Ok I had to google Qomolangma....Mount Everest...WOW...interesting
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Ok I had to google Qomolangma....Mount Everest...WOW...interesting
The petition is gaining momentum,or not?:)
https://www.change.org/p/ministry-fo...e-south-island
https://www.stuff.co.nz/timaru-heral...h-island-crazy
The sanctuary will be sponsored / supported by Heartland and will be known as Hukarere Repara Marae or something like that
Good use of their funds
Industry Group Risk
From AR2017 note 18c, the greatest 'business group' risk in dollar terms is agriculture, with $757.004m worth of assets. This represents an increase of $129.334m over the previous year.
$757.004m/ $3,931.239m = 19% of all loans
Regional Risk
From AR2017 note 18b, the greatest regional area of credit risk in dollar terms is 'Rest of the North Island' , with $888.080m worth of assets. This represents:
$1.037.873m/ $3,931.239m = 26% of all loans
The 'Rest of North Island' loans (which excludes Auckland and Wellington) have risen 18% in numerical terms over the year, outstripping the growth of the previous largest region Auckland which only grew by 11% in gross loan amounts (Auckland still covers 24.0% of all loans) .
Given 'Agriculture' loans have grown by 18% over the year, this 'growth' could reflect yet more compounding of agricultural interest charges into existing loans. According to the FY2017 Annual Results presentation (page 15), dairy represented 8% of Heartland's total loan book.
0.08 x $3,931.239m = $314m
At an interest rate of 8%, assuming no interest was actually paid, this would increase the value of the Heartland dairy industry loan book by:
$314m x 0.08 = $25.2m
Since the actual agricultural loan balance increased by $129.334m, we can assume that more net new agricultural loans were taken out, rather than just rolling over the dairy loan book. This is logical when by 30th June 2017, it was becoming clear the dairy crisis was past its worst.
This is very much a contrast to traditional market leader ANZ.NZ who kept their total rural loan book static over the similar period (for the second year in a row) ($NZ19.205m @ 30th September 2017 vs $NZ19.226m @ 30th September 2016). I think agricultural loans will remain the key sector to watch when trying to forecast potential Heartland loan problems for the future.
Looked at just in agricultural terms, you could say that Heartland are potentially compounding their own problems for the future. Or is it just a case a putting more emphasis on their rural roots? Yet because the loan book in total has grown, reducing Heartland's relative reliance on Auckland is probably a positive.
The multi-year picture is shown below:
2012 2013 2014 2015 2016 2017 Largest Regional Market Auckland (30%) Auckland (30%) Auckland (25%) Auckland (26%) Rest of North Island (25%) Rest of North Island (26%) Largest Industry Group Market Agriculture (24%) Agriculture (21%) Agriculture (16%) Agriculture (17%) Agriculture (18%) Agriculture (19%)
SNOOPY
Thanks Snoopy Interesting observations around yet more compounding of agricultural interest charges into existing loans
There isn't any 'proof' in the industry sector figures that Heartland are further compounding their rural loans. They could be strictly enforcing repayment of existing loans, while writing even more new rural business loans than we think. I put in the comparison with ANZ.NZ, because ANZ in New Zealand are the largest rural loan provider in dollar terms. Yet in percentage terms ANZ.NZ's exposure to rural is only just over half that of Heartland. That makes Heartland the greatest rural finance exposure you can buy on the market 'by far' from an NZ investor perspective, helped by the fact that you cannot buy shares in ANZ.NZ directly - you can only buy into the whole ANZ group. Yet, as 'market leader', I do think that the fact that ANZ.NZ has decided not to increase the size of their rural loan book at all as telling. Given Heartland's dairy loan exposure is going up in percentage terms and the rural loan book is growing faster than the loan book average, I do believe it is likely that dairy loans are still being compounded at Heartland though. And Heartland may be 'winning friends' taking a less hard nosed policy than ANZ.NZ!
I know Heartland are targetting the SME end of the market. I hadn't heard about that extending to the dairy portfolio, but Percy may be right. Of course more small loans making up the rural loan book would not show up in the bare gross loan figures for agriculture.
SNOOPY
ANZ lend heavily on rural farm mortgages.They are very long term,for very large sums.
HBL tries to avoid these loans,although they have lent on dairy conversions,which can mount up.
As far as I know ANZ do not lend on livestock or do seasonal loans.A farmer is therefore likely to have a mortgage with ANZ, and use HBL for short term borrowing.
As those observers who choose to operate the less selective part of their memory will attest, back in 2012 Heartland had massive issues with bad property loans: first selling them off to George Kerr, then buying them back and isolating them in a separate 'investment' category so the rest of the loan book wasn't tainted. The Queenstown property market turned for the better and Jeff and Geoff at Heartland 'got lucky' (from my outside of the tent perspective) or 'used their great skill to turn the company around' (from a Heartland believers perspective). I didn't lose money in the finance sector collapse, so didn't feel the need to recover the money I didn't lose by investing in Heartland early. I have no regrets at all about not being a Heartland shareholder so far. But as Heartland have strengthened their balance sheet and have more of a successful operational record, I would be foolish not to consider investing in a much derisked Heartland from here on in.
I don't see a particular problem with Heartland financing property developments, provided it is kept in proportion in the overall loan book and not considered a 'property can never go down in value' golden goose.
SNOOPY
I think it would depend on how much equity and hence borrowing headroom a farmer has in her farm Percy. If you have enough credit worthiness, a farmer could draw down a loan against their property and use that money 'however they like' (and that includes buying cows). If the bank was less willing to extend 'property credit' then Heartland could 'come into play'. But so could PGG Wrightson who are prepared to loan 'finishing money' on any livestock that goes through their yards (even though they don't call it a loan!). There are always 'options' out there if you are a good farmer. And if you are 'not so good', then a loan from Heartland gets more likely!
SNOOPY
Yes ex UDC man Brian Jolliffe certainly took PGC to near bankruptcy.
That is the reason HBL still avoid property developers like the plague.
Even spread of funding, matched by an equal spread of lending reduces the risks,as does having a great Reverse Equity loan book.
Savvy good farmers [and SME]do not like being too dependent on one lender [bank].
I hope HBL have a good strategy for dual listing.?
Has been a total waste of time for two other companies I hold shares in,EBO and TRA.
Snoops. PGGWrightson finance lending is all through Heartland.Check this out
https://www.pggwrightson.co.nz/Services/Finance
looking to buy udc in the future?
Restructuring and ASX listing. A bit on the nose for NZ investors. Essentially saying they wont fully support capital raises.
plenty of dodgy lending going on in aus
What happens to their banking licence?
Wouldn't want to lose that... investors (ie term depositors) might fret
It is less than than three years ago that the current structure was put in place:
Heartland - Strategy Update
Worth having a (re)read of the rational at that time.
Heartland Bank per se to become less and less of Group’s activities has focus moves to Harmony, Seniors and other finance related initiatives?
Heartland Bank will still operate in NZ as a bank,and still need to operate as per The Reserve Bank of NZ rules and regulations.
Pretty lukewarm response from fellow shareholders a sentiment shared by this hound as well.
RBNZ stipulations are there for sound reasons and I will need a ton of convincing to vote in favour of yet another reorganization.
As for the cost of an ASX listing and its ongoing costs, come on. really ? My goodness just look at how much capital they have raised from N.Z. shareholders in the last 12-18 months ! Surely they are not implying that they have exhausted their ability to raise money on the NZX or that they need vastly more than what's already been raised ?
Is this tacit admission of an inability to compete in banking in NZ?
Disc: Not holding.
The way I see it, NZ is a good steady profitable business but the big growth opportunities are in Australia. The ASX listing will certainly get it noticed and easy access to Aussie capital. Think MQG
MASSIVE opportunity for low risk high margin reverse equity mortgages there with all the major banks capital constrained and unwilling and unlikely to be willing to compete in the foreseeable future. I see the huge potential growth as a key attraction of Heartland compared to other banks. If its necessary to restructure to support this growth then that's what needs to be done and provided its all explained properly and logically I would support it.
Love that comparison with MQH
But some might see Heartland Group Holdings as more ‘risky’ than Heartland Bank and it be related down a bit by fundies.
Heartland isn't the full story of financing within PGW Kiora. I was referring to a finance product of the Livestock division called "Go" that is completely independent of Heartland. PGW are very careful not to call it a finance product, so as not to offend Heartland I suppose. But "Go Beef" and "Go Lamb" are ways for financing sheep and cattle for fattening up, with PGW Livestock clipping the animal sale ticket at both ends of the fattening process - but only when the animals are bought and sold through PGW yards. I call "Go" the latest (third) incarnation of PGW Finance, after the previous two incarnations were sold to 'Rabobank' and 'Heartland' respectively. PGW won't admit to having their own finance division again just yet. But "Go" certainly passes the 'finance division' duck test.
PGW still clips the ticket on loans they send Heartland's way. But that arrangement is far less significant in scale, than what PGW themselves are doing with "Go" in house now,
SNOOPY
Date 'Stressed' Loans on the books (X) Net Financial Receivables (Impairments deducted) (Y) (X)/(Y) Impaired Asset Expense (V) Write Off (W) Gross Financial Receivables (Z) (V)/(Z) (W)/(Z) EOHY2015 $33.469m $2,722.433m 1.23% $5.102m $1.456m $2,749.232m 0.19% 0.05% EO2HY2015 $32.824m $2,862.070m 1.15% $7.003m $2.119m $2,893.724m 0.24% 0.07% EOHY2016 $29.147m $2,928.601m 1.00% $5.610m $14.282m $2,951.075m 0.19% 0.48% EO2HY2016 $32.864m $3,113.957m 1.06% $7.891m $4.381m $3,140.105m 0.25% 0.14% EOHY2017 $28.646m $3,334.800m 0.86% $6.892m $6.552m $3,361.934m 0.21% 0.19% EO2HY2017 $38.341m $3,545.896m 1.08% $8.123m $5.119m $3,575.613m 0.23% 0.14% EOHY2018 $44.455m $3,814.979m 1.18% $10.416m $8.092m $3,814.979m 0.27% 0.21% Total $51.037m $42.001m Average 0.23% 0.18%
Once again I am only considering the time period following the acquisition of the reverse mortgage business, because this time period best reflects the 'modern' Heartland going forwards.
I have defined a 'stressed loan' ( > 90 days overdue (collective loans) OR individually impaired OR Restructured Assets) in the above table as a loan (or part of a loan) that has 'come to management's attention' (by being classified in the accounts as described) , but is not impaired. (I have finished the calculation of the 'Stressed loans' as I have defined them, by subtracting out the impaired portion.) The important thing is that there is no overlap between the loans or portions of loans in the 'stressed loan box' and the 'impaired loan box' in the table above, the way I have defined them.
So what does the above table mean?
The 'impaired asset expenses' and the 'write offs' over time should converge to a similar total. The fact that the summed impaired asset expenses are currently 20% higher than the summed actual write offs, one might interpret as Heartland being conservative in their provisioning. If it had been the other way around, with summed write offs exceeding summed impairment provisions, then one could argue that Heartland were massaging their profits by under-providing for bad debts. There is no evidence of this in the figures. In fact, the increasing divergence between the normalised V/Z and W/Z percentage averages since I last reported on these figures would suggest that Heartland has become slightly more conservative in their bad debt management over the last year.
Because loans are often written off in a lumpy way when compared across adjacent time periods, I don't believe it makes much sense to draw any conclusion from what happens in a single year.
If you believe, as I do, that a good finance company should be able to discern if a loan becomes 'stressed' before it has to be written off , then you should see a correlation between how X/Y moves and how W/Z moves. One would expect the X/Y percentage figure to be greater. If it were the same, then that would be equivalent to saying that every stressed loan ends up written off. Thankfully that doesn't happen!
Looking at the previously quoted post, my eye discerned a decreasing 'Stressed Loan' percentage even as the 'Impairment Provisions' remained steady. This is consistent with being 'too kind' when judging 'Stressed Loans', to the extent that such kindness might backfire leading to a blow out in 'Impairment Provisions at some future date. I am pleased to see that over the last year, that 'apparent trend' has reversed. The Stressed loans are going up with the Impaired Percentage going up. While having more impaired loans/write offs is never great, the fact that they are being tracked and acknowledged in a consistent way is an indicator of less nasty 'bad debt' surprises in the future. This is what we want. The accounts reflecting the true picture of what is happening 'behind the scenes'.
SNOOPY
It has been clear to me from their recent reports that the big growth in REL in Australia will be a strain on cashflow and require lots of funding. As you say Beagle, these loans are very low risk, have very limited competition and HBL is the biggest in Aussie. So I am not surprised they are looking at options in OZ, outside of their current funding from Commonwealth Bank, to support this massive growth opportunity.
But a concern would be if they intend to grow the business outside of Reserve Bank regulations in much more risking "finance company" type lending and is something to watch for in the near future.
Not sure what to think of the dual listing though !
Good point. Let's have a look six months down the road to see how the loan allocation into different categories might be evolving.
An update on how the half year has shaped up to the previous full year result. The information below has been extracted from the half year report for HY2018.
Our test requirement is:
Highest single new customer group exposure (as a percentage of shareholder funds) <10%
Regional Risk
From reference Note 12b, the greatest regional area of credit risk in dollar terms is Auckland, with $1,074.776m worth of assets. This represents:
$1,074.776m/ $4,213.597m = 26% of all Regional Group Riskloans
So 'normal service has resumed' with the former concentration champion, 'Rest of the North Island' back down to :
$1,065.767m/ $4,213.597m = 25% of all loans.
Auckland at 26% of all loans is high, yet still below historical end of year concentration levels. But I don’t rate that concentration of loans in Auckland as being an issue. Particularly so when ‘Auckland’ is such a varied catch all group. I still don't know if 'Auckland' capture the Harmony investment stake too? The fact that 'Auckland' is likely to cover a whole set of businesses that are headquartered in Auckland but are not restricted to doing business there is why I would tolerate an 'overweight' regional exposure to Auckland.
Industry Group Risk
From reference Note 12c, the greatest 'business group' risk in dollar terms is Agriculture, with $754.754m worth of assets. This represents:
$754.754m/ $4,213.597m = 18% of all loans
This is slightly down on FY2017, when agriculture was
$757.004m/ $3,931,239m = 19% of all loans
Rural loans are quite a broad church. And of those 19 percentage points, only 8 are allocated to the heavily leveraged and volatile dairy market (@EOFY2017). 8 percentage points is still below my 10 percentage point maximum being allocated to one industry. Is the decrease in the rural loan percentage evidence of some of those stretched rural loans being paid down by those hard hit farming customers at last, as Percy hinted at? In dollar terms there is not much of a change in the loan balance, so perhaps I am just seeing what I want to see? That relentless Auckland loan balance, up nearly 14% in just six months, is in itself de-risking the group's rural loan book in percentage exposure terms.
SNOOPY
Slightly off the present topic,
A while ago we were discussing how hard the internet banking was to use, shortly after that I am sure some of you will have had the chance to download the Heartland App, I downloaded it a week or so ago and it wouldn't operate on my iPhone 5, the app has been updated and it now works. Good stuff except it seems to only give me the ability to look at my savings type a/c's and not move money around a/c's or to another bank. I will copy and paste (below) how the IT dept explained it to me,
"Glad to hear you’re now able to login to the app.
We've released the app with a focus on making savings and deposit accounts easy to manage, so at the moment the app does not support our transactional accounts, like Everyday accounts. Providing this access is on the radar for future developments, as we realise this is something that will be useful for customers like yourself. At this stage we’re unable to give timings around when this feature might become available."
Interested to know how others have found the new app.
Blocky
I wouldnt have even thought about that as its a kinda basic thing isn't it?
And then I got wondering. Heck can I transfer money with my banks? So I went into my ANZ and my Kiwibank apps and both allow me to transfer money between my accounts and to other accounts.
I think the problem is that everything at Heartland goes via the Westpac.
You can do HEAPS AND HEAPS with the Heartland Mobile App ...in theory
https://www.heartland.co.nz/mobile-app/questions
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 FY2017 is derived from note 20 in AR2017 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 FY2017 Financial Receivables Maturity: Contracted/ Expected On Demand 100% $50.254m / $50.254m $37.012m / $37.012m $84.154m / $84.154m $57.040m / $57.040m 0-6 months 132% $477.190m / $629.445m $664.557m / $877.215m $743.389m / $961.274m $618.271m / $816.118m 6-12 months 132% $367.564m / $483.727m $450.638m / $594.842m $484.420m / $639.962m $521.215m / $688.004m
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 FY2017 Financial Liabilities Maturity: Contracted/ Expected On Demand 3.01% $629.125m / $18.922m $748.332m / $22.450m $718.587m / $21.630m $836.829m / $25.189m 0-6 months 32.4% $748.129m / $242.431m $1,213.450m / $395.102m $892.944m / $289.314m $1,191.957m / $386.194m 6-12 months 36.4% $538.050m / $195.682m $686.159m / $249.762m $837.844m / $304.975m $729.145m / $265.409m
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 FY2017: 'Expected' combined Loan and Deposit Cashflow On Demand $31.332m $14.562m $62.524m $31.851m 0-6 months $387.014m $482.113m $691.960m $429.924m 6-12 months $288.045m $345.080m $334.987m $422.595m Total $706.391m $841.755m $1,089.471m $884.370m
Once again lots of numbers here. Now there are four years of consecutive data on display, we can start to get a view on what 'normal' numbers should look like. So what numbers in the above table(s) are worthy of further attention?
The purpose of this exercise is to work out if Heartland has an identifiable chance of running out of cash. A customer might not be happy if Heartland decides not to offer them a loan. But they will likely be even more unhappy if they have loaned Heartland money, be it in a short term debenture or a cash account, and Heartland does not have the cash to pay them back. Whether cash is available depends on the balance between cash coming into the company and cash going out. This 'balance' is reflected in the bottom table, and this is the table that deserves our attention.
If a cash depositing customer is denied their cash on maturity, this would be equally annoying whether it happened on a 6-12 month term deposiit a 3-6 month term deposit or a cash deposit. So it is the individual figures in the tables that are important, not the totals. Even if an individual figure comes out negative (which none have), it is not certain that Heartland will default. It is not certain because 'expected' behaviour can be changed with incentives: Incentives like offering a higher than market interest rate for a defined period of management concern, for example.
From an historical perspective, the 'On Demand' net position outlook for FY2015 looked a little weak. IIRC there was serious promotion of Heartland's 'on call' account at the time and new money flowed in. Some of this money belonged to members of this forum who responded to the incentive of Heartland offering 3% at the time (? - please correct me forum members if I have remember this figure incorrectly) on their call money just as the big banks were reducing their on call deposit rates to near zero (ANZ, BNZ and Westpac now offer just 0.1% on 'at call' deposit money). By EOFY2016 there was a relative abundance of 'net on call cash available' ($62.5m) and that nearly halved to a still acceptable (because Heartland hasn't seen fit to boost it) $31.9m at EOFY2017. I see that the 'on deposit' rate at Heartland was reduced to 2.75% last year, which no doubt took a lot of the froth out of the cash market from those seeing stars when the rate was 3% and above.
Another anomaly was the 0-6 month maturity outlook from EOFY2016 (30th June 2016). IIRC this was a period when there was real uncertainty about the milk price and Heartland may have shied away from short term loan deals to dairy customers over this time, and thus created a higher than originally planned for net maturity of 0-6 month debentures. That 'bump' also looks to be ironed out in the FY2017 figures.
I see Percy is once again 'on the ball' and has replied to this post before I have finished it. You are right about us having this discussion before Percy, this is at least the fourth time. But that doesn't mean it is a waste of time. Short term cash flow is an issue that never goes away. And an imbalance in these figures is an indicator that Heartland might need to offer higher interest rates in the future to fix any upcoming cashflow situation. Offering above market interest rates, if only for a time, means lower profits for shareholders. And that is something that shareholders should know about! Given all of this information is now historical, we can compare what was indicated with what actually happened. It looks like Heartland was not forecasting any unusual cash shortfall on the 'net' existing loan book for FY2018, so no unusually high interest rate deals would be on offer to customers over the 30th June 2017 to 30th June 2018 period. Is that what happened (I haven't kept close tabs of Heartland deposit rates over the year)?
SNOOPY
It is the function of all banks' treasury dept to balance supply/demand.
This is why we notice the variations in deposit interest rates at different maturities.
Any bank having an over supply of money [maturities] will lower their interest rate for that time.
If they see more demand, they increase the interest rate for that period.
I would not try to second guess any bank's treasury dept,as that is their job,and all banks seem to manage supply/demand well.
If memory serves me correctly we have had this discussion previously.Nothing has changed in banks' treasury depts. since then.
If they see themselves running short of capital,they either sell something off,or go to shareholders for more funds.
Time to update the "Liquidity Buffer ratio" for FY2017.
Dear old Colin has now 'left the building', but what better way to immortalise his contribution to society than continuing with the 'Meads Test', and the 'solid as' quote with which he will alwys be identified? When Colin told us all those years ago that a certain finance company was 'solid as' with reference to investing debenture money, the end result was that this cash became tied up in illiquid property developments. So although the company had enough money to pay out their debenture holders 'on paper' and appeared to be operating profitably, the debenture holders could not get their cash back. The 'Meads Test' (as christened by Snoopy) is one method of finding out if a finance sector company really is 'solid as'. The basic data I need to check this out has already been calculated (see above). So let's get going.
To check out the balance between monies borrowed and monies lent and matching up those maturity dates using a one year time horizon. The equation we are looking to satisfy is:
(Total Current Money to Draw On)/(Expected Net Current Loans Outstanding) > 10%
On the numerator of the equation, we have borrowings.
HLB Borrowings
1/ Term deposits lodged with Heartland. $2,573.980m 2/ Bank Borrowings $616.838m 3/ Securitized Borrowings total $214.365m 4/ Subordinated Bonds $3.378m 4/ Subordinated Notes $21.180m Total Borrowings of (see note 13) $3,429.741m
Note 13 does not contain a clear breakdown of current and longer-term borrowing amounts and their maturity dates.
Banking facilities are provided by CBA Australia but for both Australia and New Zealand. These facilities are, I believe, in relation to the Australian part of the 'Seniors Reverse Mortgage Portfolio'. These banking facilities are secured over the homes on which the reverse mortgages have been taken out. These CBA loans have a maturity date of 30th September 2019. That means they are classed as ‘long term’ for accounting purposes (talking from a 1st July 2017 looking forwards perspective). And Heartland can’t rely on CBA Australia as a source of short-term funds.
The information given in note 13 on the securitized borrowing facilities is as follows:
Securitized bank facilities total all in relation to the Heartland ABCP Trust 1: $300.000m maturing on 1st February 2018 (*) less Current level of drawings against this facility $214.365m equals Borrowing Headroom $85.365m {A}
(*) I do not expect any problem in rolling this facility over for another year.
HLB Lendings vs HLB Borrowings
Customers owe HNZ 'Finance Receivables' of $3,545.897 There is no breakdown in AR2017 (note 11) as to what loans are current or longer terms. However, if we look at note 20, we can derive the expected maturity profile of total finance receivables due over the next twelve months.
On Demand 0-6 Months 6-12 Months Total Expected Receivables Due $57.040m + $816.118m +$688.004m = $1,561.162m less Expected Deposits for Repayment $25.189m + $386.194m + $265.409m = $676.792m equals Net Expected Cash Into Business $31.851m $429.924m $422.595m $884.370m {B}
If more money is coming in from customer loans being repaid, than is having to be repaid to the debenture holders, then this is a good thing for debenture holder liquidity. That is the case here.
Summing up:
(Total Current Money to Draw On)/(Expected Net Current Loans Outstanding)
= $85.364m / $884.370m
= 9.7% < 10%
=> Close enough to 10% (with rounding) so Pass Short term liquidity test
Of course there are other ways to satisfy liquidity requirements. Issuing new shares or corporate bonds are two, and Heartland has done both in the past. But sometimes these are not options when market conditions change. This is why it is important to retain some 'headroom' with your existing borrowing arrangements.
SNOOPY
Didn’t beat guidance — disappointing
But was in near the top of the guidance range
http://nzx-prod-s7fsd7f98s.s3-websit...214/284489.pdf
Wow ...$77m in F19
That’s +14% ....stronger growth F18
Full year dividend same as last year
What’s happened to ever increasing dividends year on year that some expect/hope for?
"
Achievements for the year ended 30 June 2018 o Launch of the Heartland mobile app for depositors and savers "
But its an App that doesn't do anything
Tone of announcement pretty downbeat ...not the same excitement as in the past. Is management getting a bit bored and Tired?
A lot of if it wasn’t for this and wasn’t for that the result would have been this sort of stuff — that’s a bit of a worry
That at least will keep snoops busy normalising things.
I get the impression they planning to move to the ASX completely over time....
move to aus will bring bigger growth and aquisitions im picking
As expected a very stable strong result.
The surprise was the 31% growth in the Australian Reserve equity loan business.I think this explains the need to restructure Heartland, so they can continue to grow this business without NZ Reserve Bank capital ratio constrainments.Will over time greatly improve ROC and ROE.
Also pleasing 12% growth in NZ RELs.I note the average size loan appears to be just $30,000,spread over 15000 clients.
Open for "business," "livestock" etc are gaining traction.
Increase in Harmoney lending still means HBL are being picky on what they lend on.
I also note Heartland are continuing to reduce their risk from large loans,and moving their lending to a greater number of smaller loans.
Motor vehicle lending is still strong.
A very good outlook with continuing strong organic growth,while still driving down costs.
Thank you Heartland.Well done.
Market always forward looking so here's my take on forward guidance.
Mid point of $76m on 560.1m shares gives forecast earnings of 13.57 cps, call it 13.5 cps because some shares will be issued in lieu of dividend during the year.
Now what's the right PE given their growth rate and compared to their peers ? Time for a peer review and detailed analysis of comparative forecast growth rates...will look at that when I have time and post my thoughts.
In the meantime, I wish I could say I was surprised by the rising impairments but I'm not. As I have warned before...start making low deposit loans and they come back and bite you.
Overall a pretty reasonable result I feel. Highlight for me is growth in reverse equity loans especially in Australia, the low point the level of impairments.
Gut feel this is a hold. I feel a PE of about 13.5 is right and on 13.5 cps this gives me a target price of $1.82 by early 2019. At $1.74 less the pending 5.5 cps final dividend due shortly, (net price $1.685) and assuming 9.5 cps in divvies in FY19 holders are looking at a gross yield inclusive of imputation credits of (9.5 / 168.5) / 0.72 = 7.8%. I think that's pretty good and makes the shares a good hold.
The trouble I see with Reverse Mortgages is that there is nothing very special in them. Sure HBL have some first mover advantage. But lets face it. Low loan to asset ratio RE loan, high interest - no reason at all to prevent other banks entering the fray. And then they can do much larger loan /asset ratio loans and start squeezing margins.
All the Australian banks are heavily capital constrained and these loans need capital. The major's in Australia have shown a lack of interest in this type of lending for a VERY VERY long time. I think this ultra low risk Australian lending is the jewel in the crown of the company whereas no deposit unsecured Harmoney lending will continue to be the thorn in their side. Thankfully the former is many times larger than the latter and growing at a vastly quicker pace.
Love the way they present numbers
Tout the EPS going up from 12 cents to 13 cents ......pretty good really
Put a couple of decimal points in the sums
EPS increased from 12.33 cents in F17 to 12.53 cents in F18 - a miserly 1.6%
That’s probably why divie not up ...new capital not working that well (yet)
This is a good achievement
Significant developments and key initiatives around employee diversity, including partnership with Global Women and Champions for Change, and introduction of flexible working policy
I regret selling out of HBL even more now (This one is a cracker - https://www.globalwomen.org.nz/our-p...483/jan-thomas)
Capital ratio.ROE,ROC.
Without having to have satisfactory NZ Reserve Bank capital ratio to support RELs it means Heartland Group will be able to grow RELs ,and use make better use of their capital to grow their Australian operations.
Heartland Bank will off course still need to comply with NZ Reverse Bank banking ratios.
This ones a cracker ...hopefully not just been by swayed by fellow directors to be a champion and doing it because he truly believes
https://www.globalwomen.org.nz/our-p...eff-greenslade
But I guess the best of the latest results is another free Maori language course! My two new words for today are:
whakaro - a state of mind
tautoko - champion
Hey - this must be worth more than just the measly increase of the EPS by only 1.6%! BTW - what is measly in Maori? They probably never will teach us that particular word :);
actually i was in a rush think my sentencing was wrong it should be hbl would get taken over by a bigger fish if the reverse mtges become big business.
Yes it seems trite to have a presentation to analysts and round the EPS to the nearest whole number. I smelled a rat straight away.
Off note 8 http://nzx-prod-s7fsd7f98s.s3-websit...214/284523.pdf in the financials and based on diluted shares on issue last year I get EPS rising from 12.24 cps to 12.535 cps a gain of just 2.4%. The reason is the growth in impairments. But wait there is more....
We have a new accounting standard that requires them to model impairments over the expected life of the loan
http://nzx-prod-s7fsd7f98s.s3-websit...214/284490.pdf - see more at page 14.
Two things occur to me.
1. This is proof of what I have been saying all along that their methodology of measuring impairments in the past has been to understate them.
2. Its does seem awfully convenient that they are taking this charge of $14-18m net directly as a charge against equity, i.e. an extraordinary item below the normal profit line...after all we can't have such mundane things impacting management's performance bonus next year can we !
Holding.... but less enthusiastic than I was.
But wait there's even more...its all okay because based on this year's forecast EPS will grow from 12.535 cps to 13.5 cps, growth of 8% !
Once the guru analysts work out that EPS is going to grow at 8% this year the share price will really take off !
I think it is a good result . Have bought more and have a lot. Think women are very important especially for reverse mortgages.
I used basic eps ..you used diluted eps ...not much in it
Bad debts up but I reckon ‘proactive provisioning’ had a lot to do with it (wasn’t the result close to guidance)
I see that new accounting standards mean bad debt provisions needs to increase by about $25m next year.
Goes against equity so not a profit impact ....but that’ll help ROE a bit
Well if EPS next year is not at least 13.51 cps so they can round it up in the analyst presentation in FY19 to 14 cps what's the bet that they actually use decimal points to depict EPS more accurately next year lol
This sort of creativity is why I have only a moderate stake and am disinclined to increase it. I think you and Percy will have to be very patient to get your $2.50 :p
7.8% gross yield is the main reason I am holding. Not expecting great things from the SP in the next year, but who knows, I could be pleasantly surprised.
At the risk of copping a ban I dont understand why they aren't encouraging language skills to communicate with their growing markets.
From Te Puni Kokiri
Māori home ownership rates are low and declining, however most Māori still have a strong desire for homeownership.. Māori are the Housing Corporation New Zealand’s (HNZC) largest applicant group and the second largest occupant group.
Existing barriers to many Māori owning their own homes include:
- low incomes;
- high debt levels;
- poor access to finance;
- the cost of home ownership (particularly deposit levels, interest rates and purchase price);
- inability to get and use information about home ownership;
- inability to raise housing finance against multiple-owned land; and
- inter-generational experience.
[QUOTE=Beagle;724751.
In the meantime, I wish I could say I was surprised by the rising impairments but I'm not. As I have warned before...start making low deposit loans and they come back and bite you.
.
The increase in impairments comes from provisioning very large loans.
Nothing to do with low deposit loans.
Maori housing. Elephants in the room - babies before being settled and prioritising spending.
And lest you think I am racist, back in the day I worked for several years in the housing space in what was then Maori Affairs (and later in the general social housing sector for several more years). Usual process was assignments on wages for the deposit and mortgage payments, low deposit, cheap interest rate, some houses available cheap as (well) built under the Maori Apprentice Scheme at the time.
When I arrived in the job 80% of the mortgages were in arrears. After 2 years major effort and some creativity about getting some payments in (eg working with employers, accessing Maori land rents) it was down to 40%. There was a lot of visiting homes. I recall one visit where the chap came to the door, and was completely stunned payments were not being made as he was passing the money over to his wife each and every payday.
probably look at udc again next year i reckon
Might increase too.
Outlook.Nett profit $75 mil to $77.Either an 11% or most probably a 14% increase.
All the time risk is reducing,while the quality of lending improves.
…………........................…..Lower big loans.Greater number of smaller loans.
………………………………………….Huge continuing low risk RELs.
………………………………………….Better quality motor vehicle loans via Holden,Jaguar/Landrover.
Yet NIM is still excellent.
as reverse mtge book gets bigger part of there business , risk will reduce alot
CGF Challenger group the elephant in the room to aspire to in aus $4 billion in annuities
Download Document 4.36MB
Hmmmm, Its interesting that the 3 cps fall, (wiping about $16.8m off the market cap is bang on the money in terms of the mid point of the net expected effect of the new provisioning standards), maybe the market is more efficient than we give it credit for sometimes or maybe this is just coincidence, who knows ?
Speaking of efficient markets, possibly the PE is also bang on the money, (forward PE about 12.7) at closing price.
I looked at the FY19 projected PE's of NAB, ANZ, WBC, CBA, BEN and BOQ just now. Average forward PE is 12.5 based off 4 traders data. Average projected FY19 EPS growth rate, (to be revised as some companies haven't reported FY18 earnings yet) is 4.4%.
Market pretty efficient in this instance, pricing HBL exactly where it should be at the closing price in my opinion. Holding for yield and maybe a little bit of eps growth ?
You're right it does sound racist.
When you compare "Maori" stats you need to compare them to cohorts of the general population with similar socio-economic markers such as age and income levels.
As such a high percentage of middle-age high-earners' investment in NZ - is funnelled into residential real estate it forces the price of land up for poorer younger people of prime child-bearing age on median and lower incomes who would otherwise be seekng to put down roots with their own homes. People waiting for middle-age to have children have greater risk of having sickly children.
Is the NZ residential tenancy environment good for good tenants to put down roots safe from eviction?
Disparities in wealth and income levels have widened over the last decades. The poorest need greater will power and but have even less ability to afford the materialism pumped at all of us through modern marketing and advertising.
This does not even delve into the psychological effects on Maori descendants of colonialism and becoming a minority in their own country in which the colonising migrant culture has become dominant...
Thank you for educating us Bj.
I think the result is solid but unspectacular, though lets keep in mind that the stock really did get way ahead of itself and this is not the fault of management. The unsustainable exuberance showed by investors for it to reach $2.14 was unwarranted and we probably wouldn't be talking about it the way we are at the moment if it was not for that. Not at any point was guidance issued for a profit upgrade but it was priced in like a forgone conclusion.
For the result itself, $67.5m is within the higher range given to us and the guidance to $75-77m touts a 11-14% rise in NPAT which is good. What is interesting is the large jump in impairment expense by 44% or a jump from 5.3% of revenue to 7.1%. Either they are writing bad business up as revenues increase, more business is taken up and more risks are taken.
The cash flow of the business itself in terms of operating is only up slightly and we just had a massive capital raise by the company done. I know the system implementation was a big one off expense and as I said before these always end up costing more than originally thought. Most models are best case scenario's and companies are only to happy to implement first and fix later.
The forward PE is about a 13, as Beagle said its fairly priced with other banks. I still think this one has been operating ahead of its banking counterparts at a higher PE because of the sustained growth it has had but it will have to show me at the HY if it is attainable. The lackluster EPS growth shows that the capital raise has not yet been put to good use returning profits back to shareholders. I think it has to prove whether its a PE15+ stock now as it has been and if it is, will be over $2 again soon. Otherwise I see it staying in the range of $1.75 to $1.90.
As for myself, I'll continue to hold but not be accumulating anymore. I have a small position in this one and the DRP actually favors me when price goes lower. There are better opportunities right now in SUM and OCA imo.
I was in from the almost the beginning and it may be time to consolidate what has become an overweight holding now. It has changed from a growth stock to an income stock for me. It is my NZ banking exposure with a good imputed dividend compared to the Aussie banks.
People bring different things to this forum. Snoops has a talent for producing reams of fundamental analysis, others have TA expertise, others again have years and years of watching the market and are willing to share that experience with us (relative) newbies. All good.
Still others have a different skill set, and (probably) a different view on many social issues from many of the other posters. I think it is appropriate and important to share these different perspectives on these forums because they have real implications for the commercial success of the organisations we have shares in. In particular, in relation to cultural and gender diversity, there are important implications in Heartland's position. I think these topics are relevant to these forums and worth discussing.
Maybe not see where this goes. I don't come here for SJW material. If I want that (which of course I never would) there are literally thousands of other sites I could go to. In fact, it's almost impossible to avoid.
You find “social justice” material irrelevant...but I don’t come here for lots of (what I consider to be) irrelevant remarks I have read. Social Justice is part of business these days. Sometimes it is a legal requirement; sometimes it effects product success. It probably always has been relevant - but what is social justice has changed over time.
Mind you, on second thoughts, it's not for me to say what people should and shouldn't discuss. If people have skin in the game and think that these social issues have some bearing on HBL, then why not discuss.
I'll leave it at that. It's going to a tough day for my Australian resource stocks. Time for happy thoughts and a cup of tea.
Cool, our posts crossed in the mail.