I am more curious about if HGH will have any sentiment to sell its shares once the escrow restrictions expire.
Selling the shares would increase HGH's capital reserve to meet the future capital requirement.
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I am more curious about if HGH will have any sentiment to sell its shares once the escrow restrictions expire.
Selling the shares would increase HGH's capital reserve to meet the future capital requirement.
What you mean is that the listing of Harmoney may cause a re-rating of the holding price of the Heartland 8.44% stake in Harmoney.
https://www.nzx.com/announcements/363561
You would be right but it would be a one off profit boost. If the share price went down in the months following there would be a one off profit loss. So I don't think HGH can use that Harmoney stake as a source of equity to lend against from a Reserve Bank oversight stance. And I don't think HGH could pay a dividend as a result of any such capital gain either. (unless of course the Harmoney stake was sold),
SNOOPY
I must be out of date with the very latest rocket science IFRS accounting standards. It seems weird to me that just because the shares they own in another company have gone up they are reporting that as part of their realised profit for the year ? Dumb out of date crusty old suburban bean counter I am. All my training was a profit cannot be reported as such until it is real profit, i.e. realised.
This modern approach of counting profits (while something is in escrow and cannot be sold) is lost on me. IFRS16 accounting for leases another "fine" example that makes me wonder if the academic accounting boffins in Brussels or Switzerland or wherever they promulgate their latest idea's, haven't got enough to do ? Maybe its time to retire and forget about all this stupid nonsense...
Lending money unsecured to people heading into a Covid deep recession based on a whole bunch of assumptions they probably dredged up from GFC days and loaded onto a digital platform also seems like a situation where it surely begs the question, what could possibly go wrong :eek2:
Thankfully there's the old fashioned reverse equity loans that are simple to understand, have very good net interest margins and you're lending money to people that will definitely pay it back from their estate. Best part of HGH's business model by a VERY VERY long way and easily understandable !!
Pleasing noting discussion on HGH's gain on purchase price of their stake in Harmoney.
Bet we all would have a lot more to say had they lost money on the investment..lol.
It is the same thing as property revaluation.
At 8.44%, the Heartland Harmoney stake is an unconsolidated investment. There has been no open market for Harmoney shares. Now there is. So whatever book value the Heartland stake had, there is now a measuring stick to compare it to. Therefore any difference between the book value of the Harmoney stake and the market value of the Harmoney stake must be reported as profit by Heartland for this half year. This is the reason behind the 'profit upgrade' announcement that Heartland made to the market today. As you note though, it is not a realised profit and in my view any such profit should be ignored as a one off.
I am surprised you bring up the subject of 'realised profit' at Heartland though. The vast majority of those reverse home equity profits are unrealised. If you discounted unrealised profits, you wouldn't want to be on the Heartland share register I would have thought!
SNOOPY
Snoops me ol mate I think we both know you're just pulling my leg (paw ?). Accounting for accrued interest validly charged on loan contracts on reverse interest mortgage with a certain end game outcome and much more predictable house price values is a very different thing that accounting for theoretical gains on fintech companies with shares in escrow. Still, a theoretical gain is a gain that theoretically might need to be revalued again one way or the other and if they want to count some valuation they dream up as income in the meantime good for them. Like you suggested, I am going to simply ignore it as a one-off or maybe offset some of it against possible under provisioning for Covid. Before you do more than just pull my paw, I would hasten to add that I did buy some more this week :)
So retirement (property) companies can take asset revaluations through the P&L but Heartland can't?
Property and retirement companies have special rules. Most professional investors and analysts with respect to retirement companies look at underlying profit anyway which strips out unrealised valuation gains and takes them off to a safe place called embedded value where they stay until they are realised. Sorry, No more accounting standard discussion for this dog today.
I'm with on that one Beagle - in my distant past training revaluation gains (loss) were taken direct
to Revaluation Reserve & not through P&P account
On the positive - a rough back of the card tot up suggests HGH's Harmoney gain looks like 4.75 - 4.9 cps across
HGH issued capital, ignoring ins & outs of of effects of restrictions on their disposal, working on roughly NZ 35.0 cps
ingoing in 2014 - which may or may not be the case
Much to even my surprise I have seen that indeed there are different accounting practises and different way accountants do stuff. I have have had three different accountants and I learn something from each of them. I am now using a chartered accountant and the way they do things is extraordinary in regards to legal tax minimisation. The world is constantly changing in the accounting world as my current accountant starts at 8.30am and leaves the office around 7pm most nights. I have come to discover that some accountants are just glorified bookkeepers.
Can someone help knock off that big wall of resistance at 1.45..
An article from Business Desk talks about the Australian ‘Retirement Income Review’ released last week and it seems happy with their 9% contribution on the basis that retirees use their capital more efficiently which means they should use Reverse Mortgages to ACCESS THEIR EQUITY!
Regulators are now encouraging RELS so they dont have to raise contribution rates to 12% (which slows economy down) .
gotta be good tail winds for HGH
Keeps getting slammed every time it tries move up a bit, wonder if ASM on Monday will break the shackles...
How long until Reserve Bank releases it's straight jacket on banks paying dividends ? ;)
should that happen - take the brake off - who knows $2 or further north could be likely .. ;)
I may be wrong, but in comparison to the rest of the market HGH looks to me to be undervalued ..
I thought it was ending in March. Sure I read that somewhere..
Posted a couple of weeks ago. Since then the Australian banks have moved northwards quite considerably and the updated forward PE's are shown above. The gap has widened by just over 1 more PE from HGH's forward PE now at 9.8 to its peer group average excluding CBA the outlier to a massive gap of 16.4 - 9.8 = 6.6. I find that quite remarkable. It will be interesting to see if there's any color provided on Monday that might shine some light on HGH's situation.
Dividend Restrictions
On 2 April 2020, the Reserve Bank announced that, taking effect immediately, all locally-incorporated banks will be restricted from paying dividends on ordinary shares and redeeming all non-Common Equity Tier 1 capital instruments such as bonds "until further notice" under revised Conditions of Registration. The Reserve Bank stated that these restrictions are designed to maintain higher levels of capital during a period of reduced economic activity resulting from the COVID-19 pandemic and will be kept in place until the economic outlook has sufficiently recovered.
The Banking Supervision Handbook (the Handbook) sets out the detailed rules regarding conditions of registration which are imposed upon banks under the Reserve Bank of New Zealand Act 1989. On 14 April 2020, the Reserve Bank issued revised versions of two Handbook documents including the document 'Statement of Principles - Bank Registration and Supervision' (BS1) which reflects these earlier announced restrictions on banks from making certain types of distributions. BS1 updates the standard wording of the Conditions of Registration and adds explanatory text.
For further information on the Handbook and revised documents, please see the Reserve Bank's website.
On 11 November 2020, the Reserve Bank announced that the restrictions on dividends and redeeming non-Common Equity Tier 1 capital instruments will be retained until 31 March 2021 or later if required.
Further, the Reserve Bank has written to insurers to advise that it expects insurers will only make dividend payments if it is prudent for that insurer to do so, they should take into account their own stress testing and elevated risks in the current climate.
For further information on this regulatory update, please see the Reserve Bank's press release.
Heartland Board been lamenting these relativities for years ...this from 2014 ASM presentation
Nothings changed ...maybe no point crying over spilt milk ...it’s just the way the world is.
Or if they truly believe that story then it’s time Jeff and the Board moved on .....they have failed miserably in closing the relativity gap......and now spending big bucks with Jarden to come up with other ideas.
Maybe the ‘colour’ tomorrow is all about FINTECH
That’s how I see it as well leftie
Always been a pretend bank (for marketing purposes) and valuation comparisons to Aussie banks in particular not that meaningful....and suppose that’s how Jeff sees it now.
Interesting that things haven’t changed much in 6 years
ASX have HGH in A peer group with Aus Finance Group AFG, Resimac RSM and My State MYS
The ASX has this little chart showing their relative positions - PE and share price growth. I had to draw HGH in (the wonky circle in negative territory) has obviously ASX couldn't cope with negative share price changes
Maybe this is what Jarden are going to come up - cos if anything HGH maybe slightly undervalued in this peer group.
If nothing else this is a bit funny
PE correlation with Australian banks has been very very good in most recent years, (I have followed this quite closely over recent years), and I think the way they are dramatically growing their reverse equity loan book the comparison with their peer group is more relevant than it has been in previous years. Disconnect in earnings multiples has never been higher than at present in recent years.
My 2 cents is unless there's a forecast downgrade at tomorrow's annual meeting the directors are right to think that the shares are considerably undervalued at present.
All depends by what you mean by correlation Beagle.
If you are saying that HGH correlation with Aus Banks should be 100% ie exactly the same as leading Aus banks, then I suspect you are overstating HGH's prospects.
If you are saying that HGH's correlation with Aus Banks should be 50% ie half the Aus banks then you might be more accurate.
Big Diff between Aus banks and HGH IMHO.
Just my two cents..... and no, I don't hold, but I have friends who have had their fingers burned on this one.
PE gap big in 2014 as Jeff pointed out. PE gap big now. Maybe that’s how it’s meant to be. Maybe it’s a big v small thing (like RYM v OCA)
What was it that caused Heartland to get out of step a few years ago and become more highly prized than Aussie banks? Maybe that’s the secret that Jeff is looking for?
Might repeat - and shareprice go to $2.14 - and then the beagle can close out another successful trade on Heartland
Be funny if Jeff puts an updated chart from 2014 up today.
Sorry to burst your bubble on your Heartland bank accounts Bjauck. But I am afraid, despite the Heartland label on the front, your Heartland bank accounts are Westpac accounts. So you are actually 'all in' with the big Australian(s).
SNOOPY
https://www.marketscreener.com/quote...44/financials/
Average analyst forecast for FY21 is $76m. Company's own forecast at mid point is $84m so it would appear the investment community are skeptical that HGH have provisioned sufficiently for Covid.
That said there's a nice growth path forecast with 13, 14 and 15 cps forecast for the next 3 years.
BUT - just for a laugh, lets pretend HGH isn't ever going to grow in the future, (I know that's completely silly but hang in there for a minute longer), and take the company's own forecast of 14.4 cps and apply a fair PE for the ultra low interest rate environment of 12 and we get a pretend fair value with no further growth ever of $1.73
HGH's PE has ranged between 11 - 17.5 in recent years. If others can't see the current opportunity, trust me I am not concerned as this for me is rated BBB - Beagle Busy Buying ;)
For you Left Field https://www.statology.org/what-is-a-strong-correlation/
We can't lose - it's fantastic Jeff and beagle are on the same page ...and they both use same methodology ...better still
Wonder what Jarden come up with ...could be the old sum of the parts are worth more than the whole.
if its BBB+ the market is pricing in one grade above junk at the moment.....:confused:
this sets up the ultimate the money or the bag....
or the Market versus the Beagle...:ohmy:
Yeah and another curious thing.Traders upramp , sprook, spin positive as they SELL and vice versa.Investors quietly fill their positions(for obvious reasons) then share their reasons why after. Then again beagle is no ordinary mutt.
HGH are starting to get into the benefits of Beagles with one on their home page https://www.heartland.co.nz/ but I reckon they need a younger keener looking one, maybe Snoopy could volunteer as I am starting to go grey and am too fat with profits and previous feeding :)
Heartland has a separate licence. What is the extent of their agreement? For example if Westpac were to be in difficulties and the OBR were instigated, would accounts at Heartland be affected too? Would the $100 cash I may have deposited at a Westpac branch, acting as agent for Heartland, for the credit my Heartland account, be frozen or included in the Administration of Westpac?
Does Heartland have to offer the same terms, conditions and interest rates as Westpac?
If It is just a matter of needing to go to a bricks and mortar Westpac branch to make cash and cheque deposits and cash withdrawals, then it would just be to use Westpac as an agent. It would not mean Heartland accounts are re-labelled Westpac accounts.
HGH then is basically a banking broker...
The outcome is no different from how any bank operates then. They take in other people's money, and lend it out to other people with not much of their own in between.
Yes. But that hasn't stopped them outsourcing their Mom and Dad customer arrangements to Westpac.
It would be a wholesaling agreement. And it would have been negotiated in such a way that allowed Heartland to set their own deposit and loan rates. As long as what was negotiated doesn't mean that Westpac breaches their own banking covenants!
Yes Heartland would be affected. I can't see how they could escape it. The saving grace is that as a Heartland customer you are effectively a wholesale Westpac customer. So if the government announced that all personal accounts at Westpac were to be frozen for 48 hours, that might not apply to your Heartland account as a matter of course.
Get the full 19 digit banking codes of all of your Heartland accounts. Any that start with '03' are Westpac accounts. Yes Heartland are using Westpac as an agent. That fact alone doesn't mean that Heartland accounts are Westpac accounts. But in this instance they are.
SNOOPY
Like the CEO address http://nzx-prod-s7fsd7f98s.s3-websit...198/336436.pdf
• Finally, the possibility of structuring the Bank’s Motor business as a separate entityunder the Bank may assist in highlighting any intrinsic value which may not be reflectedin current bank-based benchmarking. This may also provide flexibility and efficiency interms of access to, and cost of, capital.
yes since no one is going to want those old gas powered thingee's ..... crushed within 10 years...but the finance companies get there money and you dont... love it... all i need in sweden is a bike and for the hangers on ... which one of you took my bike today!!! They all peer at me.. NOT ME! only you cant even trust your nearest and dearest...
imagine all those car finance agreements on holden V6 and 8's i feel sorry for all those kiwis...
anyone have any numbers on model types... those will be the hardest to sell on soon..
The pedigree hound is always happy to back his own sense for a decent feed. Looking very good so far !
Heck Winner - who are they kidding with $83-$85m, 3 times 29.9m = 89.7m so with ongoing growth they should do $90m+ !!...and they're not utilizing last year's Covid overlay.Quote:
• Net profit after tax $29.9 million vs. full year guidance $83 million to $85 million
• Net interest margin and cost to income ratio in line with expectations
• Overall balance sheet growth flat – repayments in non-core Relationship Lending as well as
Open for Business and Harmoney have offset growth in core areas (Business Intermediated,
Motor, Reverse Mortgages NZ and Reverse Mortgages Australia)
• Economic overlay taken in FY20 has not been utilised
• Impairments to date much lower than anticipated
• Reassessment of fair value of equity investment in Harmoney may impact FY21 NPAT guidance
range
Hmmm...opportunity knocks !
So do you know for certain that it is a wholesale agreement and not merely and agreement use Westpac branches as agents? Have you got any links? Surely the agreement should be available to the public if an account holder is affected by Westpac operations?
I may have missed it and cannot locate it, but have Heartland announced or published a disclosure statement indicating their arrangement is an Wholesaling agreement as opposed to an agency for use of their branches?Quote:
Get the full 19 digit banking codes of all of your Heartland accounts. Any that start with '03' are Westpac accounts. Yes Heartland are using Westpac as an agent. That fact alone doesn't mean that Heartland accounts are Westpac accounts. But in this instance they are.
SNOOPY
I am not sure that codes really help - 06 (old National Bank) codes are not really independent from 01 codes.
So pleased to see a photo of Natasha Abeysundara in the presentation - member of the Rangatahi Advisory Board
Natasha a good person
RaboBank accounts also have an 03 prefix. I've been banking with RaboBank for many years even when they were guaranteed by their Dutch parent owner and I've never seen the slightest sign that they are financially entangled with Westpac. I suspect WestPac are simply leasing space on their servers to them.
This is what i like to hear!!
The Group remains capable of declaring an interim dividend at half year in line with previous‘usual’ dividends, should performance and conditions be supportive. Once the RBNZ restrictionsare removed, subject to the usual prudential considerations, a return to historical pay-out ratiosis expected.
You've got it wrong beagle - slow down wand think when you get all excited
Heartland generally makes more in H2 than H1
So 4 months = $30m is H1 likely profit $45m and on recent H1/H2 splits gives $95m for full year ...plus ongoing strong growth gives $100m
At $100m that's an EPS of 17 cents - your 14 PE gives what as a share price ....and what size divie
Answer in Te Reo Maori please
This is the main points I take from it. Have to say I am finding HGH's reports more difficult to read amongst all the woke ****e they increasingly put in their reports. Have bought a few this morning.
As at the end of October, which is the first four months of FY21, NPAT is tracking at $29.9 million (versus full year guidance of $83 million - $85 million).
Margin and Costs have been maintained, with NIM and Cost Income Ratio both in line with expectations
FY 20 dividend of 7c per share but returning to “normal” in 2021. I expect 10c
Overall balance sheet growth has been flat. Repayments from non-core area of Relationship Lending, Open for Business (O4B) and Harmoney have offset growth in core areas of Business 4 Intermediated (up 13% per annum); Motor is up 11.5% per annum; Reverse Mortgages are up 4.4% and 11% respectively per annum in New Zealand and Australia (excluding the FX impact). Lower interest rates and customers utilising the government’s packages appear to have contributed to the level of repayments.
Impairments way down
Economic overlay of $9.6m not been used but kept for 2021
Intermediated (up 13% per annum); Motor is up 11.5% per annum; Reverse Mortgages are up 4.4% and 11% respectively per annum in New Zealand and Australia (excluding the FX impact). Lower interest rates and customers utilising the government’s packages appear to have contributed to the level of repayments. Livestock is also down due to seasonality reasons.
Te Rangatahi - book 1 - 3 , published 1980 .. i await the beagle reply but i am not a translator. Ill settle for a market update ...holders since PGC until recently.
Any decent questions asked?
Yup. .I asked when the management is going to send us...royal shareholders some nice cup 🍰...
What would be the opposite of a decent question? An indecent question? Haven't heard any of these ...
But if you mean with decent question anything which gets the chair to drop his chin and go into hiding ... no, haven't heard any of these either.
A number of (for an AGM) quite irrelevant questions, and some open questions to get more info about the business (but chair didn't bite - i.e. not successful) - otherwise pretty relaxed affair, really.
NZSA asked whether the board should work on improving its digital competency level - and they said that they are good enough above the bonnet :):
https://en.wikipedia.org/wiki/Bank_code
"New Zealand has a 6-digit prefix identical to Australia's BSB code, and although they appear similar (e.g. ANZ bank accounts in both countries start with 01, Westpac with 03), they are not compatible. The first 2 digits indicate the bank and the next 4 digits indicate the branch. All digits, along with the seven-digit account number and two or three digit suffix, are required for all wire transfers regardless of whether the transfer is intra-bank or interbank."
The two bold bits indicate the information you are after. 03 = Westpac
SNOOPY
Looks like it'll break the 145 resistance here. This should get it through to at least the resistance at 155 I'm picking.
Disc: hold in long term portfolio & swing trading a position.
...or Rabobank or Heartland. That prefix could just indicate a processing arrangement - so it does not answer my questions. As previously posted, Rabobank is also prefix 03 so does that also mean that Rabobank accounts are merely relabelled Westpac accounts?
Anyway this discussion has become circular. I have not seen any evidence to show that my Heartland accounts are merely relabelled big Australian Bank (Westpac) accounts. My bubble remains “unbursted”.
first addition 1962 - Hoani R Waititi.. author.
Do beagles fish is my question?
Gosh no major texts prepared for teaching by education department until this book. J L Hunter inspector of primary schools wrote the forward for the first official teaching maori books for education department in NZ.
Very bullish ASM having listened and viewed it online, onwards and upwards from here...
:lol: :lol: :lol: Just for you mate that suggests a target price of rua tāra hokorua and a dividend of waru cents per share fully imputed even with RBNZ (sorry no Te Reo translation for them) restrictions. Would you like a sustainability report from me as well with that projection :p
Mine was very quick back of the envelope stuff...was to busy engaging in BBB activities before everyone else does ;)
Only way the recent price made sense was if a downgrade was coming, and now it appears its very plausible the exact opposite will happen in due course.
Cindy talking about a vaccine coming in March...she wouldn't tell us porkies surely ! Banks have a very high beta to Covid recovery. Hmmm
Wouldn't it be "a shame" if on top of your ~ $95m they had to add back some of the over-provisioning for Covid from FY20 that they confirmed is not being used this year and also account for their gain on holding Harmoney as well.....not out of the question we could possibly see a bit north of $100m !
Waltzing Man - Beagles only fish for Kingfish, Barramundi and Marlin ;)
some trout rods here from the days of scottish and english immigrants , cane ones too...
Beagles only fish for the big ones!
Yes.
Think about it. Rabobank have never had a nationwide network. Heartland have reduced their nationwide network as they follow their 'digital growth strategy'. It makes sense for both to outsource the face to face part of their respective businesses.
If either Heartland or Rabobank wanted to operated their own banking accounts, they could have got their own unique banking code, like Kiwibank did. But they did not do that.
Come to think of it, I am not really sure what the difference is between an account prefix 'indicating a processing arrangement' and actually 'being a Westpac account' means in practice. If Heartland wanted a processing arrangement separate from Westpac, they presumably could have used their own unique code that accessed a parallel off site unique Heartland computer network. The Westpac teller who serves you would then type in something like '0H' not '03' for example. But Heartland didn't arrange it that way.
If Westpac got into trouble and had to suspend their activities for a period then obviously everything else operating on the Westpac platform would also be suspended. Do you really think the Westpac branches would reopen with a sign on the door saying: "Westpac customer go away. We are seeing Heartland customers only"?
The fact is that to deal with a Heartland account in person, you go into a Westpac branch and deal with an 03 account. It comes down the the 'duck theory'. If it looks like a duck and quacks like a duck, what you are looking at is very likely a duck. If you go into a Westpac branch and see a goose, despite all indicators pointing to your account being a duck, what more can I say? Your alternative explanation of having one bank reference number for three completely separate banking systems just doesn't seem very likely.
SNOOPY
Let this kamatua translate master Beagle prediction....$2 target n 8 c dividend...kiora...
I think there is a big difference between a processing arrangement and offering separate accounts . Rabobank, Heartland and Westpac offer different accounts subject to their own financial standing and credit worthiness assessment.
Meemaw and Meepaw may miss the bricks and mortar access but Mom and Dad bankers probably do most of their banking online. I am not sure why a Westpac Bank regulatory suspension issue would affect the transaction processing side of things which Rabobank and Heartland use.
However if the processing side of things on behalf of Heartland is inextricably linked to Westpac's credit worthiness as a bank, then the fortunes of Heartland and Rabobank would be inextricably linked with Westpac - especially if Heartland could not rapidly outsource transaction processing to another outfit. In that situation, my bubble would indeed be burst and my accounts are mere westpac ducklings! I agree that a technical/ computer outage would affect them all.
Beagle ... RBNZ is Te Putea Matua
Adrian talks about Tane Mahuta the giant kauri quite a lot
Better switch back to good old English so nothing is lost in the translation ;) eps of 17 cents x mid range PE (for HGH) of 14 suggests $2.38 is not completely implausible in due course.
HGH is actually rated by the credit rating agency as BBB and by me as BBB although my meaning is a little different lol (Beagle busy buying) for those that don't know :)
Hahha.. classic!!
Jeff says - the possibility of structuring the Bank’s Motor business as a separate entity
Marac IPO ....surely not
Held back dividends will be paid out eventually to shareholders in one way or the other, that's key message came out of today's ASM
According to a behind the paywall headline on Interest.co Heartland. are considering making their vehicle finance a stand alone subsidary.
Anybody able to elaborate on this?
It was in yesterdays CEO address. No firm decisions have been made
Brief Update from For Barr. Valuation increased to $1.45
UNDERPERFORM
Heartland Group Holdings (HGH) provided a brief trading update at its Annual General Meeting (AGM), reiterating its FY21
NPAT guidance of NZ$83m–NZ$85m and estimating NPAT to be tracking around NZ$30m for the first four months of FY21.
We increase our FY21 NPAT forecast to NZ$65m, raising group loan receivables from 6.4% to 9.7% in light of stronger than
expected motor loan receivable growth. Our FY21 NPAT estimate is lower than guidance due to 1) taking a more cautious
view on impairments; in contrast management expects to see no adverse impairment impacts as a result of COVID-19, 2) we
see risk of loan receivable growth softening in 2H21 given the group's 0.8% loan growth in 2H20, and 3) we expect to see
continued net interest margin (NIM) compression across the business, corroborated by comments made by the RBNZ in its
recent monetary policy statement. We do recognise there is upside risk to numbers in a bull case economic scenario.
Considering HGH's risk profile, the level of macroeconomic uncertainty remaining, exposure to unsecured loans through
Harmoney and the ongoing elevated expenditure related to 'digital' we retain our UNDERPERFORM rating.
What's changed?
RBNZ latest monetary policy statement suggestive of further NIM compression for smaller banks
The RBNZ’s Financial Stability Report released 25 November 2020, corroborates our view that a prolonged period of stimulatory
monetary policy is likely in its current form to create a number of headwinds for HGH. This is further underpinned by 1) sustained
ultra-low interest rates which will likely continue to apply pressure to HGH’s NIM (Net Interest Margin) through reduced retail
interest rates, 2) HGH not participating in the RBNZ’s Funding for Lending Program (FLP) — expected to be implemented early
December 2020, and 3) competitors (the big four NZ banks) receiving funding at the OCR, decreasing the average funding cost of the
NZ banking industry and further widening the funding gap between HGH and competitors. In its Financial Stability Report, the RBNZ
stated ‘Banks with high proportions of funding from retail sources, including most of the smaller banks in New Zealand, would see greater NIM
compression as their funding costs would not fall by as much as the interest rates they would be able to earn on their assets’.
NIM reflective of risk profile
The RBNZ dashboard reports HGH's NIM to be 4.5% against peer banks ANZ (1.9%), BNZ (2.0%), ASB (2.1%) and Westpac (1.9%). We
view the implication of a higher risk loan book to translate into higher impairment expenses. However, for HGH this may roll into
FY22 and beyond if HGH's 'Extend' product is used to re-finance non-performing
Forbar forecast puts HGH on a forward PE of 13ish
Seems about right --- even compared to Aussie banks
What are these guys thinking??? Suggesting a FY21 NPAT of $65 million when heartland has already generated $30 million in first 4 months and describes there $83-$85 million NPAT as conservative already. (and that doesn't include positive NPAT impact from harmony IPO)
Not convinced that in this particular case FuBar know what they are talking about :t_down:
That or they are downramping :p
I think its well worth highlighting that HGH directors said yesterday they are ostensibly seeing no utilization of the Covid provisioning already provided for in FY20.
Forbar seem to have painted themselves into something of a corner here with their previous glum view and appear to be desperately trying to save face by doing a very slight upgrade to their forecast but at the same time reiterating their view that Covid provisioning is grossly inadequate. This seems incongruous with vaccine developments in recent weeks and the prospects of an economic recovery off the back of widespread vaccinations and reduced covid effect in early - mid 2021. I note for example a business confidence survey out yesterday saying business confidence had improved to the best level since Labour first got elected in 2017. That's an important lead indicator for how business's are feeling.
Who do you believe ? HGH directors working at the coal face of the business or Forbar's analyst who quickly and just to a minor extent tweaked their previously held glum view ?
My money is firmly on HGH directors with this one. I am on the same page as the Snow Leopard...should that worry me :eek2:
if your desperate and behind in your car payments you can either move to Aussi with a 2000 dollar incentive or pick kiwi fruit for a 1000 dollar incentive...
that should help anyone defaulting on there loans.
they are paying the locals to bring in the harvest... anyone thinking paintings of the harvest under the court of urbino, Count Montefeltro.
My money is firmly on HGH directors with this one. I am on the same page as the Snow Leopard...should that worry me :eek2:[/QUOTE]
To add to your worries I concur with the directors and both of you ....lol.
To add to your worries I concur with the directors and both of you ....lol.[/QUOTE]
I’m more bullish than both of you and what directors are saying (with a smirk on their face if you knew what I knew like)
Proactive provisioning and that bottom drawer trick ...Jeff a master at that
It was clear in the report yesterday that many of the loans that we were most worried about earlier in the year, cars and small businesses for example, did exactly the opposite of what we feared and have been repaid faster than what was expected. Much of it due to businesses taking advantage of interest free Government loans to pay up interest bearing loans with Heartland. This and the fact that they are limited in the dividends they can pay out, has left Heartland's coffers overflowing with cash.
Jeez ... when all the gurus agree - isn't this when one should run for the hills?
Anyway - topped up yesterday during the AGM, holding less cash should make it easier to run :):.
Time for a quick 'pit stop' at the four month mark, and a quick check on how my assumptions for FY2021 are tracking.
A trick to remember with Reverse Mortgages is that even with no new customers signed up in a year, the portfolio will still grow by 6.7%. Looked at in this light, the NZ portfolio is actually going backwards. Overall it looks like we are heading down my 'pessimistic scenario' road, which is disappointing.
Motor vehicle loans growing at 11.5%+ is way ahead of even my own optimistic scenario. However I always expected the first half to be much better than the second. That is because most of the Holden business I expect to be concluded in the first half. So I expect the full year result to drift back towards my optimistic scenario.
O4B and Harmoney are declining as I expected.
I was picking 'business intermediated lending' to fall by 10% when in fact it has grown by 13%. One interpretation of that is that third party funders are growing their businesses faster than Heartland who is supplying the capital for them to do their increased lending. The listed entity Zip (ZIP on the ASX) is one of those. The ZIP share price has tripled since Covid-19 lows, and is 50% above pre-covid levels. Meanwhile some of Heartland's other intermediated loan partners are vehicle distributors, which would tie in with motor vehicle loans performing much better than I expected.
The reduction in livestock lending on the books is seasonal, and so not reflective of what will happen in the full year. The reduction of 'Relationship Loans' (largely including rural?) I had budgeted for.
Overall I am a little concerned at how weak the Reverse Mortgage lending is compared to what I had thought. Although it may be true that this four month period has put many pensioners into a 'stunned mullet' trance, with normal reverse mortgage lending to resume shortly. It really is too early to make a good guess on the FY2021 year result. Despite the bolting motor vehicle loan portfolio in the year so far, I still think it could slow. I am happy to be able to have used the 'Covid panic' to get my HLG average entry price down to $1.30. In the process I boosted by HGH portfolio position from 'very underweight' to just 'slightly underweight'. With the share now trading at $1.47 I certainly won't be selling. But neither will I be chasing the price up further. There are still enough market risks around to keep me from further topping up at today's prices.
SNOOPY
I'm with Winner & a good number of you others here ..
Still filling up the truck with this one & plenty more spare space left for more ;)
IMO very very good value in a market where others have already risen, somewhat leaving HGH behind..
The believers may be well rewarded, perhaps in 2021..
Close over $1.50 today?
That's at least back to what it was early March
I see $2.20 coming soon
That'll be when real value investors will sell .... buy low (undervalued) sell high (when over valued)
Sound like me master winner..lol
Agree
I look at it this way - where can one 'Buy the Bank' @ 1.50 a shot for a good Div Paying stock that can only
see further increased DPS pay out - when banks are released from Govt imposed straight jackets ?
Compared to others - even non dividend paying companies at current levels suggests reasonable value IMO .. ;)
I have adapted my approach and will now buy up to an absolute maximum of 15% for very high conviction positions. If something then heads materially above 15% I rebalance after that on a case by case basis but generally won't allow anything to be more than 20% of my listed net worth.
I prefer to hold positions of 10% or less but if there's a decent size feed involved I am happy to back myself but set limits just in case I am wrong because...well, you don't know what you don't know. FWIW I am 11.5% in HGH at this point. I want more but would prefer to buy any more on a slight dip, (wish me luck with that, I think I might need it lol).
Typically excellent post from whom I consider to be the master of the sector.
Snoopy, regarding the reverse mortgage sector not performing to your expectations, could this just be the quiet before the storm, before this low interest rate environment means the oldies burn through their remaining liquid capital (stuff all interest in addition to reduced buying power), but enjoy the gains on their property value? How's the NIM likely to hold up in this part of the business?