-
02-06-2016, 07:51 PM
#7631
40 years ago Westpac could have bankrupted me.
They did not.
Unfortunately for them, they still have me as a customer.
-
02-06-2016, 08:08 PM
#7632
Originally Posted by Snoopy
Note 12(c) IRHY2016, "Concentration of credit risk by industry sector"
Agriculture: $570.735m
SNOOPY
Same report (December)-
Note 1 Segment Analysis
Under Rural - Total Assets $504.614m (pretty close to $505m)
Move on 3 months to March Disclosure Statement the amount has increased to $507.365m
(Note; this assumes that total assets in this analysis is in the main financial receivables)
Your $65m I think has come about from not comparing apples with apples?
Last edited by winner69; 02-06-2016 at 09:37 PM.
“ At the top of every bubble, everyone is convinced it's not yet a bubble.”
-
03-06-2016, 02:18 AM
#7633
So what would be, Plan C
Interesting that Heartland are suggesting that the floor value for a dairy farm is defined by the sheep/beef market.
You have to hope that the downside risk for sheep & beef is minimal.
Best Wishes
Paper Tiger
-
03-06-2016, 10:24 AM
#7634
Originally Posted by winner69
Yikes 24% drop in dairy farm prices - i didn't believe it so looked it up
Yes the Dairy Farm Index is down by 24.1% from a year ago
Yes,BUT what % of the value ratio is land?
-
03-06-2016, 02:51 PM
#7635
A maths trick to shrink bad debts (Part 1)
Originally Posted by Jantar
Ooops. True .... 20% is borrowers equity for 80% LVR. However the 59% figure you found makes HBL's position even better.
I owe Jantar a more calculated answer than I gave him. So let's say the current LVR ratio is 60% (round figures) and update Jantar's previous calculation based on this. I will use the same $260m of dairy loans on the books as before.
A 60% LVR meas that the market value of assets for which the loan was taken out at the time of loan application was:
$260m / 0.60 = $433m
Or on a smaller normalised (loans broken into $1m slice) scale:
$1m / 0.60 = $1.67m
Now lets assume these assets are dairy cows and their value has fallen 45% (see my recently quoted Stuff article) from when the loan was taken out.
This means the value of $1m cows when the loan was taken out is now:
$1.67m x (1-0.45) = $0.9185m
So if the loan is called in and the cows sold the bank will lose:
$1m - $0.9185m = $81,500 for each million loaned.
Now, lets assume that 1/3 of that $260m dairy loan total was for cows and the rest was for land and other stuff.
$260m x 1/3 = $87m
So the total Heartland loss on dairy cows would be.
$87m x 0.0815 = $7m
This is not nice, but a far cry from the $52m that I originally claimed. This is positive proof that I was scaremongering - right?
SNOOPY
Last edited by Snoopy; 03-06-2016 at 03:11 PM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
-
03-06-2016, 03:21 PM
#7636
A maths trick to shrink bad debts (Part 2)
Originally Posted by Snoopy
So the total Heartland loss on dairy cows would be.
$87m x 0.0815 = $7m
This is not nice, but a far cry from the $52m that I originally claimed. This is positive proof that I was scaremongering - right?
Now lets take the same input information and formulate this problem in a slightly different way. The $260m in dairy loans remain, but are split like this.
1/$86.7m has been lent on cows with an 80% LVR.
2/$86.7m has been lent on land with a 60% LVR
3/$86.7m has been soent on bridging loans to well capitalised farmers with a 40% LVR.
So the loan money has been split between three broad asset classes which added together average out as a 60% LVR over the whole loan book, exactly the same overall LVR asw in Part 1. But what happens to our hapless sharemilker this time?
In part 2, each $1m in loan money represents:
$1m / 0.8 = $1.25m of dairy cows
Now lets assume, as in Part 1, the dairy cows have fallen in value 45% (see my recently quoted Stuff article) from when the loan was taken out.
This means the value of $1m cows when the loan was taken out is now:
$1.25m x (1-0.45) = $0.6875m
So if the loan is called in and the cows sold the bank will lose:
$1m - $0.6875m = $312,500 for each million loaned.
So the total Heartland loss on dairy cows would be.
$86.7m x 0.3125 = $27m
Note that this loss is nearly four times greater than that calculated in Part 1 for what is ostensibly the same loan book! Granted it is still far short of the $52m I claimed. But what about the downstream effects?
What about the crop farmer down the road who bought a combine harvester on tick to harvest silage for his dairy farmer brother down the road? The dairy farmer is no longer buying so our crop farmer, another Heartland Argi customer, has gone bust as well. I make this point becasue it shows how an apparent $27m could balloon much further for Heartland. Some might say a multiplier factor of 2 , bringing the money lost to $54m might be conservative.
SNOOPY
Last edited by Snoopy; 03-06-2016 at 03:36 PM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
-
03-06-2016, 03:51 PM
#7637
Originally Posted by Snoopy
I owe Jantar a more calculated answer than I gave him. So let's say the current LVR ratio is 60% (round figures) and update Jantar's previous calculation based on this. I will use the same $260m of dairy loans on the books as before.
A 60% LVR meas that the market value of assets for which the loan was taken out at the time of loan application was:
$260m / 0.60 = $433m
Or on a smaller normalised (loans broken into $1m slice) scale:
$1m / 0.60 = $1.67m
Now lets assume these assets are dairy cows and their value has fallen 45% (see my recently quoted Stuff article) from when the loan was taken out.
This means the value of $1m cows when the loan was taken out is now:
$1.67m x (1-0.45) = $0.9185m
So if the loan is called in and the cows sold the bank will lose:
$1m - $0.9185m = $81,500 for each million loaned.
Now, lets assume that 1/3 of that $260m dairy loan total was for cows and the rest was for land and other stuff.
$260m x 1/3 = $87m
So the total Heartland loss on dairy cows would be.
$87m x 0.0815 = $7m
This is not nice, but a far cry from the $52m that I originally claimed. This is positive proof that I was scaremongering - right?
SNOOPY
From Heartland's presentation :"We don't expect there would be any impact on Heartland's capital."
So any loss of interest would go through profit and loss a/c.
I did love on page 4, dividend;"Consensus forecast 9 cps for FY2017 [fully imputed]equivalent to 7.5 yield and 10.4% gross."
They would never have put that there if they did not intend to achieve it.
The growing online products means Heartland do not have to expand their branch networks.I note TNR are doing the same.Both are positioning themselves closer to their customers.Huge growth area for "the nimble footed".
Last edited by percy; 03-06-2016 at 04:51 PM.
-
03-06-2016, 05:26 PM
#7638
Member
Originally Posted by percy
From Heartland's presentation :"We don't expect there would be any impact on Heartland's capital."
So any loss of interest would go through profit and loss a/c.
I did love on page 4, dividend;"Consensus forecast 9 cps for FY2017 [fully imputed]equivalent to 7.5 yield and 10.4% gross."
They would never have put that there if they did not intend to achieve it.
The growing online products means Heartland do not have to expand their branch networks.I note TNR are doing the same.Both are positioning themselves closer to their customers.Huge growth area for "the nimble footed".
Good to read your positive posts Percy. It makes a change to the constant bagging of HBL - in particular to the exposure to the dairy industry which is a small risk in relation to the business in total. There are so many good things going on which are constantly being ignored. Very sad.
-
03-06-2016, 05:43 PM
#7639
Originally Posted by SCOTTY
Good to read your positive posts Percy. It makes a change to the constant bagging of HBL - in particular to the exposure to the dairy industry which is a small risk in relation to the business in total. There are so many good things going on which are constantly being ignored. Very sad.
I now laugh at the constant bagging of HBL.
I upset a few people bringing up Snoopy's first post on this thread.Was thinking to myself it would be fun in a year's time to bring up a few of his,and others' latest.!!! lol.
Consensus with regard to HBL's 9 cent fully imputed dividend for FY 2017, shows how HBL,and leading brokers' analysts view HBL's prospects.
In a word "positive."
Last edited by percy; 03-06-2016 at 06:00 PM.
-
03-06-2016, 06:30 PM
#7640
Reworking the number to show "No Loss"
Originally Posted by percy
From Heartland's presentation :"We don't expect there would be any impact on Heartland's capital."
So any loss of interest would go through profit and loss a/c.
If you prefer the 'maths trick' way of looking at the results (I don't but I will go with it to make my point), it is easy to rework with just one small change to tie into the Heartland presentation.
------
A 60% LVR meas that the market value of assets for which the loan was taken out at the time of loan application was:
$260m / 0.60 = $433m
Or on a smaller normalised (loans broken into $1m slice) scale:
$1m / 0.60 = $1.67m
Now lets assume these assets are dairy cows and their value has fallen 40% (see my recently quoted Stuff article) from when the loan was taken out.
This means the value of $1m cows when the loan was taken out is now:
$1.67m x (1-0.4) = $1.00m
So if the loan is called in and the cows sold the bank will lose:
$1m - $1.0m = $0 for each million loaned.
Now, lets assume that 1/3 of that $260m dairy loan total was for cows and the rest was for land and other stuff.
$260m x 1/3 = $87m
So the total Heartland loss on dairy cows (capital) would be.
$87m x 0 = $0m
-----
The change I have made is that I have assumed the cows were bought at $2,000 a head, not $2,200. So the cow price has fallen 40%, not 45%. That small change is enough to arrest any losses by Heartland.
I am showing you this because I want you see that these rural loans are at a very delicate stage. As it stands now, if Heartland were to wind up all their livestock loans, the sharemilkers would be left jobless and penniless. But Heartland and their shareholders would be OK (on paper). In practice, Heartland management would never take such a hard nosed approach. It would destroy their reputation as a 'friendly lender'. And any chance of riding the next rural profitability wave would be gone.
But we are at the stage where even a small decrease in cow value (5%) will suddenly cause a many million dollar writedown in Heartland group equity ($7m). Everything is finely balanced. I am not saying their current presentation is wrong. But very small changes in the market, could make their forward forecast thoughts out of date in a matter of days.
SNOOPY
Last edited by Snoopy; 03-06-2016 at 06:54 PM.
Watch out for the most persistent and dangerous version of Covid-19: B.S.24/7
Tags for this Thread
Posting Permissions
- You may not post new threads
- You may not post replies
- You may not post attachments
- You may not edit your posts
-
Forum Rules
|
|
Bookmarks