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27-02-2013, 12:11 PM
#1101
Originally Posted by Xerof
On another matter dear to our hearts, I read Treasury have hired GS to run the ruler over Kiwibank....murmerings of more capital needed for their growth (something sadly lacking at HNZ btw) via a possible float
Key is on record as saying 'not while I'm Prime Minister', so perhaps some interesting spin due before the election.
The spin will have something to do with replacing Solid Energy IPO, and urgent need for CHCH rebuild funding, is my guess
anyway, no facts, just one to watch, and will no doubt spark huge debate if it is progressed
I am interested in how to judge a suitable level of capital for banks and in particular for HNZ and Kiwibank?
I've been over HNZ a couple of times, and capital seemed adequate to a non-banker. I am thinking I calculate capital adequacy ratio by putting the $344m of tier 1 capital over the $2057m of risk weighted exposures (16.7%) - is that correct? They have a 12% minimum in their conditions of registration vs Basel III minimum of 6%, so does Basel III have any effect at all for them? Is part of your concern re capital a presumption that the $143m value of their non-core property book is going to trend rapidly downwards and perhaps halve or worse? Or is it more in regard to capital requirements for growth? How much capital is enough?
Does Basel III have greater impact for Kiwibank (who currently only have a condition of 4.5% tier 1, up from 4% last year)? Although, if I am reading their disclosure statement correctly, I think they have 10.6% currently, so maybe a non-issue there too? It's pretty close to the 10.9% for ANZ's New Zealand operation?
With effect from 1 January 2013, the Bank’s conditions ofregistration were amended to implement the Reserve Bank’sBasel III policy. The changes include a requirement to maintaina Common Equity Tier 1 capital ratio of not less than 4.5% from1 January 2013, and the requirement to ensure a buffer ratio of2.5% with effect from 1 January 2014.
Anyway, appreciate your comments, Xerof, if you get the chance.
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27-02-2013, 12:32 PM
#1102
[QUOTE=belgarion;395137
A break out will be some time away methinks. And it'll not rocket to 90c ... just slow, steady plod.[/QUOTE]
Just the speed I like.!!!!!
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27-02-2013, 01:05 PM
#1103
Originally Posted by moosie_900
Almost as many buyers at 72 as the whole ask side of the board now. Could be a new support level forming, askers fleeing on the lower side of 75. Let's see some breakthrough here!
the breakthrough has already occurred...
Some will believe that the 72 support has already been formed If your principals are not Dow Theory related the recent 72 support occured on 14th February, spawned from the resistance line created on the 8th October 2012 when the intraday high reached 72c.
If your principals incl Dow Theory then 72c support formed with the 72 retest on the 25th Feb.
As it stands this breakthough has been disappointing so far considering a result come out during it....however it still early days
There's no point over complicating things with minor technical details...the simple observation will suffice...There has been over 700 optimist posts on this thread since October and HNZ has moved up bugger all during its the last 5 months breather (granted that it shot up 30% in September)... since then the NZX index has risen a further 10%.
Disc: culling stock from my Portfolio I need cash!!!...HNZ just survived for now
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27-02-2013, 04:15 PM
#1104
Liz,
it's 20 years since I was last involved in Bank treasury ops, and in those days Capital Adequacy Ratios were only just being implemented globally (Cook ratios in those days)
It seems the basic principles have morphed into Basel i,ii and iii, and without knowing the exact details, I think you can take it for granted that banks comply with the requirements at all times. Monitoring by the authorities is fairly detailed and intense.
i do know that asset classes and liability classes for that matter, have been tweaked over the years, perhaps to cope with the financial engineering that the back room boys seem to invent on a daily basis, and push out to the unsuspecting public and insto's as new products.
So, each bank would apply the rules as they stand to each item on the asset side of the balance sheet, multiply $ amounts by the appropriate weighting, to determine an 'adjusted' balance sheet number (off bs products are alo captured to varying degrees)
similarly, the same exercise is done for the liability side, to calculate adequacy ratio
in a nutshell, don't sweat the detail, but if a bank's experiencing high growth, in products that are 'expensive' to hold on/off B/S, and it's Basel ratio is nearing the limit, sure as eggs, you will be looking at a CR
HNZ products would carry more capital requirements than Kiwibank products I would suggest, and that means less leverage to expand the operations
Look for Rabo to call its perpetuals in 2017, coz that particular type of debt issue no longer counts as Basel equity......just one of the tweaks in Biii
hth
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27-02-2013, 04:33 PM
#1105
HNZ products would carry more capital requirements than Kiwibank products I would suggest, and that means less leverage to expand the operations
I would agree. Housing loans are the most favoured assets for capital requirements, ie they carry the lightest weighting after, I think, some sovereign assets (although there'd be question marks over some countries' bonds!). HNZ has a strategy of seeking commercial loans whereas Kiwibank is still heavily housing loan oriented.
I still reckon that the RBNZ should tweak the weightings for higher loan to valuation lending - to act as a bit of a brake on housing speculation. No doubt the banks would protest on the grounds of impractibility, lack of systems etc. but where there's a will there's a way, even if a few more staff have to be employed to collect the information.
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27-02-2013, 04:41 PM
#1106
Yes, and people wonder why banks are so keen to lend on residential.......
an easier solution is to tweak the weighting away from residential property, and into commercial lending
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27-02-2013, 04:43 PM
#1107
Originally Posted by Xerof
Look for Rabo to call its perpetuals in 2017, coz that particular type of debt issue no longer counts as Basel equity......just one of the tweaks in Biii
Is that why BNZ just recalled theirs? Dont ASB have some too?
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27-02-2013, 04:44 PM
#1108
Originally Posted by Xerof
Yes, and people wonder why banks are so keen to lend on residential.......
an easier solution is to tweak the weighting away from residential property, and into commercial lending
There should be a higher risk weigthing as LVR get over say 60% on a sliding scale upwards.
This is one reason why they are so reluctant to lend on businesses unless they get access to the family house as well. Not good for the economy at all.
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27-02-2013, 04:56 PM
#1109
CJ, yes thats another way to do it
Fair weather bankers are commonplace unfortunately.....lend you their umbrella, until it starts raining, then they want it back
perpetual query: yes could apply to some of the others, although RBOHA are deeply subordinated, perhaps more so than anyone elses.
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27-02-2013, 07:12 PM
#1110
Well, speak of the devil.....look what appeared in the NBR this afternoon:
Mr English did not give much in the way of detail about what those measures might be, or their timing, but the context of a pre-Budget speech indicates the government’s preference is to include them in Budget 2013, to be delivered on May 16.
“Later this year, the government will have more to say about how the financial stability tools will work alongside policies on more flexible supply in the housing market and social housing reform,” was all Mr English would say in his speech to the Auckland Chamber of Commerce this afternoon.
Those financial stability tools – the domain of the Reserve Bank – include loan-to-value ratios and additions to the capital and bank funding requirements already being imposed on banks.
Such tools though will be the preserve of the Reserve Bank and not the government, Mr English says
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