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  1. #13461
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    Quote Originally Posted by winner69 View Post
    It’s only a half million.

    They get caught up with some weird businesses ....remember that we’ll connected lady who took them for a ride with her IT companies.
    Yes -that as well.
    I must admit I have nearly sold all my HGH over the past 5 months .

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    Quote Originally Posted by fish View Post
    I guess this is just one example of an unsecured loan ?

    https://www.nzherald.co.nz/business/...ectid=12340240
    Tip of the Iceberg.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

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    Speedy Az winner69's Avatar
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    If a finance company doesn’t have some bad loans it’s not doing a very good job
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  4. #13464
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    Quote Originally Posted by winner69 View Post
    If a finance company doesn’t have some bad loans it’s not doing a very good job
    These are very difficult times and lots of companies are going to fail.
    If they have a culture that allows loans without adequate security it is not doing a very good job.
    Finance companies fail in such circumstances.
    At the very least it could be years before dividends resume.
    I am likely to sell my remaining shares as I feel increasingly uncomfortable.

  5. #13465
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    Pretty obvious some major provisioning is going to be required in regard to Covid 19 as per what Australian banks have done and in percentage of loan book terms probably a fair bit higher because of the nature of a significant part of HGH's lending. I am not sure one way or the other whether that places an obligation upon HGH to update guidance under the continuous disclosure regime of the NZX ? I half expect an update some time this month but who knows...

    As fish has astutely observed the dividend outlook is very uncertain. When one of the major supporters of this stock for many many years, (Percy) has sold out, (although we all make mistakes and nobody has a perfect track record, myself included), people should probably sit up and take note.
    Last edited by Beagle; 17-06-2020 at 08:49 AM.
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  6. #13466
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    Quote Originally Posted by Beagle View Post
    Pretty obvious some major provisioning is going to be required in regard to Covid 19 as per what Australian banks have done.
    I am not sure one way or the other whether that places an obligation upon HGH to update guidance under the continuous disclosure regime of the NZX ? I half expect an update some time this month but who knows...
    Jeff says about $80m profit this year and with only a week to got to year end that’s going to be the number.

    Heartland probably like most do a ‘soft close’ after 11 months and nothing cone of it so so all honky dory.
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

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    Quote Originally Posted by winner69 View Post
    Jeff says about $80m profit this year and with only a week to got to year end that’s going to be the number.

    Heartland probably like most do a ‘soft close’ after 11 months and nothing cone of it so so all honky dory.
    I take it after reading that post you have quite a few
    Ecclesiastes 11:2: “Divide your portion to seven, or even to eight, for you do not know what misfortune may occur on the earth.
    Ben Graham - In the short run the market is a voting machine but in the long run the market is a weighing machine

  8. #13468
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    Quote Originally Posted by Snoopy View Post
    Now how much capital is likely to be written off over FY2020?

    The new ECL (Expected Credit Loss) method for provisioning, under IFRS9, is more conservative than the old standard it replaced. As of EOFY2018, the previous allowance from the older standard was increased by nearly $28m. Although the finance industry grizzled about this at the time, with Covid-19 emerging the increased provisions now seem prescient.
    With the financial year ended 30th June just wound up, I am trying to get more of a handle on Heartland's upcoming 'Covid-19 loan book losses'. I said previously that the ECL (Expected Credit Loss) method is a more conservative way of looking at the bad debt picture. But I am not sure if this is really true.

    On my wider reading on this subject (actually just studying the Westpac FY2019 Annual Report, and HY2020 Interim Report) I note that all of the new business signed up during the year and the end of the line business that is finally written off are two classes of loans that are excluded excluded from the ECL analysis. This isn't so surprising when you think about it. A new loan that is not on the ECL system at the start of the year cannot be re-rated for credit quality if it has never been rated in the first place. Such must be the case with all 'new' loans. Likewise once a loan - or part thereof - is finally written off, it drops out of the bottom of the credit rating system. You can't re-rate a loan that has finally been determined to be unrecoverable!

    Having said that, when I go to the Heartland interim report Note 7 (p16 HY2020 i.e. period ended 31-12-2019) and look at the Non-securitised loans') both the 'new and increased provisions (net of collective provision releases)' are combined in a single ECL analysis. That seems to immediately make a lie of my claim that 'New Loans' are not part of the ECL. But I tend to think my logic is right. That means, whether combined with existing loans or not, new loans cannot be re-rated in the period in which they are instigated.

    There is another bit of the Heartland presentation on that page that strikes me as odd. The impairment allowance is reduced by adding back the 'Recovery of amounts previously written off'. That seems to make a liar of me again, as I have just stated that what is 'written off' under ECL cannot be brought back into the system. Yet two lines down that same figure is added back in (as though the recovery didn't happen) when it comes to calculating the impairment allowance. Weird to my eyes.

    The interesting thing about the three finance companies with which I am most familiar, (Heartland, Turners and Westpac) is that all of them had an increased 'bad loan provision' on adopting the new ECL debt rating system. But I am wondering if that was a conservative provision realignment, due to the lack of familiarity with how the new system will operate over time? I did note that in the case of the Westpac HY2020 report, hidden in all the Covid-19 and other new provisions, the 'Business Activity During Period' was written back up in value (meaning the bad debt provision was decreased as a result) under the ECL method.

    I am quite encouraged by comments coming out of Turners after the lockdown period. They reported their finance division remained profitable as people stayed home, didn't spend their money on frivolous things and paid down their loans. I am hopeful that many of the Heartland 'motor vehicle loans' got similar treatment. But whether this will continue into FY2021, now that we NZers are 'unlocked' and possibly about to lose our jobs as the wage subsidy ends is another matter.

    SNOOPY
    Last edited by Snoopy; 03-07-2020 at 11:37 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  9. #13469
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    Quote Originally Posted by Snoopy View Post
    I am trying to get more of a handle on Heartland's upcoming Covid-19 loan book losses. I said previously that the ECL method is a more conservative way of looking at the bad debt picture. But I am not sure if this is really true.

    On my wider reading on this subject (actually just studying the Westpac Annual Report) I note that all of the new business signed up during the year and the end of the line business that is finally written off are excluded from the ECL analysis. This isn't so surprising when you think about it. A new loan that is not on the ECL system at the start of the year cannot be re-rated for credit quality if it has never been rated in the first place. Such must be the case with all 'new' loans. Likewise once a loan - or part thereof - is finally written off, it drops out of the bottom of the credit rating system. You can't re-rate a loan that has finally been determined to be unrecoverable.
    What does that really mean re Heartland snoops?
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  10. #13470
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    Quote Originally Posted by Snoopy View Post
    I am trying to get more of a handle on Heartland's upcoming Covid-19 loan book losses. I said previously that the ECL method is a more conservative way of looking at the bad debt picture. But I am not sure if this is really true.

    On my wider reading on this subject (actually just studying the Westpac Annual Report) I note that all of the new business signed up during the year and the end of the line business that is finally written off are excluded from the ECL analysis. This isn't so surprising when you think about it. A new loan that is not on the ECL system at the start of the year cannot be re-rated for credit quality if it has never been rated in the first place. Such must be the case with all 'new' loans. Likewise once a loan - or part thereof - is finally written off, it drops out of the bottom of the credit rating system. You can't re-rate a loan that has finally been determined to be unrecoverable.
    Quote Originally Posted by winner69 View Post
    What does that really mean re Heartland snoops?
    I think it means that there is an extended lag before a loan gets tagged bad.
    For clarity, nothing I say is advice....

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