ANZ.NZ Loan Book Industry Funding Concentration FY2014
Quote:
Originally Posted by
Snoopy
From the ANZ New Zealand statement to the reserve bank on 30th September 2013, page 46, the loan book break down is like this:
ANZ (New Zealand) Loan Book FY2013 |
|
Agriculture |
$18,842m |
Forestry, fishing and mining |
$1,850m |
Business and property services |
$11,334m |
Construction |
$1,748m |
Entertainment, leisure and tourism |
$1,389m |
Finance and insurance |
$18,412m |
Government and local authority |
$9,910m |
Manufacturing |
$5,051m |
Personal lending |
$63,492m |
Retail trade |
$2,859m |
Transport and storage |
$2,147m |
Wholesale trade |
$2,704m |
Other |
$4,577m |
Total |
$144,315m |
UDC is a wholly owned subsidiary of ANZ New Zealand. So what we need to do is subtract out the UDC figures from those listed above. Then we can compare the loan book make up of 'Underlying ANZ New Zealand' with UDC.
One year later (30th September 2014) we compare the break down of the loan book. From the ANZ New Zealand statement to the reserve bank on 30th September 2014, page 48, the loan book break down is like this:
ANZ (New Zealand) Loan Book FY2014 |
|
Agriculture |
$18,811m (+0%) |
Forestry, fishing and mining |
$2,049m (+10.8%) |
Business and property services |
$12,051m (+6.3%) |
Construction |
$2,154m (+23.2%) |
Entertainment, leisure and tourism |
$1,294m (-6.9%) |
Finance and insurance |
$20,254m (+10.0%) |
Government and local authority |
$11,363m (+14.6%) |
Manufacturing |
$5,312m (+5.2%) |
Personal lending |
$70,098m (+10.4%) |
Retail trade |
$3,026m (+5.8%) |
Transport and storage |
$2,264m (+5.4%) |
Wholesale trade |
$2,695m (+0%) |
Other |
$4,093m (-11.6%) |
Total |
$155,174m (+7.5%) |
SNOOPY
ANZ.NZ Loan Book Classifications FY2104
Quote:
Originally Posted by
Snoopy
On page 40 of the ANZ NZ September 30th Reserve Bank disclosure, there is a table listing the class of loans (0-9) , along with their probability of default. '9' is default, so the probability for a grade 9 loan defaulting is 100%. However of more interest is the other grades of loan and their probability of default.
|
For retail mortgages: 30-09-2013 |
Grades 0-3: |
0.2% |
Grades 4: |
0.46% |
Grade 5: |
0.93% |
Grade 6: |
2.11% |
Grade 7,8: |
5.4% |
|
For other retail: 30-09-2013 |
Grades 0-2: |
0.1% |
Grades 3-4: |
0.29% |
Grade 5: |
1.12% |
Grade 6: |
2.67% |
Grade 7,8: |
11.25% |
Allowing for the fact that the grading groupings do not quite match up grades 0-6 are surprisingly similar. It is the loans in category 7 and 8 that are twice as likely to default in finance companies, given that in general finance companies have very low (or no) exposure to retail mortgages.
One year on and we look at the chances of default for ANZ.NZ mortgages and ANZ.NZ other retail loans. (page 41 of the ANZ NZ September 30th 2014 Reserve Bank disclosure).
|
For retail mortgages: 30-09-2014 |
Grades 0-3: |
0.2% |
Grades 4: |
0.46% |
Grade 5: |
0.93% |
Grade 6: |
2.04% |
Grade 7,8: |
5.24% |
|
For other retail: 30-09-2014 |
Grades 0-2: |
0.1% |
Grades 3-4: |
0.30% |
Grade 5: |
1.13% |
Grade 6: |
2.60% |
Grade 7,8: |
9.56% |
Overall observation? A small risk reduction from year to year in the higher risk categories (Grade 6 and above).
SNOOPY
UDC Performance for FY2014
Quote:
Originally Posted by
Snoopy
UDC is ANZ's wholly owned finance subsidiary and probably a better measuring stick for some of those other NZ listed finance companies.
https://www.udc.co.nz/pdf/UDC_Prospectus.pdf
The 'profit before tax' is listed as $59.664m (p35). But this includes a provision for credit impairment of $7.123m which I would remove to get the picture of ongoing operational performance. So I get EBT of $66.787m.
Now go to note 4 (p43) on interest expense. There is underlying interest over and above what is due to debenture holders of $16.623m.
So total underlying EBIT = $66.787m + $16.623m = $83.07m
Now turn to page 45 (note 8) and you will see total loans and advances of: $2,065.117m
So the operating margin based on the end of year loan balance book is:
$83.07/$2065.11 = 4.02%
That is almost twice the margin of the underlying ANZ bank in NZ.
The December 16th 2014 UDC Prospectus release, at last gets the details of what happened at UDC during FY2014 out into the public arena.
https://www.udc.co.nz/pdf/udc-prospectus-2014.pdf
The 'profit before tax' is listed as $71.768m (p35). But this includes a provision for credit impairment of $11.733m which I would remove to get the picture of ongoing operational performance. So I get EBT of $83.501m.
Now go to note 4 (p44) on interest expense. There is underlying interest over and above what is due to debenture holders of $16.783m.
So total underlying EBIT = $83.501m + $16.783m = $100.28m
Now turn to page 46 (note 8) and you will see total loans and advances of: $2,272.281m
So the operating margin based on the end of year loan balance book is:
$100.28m/$2272.281m = 4.41%
A significant improvement on FY2013 and it continues the improvement from a 3.87% margin in FY2012
SNOOPY
UDC underlying margin for FY2014
Quote:
Originally Posted by
Snoopy
I agree that in a favourable environment, it is probably in line with expectations for a finance company to be earning a better return on assets than a bank.
Your point about the the relative overheads is an important one. Heartland in FY2013 had selling and administration expenses of $70.347m (Heartland FY2013 report, note 9). UDC had total operating expenses of $30.887m (UDC prospectus note 4). That is a difference of $39.46m. The two are comparable in that they have a similarly sized loan book. If we add this figure onto the UDC cost structure, what would that do to the UDC operating margin on assets?
FY2013: ($83.07-$39.46+$9.72)/$2065.11 = 2.58%
Note: The $9.72m added back represents the adding back of 'fees paid to related parties' (ANZ). These are part of the $39.46m 'extra operating expenses and would have been double charged if not added back.
That is almost exactly the figure for the parent ANZ New Zealand and Westpac New Zealand! So looks like your hunch was right Macduffy. Add on the costs of operating a branch network and the operating margin on assets is right back in the ballpark that Heartland have set for FY2014.
Time to normalise the UDC figures for 2014 so they can be compared more directly with the likes of Heartland Bank.
Heartland in FY2014 had selling and administration expenses of $64.739m (Heartland FY2014 report 'Selling & Administration Expenses', note 11). UDC had total operating expenses of $31.306m (UDC prospectus note 4). That is a difference of $33.433m. The two are comparable in that they have a similarly sized loan book (UDC:$2,272.081m, Heartland $2,607.393m). If we add the operating cost difference figure onto the UDC cost structure, what would that do to the UDC operating margin on assets?
FY2014: ($100.28-$33.433+ $9.79)/$2,272.08 = 3.37%
Note: The $9.79m added back represents the adding back of 'fees paid to related parties' (ANZ). These are part of the $33.433m 'extra operating expenses and would have been double charged if not added back
This calculation shows the underlying margin at UDC to be significantly improved from FY2013's 2.58%.
SNOOPY
Heartland Bank Selling & Administration Fees FY2014
Quote:
Originally Posted by
Snoopy
OK we are talking Heartland bank now? The selling and administrative expenses" of $70.347m as summarized in note 9 of the HNZ FY2013 annual report include a $7.7m RECL termination fee. This is unlikely to be repeated. So you might conclude that Heartland selling and administration fees might reduce to:
$70.347m - $7.7m = $62.647m, plus an allowance for inflation of course.
Note 11 of the HNZ Annual Report for FY2014 shows selling and administration fees of $64.739m. This is an increase of 3.3% from FY2013 on an underlying basis.
SNOOPY
Profit vs Loan Book Size for UDC vs Heartland - Six Year Trend
Quote:
Originally Posted by
Snoopy
Today's homework from the UDC prospectus. I am trying to get a feel for the 'normal' level of business over the business cycle. All the information in the last 2013 prospectus relates to the post GFC era. But perhaps in today's financial environment that
The profit before provision for income tax and impairment is given on page 33 of the prospectus, as part of a five year summary. Likewise the corresponding loans and advances, part of the assets of the balance sheet
FY2009: $34.024m/ $1,829.156m= 1.86%
FY2010: $45.012m/ $1,968.771m= 2.29%
FY2011: $46.382m/ $1,948.522m= 2.38%
FY2012: $58.476m/ $2,014.473m= 2.90%
FY2013: $66.787m/ $2,065.117m= 3.23%
By contrast the equivalent figures for Heartland are as follows:
FY2012: $29.337m/ $2,078,276m= 1.41%
FY2013: $36.540m/ $2,010,376m= 1.82%
An update on the post financial crisis profitability trends. The Heartland comparative figures only start from FY2012, because that is when Heartland started to exist in its current form.
|
UDC |
|
|
Heartland |
|
|
|
EBT |
Loan Book |
EBT/Loan Book |
EBT |
Loan Book |
EBT/Loan Book |
FY2009 |
$34.024m |
$1,829.156m |
1.86% |
|
|
|
FY2010 |
$45.012m |
$1,968.771m |
2.29% |
|
|
|
FY2011 |
$46.382m |
$1,948.552m |
2.38% |
|
|
|
FY2012 |
$58.476m |
$2,014.473m |
2.90% |
$29.377m |
$2,078.276m |
1.41% |
FY2013 |
$66.787m |
$2,065.117m |
3.23% |
$36.540m |
$2,010.376m |
1.82% |
FY2014 |
$83.501m |
$2,272.081m |
3.68% |
$57.416m |
$2,607.393m |
2.20% |
Reference for data (UDC): p33 of 2014 prospectus (profit, loans and advances)
Reference for data (Heartland): AR2014 Statement of Comprehensive Income Operating profit, Statements of Financial Position)
SNOOPY