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  1. #7121
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    Have any of the analytical types thought through the implications of the prospect of negative interest rates on the banks' margins and profits? Net interest margins have generally been under pressure for some time but negative rates, as in Japan and parts of Europe, take us into new territory again. Will charging depositors to deposit funds make up for the lower rates paid on loans? Will lending rates go negative too? What chance of NZ experiencing negative rates? All hypothetical questions, I know, but worth a bit of thought by those of us holding NZ and Aust bank shares.

  2. #7122
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    Quote Originally Posted by cheeky View Post
    Paid article on NBR today: "Heartland may buy a business instead of returning $100m to shareholders"

    Jeff sees greater opportunity for acquisitions due to falling stockprices in the financial sector though there is nothing to "articulate in detail" at this stage

    http://www.nbr.co.nz/article/heartla...rs-jr-p-185238
    Been crying wolf since mid 2014 but nothing has happened ? I think the Tier 2 capital raise is a good idea in these uncertain times..just forewarning shareholders their capital return is looking less likely.
    Last edited by Beagle; 24-02-2016 at 02:16 PM.
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  3. #7123
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    I have no idea what all this analysis in the above threads mean,however in my opinion(uneducated as it is) it seems a good time to get in provided sp doesn't go above 116.

  4. #7124
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    Default Tier 1 and Tier 2 Lending covenants HY2015 (Period Ended 31/12/2014)

    Quote Originally Posted by Snoopy View Post
    Once again there is no mention of Tier 1 or Tier 2 in the Heartland HY2014 report.

    The 'best case' scenario is that all loans are Tier 1. $2,076.968m of loans are outstanding. 20% of that figure is:

    0.2 x $2,076.968m = $415.4m

    Heartland has total equity of $382.5m which is still below the 20% of loan target no matter what the tier classification of the loans.

    Result: FAIL TEST

    PS I do note that while other posters have protested at my 20% of equity to back up the loan measuring stick in the past, it is not too far away from the 17% which by implication is judged acceptable by management under the watchful eye of Reserve Bank chairman Graeme Wheeler. The reserve bank further qualifies their views that a company of Heartlands credit rating still has a 1 in 30 chance of going broke in any year. I prefer to think in business cycles and 30 years will contain around five of those. So you could restate the Reserve Bank's view as saying that HNZ has a one in five chance of going broke at the bottom of the business cycle. For me that investment risk is too high. So I am sticking to my 20% equity requirement, even if the Reserve Bank will settle for less.
    Once again there is no mention of Tier 1 or Tier 2 in the Heartland HY2015 report.

    The 'best case' scenario is that all capital is Tier 1, which is almost certainly correct. $2,657.084m of loans are outstanding. 20% of that figure is:

    0.2 x $2,657.084m = $531.4m

    Heartland has total equity of $462.310m which is still below the 20% of loan target no matter what the tier classification of the loans.

    Result: FAIL TEST

    PS I do note that while other posters have protested at my 20% of equity to back up the loan measuring stick in the past, it is not too far away from the 17% which by implication is judged acceptable by management under the watchful eye of Reserve Bank chairman Graeme Wheeler. The reserve bank further qualifies their views that a company of Heartlands credit rating still has a 1 in 30 chance of going broke in any year. I prefer to think in business cycles and 30 years will contain around five of those. So you could restate the Reserve Bank's view as saying that HNZ has a one in five chance of going broke at the bottom of the business cycle. For me that investment risk is too high. So I am sticking to my 20% equity requirement, even if the Reserve Bank will settle for less.

    SNOOPY
    Last edited by Snoopy; 25-02-2016 at 01:09 PM. Reason: correct 'loans' to 'capital'
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  5. #7125
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    Default Bad Debts HY2015 (Period Ending 31/12/2014)

    Quote Originally Posted by Snoopy View Post
    New tactics for the HY2014 report. The word 'impairment' isn't even mentioned in the text, which is I suppose another way to make any impaired loans go away.

    In the table on page 4 there is at least a nod to 'impaired asset expense' down to $3.3m (HY2014, ended 31st December 2013) from $5.3m in the corresponding prior period (HY2013) and $5.9m in the full year to 30th June 2014. By simple subtraction the bad debt expense for the period 1st January 2013 to 30th June 2013 ( 2HY2013 ) was $22.5m - $5.3m = $17.2m.

    'Impaired Asset Expense' is code for having lost all hope. Almost no chance of getting the money back. 'Restructured' and 'past due loans' do not fall under that category. So comparisom with the previous comparable period are - deliberately? - difficult to make.
    In the table on page 4 the 'impaired asset expense' has increased to $5.102m (HY2015, ended 31st December 2014) up from from $3.325m in the corresponding prior period (HY2014) and $5.895m in the full year to 30th June 2014 (FY2014). By simple subtraction the bad debt expense for the period 1st January 2014 to 30th June 2014 ( 2HY2014 ) was $5.895m - $5.102m = $0.793m.

    In formation of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 12 from IRHY2015

    Bad debts are outlined as follows:

    At least 90 days past due $30.652m
    Individually impaired $25.984m
    Restructured assets $4.012m

    Allowance for impairment ($19.870)m
    PV of Future Losses Adjustment ($6.919)m

    Total Stressed Loans (impairments deducted) $33.469m

    Gross Financial Receivables $2,749.232m
    Total Finance Receivables $2,722.443m

    Stressed Loan Percentage (impairment removed)= $33.469 m/ $2,722.443m = 1.59%


    SNOOPY
    Last edited by Snoopy; 04-06-2016 at 03:05 PM. Reason: Add stressed loan info
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  6. #7126
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    Quote Originally Posted by Snoopy View Post
    Once again there is no mention of Tier 1 or Tier 2 in the Heartland HY2015 report.

    The 'best case' scenario is that all loans are Tier 1, which is almost certainly correct. $2,657.084m of loans are outstanding. 20% of that figure is:

    0.2 x $2,657.084m = $531.4m

    Heartland has total equity of $462.310m which is still below the 20% of loan target no matter what the tier classification of the loans.

    Result: FAIL TEST

    ...
    All though HBL will still not pass your test I would appreciate it if you got your facts and numbers right.

    Best Wishes
    Paper Tiger
    om mani peme hum

  7. #7127
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    Just as well dairy loans not a problem for Heartland

    Dairy industry woes a long way from over

    http://www.stuff.co.nz/business/farm...kbased-analyst
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  8. #7128
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    Quote Originally Posted by Paper Tiger View Post
    All though HBL will still not pass your test I would appreciate it if you got your facts and numbers right.

    Best Wishes
    Paper Tiger
    Thanks for the heads up PT. What you may have not noticed is that the six month reporting period I was looking at was HY2015, which ended on 31st December 2014.

    So I am talking about figures generated more than a year ago. Why have I reached back into the past like this? Because once Heartland got their problem property portfolio under control, I let them off my 'tight observation leash'. Now since I have become a TNR shareholder, I need to update my semi-annual database for compartive purposes.

    I was going to do HY2015 and HY2016 together. However, because of the confusion between what data related to 'Heartland' and what data related to 'Heartland Bank' (the two terms meant slightly different things until the recent merger), I have decided to wait until the release of the HY2016 Interim report. This will contain the extra information I need which is not in the press releases made already.

    So despite what you thought, my data is accurate. But is it correct? This I am now having doubts about.

    First to clear up a bit of 'cut and paste' sloppiness from previous years. 'Tier 1' is a term that refers to the quality of bank capital, not loans. The capital is there to support the loans of course. But it was wrong of me to refer to 'Tier 1 loans'. So I have corrected that.

    My aim was to look at 'Risk share lending' by comparing 'bank equity' with the size of the loans on the books. But should I be comparing the bank capital (all Tier 1 in this case) with:

    (1) The loans made to customers (listed as finance receivables). OR
    (2) The loans made from customers, and parent banks (listed under borrowings)

    Granted the two are related because one supports the other. So even if I have been using the wrong one that necessarily doesn't stop me from getting the right answer, by accident :-). Up to now I have been using (2). But now I wonder if I should be using (1)? What do you think?

    SNOOPY
    Last edited by Snoopy; 24-03-2017 at 10:50 AM.
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  9. #7129
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    If I may offer:

    Bank capital rquirements are based on risk weightings of loans to customers, eg the preferential low risk rating afforded lending for housing compared to most commercial loans. Therefore (1) should be used.

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    Quote Originally Posted by macduffy View Post
    If I may offer:

    Bank capital rquirements are based on risk weightings of loans to customers, eg the preferential low risk rating afforded lending for housing compared to most commercial loans. Therefore (1) should be used.
    Thanks Macduffy.

    Following (1), the 'loan to' figure I should use is $2,722.443m
    Following (2), the 'loan from' figure I should use is $2,657.084m

    Given how little different those figures are, I am tempted to suggest that there are many things in life worth spending time in careful consideration and contemplation. And this isn't one of them!

    The smaller figure, all other things being equal, requires a smaller amount of shareholder equity to support it. So you could argue that using (1) is more conservative, becasue the answer (0.2 x the figure) is a larger value of shareholder equity. That observation is not that useful though. Because in the previous comparative period:

    Following (1), the 'loan to' figure I should use is $1,905.850m
    Following (2), the 'loan from' figure I should use is $2,076.968m

    So using (2) is more conservative. Oh dear!

    SNOOPY
    Last edited by Snoopy; 25-02-2016 at 06:15 PM.
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