HGH - Heartland Group Holdings

[percy]

Fitch has a BBB rating on HBL... lowest amongst its larger peers. 4 ticks under the likes of ANZ/CBA/WBC

With the lowest exposure to the NZ residential property market, I would think they are in better shape to weather an economic down turn.I would expect any big downturn in NZ would be lead by residential property.

[Marilyn Munroe]

How so??????????????????????????????

I have been told of someone who took out a car hire purchase loan from MARAC for no deposit.

I have no information about the credit worthiness of the borrower or the due diligence undertaken by MARAC, but I would classify this type of lending as adventurous as well as sensitive to negative economic changes.

Boop boop de do
Marilyn

[percy]

I have been told of someone who took out a car hire purchase loan from MARAC for no deposit.

I have no information about the credit worthiness of the borrower or the due diligence undertaken by MARAC, but I would classify this type of lending as adventurous as well as sensitive to negative economic changes.

Boop boop de do
Marilyn

Both Heartland [Marac] and Turners have very few motor vehicle loans go bad.
In fact people pay their car loans before they pay their house mortgages,'
They need their car to get to work.
Both Turners and Heartland have good records of checking borrowers' credit worthiness.
Neither do adventurous.

[Marilyn Munroe]

Neither do adventurous.

To be fair this loan may be bundled into their securitisation channel and the losses endured by the widows and orphans who are dependent on the pension funds who buy this stuff.

I have no problem with this buccaneering style of lending it is covering it with a cloak of probity that concerns me.

Boop boop de do
Marilyn

[Beagle]

Holders will of course say its justified based on superior earnings growth whereas those who have recently sold such as myself would say its got a little ahead of itself and as primarily a value investor I see better value elsewhere. I simply present the information and its up to readers to assess for themselves.
FY18 PE's according to 4traders average brokers forecasts based on Friday's closing price, (all figures rounded to the nearest single decimal point).
ANZ 12.2
NAB 13.1
WBC 12.8
BEN 13.0
CBA 13.8
BOQ 13.2
HBL 17.0

As JeremyALD astutely noted, not a huge amount has changed to HBL in the last eighteen months other than moderate EPS growth but mainly the extraordinary SP outperformance is simply a function of the fact that its been rerated from a considerable discount to its peer group to quite a considerable premium. Whether that premium is warranted or a whether a reversion towards the mean average of its peers is more likely in the medium term is of course the question. Some might even try and make the case that an even bigger PE premium is warranted and I wish them good luck with that.

[beetills]

I had shares in cbs so was handed shares when HBL took over.
I have since increased my meagre shareholding only because unlike the big Aussie banks i thought that this would be my one chance to get into a bank at a resonable cost.
Enjoyed the ride so far.

[JeremyALD]

How so??????????????????????????????

HBL play in niche areas and have grown small business lending significantly. These are the types of areas that will have lower take up rates and higher levels of default in the times of economic crisis. They also have a stake in the likes of Harmoney which haven't been through an economic crisis as of yet and have a lower credit rating which means their cost of credit will be higher. They also won't be able raise capital as easily in a recession and they are one of the only big banks that has chosen to come to shareholders for cash.

The big banks in ANZ have performed fairly well in recessions and property downturns. With HBLs new model and large amounts of lending in small business, personal and reverse mortgages I see it as riskier in hard times.

[percy]

HBL play in niche areas and have grown small business lending significantly. These are the types of areas that will have lower take up rates and higher levels of default in the times of economic crisis. They also have a stake in the likes of Harmoney which haven't been through an economic crisis as of yet and have a lower credit rating which means their cost of credit will be higher. They also won't be able raise capital as easily in a recession and they are one of the only big banks that has chosen to come to shareholders for cash.

The big banks in ANZ have performed fairly well in recessions and property downturns. With HBLs new model and large amounts of lending in small business, personal and reverse mortgages I see it as riskier in hard times.

Thanks for your reply.

[SCOTTY]

HBL play in niche areas and have grown small business lending significantly. These are the types of areas that will have lower take up rates and higher levels of default in the times of economic crisis. They also have a stake in the likes of Harmoney which haven't been through an economic crisis as of yet and have a lower credit rating which means their cost of credit will be higher. They also won't be able raise capital as easily in a recession and they are one of the only big banks that has chosen to come to shareholders for cash.

The big banks in ANZ have performed fairly well in recessions and property downturns. With HBLs new model and large amounts of lending in small business, personal and reverse mortgages I see it as riskier in hard times.

I’m probably wrong but my understanding of Harmoney is that they don’t actually lend their own money but act as a facilitator for others to lend money through their platform. Harmoney clip the ticket on the way through?

[777]

I’m probably wrong but my understanding of Harmoney is that they don’t actually lend their own money but act as a facilitator for others to lend money through their platform. Harmoney clip the ticket on the way through?

But as I understand it Heartland are also one of the "others" you refer to.