HGH - Heartland Group Holdings

[percy]

Snoopy time for you to look at banks who have a large exposure to dairying ,mining,Australian retail,Australian and Auckland property,and see whether you can come up with some accurate figures,as your figures for the bank with exposure to only one of these areas [if fact the smallest at 8% compared with others well over 10% and in one case over 12% from memory], leaves a lot to be desired.
At present time your HBL figures are a little over the place.Ranging from $0 post 7665,$7mil post 7660,and $27 to 54mil in post 7661.
I think we would agree there is a big difference between $0 and $54mil.

[Snoopy]

Interesting that Heartland are suggesting that the floor value for a dairy farm is defined by the sheep/beef market.

You have to hope that the downside risk for sheep & beef is minimal.

Best Wishes
Paper Tiger

PT, as a loyal Heartland shareholder, I expect you to have more confidence than this. PR Form 7058 (below) I hope will restore your confidence.

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The downside for XXXXXX is minimal! NZ are the most cost effective clever farmers in the world blessed with a bounteous benign climate. The markets for our products are large and the reward potentially huge. We are currently riding an insatiable wave of overseas demand. What could possibly go wrong?

Note: Replace XXXXXX with 'wool', 'aquaculture', 'goats' , 'ostriches', 'dairy', 'sheep & beef' depending on which farming era you wish to use this form to promote.

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SNOOPY

[Snoopy]

At present time your HBL figures are a little over the place.Ranging from $0 post 7665,$7mil post 7660,and $27 to 54mil in post 7661.
I think we would agree there is a big difference between $0 and $54mil.

At last you get it Percy. Yes my results are all over the place. Small variations in forecast inputs produce big variations in forecast outputs. Thus current proclamations by Heartland management are inherently uncertain.

SNOOPY

[Snoopy]

Same report (December)-

Note 1 Segment Analysis

Under Rural - Total Assets $504.614m (pretty close to $505m)

Move on 3 months to March Disclosure Statement the amount has increased to $507.365m

(Note; this assumes that total assets in this analysis is in the main financial receivables)

Your $65m I think has come about from not comparing apples with apples?

You could be right Winner. The trouble is 'rural' is a flexible term. So if Heartland are using the term 'rural' consitently between the presentation and the interim report then there is very little change. Not sure where this leaves the large loans being repaid that Percy talked about.

SNOOPY

[percy]

At last you get it Percy. Yes my results are all over the place. Small variations in forecast inputs produce big variations in forecast outputs. Thus current proclamations by Heartland management are inherently uncertain.

SNOOPY

When HBL's annual result is announced in late August,I think we will all look back and see that this latest presentation, was clearer than we think.
Provisions,impairments etc .The next quarter's will be the most telling,yet rereading the presentation, you will note Heartland's management are not unduly concerned. In fact they are telling us they are continuing the strong progress they made over the past few years.New products,new channels for delivery,including online,means increasing business.Was not that long ago 9 cents eps seemed "pie in the sky",and now they will be paying 9 cents dividend.!!,Incredible.
We must keep in mind dates.HBL's year finishes 30th June 2016.The presentation was dated 18th May 2016.Only 6 weeks before year end.So they have already had 6 weeks trading in this last quarter.They would have a clear picture what the next 6 weeks will bring.
I have often stated on this thread HBL achieve what they say they will do.I see no reason to change that statement.

[Snoopy]

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%

In the table under note 6 of AR2015, the 'impaired asset expense' has increased to $12.105m (FY2015, ended 30th June 2015) up from from $5.895m in the corresponding prior period (FY2014). The HY2015 impaired asset expense was $5.102m. By simple subtraction the bad debt expense for the period 1st January 2015 to 30th June 2015 (2HY2015) was $12.105m -$5.102m = $7.003m.

In formation of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 11 from AR2015

Bad debts are outlined as follows:

At least 90 days past due $34.975m
Individually impaired $25.622m
Restructured assets $3.881m

Allowance for impairment ($25.412)m
PV of Future Losses Adjustment ($6.242)m

Total Stressed Loans (impairments deducted) $32.824m

Gross Financial Receivables $2,893.724m
Total Finance Receivables $2,862.070m

Stressed Loan Percentage (impairment removed) = $32.824 m/ $2,862.070m = 1.15%

SNOOPY

[Snoopy]

In the table under note 6 of AR2015, the 'impaired asset expense' has increased to $12.105m (FY2015, ended 30th June 2014) up from from $5.895m in the corresponding prior period (FY2014). The HY2015 impaired asset expense was $5.102m. By simple subtraction the bad debt expense for the period 1st January 2015 to 30th June 2015 (2HY2015) was $12.105m -$5.102m = $7.003m.

Information of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 11 from AR2015

Bad debts are outlined as follows:

At least 90 days past due $34.975m
Individually impaired $25.622m
Restructured assets $3.881m

Allowance for impairment ($25.412)m
PV of Future Losses Adjustment ($6.242)m

Total Stressed Loans (impairments deducted) $32.824m

Gross Financial Receivables $2,893.724m
Total Finance Receivables $2,862.070m

Stressed Loan Percentage (impairment removed)= $32.824 m/ $2,862.070m = 1.15%

In the table under note 4 of IRHY2016, the 'impaired asset expense' has increased to $5.610m (HY2016, ended 31st Dec 2015) up from from $5.102m in the corresponding prior period (HY2015). By simple subtraction the bad debt expense for the immediate period 1st January 2015 to 30th June 2015 (2HY2015) was $12.105m -$5.102m = $7.003m.

Information of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 6 from IRHY2016.

Bad debts are outlined as follows:

At least 90 days past due $21.207m
Individually impaired $27.179m
Restructured assets $3.235m

Allowance for impairment ($16.875)m
PV of Future Losses Adjustment ($5.599)m

Total Stressed Loans (impairments deducted) $29.147m

Gross Financial Receivables $2,951.075m
Total Finance Receivables $2,928.621m

Stressed Loan Percentage (impairment removed)= $29.147 m/ $2,928,601m = 1.00%

SNOOPY

[percy]

Maybe Heartland's presentation paints a clearer picture which is easier to understand.
page 8,Key Financial/Operational Metrics;
................................2012...........201 3..........2014...........2015
Dad debt ratio..............0.5%.........0.4%...........0.3 %...........0.2%.......clearly reducing.
Net Interest margin........4%............4.2%...........4.2%... .......4.4%.....Increasing and the envy of the Australian banks..[twice as much].
eps..............................4cents..........6 cents........9cents..........10cents..Again very positive real growth.
ROE.............................4.2%............6. 5%..........9%..............10.4%.Excellent progress.
Cost to income ratio.......0.5%............0.4%.........0.3%..... ......0.2%.certainly reducing costs.

[forest]

Percy nice clear overview of HBL progress.

HBL was established when the economics for the industry were very difficult. They know how to get over a hurdle. All the worries for the impaired loans are over done in my view.
HBL business model is lending out money. An expected cost of this is some impairment of loans like all other banks.
Some years the impairments will be a little higher than others but it is important to look at the bigger picture and that is very nicely laid out in the presentation.

[percy]

Percy nice clear overview of HBL progress.

HBL was established when the economics for the industry were very difficult. They know how to get over a hurdle. All the worries for the impaired loans are over done in my view.
HBL business model is lending out money. An expected cost of this is some impairment of loans like all other banks.
Some years the impairments will be a little higher than others but it is important to look at the bigger picture and that is very nicely laid out in the presentation.

Totally agree.
What I find telling is the fact Net interest margin is increasing while Bad debt ratio is decreasing.
Yes like all banks HBL will incur impairments,as part of being in the banking business ,however when we read in the Dairy update of the presentation HBL state"We don't expect that there would be any impact on Heartland's capital",we can see how wrong many posters here have been.
What this statement tells us, is rather than taking a "hair cut" on dairying loans,they may get a "light trim" on lost interest.Huge difference.