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  1. #11101
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    Quote Originally Posted by minimoke View Post
    OK. Lets see where this goes. Is it HBL's "job" to use shareholder funds to "fix" the
    psychological effects on Maori descendants of colonialism (assuming this is a problem - which of course it isn't)
    I don't agree with the "of course", but I don't think it is Heartland's job to "fix" the problem.

    I do think that it is commercially sensible for any large organisation to embrace diversity and to be "institutionally aware" of social issues and able to spot and act on opportunities and threats arising from them.

  2. #11102
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    Quote Originally Posted by Bobdn View Post
    Cool, our posts crossed in the mail.
    NO Problem Bob! Enjoy your cuppa! Iíll have a coffee.

  3. #11103
    always learning ... BlackPeter's Avatar
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    Quote Originally Posted by davflaws View Post
    I don't agree with the "of course", but I don't think it is Heartland's job to "fix" the problem.

    I do think that it is commercially sensible for any large organisation to embrace diversity and to be "institutionally aware" of social issues and able to spot and act on opportunities and threats arising from them.
    I think that most people would agree that a large organisation should embrace diversity, particularly if this diversity reflects their customer base. I certainly do.

    The question however is, whether they should focus with their "diversity" only on one minority (even if this minority has politically a special status) and that way risking to alienate other customers. There are likely more of Heartlands customers fluent in Mandarin or Dutch or German than customers who are fluent in Maori.

    Just wondering when they are reflecting this in their company culture and their annual reports?
    ----
    "Prediction is very difficult, especially about the future" (Niels Bohr)

  4. #11104
    Legend minimoke's Avatar
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    Quote Originally Posted by davflaws View Post

    I do think that it is commercially sensible for any large organisation to embrace diversity and to be "institutionally aware" of social issues and able to spot and act on opportunities and threats arising from them.
    I think we have been through this before - the only "diversity" imperative is that it improves the customer experience and adds value to shareholders. Virtuous activity, such as targeting a specific gender or race for attention, or corporate donations, or "greening" is fine providing it has been put to shareholders and has their backing. Virtue has a direct cost and an opportunity cost - if shareholders are fine with this then all well and good.

  5. #11105
    Trying to get outta here
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    Quote Originally Posted by minimoke View Post
    I think we have been through this before - the only "diversity" imperative is that it improves the customer experience and adds value to shareholders. Virtuous activity, such as targeting a specific gender or race for attention, or corporate donations, or "greening" is fine providing it has been put to shareholders and has their backing. Virtue has a direct cost and an opportunity cost - if shareholders are fine with this then all well and good.
    Well said, it's easy for over the top PC nonsense to cloud ones vision these days.

  6. #11106
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    A good article on Heartland behind the paywall on NBR today, for those interested. Clear from that article that they will be seeking more funding in 2019

  7. #11107
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    Quote Originally Posted by couta1 View Post
    Well said, it's easy for over the top PC nonsense to cloud ones vision these days.
    Perhaps what is "PC nonsense" for the person in Bulls may not be so for the dude in their hybrid in Ponsonby?

  8. #11108
    Senior Member Marilyn Munroe's Avatar
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    An interesting article about reverse mortgages and some of the risks to a lenders balance sheet appears on the interest.co.nz site which is based on an item in the Financial Times.

    It focuses on the dangers of a no negative equity guarantee (NNEG). This applies where the outstanding balance of the reverse mortgage is greater than the proceeds of a sale. This can arise if the mortgagee has greeter longevity than provided for at the beginning or the price of houses goes down. The articles pose the question; are lenders provisioning enough capital against the risks in this type of lending?

    If their is no NNEG and the proceeds of sale are less than the outstanding balance the mortgagee or the executor of the estate will have to have to put cash on the table to clear the mortgage debt. You can imagine the reaction of these people when asked to stump up cash.

    If there is a NNEG and the proceeds of sale are less than the outstanding balance the lender eats the shortfall.

    A cure for cancer and alzheimers plus a ban on foreign house buyers are not beyond the bounds of reason. It would be a shame if Jeff has to go around machine gunning his reverse mortgagees to maintain solvency.

    https://www.interest.co.nz/opinion/9...ebt-piled-your

    https://www.ft.com/content/ddce25d0-...a-eeb7a9ce36e4

    Boop boop de do
    Marilyn
    Last edited by Marilyn Munroe; 17-08-2018 at 11:43 PM. Reason: added and removed words
    Diamonds are a girls best friend.

  9. #11109
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    Interesting MM and certainly something that needs to be watched very carefully with this new type of lending. These loans are very capital intensive and HBL will need to get lots of funding to keep growing Senior Finance in Australia as fast as it is now as well as the reverse mortgages here in NZ, albeit at a much slower uptake rate.
    HBL has a '"no negative equity guarantee" on these loans if I remember correctly so will never charge more than the proceeds of the house when sold.

    Most of these loans are being taken for home improvements, debt consolidation and extra income. So far most of the reverse mortgages have been fairly small and the LVRs are very low. I've also read somewhere that many of the loans have had much faster payback rate than originally expected.

    So I think these loans are very low risk at the moment but certainly something to watch out for and HBL should probably be providing us with more information in this regard in their reports.

  10. #11110
    percy
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    HBL have $453 mil lent to 15,000 NZ customers.Therefore the average size loan is $30,200.
    I think the average house price in NZ is between $450,000 to $500,000.
    House prices would have to fall over 80% before HBL hit troubles.I would think all the major banks would hit the wall with a 50% fall,therefore Heartland Bank would be the last bank standing.!!!.
    HBL will not be lending a very fit 65 year old at great deal.
    However, a 79 year old with a history of heart problems, may be able to borrow more than they thought.?

    ps.Today's article, Managing a reverse mortgage, at www.stuff.co.nz,business is worth reading.
    Perhaps a kind poster would post the link.?
    Last edited by percy; 18-08-2018 at 08:22 AM.

  11. #11111
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    Quote Originally Posted by percy View Post
    ps.Today's article, Managing a reverse mortgage, at www.stuff.co.nz,business is worth reading.
    Perhaps a kind poster would post the link.?
    Here it is:
    https://www.stuff.co.nz/business/opi...e-on-your-home

  12. #11112
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    Default Reverse Residential Mortgage Risk

    Quote Originally Posted by iceman View Post
    So I think these loans are very low risk at the moment but certainly something to watch out for and HBL should probably be providing us with more information in this regard in their reports.
    I have always found Heartland's disclosure compares favourably with what is disclosed by other banks.

    If you look in the Financial Report 2017, note 26 (Capital Adequacy), you will find the requirements of the Basel 3 standards that must be complied with, including what happens in times of 'economic stress'.

    In note 26c, the relative risks of the entire loan book, as estimated by 'relative risk rating' is there. I will reproduce some of that information below in a comparison chart that I have done to compare the relative risk of a Heartland 'Property Investment Mortgage' with a Heartland 'Reverse Residential Mortgage'. These risks vary according to the loan to value ratio (LVR) of each type of loan.

    Average Risk Weighting
    Loan to Value Ratio Property Investment Mortgage Reverse Residential Mortgage
    >100% 100% Not Allowed
    100%> and >90% 90%
    90%> and >80% 70%
    >80% 100%
    80%> 40%
    80%> and >60% 80%
    60%> 50%

    The total property investment mortgage book comes to $46.609m, much smaller than the residential reverse mortgage book of $922.748m. Heartland isn't known for conventional property loans. So this property investment could be the tail of when Heartland's ancestors did do residential conventional mortgages from the old building society days?

    Looking at the same table we can see that the reverse mortgages with an LVR <60% total $885.278m.

    So $885.278m/$922.748m = 96% of all the reverse mortgages on the books.

    That means that if every properties` underlying backing value dropped by 40%, then Heartland would still recover in full 96% of their reverse mortgage loans. Only the remaining 4% of loans would be wiped out (total $37.470m). With shareholder capital of $565.595m on the balance sheet, I don't think such a loss (a fairly extreme stressed scenario) would 'break the bank'.

    SNOOPY
    Last edited by Snoopy; 18-08-2018 at 12:50 PM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  13. #11113
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    Quote Originally Posted by bull.... View Post
    as reverse mtge book gets bigger part of there business , risk will reduce alot
    Quote Originally Posted by Snoopy View Post

    Average Risk Weighting
    Loan to Value Ratio Property Investment Mortgage Reverse Residential Mortgage
    60%> 50%

    Looking at the same table we can see that the reverse mortgages with an LVR <60% total $885.278m.

    So $885.278m/$922.748m = 96% of all the reverse mortgages on the books.
    If we look table 26C, on p54 in the Financial Report 2017 we see that the lowest risk loans that Heartland does are to 'Welcome Home Loans' which has a government guarantee, and to low LVR conventional property loans, a market which Heartland is slowly exiting to leave to the big banks. As a broad brush comment, I believe that Bull's assessment of a larger reverse mortgage proportion of the loan book de-risking the total loan portfolio is correct.

    So why are Heartland looking at taking the reverse mortgage portfolio out of the loan book, and spinning it off into a separate lending entity that is distinct from the New Zealand registered Heartland Bank? Won't the removal of these relatively low risk loans increase the loan book risk for the remaining Heartland Bank?

    Furthermore how will this new stand alone 'Heartland Reverse Mortgage Business' , a strongly cashflow negative business unit remember, gain the cash to grow when it is cut off from Heartland bank?

    SNOOPY (struggling to make sense of the restructuring proposal)
    Last edited by Snoopy; 18-08-2018 at 01:13 PM.
    Industry shorthand sees BNZ employees still called 'bankers' but ANZ employees now called 'anchors'. Westpac has opted out of banking industry shorthand...

  14. #11114
    percy
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    [QUOTE=Snoopy;725234Looking at the same table we can see that the reverse mortgages with an LVR <60% total $885.278m.

    So $885.278m/$922.748m = 96% of all the reverse mortgages on the books.

    That means that if every properties` underlying backing value dropped by 40%, then Heartland would still recover in full 96% of their reverse mortgage loans. Only the remaining 4% of loans would be wiped out (total $37.470m). With shareholder capital of $565.595m on the balance sheet, I don't think such a loss (a fairly extreme stressed scenario) would 'break the bank'.

    SNOOPY[/QUOTE]

    Certainly it would not "break Heartland Bank",but would most probably "break every other bank."

  15. #11115
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    No question the high margin very low risk reverse home equity part of HBL's loan book is the best part of the business on a risk / reward basis. The very high growth rate of this part of the business is what makes HBL a good hold. On a theoretical ex divvy SP of $1.665 and forward eps of 13.5 cps the forward PE of just 12.33 is a little lower than the 12.5 average of the peer group I follow and the growth rate of 8% in EPS for FY19 quite a bit higher than the average 4.4% of the big Aussie banks, although if you take the average of the growth rate in EPS for FY18 and FY19 and compare it with the Aussie banks we're talking about much the same average level of EPS growth. Conclusion - taking into account the full imputation credits available with HBL dividends HBL is sound hold cum a 5.5 cps divvy at $1.72.
    All going well we should beat the previous high of $2.14 sometime in 2020 or 2021 with $2.50 by about 2023 or 2024.
    Nearly 8% gross annual divvies in the meantime though so total shareholder return should be solid.
    Last edited by Beagle; 18-08-2018 at 02:08 PM.
    No butts, hold no mutts, (unless they're the furry variety).

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