Might be able to reallocate / transfer some of equity allocated to the non-banking group to the banking group to shore up the banking group (or some other financial engineering) — sneaky eh
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It’s going to take years before anything needs to be done ..that 15% mentioned is by 2025 or something
No worries
What the RBNZ is talking about
https://www.rbnz.govt.nz/-/media/Res...ough.pdf?la=en
This looks to be the roading equivalent of saying - lets avoid crashes and decrease the speed limit. If we set the open road speed limit at 60 kph, there will be a lot less fatal crashes so let forget 90, 80 and go straight down to 60.
This would be great at achieving this single objective (assuming adherence to the rules). It would create incredible operational inefficiencies relative to previous settings.
So if you need up to 60% more capital to do the same lending, if no additional capital is contributed, lending needs to reduce by 37.5%.
All of this additional capital that is soaked up in the higher "safety" threshold hasn't been made available to residental and commercial customers
If your lending has to reduce by 37.5%, there would need to be quite an expansion of margins so that this reduced activity level didn't cause profitability to drop
The more capital that is needed, the harder it is to finance growth.
Also unless RBNZ were to relax their buffer requirements should banks post losses, banks would need to operate above this new threshold. This potentially means that we could have the strange combination of a severe credit crunch (which is just what RBNZ are trying to avoid) when banks are actually pretty sound on international benchmarks.
There looks to be some pretty big down-side risks to NZ inc from this decision (if it progresses in its current form).
Of cource its just coincidence that RBNZ want to increase the financial Capital requirements?? ... After they arguably had a decent (negative?) role to play in the capital reserves needed for CBL and the events that followed..
NZRB hands got burnt.. So best make a much larger buffer do rerisk themselves vs really derisking the banking big 4.. Who by accounts have decent ratios v international benchmarks....
.. And sigh, I bought decent amount of WBC last week.. Thinking its at its lows and on the up after their Aus AGM and mea culpa seemed well received.
Well the market is looking a little worried, with the share price down to $1.46. But I guess it is just following the general market trend. Nothing to do with having a 'Shortage of Capital'! Hey that last phrase sounds familiar. Where abouts on this thread have I heard it before?
SNOOPY
You heard from the same poster who said Heartland would not get a banking licence.
You may not have a long memory,but I have.....lol.
https://www.msn.com/en-nz/money/mark...cid=spartandhp
I would think HGH would be okay with its teir 1 capital ratio already but after the Aussies milking us Kiwi's for years and having low capital ratio's the RBNZ obviously thinks its time for them to sure-up their capital ratio's here and I have no sympathy for them.
Surely this is positive for HGH
This things broken and I bought more yesterday at $1.45, I'm moving back to my roots next year by getting away from diversification in any meaningful way, every time I've gone beyond holding 3 or 4 stocks I've been skunked.
I would have actually thought HBL was best positioned of the banks, market seems to think differently!
Bigly differently, with it going down 10c in not much over 10 trading hours.
My (re)entry price of $1.50 looking very expensive now.
I first bought into this (one of my very first purchases!!) just over three years ago at $1.33. Sold out (belatedly) in two parcels at $1.68 and $1.49, wonder if I'll be re-entering at the same price I first bought at?! :p
Not far to go before my stop loss gets triggered. Maybe signing up for the DRP was a waste of time - I may not be a holder fro that much longer
$1.36, down over 6% today with an hour left to trade... and we won't talk about yesterdays drop either... winner, you reckon the race between ARV and HGH back on?
https://www.nzherald.co.nz/business/...ectid=12179078
Heartland led the market lower, falling 6.9 per cent to $1.35, its lowest close since August 2016. The local lender has dropped 11 per cent since the Reserve Bank unveiled plans that would require a significant increase in the capital held by banks. Macquarie analysts estimate Heartland would need to boost its capital holdings by about $1 billion.
Anyone heard anything from heartland.
Heartland said this yesterday
http://nzx-prod-s7fsd7f98s.s3-websit...529/292595.pdf
To put that possible $1 billion extra capital needed shareholder equity at June 2018 was only $664m. That would be a huge injection eh ...but when one is highly leveraged to start with that would good.
Well Heartland Bank will require a 15% equity ratio.
We know HBL had a 13.4% equity ratio.
I believe to take that 13.4% ratio to 15% would require $69mil extra equity.[over 5 or more years].
However HBL included Australian REL and other Australian business.
Take that out of HGH,then we have to find out how much capital that 15% requires.
I really do not know,but I can see Heartland Bank having 15% equity ratio,but I will have to see what equity ratio HGH has.
To suggest HGH needs to raise a lot of capital to support Heartland Bank is with out foundation.
The rapid growth in Australia will mean at some stage HGH will want more capital to support further ongoing growth.
RBNZ report reads as if they also going to tighten up on how equity ratios are calculated .....banks are a bit dodgy how they do it now.
Good points, the alarmists leaping to conclusions about getting to 15% is just wrong, but the market recognised that "The rapid growth in Australia will mean at some stage HGH will want more capital to support further ongoing growth." and on the back of a US market rout to recent lows, that NZX diligently follows, it's not surprising HGH SP has been punished along with the other banks who incidentally have not disclosed that they will require further capital raising, like Heartland probably will.
Listen to the market, it has a schizophrenia about it but it does foretell discomfort and concern, in this case potentially further dilution right when the company is looking to expand into new international markets and the RBNZ raise the bar on local capital adequacy. One can't ignore the market, it's been saying for a long time that Heartlands' SP got way ahead of itself, all we're trying to figure out is how far ahead that actually is.
What a shocker. Another day with a final wave of capitulation tomorrow ?
Hey Winner...that head and shoulders is now complete except we can't see it because there's this new listing ticker.
I would think like any good bank the extra costs will be passed onto the consumer in the form of higher interest rates. Will be interesting how these tightening credit conditions will flow into the NZ housing market.
I think the mistake is not diversification but not understanding risk-or just being greedy.
Perhaps we get carried away and biased on threads such as this.
You mentioned sometime ago you had invested in mercury.
In my case the gains from this have far outweighed the loss here.
Most of my investments are low risk and diversified.
Strange how we dont seem to talk so much about the less risky shares .
ANZ NZ has come out and said they will need additional $ 6-8 BILLION to meet the new capital requirements. BNZ, Westpac and ASB have all said they need large numbers. All the aforementioned, as well as Kiwibank, have said there is no question mortgage and other lending rates need to go up.
Lets see if the Reserve Bank actually goes ahead with this. Can't imagine the Government being excited about it.
https://tmmonline.nz/article/9765141...rowth-kiwibank
I like the analogy of the plumber used in this story. I expect the net effect on HGH in terms of earnings per share going forward to be minimal if any.
Here we go - courtesy of bigcharts:
Attachment 10204
Jeez that’s one really sad chart
Multiyear lows and nearly 40% off it’s not that long ago highs
What a dog
Doubt Heartland will be showing a TSR Chart in their upcoming presentations .....Jeff was always so proud of such a chart and shareholders salivated over it.
Maybe reasonably priced by the market now ....just
I take my hat off to those punters who sold out over 2 bucks
Thanks and many thanks to you BP for the chart. I reckon we're very close to a bottom on this. $1.32 would see this as a perfect 10/10
Forward PE of 10 based on forecast earnings of 13.2 cps and 10% gross dividend yield based on 9.5 cps / 0.72 = 13.194 cps gross.
Those are to the best of my recollection the best metrics this company has traded on in many many years.
http://www.sharechat.co.nz/article/9...ges-higherhtml
We all know this strong correlation so that suggests we have already hit a bottom and its onward and upward from here.
From todays announcment
"Heartland's Tier 1 capital ratio is currently approximately 13.2%. If the proposal was to be implemented in its current form, Heartland would be required to lift its Tier 1 capital ratio to 15% over a 5 year transitional period. This equates to an increase in Tier 1 capital of less than 0.4% (or approximately $15m) per year, based on Heartland's current financial position.
Following the recent corporate reorganisation, Heartland's new corporate structure gives it some flexibility to mitigate the impact of any future changes:
o Heartland's Australian reverse mortgage business (with approximately A$640m of assets) is not part of Heartland's banking group. Hence any new capital requirements will not apply directly to those assets.
o Heartland's corporate structure provides for various capital raising options. For example, Heartland Group Holdings Limited could potentially raise debt, and use the proceeds to subscribe for new Tier 1 capital in Heartland Bank Limited. "
(Assuming it was reported correctly), whoever at Maquaries said HGH would need to raise $1b in extra capital should be fired as in my opinion they have seriously undermined the credibility of their organisation.
Dam, all the panicking is over and I missed out on cheap shares... ah well
OCA still getting cheaper so might have to look there
Interesting that the HGH announcement was classified as '' not price sensitive''
I would suggest that it is exactly the opposite.
Love this bit from Heartland’s announcement — “Heartland Group Holdings Limited could potentially raise debt, and use the proceeds to subscribe for new Tier 1 capital in Heartland Bank Limited. "
Yep, real financial engineering to circumvent the intent of the RB is indeed possible ...questionable?
You know you want to switch out of your low 17% growth underlying profit company into a greyhound that's growing at triple the rate. Be quick or be disappointed :)
Love the bit in Heartland's announcement where they said they can meet the new capital requirements simply through the dividend reinvestment scheme over the next five years. Talk about an easy bar to jump. Will be brutally tough for some banks though but that's their problem not HGH's !
Interesting times indeed. I think HGH REL holders wil be in an OK position They wil be capital rich and can afford any increase in interest rates and they will still have access to a REL due to HGH's low equity requirement.
The people I am very concerned about are those that bought property with a bank mortgage when the market was at a high. Taking a flattening / reducing property market will push people closer to negative equity. Add in increased costs of servicing that debt - well things are potentially going to get very ugly.
The Aussie house market is down 10% which is worrying
At the moment it is only a consultation paper seeking out public views on proposal to increase min level of regulatory capital.
Cut off end of March, so the uncertainty will drag on for months.
I said I would not buy any more HGH.
However, I changed my mind and brought a few more for myself as a Christmas present today.
Only present I know that will keep paying me fully imputed divies,and if a couple of brokers' forecasts are right, they will be increasing divies.!
Can you explain why there is "no affect" [sic], i.e. nothing zip nada effect, on HGH REL lending regardless of the market valuations on the property that the punters converting to REL are exposed to? I think you're pushing the boat out a bit far here, but still keen to understand why you think that the market valuations of ones residential property have no effect on a conversion to a REL.
Big difference between lending 80% to 90% of a property's valuation and 12% to 40%.
Remember the story about the difference between being committed and being involved.?
A pig and a chicken were walking along the road early one sunny morning,when they came upon a cafe.
The chicken said to the pig "lets go and have breakfast of bacon and eggs".
The pig said no,"for you,you are only involved ,yet for me it is a commitment."
I like to think HGH are" involved "in the Australian property market,while the Australian Banks are "committed".
These guys should come and see Heartland and share ideas
Transforming a Traditional Bank into an Agile Market Leader
https://www.strategy-business.com/ar..._campaign=resp
Shares with directors with a lot of skin on the line, good management,a strong balance sheet, and the capacity to grow dividends always recover the quickest from any recession.
You do your research, and are sure your portfolio will survive any stress test,but you never know if you are right or not until the recession is over.
I will be sorry to see CFO David Mackell leave Heartland.Very competent, easy to talk to person,as was his predecessor Simon Owen.
Wouldn't surprise me if Chris made him an offer he can't refuse.
I think you are right.I would not be surprised either.
Well I am very surprised he is moving from HGH, with a market cap of near $768mil, to NZM with a market cap of near $100mil. ?
"Heartland will consider its on-going requirements, particularly in light of the recent corporate restructure, and will provide a further market update prior to David’s departure.
That's code Jeff uses to say he is going to start empire building .....probably a Group Finance person with a CFO for both both the Bank and Australia reporting to him. Sounds like more expenses to me
From $2.14 high to this YE close $1.36 is a big disappointment. Stuff the dividends, it'd be years to recover that degree of capital losses. Shows how with ramping and ceaseless promotion, that a share can get way ahead of itself and upset a lot of punters for a long time when sensibility creeps back in. God help HGH if the market Bear truely takes hold, all I can say is you'll need a strong stomach if you're holding and impeccable timing to find and get a fill at the lows, wherever that ends up being.
I respect the directors and management of HGH more than Sharetrader posters,as they have very large personnel holdings,and each have proven successful business records.
None of them have sold any of their shares.
HGH have a record of achieving what they say they will do.They are taking advantage of the opportunities that are avaliable to them.
I still retain my view of HGH as a high conviction stock.It is my second largest holding.
I will refrain from making a decission to hold,sell or buy more until HGH's interim report is released in early Feburary,however I am expecting a solid result with a positive outlook..
disc.I brought a few more last week,as a Christmas present for myself..
Neither are defensive in a bear market so to pick then one needs to assume either the bear isn't coming here or these companies are special and immune to a bear market, (nothing about their SP performance in 2018 provides evidence of the latter in my opinion). If they could just stop going down and pay their dividends for 2019 that would be a good start. (Still hold some HGH)
Just like Dogs of the Dow the Dogs of the NZX sometimes a good strategy but more often than not tend to underperform (as a group). Losers often remain losers
Dogs of the NZX were in the bottom 10 in the 2017 competition
Both down nearly 30% this year .....couldn’t repeat that could they ...you never know
Vehicle retailers and manufactures generally speaking had their share prices brutalised in the GFC...people simply fix the vehicle they have as and when necessary in really tough times. The other thing is a lot more loans go bad so Turners cop it from both directions whereas at least with HGH more and more people borrow money even at higher interest rates in the hope of getting by so at least HGH get more business to help with their significantly increased loan delinquencies. Dog's can be dog's two years in a row, even three.
GE a classic example...that was a real dog of the DOW in 2017 (down from $31.60 to $17.45) and anyone who bought that at $17.45 as part of their dog's of the Dow strategy for 2018 was been well bitten with it now down to $6.92, a 60% loss in 2018 after nearly halving the year before ! Couldn't happen on the NZX though...or could it...
Financials and vehicle companies are not defensive sectors.
HGH's Marac downfall was property development loans.The rest of Marac's business traded well through GFC.
Turners had one bad year in 2008 and a huge profit in 2009.
Neither had any abnormal vehicle loan problems.
Both companies have strengthened their business model since GFC,and will trade well in any slowdown.
I expect HGH's REL business to keep going gangbusters.A matter of the right product at the right time.Pleasing they have secured funding for the next four years from CBA."Committed [think about the pig and the chicken.lol.]warehouse facility to 30th September 2022."
Couldn't find heartland in any of the big wig brokers picks
Perhaps more surprising, is I found AFT and ARV
$1.33 ... sheesh, this is now exactly at the level where I first bought into HBL just over three years ago. Sold out during October/November, I might just be tempted to get back in at these levels once the tide turns.
$1.32, crazy stuff... and I thought $1.50 was cheap... Gross dividend yield nearing 10% now
They need to come out with some sort of announcement reaffirming profit guidance, surely can't go below $1.30
A good few cents below that dog on the asx flexigroup - now that when you know its bad
A very good result coming out in 4 to 5 weeks so no worries long term
The expected rerating down because of the ‘riskier’ group structure continues
I also have a paper loss - but $1.33 was so attractive that I pinged off some STU at a loss and popped the HGH order in @ $1.33.
4:00 pm came and and the last order seemed to go through @ $1.34.
Blow me at 5:00pm I get an email confirming the buy at $1.32
Strange but it pays the brokerage.
Yes looking forward to some reaffirmation of guidance.
The market either knows something I don't, or the market fears something I don't.
HGH's half year result announcement is due early February,and should confirm my confidence "all is on track".
TRA's divie is due at the end of this month.No sure when their next update will be..
Fear of the bear.
Funny HGH sp went down, as milk prices went up.????? ....lol.
Must prove people fear "The Bear" more than they love "The Cow."...??????????????