ANZ.NZX - Anyone holding?

[Snoopy]

Time to normalise the UDC figures for 2015 so they can be compared more directly with the likes of Heartland Bank.

Heartland in FY2015 had selling and administration expenses of $68.403m (Heartland FY2015 report 'Selling & Administration Expenses', note 5). UDC had total operating expenses of $32.278m (UDC prospectus note 4). That is a difference of $36.125m. The two are comparable in that they have a similarly sized loan book (UDC:$2,347.183m, Heartland $2,862.070m). If we add the operating cost difference figure onto the UDC cost structure, what would that do to the UDC operating margin on assets?

FY2015: ($108.701-$36.125+ $10.464)/$2,347.183 = 3.53%

Note: UDC do not have a branch network of their own, but operate through ANZ bank branches in New Zealand. The $10.464m added back represents the adding back of 'fees paid to related parties' (ANZ). These are part of the $36.125m 'extra operating expenses (p43 note 4). The $10.464m could be thought of as a contribution to the ANZ branch network that allows UDC to carry on business as normal. But what I am interested in is the difference in operating cost of a finance company with and without a branch network. So this $10.464m which largely reflects a branch network allowance must be removed from my comparison.

This calculation shows the underlying margin at UDC to be slightly improved from FY2014's 3.37%.

Time to normalise the UDC figures for 2016 so they can be compared more directly with the likes of Heartland Bank.

Heartland in FY2016 had selling and administration expenses of $69.872m (Heartland FY2016 report 'Selling & Administration Expenses', note 5). UDC had total operating expenses of $31.623m (UDC Financial Statement 2016, note 4). That is a difference of $38.249m. The two are comparable in that they have a similarly sized loan book (UDC:$2,573.030m, Heartland $3,133.957m). If we add the operating cost difference figure onto the UDC cost structure, what would that do to the UDC operating margin on assets?

FY2016: ($107.233-$38.249+ $10.011)/$2,573.030 = 3.07%

Note: UDC do not have a branch network of their own, but operate through ANZ bank branches in New Zealand. The $10.011m added back represents the adding back of 'fees paid to related parties' (ANZ). These are part of the $38.249m 'extra operating expenses (calculated above, using figures from Financial Statements 2016, note 4). The $10.011m could be thought of as a contribution to the ANZ branch network that allows UDC to carry on business as normal. But what I am interested in is the difference in operating cost of a finance company with and without a branch network. So this $10.011m which largely reflects a 'branch network allowance payment' must be removed from my comparison.

This recent year trend in the underlying margin at UDC is

FY2016	3.07%
FY2015	3.53%
FY2014	3.37%
FY2013	2.58%

SNOOPY