HGH - Heartland Group Holdings

[janner]

I apologise if its taken as otherwise.

Nothing to apologise for STC... As I said. " just sparring "..

Which is one of the reasons I like this forum.. Different opinions and dissections.. Mostly with intelligence ..

A little Borax now and then does no harm..

All good grist to the mill..

Long may it continue..

[winner69]

one could say the announcement has hardly set the world on fore and got the market all excited ....one way or the other ..... with only jsut above average volume days yesterday and not that busy today. One of HNZ disciples got a little excited yesterday and mentioned that it could be a 2 million day ....eah right

just the normal sort of activity ..... what does that mean?

[Snoopy]

Actually, here are some other pearlers from Snoopy about Heartland over the last nine months. They represent ongoing negativity, a desire to bury oneself in the balance sheet, and not actually visit or speak to the company, ignoring real world developments and instead making assumptions based on historical information that was outdated.

Without requoting myself as you have done Sparky, the consistent message I have been trying to get across is that Heartland could do with more capital.

The 'rule of thumb' for quasi-finance companies is to have shareholders equity equal to 20% of loan debt. HNZ for the first time has s/h equity around this level. Yet such ratios can be easily upset if some of those property loans in particular go bad. The last annual report showed more loans moving into the 'at risk' category. Nothing much has changed over the last year, except that HNZ have now fully utilised their bad debt provision for property. The shareholders equity (which is going up) and bank borrowing facilities (which are going down) are the cushion to such adverse events.

The other problem banks face is matching loan periods of the money lent out with the rotating cashflow of the term deposits that fund them. Heartland does not release this information at all to the market. So I prefer to be extra cautious and watch Heartland tick all of those other boxes for which information is released.

I was wrong about Heartland getting their banking licence so soon. But it was the Reseve Bank's own rules that required three years of accounts to be presented. I find it inexplicable that they ignored their own rules when giving the OK for Heartland to become a bank.

Of course Heartland are not 'too big to fail'. So the 'safety' of having a banking lcence is in reality more of a marketing tool. Certainly the credit rating outlook of HNZ was not changed when they became a bank.

SNOOPY

[macduffy]

Quite so, Snoopy.

Banking is a capital hungry business and if HNZ is to grow it will need to raise big chunks of new equity from time to time, particularly once the new Basle capital adequacy rules take effect. Big profits help, of course, but not if too big a proportion get paid out in dividends.

For me, HNZ still has to prove itself - so I'm not holding.

[biker]

Should HNZ be worth NTA? Not in my opinion with the exception of a T.O. (Heartland Financial USA anyone? Same colours too )

Or..... Kiwibank Heartland anyone?

[percy]

Quite so, Snoopy.

Banking is a capital hungry business and if HNZ is to grow it will need to raise big chunks of new equity from time to time, particularly once the new Basle capital adequacy rules take effect. Big profits help, of course, but not if too big a proportion get paid out in dividends.

For me, HNZ still has to prove itself - so I'm not holding.

Trying to grow low margin mortgage loans would put pressure on capital ratios.forest [who was at the agm] pointed out in his post #1270 that HNZ were not chasing this sector.So, need for capital is not an issue.
I think if we are looking to compare HNZ with the major Australian Banks we are making a mistake.Banking licence is about cheaper funds and a marketing tool.HNZ is more MARAC with a banking licence.SCOTTY pointed out a long time ago UDC's fantastics result.I feel HNZ is closer to UDC than the likes of Westpac or ANZ.HNZ are steadily proving themselves.I see more of a movement away from home loans to more profitable lending.
As for new Basle capital adequacy rules, I am sure new Reserve Bank Governor had them in mind when he granted HNZ a bank licence.

[Snoopy]

Actually, here are some other pearlers from Snoopy about Heartland over the last nine months. They represent ongoing negativity, a desire to bury oneself in the balance sheet, and not actually visit or speak to the company, ignoring real world developments and instead making assumptions based on historical information that was outdated.

One more comment on this. I do place a lot of emphasis on the balance sheet. But a balance sheet is a snapshot of the companies position "right now". It is very current information, the most current available. The Balance sheet is historical only in the sense that all data is historical as soon as it is captured. If you regard the balance sheet as outdated, then by implication the entire financial report becomes 'not worth bothering about' historical bunk.

In other companies that I have analyzed I have used historical information to the extent that Sparky may have a point, depending on your views of how things should be done. But in the case of HNZ, all of my 5 checking calculations are based on the balance sheet. It is not possible to use published information more current than this.

SNOOPY

[percy]

[QUOTE=Snoopy;394935]

I was wrong about Heartland getting their banking licence so soon. But it was the Reseve Bank's own rules that required three years of accounts to be presented. I find it inexplicable that they ignored their own rules when giving the OK for Heartland to become a bank.

One phone call to either Bruce Irvine or Jeff Greenslade was all it would have taken to get the correct information.They had been in discussion with the Reserve Bank for months/years.
Buffett spends all night reading annual reports, and all day on the phone talking to managers.You could take a leaf out of his book,and use the phone.

[macduffy]

Trying to grow low margin mortgage loans would put pressure on capital ratios.forest [who was at the agm] pointed out in his post #1270 that HNZ were not chasing this sector.So, need for capital is not an issue.
I think if we are looking to compare HNZ with the major Australian Banks we are making a mistake.Banking licence is about cheaper funds and a marketing tool.HNZ is more MARAC with a banking licence.SCOTTY pointed out a long time ago UDC's fantastics result.I feel HNZ is closer to UDC than the likes of Westpac or ANZ.HNZ are steadily proving themselves.I see more of a movement away from home loans to more profitable lending.
As for new Basle capital adequacy rules, I am sure new Reserve Bank Governor had them in mind when he granted HNZ a bank licence.

Fair points. percy.

I wonder though, how much of UDC's success stems from having ANZ as its parent? How much business comes their way from having all those commercial and corporate managers out there, putting business their way which for one reason or another is more suited to the finance company than the bank? How much the ANZ name is worth to UDC in terms of cost of funds, investors' confidence etc.? HNZ will be a different animal - part bank part finance company. Let's see how they go!

[percy]

Thank you belgarion and macduffy.I value your opinions.I think switching can go on for some time.UDC having ANZ has never affected MARAC in the past,although I would think ANZ channel a good bit of business their way .Maybe to compete with UDC ,HNZ needed bank licence.My best investments in the past [EBO] did not have instos on their register for years.