Originally Posted by
Snoopy
Once again there is no mention of Tier 1 or Tier 2 in the Heartland FY2012 report.
The 'best case' scenario is that all loans are Tier 1. $2,097.553m of loans are outstanding. 20% of that figure is:
0.2 x $2,097.553m = $419.5m
Heartland has total equity of $370.5m which is well below the 20% of loan target no matter what the tier classification of the loans.
Result: FAIL TEST
Heartland have increased their lending and reduced their capital by paying out dividends, hence the poor result on this test. Last year I started a barrage of derision by suggesting a capital raising was looking likely when Heartland failed this same test. Over that FY2013 year Heartland obtained their banking licence (good, although they don't have the same freedom as other banks as regards capital ratios), decided to lend more against tier 2 assets (bad from this statistic's point of view, which is not to say tier 2 loans aren't profitable). Furthermore during the year the so called Basel 3 requirements, designed to shore up the stability of banks and requiring banks to carry more capital have been implemented (bad for this statistic).
I don't wish to speculate again on the overall likelihood of a cash issue to shore up HNZ in FY2014. All I will say is that given what has happened over FY2013, and looking at the trend in this statistic, such a cash issue to shareholders or a third party placement of HNZ shares is looking much more likely now.
SNOOPY