HGH - Heartland Group Holdings

[Waltzing]

"How the hell Heartland going to make any money ???"

classic , im sure our grandparents would be thinking Deja Vu.

A retired teacher aged 87 simply said "here we go again"

[Snoopy]

How the hell Heartland going to make any money ???

Easy:

Market Leading Mortgage Interest Rate	1.99%
less Market Leading Bank Interest Margin	3.99%
equals Future Term Deposit Rate for Heartland Term Deposit Customers	-2.0%

SNOOPY

[nztx]

"How the hell Heartland going to make any money ???"

classic , im sure our grandparents would be thinking Deja Vu.

A retired teacher aged 87 simply said "here we go again"

Just ask Grunter Robertson -- creating the fluid stuff seems no problem to pull out of tomorrow's mythical hat ..

[Beagle]

Easy:

Market Leading Mortgage Interest Rate	1.99%
less Market Leading Bank Interest Margin	3.99%
equals Future Term Deposit Rate for Heartland Term Deposit Customers	-2.0%

SNOOPY

No we can't have such flippant barking mate. I have taken it upon myself to do something about marketing these new mortgages as you can see https://www.heartland.co.nz/

https://tmmonline.nz/article/9765176...est+ever+in+NZ

[thegreatestben]

Still can't figure out why my applications get denied, I'm an easy tick on every single condition.
Only thoughts are I'm not borrowing enough?

• a NZ citizen or permanent resident, over 18 years old - TICK
• looking for a home and have a 20% deposit, or already owning a home and have at least 20% equity - TICK
• planning to live or currently living in the property - TICK
• able to meet the repayments over the requested loan term from your salary or wages - TICK
• a standalone, single section house that is freehold, cross lease or on a unit title - TICK
• owned or purchased either joint or individually (not in a trust or company). - TICK
• located in a major centre - TICK

[Leftfield]

Still can't figure out why my applications get denied, I'm an easy tick on every single condition.
Only thoughts are I'm not borrowing enough?

Suggest you take it up with HGH and let us know how you get on.

[BlackPeter]

https://www.nzherald.co.nz/business/...AANIAHO46WWSU/

I honestly never thought I would see the day you could borrow money at 1.99% !

Actually - our son back in Germany managed already several years ago to get a ten year fixed term mortgage for his house ... with a 0.95% interest rate. New Zealand interest rates are just outrageously dear, even at 1.99% they still are !

[Beagle]

Who remembers "Spot" the Telecom Jack Russell terrier ? Little refresher here https://www.nzonscreen.com/title/spo...mmercials-1991
I've decided that for a small fee I will offer my Beagle services for more advertisements for HGH, (but I'm not jumping into any swimming pools and I can't promise not to eat any tasty pies lying around)

Now as silly as all this sounds...actually SPOT the telecom dog was a phenomenal marketing success for Telecom back in the day starring in 43 different commercials.

Wonder if HGH will follow suit with that Beagle ? Seems to be doing good for the share price already

What HGH need is a good sharp punchy name for their Beagle that really gets the message across. I think that name should be Buck, (apologies to the "Call of the Wild" producers, itself a great movie but I digress). Buck the Beagle could feature in their home equity release video's. A nice looking couple with their lovely Beagle...stay in your own home and enjoy Buck and all the comforts and benefits that confers

[Beat the Bank]

I was trying to test if you already have a Direct Call Account whether you can open another NEW one to get the .2% extra

I approached them and they gave me the extra as I already had accounts and the app. So worth the try other loyal customers/shareholders

[Snoopy]

The objective of this post is to consider cash flow, both in and out over the subsequent one year period after reporting date. This will help evaluate the ability of Heartland to repay debentures due for repayment in the 12 months following the end of year account reporting date.

<SNIP>

If we now take the expected cash inflows and subtract from those the expected cash outflows we can examine the expected net cashflow from a 'one year in advance' perspective.

The problem is that -this year- we cannot do this, because Heartland has provided no information on the maturity profile of loans coming due in the FY2021 financial year. I contend that this means the information supplied on liquidity in this years financial report is a joke. Measuring liquidity is a complex exercise done by comparing expected (not contracted ) cash inflows from maturing receivables loans to expected (not contracted) cash outflows from repaying debenture holders. This I understand. But to provide no information at all on maturing receivables means that measuring liquidity on a short term (or any term) basis is actually impossible.

I am at a loss to explain what Heartland are trying to achieve by only disclosing one half of their liquidity story. I think the level of disclosure under Note 23 in the FY2020 accounts is woefully inadequate. When information is withheld that has historically been disclosed, it always begs the question, what are Heartland trying to hide?

I see that in Note 1 of the accounts Heartland says:

"The Group has responded to the pandemic by working with its customers to understand their needs and provide them with the financial support that best meets their requirements. To date, that support has included participating in industry wide measures (such as the mortgage deferrals programme and the provision of liquidity under the Business Finance Guarantee Scheme (BFGS) program), and implementing other measures such as temporary payment reduction or payment deferral arrangements for both business and consumer customers. The Group has also developed a product, Heartland Extend, which provides customers with flexible payment options."

The Heartland Group NZX/ASX annual announcement of 17th September contains useful information as to how Heartland plans to manage liquidity.

From p3

"Most of Heartland’s customers have returned to pre-COVID-19 payment schedules. At 27 August 2020, 96% of Consumer loans and 98% of SME and Business loans were on usual (or pre-COVID-19) repayment schedules or had taken up Heartland Extend."

If we regard "Consumer Loans" as "Harmoney NZ", "Harmoney AU" and "Personal Loans" that adds to be a total of: $146m+ $54m+ $12m = $212m. So the amount of loans 'not on schedule' were:

0.04 x $212m = $8.5m

If we regard "SME and Business loans" as "Open for Business", "Business Intermediated" and "Business Relationship" that adds to a total of: $155m+$499m+$496m = $1,150m So the amount of loans 'not on schedule' were:

0.02 x $1,150m = $23m

Added together this is nearly 40% of forecast FY2021 profit. So despite the small percentages, we are not talking about trivial money. And remember these repayment wobbles do not include 'Heartland Extend', which are really debt payments temporarily forgiven because it is judged they will 'come right'.

Specifically on the subject of liquidity from p11:

"Heartland Bank’s focus is on the reduction of risk concentrations in its deposit book and shifting its deposit mix in favour of lower rate call deposits where Heartland is relatively underweight."

"risk concentrations in its deposit book" is an interesting phrase. This implies Heartland are concerned that the term deposits that Heartland are attracting do not match the terms on which Heartland wishes to on loan that money. In an interesting quirk of human behaviour, "call" accounts are actually quite sticky as most call depositors leave their money in those accounts for an extended period of time. So I read the Heartland quote as saying that they are looking to extend the length of the average term deposit.

"A strategy to shift funding away from short-term uncommitted sources in favour of committed wholesale lines." means that Heartland are looking towards giving certainty to their loan book by selling off 'chapters of the total loan book 'in the form of securitized loan packages (collections of "in kind loans" on sold to a buyer that has the capital resources to fund a loan 'chapter', but where Heartland offers a capital guarantee to the loan 'chapter' buyer).

"The innovative Australian reverse mortgage-backed syndicated loan securitisation transaction announced on 15 September 2020 (for $A142m) is funded by established offshore institutional investors. The first-of-its-kind transaction achieves another milestone in executing Heartland’s strategy to diversify type, source and tenor of its Australian funding and importantly evidences market liquidity to existing warehouse funders".

The Australian Reverse mortgage book $NZ957.5m at balance date. If you take as a conservative requirement that Heartland should hold 20% of the capital it loans out then the $142m new loan provides sufficient liquidity to cover a loans receivable balance of: $A142m / 0.2 = $A710m. I think that new loan facility is close to covering the entire Australian REM loan portfolio on its own., which combined with the already existing facilities:

"Other funding activity included:•execution and utilization of a new A$250 million reverse mortgage funding warehouse provided by a major Australian financial institution
•issuance of A$100 million new Medium Term Notes."

provides plenty of headroom for the growth of the Australian REM loan portfolio into the future.

But something is missing from this discussion. There are no estimate being released on the 'demand' side of loans going forwards. It is all very well signing up depositors willing to give you capital to loan out. But what if there are not enough people and businesses on the other side of the ledger that want money? Heartland would then have a lot of money to pay out in debenture interest without the corresponding income stream from the loan capital that would normally service that debt. This is the only year that Heartland has not mentioned the maturity profile of their 'account receivables' and that to me is a worry.

SNOOPY