HGH - Heartland Group Holdings

[Snoopy]

Brexit and Heartland.
Funding;Unlike the Aussie banks HBL does not rely on any European wholesale funding. So no funding problems for Heartland,who have 38,000 individual depositors, 19,000 of whom have been with Heartland for 10 years or more..

According the to last half yearly report (HY2016), Heartland has $377.605m in bank borrowings. This is rather smaller than the $2,174.533m of depositors funds on the books. But it is certainly not nothing.

The trend seems to be increasing the amount of depositors funds relative to parent bank borrowing over recent times. That means less risk exposure to overseas wholesale banking markets. Obviously the prefoetal support for Heartland which commenced trading five years ago from all those depositors who put their money in ten or more years ago has been helping.

SNOOPY

[Snoopy]

You forgot option C - With great reluctance and after a great deal of time has passed and considerable forbearance has been shown, reluctantly doing what is only done as an absolute last resort because all possible efforts aimed at recovery, rescheduling, restructuring, refinancing or otherwise avoiding recognising a loss have been completely and utterly exhausted and the loan has irrevocably failed with absolutely no chance whatsoever of even a partial recovery. This is only done after all channels of recovery have been fully exhausted including any proceedings taken against guarantor's if any and liquidation of all assets held as security.

That's how most finance companies and banks operate.

Don't let the bad loans or potential bad loans overcloud your view of Heartland, Roger. Go back to 2012, and the fall back position for some of those expensive property development sections in the 'non-core' property portfolio was to put a couple of sheep on them. As Heartland themselves have joked, dairy cows can at least be slaughtered. And the price of beef in the supermarkets seems to be holding up.

The 'Snoopy Adjusted Underlying Profit' assumes a non-core property type hit every five years. This means whatever the headline figure for FY2016, and it might be bad, the SAUP I still estimate at $52.683m. I think you need to look through the big hits like the dairy downturn, to determine fair investment value.

The Reserve Bank are actual the most brutal Heartland bears. That BBB rating means Heartland will be expected to go bust one in every six recessions. It is still a little early to predict whether the coming recession will be 'the one'.

SNOOPY

[Snoopy]

Good question

I reckon A ........as long s it's seen as proactive provisioning to smooth earnings growth

I think 'A' would look better for the long term management incentives too. 'B' is what a new MD would do. Clear the decks, so we can have five nice years of 'A', before crossing companies to the next corporate assignment. Then let the next new guy have his 'B' year. I think that is how management incentives tend to work these days.

SNOOPY

[winner69]

I think 'A' would look better for the long term management incentives too. 'B' is what a new MD would do. Clear the decks, so we can have five nice years of 'A', before crossing companies to the next corporate assignment. Then let the next new guy have his 'B' year. I think that is how management incentives tend to work these days.

SNOOPY

......Roger's C) probably closer to reality but A) is the fine tuning bit to proactively smooth things out a bit so the tables in the reports keep showing these incremental improvement in key ratio's

[Beagle]

Don't let the bad loans or potential bad loans overcloud your view of Heartland, Roger. Go back to 2012, and the fall back position for some of those expensive property development sections in the 'non-core' property portfolio was to put a couple of sheep on them. As Heartland themselves have joked, dairy cows can at least be slaughtered. And the price of beef in the supermarkets seems to be holding up.

The 'Snoopy Adjusted Underlying Profit' assumes a non-core property type hit every five years. This means whatever the headline figure for FY2016, and it might be bad, the SAUP I still estimate at $52.683m. I think you need to look through the big hits like the dairy downturn, to determine fair investment value.

The Reserve Bank are actual the most brutal Heartland bears. That BBB rating means Heartland will be expected to go bust one in every six recessions. It is still a little early to predict whether the coming recession will be 'the one'.

SNOOPY

Pretty sure you said yourself a few chapters ago that UDC were significantly more realistic when it came to overall debt provisioning. BBB is vulnerable to a deep prolonged recession...something few if any people here want to admit.

[macduffy]

The Reserve Bank are actual the most brutal Heartland bears. That BBB rating means Heartland will be expected to go bust one in every six recessions. It is still a little early to predict whether the coming recession will be 'the one'.

I learn something new every day. I always thought that those ratings were set by the likes of Moodys, Standard and Poors, Finch etc. as is the case with industrial-type companies.

[percy]

I learn something new every day. I always thought that those ratings were set by the likes of Moodys, Standard and Poors, Finch etc. as is the case with industrial-type companies.

You are off course correct.
A laugh a page on this thread.!!
Wonder when the next recession is coming?
The motel I stayed in at Westport for the last two nights was full.
Recession up your way Macduffy?
Local banks increased their deposit rates?

[winner69]

When Heartland rave about their BBB rating they provide a link to a RBNZ document about what it means

Table below

Approx. probability of default over 5 years with a BBB rating is 1 in 30 (5 times more likely than those with a A rating). The approximate, median likelihood that an investor will not receive repayment on a five-year investment on time and in full based upon historical default rates published by each agency.

Irrespective of whether motels are full in Westport or Aucklnd is booming there is always a possibility of default

[percy]

In practical terms comparing BBB with AAA rating.
Enjoy this.
I recently asked Heartland Bank's head of banking,Chris Foold whether Heartland would be looking for a higher rating.
"No point, as were are already attracting funds at the same rate as AAA Banks."!!!!!!!!!!!!

[macduffy]

Thank you both for clearing that up, I'll now remove my mischievous tongue from my aching cheek!

Back to pondering Brexit, imminent recessions and rising interest rates!