HGH - Heartland Group Holdings

[Snow Leopard]

...Now I can't see what the 'average earning assets' are, and these would not normally be declared at 'snapshot report time'. But if you go to the balance sheet, the 'end of year financial receivables' (a proxy for the average?) are $1,985.119m...

plus cash & equivalents
plus investments
plus whatever else produces interest

Do not know how close that will get you but give it a go.

Best Wishes
Paper Tiger

[vorno]

...
Craig Stephen.Has since left HNZ.Went out of his way to give me clear answers,and guidance.

What, pray tell was the guidance given Sir Percy?

[percy]

What, pray tell was the guidance given Sir Percy?

One of the most telling bits of information Craig gave me was they had less trouble with car loans, than they did with house mortgages!
People need their car to get to work.No work,no income.
Other bits and pieces was more helping me understanding their balance sheet. The fact that Heartland's equity ratio,and liquidity was extremely strong. Other guidance, was that they were looking for margin rather than growing the lending book.Replacing low margin mortgage lending with more profitable products.Also how they were servicing Timaru successfully from Ashburton,rather than Christchurch.
W69..Yes Allison is very pleasant to talk to.I have only spoken to her when I have rung Jeff Greenslade,to congratulate him on achieving yet another milestone .Appears Jeff is very lucky to have her as a PA.

[mouse]

My view is that housing is overrated as an investment. Plus thousands of Bank dollars are tied up with one loan. Cars, a higher interest rate plus a shorter term. The problem with cars is their electronics fail and the car has died. But that is the borrowers problem, not the banks. We then get a loan history of borrowers. Do we give them a better rate?, I dont know. Maybe we should.
Then we come to Earthmovers, etc. Business down, cant pay. Repossess the beast. Sell it if you can. If not, sell it overseas. But it is difficult to export a large building made of concrete. A bit of a 'stuck' asset.

[Snoopy]

I am curious about this ever improving net interest margin of Heartland. Is there a way to calculate what is happening to the net interest margin without waiting for Heartland's annual slide presrentation?

The reserve bank has a collective margin table for all NZ banks

http://www.rbnz.govt.nz/statistics/tables/s20/

For the June 2014 quarter they list the net interest margin averaged over all 23 registered banks. So I guess those banks have suppied the reserve bank sufficient information to calculate it. But is there sufficient information on the net for Joe share investor to do the same?

'Investorwords' defines the net interest margin as follows:

"The dollar difference between interest income and interest expenses, usually expressed as a percentage of average earning assets"

(http://www.investorwords.com/3249/ne...st_margin.html)

The Heartland disclosure statement for FY2014 is here.

http://www.heartland.co.nz/uploadGal...nt%20Jun14.pdf

Note 8 from the Heartland declaration has:

1/ the 'total interest income' at $200.141m and
2/ the 'total interest expense' at $93.719m

The dollar difference on those two is $106.442m.

Now I can't see what the 'average earning assets' are, and these would not normally be declared at 'snapshot report time'. But if you go to the balance sheet, the 'end of year financial receivables' (a proxy for the average?) are $1,985.119m.

$106.442m / $1,985.119m = 5.36%

That is rather higher than the 4.44% quoted in Heartland's own chart. But not far enough out to indicate that I am totally going down the wrong road.

Since net interest margin seems to be one of the keys to Heartland going forwards, can anyone make a better fist of this calculation than I have?

Thanks for the constructive tweaks suggested by Xerof and PT. Now to rerun the figures as per these suggestions.

Unchanged from before: Note 8 from the Heartland declaration has:

1/ the 'total interest income' at $200.141m and
2/ the 'total interest expense' at $93.719m

The dollar difference on those two is $106.442m.

Now we will figure out the average asset book as estimated from the EOFY2013 and EOFY2014 figures

	EOFY2014	EOFY2013	Average
Cash/Cash Equivalents	$34.588m	$172.777m	$103.683m
Investments	$238.859m	$165.223m	$202.041m
Investment Properties	$24.888m	$58.287m	$41.588m
Finance Receivables	$1,985.119m	$2,010.376m	$1,997.748m
Total			$2,345.060m

$106.442m / $2,345.060m = 4.54%

That is just higher than the 4.44% quoted in Heartland's own chart. But given I don't have the data that Heartland have on actual average assets under management, this is as close as I'm going to get on the figures provided. Thanks guys.

SNOOPY

[Snoopy]

Thanks for the constructive tweaks suggested by Xerof and PT. Now to rerun the figures as per these suggestions.

Unchanged from before: Note 8 from the Heartland declaration has:

1/ the 'total interest income' at $200.141m and
2/ the 'total interest expense' at $93.719m

The dollar difference on those two is $106.442m.

Now we will figure out the average asset book as estimated from the EOFY2013 and EOFY2014 figures

	EOFY2014	EOFY2013	Average
Cash/Cash Equivalents	$34.588m	$172.777m	$103.683m
Investments	$238.859m	$165.223m	$202.041m
Investment Properties	$24.888m	$58.287m	$41.588m
Finance Receivables	$1,985.119m	$2,010.376m	$1,997.748m
Total			$2,345.060m

$106.442m / $2,345.060m = 4.54%

Now the interesting stuff starts. Calculating the net interest margin that Heartland hasn't told you about yet :-).
The figures below are for Q1 FY2015

Note 5 from the Heartland declaration has:

1/ the 'total interest income' at $52.037m and
2/ the 'total interest expense' at $23.100m

The dollar difference on those two is $28.937m.

Now we will figure out the average asset book as estimated from the EOFY2014 and EOFQY2015 figures

	EOFY2014	EOFQY2015	Average
Cash/Cash Equivalents	$34.588m	$37.805m	$36.197m
Investments	$238.859m	$241.289m	$240.074m
Investment Properties	$24.888m	$23.150m	$24.019m
Finance Receivables	$1,985.119m	$2,047.011	$2,016.065m
Total			$2,316.355m

Annualising that result

4 x $28.937m / $2,316.355m = 5.00%

That means if Heartland can annualize the quarterly improvement, they will lift their net interest marging by a half percentage pount over FY2014. That represents a potential 20% improvement.

SNOOPY

[winner69]

Snoopy ....they probably time weight things as well but your FY14 is pretty close to what they say.

Also if you used RB report for Q1 it only applies to heartland Bank and doesn't include her.

So if margins did expand by 0.5% that's an extra $12m on the bottom line

So $36m plus $12m plus say growth $4m is well in excess of their $45m to $47m guidance

Wonder whose right or whose kidding who

[noodles]

I think Heartland has hit the big time now. Just received my first Heartland Bank email phishing scam. This is a positive development for Heartland. Even the scammers are following them

[Beagle]

http://www.heartland.co.nz/content/i...l-account.aspx

New product called direct call paying market leading interest rate.

[Tomtom]

My view is that housing is overrated as an investment. Plus thousands of Bank dollars are tied up with one loan. Cars, a higher interest rate plus a shorter term. The problem with cars is their electronics fail and the car has died. But that is the borrowers problem, not the banks. We then get a loan history of borrowers. Do we give them a better rate?, I dont know. Maybe we should.
Then we come to Earthmovers, etc. Business down, cant pay. Repossess the beast. Sell it if you can. If not, sell it overseas. But it is difficult to export a large building made of concrete. A bit of a 'stuck' asset.

I seem to remember reading that sub-prime car loans have often outperformed home loans in terms of delinquencies because owners realise owning a car to get to work is essential even if you end up moving to a rental dwelling or similar. That said we've not has a large house price decline in New Zealand in many years.