HGH - Heartland Group Holdings

[Master98]

Fitch already response to HNZ amalgamation:
http://www.reuters.com/article/2015/11/06/idUSFit93916620151106#std9FsR0pvO5xSGk.97
Fitch: Heartland Bank's Restructure Credit Neutral

[Joshuatree]

What they're doing here makes good common sense and will give them financial headroom to take advantage of opportunities and face the challenges that lie ahead.
Baa Baa - In effect there's a value shift from those people who invest in a Tier 2 capital investment to those investing in the ordinary shares. (I would suggest many people investing in a Tier 2 capital compliant fixed interest opportunity don't understand the risks they're taking especially in regard to the Reserve Bank's open bank resolution). Stocks on a Pe of about 11.5 = 8.7% earnings yield...issue 75m debt at say 6% and in effect there's a value shift of about 2.7% on $75m = $2m per year of extra value for ordinary shareholders. By cancelling a certain number of shares they're able to increase EPS marginally on the remaining shares.

An extra $2m a year of earnings at a PE of circa 11.5 = $23m..devided by 470m odd shares = 4.9 cents a share and what do you know that's what the SP is up by today.
That said some of the senior bankers in the company will probably get a nice juicy bonus for boosting the EPS so how much value shareholders actually see remains to be seen, as does whether they get the issue over the line.

Overall though it looks like a sound move as does streamlining of the corporate structure which will add some efficiency.

Thanks for the informative objective post

[K1W1G0LD]

Fitch already response to HNZ amalgamation:
http://www.reuters.com/article/2015/11/06/idUSFit93916620151106#std9FsR0pvO5xSGk.97
Fitch: Heartland Bank's Restructure Credit Neutral

All this good news in one day and the shareprice has hit $1.30.
I'm so happy I could burst!

[mouse]

Can someone explain please why the bank borrows money through a tier-2 raise then has too much cash so cancels shares and pays out borrowed cash to shareholders. What's the point, or have I just got this wrong?

Because, at the present, the Greedy Shareholders want a reasonable return on share capital. But money on deposit comes at a lower rate. So, shareholder cash is more at risk now, due to less shareholder cash in shares. Swings and whatever.

[kiora]

Because, at the present, the Greedy Shareholders want a reasonable return on share capital. But money on deposit comes at a lower rate. So, shareholder cash is more at risk now, due to less shareholder cash in shares. Swings and whatever.

I agree Mouse .The risk for provisioning will be higher IMHO

[percy]

Heartland Bank is a bank.It is run be very experienced bankers,and has a board made up of people with proven business experience.
The business is based on money,the best use of money,borrowing at the best price,and lending at good margins to people who can repay their loans, and their interest.Heartland Bank must make sure they have diversified sources of funding and a diversified loan book.Heartland Bank must report quarterly to The Reserve Bank of NZ.It is subject to Fitch's Credit Ratings.The board of Heartland must make sure they keep their capital ratios right.
As we would expect HNZ have been doing all of these things.So it is only natural that HNZ look at themselves with "the owner's eye".[Directors and management are large shareholders].
They have seen that HNZ has too much capital and making use of "capital management" they can use a bond issue, and spare cash, to return the excess to shareholders,without weakening capital ratios.
They are only doing what they are experts at,banking and use of money.HNZ's EPS,ROE and capacity to increase dividends will improve with this capital return.
Should Heartland Bank need to raise funds for a large acquisition in a couple of years time,they will be well supported because the market knows they make great use of their capital.
HNZ are returning capital,while the Aussie Banks are raising capital.!!..I think that says it all.!
ps.www.scoop.co.nz and www.stuff.co.nz are both talking of $100mil return.I think they are right.$75mil from a bond issue and $25mil from "petty cash".

[kizame]

AND... What I specifically like about them is that they don't make rash aquisitions (except maybe Harmoney,but this may yet prove me wrong) They don't overpay or overstretch themselves in order to get what they want. The prudence shown over MTF is a good example.
This tells me that my capital invested in their shares is being nurtured.
Normally I am an impatient person wanting growth to happen quickly,but you can't beat a continuing steady increase over time.

[percy]

AND... What I specifically like about them is that they don't make rash aquisitions (except maybe Harmoney,but this may yet prove me wrong) They don't overpay or overstretch themselves in order to get what they want. The prudence shown over MTF is a good example.
This tells me that my capital invested in their shares is being nurtured.
Normally I am an impatient person wanting growth to happen quickly,but you can't beat a continuing steady increase over time.

I agree with you.They want to be the best bank,not the biggest.
Harmoney.I think if they had not taken a shareholding, we all would be disappointed in them, not being it that" new growing" sector.It looks to me HNZ have first right to pick the loans they want,so maybe it is very successful for HNZ.
And yes "you can't beat a continuing steady increase over time."

[winner69]

Because, at the present, the Greedy Shareholders want a reasonable return on share capital. But money on deposit comes at a lower rate. So, shareholder cash is more at risk now, due to less shareholder cash in shares. Swings and whatever.

Yes - Heartland will be increasing its leverage

Some will say good, some will have reservations

[nextbigthing]

Yes - Heartland will be increasing its leverage

Some will say good, some will have reservations

Even Roger said it's good. Shame we can't buy more on a Saturday. Next stop $1.60