sharetrader
Page 59 of 87 FirstFirst ... 94955565758596061626369 ... LastLast
Results 581 to 590 of 867
  1. #581
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,221

    Default UDC vs Underlying ANZ (New Zealand) FY2018

    Quote Originally Posted by Snoopy View Post
    Time for my annual 'disentanglement' of ANZ.NZ from its UDC subsidiary. The information I need about the ANZ bank in New Zealand can be found here:

    https://www.anz.co.nz/about-us/media...r-information/

    UDC and ANZ New Zealand have the same balance date. So it is legitimate to work out the distribution of loans on their respective books using 30th September end of year data. First I need to:

    1/ Slightly rearrange the ANZ (NZ) categories (ANZ September 30th 2017 Bank Disclosure Statement, p30) so that they link up to those listed in the UDC FY2017 Financial Statements. THEN
    2/ I need to subtract the UDC equivalent figures (page 18, UDC FY2017 Financial Statements) to get the underlying ANZ bank figure.

    (Note: Receivables for UDC in industry groups are listed after provisions for credit impairment are taken into account. OTOH, receivables for ANZ.NZ industry groups are listed before allowances for credit impairment are taken into account. This means the UDC figures are lower than they would be on a 'like for like' comparative figure basis. However the error is only 1.0% overall, not enough to undo the validity of this exercise in my judgement)

    The results are below:


    All ANZ.NZ = UDC + Underlying ANZ.NZ
    Agriculture forestry, fishing and mining: $20,727m (11.6%) $563m (18.9%) $20,164m (11.4%)
    Business and property services: $34,614m (19.3%) $171m (5.8%) $34,443m (19.6%)
    Construction: $2,772m (1.6%) $409m (13.8%) $2,363m (1.3%)
    Electricity Gas Water & Waste: $3,581m (2.0%) $12m (0.3%) $3,569m (2,0%)
    Finance and insurance: $20,834m (11.6%) $70m (3.3%) $20,764m (11.8%)
    Government and local authority: $11,201m (6.3%) $0.6m (0.4%) $11,200m (6.4%)
    Manufacturing: $4,696m (2.6%) $59m (2.0%) $4,637m (2,6%)
    Personal & Other lending: $71,031m (39.7%) $858m (28.8%) $70,173m (39.8%)
    Retail and Wholesale: $7,260m (4.1%) $390m (13.1%) $6,870m (3.9%)
    Transport and storage: $2,403m (1.3%) $443m (14.9%) $1,960m (1.1%)
    Total: $179,119m (100%) $2,975m (100%) $176,144m (100%)

    As was the case last year, notwithstanding the shuffling of disclosure with the reclassification of the ANZ.NZ loan categories, the loan allocation of ANZ.NZ with UDC removed, is little different the loan allocation of the whole of ANZ.NZ. This is no surprise. The whole of the UDC loan book is only 1.6% of the ANZ.NZ loan book. And ANZ.NZ itself (which you cannot invest in directly) is only a fraction of the whole ANZ operation which is the ANZ vehicle listed on the NZX. However, the converse is not true.

    UDC is very different from ANZ.NZ. In percentage terms:

    1/ the Agricultural exposure of UDC is double,
    2/ 'Construction' and 'Transport and Storage' exposure are up by nearly a factor of 10, AND
    3/ 'Retail and Wholesale' exposure are higher by a factor of 4.

    The volatility of these 'industry groupings' is testament to UDC being a much greater investment risk than any investment in ANZ itself.

    The following inter-year table shows how UDC is funded by its 100% owner ANZ

    UDC: Backing For Loans FY2014 FY2015 FY2016 FY2017
    UDC Shareholder Capital $341.412m (15.6%) $365.462m (14.6%) $423.247m (16.2%) $485.645m (16.7%)
    ANZ Committed Credit Facility (Note 8) $280.000m (12.8%) $395.000m (15.8%) $595.000m (22.8%) $1,385,027m (47.6%)
    Debenture Investments From Public (Note 8) $1,569.247m (71.6%) $1,736.026m (69.5%) $1,591.711m (61.0%) $1,039.133m (35,7%)

    There is a very significant change happening with the role of debenture holders in funding UDC much reduced as the ANZ parent seemingly looks to take over that role. Debenture holders no longer have any guarantee that their debentures will not be repaid early - a big negative for some debenture investors.
    Time for my annual 'disentanglement' of ANZ.NZ from its UDC subsidiary. The ANZ.NZ is the largest bank in New Zealand. That means the way the bank behaves has significant implications for all investors in NZ, not just ANZ group shareholders and UDC debenture holders.

    The information I need about the ANZ bank in New Zealand can be found here:

    https://www.anz.co.nz/about-us/media...r-information/

    UDC and ANZ New Zealand have the same balance date. So it is legitimate to work out the distribution of loans on their respective books using 30th September end of year data. First I need to:

    1/ Slightly rearrange the ANZ (NZ) categories (ANZ September 30th 2018 Bank Disclosure Statement, p32) so that they link up to those listed in the UDC FY2018 Financial Statements. THEN
    2/ I need to subtract the UDC equivalent figures (page 18, UDC FY2018 Financial Statements) to get the underlying ANZ bank figure.

    (Note: Receivables for UDC in industry groups are listed after provisions for credit impairment are taken into account. OTOH, receivables for ANZ.NZ industry groups are listed before allowances for credit impairment are taken into account. This means the UDC figures are lower than they would be on a 'like for like' comparative figure basis. However the error is only 1.0% overall, not enough to undo the validity of this exercise in my judgement)

    The results are below:


    All ANZ.NZ = UDC + Underlying ANZ.NZ
    Agriculture forestry, fishing and mining: $20,936m (11.3%) $594m (18.1%) $20,342m (11.2%)
    Business and property services: $35,501m (19.2%) $183m (5.6%) $35,318m (19.5%)
    Construction: $3,092m (1.7%) $451m (13.7%) $2,641m (1.5%)
    Electricity Gas Water & Waste: $3,309m (1.8%) $15m (0.5%) $3,294m (1.8%)
    Finance and insurance: $19,324m (10.5%) $67m (2.0%) $19,257m (10.6%)
    Government and local authority: $12,868m (7.0%) $0.377m (0.0%) $12,868m (7.1%)
    Manufacturing: $4,764m (2.6%) $61m (1.9%) $4,703m (2,6%)
    Personal & Other lending: $75.796m (41.0%) $1,055m (32.1%) $74,741 (41.2%)
    Retail and Wholesale: $7,195m (3.9%) $419m (12.8%) $6,776m (3.7%)
    Transport and storage: $2,126m (1.1%) $438m (13.3%) $1,688m (0.9%)
    Total: $184,911m (100%) $3,293m (100%) $181,628m (100%)

    As was the case last year, the loan allocation of ANZ.NZ with UDC removed, is little different the loan allocation of the whole of ANZ.NZ. This is no surprise. The whole of the UDC loan book is only 1.8% of the ANZ.NZ loan book. And ANZ.NZ itself (which you cannot invest in directly) is only a fraction of the whole ANZ operation, which is the ANZ vehicle listed on the NZX. However, the converse is not true.

    UDC is very different from ANZ.NZ. In sector allocation percentage terms:

    1/ the Agricultural exposure of UDC is 60% higher,
    2/ 'Construction' and 'Transport and Storage' exposure are up by a multiple of 8, AND
    3/ 'Retail and Wholesale' exposure are higher by a factor of 3.

    The volatility of these three 'industry groupings' is testament to UDC being a much greater investment risk than any investment in ANZ itself.

    The following inter-year table shows how UDC is funded by its 100% owner ANZ

    UDC: Backing For Loans FY2014 FY2015 FY2016 FY2017 FY2018
    UDC Shareholder Capital $341.412m (15.6%) $365.462m (14.6%) $423.247m (16.2%) $485.645m (16.7%) $550.944m (17.0%)
    ANZ Committed Credit Facility (Note 8) $280.000m (12.8%) $395.000m (15.8%) $595.000m (22.8%) $1,385,027m (47.6%) $1,762.003m (54.3%)
    Debenture Investments From Public (Note 8) $1,569.247m (71.6%) $1,736.026m (69.5%) $1,591.711m (61.0%) $1,039.133m (35.7%) $931,280m (28.7%)

    There is a very significant change happening over the last two years, with the role of debenture holders in funding UDC much reduced as the ANZ parent seemingly looks to take over that role. It was confirmed in January 2019 that ANZ plans to pay out all UDC debenture holders over 2019.

    SNOOPY
    Last edited by Snoopy; 29-01-2019 at 08:09 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  2. #582
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,221

    Default UDC: The 'before' and 'after' sales profile

    Quote Originally Posted by Snoopy View Post

    FY2015 All ANZ.NZ UDC Underlying ANZ.NZ
    Agriculture forestry, fishing and mining: $21,731m (12.2%) $465m (19.5%) $21,266m (12.1%)
    Business and property services: $13,681m (7.7%) $130m (5.4%) $13,551m (7.7%)
    Construction: $2,170m (1.2%) $344m (14.2%) $1,826m (1.0%)
    Entertainment, leisure and tourism: $1,386m (0.8%) $8m (0.3%) $1,378m (7.8%)
    Finance and insurance: $27,569m (15.5%) $87m (3.6%) $27,482m (15.6%)
    Government and local authority: $12,229m (6.9%) $0.5m (0.0%) $12,229m (7.0%)
    Manufacturing: $5,925m (3.3%) $78m (3.2%) $5,847m (3.3%)
    Personal & Other lending: $85,202m (47.6%) $597m (24.6%) $84,605m (48.2%)
    Retail and Wholesale: $5,785m (3.2%) $293m (12.0%) $5,492m (3.1%)
    Transport and storage: $2,264m (1.4%) $425m (17.5%) $1,851m (1.2%)
    Total: $178,148m (100%) $2,430m (100%) $175,718m (100%)
    Quote Originally Posted by Snoopy View Post

    FY2018 All ANZ.NZ = UDC + Underlying ANZ.NZ
    Agriculture forestry, fishing and mining: $20,936m (11.3%) $594m (18.1%) $20,342m (11.2%)
    Business and property services: $35,501m (19.2%) $183m (5.6%) $35,318m (19.5%)
    Construction: $3,092m (1.7%) $451m (13.7%) $2,641m (1.5%)
    Electricity Gas Water & Waste: $3,309m (1.8%) $15m (0.5%) $3,294m (1.8%)
    Finance and insurance: $19,324m (10.5%) $67m (2.0%) $19,257m (10.6%)
    Government and local authority: $12,868m (7.0%) $0.377m (0.0%) $12,868m (7.1%)
    Manufacturing: $4,764m (2.6%) $61m (1.9%) $4,703m (2,6%)
    Personal & Other lending: $75.796m (41.0%) $1,055m (32.1%) $74,741 (41.2%)
    Retail and Wholesale: $7,195m (3.9%) $419m (12.8%) $6,776m (3.7%)
    Transport and storage: $2,126m (1.1%) $438m (13.3%) $1,688m (0.9%)
    Total: $184,911m (100%) $3,293m (100%) $181,628m (100%)
    At the end of FY2015, UDC dined out on a glossy prospectus as the iconic provider of equipment across all New Zealand industry sectors. But shortly after this, the owner, ANZ Bank, decided to trim its corporate branches. UDC was one branch ear marked for the chop. The FY2018 UDC annual report was reduced to a comment less rough looking black and white e-document, designed to repel future investors, while still meeting legal requirements. I think it is fair comment to say that the failed sales process for UDC has become an embarrassment for the ANZ Bank. The solution seems to be to take UDC completely 'in house', stop the charade of UDC being seen as 'independent', while hoping the public forgets about the whole failed disposal, Yet this outcome was unknown if we wind the clock back to 2015. With pressure on the ANZ to improve its capital ratio, there was a real chance that ANZ could unload some of their risky account receivables by selling UDC. So how did ANZ plan to rejig the 'account receivable' balance so that the ANZ parent could get maximum benefit from a UDC sale?

    Year to year, we don't see much difference. But this comparison, across three years, does highlight some significant changes. The UDC loan book has grown by 35%, well up on the ANZ.NZ parent growth of just 3.9%. Have ANZ taken the opportunity to guide some of their less desirable loans into the UDC disposal bin? In gross dollar terms, all significant sectors at UDC are higher, except for Finance & Insurance and Manufacturing. Could the fact that ANZ have seen fit to keep more of 'Finance & Insurance' and 'Manufacturing' 'in parent house' mean that this is where the ANZ sees the best growth opportunities for NZ, and itself, going forwards? Returning to the UDC rubbish bin theory, by far the biggest increase in the UDC portfolio was 'personal loans and other lending'. 'Personal loans and other lending' is a very large catch all bucket. I guess a lot of that could relate to small business lending, where proprietors put up their own home as collateral. I wonder if ANZ see this lending as relatively unprofitable and/or difficult to administer? If you look down the 'All ANZ.NZ' column they are now doing $10b less of it.

    SNOOPY
    Last edited by Snoopy; 29-01-2019 at 09:20 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  3. #583
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,221

    Default 'Stressed Loan' vs 'Impaired Asset Expense' Trend: FY2018: UDC vs Heartland

    Quote Originally Posted by Snoopy View Post
    What is a 'Stressed Loan'? For the purpose of this discussion, I have a special definition.

    Stressed Loan Definition UDC Heartland
    1/ Take loan total from categories 7 and 8 a/ Take loans at least 90 days past due.
    2/ add 'Default' loans b/ add Loans individually impaired.
    c/ add Restructured assets. (*)
    3/ less Provision for Credit Impairment d/ less Provision for Credit Impairment.'
    4/ equals 'Total Stressed Loans' e/ equals 'Total Stressed Loans''

    (*). (Note that from FY2017 ' Restructured Assets' are now not reported on by Heartland.)


    A 'Stressed Loan' can be thought of as a kind of 'Vulnerable Loan', as previously described, but with the Impairment provision taken out. There is no overlap between a 'stressed loan', as defined here, and the amount of money written off each year in bad debts. But yes, 'Stressed Loans' are very much a judgement call by management.

    They may
    1/ recover,
    2/ stay stressed or
    3/ have to be written off.

    As a shareholder in either ANZ (owner of UDC) or Heartland:

    1/ I would hope that management would have a robust process that identifies problem loans before they have to be written off.
    2/ So as a shareholder, I would hope such loans were seen as 'stressed' before being classified as 'impaired' and certainly before an actual write off was declared.

    How does one check that this is what happens in reality? One way could be to look at the 'stressed loans' for both companies on an annual trending basis and see how this compares with the equivalent annual trend in write offs.


    Heartland

    The column (W) lists the actual dollar amount in bad debts written off over that period, as detailed in AR2017 note 19e.

    The key point to note here is that the 'impaired loan expense' / 'write offs' (represented by letter 'W' in each case) only occur:

    1/ when the impaired portion of the loan has gone through the whole loan review system'. AND
    2/ when a loan repayment has been missed, or a non payment is imminent

    Heartland
    Date 'Stressed' Loans on the books (X) Net Financial Receivables (Impairments deducted) (Y) (X)/(Y) Write Offs (W) Gross Financial Receivables (Z) (W)/(Z)
    EOHY2012 $87.728m $2,075.211m 4.23% $12.138m+$1.685m $2,104.591m 0.66%
    EOFY2012 $90.489m $2,078.276m 4.35% $14.636m+$3.180m $2,105.702m 0.85%
    EOFY2013 $48.975m $2,010.393m 2.43% $6.679m+$1.961m $2,060.867m 0.42%
    EOFY2014 $41.354m $2,607.393m 1.59% $35.258m+$3.260m $2,631.754m 1.46%
    EOFY2015 $39.066m $2,862.070m 1.36% $1.555m+$1.910m $2,893.704m 0.12%
    EOFY2016 $37.851m $3,113.957m 1.21% $12.010m+$6.653m $3,135.203m 0.60%
    EOFY2017 $38.341m $3,545.896m 1.08% $2.140m+$9.531m $3,567.191m 0.33%

    Note: During FY2016 'Heartland New Zealand Limited' and 'Heartland Bank Limited' combined into a single listed entity.


    UDC

    I have redefined the 'Total Financial Assets' as listed in note 10d to be 'Net Financial Receivables', because they have already had their 'Provision for Credit Impairment' deducted (netted off).

    UDC
    Date 'Stressed' Loans on the books (X) Net Financial Receivables (Impairments deducted) (Y) (X)/(Y) Impaired Asset Expense (W) Gross Financial Receivables (Z) (W)/(Z)
    EOFY2011 $126.218m $2,007.012m 6.29% $15.103m $2,049.504m 0.74%
    EOFY2012 $96.670m $2,102.299m 4.60% $10.164m. $2,141.780m 0.47%
    EOFY2013 $86.877m $2,161.193m 4.02% $12.399m $2,198.653m 0.56%
    EOFY2014 $95.364m $2,344.131m 4.07% $21.933m $2,375.936m 0.92%
    EOFY2015 $82.267m $2,429.695m 3.39% $11.503m $2,461.224m 0.47%
    EOFY2016 $85.475m $2,655.841m 3.22% $12.352m $2,684.750m 0.46%
    EOFY2017 $116.131m $2,975.781m 3.90% $4.838m $3,005.059m 0.16%



    Discussion

    In the case of Heartland, the 'stressed loan' percentage is consistently going down. However, the actual write offs per year do not show an obvious correlation to the same year's 'stressed loan' figure. In FY2014, for example, the quantum of write offs are almost equal to the quantum of stressed loans. Yet one year later (FY2015) the write offs are only less than one tenth of the stressed loans. Will the case of FY2016 and FY2017, where stressed loans are two to three times the amount actually written off become the new norm?
    .
    In the case of UDC, the stressed loans look to float around at 4% of the total, much higher than the Heartland equivalents of recent years. For FY2017 only, the 'Impaired Asset Expense' to 'Gross Financial Receivables' is startlingly low, even as the stressed loans jumped up. A one year aberration? Despite making my own interpretation of how to define a 'stressed loan' at UDC - to bring the number more into line with what happens at Heartland - the stressed loan percentage at UDC remains stubbornly high in comparison. UDC loans are perhaps more heavily weighted towards 'working equipment' which may not have much 'fire sale' value during a business downturn. So could it just be in the nature of the UDC business that management need to keep a really close eye on a large portion of their loans? How they do this, while using a skeleton staff compared to Heartland, remains a mystery to me!

    What would I like to see in these figures? If you accept that:

    1/ When a loan is written off it is largely too late to fix it, AND
    2/ The overall number of write offs can be contained (it is inevitable that in any lending organisation, some loans will have to be written off) [TR]
    [TD]EOFY2014[/TD][TD=align:right]$43.354m[/TD][TD=align:right]$2,607.393m[/TD][TD=align:right]1.66%[/TD][TD=align:right]$35.258m+$3.260m[/TD][TD=align:right]$2,631.754m[/TD][TD=align:right]1.46%[/TD]
    [/TR]

    THEN I am interested in how management deals with 'stressed loans' before they get to that stage.

    My concern is that the write offs at UDC over FY2017 are exceptionally low, and there is an unusual incentive for management to project the result like this (UDC is up for sale). Write offs are also down at Heartland over the comparable period (which could indicate a favourable market to lenders), but not by as much. The percentage of 'stressed loans' at UDC remains significantly comparatively higher than Heartland. There are a couple of ways to interpret that:

    Either:

    1/ UDC staff remain 'exceptionally diligent' in reviewing stressed loans (as assessed by UDC) and this policy is leading to lower and lower actual write offs.
    2/ UDC are being exceptionally lenient in classifying some loans as stressed when really they should be wholly or partially impaired or maybe even written off.

    I would have expected more 'exceptional diligence' from Heartland, simply because they have more staff. The Heartland pattern of reducing 'write offs' coupled with reducing 'stressed loans' does make a plausible narrative. But I am concerned that some of those UDC stressed loans may be a little more stressed than UDC management are letting on. It is hard to be definitive about one year's results. In the meantime I would be cautious in assessing the UDC write off picture.

    What is a 'Stressed Loan'? For the purpose of this discussion, I have a special definition.

    Stressed Loan Definition UDC Heartland
    1/ Take loan total from categories 7 and 8 a/ Take loans at least 90 days past due.
    2/ add 'Default' loans b/ add Loans individually impaired.
    c/ add Restructured assets. (*)
    3/ less Provision(s) for Credit Impairment{s) d/ less Provision(s) for Credit Impairment(s)
    4/ equals 'Total Stressed Loans' e/ equals 'Total Stressed Loans''

    (*). (Note that from FY2017 ' Restructured Assets' are now not reported on separately by Heartland.)


    A 'Stressed Loan' can be thought of as a kind of 'Vulnerable Loan', as previously described (my post 352), but with the Impairment provision taken out. There is no overlap between a 'stressed loan', as defined here, and the amount of money written off each year in bad debts. But yes, 'Stressed Loans' are very much a judgement call by management.

    They may
    1/ recover,
    2/ stay stressed or
    3/ have to be impaired and later written off.

    As a shareholder in either ANZ (owner of UDC) or Heartland:

    1/ I would hope that management would have a robust process that identifies problem loans before they have to be written off.
    2/ So as a shareholder, I would hope such loans were seen as 'stressed' before being classified as 'impaired' and certainly before an actual write off was declared.

    How does one check that this is what happens in reality? One way could be to look at the 'stressed loans' for both companies on an annual trending basis and see how this compares with the equivalent annual trend in write offs.


    Heartland

    The column (W) lists the actual dollar amount in bad debts written off over that period, as detailed in AR2018 note 20e.

    The key point to note here is that the 'impaired loan expense' / 'write offs' (represented by letter 'W' in each case) only occur:

    1/ when the impaired portion of the loan has gone through the whole loan review system'. AND
    2/ when a loan repayment has been missed, or a non payment is imminent

    Heartland
    Date 'Stressed' Loans on the books (X) Net Financial Receivables (Impairments deducted) (Y) (X)/(Y) Write Offs (W) Gross Financial Receivables (Z) (W)/(Z)
    EOFY2013 $48.074m $2,010.376m 2.39% $6.679m+$1.081m $2,060.867m 0.377%
    EOFY2014 $43.354m $2,607.393m 1.66% $35.258m+$3.260m $2,631.754m 1.46%
    EOFY2015 $32.824m $2,862.070m 1.15% $1.555m+$1.910m $2,893.724m 0.120%
    EOFY2016 $32.894m $3,113.957m 1.06% $12.010m+$6.653m $3,140.105m 0.594%
    EOFY2017 $34.490m $3,545.896m 0.973% $2.140m+$9.531m $3,575.613m 0.327%
    EOFY2018 $43.278m $3,984.941m 1.06% $4.546m+$14.924m $4,017.436m 0.485%

    Note: During FY2016 'Heartland New Zealand Limited' and 'Heartland Bank Limited' combined into a single listed entity.


    UDC

    I have redefined the 'Total Financial Assets' as listed in note 10d to be 'Net Financial Receivables', because they have already had their 'Provision for Credit Impairment' deducted (netted off).

    UDC
    Date 'Stressed' Loans on the books (X) Net Financial Receivables (Impairments deducted) (Y) (X)/(Y) Impaired Asset Expense (W) Gross Financial Receivables (Z) (W)/(Z)
    EOFY2014 $95.364m $2,344.131m 4.07% $15.333m $2,375.936m 0.645%
    EOFY2015 $82.267m $2,429.695m 3.39% $11.503m $2,461.224m 0.467%
    EOFY2016 $85.475m $2,655.841m 3.22% $9.753m $2,684.750m 0.363%
    EOFY2017 $116.131m $2,975.781m 3.90% $10.558m $3,005.059m 0.351%
    EOFY2018 $93.502m $3,283.630m 2.85% $8.875m $3,318.198m 0.268%

    Note: The 'impaired asset expense' in the table above is NOT the same as the 'credit provision charge' in the UDC income statement. The former is the cash taken off the books in a calendar year because certain impaired assets have been completely or partially written off. The credit provision charge is an annual adjustment to the 'provision for impairment'.

    Discussion

    I will preface this discussion by saying that, in previous years, I have made a bit of a hash of things in my tabulated calculations above. Some of this hash was because I have now changed my mind on what ingredients made up the final number. But my major mistake was made looking at UDC There I added "Collective Provision charge to the Statement of Comprehensive Income" (effectively a cash charge as I see it now) to the 'Individual provision bad debts written off' (also a cash charge) without changing the sign of the latter. The latter had a negative sign in front of it - because it was shown in the 'Provision of Credit Impairment' Note as reducing a provision. Absolutely correct, nothing wrong with that presentation. But I wanted to use that figure in a different context of 'cash movement'. 'Individual provision bad debts written off' represents cash out during the year and so does any charge made to the 'Statement of Comprehensive Income' for the year. I should have added these two 'cash out' numbers together, and now I have done just that, I should conclude by saying that, despite these errors, the general thrust of my previous argument has not been affected.

    I ended last year's discussion expressing my doubts about the ever decreasing write-off rate at UDC, while the 'stressed loans' did not show such a trend. We are now at the end of FY2018 and the write off rate has dropped again, although this time the stressed loan count is down as well. We mammals like to look for correlations. But I am going to put forward an alternative explanation as to why the 'stressed loans' and 'write offs' should not be correlated. Suppose, as the owner of UDC, you wanted to sell it and were keen for the business to be marketed in the best possible light. Would it not be sensible to really cast your eye more closely that usual over the stressed loan portfolio? That way you could bring about more early interventions to make sure not as many 'stressed' loans became 'distressed'. The counter argument to that is: Why would you wait for a whole of business sale to implement a best practice policy? And isn't it equally important to focus on stopping the unstressed part of the loan book becoming stressed at any time? Wouldn't any decent manager do all this anyway? The UDC sale, in one form or another, was very much on the table during FY2018. So I think it is still too early to say if the lower write off expenses at UDC can be sustained. My critical eye remains on UDC in this regard.

    In the case of Heartland, the 'stressed loan' percentage went down with a thump as Heartland extracted itself from its legacy property problems over FY2013 and FY2014.. Stressed loans have reached a plateau of about 1%. The actual write offs at Heartland were very high in FY2014, and that year should be seen as an outlier. There is a pattern of up and down years (highs and lows correcting each other over time?) averaging some 0.45%. This contrasts with the monotonic decline at UDC

    The UDC stressed loans look floats around at 4% of the total. This is much higher than Heartland. But this could be due to the nature of the business rather than management incompetence. UDC loans are perhaps more heavily weighted towards 'working equipment' which may not have much 'fire sale' value during a business downturn. Yet I would have expected more diligence from Heartland, simply because they have more staff. The Heartland pattern of reducing 'write offs' coupled with reducing 'stressed loans' does make a more plausible narrative than what is happening at UDC.

    SNOOPY
    Last edited by Snoopy; 30-01-2019 at 12:15 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  4. #584
    Speedy Az winner69's Avatar
    Join Date
    Jun 2001
    Location
    , , .
    Posts
    37,737

    Default

    Big day for Aussie banks today with the Royal Commission Report coming out

    Some say the shorters of banking stocks could get hurt
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  5. #585
    Legend peat's Avatar
    Join Date
    Aug 2004
    Location
    Whanganui, New Zealand.
    Posts
    6,435

    Default

    And yet , from the AFR

    Opinion
    Shorting the big four banks: widow-maker no more?
    https://www.afr.com/news/economy/sho...0190203-h1asf7 (only the first paragraph for free)
    For clarity, nothing I say is advice....

  6. #586
    IMO
    Join Date
    Aug 2010
    Location
    Floating Anchor Shoals
    Posts
    9,696
    Last edited by Joshuatree; 04-02-2019 at 06:05 PM.

  7. #587
    IMO
    Join Date
    Aug 2010
    Location
    Floating Anchor Shoals
    Posts
    9,696

    Default

    PURSUIT OF POSSIBLE MISCONDACT:

    Hayne referses cases to APRA and ASIC
    CBA - "Conflicted remuneration"
    AMP - For outsourcing services on insurance
    IIML (IOOF) - Failed best interest of members
    Suncorp -- (didnt see)
    FREEDOM - Unsconsciounable conduct
    YOUi - Breaching duty of good faith
    Allianz - 3x for Misleading deceptive conduct
    NAB - CEO + Chair critices

  8. #588
    Speedy Az winner69's Avatar
    Join Date
    Jun 2001
    Location
    , , .
    Posts
    37,737

    Default

    Will probably affect NZ in due course .....like getting credit will be tougher as responsible lending regime really kicks in
    “ At the top of every bubble, everyone is convinced it's not yet a bubble.”

  9. #589
    Senior Member
    Join Date
    Oct 2013
    Posts
    1,275

    Default

    Yes. The responsible lending regime will make it harder for average borrowers. Some people were complaining to the Commission that banks were irresponsible for lending them money. So at least there'll be fewer complaints.

    Lots of things to like in the Hayne report. I never understood what mortgage brokers did and why people didn't just deal directly with the bank. Looks like Hayne's recommendations will likely push all this business back the banks' way.
    Last edited by Bobdn; 04-02-2019 at 06:57 PM.

  10. #590
    Veteran novice
    Join Date
    Jun 2007
    Location
    , , .
    Posts
    7,289

    Default

    Lots of things to like in the Hayne report
    Well done! I'm barely past the introduction of the 560 page report!


Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •