HGH - Heartland Group Holdings

[winner69]

DATA TABLE FOR PERFORMANCE RATIOS
https://bankdashboard.rbnz.govt.nz/profitability

Question

Why doesn't the much lauded Heartland NIM (4.3 v big 4 at 2.1/2.2) lead into a superior ROE v the big four

Table shows they underperform quite badly on this measure

[Rawz]

Question

Why doesn't the much lauded Heartland NIM (4.3 v big 4 at 2.1/2.2) lead into a superior ROE v the big four

Table shows they underperform quite badly on this measure

I give up master winner

Why are the banks so much more efficient in generating profits off their net assets?? Even though they have lower NIM

[Ggcc]

I give up master winner

Why are the banks so much more efficient in generating profits off their net assets?? Even though they have lower NIM

Currently for HGH Reverse equity loans

[alokdhir]

Indicative rates as per HGH reverse mortgage brochure is 7.5 % ...thats creaming rates ...maybe as they have monopoly ?

[Muse]

Question

Why doesn't the much lauded Heartland NIM (4.3 v big 4 at 2.1/2.2) lead into a superior ROE v the big four

Table shows they underperform quite badly on this measure

Interesting question.

My gut reaction without taking the time to check my notes

NIM only part of the equation: net lending margin (NIM after credit losses) is the absolute most important metric in a financial institution. More risky firms achieve higher NIMs to attempt to compensate for the incremental risk they take. Given the origins of heartland as an aggregation of non bank lenders/societies and only securing registered bank status in 10 years ago, it wouldn't be surprising if they had higher credit losses than the big 4, though the relative credit quality of lending continues to improve yoy. The higher ICLs and future provisions translate into lower NLMs.

The other possibility (or combination with the above) is from scale. Heartland might have better NIMs and/or NLMs, but operating costs as a % of income or average book could be higher. I'd need to check my notes. Very possible to have high NIM/NLM but if you aren't at scale or have disproportionately high operating costs it doesn't flow to the bottom, which translates into ROE. There are benchmarks for all that but I can't recall it offhand.

Final impression is that I guess all 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.

another final possibility is the composition of how receivables are funded. Up to a certain point, the higher the leverage the better the ROE. But I dont think that is the case as the big 4 all have strong core capital ratios, so its likely one or a combination of the above.

will check my notes and revert later when not being terrorised by small humans.

[kiora]

https://www.interest.co.nz/saving/bank-leverage
And this
https://www.interest.co.nz/saving/ba...ial-comparator

[dreamcatcher]

Increasing mortgage debt for over 65's with rising number of retiring people turning to reverse mortgages to pay off their home loans

https://www.stuff.co.nz/business/129...-among-over65s

[Rawz]

Interesting question.

My gut reaction without taking the time to check my notes

NIM only part of the equation: net lending margin (NIM after credit losses) is the absolute most important metric in a financial institution. More risky firms achieve higher NIMs to attempt to compensate for the incremental risk they take. Given the origins of heartland as an aggregation of non bank lenders/societies and only securing registered bank status in 10 years ago, it wouldn't be surprising if they had higher credit losses than the big 4, though the relative credit quality of lending continues to improve yoy. The higher ICLs and future provisions translate into lower NLMs.

The other possibility (or combination with the above) is from scale. Heartland might have better NIMs and/or NLMs, but operating costs as a % of income or average book could be higher. I'd need to check my notes. Very possible to have high NIM/NLM but if you aren't at scale or have disproportionately high operating costs it doesn't flow to the bottom, which translates into ROE. There are benchmarks for all that but I can't recall it offhand.

Final impression is that I guess all 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.

another final possibility is the composition of how receivables are funded. Up to a certain point, the higher the leverage the better the ROE. But I dont think that is the case as the big 4 all have strong core capital ratios, so its likely one or a combination of the above.

will check my notes and revert later when not being terrorised by small humans.

Thanks for your post FM, i think all your points are on the money

[winner69]

Hope Heartland does better than ASB

ASB Bank lifted its annual net profit by 11% as it benefited from higher margins as interest rates rose and income grew faster than costs.

[alokdhir]

Pre result day SP languishing with persistent seller even below yesterday's price ....

Maybe someone not very impressed with the results preview ...lol

Cant be anything wrong ...our experts here and even great Jarden has full confidence in their dear Jeff ....But Forbars is a different story

Fingers crossed ...97M and 7.5 Cents divvy is my humble expectations ...FY23 ...105 m please