Correct. I had continued with Axe's dice and 1:36. For a 1:30 it is indeed 20.4 yesrs.
My calculations may be correct. But does either of those calculations that I did give the right answer to the questions posed?
Now another question. Heartland seem to be soundly run. So how do they move up from their bottom of the barrel bank BBB rating? Or do the niche markets they operate in, forever condemn Heartland to remain BBB?
SNOOPY
Last edited by Snoopy; 02-07-2016 at 04:32 PM.
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My calculations may be correct. But does either of those calculations that I did give the right answer to the questions posed?
Now another question. Heartland seem to be soundly run. So how do they move up from their bottom of the barrel bank BBB rating? Or do the niche markets they operate in, forever condemn Heartland to remain BBB?
SNOOPY
No need for a higher credit rating.
They are already attracting funds at the same rate the Australian banks are paying.
38,0000 individual depositors more than satisfied with Heartland's BBB rating.
No need for a higher credit rating.
They are already attracting funds at the same rate the Australian banks are paying.
38,0000 individual depositors more than satisfied with Heartland's BBB rating.
and most of them have been with Heartland for 10 years or more .....with deposit rates generally higher than they would have got get from those Australian banks
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
and most of them have been with Heartland for 10 years or more .....with deposit rates generally higher than they would have got get from those Australian banks
No need for a higher credit rating.
They are already attracting funds at the same rate the Australian banks are paying.
38,0000 individual depositors more than satisfied with Heartland's BBB rating.
They are already attracting funds at the same rate the Australian banks are paying. .......not quite true percy as chart from Heartland below
A good trend though
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
They are already attracting funds at the same rate the Australian banks are paying. .......not quite true percy as chart from Heartland below
A good trend though
An excellent trend,which confirms what Heartland Bank's head of retail banking,Chris Flood was trying to convey to me, when I recently spoke with him .
Investor A and B have taken different risks with choosing between a 1 year TD renewed 5 times or one 5 year TD. I would not agree that they would have "exactly" the same money at the end unless the interest rate offered to both was the same at the time of deposit and did not change at all over a 5 year period - which is unlikely.
In my view the depositor that has taken increased risk is the depositor with the 5 year.
This risk is normally rewarded by the bank offering a higher interest rate for the longer period. The depositor takes some interest rate risk ( that interest rates may rise and they miss out) they take the risk that their personal circumstances may change over the 5 years and they may have to withdraw their money early (resulting in loss of interest and fees.) They also take risk that there is a one in 30 chance over the 5 years that heartland may not be able to pay in full and on time (credit risk).
The difference between a one in 30 chance over 5 years and a one in 30 chance for a single year is significant - if there is a one in 30 chance over 5 years - what is the chance for a single year?
Originally Posted by Snoopy
Let's put this question in a more Heartland relevant way. There are two investors, each investing $10,000 with Heartland on the same day.
1/ Investor A puts their money in a Heartland term deposit for 5 years. Interest is compounded annually.
2/ Investor B puts their money in a one year Heartland term deposit. Upon maturity, investor B reinvests their term deposit plus interest earned for another year. Investor B does this for five years in total.
Over the five years the credit rating of Heartland does not change and the interest rate curve remains flat (i.e. the one year interest rate is the same as the five year interest rate). The actual interest rate earned from Heartland does not change over the five year period.
Now hopefully Axe, you will agree with me that at the end of the five years both Investor A and Investor B will have excatly the same amount of money in their Heartland account. But which investor, A or B, has taken the greatest risk over the five year investment period?
Investor A and B have taken different risks with choosing between a 1 year TD renewed 5 times or one 5 year TD. I would not agree that they would have "exactly" the same money at the end unless the interest rate offered to both was the same at the time of deposit and did not change at all over a 5 year period - which is unlikely.
Axe, as unlikely as that may seem, if you had read the entire question, you would have seen that I was asking you about just such an unlikely scenario. Changing the question to make it more realistic is pragmatic and sensible, but it doesn't address the question I was asking you!
(Snoopy's head looks up expectantly and tail wags)
I am still hoping Axe that you might take pity on a poor mutt and answer the question that I asked. After all, I did answer the probability question that you put to me. However, failing that, I can come at what I see as 'the issue' from a different angle.
So now to the new question.
The 'one in whatever' ratio (1:30 for a BBB organization) interpretation that the reserve bank quotes in their explanatory notes is
"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."
Suppose I had taken out the following five term deposit investments with Heartland.
1/ A five year term deposit taken out in FY2012
2/ A five year term deposit taken out in FY2013
3/ A five year term deposit taken out in FY2014
4/ A five year term deposit taken out in FY2015
5/ A five year term deposit taken out in FY2016
Which of these investments (could be one, more than one, or none) does the implied current Heartland BBB credit risk 1:30 of not being repaid apply to?
SNOOPY
Last edited by Snoopy; 03-07-2016 at 10:25 AM.
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Heartland Bank can trace their history back to 1875.
At no time have they ever not repaid an investment on time and in full to the best of my knowledge.
So after 140 years, I would think the odds are very much in favour of them continuing to repay investments in full and on time.
Heartland Bank can trace their history back to 1875.
At no time have they ever not repaid an investment on time and in full to the best of my knowledge.
So after 140 years, I would think the odds are very much in favour of them continuing to repay investments in full and on time.
For most of those years loans were approved by directors who;
Were in the same class at school as your big sister,
Drove past your farm on the way to the meeting,
Brought or sold goods and services with you, or
Had a quiet word with your boss at the County Club
Originally Posted by Jantar
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