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Member
I just got this rec for ANZ on my email from Oz and it reads
"Currency
TheNew Zealand division of the Australia and New Zealand Banking Group Limited(ANZ) accounted for 14% of the group’s profit in FY13, required 11% of thegroup’s capital at 30/9/13 and produced an average return on NTA (RoNTA) of 23%compared to a company average of 19%. So an increase in the NZ$ relative to theA$ is good for RoNTA, good for profits and good for the absolute amount ofcapital that the company has."
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Originally Posted by blueswan
I just got this rec for ANZ on my email from Oz and it reads
"Currency
TheNew Zealand division of the Australia and New Zealand Banking Group Limited(ANZ) accounted for 14% of the group’s profit in FY13, required 11% of thegroup’s capital at 30/9/13 and produced an average return on NTA (RoNTA) of 23%compared to a company average of 19%. So an increase in the NZ$ relative to theA$ is good for RoNTA, good for profits and good for the absolute amount ofcapital that the company has."
Thanks for the update Blueswan.
Unfortunately that only applies if you live in Australia. In $NZ terms the value of the Australian profits are going down. So we can expect the NZX quoted value of ANZ shares to go down as a result of the appreciation of the NZ currency verses the OZ dollar.
SNOOPY
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'Bank' or 'Finance Company'?
What is the difference between a bank and a finance company? The quick answer is, those that hold banking licences are banks. But this is not a very useful answer. I want to know how the underlying loan book differs. This is a question that is impossible to answer, because different finance companies have different areas of business expertise.
But what would happen if you were a bank (ANZ) that bought outright a finance company (UDC) as far back as 1980? That would be enough time to reorganize things. You could steer your bank style business towards "ANZ New Zealand", and steer the 'finance style business' towards "UDC". After 33 years, how does the respective break down over the business sectors look for both?
SNOOPY
Last edited by Snoopy; 25-01-2014 at 02:10 PM.
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ANZ.NZ Loan Book Industry Funding Concentration FY2013
Originally Posted by Snoopy
What is the difference between a bank and a finance company? The quick answer is, those that hold banking licences are banks. But this is not a very useful answer. I want to know how the underlying loan book differs. This is a question that is impossible to answer, because different finance companies have different areas of business expertise.
But what would happen if you were a bank (ANZ) that bought outright a finance company (UDC) as far back as 1980? That would be enough time to reorganize things. You could steer your bank style business towards ANZ New Zealand, and steer the 'finance style business' towards UDC. After 33 years, how does the respective break down over the business sectors look?
From the ANZ New Zealand statement to the reserve bank on 30th September 2013, page 46, the loan book break down is like this:
ANZ (New Zealand) Loan Book FY2013 |
|
Agriculture |
$18,842m |
Forestry, fishing and mining |
$1,850m |
Business and property services |
$11,334m |
Construction |
$1,748m |
Entertainment, leisure and tourism |
$1,389m |
Finance and insurance |
$18,412m |
Government and local authority |
$9,910m |
Manufacturing |
$5,051m |
Personal lending |
$63,492m |
Retail trade |
$2,859m |
Transport and storage |
$2,147m |
Wholesale trade |
$2,704m |
Other |
$4,577m |
Total |
$144,315m |
UDC is a wholly owned subsidiary of ANZ New Zealand. So what we need to do is subtract out the UDC figures from those listed above. Then we can compare the loan book make up of 'Underlying ANZ New Zealand' with UDC.
SNOOPY
Last edited by Snoopy; 13-01-2017 at 03:48 PM.
Reason: Tabulate Results
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Originally Posted by Snoopy
From the ANZ New Zealand statement to the reserve bank on 30th September 2013, page 46, the loan book break down is like this:
Agriculture $18,842m
Forestry, fishing and mining $1,850m
Business and property services $11,334m
Construction $1,748m
Entertainment, leisure and tourism $1,389
Finance and insurance $18,412m
Government and local authority $9,910m
Manufacturing $5,051m
Personal lending $63,492m
Retail trade $2,859m
Transport and storage $2,147m
Wholesale trade $2,704m
Other $4,577m
Total $144,315m
UDC is a wholly owned subsidiary of ANZ New Zealand. So what we need to do is subtract out the UDC figures from those listed above. Then we can compare the loan book make up of 'Underlying ANZ New Zealand' with UDC.
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 slightly rearrange the above categories so that they correspond to those listed in the December 2013 UDC prospectus. Then I need to subtract the UDC equivalent figures (page 53, December 2013 prospectus) to get the underlying ANZ bank figure.
|
All ANZ.NZ |
UDC |
Underlying ANZ.NZ |
Agriculture forestry, fishing and mining: |
$20,674m |
- $379m |
= $20,295m |
Business and property services: |
$11,334m |
-$114m |
= $11,220m |
Construction: |
$1,748m |
- $282m |
= $1,466m |
Entertainment, leisure and tourism: |
$1,389m |
-$19m |
= $1,370m |
Finance and insurance: |
$18,412m |
- $101m |
= $18,311m |
Government and local authority: |
$9,910m |
-$4m |
= $9,906m |
Manufacturing: |
$5,051m |
- $108m |
= $4,943m |
Personal & Other lending: |
$68,069m |
-($5.7m +$8.1m+$14m+$33m+$13m+$443m) |
= $67,552m |
Retail and Wholesale: |
$5,563m |
-$248m |
= $5,315m |
Transport and storage: |
$2,147m |
-$387m |
=$1,760m |
Total: |
$144,315m |
- $2,161m |
= $142,514m |
Last edited by Snoopy; 07-12-2014 at 01:55 PM.
Reason: Tabulate data
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Originally Posted by Snoopy
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 slightly rearrange the above categories so that they correspond to those listed in the December 2013 UDC prospectus. Then I need to subtract the UDC equivalent figures (page 53, December 2013 prospectus) to get the underlying ANZ bank figure.
Agriculture forestry, fishing and mining: $20,674m - $379m = $20,295m
Business and property services: $11,334m -$114m = $11,220m
Construction: $1,748m - $282m = $1,466m
Entertainment, leisure and tourism: $1,389m -$19m = $1,370m
Finance and insurance: $18,412m - $101m = $18,311m
Government and local authority: $9,910m -$4m= $9,906m
Manufacturing: $5,051m - $108m = $4,943m
Personal & Other lending: $68,069m -($5.7m +$8.1m+$14m+$33m+$13m+$443m)= $67,552m
Retail and Wholesale: $5,563m - $248m = $5,315m
Transport and storage: $2,147m -$387m =$1,760m
Total $144,315m - $2,161m = $142,514m
Rather than put too many figures in one table, the percentage of loan assets in the allocated asset categories are as follows:
|
UDC |
ANZ |
Agriculture forestry, fishing and mining: |
17.5% |
14.2% |
Business and property services: |
5.3% |
7.9% |
Construction: |
13.0% |
1.0% |
Entertainment, leisure and tourism: |
0.9% |
1.0% |
Finance and insurance: |
4.7% |
12.8% |
Government and local authority: |
0.2% |
7.0% |
Manufacturing: |
5.0% |
3.5% |
Personal & Other lending: |
23.9% |
47.4% |
Retail and Wholesale: |
11.5% |
3.7% |
Transport and storage: |
17.9% |
1.2% |
Not all divergences are significant You can see the big divergences here. My observations on the above figures are listed below:
1/ UDC has over ten times their underlying loan book in construction, compared with underlying ANZ. Construction financing would be classed as higher risk lending.
2/ ANZ has three times the UDC finance and insurance quota. I believe the ANZ figure includes superannuation and kiwisaver funds which would explain that difference.
3/ The UDC relative share of the local government market is miniscule. That makes sense. Most local bodies have good credit ratings: why borrow at higher rates from a finance company when a bank will lend you those same funds at a lower rate?
4/ ANZ has double the percentage of loans under management in the personal category. Makes sense as UDC doesn't do house mortgages!
5/ Retail and wholesale much higher with UDC. I would guess that reflects the relative risk of small retail and wholesale businesses.
6/ Transport and Storage at UDC much higher. Possibly this reflects the greater funding of cars and trucks?
SNOOPY
Last edited by Snoopy; 03-12-2014 at 07:31 PM.
Reason: Tabulate Data
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Hi Snoopy
Those relative percentages are pretty much as we would expect. As you note, finance companies aren't into house loans but are big financiers at the property development end of town - or at least were when that was a big thing! They also do a big business in financing the transport and logging industries, earth moving, farm machinery etc. Their personal loans cater to a generally lower security sector so we wouldn't expect them to compete directly with the banks.
What the figures don't tell us so clearly is the quality of the respective loan portfolios but of course a fair idea of this can be gleaned from write offs and provisioning from year to year.
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UDC Balance Sheet Impaired Loan Percentage FY2013
Originally Posted by macduffy
Those relative percentages are pretty much as we would expect. As you note, finance companies aren't into house loans but are big financiers at the property development end of town - or at least were when that was a big thing! They also do a big business in financing the transport and logging industries, earth moving, farm machinery etc. Their personal loans cater to a generally lower security sector so we wouldn't expect them to compete directly with the banks.
What the figures don't tell us so clearly is the quality of the respective loan portfolios but of course a fair idea of this can be gleaned from write offs and provisioning from year to year.
Frankly I am surprised how high the provision for loan impairment is at UDC (page 33 UDC 2013 prospectus). Granted it has been reducing since the depths of the GFC.
From note 8, with reference to the whole EOFY2013 loan book:
$37.460m / ($2,241.110m+$37.460m+$131.094m+$7.439m) = 1.55% 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 update to the Reserve Bank)
($826m-$37m)/ ($91,543m -$2,103m) = 0.88%
Compare that to Heartland (HNZ AR2013 p39)
$50.491m/ $2,060.867m = 2.45% 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.
SNOOPY
Last edited by Snoopy; 03-07-2018 at 03:06 PM.
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ANZ.NZ Loan Book Classification FY2013
Originally Posted by Snoopy
Frankly I am surprised how high the provision for loan impairment is at UDC (page 33 UDC 2013 prospectus).
On page 40 of the ANZ NZ September 30th Reserve Bank disclosure, there is a table listing the class of loans (0-9) , along with their probability of default. '9' is default, so the probability for a grade 9 loan defaulting is 100%. However of more interest is the other grades of loan and their probability of default.
|
For retail mortgages: |
Grades 0-3: |
0.2% |
Grades 4: |
0.46% |
Grade 5: |
0.93% |
Grade 6: |
2.11% |
Grade 7,8: |
5.4% |
|
For other retail: |
Grades 0-2: |
0.1% |
Grades 3-4: |
0.29% |
Grade 5: |
1.12% |
Grade 6: |
2.67% |
Grade 7,8: |
11.25% |
Allowing for the fact that the grading groupings do not quite match up grades 0-6 are surprisingly similar. It is the loans in category 7 and 8 that are twice as likely to default in finance companies, given that in general finance companies have very low (or no) exposure to retail mortgages.
SNOOPY
Last edited by Snoopy; 03-02-2016 at 03:50 PM.
Reason: Tabulate Data
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Originally Posted by Snoopy
On page 40 of the ANZ NZ September 30th Reserve Bank disclosure, there is a table listing the class of loans (0-9) , along with their probability of default. '9' is default, so the probability for a grade 9 loan defaulting is 100%. However of more interest is the other grades of loan and their probability of default.
For retail mortgages:
Grades 0-3: 0.2%
Grades 4: 0.46%
Grade 5: 0.93%
Grade 6: 2.11%
Grade 7,8: 5.4%
For other retail:
Grades 0-2: 0.1%
Grades 3-4: 0.29%
Grade 5: 1.12%
Grade 6: 2.67%
Grade 7,8: 11.25%
Allowing for the fact that the grading groupings do not quite match up grades 0-6 are surprisingly similar. It is the loans in category 7 and 8 that are twice as likely to default in finance companies, given that in general finance companies have very low (or no) exposure to retail mortgages.
The ANZ.NZ grading system is from 0 to 9, where '9' is defined as 'default'. The ANZ statement of position to RBNZ (30th September 2013) lists net loans and advances to be $90,489m. Bizarrely when you go to the IRB exposures by customer credit rating, the total credit risk exposure jumps to $125,679m. Something to do with 'off balance sheet credit exposure' I think. Maybe those 'grade 9' exposures are included as part of this figure? Anyone know?
Total impaired assets from note 15 amount to $894m. That is hardly material when total loan assets on the books are $90,489m.
The whole point of this observation is that at a pinch you can ignore the impaired assets in the ANZ.NZ report to the RBNZ. You can't do that when you are considering a bank like Heartland.
SNOOPY
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