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  1. #13741
    Join Date
    Feb 2020


    Heartland's internet banking UI could do with a bit of an update but other than that they're doing pretty ok in the digital area I think.

  2. #13742
    Join Date
    Jun 2004
    , , New Zealand.


    Quote Originally Posted by winner69 View Post

    I think you will find that Heartland’s equity in Harmoney is treated as an Investment in Equities and that equity as such is ‘valued’ each year with any change in that value going through Income Statement.

    Heartland don’t pick up their ‘share of Harmoney’s profit’ in their accounts. They do not equity account Harmoney’s earnings.

    The lending done through Harmoney is done in Heartland’s name (just like others using the platform) and it is those loans that Heartland shows in their books. Harmoney is just a shopfront Heartland use.

    I admit I haven’t delved too deeply into Heartland’s account to say that’s how it’s done but it appears so but willing to stand corrected if this is a load of the proverbial.
    This is what I have previously mused about the relationship between Heartland and Harmoney.

    Quote Originally Posted by Snoopy View Post
    Heartland own just 13.1% of Harmoney. But 'ownership' and 'providing capital with which to make loans' are two different things, And I think Heartland do both of those things for Harmoney.
    I think you have just said you agree with that statement at least Winner. But here is where my thinking on Harmoney has become a little confused.

    When Harmoney was a 'peer to peer' lender, there was a very clear division between one set of customers supplying loan capital, another set of customers taking borrowing capital and Harmoney clipping the ticket for bringing the parties together and administrating the loans. Now the retail customers supplying loan capital have been discarded, but the retail 'borrowing' customers are still there. Big players, the likes of Heartland, have replaced retail customers as the supplier of loan capital. So as part owners of Harmoney, Heartland are supplying loan capital AND clipping their own loan ticket. When Heartland talk about 'Harmoney & Other Consumer Loans' they are talking about the former conduit of income, not the latter. I would argue it is misleading to report like this, just like it would be misleading to label 'Motor Vehicle Finance' as 'Kia & other Motor Vehicle Finance'. Because although Kia might now be Heartland's biggest motor vehicle loan customer, the Kia loans are in essence no different to other motor vehicle loans. Likewise from a 'Consumer Loan' perspective, there is nothing to distinguish a Harmoney consumer loan from any other consumer loan as far as Heartland is concerned from an operational perspective. 'Harmoney & Other Consumer Loans' should just be called 'Consumer Loans' and that simple 'switch of label' would make the accounts much easier to understand.

    The actual Heartland earnings from the Harmoney entity, resulting from Heartland's 13.1% equity stake, are in fact hidden in Note 11 of the annual accounts for FY2020. Note 11 is labelled 'Investments' and a sub-category of that is labelled 'equity investments'. Heartland's 13.1% Harmoney sake is part of this $16.335m 'equity investment' total. We are further referred on to Note 20 for a description as to how this equity is treated:

    "Fair value for details of the split between investments measured at fair value through profit or loss, fair value through other comprehensive income and amortised cost."

    From Note 20 we learn

    "The fair values of financial assets and financial liabilities that are traded in active markets are based on quoted market prices or dealer price quotations. For all other financial instruments, the Group determines fair value using other valuation techniques."

    Harmoney is not a listed entity as I write this. So it is the last sentence in the quote above that applies. Further on in Note 20 we learn that in valuing such assets Heartland use:

    "Level 3: Inputs for the asset or liability that are not based on observable market data (unobservable inputs)."

    It sounds to me on this basis that Heartland are able to make up the value of Harmoney on their books to be whatever they like, by choosing whatever 'unobservable inputs' they deem fit

    "Investments in unlisted equity securities are classified as being fair valued through profit or loss and are valued under Level 3 of the fair value hierarchy, with the fair value being based on unobservable inputs."

    No more explanation is given. But I am imagining that the unobservable inputs that cause an annual change in the value of the Harmoney stake are taken into the Heartland statement of Comprehensive income 'somewhere' but are not labelled as anything to do with Harmoney in the Heartland accounts. Is that how you see it working Winner?

    Last edited by Snoopy; Today at 02:22 PM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

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