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  1. #371
    percy
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    Quote Originally Posted by macduffy View Post
    Yes, too big to fail, perhaps, but for Westpac shareholders the concern was that the heavily discounted rights issue needed to right the ship might "fail" and that a marriage with another of the big four might be ordained, to the disadvange of WBC shareholders. We can be rather relaxed about it now but at the time it was a serious concern, as evidenced by the bargain price at which the shares and rights traded.
    I seem to remember it only took one boardroom appearance by Kerry Packer and Al "chainsaw" Dunlap,for the Westpac board to regain focuss.!

  2. #372
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    Default UDC Balance Sheet Impaired Loan Percentage FY2016

    Quote Originally Posted by Snoopy View Post
    The annual provision for loan impairment at UDC (page 32 'Summary Financial Statements' UDC 2015 prospectus) is still high: $10,427m down 11% on the high previous year figure $11,733m from FY2014 . Granted it is still much less since the depths of the GFC.

    From note 6 (Net Loans & Advances) the resultant provisions on the books without bad debts already written off, with reference to the whole EOFY2015 loan book is:

    $31.529m /($2,347.163m+$31.529m+$129.586m+$8.849m) = 1.25% of gross value loans on issue

    ------

    The figures for ANZ New Zealand, suitably disentangled from UDC are (using note 12: 'Net Loans and Advances' based on ANZ New Zealand's September 30th 2015 update to the Reserve Bank)

    ($611m-$31.529m)/ ($106,357m -$2,347m)= 0.56% of gross value loans on issue

    -------

    Compare that to Heartland (HNZ AR2015, Note 11 'Finance Receivables' )

    ($25.412m+$6.242m)/ $2,893.724m = 1.09% of gross value of loans on issue.

    Of course we all know that UDC isn't a 'real' finance company, even to the extent that they don't have to keep the Reserve Bank updated on their financial position. As long as the parent ANZ New Zealand (who have full control of the UDC purse strings) keeps their own disclosure up to date, the UDC are off the radar as far as the Reserve Bank of NZ is concerned. In practice UDC are simply a 'marketing arm' of the ANZ. If anything that might make UDC potentially more 'reckless' than fully independently owned finance companies. That's because they know that ANZ Bank will bail them out if they get into trouble. So I think it is interesting that in practice UDC are less reckless with their lending policies (hold a lower relative provision for credit impairment on the balance sheet) than Heartland.
    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%

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    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%

    SNOOPY
    Last edited by Snoopy; 04-07-2018 at 06:35 PM.
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  3. #373
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    Quote Originally Posted by Biscuit View Post
    I guess it does show that I have never considered ANZ to be seriously overvalued in that time. But then I have never considered CEN to be overvalued either (which was also a mistake).
    The relatively poor performance of CEN in recent years can be put down to the uncoupling of 'growth' and 'power usage' in the wider economy. Overshadowing that was the actual or potential shut down of much of NZs heavy industry, casting doubt on the future price path of power. The future price of power has traditionally 'ratcheted up' with the construction of each new incremental power station. With no significant new power stations given the green light, this has produced the current flat outlook for power prices. I am not sure without the benefit of hindsight, how obvious all of this was. So I am not sure how clear it was that Contact was overvalued in the past.

    I fell into the same trap as you Biscuit, although I bought my first (small) bite of Contact way back at float time, and became dazzled by the stellar early performance of this 'growth' share.. Investing in the DRP was good for tax reasons IIRC. Unfortunately many of those tax effective DRP purchases subseqently went under water! Yet, despite it all, in capital terms I am more or less back at the 'break even' point. I don't believe power prices will remain flat forever though. IMO our day as Contact shareholders will come again! But I can't tell you exactly when that day will be!

    SNOOPY
    Last edited by Snoopy; 10-01-2017 at 06:34 PM.
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  4. #374
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    Multi year trends of the above statistics are in the table below



    FY2013 FY2014 FY2015 FY2016
    UDC: Loans Impaired/Gross Value of Loans 1.78% 1.48% 1.43% 1.19%
    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%
    Thanks, Snoopy, interesting numbers. The big improvement on UDC's previous year's 1.43% wouldn't indicate that ANZ is using the finance coy to quarantine impaired loans - but then, perhaps all three of the above are taking a slightly more relaxed view of their loan books this year!

  5. #375
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    UDC sold to HNA Group...
    https://www.nzx.com/companies/ANZ/announcements/295406
    Last edited by huxley; 11-01-2017 at 09:02 AM.

  6. #376
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    Quote Originally Posted by Biscuit View Post
    I bought a few ANZ shares after the GFC knocked the Aussie banks (probably irrationally -tarred with the same brush). Still hold, but have never bought more than a very small holding because I simply could not understand their financials - they are way too complicated for me to make head nor tail of, and I nearly only invest if the accounts are straightforward.
    My problem with investing in banks is that they all do amazingly well between crises. Then at crisis time they suddenly announce.

    "Whoops we've lost a few billion. Can you shareholders please bail us out please?"

    rather than trying to understand everything that a bank does, I have become convinced that the key to it is understanding those bad loans, or perhaps more correctly those loans that have a 'propensity to go bad' (because if a loan has already gone bad it's too late). This doesn't equate to becoming an ultimate doomsdayer. It would be easy to arouse yourself into a "scardey cat state" where you can imagine a domino like collapse of loans and the whole bank falling over. Instead I am trying to take a more measured appraoch by taking the banks own 'measurements of stressed and or vulnerable loans.

    p51 of the September 2016 ANZ.NZ reserve bank declaration shows that this is no easy task though:

    -------

    Implementation of the advanced internal ratings based approach to credit risk measurement

    The Banking Group adheres to the standards of risk grading and risk quantification as set out for Internal Ratings Based (IRB) banks in the RBNZ document Capital Adequacy Framework (Internal Models Based Approach) (BS2B). Under this IRB Framework banks use their own measures for calculating the level of credit risk associated with customers and exposures, by way of the primary components of:

    Probability of Default (PD): An estimate of the level of risk of borrower default graded by way of rating models used both at loan origination and for ongoing monitoring.

    Exposure at Default (EAD): The expected facility exposure at default. Total credit risk-weighted exposures include a scalar of 1.06 in accordance with the Bank’s Conditions of Registration.

    Loss Given Default (LGD): An estimate of the potential economic loss on a credit exposure, incurred as a consequence of obligor default and expressed as a percentage of the facility’s EAD. For Retail Mortgage exposures the Bank is required to apply the downturn LGDs according to loan to value (LVR) bands as set out in BS2B. For farm lending exposures the Banking Group is required to adopt RBNZ prescribed downturn LVR based LGDs, along with a minimum maturity of 2.5 years and the removal of the firm-size adjustment.

    For exposures classified under Specialised Lending, the Banking Group uses slotting tables supplied by the RBNZ rather than internal estimates.

    ------

    My reading of that is that banks are allowed to risk manage their loans with whatever system they like to devise themselves. As long as they have a system, it doesn't really matter what it is. This explains why I have been having trouble comparing loan standards between different finance companies and banks.

    SNOOPY
    Last edited by Snoopy; 12-01-2017 at 09:03 AM.
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  7. #377
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    Quote Originally Posted by huxley View Post
    UDC sold to HNA Group...
    That would mean tougher competition for people like Heartland

  8. #378
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    Quote Originally Posted by Big Blind View Post
    That would mean tougher competition for people like Heartland
    I think we'll have to wait and see on that. While HNA Group may or may not be more competitive than ANZ on the loan side in this business segment, HNA may find that it also needs to pay a little more for its local funding if UDC depositors become uncomfortable about the loss of the "moral comfort" of ANZ's parentage.

  9. #379
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    http://www.smh.com.au/business/banki...08-gto0xz.html

    Interesting article detailing the bank shares you should have bet.

  10. #380
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    Quote Originally Posted by huxley View Post
    Detail below

    -----

    ANZ today announced an agreement to sell UDC Finance, the asset finance business of its wholly owned subsidiary ANZ Bank New Zealand, to HNA Group, a global company focused on tourism, logistics and financial services. The sale reflects a continued focus by ANZ on simplifying its business and capital efficiency.

    ANZ New Zealand CEO David Hisco said: “The sale of UDC is consistent with our strategy to simplify the bank and is a good outcome for customers and staff. HNA Group is one of the world’s largest asset finance and leasing companies, and it intends to preserve UDC’s operations including offering continued employment to all staff.”

    Sale Price Premium to Net Assets (30/09/2016) Price-to-Book Ratio (UDC net assets 30/09/2016)
    ~NZ$660m ~NZ$235m ~1.6 times

    The transaction also includes the Esanda name and trademarks in Australia and New Zealand. The additional consideration for the name and trademark sale is not material to ANZ.

    The UDC sale is subject to closing steps and conditions including engaging with investors on the replacement of the Secured Investment program and regulatory approvals. Completion is expected late in the second half of the 2017 calendar year.

    ------

    Am I reading my highlighting correctly? Is "replacement of the secured investment program" code for all existing NZ debenture holders being paid out, and all funding to come from the Chinese in future?

    SNOOPY
    Last edited by Snoopy; 11-01-2017 at 10:12 AM.
    Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7

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