Hehe, yeah, I thought better of it Snoopdog, but you've outed part of my longer post, preserved for ever:sleep:
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Hehe, yeah, I thought better of it Snoopdog, but you've outed part of my longer post, preserved for ever:sleep:
To be fair Sparky, (and it was before your time here), I was very bearish towards both PGC and HNZ when Kerr had his hand on the till(er). Not many listened....60 to 25, 88 to 35 and now back to 80
I am then on record endorsing Balances view that once Kerr had been forced out, "the fog over HNZ has lifted", however, personally, I would not be buying HNZ.
good on all those who did buy under 55.
I have always found your posts very constructive.Usually made me think,and I have always learnt from them.You always have your facts right.
I am very keen to see Heartland expand in Timaru.
Crops,dairying,farming,service industries make up the very strong economy of South Canterbury.
I therefore see it as the ideal place for Heartland to expand.
I maybe wrong, but I think it was Alan Hubbard's lending outside South Canterbury area that was the cause of the defaults.
Yep, there is a HUGE opportunity for someone to fill the old 'finance' company void left by all the failed entities, but the funding models need to change. Mum and Dad won't be back to the mezzanine finance sector in any hurry, and prime lenders terms would be inhospitable. Notice all the 'standby facilities' provided by major banks have largely evaporated.
this I believe is the reason we haven't seen major expansions by the likes of HNZ et al since the implosion; one they are gunshy; two, raising funds is not all that easy for them, and three, noone is prepared to borrow much on the 'new' terms (first mort, gsa, personal guarantee)
agree re Hubbard lending, I understand that virtually all of the new money raised under the Crown guarantee basically went straight down the gurgler to property development shysters, and of course to various related parties
Hubbard used SCF to feed his ego.
He was dishing out money like lollies at a kiddies' party. And he was enjoying the attention.
Others used Hubbard to feed their speculative activities.
The Crown was dumb enough to not see what kind of people were using their Crown guarantee.
Disc - I inherited shares via PGC, sold them a year or so go and bought back in this year with the intention to monitor closely/hold 2 - 3 years. Yes- feeling this way I probably should have bought further safer shares like RYM, SUM. But NZ needs lenders like HNZ and I want it to succeed.
When I sold it was because of being uncomfortable with the riskd involved with the type of lending HNZ is involved with and high level of experience/systems required to monitor the payment risk of those types of lending. Drawing from my experience/observations while working in maintream banks, a finance company and a factoring company, IMHO cashflow lending (against security of the assets NOT landed property) and invoice discounting require special skill sets to assess the initial facility application and very stringent/regular review processes to monitor the ongoing risk of the customer and in the case of Invoice Discounting the customer's debtor.
Why am I concerned that Heartland have not got the right people/processes in place? or for that matter any new "Finance Company" type of Bank:
1)Lack first mortgage security - there is usually no First Mortgage over property to fall back on if the lender gets it wrong
2) Lack of experienced lenders in NZ - In the last 10 years or so many New Rural/Relationship Manager's have not had come through ranks nor had the benefit of being an assistant to an experienced lender, instead they may have the degree, may have been an accountant or a great marketeer/networker. Within 1- 2 months (sometimes less) they start in the role face to face with the customer and their professional team (solicitor, accountant and do) while they are still coming to grips with Bank's policies, systems and a comprehensive understanding of Balance Sheets & Accounts, budgets and forecast cashflows. Vital warning flags which become second nature with experience are missed and they are too busy trying to keep on top of things to invest in time building up the skills.
3) Time constraints to undertake meaningful monitoring due to demand to grow the book - Regular monitoring/reviewing including customer visits and asking the right questions is vital - things can deterioate very quickly and can be masked e.g. bank account may be operating within arrangement but in fact it is being assisted by not paying creditors, contras, family loans etc rather than trading income
4) Main transactional account held at other bank -The first mortgagee lender often requires the main trading account to be held with them - this takes away the finance companies ability to review transactions to possibly pick up anomalies
I am not saying Heartland has not covered off all these risks but, again IMHO, the successful asset lenders/factoring companies which have been around for years and rode out the GFC concerntrate on a very narrow range of products with strict monitoring systems in place. They do not try to be a full service financial institution.
I hope/want HNZ to succeed, I believe very strong governance will be required and the higher interest/fees charged are set at a level to
fund the time required to monitor the loan book in both the good and bad times. It is often only in bad times that it becomes evident that monitoring/adherence to policies had become lax in the good times when the risks could have been mitigated earlier and more options are available to bank and customer.
Bonne vie.
You make valid points.
Speaking with Craig Stephen I learnt a lot.He said they {Marac} had less trouble with motor vehicle finance than HNZ had with mortgages on property.He said borrowers needed their car to get to work.This appeared to be more important than their house.[surprised me]
HNZ are not that keen to grow their book in areas they donot understand.Although they are a full financial institution I think they are concentrating very much on areas where they have experience.Lending on livestock would need careful monitoring.So I can't see many banks being in this space,so HNZ should do well.
New areas.At the agm Jeff Greenslade spoke of medical and education [school fees] as new areas they were looking at.Craig Stephen said they were still researching these areas.
HNZ like all lenders will have their defaults and problems,however I feel HNZ are being very careful in the direction they go.
Not "putting it on the house" means HNZ can charge more,however the risk for HNZ is as you point out, a great deal more for HNZ.
Factoring is a part of the market I did not ask about.
Marac lost PGC shareholders' funds through lending in an area they did not understand.[property development].
So I would think the lesson learnt is very much in HNZ's mind.
Many HNZ shareholders are from PGC. The split gave the perception that PGC was the high risk high return deal making arm, while Heartland became the relatively safe conservative banking arm.
This I believe is the most salient point. Neither Technical Analysis (looking at share price charts) , nor Fundamental Analysis (reading the annual report) will tell you if the staff processing the loans are up to it. And the share price going up a few cents, or the announcement of increased profits are not measures of staff competence either. All you can do is look for pointers, like the change in risk classification of some loans which is given in the annual report (but not the half year report).Quote:
Why am I concerned that Heartland have not got the right people/processes in place? or for that matter any new "Finance Company" type of Bank:
<snip>
2) Lack of experienced lenders in NZ - In the last 10 years or so many New Rural/Relationship Manager's have not had come through ranks nor had the benefit of being an assistant to an experienced lender, instead they may have the degree, may have been an accountant or a great marketeer/networker. Within 1- 2 months (sometimes less) they start in the role face to face with the customer and their professional team (solicitor, accountant and do) while they are still coming to grips with Bank's policies, systems and a comprehensive understanding of Balance Sheets & Accounts, budgets and forecast cashflows. Vital warning flags which become second nature with experience are missed and they are too busy trying to keep on top of things to invest in time building up the skills.
<snip>
One other thing you can do is look at the senior company management and see if there has been any turnover in senior management positions. Because sometimes that turnover can be reflected in unreported lower levels of management changes as well.
IMO to perform these functions, Heartland does not have to be a 'bank'.Quote:
I am not saying Heartland has not covered off all these risks but, again IMHO, the successful asset lenders/factoring companies which have been around for years and rode out the GFC concentrate on a very narrow range of products with strict monitoring systems in place. They do not try to be a full service financial institution.
I do too. And I think when the next rights issue comes up, that might be the time to invest and help them.Quote:
I hope/want HNZ to succeed,
SNOOPY