Will call tomorrow - thank you
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Check to see whether the dividends are imputated in NZ.
If you are a NZ resident, Australian franking credits are of no use to you.
If you are with Craigs they will shunt(shift) them ,no charge.
ANZ dividends are partially imputed for NZ Shareholders.
Correct. But it makes no difference as an NZ shareholder if you hold ANZ shares on the NZX or ASX. You still get to claim the NZ imputation credits and you can't use the Aussie franking credits no matter what market you choose to hold your ANZ shares on.Quote:
If you are a NZ resident, Australian franking credits are of no use to you.
Also just because you hold ANZ shares on the NZX do not assume that the advice ANZ give you about what to do with your shares is NZX friendly. To get around the Australian capital gains tax, some Australian companies offer so called tax effective buybacks which are a disaster for NZ based shareholders. Not only are NZ shareholders not eligible for the attached Australian franking credits. The shares bought back are classed as a dividend for NZ purposes which means that any capital returns using this method end up being fully taxable in NZ shareholders hands. But Australian companies have no obligation to point this out to NZ shareholders and generally they don't.
SNOOPY
OK so from all these comments I take the following: Makes no difference except ASX has more liquidity for these stocks?
Time for my annual 'disentanglement' of ANZ.NZ from its UDC subsidiary. The information I need about the ANZ bank in New Zealand can be found here:
https://www.anz.co.nz/about-us/media...r-information/
UDC and ANZ New Zealand have the same balance date. So it is legitimate to work out the distribution of loans on their respective books using 30th September end of year data. First I need to:
1/ Slightly rearrange the ANZ (NZ) categories (ANZ September 30th 2017 Bank Disclosure Statement, p30) so that they link up to those listed in the UDC FY2017 Financial Statements. THEN
2/ I need to subtract the UDC equivalent figures (page 18, UDC FY2017 Financial Statements) to get the underlying ANZ bank figure.
(Note: Receivables for UDC in industry groups are listed after provisions for credit impairment are taken into account. OTOH, receivables for ANZ.NZ industry groups are listed before allowances for credit impairment are taken into account. This means the UDC figures are lower than they would be on a 'like for like' comparative figure basis. However the error is only 1.0% overall, not enough to undo the validity of this exercise in my judgement)
The results are below:
All ANZ.NZ = UDC + Underlying ANZ.NZ Agriculture forestry, fishing and mining: $20,727m (11.6%) $563m (18.9%) $20,164m (11.4%) Business and property services: $34,614m (19.3%) $171m (5.8%) $34,443m (19.6%) Construction: $2,772m (1.6%) $409m (13.8%) $2,363m (1.3%) Electricity Gas Water & Waste: $3,581m (2.0%) $12m (0.3%) $3,569m (2,0%) Finance and insurance: $20,834m (11.6%) $70m (3.3%) $20,764m (11.8%) Government and local authority: $11,201m (6.3%) $0.6m (0.4%) $11,200m (6.4%) Manufacturing: $4,696m (2.6%) $59m (2.0%) $4,637m (2,6%) Personal & Other lending: $71,031m (39.7%) $858m (28.8%) $70,173m (39.8%) Retail and Wholesale: $7,260m (4.1%) $390m (13.1%) $6,870m (3.9%) Transport and storage: $2,403m (1.3%) $443m (14.9%) $1,960m (1.1%) Total: $179,119m (100%) $2,975m (100%) $176,144m (100%)
As was the case last year, notwithstanding the shuffling of disclosure with the reclassification of the ANZ.NZ loan categories, the loan allocation of ANZ.NZ with UDC removed, is little different the loan allocation of the whole of ANZ.NZ. This is no surprise. The whole of the UDC loan book is only 1.6% of the ANZ.NZ loan book. And ANZ.NZ itself (which you cannot invest in directly) is only a fraction of the whole ANZ operation which is the ANZ vehicle listed on the NZX. However, the converse is not true.
UDC is very different from ANZ.NZ. In percentage terms:
1/ the Agricultural exposure of UDC is double,
2/ 'Construction' and 'Transport and Storage' exposure are up by nearly a factor of 10, AND
3/ 'Retail and Wholesale' exposure are higher by a factor of 4.
The volatility of these 'industry groupings' is testament to UDC being a much greater investment risk than any investment in ANZ itself.
The following inter-year table shows how UDC is funded by its 100% owner ANZ
UDC: Backing For Loans FY2014 FY2015 FY2016 FY2017 UDC Shareholder Capital $341.412m (15.6%) $365.462m (14.6%) $423.247m (16.2%) $485.645m (16.7%) ANZ Committed Credit Facility (Note 8) $280.000m (12.8%) $395.000m (15.8%) $595.000m (22.8%) $1,385,027m (47.6%) Debenture Investments From Public (Note 8) $1,569.247m (71.6%) $1,736.026m (69.5%) $1,591.711m (61.0%) $1,039.133m (35,7%)
There is a very significant change happening with the role of debenture holders in funding UDC much reduced as the ANZ parent seemingly looks to take over that role. Debenture holders no longer have any guarantee that their debentures will not be repaid early - a big negative for some debenture investors.
SNOOPY
ANZ have re-jigged their breakdown of loan categories for FY2017. These do not exactly line up with the loan categories for ANZ's subsidiary UDC. So some rearrangement of categories is required to line them up. Below is my take on how to do it.
ANZ.NZ UDC Category 1 Agriculture Agriculture Forestry & Fishing Forestry Fishing & Agricultural Services Mining Category 2 Manufacturing Manufacturing Category 3 Electricity, Gas, Water & Waste Services Electricity, Gas & Water Category 4 Construction Construction Category 5 Wholesale Trade Retail & Wholesale Retail Trade & Accommodation Accommodation, Cafes & Restaurants Entertainment, Leisure & Tourism Category 6 Transport, Postal & Warehousing Transport & Storage Category 7 Finance & Insurance Services Finance, Investment & Insurance Category 8 Public Administration & Safety Government Administration & Defence Professioinal NZ Services Category 9 Rental Hiring & Real Estate Services Property & Business Services Category 10 Households Personal & Other Services All Others Education Communications Health & Community Services
SNOOPY
PS Now I can use this categorization to finish my previous post!
HNZ (FY2017) UDC (FY2017) Agriculture Forestry & Fishing: $836.977m (21.3%) $547.780m (18.4%) Mining: $19.006m (0.5%) $15.091m (0.5%) Manufacturing: $76.445m (1.9%) $59.203m (2.0%) Finance & Insurance: $395.804m (10.1%) $70.125m (2,4%) Retail & Wholesale Trade: $189.141m (4.8%) $367.356m (12.3%) Households: $1,717.407m (43.7%) $820.382m (27.6%) Property & Business Services $347.776m (8.8%) $171.163m (5.8%) Transport & Storage: $179.006m (4.6%) $442.523m (14.9%) Other Services: $110.747m (3.2%) $482.158m (16.2%)
Total for Heartland $3,931.2m (100%) , with the collectively impaired assets yet to be adjusted for. This equates to a loan book YOY growth of 14.3%.
Total for UDC $2,975.8m (100%), with credit impairment already adjusted for. This equates to a loan book YOY growth of 12.1%.
Looking at the year on year figures, comparing each company to itself one year earlier, I am struck by the following observations:
1/ Heartland's rural loan book grew by 23% YOY. UDC's rural loan book only grew by 11% YOY. Are Heartland continuing to be more generous in rolling over marginal rural loans? Provisioning in rural was much reduced (from $3m to just $0.3m). .
2/ Heartland's 'finance & insurance' book grew by 17% YOY, more than wiping out last years reduction.. UDC's 'finance & insurance' book fell by 20% YOY. In big picture terms, finance and insurance is far more important to Heartland (10% of all business vs only just 2.4% for UDC).
3/ UDC are very up front that financing construction is part of their business mix. Heartland do not report 'construction' as a separate business category. So I have combined UDC's 'Construction' figures into the broad 'other services' basket.
UDC construction loans totalled $408.987m at EOFY2017, up from $355.757m at EOFY2016, and represent a not insignificant 14% of the total loan book. This construction increase of 15% YOY in dollar terms, is now ahead of the average 12.1% YOY growth for the whole of UDC, - partially making up for the PCP slide. If UDC is representative, this indicates a much for favourable year of construction in the year ended 30th September 2017. Will this continue post the election of the Labour lead government?
To conclude this comparison, 'the raw table data' would suggest to me that UDC would be less exposed to an economic downturn, because the proportion of loans to 'Households' is lower. However, add back the $178m difference 'Retail and Wholesale' and the $409m in 'Construction' (with no separate Construction disclosure for this at Heartland) ,totalling $584m, (Retail and Construction are both fast responders to a Consumer downturn), and there may not be much difference, The enduring difference between the two is the much greater difference between 'Transport and Storage' in favour of UDC (17.4% of all loans verses 4.6% for Heartland) . This, despite Heartland increasing their exposure fivefold to this sector over the FY2017 financial year.
SNOOPY
A question, Snoooy. Are you using UDC's "Agriculture, Fishing and Forestry" numbers in arriving at an 11% YOY growth rate for UDC's rural loan book? If so, I would suggest that their lending to this sector is heavily weighted towards the Forestry part. UDC have "traditionally" had a major share of the business of financing forestry machinery/loggers and such. On the other side of the category, I suspect that their involvement in other parts of the rural sector are comparatively modest, being left largely to their bank parent.
Yes. I am not aware of any publicly declared information that breaks down 'Agriculture Fishing and Forestry' for UDC further.
Thanks for that insight. Forestry is still cyclical, albeit with a longer time frame between 'planting' and 'harvest' compared with a farmed animal. Forestry machinery / loggers would be likely purchased by contractors rather than forest owners. I guess that forest owners could postpone their harvesting by a couple of years if the price of logs really tanked. But whether the forestry contractors could or would adjust their equipment purchasing behaviour because of that is a question that I don't know the answer to.Quote:
If so, I would suggest that their lending to this sector is heavily weighted towards the Forestry part. UDC have "traditionally" had a major share of the business of financing forestry machinery/loggers and such. On the other side of the category, I suspect that their involvement in other parts of the rural sector are comparatively modest, being left largely to their bank parent.
SNOOPY
Updating the actual bad debt write offs in relation to the size of the loan book at the end of FY2017. Section 7 in the UDC 2017 Financial Statements is named "Provision for Credit Impairment". Bad debts actually written off are compared against the 'provision for loan impairment' stated on page 3, the 'Statement of Comprehensive Income'.
UDC Bad Debt Write Off (Note 7: Provision for Credit Impairment) New Annual Bad Debt Provision (Income Statement) FY2010 $17.343m FY2011 $4.891m FY2012 $10.164m $6.031m FY2013 $12.399m $7.123m FY2014 $3,300m +$18.633m = $21.933m $11.733m FY2015 -$0.659m + $12.162m= $11.503m $10.427m FY2016 $1.297m + $11.055m = $12.352m $7.418m FY2017 -$2.860m + $7.698m = $4.838m $5.929m
Actual write offs look to be in a range of $10m to $12m, excluding the spike from FY2014 and the unusually low figure in FY2017.
Putting these 'actual write offs' as a percentage of the end of year loan book gives them better context Note that:
1/ the 'actual write offs' are found in the annual change of the holding provision for bad debts and do not directly correspond to the top up expenses for this provision that may be found in each annual income statement.
2/ the denominator is the 'carrying value' of the Net Loans and Advances, This has already been adjusted for the provision for credit impairment, unearned income and deferred fee revenue and expenses.
FY2012: $10.164m/$2,014.473m = 0.505%
FY2013: $12.399m/$2,065.117m = 0.600%
FY2014: $21.933m/$2,272.081m = 0.965%
FY2015: $11.503m/$2,347.163m = 0.518%
FY2016: $12.352m/$2,573.030m = 0.490%
FY2017: $4.838m/$2,911.514m = 0.166%
For FY2017, UDC has easily the lowest percentage of write offs for the last five years.
For comparative purposes, it is informative to look 'over the fence' to Heartland Bank. See Note 6 (AR2017) to work out the latest details of 'impaired asset expense' as follows:
FY2012: $5.642m
FY2013: $22.527m
FY2014: $5.895m
FY2015: $12.105m
FY2016: $13.501m
FY2017: $15.015m
Note that unlike UDC, Heartland writes off uncollectible debts or part debts directly from each annual profit result. I will now normalize these against the 'total finance receivables'. 'Total finance receivables' are already adjusted for any provision for impairment and the present value estimate of future losses (AR2017, Note 11).
FY2012: $5.642m/ $2078.3m = 0.271%
FY2013: $22.527m/ $2010.4m = 1.12%
FY2014: $5.895m/ $2607.4m = 0.226%
FY2015: $12.105m/ $2862.1m = 0.423%
FY2016: $13.501m/ $3114.0m = 0.434%
FY2017: $15.015m/ $3546.0m = 0.423%
Summarizing and comparing the above information:
UDC Debt Write Off Heartland Debt Write Off FY2012 0.505% 0.271% FY2013 0.600% 1.12% FY2014 0.820% 0.226% FY2015 0.518% 0.423% FY2016 0.430% 0.434% FY2017 0.166% 0.423%
The question that rears its ugly dead from the above data table is as follows:
Why is the impairment percentage so much lower for UDC in FY2017 compared with UDC's past year results? Perhaps we had a really low impairment year? But if that was true, we might expect a similar reduction in impaired loans over the same time period from the closely comparative Heartland. This didn't happen. I do note that UDC was put up for sale over the FY2017 financial year and it would have been helpful to show the accounts in their best possible light leading up to any sale. So were the impairments at UDC for FY2017 really that much lower? Or has some 'window dressing' gone on here?
That is a point to ponder for potential investors, if UDC is floated on the sharemarket soon!
SNOOPY