HGH - Heartland Group Holdings

[beetills]

I can't think of too many aquisitions that would suit the banking business apart from MTF at the moment.Isuppose they could buy some distressed farms.

[percy]

Good discussion here on ROE, but I think some of you Heartlanders see ANZ on a pedestal that is higher than it should be. From a bankers perspective the amount available to loan is tied to the amount of 'tier' capital available to be loaned against. In the case of Heartland 'Tier Capital' and shareholders equity are one and the same thing. But the ANZ and the other big banks have other sources of 'Tier capital' not available to Heartland.

Perusing my latest ANZ report (from 2012) page 58 lists total shareholders equity as $41.22 billion.

Now go over to page 117 and you will $752m of US trust securities (currently also Tier 1 capital) and three issues of ANZ convertible preference shares adding up to $5,114m (I believe these currently rank as Tier 2 capital). Perpetual subordinated notes of $953m add more tier 2 capital.

Below that is a list of more subordinated notes. Those maturing five years into the future can be fully regarded as more tier 2 capital amounting to $4,632m. Those maturing in four years time ($582m) need to be discounted 20% to arrive at yet more tier 2 capital of $466m.

As at 30th June 2012 ANZ has $5,114m + $4,632m + $466m = $10.212b of Tier 2 capital. That is less than 50% of the available Tier 1 capital ($41,220m + 752m = $41.972b).

So all of that tier 2 capital is available to be borrowed against.

Summing up all the Tier 1 and Tier 2 capital then, ANZ has $52.184b of Tier 1 and Tier 2 capital to back up their loans.

For FY2012 the ROE based on end of year shareholders equity is:

$6,011m/$41.220m = 14.6%

But if you do the same calculation on tier 1 and tier 2 capital, the Return on 'backing capital' is a rather lower.

$6,011m/$52,184m = 11.5%

That is close to the 10% ROE that Heartland is projected to achieve for FY2013.

In addition to this Heartland in common with all other banks will be facing the new Basel III capital conservation buffer (CCB) requirements that will increase the backup equity required to be held on the balance sheet significantly.

Even assuming all those doubtful Heartland property loans on the books coming good (no more capital destroying provisions for bad debts) , the picture that emerges here is irrefutable. Heartland has a very fully stretched balance sheet as everything stands now. There is very little room for growth beyond FY2013 with such a constrained capital base

SNOOPY

Above posted on 25/11/2013.
Just love the last sentence.
Yet only one Australasian bank has excess capital.HBL.

[winner69]

]

Above posted on 25/11/2013. (A good post by snoopy on ANZ)
Just love the last sentence.
Yet only one Australasian bank has excess capital.HBL.

Beauty is in the eye of the beholder - esp. with rose tinted glasses on

Proverbs 16:18 may be relevant here.

[mouse]

]


Proverbs 16:18 may be relevant here.

Pride goeth before destruction, and a haughty spirit before a fall. (King James version)
(For those with only the Koran at home).

[percy]

Yet common sense prevails.

[winner69]

Yet common sense prevails.

Yes hope so, I think it would be common sense for Heartland not to over over leverage themselves by returning capital to shareholders

[percy]

Yes hope so, I think it would be common sense for Heartland not to over over leverage themselves by returning capital to shareholders

The directors and management, who have a lot of skin in the game,a proven history of common sense and prudent stewardship, may, or may not agree with you.

[K1W1G0LD]

Yes hope so, I think it would be common sense for Heartland not to over over leverage themselves by returning capital to shareholders

Does anyone have a fix for a stubbornly stalled shareprice?

[h2so4]

Does anyone have a fix for a stubbornly stalled shareprice?

Sell calls.

[winner69]

Does anyone have a fix for a stubbornly stalled shareprice?

A profit upgrade

Economy on a roll and all that so they must be creaming it - especially as no surprises about bad debts looming

But thats not Jeff 's modus operandi so price possibly remain 'stubbornly stalled'