How's it being funded, if P&I on Reverse jobs are all being backloaded until a later rainy day
when the bucket gets kicked ? :)
Printable View
Well - its being funded by HGH through drawdowns on committed facilities & deposits, as the reverse mortgages are drip fed (IE not provided all at once up front) to customers.
Yes - interest income isn't realised in the form of cash (think I was the first to point this out) until the underlying property is sold and the loan is repaid. That's not a bad thing - as it compounds. Ah - the power of compounding interest - especially when provided at very attractive NIM/NOI margins as a % of average receivables, and exceptional NLM (net interest income less credit losses). Analogous to a bank account, I think most would agree it makes better long term financial sense to reinvest interest income so that interest in turn compounds, and then compounds, and compounds again until maturity. Thanks to committed facilities which it uses to fund its RM working capital requirements, and other diversified cash income streams, HGH is in the nice position it can defer interest cash conversion so it can secure a larger and accretive payout later.
A more fulsome analysis of the cashflow and capital intensity profile of the reverse mortgage business - and banking more generally - needs to consider the risk weighting of underlying credit exposures as that is ultimately the key driver to the capital tied up in a financial institution. In that respect RM's are highly capital efficient, with 50% risk weightings in both NZ and Australia.
Digging into the disclosure statements for HBL (NZ bank), of its $5.359bn net credit exposure, $2.037bn of that was corporate exposures to unrated borrowers, which demanded a 100% risk weighting ($2.037), and tied up $162.9m of pillar 1 capital (8% of RW exposures)
Reverse mortgages has net credit exposure of $805.1m, a 50% risk weighting, and required only $32.2m of pillar 1 capital.
So - the differential in risk weighting dramatically more than offsets interest income being capitalised to receivables when looking at the aggregative capital intensity relative to traditional lending. Couple that with compounding interest income, high NIM/NOI margins achieved, and effectively nil credit losses, the economics of the RM division are outstanding.
As the growth engine behind HGH it was nice to see RM in such rude health at the 1H FY23 result.
NZ: 24.6% growth in receivables YOY (and up 12.1% on June22), with NOI as a % of average receivables expanding from 2.45% tp 2.68%
AU: 22.8% growth in receivables YOY (and up 12.9% on June22), with NOI as a % of average receivables expanding from 1.72% to 1.75%
But it is important to note that the RBNZ is under going a review of risk weightings of various asset classes, including reverse mortgages, with submissions ended in February. I made a submission. I mentioned this last year but went without notice, even from those +20 post-a-day full timers whose lives revolve meandering through various threads posting noise, rubbish and out of context factoids. Should the risk weightings be increased, the RM business would still be an outstanding one, but would dampen its growth reasonably significantly.
going to get savaged today ... how are there bond's positioned need a update ?
KPMG review of NZ banking sector 2022
Banks don’t make excessive profits but Kensington says -
Tough times ahead. Kensington said all the bank chief executives and chief financial officers recognise their organisations have been “making hay”, but that the economy is likely heading into a slowdown or recession.
In previous crises, such as the 1989 share market crash and the global financial crisis (GFC), the NZ economy has generally weathered the first couple of years very well, but it’s been the third and fourth years in which most distress has been felt, he said.
That’s also likely to be true of the covid pandemic.
Lot of stuff in report but some charts/tables show HGH relative performance to others
https://assets.kpmg.com/content/dam/...banks-fips.pdf
heartland net int margin had a big fall last yr not good when compared to other banks increasing there's
Nothing wrong.
Just a slight adjustment to their lending mix.More first mortgages.
Read their presentation.
Heartland’s NIM is expected to stabilise at its current level as Heartland continues to proactively manage portfolio pricing and margin in
competitive markets.
http://nzx-prod-s7fsd7f98s.s3-websit...457/389620.pdf
those mortgages could generate more on the bottom line. they are all digital so less human interaction compared to the banks. Cant just compare NIM for true performance
Bull, it is times like this that we Heartland shareholders need to remind you that Heartland is not really a bank. All of Heartland's 'banking' is done via Westpac's banking licence. So don't worry, Westpac has got us covered. Heartland is merely a finance company with a thin layer of bank marketing veneer pasted over the top of it. To use a painting and panel beating analogy, Heartland is what you call a 'wrap bank'.
Notice Heartland have gone very quiet on the 'fintech' angle as well, as such lenders crash overseas. Heartland are even going after regular mortgages to show how 'responsible' and 'conservative' they are. Latest reporting shows a big decrease in their capital allocation to fintech (or was that just the 'marking to market' of their Harmoney stake?).
Anyway far bigger things to worry about in NZ, like the collapse of the health system and the re-emergence of third world diseases. Even Heartland getting in on the act. It is a long time since a death of Ricketts has made mainstream news.
SNOOPY
Personnel lending via harmoney went into run off. It was HGH highest NIM % contributor, but given HGH was actually doing P2P lending through it (before harmoney disc P2P) it also had the highest credit losses. That dropping away accounts for a large proportion of the drop in FY22 NIM.
Ive always advocated NLM margin as the better one (NIM less incurred credit losses) as it arguably far more relevant and somewhat adjusts for the mix of risk.
The credit quality of receivables has improved significantly over the last 5 years.
Reading all above posts including hint of expected SP by W69 with keen interest ....maybe my original expectations will come true and Mike will be happy to see SP below $ 1.53 which he was so craving for ....
Big question remains which the holders and true inside knowledge people like Percy/ FM shud advise on to non holders ....Will it be good buy for LT around that SP or we people shud stay away and outside only ....unbiased views will be very helpful please
Wonder how the local Fed Reserve of Adrian Orrsome's RB empire is holding up ? :)
Robbo and Orrsome have have been quiet of late .. finding the readies for Flood Relief Support
a Budget and potential turbulence with hyped interest rates might be causing a few headaches
and differences of opinion :)
At least $2 bills were in the piggy bank for some bene rises and a few other things ..
Well you know how those Aussies just love kiwi companies crossing the ditch and telling them 'we know better'. There are a long list of kiwi corporates that have gone to Australia and come back with their figurative 'tails between their legs' following such a strategy. Challenger Bank gives Heartland a 'truly Australian face'. And you can't say that Heartland isn't hiding the fact that, even so, it won't be a walkover: 'Challenger' in this context is both a noun and an adjective.
SNOOPY
The remainder of the 2023 calendar year will be significant for Heartland as it progresses towards the completion of the acquisition of Challenger
Bank, therefore becoming an ADI in Australia, and realises the benefits this will provide its existing Australian businesses Heartland Finance and
StockCo Australia – as well as future product opportunities.
So HGH are looking for the same on going benefits from buying Challenger Bank, as they are achieving by having a banking licence for Heartland Bank.ie cheaper cost of funding.Results of this will be HGH maintaining a NIM over double the sector average.
Nobody has ever explained to me why the outrageously above average NIM results in a below average ROE
Been there, answered that, last year, when you said the same thing.
"Those metrics are for the licensed subsidiary operations only. IE, ANZ new zealand not the the consolidated group operations. Heartland does have superior consolidated group returns on equity than almost all the australasian banks (bar CBA) for FY22 forecast. This implies that the far larger australian operations of the big banks are substantially less profitable than in NZ, and the sheer weight of the aussie operations drag down the reported group ROEs. So while HGH as a consolidated group might generate superior ROEs than the consolidated operations of the big aussie banks, and be rewarded by trading at higher price to books as a result, the aussie subsidiaries actually operate more efficiently than heartland bank NZ itself."
So for the consolidated group - you know, the thing you buy a share in a pays you a dividend, HGH has above average ROEs.
I'm just a noob but the way I see it is the book value per share grows about 4.2% per year. Sometimes it trades 1x book value and sometimes 1.5x. On average about 1.25x book value....
If you wanted a long term strategy you could accumulate shares as close to book value as possible and maybe even trim when it gets up around 1.5x book value...
On your journey of buying and building a position your capital should increase on average 4.2% per year and you will collect a nice reliable dividend. Currently that is over 9%!
I am a retired bookseller. Yes the sharemarket has been my hobbie for over 50 years.
I rely on my own research.
I only share my thoughts here..Never try to offer any advice.
I expect people reading my thoughts to make their own minds up,after doing their own research.
I have made ever mistake there is possible to make.Still make a few,but usually wake up to them pretty quickly.
HGH I have been a holder since day one.
Currently I am impressed by HGH's moves to strengthen and grow their Australian operations.Makes good sense to me.
Percy, this is one of the things I love about you. You never profess to be anything other than who you are, you are down to earth and humble, and you are one of the wisest people I know.
This seems like an ideal moment to publicly thank you for your contributions to these forums, but more importantly, for your friendship and the unfailing, infinitely patient, encouragement and support you give me behind the scenes.
Some here could benefit from taking a leaf out of your book (pun intended ;))
I whole heartedly agree. One of the most decent honest posters on here, he has unselfishly shared his opinion with us on here and with some of us behind the scenes. He is a breath of fresh air and I am immensely grateful I have gotten to know him. One of life’s treasures :)
Great story but let's not gild the tale above its station. You mean held it since day one except for that little wobble around the time Covid struck? However, to your great credit you realised your mistake and bought back in, once the resilience of Jeff and his team came to light.
SNOOPY
The day’s high was on very, very low volume though; probably Sharesies. Ended a bit down, but not a train wreck. Not today in anycase.
I guess we will follow the USA.
Yahoo Finance headlines.
"Bank stocks rally in sharp reversal from previous session"
May have been a bit like a Briscoes' one day sale.?
DRP strike price should be ~$1.6388 (inclusive of the 2% discount to the 5 day VWAP post ex date), w/ nil brokerage.
Could be worth less than this by end off today:mellow:
On sale today - I topped up.
Not a good time to buy in... possible can drop to $1.30-1.40 in 6 months time...
Saudi bank refused to back Credit suisse and the world banking sector is very vulnerable
Price alert just pinged.....randomly set up at $1.60....
It's at times like this we think of the simple definition of "A Long Term Hold" :
A short term trade that did not work out........lol
Yet to regret any HGH purchases I've made!
Yet to sell any either. I'm always please to see the same sensible voices supporting HGH when times are tough.
It has been a bit of a rollercoaster ride over the years (with 3 or 4 different names for the stock) with several sharp falls along the way but overall it has been an outstanding investment with both a healthy capital gain and good yield. The current fall is no different to others before it and certainly is no reason at all to sell this stock, in my view, because of it. I sold a few recently but am more likely to put that money back in given the current price.
I remember years ago buying some Heartland shares at 98 cents ……bought at the high at the time.
Of course share price fell
I got the bragging rights to being one of a few punters who could claim to have lost money buying Heartland …..lasted a month or so but huge relief when share price ended up going over 98 cents
10 years ago, as a newbie and a small inheritance I first looked at the share market. Warren Buffet said "invest in banks" so I did. I bought 10k of Heartland shares (HBL at that time) at 88c and have never since sold or added. It has just been sitting in my portfolio delivering a terrific return every year despite the ups and downs of the share price. Have faith!
stagflation not good for hgh ... slow timber
Wife gave me some money to invest this morning..
Bought her more HGH at $1.62.
HMY must be getting towards to manageable chomp for HGH to take out of circulation
with AU $40 mil Market Cap over on ASX ..
Winner, Percy & the band of loyals wont mind a bit if a small Cap Raise is needed to help
get the deal done :)
Global dairy prices down again overnight auction
Not a good sign for HGH share price in a month or so
Great news!
Dairy prices contribute significantly to bread and butter issues ... if they drop, inflation turns into (dairy-) deflation and our very own reserve bank might stop cranking up interest rates (remember - butter will get cheaper), which would be good for all stocks.
Long may dairy price deflation continue - and may it be shared by energy price deflation!
If prices down and stocks up, HGH will be fine as well.
Never mind. Dividend paid today. Pity the DRP price is above current market by over 3c. But ongoing yield is good even so, hence not complaining.
I guess in every bit of news there are winners and losers.
Looking at NZ farmers - I've seen some hardworking farmers you describe, but I've seen as well farmers who don't care for the environment, who don't care for their animals and who clearly don't care for their domestic customers. I have seen farmers who subdivide and sell the farm (and this is how they really get rich) to live a lavish lifestyle in Golden Bay. I could give you names.
I do feel for hardworking people who care for their community. These are some of the farmers but clearly not all.
If you compare however the prices of agricultural products around the world, then you see that all NZ consumers get fleeced. Not just by farmers, but as well by farmers. We get the lower quality products for premium prices. On the other hand do they sell their premium products abroad - often cheaper than in NZ. Have not seen any other country where the farming community cares so little about the local population.
I do care about consumers. Hard working for their families and exploited by a bunch of greedy farmers and traders.
Good to get this off the chest ... and now we should probably talk again about HGH. Not that dependant on dairy prices (despite the funny correlation, but I think long term they will benefit from more realistic food prices in NZ. We all will.
Dairy farmers are so well off its not even funny. Dont cry for your farmer. Cry for the share milker. Dairy farmers are all multi millionaires
I used to be a Fonterra farmer, we put money into the community through schools and scholarships and the factory staff often seemed to have a better life and income than a lot of us did (I personally know staff who hate the company but will stay for life and brag about the pension scheme while enjoying their months of holidays). It is the one share I have NO regret about selling. Even the local product was often sold below international market and yet I still witnessed all the complaining about how much we were fleecing the public. It isn't easy being a farmer these days. Backbone of the nation when I was first starting out, wouldn't be in a hurry to tell anyone what I did towards the end.
I hope you made your fortune but doesn't sound like it
Well, yes and no. They normally don't get money from the government (though sometimes they do - e.g. disaster relief), but on the other hand we always seem to have governments (no matter which couleur) which tend to ignore many of the big polluters and which allow them (e.g. by ignoring science and by underfunding control measures) to keep polluting our country with substances which are (for good reasons) already banned in many other countries. Our farmers are subsidized ... just not with money, but they have instead the licence to destroy our health and our environment. They are as well subsidized by our government paying for and maintaining overseas the "green NZ" fairy tale.
Again - there are good and bad farmers (here and everywhere else), but I certainly don't see our farmers as a group disadvantaged to their competitors. No need to pity our farmers in NZ as a matter of course. If it would be harder for them to produce here than for others to produce there, they would have already moved on to greener pastures.
Sorry for hijacking the thread, but this had to be said. Maybe we need a separate thread to discuss the sorry state of our environment caused by all sorts of bad NZ farming practises and how some of our farmers have no reluctance at all to destroy common goods (like healthy air, soil and water) to maximise their personal profits.
my post on Unlisted Silver Fern Farms thread.
NZ red meat exporters back Beef + Lamb New Zealand’s Kiwis Backing Farmers campaign
New Zealand’s red meat processing and exporting sector is supporting the Kiwis Backing Farmers campaign, saying the only sustainable way for the Government to deliver better outcomes for the environment and the economy is to work with farmers.
The campaign, spearheaded by Beef + Lamb New Zealand and rural advocacy group 50 Shades of Green, aims to highlight the cumulative effects of successive policies, such as the wholesale conversion of productive sheep and beef farms into carbon farms, on rural communities.
“New Zealand’s sheep and beef farmers are already among the most carbon efficient and environmentally sustainable producers of red meat in the world,” said Sirma Karapeeva, chief executive of the Meat Industry Association.
“However, successive waves of new regulation in areas such as freshwater, biodiversity and carbon farming are putting the sheep and beef farmers’ status as champions for the environment at risk.
“Many of these regulations could be much better aligned with on-farm practice, and collectively add unnecessary costs on farmers at a time when inflation and volatile global markets are putting their operations under extreme pressure.”
Ms Karapeeva says the meat processing sector is also concerned about the lack of limits on fossil fuel emitters offsetting their emissions by planting trees on productive land.
“This risks pushing more land into carbon forestry, which will have long-term consequences for the viability of rural communities and the New Zealand economy as a whole.
“We all have a deep interest in creating a cleaner, greener environment and a thriving economy, which is why we’re calling on the Government to work with sheep and beef farmers to achieve this.”
“As it stands, the red meat sector generates almost $12 billion in earnings from exports to more than 100 countries and employs 92,000 people, and by working together we can grow this in a sustainable way.”
under 1.50 soon ? people obviously noy happy about the bad nim
Dividend converted into shares at $1.50 for me, will continue to add.
Nothing to do with NIM - HGH just following market trends on banks.
In ye olde days a hound would bark at $1.40 like it was a blood moon. Now we have had dilution and there was talk of a need for more capital in the future. What say the people? $1.25? Even I'd bark at that.
Sub $1.50 by the looks. Let’s see what tomorrow brings. I’m presuming a little bounce
Edited: Ok $1.50 but still heading south for a while but I do see that little bounce happening
Just feel like it’s going to go under book value so no point looking until under $1.44
does hgh have any of these
RBNZ says NZ banks' Additional Tier 1 capital bonds are 'going-concern capital' & may be subject to loss if the bank issuer gets into serious trouble
https://www.interest.co.nz/banking/1...capital-may-be
No - all capital is Tier 1 CET1 capital. No AD1 or tier 2 capital.
HBL is/was considering an issue of tier 2 subordinated notes. Different type of instrument to AD1 CoCos.
Natural next question be how CS’ tier 2 notes fared in its merger with UBS. There was no impact.
https://www.bondsupermart.com/bsm/ar...bs-RCMS_268680
I would not be surprised to see the tier 2 note issue differed. Note very little is known about the fine print of the mooted T2 subnote issue as nothing has been released nor the offer launched.
Anyone think there could be a slow bank run from HGH to ANZ, BNZ, ASB or Westpac.
Similar to the US regional state banks seeing some deposit flight to Citi, Bank of America etc.
I.e move your deposits to the ‘too big to fail banks’
Heartland have proved very adept at raising deposits.
For each of the last four sequential quarterly growth rates in net deposits, HBL has grown deposits far in excess of industry growth rates, and has among the highest deposit growth rates in NZ.
The most recent available quarter saw deposits across all deposit takes grow 2.3%, HBL was 1.6x that 3.7%.
HBL's deposit rates remain sharp and note the 'shareholder' deposit offer has recently been sent out.
Attachment 14522
Hey FM, it will be interesting if HBL can continue this trend in current banking industry climate
Page 32 Heartland presentation 28/02/2023
Heartland Group
Heartland increased borrowings by $158.3 million (2.6%) to $6,329.1 million.
New Zealand
• Heartland Bank increased borrowings by $249.7 million (5.7%) to $4,596.3 million.
‒ Deposits grew $480.5 million (13.4%) to $4,077.7 million, driven by competitive pricing on
targeted products, including Heartland’s Notice Saver offerings which both received Canstar
New Zealand recognition in the half.2
‒ In Q1 of FY2023, Heartland Bank experienced the highest growth rate in retail deposits of all
main and domestic banks in NZ.1
‒ Other borrowings decreased by $230.8 million (30.8%), largely due to the maturity of $150
million retail bond, as well as the amount drawn down in Heartland Bank’s committed auto
warehouse facility decreasing by $76.6 million.
• Total liquidity strengthened, increasing by $146.9 million (23.4%) to $774.8 million.
• Heartland Bank holds liquidity well in excess of regulatory minimums and maintains strong
regulatory liquidity ratios.
liquidity nearly equal to on call deposits- that's a very good bank.
But how robust is their loan book I wonder?
To any one who has any concerns about Heartland Bank or Heartland Group ,I think reading HGH's 28th February presentation will find it interesting,and informative as well as being reassuring. Here is the link.
http://nzx-prod-s7fsd7f98s.s3-websit...457/389620.pdf