sharetrader
Page 57 of 87 FirstFirst ... 74753545556575859606167 ... LastLast
Results 561 to 570 of 867
  1. #561
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default UDC Balance Sheet Impaired Loan Percentage FY2017

    Quote Originally Posted by Snoopy View Post
    The annual provision for loan impairment at UDC (page 3 UDC Finance Annual Report 2016) is: $7.418mm down 29% on the high previous year figure $10.427m from FY2015 .

    From note 6 (Net Loans & Advances) the resultant provisions on the books without bad debts already written off, with reference to the whole EOFY2016 loan book is:

    $28.909m /($2,573.030m+$28.909m+$139.730m+$8.950m) = 1.05% of gross value loans on issue

    ------

    The figures for ANZ New Zealand, suitably disentangled from UDC are (using note 13: 'Net Loans and Advances' based on ANZ New Zealand's September 30th 2016 update to the Reserve Bank)

    ($622m-$28.909m)/ ($114,623m -$2,573m)= 0.53%

    -------

    Compare that to Heartland (HNZ AR2016, Note 11 'Finance Receivables' )

    ($21.161m+$4.987m)/ $3,140.105m = 0.83% of gross value of loans on issue.

    -------

    Multi year trends of the above statistics are in the table below

    FY2013 FY2014 FY2015 FY2016
    UDC: Loans Impaired/Gross Value of Loans 1.55% 1.31% 1.25% 1.05%
    ANZ.NZ excluding UDC: Loans Impaired/Gross Value of Loans 0.88% 0.67% 0.56% 0.53%
    Heartland Bank: Loans Impaired/Gross Value of Loans 2.45% 0.93% 1.09% 0.83%
    %
    From note 6 (Net Loans & Advances) the resultant UDC provisions on the books with reference to the whole EOFY2017 loan book is:

    $29.278m /($2,911.594m+$29.278m+$169.965m+$6.486m) = 0.94% of gross value loans on issue

    (As an aside, the annual provision for loan impairment at UDC (page 3 UDC Finance Annual Report 2017) is $5.929m. This is down 20% on the high previous year figure of $7.419m from FY2016.)


    ------

    The figures for ANZ New Zealand, suitably disentangled from UDC are (using note 13: 'Net Loans and Advances' based on ANZ New Zealand's September 30th 2017 update to the Reserve Bank are (link to reference below).

    https://www.anz.co.nz/resources/9/0/...df?MOD=AJPERES

    ($579m-$29.978m)/ ($120,539m -$2,912m)= 0.47%

    -------

    Compare that to Heartland (HBL AR2017, Note 11 'Finance Receivables' )

    ($25.865m+$3.852m)/ $3,575.613m = 0.83% of gross value of loans on issue.

    -------

    Multi year trends of the above statistics are in the table below

    FY2013 FY2014 FY2015 FY2016 FY2017
    UDC: Loans Impaired/Gross Value of Loans 1.55% 1.31% 1.25% 1.05% 0.94%
    ANZ.NZ excluding UDC: Loans Impaired/Gross Value of Loans 0.88% 0.67% 0.56% 0.53% 0.47%
    Heartland Bank: Loans Impaired/Gross Value of Loans 2.45% 0.93% 1.09% 0.83% 0.83%

    The above table shows the significant impaired asset divergence between a mainstream bank, like ANZ, and second tier lenders - like UDC and Heartland - is significant and ongoing. There is an interesting correlation apparent between the ANZ parent bank and its subsidiary UDC. The UDC verses ANZ impaired loan percentage looks to be tracing a path that maintains a 2:1 difference between the relative preponderance of impaired loans, with UDC having the higher number. But both are downtrending over the last five years. The level of Heartland impaired loans looks to have plateaued, albeit at a slightly lower level than UDC.

    SNOOPY
    Last edited by Snoopy; 05-07-2018 at 08:13 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  2. #562
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default Default ANZ.NZ Loan Book Classifications FY2017

    Quote Originally Posted by Snoopy View Post
    One year on and we look at the chances of default for ANZ.NZ mortgages and ANZ.NZ other retail loans.

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

    (The following tables are updated from page 53 of the ANZ NZ September 30th 2016 Reserve Bank disclosure).

    For retail mortgages: 30-09-2012 For retail mortgages: 30-09-2013 For retail mortgages: 30-09-2014 For retail mortgages: 30-09-2015 For retail mortgages: 30-09-2016
    Grades 0-3: 0.2% 0.2% 0.2% 0.2% 0.2%
    Grades 4: 0.46% 0.46% 0.46% 0.46% 0.46%
    Grade 5: 0.93% 0.93% 0.93% 0.92% 0.92%
    Grade 6: 2.12% 2.11% 2.04% 2.02% 2.00%
    Grade 7,8: 5.35% 5.40% 5.24% 5.27% 5.13%

    For other retail: 30-09-2012 For other retail: 30-09-2013 For other retail: 30-09-2014 For other retail: 30-09-2015 For other retail: 30-09-2016
    Grades 0-2: 0.1% 0.1% 0.1% 0.1% 0.1%
    Grades 3-4: 0.29% 0.29% 0.30% 0.26% 0.26%
    Grade 5: 1.10% 1.12% 1.13% 1.00% 0.99%
    Grade 6: 2.50% 2.67% 2.60% 2.39% 2.11%
    Grade 7,8: 10.07% 11.25% 9.56% 8.79% 7.86%

    Overall observation? A continuing small risk reduction from year to year in the higher risk categories (mostly Grade 6 and above). Yet despite the reserve bank telling us of the risks of an inflated housing market, ANZ are seeing less risk in their retail mortgages than last year. I find that a bit strange.
    One year on and we look at the chances of default for ANZ.NZ mortgages and ANZ.NZ other retail loans.

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

    (The following tables are updated from page 54 of the ANZ NZ September 30th 2017 Reserve Bank disclosure, and the percentage numbers represent the probability of default).

    For retail mortgages: 30-09-2012 For retail mortgages: 30-09-2013 For retail mortgages: 30-09-2014 For retail mortgages: 30-09-2015 For retail mortgages: 30-09-2016 For retail mortgages: 30-09-2017
    Grades 0-3: 0.2% 0.2% 0.2% 0.2% 0.2% 0.2%
    Grades 4: 0.46% 0.46% 0.46% 0.46% 0.46% 0.46%
    Grade 5: 0.93% 0.93% 0.93% 0.92% 0.92% 0.92%
    Grade 6: 2.12% 2.11% 2.04% 2.02% 2.00% 1.98%
    Grade 7,8: 5.35% 5.40% 5.24% 5.27% 5.13% 5.02%

    For other retail: 30-09-2012 For other retail: 30-09-2013 For other retail: 30-09-2014 For other retail: 30-09-2015 For other retail: 30-09-2016 For other retail: 30-09-2017
    Grades 0-2: 0.1% 0.1% 0.1% 0.1% 0.1% 0.1%
    Grades 3-4: 0.29% 0.29% 0.30% 0.26% 0.26% 0.26%
    Grade 5: 1.10% 1.12% 1.13% 1.00% 0.99% 1.01%
    Grade 6: 2.50% 2.67% 2.60% 2.39% 2.11% 2.18%
    Grade 7,8: 10.07% 11.25% 9.56% 8.79% 7.86% 8.06%

    This is a very general assessment of risk in the New Zealand loan market, as seen by the ANZ bank. Of most interest is how these figures change 'year to year', and the simple answer to that is 'not much'. Yet retail mortgages are edging down to be less and less likely to default at the hight risk grade level. Is this just a product of a flat interest rate outlook, with interest rates sitting at all time lows?

    For 'other retail' there is a slight uptick in default risk Is that a hint that the good times for business cannot continue forever?

    Another observation: The really good quality 'loans for stuff' are less likely to default than the very good quality loans for houses. I wonder what the explanation could be for that?

    SNOOPY
    Last edited by Snoopy; 05-07-2018 at 02:24 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  3. #563
    percy
    Join Date
    Oct 2009
    Location
    christchurch
    Posts
    17,221

    Default

    Simple.
    People need a car to get to work.No work,no pay.No pay,no anything.
    Told you that years ago on HBL thread.
    Or you can't dig without your digger,or carry logs without your truck,etc.
    Last edited by percy; 05-07-2018 at 04:23 PM.

  4. #564
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default

    Quote Originally Posted by percy View Post
    Snoopy wrote: "Another observation: The really good quality 'loans for stuff' are less likely to default than the very good quality loans for houses. I wonder what the explanation could be for that? "

    Simple.
    People need a car to get to work.No work,no pay.No pay,no anything.
    Told you that years ago on HBL thread.
    Or you can't dig without your digger,or carry logs without your truck,etc.
    That might just be the answer Percy. Or if we go back to the old wild west days the equivalent would be:

    "You can drive a man off his land, but don't you dare try to take that horse from under him!"

    OR considering we are talking about the 'top of the credit ratings' here:

    "You can drive a good man off his land, but don't you dare try to take that good horse from under him!"

    Going back to that ANZ default loan table, once the credit ratings go south, the 'house' becomes more valuable than the 'car' again. So the expression becomes.

    "Get that bad man off the land and whip that donkey out from under him!"

    I am not sure what happens if our 'bad' cowboy has 'bad land' but still has a 'good horse' though. I have a feeling it might be the job of the other sheriff to deal with that guy.....

    SNOOPY
    Last edited by Snoopy; 05-07-2018 at 07:12 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  5. #565
    percy
    Join Date
    Oct 2009
    Location
    christchurch
    Posts
    17,221

    Default

    You are on to it..!!
    Was thinking about you and NIM...
    Not sure whether it is so true today, but a few years ago there were a huge number of people who had money with banks ,in no interest accounts.Cheque accounts etc.A large number had between half a million dollars and one million dollars in them.It was about the time Trust Bank floated,and I think you got priority if you were a large depositor with Trust Bank.
    What sort of NIM would you achieve should you lend at 6% and pay 0% for funds,.???????
    Magic.
    Love to know if the above is still true today.

  6. #566
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default Capital Adequacy ratio for ANZ.NZ: Update for FY2017

    Quote Originally Posted by Snoopy View Post
    Today I want to update the ANZ New Zealand banking covenants for September 30th 2016 quarter (corresponding to the EOFY). ANZ New Zealand includes their wholly owned subsidiary UDC finance.

    The document I am referencing is the:

    "ANZ bank New Zealand Limited Annual Report and Disclosure Statement for the year ended 30th September 2016, Number 83 issued November 2016"

    Page 49, note 29 contains the information on capital adequacy.

    The information supplied is as follows:

    Common Equity Tier 1 ratio: 10.0% (vs RBNZ minimum of 4.5% + 2.5% buffer)
    Total Tier 1 ratio: 13.2% (vs RBNZ minimum of 6.0% + 2.5% buffer)
    Total Tier 1 & 2 ratio: 13.7% (vs RBNZ minimum of 8.0% + 2.5% buffer)

    The ANZ.NZ Tier 1 capital ratio has gone down slightly again in New Zealand over the year, and no new share capital injection initiative is apparent from the accounts. Total equity has increased to $12,710m, an increase of 2% due to an increase retained earnings.

    From Note 17 on Subordinated Debt, The ANZ New Zealand operation has been shored up by the issue of a new tranche of ANZ convertible notes, dubbed "ANZ New Zealand Internal Capital Notes 2."

    • On 15 June 2016, the Bank issued 9.38m million convertible notes (ANZ NZ ICN2) to the NZ Branch at NZ$100 each, raising NZ$938 million.

    This issue is structured as additional Tier 1 capital for ANZ.NZ.

    Page 50 contains detailed notes on just how the ANZ NZ capital is made up. If you use that information and use it to calculate the above ratios, based on a loan book with net loans and advances of $114,623m (from the balance sheet) I calculate the above ratios as follows (total net loans and advances of broken down under Note 13 'Net Loans & Advances'):

    Common Equity Tier 1 ratio: $8,725m/$114,623m = 7.6%
    Total Tier 1 ratio: $11,505m/$114,623m = 10.0%
    Total Tier 1 & 2 ratio: $11,973m/$114,623m = 10.4%

    Those figures are a different to those precedingly calculated. That is because the Tier 1 and Tier 2 capital figures have been 'risk adjusted' before they went into my first calculation. The risk adjustment is done because the expected capital recovery from loans -should they go bad- is different among the different classes of loans (corporate, sovereign, bank, retail mortgages and other retail)

    SNOOPY

    PS Tabulated version of above results

    30/09/2016 (risk adj) 30/09/2016 (book value) RBNZ Required
    Common Equity Tier 1 Ratio 10.0 7.6 4.5+2.5
    Total Tier 1 Ratio 13.2 10.0 6.0+2.5
    Total Tier 1&2 Ratio 13.7 10.4 8.0+2.5

    A multi year picture of capital adequacy is shown below:

    FY2012 FY2013 FY2014 FY2015 FY2016
    Quoted Common Equity Tier 1 Ratio N/A 10.4% 10.7% 10.5% 10.0%
    Quoted Total Equity Tier 1 Ratio 10.8% 10.8% 11.1% 12.7% 13.2%
    Quoted Total Equity Tier 1 & 2 Ratio 12.5% 12.4% 12.3% 13.6% 13.7%

    It is interesting that although the Common Tier 1 equity has been weakening, other tier 1 (including preference shares) and tier 2 capital has been issued to strengthen the balance sheet.
    Today I want to update the ANZ New Zealand banking covenants for September 30th 2016 quarter (corresponding to the EOFY). ANZ New Zealand includes their wholly owned subsidiary UDC finance.

    The document I am referencing is the:

    "ANZ bank New Zealand Limited Annual Report and Disclosure Statement for the year ended 30th September 2017, Number 87 issued November 2017"

    Page 50, note 26 contains the information on capital adequacy.

    The information supplied is as follows:

    Common Equity Tier 1 ratio: 10.7% (vs RBNZ minimum of 4.5% + 2.5% buffer)
    Total Tier 1 ratio: 14.1% (vs RBNZ minimum of 6.0% + 2.5% buffer)
    Total Tier 1 & 2 ratio: 14.4% (vs RBNZ minimum of 8.0% + 2.5% buffer)

    The ANZ.NZ Tier 1 capital ratio has increased in New Zealand over the year, back up to historic recent highs.and no new share capital injection initiative is apparent from the accounts. Total equity has increased to $12,781m, an increase of 0.6% due to an increase retained earnings.

    From Note 17 on Subordinated Debt, The ANZ New Zealand operation remains steady with no new notes issued, nor old notes redeemed during the year. Each of the three ANZ New Zealand Capital Notes issues are structured as additional Tier 1 capital for ANZ.NZ.

    Page 51 contains detailed notes on just how the ANZ NZ capital is made up. If you use that information and use it to calculate the above ratios, based on a loan book with net loans and advances of $120,529m (from the balance sheet) I calculate the above ratios as follows (total net loans and advances of broken down under Note 13 'Net Loans & Advances'):

    Common Equity Tier 1 ratio: $8,727m/$120,529m = 7.2%
    Total Tier 1 ratio: $11,505m/$120,529m = 9.5%
    Total Tier 1 & 2 ratio: $11,709m/$120,529m = 9.7%

    Those figures are a different to those precedingly calculated. That is because the Tier 1 and Tier 2 capital figures have been 'risk adjusted' before they went into my first calculation. The risk adjustment is done because the expected capital recovery from loans -should they go bad- is different among the different classes of loans (corporate, sovereign, bank, retail mortgages and other retail)

    SNOOPY

    PS Tabulated version of above results

    30/09/2017 (risk adj) 30/09/2017 (book value) RBNZ Required
    Common Equity Tier 1 Ratio 10.7 7.2 4.5+2.5
    Total Tier 1 Ratio 14.1 9.5 6.0+2.5
    Total Tier 1&2 Ratio 14.4 9.7 8.0+2.5

    A multi year picture of capital adequacy is shown below:

    FY2012 FY2013 FY2014 FY2015 FY2016 FY2017
    Quoted Common Equity Tier 1 Ratio N/A 10.4% 10.7% 10.5% 10.0% 10.7%
    Quoted Total Equity Tier 1 Ratio 10.8% 10.8% 11.1% 12.7% 13.2% 14.1%
    Quoted Total Equity Tier 1 & 2 Ratio 12.5% 12.4% 12.3% 13.6% 13.7% 14.4%

    The decline Common Tier 1 equity has been reversed, while other tier 1 (including preference shares) and tier 2 capital continues to strengthen. A response to regulatory authorities to shore up the capital position of the balance sheet?

    Under note 25 on capital adequacy:

    "Certain instruments issued by the Bank qualify as tier 2 capital instruments subject to phase-out under RBNZ Basel III transition arrangements. Fixing the base at the nominal amount of such instruments outstanding at 31 December 2012, their recognition is capped at 20% of that base from 1 January 2017; and from 1 January 2018 onwards these instruments will not be included in regulatory capital."

    So possibly the ANZ in New Zealand is building up its Tier 1 capital in anticipation of losing any 'backing ability' its Tier 2 capital now has?

    SNOOPY
    Last edited by Snoopy; 16-07-2018 at 12:23 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  7. #567
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default Capital Adequacy for ANZ (Australia) -The Consolidated Group (FY2017)

    Quote Originally Posted by Snoopy View Post
    Just in case the message has been lost. It is not possible to invest in ANZ (New Zealand) or UDC from a direct equity perspective. It is possible to invest in the ultimate parent though, and this ANZ in Australia. For convenience of NZ investors, ANZ (Australia) is listed on the NZX.

    All FY2016 numbers quoted below are from the FY2016 ANZ Annual Report

    FY2014 FY2015 FY2016 Reference
    Normalised Profit (A) $7,117m $7,216m $5,889m p5 (Financial Highlights)
    Shareholder Equity 'Tier 1 Capital' (B) $49,284m $57,353m $57,924m p64 (Balance Sheet)
    Return on Equity (A)/(B) 14.4% 12.6% 10.2% calculated
    Additional 'Tier 1 Capital' (C) $6,004m $7,423m $9,493m p104 (Subordinated Debt)
    Total 'Tier 1 Capital' (B)+(C) $55,288m $64,776m $67,390m calculated
    'Tier 2 Capital' Perpetual Subordinated Notes (D) $1,087m $1,188m $1,190m p104 (Subordinated Debt)
    'Tier 2 Capital' Dated Subordinated Notes (E) $6,516m $8,398m $11,281m p104 (Subordinated Debt)
    'Tier 2 Capital' Discount for near dated 2019 notes (F) $0m -$271m -$245m 2019 notes calculated at 20%
    'Tier 2 Capital' Total (D)+(E)+(F) $7,603m $9,315m $12,226m calculated
    Total Capital (Tier+Tier2) (G) $62,891m $74,091m $79,616m calculated
    Return on Total Capital (Tier+Tier2) (A)/(G) 11.3% 9.7% 7.4% calculated

    That last line in the table is not one you will find in any ANZ report. Yet it is an interesting measure of how much 'equity', in the widest sense of that word, that ANZ management regard as prudent. Since EOFY2014 ANZ capital of all kinds has increased by nearly 25%!

    If, for a comparative example, you take the equivalent ROTC ('Return On Total Capital') for New Zealand's own 'Heartland Bank': Net Profit $54.164m (excluding other comprehensive income) Shareholder Equity $498.341m (for Heartland ROTC = ROE, because Heartland as yet has no subordinated bond type capital)

    Then ROTC = $54.164m / $498.341m = 10.9%
    It is not possible to invest in ANZ (New Zealand) or UDC from a direct equity perspective. It is possible to invest in the ultimate parent though, and this ANZ in Australia. For convenience of NZ investors, ANZ (Australia) is listed on the NZX. FY2015 is a good base year for comparative purposes. This is because there was a significant cash issue during FY2015 to fix a perceived shortage of capital.

    All FY2017 numbers quoted below are from the FY2017 ANZ Annual Report

    FY2014 FY2015 FY2016 FY2017 Reference
    Normalised Profit (A) $7,117m $7,216m $5,889m $6,938m p23 (Financial Highlights)
    Shareholder Equity 'Tier 1 Capital' (B) $49,284m $57,353m $57,927m $59,075m p69 (Balance Sheet)
    Return on Equity (A)/(B) 14.4% 12.6% 10.2% 11.7% calculated
    Additional 'Tier 1 Capital' (C) $6,004m $7,423m $9,493m $8,452m Summed p98-100 (Subordinated Debt)
    Total 'Tier 1 Capital' (B)+(C) $55,288m $64,776m $67,390m $67,427m calculated
    'Tier 2 Capital' Perpetual Subordinated Notes (D) $1,087m $1,188m $1,190m $1,150m p101 (summed)
    'Tier 2 Capital' Dated Subordinated Notes (E) $6,516m $8,398m $11,281m $8,108m p101 (summed)
    'Tier 2 Capital' Discount for near dated 2019 notes (F) $0m -$271m -$245m -$241m 2019 notes calculated at 20%
    'Tier 2 Capital' Total (D)+(E)+(F) $7,603m $9,315m $12,226m $9,017m calculated
    Total Capital (Tier+Tier2) (G) $62,891m $74,091m $79,616m $76,444m calculated
    Return on Total Capital (Tier+Tier2) (A)/(G) 11.3% 9.7% 7.4% 9.1% calculated

    That last line in the table is not one you will find in any ANZ report. Yet it is an interesting measure of how much 'equity', in the widest sense of that word, that ANZ management regard as prudent.

    If, for a comparative example, you take the equivalent ROTC ('Return On Total Capital') for New Zealand's own 'Heartland Bank': Net Profit $60.808m (excluding other comprehensive income)

    Shareholder Equity at EOFY2017 was $569.595m. Tier 2 capital (the sum of the subordinated bonds and notes on issue) totals $14.975m

    Then ROTC = $60.808m / ($569.595m + $14.975m) = 10.4%

    SNOOPY
    Last edited by Snoopy; 15-08-2018 at 10:28 PM. Reason: Work In Progress
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

  8. #568
    Veteran novice
    Join Date
    Jun 2007
    Location
    , , .
    Posts
    7,289

    Default

    Solid result from ANZ Group.

    http://news.iguana2.com/macquaries/ASX/ANZ/504566

    Well received by the market, so far. Probably an element of relief, considering the on-going Australian angst with banks!

  9. #569
    Senior Member
    Join Date
    Oct 2013
    Posts
    1,275

    Default

    Yeah, good result and a great relief. I hold far too much as a result of being in the DRP for years. Need to sell some to get some balance back.

  10. #570
    On the doghouse
    Join Date
    Jun 2004
    Location
    , , New Zealand.
    Posts
    9,222

    Default UDC Performance (Operating Margin): FY2018 view

    Quote Originally Posted by Snoopy View Post
    The following information can be found in UDC's FY2017 annual report.

    The 'profit before tax' is listed as $85.710m (p3). But this includes a provision for credit impairment of $5.929m which I would remove to get the picture of ongoing operational performance. So I get EBT of $91.639m.

    Now go to note 3 (p11) on interest expense. There is underlying interest over and above what is due to debenture holders of $38.655m.

    So total underlying EBIT = $91.639m + $38.655m = $130.294m (+22% on FY2016)

    Now turn to page 12 (note 6) and you will see total net loans and advances of: $2,911.594m (a 13% rise on FY2016).

    The operating margin ( EBIT/'Total Net Loans and Advances' ) based on the end of year loan balance book is:

    $130.294m/$2,911.594m = 4.48%

    Put in context, the operating margin over the last few years has gone like this:

    Operating Margin
    FY2017 4.48%
    FY2016 4.17%
    FY2015 4.63%
    FY2014 4.41%
    FY2013 4.02%
    FY2012 3.87%

    To Summarize: Operating Profit (EBIT) for FY2017 is up strongly, but this is largely due to the much higher interest bill being paid, outside of the the interest due to debenture holders. If you look at note 8, you will see that UDC debenture holders have pulled over $500m out of the company over FY2017. I see this as a significant loss of confidence by the investing public in UDC. This loss of confidence was perhaps precipitated by an announced sale to HNA of China, before that deal was pulled. The credit rating of UDC is now BBB (as assessed by Standard and Poor's) with a negative outlook. This is a very large fall from the AA- rating the company in September 2016!

    The loss of debenture support has been more than made up by the ANZ bank doubling its own capital support for UDC. In November 2007 this facility was further increased to $2,700m by UDC's owner the ANZ bank. At this level, all the remaining UDC debenture holders could be repaid! Since the company is now largely dependent on the ANZ bank to obtain borrowing capital for survival, it is not clear to me that a potential full 'sale' of UDC to another outside buyer by ANZ remains a meaningful proposition.
    The following information can be found in UDC's FY2018 annual report.

    The 'profit before tax' is listed as $90.779m (p3). But this includes a provision for credit impairment of $10.885m which I would remove to get the picture of ongoing operational performance. So I get EBT of $101.664m.

    Now go to note 3 (p11) on interest expense. There is underlying interest over and above what is due to debenture holders of $58.737m.

    So total underlying EBIT = $101.664m + $58,737m = $160.401m (+23% on FY2017)

    Now turn to page 12 (note 6) and you will see total net loans and advances of: $3,222.430m (an 11% rise on FY2017).

    The operating margin ( EBIT/'Total Net Loans and Advances' ) based on the end of year loan balance book is:

    $160.401m / $3,222.430m = 4.98%

    Put in context, the operating margin over the last few years has gone like this:

    Operating Margin
    FY2018 4.98%
    FY2017 4.48%
    FY2016 4.17%
    FY2015 4.63%
    FY2014 4.41%
    FY2013 4.02%
    FY2012 3.87%

    To Summarize: Operating Profit (EBIT) for FY2018 is up strongly, but this is largely due to the much higher interest bill being paid to the ANZ bank, outside of the the interest due to debenture holders. If you look at note 8, you will see that UDC debenture holders have pulled a further $100m out of the company over FY2018 to add to the $500m taken out of the company over FY2017. I see this as a significant loss of confidence by the investing public in UDC continuing. This loss of confidence was perhaps precipitated by an announced sale of UDC to HNA of China, before that deal was pulled because of HNA's opaque ownership. During the year, whike ANZ was waiting for Overseas Investment Office approval for the deal, rating agency Standard & Poor’s downgraded HNA Group’s rating to “B”. This is effectively a “junk” rating, indicating a company faces major ongoing uncertainties about its ability to meet its financial commitments. Since a subsidiary cannot have a higher credit rating than its parent, UDC may have gone into receivership had the HNA takeover gone through.

    The credit rating of UDC is now BBB (as assessed by Standard and Poor's) but the negative outlook has now been removed. Nevertheless, this is a very large fall from the AA- rating the company had back in September 2016!

    The loss of debenture support has been more than made up by the ANZ bank doubling its own capital support for UDC. In November 2007 this facility was further increased to $2,700m by UDC's owner the ANZ bank, where it remains in September 2018. So ANZ retains the capacity to pay out all the remaining UDC debenture holders! The company is even more dependent on the ANZ bank to obtain borrowing capital for survival (65% of capital backing UDC comes directly from ANZ). UDC has been taken off the 'for sale' list for now.

    SNOOPY
    Last edited by Snoopy; 24-01-2019 at 05:38 PM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

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
  •