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10-06-2016, 12:44 AM
#7711
Late Night Thinking -- One of Some
Originally Posted by Paper Tiger
Position of Rural (includes Dairy) Loans for last 4 quarters:
Obviously it is not getting better yet.
There is more to the total picture across all sectors (i.e. another $9,284 of individually impaired assets) so read the DS if you are really interested but Rural is currently the 'biggy'.
Best Wishes
Paper Tiger
Consult your doctor as to whether a high dairy diet is good for you.
Whilst the table of impaired and overdue loans is useful in providing an indication of the state of the Rural (but we guess mostly Dairy) sector the underlined section was really a pretty stupid thing to post.
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10-06-2016, 12:51 AM
#7712
Late Night Thinking -- Two of More than Two
Originally Posted by Paper Tiger
Percy, I am absolutely mortified that someone of your standing on this forum should even entertain the least glimmer of doubt as to my ability to copy and paste numbers.
I offer this image from the latest Disclosure Statement as proof of my accuracy:
My distress is deep and my partner is going to have cope with the ramifications of this when they get home tonight AND I will almost certainly exceed my weekly recommended alcohol consumption before the day is out.
I have half a mind to never here post ever again.
Exit stage left.
Because what is important is not the size of the impaired loan but how many dollars loss you are going to suffer on the loan.
A $2.959M loss is definitely bigger than a $1.180M loss even if $23.5M is much, much bigger than $5.1M.
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10-06-2016, 01:00 AM
#7713
Late Night Thinking -- Three of Several
Originally Posted by Snoopy
Here is the information behind today's Heartland 'Question of the day'.
Date |
'Stressed' Loans on the books (X) |
Net Financial Receivables (Impairments deducted) (Y) |
(X)/(Y) |
Impaired Asset Expense |
EOHY2012 |
$87.728m |
$2,075.211m |
4.23% |
$1.854m |
EOFY2012 |
$90.489m |
$2,078.276m |
4.35% |
$3.788m |
EOHY2013 |
$80.383m |
$2,044.793m |
3.93% |
$5.254m |
EOFY2013 |
$48.975m |
$2,010.393m |
2.43% |
$17.313m |
EOHY2014 |
$42.498m |
$1,905.850m |
2.23% |
$3.325m |
EOFY2014 |
$41.354m |
$2,607.393m |
1.59% |
$0.793m |
EOHY2015 |
$33.469m |
$2,722.433m |
1.23% |
$5.102m |
EOFY2015 |
$32.824m |
$2,862.070m |
1.15% |
$7.003m |
EOHY2016 |
$29.147m |
$2,928.601m |
1.00% |
$5.610m |
First a couple of definitions based on how Heartland present their books.
An [ADD]fully[/ADD] impaired loan is something that in the judgement of Heartland has zero balance sheet value. It was 'written off' during the period covered by the accounts.
Heartland in their breakdown of the 'Asset Quality of Financial Receivables' list the following three mutually exclusive problem loan categories.
a/ Loans at least 90 days past due.
b/ Loans individually impaired.
c/ Restructured assets.
[REMOVE]I find this slightly confusing. But[/REMOVE] the 'loans individually impaired' does not mean that those loans are written off [REMOVE], despite them being listed as impaired[/REMOVE]. If I interpret the accounts correctly, it means that these loans are partially written off, and accounted for in the 'Provision for Impairment' (a separate listing category, d/).
My definition of a 'stressed loan' total can be calculated as follows:
'Stressed Loan Total' = (a)+(b)+(c)-(d)
The last column lists the actual dollar amount in bad debts written off over that half year period.
SNOOPY
If there are any useful metrics that can be pulled from this sort of data then the important one is the ratio of 'Total Provision for Impaired Assets' to 'Gross Financial Receivables'.
That is to say how much you are going to lose related to how much you lent.
It may provide interest to some to compare 'Total Impaired Assets' to 'Gross Financial Receivables'.
There is insufficient years of history to attempt to trending the data.
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10-06-2016, 01:05 AM
#7714
Late Night Thinking -- Four of At Least Four
Originally Posted by Snoopy
The ratio of:
'Stressed Loans' / ' Size of Net Loan Book'
presents a very favourable picture. Investors can see that the 'streesed loans' in dollar terms are steadily reducing as the total net loan book size is increasing. Put simply four years ago evey hundred dollars of loan on the books was associted with just over $4 of 'stressed debt'. Today evey hundred dollars of loan on the books was associted with just $1 of 'stressed debt'. It is a wonderful story. And 'the fans' would say it is entirely due to management taking hold of what was a 'rag tag' of lending institutions and blending them together into the slick Heartland operation we see today. The smooth progression looks almost too good to be true, with a seemless unbroken descent towards loan portfolio perfection. But sometimes when things look too good to be true, that is because they are!
Contrast this trend to Heartland actual debt write off record, the last column. This last column is not 'spinnable' by management. When a debt actually goes bad, the payments stop coming in and the underlying asset is sold for recovery purposes, there can be no doubt that that asset is bad.
The 'impaired asset expense' is actually quite lumpy. The biggest lump was during the period 2HY2013. That $17m wrote down was connected with the problem property portfolio. Take out that 'outlier', and the latest three half yearly write downs are high in historical terms. Not high enough to be a problem: Writing off 20% of a $30m stressed loan book is not going to cripple a company like Heartland. But the divergence between the trends of the last two columns is stark.
OK, I'm coming out with it. I think this evidence here that the 'Stressed Loans' picture is being massaged for the benefit of making management look good. A further hint of this is the much higher percentage of stresssed loan provisions on the books of UDC, a comparable lender. I don't think this is a problem for Heartland now. But I am wondering how an ever lower level of stressed loan provisions, in absolute and relative terms, can be justified when the actual loan write offs at Heartland follow no such trend!
SNOOPY
Best pass over this completely.
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10-06-2016, 01:16 AM
#7715
Late Night Thinking -- Five of Probably Five
What should really matter, to be blunt, is too make as much real profit as possible without it all blowing up.
So the aim is not to minimise the provision for impaired assets/impaired asset expense per se but to achieve the greatest sustainable difference between interest earned and impaired asset expense.
Or to put it simply maximise the reward to risk ratio/minimise the risk to reward ratio.
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10-06-2016, 01:21 AM
#7716
Late Night Thinking -- Six of Definitely Six
And so far Heartland have been doing an excellent job of achieving this and appear to have what it takes to continue.
Time to drink the tea, clean the teeth and put the tablet away.
Best Wishes
Paper Tiger
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10-06-2016, 01:25 AM
#7717
Late Night Thinking -- You Knew There Would Be One More Didn't You
As usual, Do Your Own Research.
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10-06-2016, 06:20 AM
#7718
Originally Posted by Paper Tiger
And so far Heartland have been doing an excellent job of achieving this and appear to have what it takes to continue.
Time to drink the tea, clean the teeth and put the tablet away.
Best Wishes
Paper Tiger
I hope you slept well PT, and trust that Snoopy just might agree with you on point 5&6.
I'm only a small holder of HBL yet I appreciate you both running your experienced eyes over their figures. What I like about HBL is its willingness to explore non-traditional lending opportunities and niche markets, and as table 3 shows, they seem to be doing their best to minimise the risk on their loan books.
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10-06-2016, 06:25 AM
#7719
Originally Posted by 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.
Paper Tiger.At the end of the day some/a lot of impairements,past dues and overdues finally become bad debts.And as you rightly point out the
ratio of bad debts to total loans is what we must watch.The above table clearly shows they are reducing.,as is the cost to income ratio.With Heartland Bank developing more online products, such as "open for business", and more online channels, the cost to income ratio will further decrease,while the net interest margin will further increase.
The Key Financial/Operational Metrics prove Heartland Bank are oncourse to be the best bank,not the biggest.
Last edited by percy; 10-06-2016 at 06:33 AM.
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10-06-2016, 08:21 AM
#7720
Yes, I also appreciate the above metrics very much... and on that basis, I think it is fair to say, Heartland are "well positioned"
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