The objective of this post is to consider cashflow, both in and out over the subsequent one year period after reporting date. This will help evaluate the ability of Heartland to repay debentures due for repayment in the 12 months following the end of year account reporting date.
The following information for FY2016 is derived from note 20 in AR2016 on 'Liquidity Risk'.
1/ Contractual information is extracted from the table titled 'Contractual Liquidity Profile of Financial Assets and Liabilities.
2/ Expected information is calculated by multiplying the 'Contracted' risk by the Expected Behaviour Multiple.
3/ The Expected Behaviour Multiple is dervied from Heartlands own results, back in the day they printed both 'Contracted' and 'Expected' behaviour.
Loan Maturity |
Expected Behaviour Multiple |
FY2014 Financial Receivables Maturity: Contracted/ Expected |
FY2015 Financial Receivables Maturity: Contracted/ Expected |
FY2016 Financial Receivables Maturity: Contracted/ Expected |
On Demand |
100% |
$50.254m / $50.254m |
$37.012m / $37.012m |
$84.154m / $84.154m |
0-6 months |
132% |
$477.190m / $629.445m |
$664.557m / $877.215m |
$743.389m / $961.274m |
6-12 months |
132% |
$367.564m / $483.727m |
$450.638m / $594.842m |
$484.420m / $639.962m |
Note that in the above table, a 'loan maturity' represents an expected
inflow of cash from a Heartland bank perspective.
Deposit Maturity |
Expected Behaviour Multiple |
FY2014 Financial Liabilities Maturity: Contracted/ Expected |
FY2015 Financial Liabilities Maturity: Contracted/ Expected |
FY2016 Financial Liabilities Maturity: Contracted/ Expected |
On Demand |
3.01% |
$629.125m / $18.922m |
$748.332m / $22.450m |
$718.587m / $21.630m |
0-6 months |
32.4% |
$748.129m / $242.431m |
$1,213.450m / $395.102m |
$892.944m / $289.314m |
6-12 months |
36.4% |
$538.050m / $195.682m |
$686.159m / $249.762m |
$837.844m / $304.975m |
Note that in the above table, a 'financial liability (debenture) maturity' represents an expected
outflow of cash from a Heartland bank perspective.
If we now take the expected cash inflows and subtract from those the expected cash outflows we can examine the expected net cashflow from a 'one year in advance' perspective.
Deposit Maturity |
FY2014: 'Expected' combined Loan and Deposit Cashflow |
FY2015: 'Expected' combined Loan and Deposit Cashflow |
FY2016: 'Expected' combined Loan and Deposit Cashflow |
On Demand |
$31.332m |
$14.562m |
$62.524m |
0-6 months |
$387.014m |
$482.113m |
$691.960m |
6-12 months |
$288.045m |
$345.080m |
$334.987m |
Total |
$706.391m |
$841.755m |
$1,089.471m |
I should note here that 'expected' behaviour from future and existing depositors can be modified. Heartland could put a special offer into the market to attract more deposit money if required, for example. Nevertheless even without this I see little cause for concern if customer behaviour pans out as expected.
From an historical perspective, the 'On Demand' net position outlook for FY2015 looked a little weak. But there has been a lot of promotion in the market regarding Heartland's 'on call' rates over the last year. So it is fair to assume that any potential problem in this area has been well and truly fixed.