Sometimes I think you do it delibrately
Quote:
Originally Posted by
Snoopy
What you are telling me is part of the picture PT. But no bank would be foolish enough to run their actual loan to equity ratio as low as the minimum reserve bank requirements. Otherwise a customer like young Percy could go into Heartland to withdraw $100 to buy a bunch of flowers for his good wife. But he would be kept waiting until Joe Driver from the coin arcade, puts in the morning coin take to make the balancing $100 deposit required to avoid tipping Heartland into administration!
The question is, what level of buffer over and above the reserve bank requirements do management regard as acceptable? ...
Very droll Snoopy, very droll.
No - what I meant was if you look at the latest half year disclosure statement and beagle 19(j) you will see that they sat on 14.46% (as opposed to the not totally comparable 13.76% a year earlier). They seem to like to hang around that sort of value.
Perhaps for our readers out there we ought to spell out what a couple of the various minimum ratios practically mean.
Whilst the Total Capital Ratio (or TCR) is above 10.5% then from the New Zealand Reserve Bank's perspective it is a case of 'No Worries'.
Should the TCR drop below 10.5% but be above 8.0% then HBL must
"limit the aggregate distributions of the bank’s earnings to the percentage limit to distributions that corresponds to the banking groups buffer ratio"
i.e. reduce dividends etc to a maximum of 60%, 40%, 20% and then 0% of earnings as the 8.0% threshold is approached.
But even below 8.0% TCR HBL is still not a bust but would be required to do some recapitalisation - tout suite (that's French for pronto).
Having said all that if they get anywhere near 10.5% then you will see this Tiger leaving by the nearest exit.
Best Wishes
Paper Tiger
The Heartland Home Equity Release Riddle
Quote:
Originally Posted by
Snoopy
Refer to the interim report of FY2016 for the latest audited Heartland information. Time has rolled on and the total loan portfolio at the latest balance date (31-12-2015) was: $2,928.621m (Interim Statement of Financial Position)
Home equity release loans, which apparently have separate capital requirements total $422.706m (note 18c).
So the loan portfolio, less home equity release loans, was:
$2,928.621m - $422.706m = $2,505.915m
Before I get hauled up by a real accountant for the above....
This home equity release stuff still does my head in. Normally with a loan as a bank customer, the customer/bank timeline goes like this.
1/ You want stuff.
2/ The bank lends you the money to buy the stuff.
3/ You pay the bank their money back + interest with regular payments.
With HER there is a different sequence of events.
1/ You have stuff, but you want money.
2/ You give a promise of stuff (a claim on your house) to the bank, they give you money.
3/ The bank takes your stuff in proportion to the money that you have taken from them, plus interest.
So technically a HER loan is not a loan in customer terms (financial receivable in bank terms). Because as soon as the bank hands you money they simultaneously gain title to an equivalent amount of offsetting stuff.
However, if you look at how the accounts really work, (Note 43, AR2014) you will see that all the money that the 'rich bank' has to give to you, the homeowner, they don't actually have. Heartland are borrowing the home equity release money from another bank. So perversely, both you and Heartland Bank simultaneously become more indebted when you take out a home equity release loan!
Thus, even though my above treatment of a HER loan as an account receivable looks odd, I believe my treatment of HER loans as 'financial receivables' for Heartland is justified. Because Heartland structures their HER loans by borrowing the money from other banks.
SNOOPY
>> Third Quarter Disclosure Statement out - Heartland Not Bust Yet...
Quote:
Originally Posted by
Snoopy
Before I get hauled up by a real accountant for the above....
This home equity release stuff still does my head in. Normally with a loan as a bank customer, the customer/bank timeline goes like this.
1/ You want stuff.
2/ The bank lends you the money to buy the stuff.
3/ You pay the bank their money back + interest with regular payments.
With HER there is a different sequence of events.
1/ You have stuff, but you want money.
2/ You give a promise of stuff (a claim on your house) to the bank, they give you money.
3/ The bank takes your stuff in proportion to the money that you have taken from them, plus interest.
So technically a HER loan is not a loan in customer terms (financial receivable in bank terms). Because as soon as the bank hands you money they simultaneously gain title to an equivalent amount of offsetting stuff.
However, if you look at how the accounts really work, (Note 43, AR2014) you will see that all the money that the 'rich bank' has to give to you, the homeowner, they don't actually have. Heartland are borrowing the home equity release money from another bank. So perversely, both you and Heartland Bank simultaneously become more indebted when you take out a home equity release loan!
Thus, even though my above treatment of a HER loan as an account receivable looks odd, I believe my treatment of HER loans as 'financial receivables' for Heartland is justified. Because Heartland structures their HER loans by borrowing the money from other banks.
SNOOPY
Snoopy you must read & understand this >> Money Creation in the Real Economy <<
Your two 'different' scenarios are no different on the balance sheet.
Best Wishes
Paper Tiger
Drink more milk, eat more cheese, and top your cereal with lots of yoghurt*
Position of Rural (includes Dairy) Loans for last 4 quarters:
http://i7.photobucket.com/albums/y26...0518-Rural.png
Obviously it is not getting better yet.
There is more to the total picture across all sectors (i.e. another $9,284 of individually impaired assets) so read the DS if you are really interested but Rural is currently the 'biggy'.
Best Wishes
Paper Tiger
Consult your doctor as to whether a high dairy diet is good for you.