed, thanks for the info percy... Lets hope the good news translates into a sp rise sometime.

Some time !!.. Not a vote of confidence is it ??..

[winner69]

The important thing Percy ......what was Jeffs body language like?

Did he do a Sodi at the Diligent meeting? Did he keep looking up and to the left?

How engaged were the rest of the board when the speeches were being made?

More important than the words this

Cheers mate

[janner]

Was not there.. Agree W69.. so much more can be learnt from those Behind .. As one looks to those in the fore..

Disc. Holding..

[blobbles]

My P/E for the company was 10-15, but with that sort of earnings growth... 15-20 maybe in order? I doubt they can sustain it, else I would say P/E of 30!

Time to top up if it stays this low me thinks...

[winner69]

ASM report http://www.stuff.co.nz/business/industries/9353852/Heartland-looks-at-acquisitions

That Kevin Arscot quoted seemed rather pissed off with progress ......obviously thinks hnz should be more aggressive and use that 15% equity ratio better .....in other words take more risk?

Seems he shouldn't be a hnz sharehold .....he just get the story does he

[percy]

ASM report http://www.stuff.co.nz/business/industries/9353852/Heartland-looks-at-acquisitions

That Kevin Arscot quoted seemed rather pissed off with progress ......obviously thinks hnz should be more aggressive and use that 15% equity ratio better .....in other words take more risk?

Seems he shouldn't be a hnz sharehold .....he just get the story does he

Yes, I think we see that often in companies.A lot of shareholders expect huge returns very quickly.
Heartland, should they have stayed a finance company may have taken on more risks.
Heartland "The Bank" is not prepared to take on those risks.They want "better quality" loans with "better margins."
I think "The Board" and most shareholders are very pleased with the progress.When "The Chairman" noted the milestone achievements,I know I thought they have made excellent progress.You will note all through this thread I have been more than happy with the progress Heartland have made.In fact I think it has been outstanding,so I would have to disagree with Kevin Arscott.