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  1. #21
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    Quote Originally Posted by Paper Tiger View Post
    Snoopy: If you want to analyse the NZ part of ANZ why not work from the Disclosure Statements available at http://anz.co.nz/about-us/media-cent...r-information/

    If you are going to burrow into any other NZ banks they should have public DS as well.
    Thanks for this reference PT. I see that ANZ divide their business segments into retail, commercial, wealth and institutional. Not strictly comparable with the likes of Heartland,but I will look into it further.

    I have also found this profit announcement from UDC

    https://www.udc.co.nz/comm/about_us/...type=borrowing

    That announcement is rather superficial. UDC is a wholly owned subsidiary of ANZ bank and is probably a better comparative stick to measure the likes of Dorchester and Heartland against. But I haven't found a segmented UDC results disclosure in detail yet

    SNOOPY
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  2. #22
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    Quote Originally Posted by Snoopy View Post
    For operating segment purposes, Heartland operates in four sectors:

    1/ Retail & Consumer
    2/ Business
    3/ Rural
    4/ Non core property

    ANZ have more categories in their breakdown of business units. I cannot say whether the ANZ categories, listed in AR2013 p127 dovetail neatly into the rather broader Heartland headings. But my best guess as to how they might be aligned is below:

    1/ Retail & Consumer includes 'Personal Lending'

    2/ Business includes 'Business Services', ''Electricity Gas and Water supply', 'Entertainment Leisure and Tourism', 'Financial Investment and Insurance', 'Government & Official Institutions', 'Manufacturing', 'Retail Trade', 'Transport and Storage', 'Wholesale Trade' 'Other' and 'Financial Investment and Insurance'.

    3/ Rural includes 'Agriculture forestry fishing and mining'

    4/ Non core property includes 'Construction' and 'Property Services'

    So how do the relative numbers stack up? Stay tuned.
    The question I want to address here is whether the ANZ group in New Zealand is an at all appropriate measuring stick for Heartland. With my categorization as described above,I get the following concentration of credit risk for ANZ New Zealand.

    1/ Retail & Consumer: $A63,347m (53.0%)
    2/ Business: $A37,973m (31.8%)
    3/ Rural: $A18,105m (15.1%)

    That adds to 100% and I have deliberately left out the separate 'property' category which comparator Heartland describes as non-core.

    The comparative figures from the Heartland Annual Report for FY2013 are:

    1/ Retail & Consumer: $NZ988m (49.5%)
    2/ Business: $NZ549m (27.5%)
    3/ Rural: $NZ457m (22.9%)

    I would judge that a good match for an 'apple with apple' comparison,or at least a 'Granny Smith' to 'Braeburn' comparison.

    SNOOPY
    Last edited by Snoopy; 10-01-2014 at 03:34 PM.
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  3. #23
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    Default Extending the Compariosn with WBC

    Quote Originally Posted by Snoopy View Post
    The question I want to address here is whether the ANZ group in New Zealand is an at all appropriate measuring stick for Heartland. With my categorization as described above,I get the following concentration of credit risk for ANZ New Zealand.

    1/ Retail & Consumer: $A63,347m (53.0%)
    2/ Business: $A37,973m (31.8%)
    3/ Rural: $A18,105m (15.1%)

    That adds to 100% and I have deliberately left out the separate 'property' category which comparator Heartland describes as non-core.

    The comparative figures from the Heartland Annual Report for FY2013 are:

    1/ Retail & Consumer: $NZ988m (49.5%)
    2/ Business: $NZ549m (27.5%)
    3/ Rural: $NZ457m (22.9%)

    I would judge that a good match for an 'apple with apple' comparison,or at least a 'Granny Smith' to 'Braeburn' comparison.
    To extend the comparison, I have been looking at the New Zealand Business of WBC. p202 of AR2013 contains the relevant sector breakdown. Once again I have made 'best guess' assumptions to align the different business categories listed with those listed by Heartland.

    1/ Retail & Consumer: $A24,463m (46.0%)
    2/ Business: $A22,030m (41.4%)
    3/ Rural: $A6,661m (12.5%)

    This is a rather different picture to the other two, with a lot more in the 'business' category and a lot less in 'rural'. So should we expect difference in profitability to go along with this? Stay tuned.

    SNOOPY
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  4. #24
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    Quote Originally Posted by Snoopy View Post
    To extend the comparison, I have been looking at the New Zealand Business of WBC. p202 of AR2013 contains the relevant sector breakdown. Once again I have made 'best guess' assumptions to align the different business categories listed with those listed by Heartland.

    1/ Retail & Consumer: $A24,463m (46.0%)
    2/ Business: $A22,030m (41.4%)
    3/ Rural: $A6,661m (12.5%)

    This is a rather different picture to the other two, with a lot more in the 'business' category and a lot less in 'rural'. So should we expect difference in profitability to go along with this? Stay tuned.
    On p251 of the annual report, NZ profit is listed at $A879m. You need to add back the one off impairment charge of $A97m to get a more representative figure of $A976m.

    p145 has a detailed summary of interest expenses. I add up those not due to depositors (at call and term rates) , certificates of deposit and 'debt issues' to sum to $A3,381m.

    Apportioning this underlying business debt across geographic sectors from (p257) and the amount of interest allocated to the New Zealand business can be deduced as follows:

    (3,885/38,783)*$A3,381m = $A338.7m

    We need to add this back into the after tax 'segment profit' to get EBIT:

    EBIT= $A976m + $A339m = $A$A1,315m

    Total Assets are listed as on p251 as $61,469m.

    So the operating margin based on end of year assets (*) is:

    $A1,315m/$A61,469m = 2.14%

    That compares very closely with the ANZ New Zealand figure of 2.10%, despite the difference in business mix.

    SNOOPY

    (*) In an twist in phrasing, ANZ uses the phrase 'external assets' (p156 ANZ report), whereas WBC uses the term more generic 'assets'. However cross reference with the ANZ balance sheet reveals that 'external assets' seem to include 'all assets'. I remained confused as to why ANZ called these 'external assets' in the segmented result section of the report. It does make more sense to me to calculate operating efficiency on an underlying loan book basis. Nevertheless the two numbers as calculated are comparable.
    Last edited by Snoopy; 01-02-2016 at 01:15 PM.
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  5. #25
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    Quote Originally Posted by Paper Tiger View Post
    Snoopy: If you want to analyse the NZ part of ANZ why not work from the Disclosure Statements available at http://anz.co.nz/about-us/media-cent...r-information/
    Page 1 of this document lists the NZ applicable credit ratings for the NZ arm of ANZ bank.

    Rating Agency,Current Credit Rating, Qualification

    Standard & Poor’s, AA-, Outlook Stable
    Moody’s Investors Service, Aa3, Outlook Stable
    Fitch Ratings, AA-, Outlook Stable

    From note 28 of this document the ANZ capital ratio, in accordance with Basel 3 requirements (fully effective 1st January 2014 in New Zealand) as at 30th September 2013 are as follows:

    ANZ.NZ Banking Group (Reserve bank minimum requirement)
    Common Equity Tier 1 capital: 10.4% (4.5%)
    Total Tier 1 capital: 10.8% (6.0%)
    Total capital: 12.4% (8.0%)

    This means at 30-09-2013 there was a total capital buffer of 4.4%.

    Now for comparison purposes we can look at the Heartland bank figures on exactly the same date, from the three month figures released to the stock exchange on 27-11-2013

    The figures in brackets are the minimum requirements that must be kept as a condition of bank registration.

    Heartland Bank (Reserve bank minimum requirement)
    Common Equity Tier 1 Capital: 14.45% (10.0%)
    Total Tier 1 Capital: 14.45% (10.0%)
    Total Capital: 14.45% (12.0%)

    This means at 30-09-2013 there was a total capital buffer at Heartland of 2.45%

    This is evidence that in the event of a downturn there is a far lesser chance that ANZ shareholders will have to dip into their pockets than Heartland shareholders.

    SNOOPY
    Last edited by Snoopy; 07-12-2014 at 01:09 PM.
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  6. #26
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    Default UDC Performance for FY2013

    Quote Originally Posted by Snoopy View Post
    My particular measuring stick of choice at the moment is 'Operating Margin'. This is 'Operating Profit' divided by assets under management. I regard 'Operating Profit' as the same as Earnings Before Interest and Tax (EBIT).

    If you turn to page 156 of AR2013, the 'Segment Result Before Tax' (EBT) for NZ operations is listed at $A1,219m. ( I will work in $A for the NZ operation because this is the currency used in in the Annual Report.) To get EBIT I have to add back an allowance for the core underlying bank debt.

    Total interest expense is shown in note 4 as $15,869m. But this includes interest payable to depositors. The underlying interest bill is only $4,789m.

    Where the allocation of corporate interest between segments is not specified, I prefer to allocate this in proportion to divisional revenue. Again using the information on page 156, New Zealand revenue is:

    $2,208m / $18,446m = 12% of the total.

    12% of $4,789m comes out to $574m

    Adding this to the NZ segment result gives me my EBIT figure.

    $1,219m + $579m = $1,793m

    Total NZ 'external assets' are listed on p156 as $85,229m.

    So the 'operating margin' based on assets in loans is:

    $1,793m / $85,229m = 2.104%

    I note that this is the operating margin, looking at the NZ business in its entirety.
    Thanks to Belgarian for pointing me in the right place to uncover the equivalent figures for UDC. UDC is ANZ's wholly owned finance subsidiary and probably a better measuring stick for some of those other NZ listed finance companies.

    https://www.udc.co.nz/pdf/UDC_Prospectus.pdf

    The 'profit before tax' is listed as $59.664m (p35). But this includes a provision for credit impairment of $7.123m which I would remove to get the picture of ongoing operational performance. So I get EBT of $66.787m.

    Now go to note 4 (p43) on interest expense. There is underlying interest over and above what is due to debenture holders of $16.623m.

    So total underlying EBIT = $66.787m + $16.623m = $83.07m

    Now turn to page 45 (note 8) and you will see total loans and advances of: $2,065.117m

    So the operating margin based on the end of year loan balance book is:

    $83.07/$2065.11 = 4.02%

    That is almost twice the margin of the underlying ANZ bank in NZ, which is not what I was expecting. I will have to consider.

    1/ whether I have made a mistake.
    2/ what all this means for the likes of the potential of Heartland.

    SNOOPY
    Last edited by Snoopy; 16-01-2014 at 11:14 AM.
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  7. #27
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    Hi Snoopy.

    Why wouldn't you expect that a finance company would have a higher operating margin than a retail bank? In relatively favourable economic conditions? After all, the finance company is lending to the higher risk end of the market - at higher interest rates. Certainly, their cost of funds is likely to be higher but its noticeable these days that UDC's debenture rates are very similar to ANZ's deposit rates for the same term. I don't know about relative overheads but UDC doesn't support an extensive branch network with the costs involved there.

    My instinct would be that the finance arm would have the better operating margin. Until the next recession!

  8. #28
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    Hi Snoopy.

    Why wouldn't you expect that a finance company would have a higher operating margin than a retail bank? In relatively favourable economic conditions? After all, the finance company is lending to the higher risk end of the market - at higher interest rates. Certainly, their cost of funds is likely to be higher but its noticeable these days that UDC's debenture rates are very similar to ANZ's deposit rates for the same term. I don't know about relative overheads but UDC doesn't support an extensive branch network with the costs involved there.

    My instinct would be that the finance arm would have the better operating margin. Until the next recession!

    Apologies for the duplication!
    Last edited by macduffy; 16-01-2014 at 11:34 AM.

  9. #29
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    Macduffy;
    I think your post was worth duplication.!

  10. #30
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    Quote Originally Posted by Snoopy View Post
    Thanks to Belgarian for pointing me in the right place to uncover the equivalent figures for UDC. UDC is ANZ's wholly owned finance subsidiary and probably a better measuring stick for some of those other NZ listed finance companies.

    https://www.udc.co.nz/pdf/UDC_Prospectus.pdf

    The 'profit before tax' is listed as $59.664m (p35). But this includes a provision for credit impairment of $7.123m which I would remove to get the picture of ongoing operational performance. So I get EBT of $66.787m.

    Now go to note 4 (p43) on interest expense. There is underlying interest over and above what is due to debenture holders of $16.623m.

    So total underlying EBIT = $66.787m + $16.623m = $83.07m

    Now turn to page 45 (note 8) and you will see total loans and advances of: $2,065.117m

    So the operating margin based on the end of year loan balance book is:

    $83.07/$2065.11 = 4.02%

    That is almost twice the margin of the underlying ANZ bank in NZ, which is not what I was expecting. I will have to consider.

    1/ whether I have made a mistake.
    2/ what all this means for the likes of the potential of Heartland.

    SNOOPY
    The penny finally dropping.!!
    Taken a long time.!!

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