New Shareholder Barrier 1: The Rural Investment Portfolio (Iteration 2)
Quote:
Originally Posted by
Paper Tiger
'Take more care in sourcing your data'
Best Wishes
Paper Tiger
Snapshot Time |
Rural Loans (A) |
Total Loans (B) |
(A)/(B) |
|
EOFY2012 |
$530.440m |
$2,197.494m |
24% |
(B) for All Group |
EOFY2013 |
$499.942m |
$2,557.796m |
20% |
(B) for All Group |
EOHY2014 |
$462.564m |
$2,344.661m (*) |
16% |
(A/B) All Group Adjusted |
EOFY2014 |
$492.020m |
$2,891.597m |
16% |
(B) for All Group |
EOHY2015 |
$508.655m |
$2,471.156m (*) |
17% |
(A/B) All Group Adjusted |
EOFY2015 |
$537.286m |
$3,234.025m |
17% |
(B) for All Group |
EOHY2016 |
$570.735m |
$3,237.047m |
18% |
(B) for Amalgam |
(*) indicates figure is a low estimate. (Actual group figure not disclosed by Heartland).
The adjusted figures show that the best thing Heartland did to reduce rural debt portfolio risk was to acquire Seniors!
We can also see with more clarity that since the Seniors acquisition, rural debt risk has been steadily increasing again.
Under section 12d in HYAR2016 Heartland states:
"At 31 December 2015 the banking group did not have any period end or peak end-of-day credit exposures over 10% of equity to individual counter parties (not being members of groups of closely related counter parties) or groups of closely related counterparties (excluding central government of any country with a long-term credit rating of A-or A3 or above."
This is good to know. However, I have a slightly different view from Heartland as regards dairy farm loans. There has been a heavy incentive (the high milk price) for dairy farmers to borrow and invest. Heartland loans are likely to be at the riskier end of the dairy loan spectrum, because they charge higher rates than other banks. So in my judgement, despite these loans being spread around different unconnected farms, these loans should be grouped together for risk assessment purposes.
Dairy exposure has been declared as 8% of the lending book at 31-12-2015 (see text interim result announcement).
0.08 x 3,237,047m = $259m This represents 45% of the $571m listed Agricultural loans, up from 41% six months earlier. One explanation for this is that Heartland are capitalising interest payments in the hope that the dairy situation will improve in the medium term. However, the dairy situation is not improving. So I am expecting a significant jump in dairy loan write downs in the second half years.
Overall dairy loans were not projected as problems at 31-12-2015. But watch this space!
SNOOPY