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25-04-2017, 02:46 PM
#9291
Originally Posted by Joshuatree
Many of us experienced it and you ended up in the bin more than once. The threads are there in their 100's. I needed to present the other side to that post to give balance.Live and learn do we all.
Sold a few today as i needed to rebalance a little as HBL was getting just too big a % of my portfolio.
My life is so much better with my out of balance portfolio.More profitable too.!!..lol.
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25-04-2017, 05:01 PM
#9292
Originally Posted by iceman
Lets not forget HBL is not an average persons bank,where they deposit their wages and withdraw daily needs,not what they are aiming for at the moment I think.
So few consumers would really know a lot about them. Not a traditional street corner bank, yet.
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25-04-2017, 05:02 PM
#9293
I can't understand why you would re-balance out of a great performing stock,enhances returns and all.
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25-04-2017, 05:53 PM
#9294
Originally Posted by kizame
Lets not forget HBL is not an average persons bank,where they deposit their wages and withdraw daily needs,not what they are aiming for at the moment I think.
So few consumers would really know a lot about them. Not a traditional street corner bank, yet.
My comment was firmly tounge in cheek. I've been in love with this organisation since it was BSH and don' t regret one minute of it :-)
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25-04-2017, 11:02 PM
#9295
Liquidity Buffer Ratio aka Meads Test HY2017 (Part 3)
Originally Posted by Snoopy
Time to update the "Liquidity Buffer ratio" for FY2016.
When dear old Colin told us all those years ago that a certain finance company was 'solid as' with reference to investing debenture money, the end result was that this cash became tied up in illiquid property developments. So although the company had enough money to pay out their debenture holders 'on paper' and appeared to be operating profitably, the debenture holders could not get their cash back. The 'Meads Test' (as christened by Snoopy) is one method of finding out if a finance sector company really is 'solid as'. The basic date I need to check this out has already been calculated (see above). So let's get going.
To check out the balance between monies borrowed and monies lent and matching up those maturity dates using a one year time horizon. The equation we are looking to satisfy is:
(Total Current Money to Draw On)/(Expected Net Current Loans Outstanding) > 10%
On the numerator of the equation, we have borrowings.
HNZ BORROWINGS
1/ Term deposits lodged with Heartland. |
$2,282.876m |
2/ Bank Borrowings |
$429.304m |
3/ Securitized Borrowings total |
$284.429m |
4/ Subordinated Bonds |
$3.378m |
Total Borrowings of (see note 13) |
$2,999.987m |
Note 13 does not contain a clear breakdown of current and longer-term borrowing amounts and their maturity dates.
Banking facilities are provided by CBA Australia but for both Australia and New Zealand. These facilities are, I believe, in relation to the Australian part of the 'Seniors Reverse Mortgage Portfolio'. These banking facilities are secured over the homes on which the reverse mortgages have been taken out. These CBA loans have a maturity date of 30th September 2019. That means they are classed as ‘long term’ for accounting purposes. Heartland can’t rely on CBA Australia as a source of short-term funds.
The information given in note 13 on the securitized borrowing facilities is as follows:
|
Total FY2016 |
Total FY2015 |
Facility Maturity Date FY2016 |
Securitized bank facilities total all in relation to the Heartland ABCP Trust 1 |
$350.000m |
$350.000m |
1st February 2017 (*) |
less Current level of drawings against this facility |
$284.429m |
$258.630m |
equals Borrowing Headroom |
$65.571m {A} |
$91.370m |
(*) I do not expect any problem in rolling this facility over for another year.
HNZ LENDINGS vs HNZ DEBENTURES
Customers owe HNZ 'Finance Receivables' of $3,113,957,000. There is no breakdown in AR2016 (note 11) as to what loans are current or longer terms. However, if we look at note 20, we can derive the expected maturity profile of total finance receivables due over the next twelve months.
|
On Demand |
0-6 Months |
6-12 Months |
Total |
Expected Receivables Due |
$84.154m |
+ $961.274m |
+ $639.962m |
= $1,685.390m |
less Expected Deposits for Repayment |
$21.630m |
+ $289.314m |
+ $304.975m |
= $615.919m |
equals Net Expected Cash Into Business |
$62.524m |
$671.960m |
$334.987m |
$1,069.471m {B} |
If more money is coming in from customer loans being repaid, than is having to be repaid to the debenture holders, then this is a good thing for debenture holder liquidity. That is the case here.
Summing up:
(Total Current Money to Draw On)/(Expected Net Current Loans Outstanding)
= $65.571m / $1,069.471m
= 6.1% < 10%
=> Fail Short term liquidity test
On the surface this is an odd result. The expected cashflow outstanding is hugely positive, much greater than the pcp. So how can I fail Heartland on this liquidity test? One answer is that getting more net money in than in previous years could mean that Heartland might have difficulty applying that money into new loans.
|
FY2016 |
FY2015 |
Amount lent to Customers (Receivables) |
$3,113.957m (+8.8%) |
$2,862.070m |
Total Borrowings |
$2,999.987m (+6.2%) |
$2,825.245m |
Amount borrowed from Customers (Debentures and Deposits) |
$2,282.876m (+8.8%) |
$2,097.458m |
Securitized borrowing facilities have gone up by $25.799m over the same annual comparative period, while the $350m borrowing ceiling remains the same. So Heartland have upped their current period risk profile yet again by having a smaller declared available loan buffer to cover any mismatch between maturing borrowings and maturing receivables.
(Total Current Money to Draw On)/(Net Current Loans Outstanding) > 10%
In the numerator of the equation, we have borrowings.
HNZ BORROWINGS
1/ Term deposits lodged with Heartland. |
$2,512.629m |
2/ Bank Borrowings |
$454.317m |
3/ Securitized Borrowings total |
$276.696m |
4/ Subordinated Bonds |
$3.379m |
Total Borrowings of (see note 7, IRFY2017) |
$3,247.021m |
Note 7 does not contain a clear breakdown of current and longer-term borrowing amounts and their maturity dates.
Banking facilities are provided by CBA Australia but for both Australia and New Zealand. These facilities are in relation to the reverse mortgage portfolio. These banking facilities are secured over the homes on which the reverse mortgages have been taken out. These loans have a maturity date of 30th September 2019. That means they are classed as ‘long term’ for accounting purposes. Heartland can’t rely on CBA Australia as a source of short-term funds.
The information given in note 7 on the securitized borrowing facilities is as follows:
-------
|
Total HY2017 |
Total FY2016 |
Facility Maturity Date HY2017 |
Securitized bank facilities total all in relation to the Heartland ABCP Trust 1 |
$350.000m |
$350.000m |
3rd August 2017 (*) |
less Current level of drawings against this facility |
$276.696m |
$284.429m |
equals Borrowing Headroom |
$73.304m {A} |
$65.571m |
(*) I do not expect any problem in rolling this facility over for another year.
-------
Summing up:
(Total Current Money to Draw On)/(Expected Current Net Loan Maturity Outstanding)
= {A}/{B (from post Liquidity Buffer Ratio HY2017 (Part 2) }
= $73.304m / $1153.477m
= 6.4% < 10%
=> Fail Short term liquidity test
|
HY2017 |
FY2016 |
Amount lent to Customers (Receivables) |
$3,334.800m (+7.1%) |
$3,113.957m |
Total Borrowings |
$3,247.021m (+8.2%) |
$2,999.987m |
Amount borrowed from Customers (Debentures and Deposits) |
$2,512.679m (+10.1%) |
$2,282.876m |
a/ Securitized borrowing facilities are $7.773m lower over the six month comparative period.
b/ External Bank borrowings have increased by $25.013m.
c/ $20m has been raised in part one of a cash issue.
Heartland have reduced their current period liquidity risk profile by:
1/ Increasing the debentures and parent bank borrowings at a faster rate than the receivables.
2/ Increasing the borrowed funds from Heartland bank customers, at a faster rate than the increase of all borrowings.
SNOOPY
Last edited by Snoopy; 26-08-2018 at 01:11 PM.
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25-04-2017, 11:26 PM
#9296
Originally Posted by kizame
I can't understand why you would re-balance out of a great performing stock,enhances returns and all.
I don't expect you too. Except to say we all have our unique investment criteria situs, risk situs, reward situs etc.And experiences. I like to think I've learnt from my mistakes and experiences but i still make mistakes ;more in my spekky trading portfolio but i allow for that.
"Everyone has a plan until they get punched in the mouth" Mike Tyson
Last edited by Joshuatree; 26-04-2017 at 09:47 AM.
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26-04-2017, 05:31 AM
#9297
Liquidity Ratios - The Facts instead of the Fiction
Read HY2017 Section 14 Liquidity Risk - use the numbers provided instead of making up something from fairyland.
Worst Case On Demand 13.94% [($69.67+$49.29)/($754.58+$99.06)]
Worst Case 6 months 45.86% [$871.74/$1,900.80]*
Worst Case 12 months 50.54% [$1,410.19/$2,789.99]*
*The only one that has any real meaning is the On Demand.
TTFN
Paper Tiger
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26-04-2017, 10:41 AM
#9298
Originally Posted by Paper Tiger
Read HY2017 Section 14 Liquidity Risk - use the numbers provided instead of making up something from fairyland.
Worst Case On Demand 13.94% [($69.67+$49.29)/($754.58+$99.06)]
Worst Case 6 months 45.86% [$871.74/$1,900.80]*
Worst Case 12 months 50.54% [$1,410.19/$2,789.99]*
*The only one that has any real meaning is the On Demand.
TTFN
Paper Tiger
PT, the numerator of your second two ratios 'Worst Case 6 months' and 'Worst Case 12 months' does not contain the $42.29m 'undrawn committed bank facilities'. However you did include this $42.29m in your 'Worst Case on Demand' ratio. Is there a reason for treating the 'Worst Case on Demand' ratio differently in this respect?
SNOOPY
Last edited by Snoopy; 26-04-2017 at 10:43 AM.
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26-04-2017, 11:46 AM
#9299
Originally Posted by Paper Tiger
Can I just point out that the figures you use are not the expected maturity numbers but the contractual maturity figures.
So for instance that $748.332m was probably sitting in peoples current accounts, on call savings accounts, etc.
So while people will demand some of that money now, by going to a hole in the wall and getting cash out or paying for the weeks supply of dog food with their debit card, they will not want it all. And on the flip side of this is that people also put their wages and dividend payments back in.
With both term deposits and loans, there is the expectation that people will take up new ones.
All banks work this way and fail your test on the contractual profile (you passed Heartland last year because you did use the expected numbers).
This contractual profile becomes important if there is a significant loss of confidence in the bank and everybody wants their money out asap.
Originally Posted by Paper Tiger
Read HY2017 Section 14 Liquidity Risk - use the numbers provided instead of making up something from fairyland.
I think that I will continue to follow the advice of the first PT, and not the second PT. That means I take the printed 'contacted' figures and transform them into 'expected' figures. Whether that is using 'fairyland numbers' is a matter of opinion.
But since note 14 also says:
"The banking group does not manage its liquidity risk on a contractual liquidity basis."
I would argue there is a good case for transforming the contracted figures into something else.
SNOOPY
Last edited by Snoopy; 26-04-2017 at 11:47 AM.
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26-04-2017, 11:54 AM
#9300
Originally Posted by Paper Tiger
Worst Case On Demand 13.94% [($69.67+$49.29)/($754.58+$99.06)]
The above figure is calculated from figures in IRFY2017 note 14, using the formula:
-----
[(Cash & Cash Equivalents) + (Undrawn Committed Bank facilities)]
'divided by'
[(On Demand Debentures) + (Unrecognised Loan Commitments)]
------
However the 'undrawn committed bank facilities' of $49.294m listed in note 14 do not correspond to the 'borrowing headroom' derived from 'note 7'.
$350.000 - $284.429m = $65.571m
I wonder what the explanation for that little inconsistency is?
SNOOPY
Last edited by Snoopy; 26-04-2017 at 12:02 PM.
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