I think you will find that the 'minimum capital requirement' (for the Bank) remains at 12%.
It is also not appropriate to apply it to HNZ as a whole as you are doing here.
Best Wishes
Paper Tiger
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Hi again Harvey. I have reviewed my own 'doubtful debt' calculation (the size of the orange bar) and am pleased to report I got it right first time after all. So no need to change the graph.
My excuse? I had been fiddling with the presentation of my graph, off and on, for a few days. By the time I had decided what information to present and in what form I had forgotten some of the details of how I calculated the information in the first place! The balance sheet equity has the impaired assets already removed. And to match that I did the same with my own patented 'snoopshot' on doubtful debts. Thanks for making me look at it again though, to remind me of what I had actually done!
SNOOPY
This 'minimum capital requirement' has been discussed on this thread before. See post 2990, the interest.co.nz reference quoted by Captain Dan. You are correct PT, the 'minimum capital requirement' (for the Bank) remains at 12%.
"Since January 1 this year banks also require a buffer ratio for common equity tier one capital of at least 2.5%. This buffer ratio is described by the Reserve Bank as a counter-cyclical capital buffer that can be applied in times of excessive credit growth. It's part of the Reserve Bank's version of the global Basel III bank capital adequacy standards, which have been endorsed by the G20. Heartland isn't required to maintain this buffer."
My 14.5% equated to 12% + 2.5% (the buffer). I now see that Heartland has an exemption regarding this buffer. I will correct my chart accordingly. But I don't think that correction is material enough to affect my conclusions.
If you have a better way to do things I will implement it. As it stands, just using the HNZ group figures as I have done looks to me as though it is the best I can do.Quote:
It is also not appropriate to apply it to HNZ as a whole as you are doing here.
SNOOPY
Winner I can't help but notice (note 28) that the deposits held by the group have reduced during the year from $1,838.619m to $1,736.751m, a 5% reduction. There was clearly no pressure during the year to keep depositors reinvesting, so no pressure to offer really good interest rates. By contrast a lot of bank borrowing, relating to the HER loans acquisition is now on the balance sheet out of Australia, probably at relatively low rates in New Zealand terms. It might be that which has contributed to the increasing net interest margin. There are no facilities to materially increase that borrowing. So I would guess net interest margin may flatten out, or even decline into FY2015.
SNOOPY
Winner, the equity transferred to get the HER business was $86.140m (note 40). Assuming an ROE of 10% that equates to an after tax profit increment of $8.614m.
The business was acquired on 1st April, so one quarter of that incremental gain is already in this years profit figure. So teh three quarters Heartland can expect in FY2015 amounts to
0.75 x $8.614 = $6.5m
On my normalised profit of $41m for FY2014 this means a profit of $47.5m for FY2015. So maybe a reduction in the interest margin explains the difference?
SNOOPY
I think I have sussed the secret formula as to how Heartland arrive at their guidance figures.
So how did they get $45m for next year. The thinking is -
1 - We made $36m last year.
2 - NPAT has been steadily increasing by about $3m each half year for a while
3 - But our business )exc HER) is reaching maturity and growth will slow
4 - So lets say that for FY15 we will increase NPAT by $2m each half year.
5 - Still pretty respectable (and that guy percy will be ok with this)
6 - So that's means H1 of $21.3 and H2 of $23.3m
7 - Hey that's just under $45m for the full year. Good
8 - Analysts will be happy (esp Forbar)
9 - So we can play it safe in case something goes wrong and say $42m-$45m
Easy peasy eh.
And No 10 - of course nobody is expecting us to make any money out of home equity stuff (even an accountant on Sharetrader says so). We'll keep that up our sleeves eh
As Buffett says .... 'the rearview mirror is always clearer than the windshield'
The rear view mirror sure is clear but heck the windscreen has got many dirty streaks over it and when I squirt the washer button the blades sure do make it even murkier. Hope no sun strike.
Anyway what my theory looks like in picture form
Roger has to promise to start a standing ovation when Jeff announces an upgraded FY guidance figure of $47m at the ASM
Headlines next day in The Herald "Rapturous applause greets Heartland profit upgrade"
Bout time ASMs had a bit of excitement
Sounds like you will have mates there to help you out
Please promise
LOL. No9 should read The Dairy prices are in freefall so we'd better allow some provisioning in there just in case some of our customers in that sector end up in the shyte. :)
Regarding said standing ovation, I think I'm on safe ground, no profit upgrade this early in the financial year...too much uncertainly down on the farm.
I promise to have a drink or two to put a dent in their AGM entertainment budget though :)
I sense I am going to get banned from this thread .... or even worse be put on the Ignore list like Snoopy is.
Jeez if you read the Annual Accounts thoroughly and read between the lines in the presentations and talk to a nice lady in their Wellington office you can really glean a lot. Even the man from Coop is quite complementary about Heartland and willing to share insights.
I think I know heaps about Heartland now - except their Diversity Policy
I don't know about others but I don't mind a good satirical post with good humour. I suspect your musings about profit projections aren't too far from the truth.
I can't help myself I bought more today. Has anyone got a good remedy for dividend fever :)
I think I know heaps about Heartland now - except their Diversity Policy
That should be your first question at the Annual Meeting. Unless somewhere, in a mass of data, Snoopy has answered it.
An interesting article in this morning's The Press, page B4 headed ,"Reverse mortgages have their place."
"Quite frankly there's not a lot of personal downside."
Good to see a well balanced informative article.
This months Consumer has an article about these products.
They write-off the TSB product because no guarantee of staying in the house and if the outstanding amount at the end of the day is more than the sale price the difference needs to be paid.
They say these products have fish hooks and other options are available but the only realistic one is to borrow from the children using the house as collateral (all legally drawn up of course)
At the end of the day if the old folk want some cash just trot down (or use the old motorised buggy) to Heartland and they will sort something out for you