I thought it was just because they are giving a Q3 trading update at 11.30am.
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I thought it was just because they are giving a Q3 trading update at 11.30am.
Oh yes this is probably it... buying Heartland will be in the future, probably when it is closer to $3-4 a share
Newbie here and... total mook :) learning much from the forum and very grateful to have found it. I have been hoping ANZ dipped below 33 again since it got close a few months ago. Im a novice investor and have taken a bath when following my brokers advice (my fault also didnt do my own research, didnt follow the market when overseas for many years), now I usually make small plays of around 5K, but the ANZ price neccesitates a much larger spend. Opinions very welcomed on whether now is a good time to buy.
Welcome Corleone.
This is a chat site where we share our thoughts.None of us are financial advisers.So you can get ideas from posters,but acting on what is posted, could cost you a lot of money.You must do your own research.Just take your time working out who knows what they are talking about.t.
Thanx for the welcome Percy, I know its informal banter on the forum and some posters have specialised areas and some are serial rampers if they are holders etc. I have been doing some ANZ research the last 2 days (reading financial op ed pieces). Seems half think its a great time to buy and half say tread very carefully.
Yes, that's it.
http://www.asx.com.au/asxpdf/2015081...s6v5652863.pdf
Percy's on the money there, Corleone!
You'll be aware that ANZ are raising additional capital, partly through a Share Purchase Plan whereby shareholders get to apply for up to $15,000 worth of shares, subject to scaling in the event of oversubscription. The issue has already gone "ex" so purchases on market now won't qualify. The issue price will be the lesser of $A30.95 or the weighted average market price over the 5 days prior to the issue closing in early Sept, less a small discount, 2% from memory. The current market price is less than $A30.95 and there is a theory that buyers will keep it that way to depress the issue price. Maybe, maybe not. Just a point to bear in mind if weighing whether or not now is a good time to buy.
I am a long time holder of ANZ shares and remain in two minds as to whether I will participate in the SPP.
From memory, the last SPP in 2009 (height of the credit crunch) was at about $AU14. That had something like 45% of retail shareholders taking up the maximum amount ($15000). I am not so sure that this SPP will be so popular as I am not so certain that the share price is at such a nadir. DYOR.
Comment on yesterday's trading update.
http://www.sharecafe.com.au/sharecafe.asp?a=AV&ai=36102
I'm warming to the idea of the capital raise. The more the SP falls, the warmer I am getting. If SP remains suppressed and 2% discount can get price around $28, I think I will buy in.
Yes, I'd probably settle for $28 too. The problem is that the final price won't be known until after the issue closes.
Is anyone holding? I'm already down 6% :( it just keeps going down
Wondering what a good entry point will be? .... or will the decline be in for a while, and best to stay away!
Technically its looks broken with a clear break well below the 200 day MA. Fundamentally its starting to look like a value play but I can't help but wonder if the tide isn't turning. Losses from their exposure to small miners could be substantial. PE is currently 10.5 which looks cheap but a guy I know holds HSBC and that's on a PE of 7.5 and has been going down steadily for two years :eek2: Oversold or value trap ?, you be the judge. Disc: I don't hold.
I can't see the SPP failing. It's for $.5b, at a price which will be lower, in all probability, than the $2.5b raised in the institutional placement which was at $30.95. If it's not, it will mean that the shareprice has recovered to the placement price!
1 September is the first of 8 trading days over which the SPP price will be calculated. ( weighted average sale price over this period minus 2%).
Not just HSBC but Standard Chartered ,the other UK bank with major interests in the Far East, which has fallen even faster and further. Not surprising really when you read some of the scare stories regarding China and other EMs which are being published in the UK. Try http://ftalphaville.ft.com/ and the FT itself.
Personally I don't see how the Aussie banks can be immune.
Not specifically ANZ but a comment on the Aussie banks generally and on the recent trend there for yields on leading "income" stocks to converge around the 4-4.5% mark.
https://www.livewiremarkets.com/wire...eid=9f402457b0
Now at $26.86. I'm thinking of passing up the share issue and buying on the market.
What's the price for the 'share issue'?
I suggest you have a long look at the history of the share price. It is presently lower than it was in 2013... and it is still falling !.
Overseas banks are also still falling.
The global event that happened August 7 appears to have hit almost Every Large company on most of the stock exchanges.
Looking at the last 14 days the price has tried to rally from 29 to 32, failed and fallen back.. and continues to do so...
Red flag territory
The price will be set on the volume-weighted average price of ANZ shares traded on the ASX during the 5 trading days up to, and including, the scheduled closing day (Tues 8 Sept), less a 2% discount. Seems a better deal to me, almost certainly, than paying brokerage to buy on market - and forgoing the 2% discount.
Disc: I've applied for a chunk.
I bought mine on ASX and they didn't make it easy to take advantage of the offer. I would have had to get a bank cheque and pay retail on exchange rate plus then mail in with application form.
You would think that they would have made it easier given they have branches over here but oh well, I can now choose to buy on market and they don't get my capital.
I think we may see a bit of buying after this is closed. There can't be too many buyers right now, it's in most retail investors interests to drive price as low as possible during this cap raise period.
I wasn't familar with BPAY so thanks for the heads up. I will still hold off on capital raise. We may see a bump after capital raise and if so great, if not, I have penciled in $24AUD as a price where I may top up. If we get there, I may revise that to $23 lol.
Just at a glance I notice ANZ banks shareprice is back at '06 levels. So obviously it's been returning steady dividends to shareholders over that time so why has the banks shareprice ended up the same place it was about a decade ago? Is there more going on here than meets the eye? Taken at face value the price looks attractive but if this was such a steal I'm sure the PE would be pushed out further.
The short answer is that the market (a) doesn't think that past growth will be maintained and (b) that a recession in Aust/NZ will impact, particularly through lower house valuations and subsequent loan problems. All Aust and NZ bank shareprices are being affected to some degree.
ANZ have been very aggressive in lending to business over the last few years....perhaps too aggressive if there's any sort of recession.
I didn't know that! The usual comment is that the banks neglect lending to business in favour of the more "plain vanilla" housing lending, thus restraining the economy and inflating property prices. Until recently, capital ratio rules have fostered this bias by favouring lending for housing.
So ANZ have been more accommodating towards business than the other majors?
I must admit, compared with the other banks, I thought that ANZ was more exposed to residential mortgages and Asia.
Disc: Despite being a long-term ANZ shareholder, I admit to only looking at the photos in the annual report and perusing the Newspaper headlines concerning ANZ!
[QUOTEHence SP weakness compared to the other aussie banks. ][/QUOTE]
There's not a lot in it though. ANZ down about 27% from highs in the last 6 months. All the others down 23-25%. The dilution effect of the capital raising also partly to blame.
ANZ financial year ends in September, I am not across all of the ex dividend dates but if you think about those, some of the ANZ dividend for full year will be built into share price while others if gone ex div will be discounted. Either way, there is very little between the banks, they are all around 25% from recent highs and have led the fall in ASX20 along with the miners.
Now that the SPP price determination date has passed ANZ has taken a nice 61.5c move up (ASX). Just a matter now of waiting to see what the SPP price comes out as - and how much applications are scaled back.
Duplicate.
SPP shares issued at $26.50. The amount was oversubscribed but all applications accepted without scaling back.
http://www.asx.com.au/asxpdf/2015091...gmz0tg7530.pdf
It would be interesting to know what percentage of shareholders participated. A further break down to see what percentage of NZ shareholders participated would be interesting too - as for a start, it would take more of an effort for NZ based shareholder to participate. You'd think they would cater for the NZ part of ANZ, after all we comprise 2/3's of the name! Renounceable rights issues are fairer especially for non-residents and those who do not/ are not able to participate.
Disc: I did not participate.
Yes, 2/3's of the name but probably only about 15% of the business these days. Investors in Aust shares need to have an AUD account to utilise BPay for cash issues etc, IMO.
You make a good point and it is something to bear in mind for the future. The facts are though, I was only ever luke warm about this raise.
I know now it looks like we might have missed out on an opportunity but it was never my intention to trade it, and I feel it won't be the last time we see $26.50. Its hard sitting on your hands but if it can get to around $24, I might not be able to resist a decent stake.
I agree it is definitely advisable to have an Australian bank account when investing in Aus shares - especially if you have quite a few. However, ANZ is one of the largest if not the largest NZ Bank and one of the largest Australian companies. Being a bank and with extensive NZ operations, of all companies one would think they could organise a facility for its NZ shareholders to make payment in NZ dollars.
I suspect they did not consider the numbers of its (smaller) individual NZ shareholders warranted the effort of enabling payment in NZ dollars. Similarly they did not consider a Rights issue as being fairer to those individual shareholders who could not / would not participate in the capital raising. Indicative of a different attitude compared to the other Australasian banks who undertook rights issues?
And the shareholders resident outside Australasia? With a rights issue they can at least participate in the automatic sale of entitlements.
I don't have an Australian bank account either. ASB did the work form me since I have a nominee account with them - one of the few advantages of having a nominee account.
Disc- Applied for a few
ANZ are happy to pay dividends in NZD directly into the NZ bank accounts of their NZ resident shareholders. NZ residents can also make use of any NZD imputation credits attached to dividends too. All the more reason to enable payment for a SPP to be made in NZD, I would have thought...
[QUOTEI suspect they did not consider the numbers of its (smaller) individual NZ shareholders warranted the effort of enabling payment in NZ dollars. Similarly they did not consider a Rights issue as being fairer to those individual shareholders who could not / would not participate in the capital raising. Indicative of a different attitude compared to the other Australasian banks who undertook rights issues?
][/QUOTE]
In principle I'd agree that renounceable rights issue are fairest to shareholders. Interestingly though, on this occasion it would have resulted in small shareholders paying the same price as the institutional placement, $30.95, rather than the SPP price of $26.50. As the "old" shares traded below $30.95 during the issue period the rights wouldn't have had any value.
ANZ management's claim that a rights issue would have resulted in a lot of small entitlements seems to be correct. Something like 1 for 35, if my maths are anywhere near the mark!
There was a little blurb on Reuters the other day explaining:
I'd imagine they'll be getting back to their knitting soon.Quote:
ANZ has a return on risk weighted assets (RoRW) of 2.84 percent in Australia compared with 0.81 percent in Asia, excluding its minority partnerships which it is looking to exit. The Asian RoRW translates to a level of profitability below the cost of capital, meaning the bank is destroying value.
Its cost-to-income ratio is 44.7 percent, higher than its three main rivals - CBA, National Australia Bank and Westpac - and compared with 36.7 percent at its Australian franchise, reflecting high costs in Asia.
I always thought that their investment in Asian tigers was high risk - nice purring kitty cats bringing in comparatively good returns when times were good but wild cats showing claws and teeth when times became bad. At least for those who participated, the sp is still above the spp price.
This seems relevant:
The five macro forces driving bank equity flows
1. Quantitative Easing (QE) initially feels good as low interest rates reduce loan losses
and is expected to stimulate loan growth. After a while, however, ultra-low rates
destroy the profitability of deposit gathering business (eg, look at China now) and
excess liquidity has too flow into some type of lending and it destroys trade financespreads (eg, look at STAN and ANZ). As a lot of Asia enters this bad QE phase the
US is exiting with higher US interest rates to restore banks deposit businesses.
That’s good news for US banks.
2. Tighter global bank regulation and the imposition of mechanical liquidity constraints
slows credit growth. It becomes hard to grow loans faster than high-quality deposit.
Further the looming imposition of the Net Stable Funding Ratio reduces the ability
of banks to mismatch duration of loan assets and funding liabilities. Finally bank
regulatory capital intensity rises. That’s feels very bad for Australia whereas
countries like India and the Philippines still have structurally strong deposit and
high system credit growth.
3. Low system credit growth forces banks to pull cost lever through
outsourcing/offshoring/digitisation/robotics/branch rationalisation. That’s likely
good for high labour cost countries like Australia but ironically cost out initiatives
require investment.
4. Rising bank regulatory capital intensity is bad for bank dividends, particularly in
Australia where regulatory capital arbitrage activity has been high. The opposite
holds true in the US where banks are already re-capitalised and capital generation
will surge given restored deposit businesses, the eventual end of the
litigation/penalty cycle and cost restructuring. In short global PMs should beswitching from still expensive Australian banks to high quality US banks. For
example switch from CBA to Wells Fargo, WBC to JPM etc etc.
5. Currency and interest rates will drive a reversal of global bank equity flows. The
end of the artificial QE drag on the USD is profound as USD investor benchmarks
created significant carry trades for investors.
cut from todays http://ftalphaville.ft.com/marketslive/2015-09-29/
The more you hear about the Asian operations the higher the level of risk taken appears for that diminishing return. That said the incoming CEO has indicated they're doubling down on the dabbling in Asia.
Can anyone explain the sudden drop today? There was upwards preasure that suddenly reversed.
Is that just a response to the NZD?
Have a read of KW's Big Short thread
Thanks. Essentially the banks look like there's no room to grow, despite performing well and also there are fears they could drop...
But it sure does look like a good buy at the moment, at least in terms or a long term investment imo
Don't worry Morningstar still rates it a buy ;)
If you're in the DRP it's not all bad news, infact the lower the better for the 10 days from 13 November.
The Acquisition Price to be used in determining the number of shares to be provided under the DRP and BOP in connection with the 2015 Final Dividend will be the arithmetic average of the daily volume weighted average sale price of all fully paid ANZ ordinary shares sold on the ASX during the ten trading days commencing 13 November 2015, and then rounded to the nearest whole cent. - See more at: https://www.shareholder.anz.com/page....RUkgu4x2.dpuf
Sometimes though you have to look through the recommendation to see relevance, ANZ's SP has declined to an almost 3 year low which is also the price highs going back to 2009 after the recovery from the GFC. Some might think that's good buying, but even then it's a falling knife with no obvious fundamental price support amidst increasing headwinds for the Aus Banking sector.
It's not just the banks though. BHP hit a 6 year low today and the ASX "lost" $27b in the day! Commentators are blaming the failure of the RBA to lower interest rates coupled with the prospect of higher USD rates.
I just feel like there must be some good long term investments there, or at least some diverse investing...
Morningstar jokes aside I'm very tempted to start purchasing if it keeps falling
My bank friend said ANZ's china business was in a really really bad situation. bad debt is about 4.5%. (CBA is even worse but it's has less exposure)
I am not surprised at all... if you know china's overall bad debt situation..
Yes, hopefully a good buy. Bought a further 600 last week before it went xd at 28.20. Up 3% today and a 95 cent per share dividend being paid out in December.
Let's hope the NZD reteats back to 80 cents AUS. Amazing to think that ANZ is bigger than all the companies on the NZX combined.
Let the good times roll, Huxley
Really happy I didn't buy when it dipped to 33.50 a few months ago lol. Thankfully I bought HNZ for 1.09 instead. I don't see this stabilizing anytime soon.
I feel the same way about BHP which i tried to buy at $27 but didn't realize that I had to have first completed a CHESS securities application so the sale never happened. And now look what's happened. Still, buying at that price might have worked out really well over the next 10-15 years. We just don't know.
I have both HNZ and ANZ. As I say from time to time: HNZ is assessed as having a 1 in 30 probabilityof default over 5years with it's BBB rating and ANZ 1 in 300 with it's AA-. Never hurts to spread the love around.
http://www.rbnz.govt.nz/regulation_a...ks/3498179.pdf
Nice rally for the Australian banks this week. Great to see the NZD dropping as well. Some interesting points from the SMH, with a note of caution about ANZ. Still, I'm keeping them ;)
"Stocks in the big four banks have rallied hard over the past week - harder than the sharemarket in general - prompting analysts to suggest the sector has bottomed.
The reason for the bank rally was that the stocks were beginning to look irresistible after the falls, said Watermark Funds Management analyst Omkar Joshi.
"There's been a lot of bad news that's been out there for a while - most of this year, in fact about capital and bad debt - and most of that has played out now," Mr Joshi said on Friday.
Here are the main reasons Mr Joshi lists for the banking recovery:
Capital raising done
"Capital was one of the key concerns that was overhanging the stocks for most of the year. Now all four have gone ahead and done their capital raisings. That's finished now and the capital raising is out of the way."
Raising rates has helped banks deal with holding more capital
Each of the banks has recently raised their lending rates independent of the cash rate, and there's been little fallout from that, said Mr Joshi.
Good asset quality - bad debts under control
"We haven't seen a sudden uptick in bad debts," said Mr Joshi. "That's another thing that's comforted people, with the exception of ANZ. The other three are doing ok - bad debts are falling away." Having said that, "bad debts are probably going up."
Shares cheap
"When you look at both valuation multiples and the 7 per cent dividend yield for NAB and ANZ, they start to look pretty bloody cheap."
... but be wary of ANZ
ANZ's Asian investments were not going well, said Mr Joshi.
Read more: http://www.smh.com.au/business/marke...#ixzz3s4QHONt7
Follow us: @smh on Twitter | sydneymorningherald on Facebook
Hey bobdn quick question regarding dividends from ANZ - do they pay rwt for you or do they put the gross amount into your account and leave you to pay tax? No problems if you don't wana give tax advice on here I'm just keen to get general info! Cheers
Looks like I got the gross amount and no RWT was taken out. I borrowed to buy my ANZ shares so will be submitting a tax return anyway. I need to clear up a few things like what exchange rate do I use when working out the value of dividends in NZ dollars.
more information about this is here:
http://www.ird.govt.nz/business-inco...onvert-nz.html
From personal experience - the IRD is happy if you use their tables, but they seem to be happy as well if you use the "official" exchange rates as published by the dividend payer (e.g. ANZ would publish their exchange rate for NZ paid dividends). Important is just that you use for the whole tax year the same method - i.e. you are not allowed to use one method for one dividend payment and the other method for the other dividend payment.
Still easier obviously if you own NZX listed ANZ shares ... you are paid in NZD (typically including some NZ imputation credits), and this are the data you give IRD.
Discl: not a tax expert, but it worked so far for me (using the exchange rate announced by the respective Australian company when paying dividends) ....
Thanks BlackPeter and macduffy, really helpful.
Huxley, ANZ pay dividends with both Australian Franking Credits and New Zealand Imputation credits attached. If you are a New Zealand Taxpayer, you must disregard the Australian franking credits. The cheque ANZ put into your account is a net amount.
For a New Zealand taxpayer you must calculate your gross income by adding the net amount deposited in your bank account to the New Zealand imputation credits paid. (Note this means that in general for a fixed number of shares, the gross income for a New Zealand taxpayer is not the same as the gross income for an Australian taxpayer).
In an IR3 form (FY2015), The NZ imputation credits should be claimed under question 14 (Did you have any New Zealand dividends paid..?). The gross income however should be declared under question 17 (Did you receive any overseas income?)
Because the income for New Zealand shareholders is not fully imputed, you will generally have a 'wash up' amount of extra tax on your ANZ dividends to pay at a later date.
HTH
SNOOPY
discl: ANZ Shareholder
Just to add to Snoopy's post, ANZ's dividend advice states "... your NZ gross income will include the aggregate of the Dividend Amount and the NZ Imputation Credit which should be included in your income tax return." Both amounts are expressed in the dividend advice in NZD.
However, ANZ dividends subject to the Dividend Reinvestment Plan don't show the Dividend Amount in NZD, but in AUD - this amount is subject to reinvestment based on the AUD shareprice - as defined. The NZ Imputation Credit is shown in NZD and the advice includes details of forex rates applicable to the dividend - AUD/NZD and AUD/GBP. Definition of NZ gross income is as above.
Disc: Holding both
As Macduffy has said, the amounts printed on your dividend statements (currency expression aside), are the same whether you take the dividend as cash or whether you choose to reinvest in more shares via the drp. Thus the tax consequences, depending on which path you choose, are also the same.
SNOOPY
Great thanks Snoopy. One last question (maybe not:) - in the interim dividend I received in July for my nzx.anz shares, there was no mention of imputation credits. At that stage, I had 1227 shares. The payment rate was .86 cents as you know, and the total gross/net amount was listed as $1,055 The franking credit is listed (no good to us I guess) at $452.
I think I might be missing something here, but how do I know what the imputation credits are? Thanks in anticipation.
Looking on the NZX site you should have received 86c ps (AUD) dividend with a 10c per share imputation credit.
https://www.nzx.com/markets/NZSX/sec.../ANZ/dividends
cool thanks, that's how I'll calculate it then.
No, held in NZ.
Bobdn, I just had a look at my 2015 interim dividend statement dated 1st July 2015. There were seven 'headers' spread out across the page as follows:
Class of Share Dividend per Share Number of Shares Franked Amount Dividend Amount Franking Gredit NZ Imputation Credit
All amounts are listed in Australian dollars except for the imputation credits. These are listed under the furthermost column to the right, in $NZ. My ANZ shares are listed on the NZX, as I believe are yours. So our interim dividend statements should be both printed in the same format.
SNOOPY
Thanks both. My shares are nz listed, however my statement doesn't have the imputation header. I'm in the drp but i assume that would not mean a different statement
I'll check in with computershare and report back in due course.
If panic sets in about Asia and the Australian business starts to trade at an irrational discount I still think some will be tempted. The core business is still performing and it seems to me that the "super-regional" business could eventually be shirked which would streamline the business towards investor returns. Perhaps a little wishful and/or premature in my part however.
Given the companies performance over the last decade the remuneration issues also appears poignant.
Core business seems just fine...
http://m.nzherald.co.nz/business/new...ref=NZH_FBpage
Only if writing scripts to sequels becomes a core business activity...
Anyway if it where as well run as the other 3 it would trade at a similar premium.
My broker is raving about the dividends from the Australian banks, as well as their relative cheapness. I picked up some ANZ the other day, though I felt it better to do it on our own NZX rather than buying in Australian dollars. I suppose though that the NZX price will ultimately take into account any swings in currency?
Yes, indeed!
Any "discrepancies"- currency adjusted - are quickly arbitraged away by traders. There is an argument that buying/selling Aust stocks on the ASX is preferable due to the greater depth of that market but I doubt that's an issue for us retail investors for a widely traded stock such as ANZ.
Just remember ANZ have the largest chunk of loans in the ASX Mining sector of the Big Aussie banks some 12-13 billion outstanding ..how much of this will default will be interesting with very few miners making a profit currently ..
http://www.barrons.com/articles/dont...cks-1452579741
Yes we will find out on 17 Feb what the fwd guidance is for the half yr result due out in early May.......
I actually would like to BUY a position in ANZ ,,,but not yet more round Tax loss selling MAY-JUNE (low 20's NZX) ...good yield ....and a good play on AUD weakness that will rebound on better AUS economy going forward .....
And also very interested to see how ANZ would value themselves when I borrowing funds from them ?
IMHO ANZ the best of the Big four ...using P/E ratio /divi payout ratio/Yield and personal banking experience
but they may have more risky a loan book
Citi rates ANZ a "Buy".
"Citi rates ANZ as Buy (1) - Citi analysts note how investors have started to price Australian banks differently with CommBank leading the pack in terms of relative valuation. The analysts argue this sector bifurcation doesn't appear justified. In their view, current circumstances are making operational performances more uniform across the sector.
Negative capital generation is driving CET1 ratios lower for all banks with little or no buffer, point out the analysts. They believe share price falls add to valuation support for the sector in general.
Citi's Major Bank order of preference has ANZ Bank (Buy) first, then National Australia Bank (Buy), then Westpac (Neutral) and finally CBA (Neutral); in complete opposite order of current market pricing.
Target price is $33.25 Current Price is $24.41 Difference: $8.84 If ANZ meets the Citi target it will return approximately 36% (excluding dividends, fees and charges). Current consensus price target is $30.90, suggesting upside of 26.6%(ex-dividends)The company's fiscal year ends in September.
Forecast for FY16:
Citi forecasts a full year FY16 dividend of 184.00 cents and EPS of 257.50 cents . At the last closing share price the estimated dividend yield is 7.54%. At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.48. How do these forecasts compare to market consensus projections?
Current consensus EPS estimate is 254.2, implying annual growth of -6.4%.Current consensus DPS estimate is 182.9, implying a prospective dividend yield of 7.5%.Current consensus EPS estimate suggests the PER is 9.6.Forecast for FY17:
Citi forecasts a full year FY17 dividend of 0.00 cents and EPS of 256.90 cents . At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 9.50. How do these forecasts compare to market consensus projections?
Current consensus EPS estimate is 261.9, implying annual growth of 3.0%.Current consensus DPS estimate is 185.5, implying a prospective dividend yield of 7.6%.Current consensus EPS estimate suggests the PER is 9.3."
There was an odd story on Stuff suggesting ANZ New Zealand might still using Windows XP and Office 2003? More importantly while Citi are ranking ANZ a buy but Morgan Stanley think they will cut second half dividends.
The December 15th 2015 UDC Prospectus release, at last gets the details of what happened at UDC during FY2015 out into the public arena.
https://www.udc.co.nz/pdf/UDC_Prospectus_69.pdf
The 'profit before tax' is listed as $79.323m (p34). But this includes a provision for credit impairment of $10.427m which I would remove to get the picture of ongoing operational performance. So I get EBT of $89.750m.
Now go to note 4 (p43) on interest expense. There is underlying interest over and above what is due to debenture holders of $18.951m.
So total underlying EBIT = $89.750m + $18.951m = $108.701m
Now turn to page 45 (note 6) and you will see total net loans and advances of: $2,347.163m
So the operating margin based on the end of year loan balance book is:
$108.701m/$2,347.163m = 4.63%
A significant improvement on FY2014 and it continues the improvement from a 3.87% margin in FY2012
SNOOPY
Time to normalise the UDC figures for 2015 so they can be compared more directly with the likes of Heartland Bank.
Heartland in FY2015 had selling and administration expenses of $68.403m (Heartland FY2015 report 'Selling & Administration Expenses', note 5). UDC had total operating expenses of $32.278m (UDC prospectus note 4). That is a difference of $36.125m. The two are comparable in that they have a similarly sized loan book (UDC:$2,347.183m, Heartland $2,862.070m). If we add the operating cost difference figure onto the UDC cost structure, what would that do to the UDC operating margin on assets?
FY2015: ($108.701-$36.125+ $10.464)/$2,347.183 = 3.53%
Note: UDC do not have a branch network of their own, but operate through ANZ bank branches in New Zealand. The $10.464m added back represents the adding back of 'fees paid to related parties' (ANZ). These are part of the $36.125m 'extra operating expenses (p43 note 4). The $10.464m could be thought of as a contribution to the ANZ branch network that allows UDC to carry on business as normal. But what I am interested in is the difference in operating cost of a finance company with and without a branch network. So this $10.464m which largely reflects a branch network allowance must be removed from my comparison.
This calculation shows the underlying margin at UDC to be slightly improved from FY2014's 3.37%.
SNOOPY
An update on the post financial crisis profitability trends. The Heartland comparative figures only start from FY2012, because that is when Heartland started to exist in its current form.
UDC Heartland EBT Loan Book EBT/Loan Book EBT Loan Book EBT/Loan Book FY2009 $34.024m $1,829.156m 1.86% FY2010 $45.012m $1,968.771m 2.29% FY2011 $46.382m $1,948.552m 2.38% FY2012 $58.476m $2,014.473m 2.90% $29.377m $2,078.276m 1.41% FY2013 $66.787m $2,065.117m 3.23% $36.540m $2,010.376m 1.82% FY2014 $83.501m $2,272.081m 3.68% $57.416m $2,607.393m 2.20% FY2015 $89.750m $2,347.163m 3.82% $76.304m $2,862.070m 2.67%
Reference for data (UDC): (p32 of 2015 prospectus (No.69) , p33 of 2014 prospectus) (Profit before Income tax & Credit Impairment, Net loans and advances)
Reference for data (Heartland): AR2015, AR2014 Statement of Comprehensive Income Operating profit, Statements of Financial Position)
SNOOPY
Updating the actual bad debt write offs in relation to the size of the loan book at the end of FY2015. Section 7 in the UDC 2015 prospectus is named "Provision for Credit Impairment". Bad debts actually written off are compared against the 'provision for loan impairment' stated on page 32, the 'Summary Financial Statement', which were $10.427m (FY2015) and $11.733m (FY2014).
UDC Bad Debt Write Off New Bad Debt Provision FY2010 $17.343m FY2011 $4.891m FY2012 $10.164m $6.031m FY2013 $12.399m $7.123m FY2014 $18.633m $11.733m FY2015 $12.162m $10.427m
Actual write offs are down, coming off a spike from FY2014
Putting these actual write offs as a percentage of the end of year loan book gives them better context.
FY2012: $10.164m/$2,014.473m = 0.505%
FY2013: $12.399m/$2,065.117m = 0.600%
FY2014: $18.633m/$2,272.081m = 0.820%
FY2015: $12.162m/$2,347.163m = 0.518%
This is an improvement back towards FY2012 values.
For comparative purposes, it is informative to look 'over the fence' to Heartland Bank. Note 6 (AR2015) details impaired asset expense as follows:
FY2012: $5.642m
FY2013: $22.527m
FY2014: $5.895m
FY2015: $12.105m
Normalize these against the total finance receivables
FY2012: $5.642m/ $2078.3m = 0.271%
FY2013: $22.527m/ $2010.4m = 1.12%
FY2014: $5.895m/ $2607.4m = 0.226%
FY2015: $12.105m/ $2862.1m = 0.423%
It is interesting to see that Heartland's write offs are increasing whereas UDC write offs are decreasing. The overall write offs for Heartland are nevertheless still less in percentage terms than UDC.
UDC Debt Write Off Heartland Debt Write Off FY2012 0.505% 0.271% FY2013 0.600% 1.12% FY2014 0.820% 0.226% FY2015 0.518% 0.423%
SNOOPY