Can we please stop with the foreign language. It all loos Greek to me.
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Plain English then;
"we are well positioned."
sorry PT.!!!! lol.
The book The Galactic Pot-Healer by Philip K Dick presented a future world where a group of people are so bored that there main pleasure in life is to play a little game where they use computers to translate a phrase from language to language eventually arriving back at the original language in a much mangled form.
It appears that this nightmare scenario is finally arriving.
Best Wishes
Paper Tiger
The other comparison you Heartlanders like to make is with Westpac. The WBC Annual report for 2013 landed in my mailbox last week. Using the profit from p83, and the balance sheet equity, the Return on Equity figure for Westpac was as follows:
$6.368b / $46.618b = 13.7%
However, as with ANZ Westpac makes their loans dependent on their holding of 'total Tier capital', which includes additional elements to just shareholders equity. On p173 of this report Westpac lists the following additional Tier 1 equity.
$1,177m (Westpac Convertible Preference Shares)
$1,367m (Westpac Capital notes)
$906m (Stapled Preferred Securities)
$616m (Convertible Debentures and Trust Prepared Securities)
Add in the shareholders equity and I get total Tier 1 equity of $50.684b
In addition there is $4.886m of subordinated Tier 2 debt which I have reduced by $270m to take into account the early maturity(less than five years) of some 2015 debt, and to which must be added $378m of Tier 2 subordinated perpetual notes. That amounts to $4.994b of tier two debt in total for calculation purposes.
If you now do the same return calculation on tier 1 and tier 2 capital, the Return on this 'total backing capital' is a rather lower.
$6.368b / ($50.684b + $4.994b) = 11.4%
That is within one decimal point of the ANZ FY2012 figure.
SNOOPY
Just to bring this back to the Heartland context, here are the figures that Scotty worked out:
"For this financial year, HNZ is forecasting a profit of between $34 - 37m. By my calculations, the $34m bottom range projection equates to a 10% return on shareholder equity (88cps) which is about 9c per share. On say a pe of 12, this would give a share price of $1.08. Looking into the future, a return of 15% without any increase in equity but keeping the pe @ 12 would put the share price at $1.62."
If the bottom range figure of $34m is a 10% ROE then the top range figure of $37m is 10.9%. These figures seem entirely consistent with a smaller bank without the extra tier capital resources available to bigger banks. Why some here feel so resolute that Heartland can outperform the larger banks by so much on a tier capital basis (as a 15% ROE would imply) remains a mystery.
SNOOPY
PS I should add that since the annual report has been released NTA as of 30th June was confirmed at:
$331.2m/ $388.7m = 85c, not 88c. That in turn means the the projected ROE for FY2013, assuming NTA remains constant is forecast by Heartland themselves as between 10.3% and 11.3%.
However for those who insist on an ROE of 15% close your eyes and say "I believe, I believe, I believe." Who knows, it might just come true for you.
FY2013 looks to be shaping up quite well for Heartland. Looking further forward than that the new basal 3 Capital Conservation Buffer adding 2.5 percentage points to the amount of capital that must be held, plus another 0-2.5 percent for the countercyclical buffer means very little if any spare capital. So no growth beyond FY2013 if current dividend levels are maintained. A PE of 10 sounds about right in those circumstances.
Round figures I will go for an 11% ROE on shareholders equity of 85c giving earnings of 9.35c. A PE of ten translates that to a share price of 94c. Sounds about right.
However, all that assumes no more bad property debts that would further reduce the equity base. I would discount the share price by 10% to take account of that risk, and that leaves fair value at 85c, exactly where Heartland trades today. Heartland, a good solid company that is fairly and fully priced at 85c.
SNOOPY
I think Snoopy is on the verge of saying HNZ is a BUY .... yes a BUY
Better get in quick before the recommendation comes