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  1. #7721
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    Quote Originally Posted by Paper Tiger View Post
    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'.
    The 'Total Provision for Impaired Assets' is already regarded as lost, from a bank management perspective. This is not to say that everything accounted for in the impairment provision will be lost. For example TNR in their last half yearly result wrote back part of their impairment provision. But it does mean that Heartland are managing their business assuming, for now, that the 'Total Provision for Impaired Assets' is lost.

    'Gross Financial Receivables' is a figure of receivables before the impairment provisions are deducted. I would argue that because Heartland are managing their receivables assuming the 'Total Provision for Impaired Assets' is already dead money, the most useful figure for comparisons is the 'Total Financial Recivables' (with impairments already deducted). Personally I find the phrase 'Total Financial Recivables' ambiguous. So I have chosen to call 'Total Financial Recivables' 'Net Financial Receivables' ('Net' implies something has been subtracted from a higher total). This is why I have used 'Net Financial Receivables' for my calculated comparisons.

    A problem is bank balance dates provide a snapshot of what is happening. But a 'snapshot of impaired assets' is just that. Impaired assets are dynamic and changing. From an investment perspective I want to know what will happen in the future.

    Generally loans do not go bad overnight. A loan is always good when it is first agreed to. Then something might happen that causes the bank to 'monitor' that loan. An inkling that the loan has become 'substandard' might lead to it being seen as 'doubtful'. Things become more serious when 'doubtful' turns to 'at risk of loss' and finally the worst loans actually 'default'.

    The 'default' loans always make headlines. But from a bank managment perspective it is the 'doubtful' and 'at risk of loss' loans that IMO are the best indicators of the risk going forwards. If a loan is already in default there is very little bank management can do at that late stage! This is why I am much more interested in the 'stressed' loan balance' that is left on the books rather than the 'impairment' already off the books. 'Stressed loan' is not a definitive accounting term. But from a Heartland perspective I define a stressed loans as (see note 19 of AR2015):

    (At least 90 days past Due)
    plus (Individually Impaired)
    plus (Restructured Assets)
    less (Provision for Impairment)

    Consequently I believe my previously published comparison chart is the best way to assess the 'stressed loan' situation.

    There is insufficient years of history to attempt to trending the data.
    Four years worth of data is not ideal. I prefer to work on data that at least covers a business cycle, and that means a minimum of five years. But four years worth of data, with Heartland in some semblence of the form it is in today, is all we have. So that is all we can work with. I don't think there is sufficient 'lack of data' to just ignore it and give up.

    SNOOPY
    Last edited by Snoopy; 10-06-2016 at 01:48 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  2. #7722
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    Quote Originally Posted by Paper Tiger View Post
    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.
    I think that PT has put succinctly the issue I have been waffling around on this thread for some time now.

    The choice of the phrase 'real profit' is particularly insightful and something I agree with. So what is 'real profit'?

    'Real profit' is in practice lumpy. But banks can see individual large loans and classes of small loans going bad before those loans actually go bad. So banks create impairment provisions. Impairment provisions allow a bank to smooth profits over different time periods. Ultimately all such smoothing comes out in the wash. Impairment provisions are not something I have a problem with in general.

    But what happens if the annual top up of the 'impairment bucket' is more than matched by the 'actual loss' drain hole at the bottom? Eventually your impairment loan bucket will be empty. And if the 'impairment bucket' bcomes empty, that means that your 'declared profit'', with impairment provisions carefully deducted, was not 'real'.

    In this case though, I am not considering the 'impairment bucket' directly. I am considering the 'stressed loan bucket' which I am claiming is the best indicator of what will happen to the actual 'impairment bucket' in the future.

    The nub of the issue: My table of the 'stressed asset trend' vs 'impaired loan expense' does not show an empty bucket. But it does show the hole in the bottom of the bucket is leaking at a rate that is not being matched by the annual 'top ups'.

    The next task then, is to quantify the 'net leak' so we can arrive at Heartland's 'real profit'.

    SNOOPY
    Last edited by Snoopy; 10-06-2016 at 01:44 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  3. #7723
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    Well HBL won the race against ARV, $1.30 and increasing ... but in my book "everyone's a winner" (lately...)

  4. #7724
    Senior Member pierre's Avatar
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    All the musings about metrics on ST are clearly stimulating the market. SP up to 129....and plenty of buyers wanting more shares than sellers appear keen to part with. Might even close at 130 today.

    Keep up the good work Snoopy, Percy, TJ, PT et al!

  5. #7725
    percy
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    Today I sold some of my "low conviction" Australian shares, and have recycled some of the funds into my" high conviction" Heartland Bank.
    Paid $1.30 for HBL,which will bring my average cost well up.HBL was already my largest holding..

  6. #7726
    Speedy Az winner69's Avatar
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    Hey nextbigthing Heartland back to $1.30 again.

    Of course it will push on to $1.60 this time, won't it?

    Most have forgotten it was $1.40 odd just over a year ago - so a bit if a way to go yet before we can call them a real winner - but a good recovery story eh
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  7. #7727
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    Jeez , 2 Authors on one thread, at this rate HBL thread could soon be looking like a best selling Blockbuster , but that's all good and so is the SP.

  8. #7728
    Reincarnated Panthera Snow Leopard's Avatar
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    Question How do they calculate it

    Quote Originally Posted by percy View Post
    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%...
    Yes, I meant to ask you about this metric at the time as I have not met it before.

    Is it the ratio of loans made to fathers to put their offspring through college?

    Best Wishes
    Paper Tiger
    om mani peme hum

  9. #7729
    Reincarnated Panthera Snow Leopard's Avatar
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    Exclamation Oh well

    Quote Originally Posted by Snoopy View Post
    The 'Total Provision for Impaired Assets' is already regarded as lost...
    ...Consequently I believe my previously published comparison chart is the best way to assess the 'stressed loan' situation....
    Quote Originally Posted by Snoopy View Post
    I think that PT has put succinctly the issue I have been waffling around on this thread for some time now....
    ...The next task then, is to quantify the 'net leak' so we can arrive at Heartland's 'real profit'.

    SNOOPY
    Snoopy I really, really feel that you are barking up the wrong tree so to speak and that your understanding of this area is sufficiently deficient that you can not see that it is askew.

    Please, please do some research into the area of impairment for financial assets before embarking on the Heartland, or anybody else's accounts.

    You know my PM link.

    But it is 'up to you' as my parents would say.

    Best Wishes
    Paper Tiger
    Last edited by Snow Leopard; 10-06-2016 at 04:05 PM. Reason: Forgot a title
    om mani peme hum

  10. #7730
    Reincarnated Panthera Snow Leopard's Avatar
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    Thumbs up Spot the pun

    Quote Originally Posted by K1W1G0LD View Post
    Jeez , 2 Authors on one thread, at this rate HBL thread could soon be looking like a best selling Blockbuster , but that's all good and so is the SP.
    We need an editor and you have been press-ganged.

    Best Wishes
    Paper Tiger
    om mani peme hum

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