Forgive my ignorance but what is an undisclosed seller?
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Sub-underwriters bailing out..........at least those that had the moral fibre to pay for their commitments......would seem the banking license might be a distant fantasy, as predicted on this channel very early on
up 3 cents today with nearly 3mil traded, somebodys buying up large!
At 49 cents can anyone tell me the major downside of this stock?
On the the site interest.co.nz there is a comment by large shareholder George Kerr that he wants Heartland to grow by emulating American bank Wells Fargo.
http://www.interest.co.nz/news/57607...rns-over-20-ye
My jaw hit the floor when I read that.
George as a master of the financial universe should ask his fellow financial master of the universe and large shareholder in Wells Fargo, Warren Buffett, how all those residential second mortgages in California they loaned during the housing bubble are getting on.
Boop boop de do
Marilyn
Well looks like George has been doing some selling. :)
Result out... not too surprised that George is selling.
There are some good bits in there (deposits up, despite expiry of the guarantee, impairments reducing), but pretty hard to get excited about it. Hard to see this year hitting forecast and next year won't have the one-off tax benefit to salvage it. At this rate, could be another couple of years of consolidating before it is able to cast off the GFC leg-irons.
The "Looking forward" statements tell the true story - a banking license is not even on the horizon, and they have little chance of meeting forecasts
watch out for the sub-underwriters and underwriters bailing......
I have been puzzled by Heartlands desire to become a registered bank.
As a cynical person I wondered if the bank registration was just a story told to win over those voting on the merger. The real driver was to shelter MARAC beneath CBS Canterburys balance sheet.
Now that the "Mission Accomplished" banner has been unfurled in the boardroom will we see bank registration quietly fade away?
Boop boop de do
Marilyn
Well I am un decided.HNZ appear to be like Mainland Cheese;"Good things take time."HNZ have achieved a merger,and seem to be sticking to their agenda.I think they have been over careful with everything they do ,so they don't risk putting "The Bank" licence at risk.They have got through the govt guarantee ,and hopefully the have laid solid foundations for the future.I continue to hold and expect it will take time.The NTA at 85 cents is reassuring.
Whatever the motivation(s) underlying the quest for a banking licence, I think the outcome - either way - will have a big impact on the fortunes of HNZ. The more so if it comes sooner, not later.
I suppose the NTA is reassuring, hadn't really thought about it. Until HNZ puts decent and sustained profits together and pays solid dividends the NTA has an academic quality? HNZ is trading at 0.55 times NTA. With decent profits and dividends, or increasing promise of same, the HNZ price will move towards the 1.8 times NTA of ANZ and the 2.0 times NTA of WBC. Getting there will take much more time than Mainland cheese, and a few more old boys on the Mainland commercials will have popped their clogs along the way, but loyal HNZ holders will wallow in good port and vintage tasty.
Great post Under surveillance.
A bit ignorant here - why would they want to enter into a lockup agreement with Harrogate Trustee for 5% of share capital till FY result?
Nice chart !
best wishes
Paper Tiger (wearing a Technical hat) :blush:
Got to love it ..... George getting all grumpy and saying Heartland is under perfoming and they better get their act together .... and George holding onto the shares in HNZ
George talks tough
http://www.stuff.co.nz/business/indu...rr-talks-tough
That lock up deal with Harrogate a 'defensive move' to make a full takeover by somebody a bit harder .... me thinks George has had some influence in this action .... see Belg your mate looking after you after all
About the share lock-up agreement.
Imagine yourself to be an Aussie banker sitting in your plush office in Melbourne. You have a problem. You have been trying to grow your customer base at your subsidiary across the ditch by spending megabucks on advertising. The trouble is all your fellow Ocker Banker mates are doing the same, so all you are doing is churning customers.
You think, why not simply buy these customers by making a cash bid for a struggling small bank with a tidy number of customers and a sinking share price.
Boop boop de do
Marilyn
Odd... he was selling his own indirect holdings via Pyne Holdings and can be presumed to be still selling (now below 5%), so may well be him pushing the price down... while saying it is badly performing and speculation he might have something to do with a lock-up to stop others getting it...
Such cynicism in one so young.
Seriously - wouldn't you just be buying customers who, by their actions, have shown that they don't want a relationship with an Aussie bank ? And who have already voted with their feet.
Or customers who have already been rejected by the Aussie banks ?
I don't think it's a defensive move at all - the lock-up agreement specifically gives Tomlinson the right to sell into a full takeover - end of story. And anyway, such moves are illegal if my memory is correct (frustration of T/O?)
If you accept that Tomlinson was fitted into doing the underwrite, and I am led to believe thats correct (sweet talking Georgie Porgie says no chance of you being called upon old son, the mugs will all take up their rights, and if you are called, leave the arrangement of the funding to me), then its got to the point where Tomlinson wants out and to cut his losses (see last weeks curious SSH, where there was a 'rearrangement' of who tells who what to do with the running of Harrowgate)
He is after all down 30% less underwriting fees collected, plus funding costs in a market that simply does not like HNZ and it's prospects.
So who has who over a barrel?
I suspect the lock-up buys HNZ and their 'advisors' a bit of time to find a home (acceptable to PGC and HNZ) for the 19m, with some sort of side deal done to 'alleviate' the costs to Tomlinson
So it begs the question, who funded the underwrite ? Hmmm, only need one guess at that - perhaps that secretive slush fund owned by PGC?
As for Kerr/PGC deciding the HNZ's aren't for sale, well surprise surprise, given he's so far out of the money it's become a joke, long at 78, more at 75 and even more again at 65, when at the time of the split-off, everyone was looking up.
Despite this huge overhang of 'reluctant' holders, it's hard to see much further downside, so they will just have to hold the line and wait for the improvements, meantime sweating on unrealised losses
"curiouser and curiouser" said Alice.....
AIMHOO and please do your own research
Not being a follower, not sure if this is covered above:
http://http://www.stuff.co.nz/busine...der-won-t-sell
So George also buying through Torchlight for the past week... 17m shares is not small change.
I'm feeling too small to be playing in the same water as great white sharks....
hmmmm.........so i guess i should prepare for a pathethic offer for Heartland by GK? and then be given a recomendation to sell and buy back later when the SP dives after the T/O offer?
bah.
Looks like you're on the right track geezy :)
PGC are continuing to accumulate HNZ shares. I’m guessing GK’s looking for the 20% mark, that way he’s assured a place at the table when one of the big Aussie banks swoop in to pick up HNZ.
So much for the concept of a NZ listed bank, oh well.
Business Day columnist Chalkie has had a dig into recent Heartland share transactions. His conclusion; "Chalkie also reckons PGC's latest purchase of Heartland shares is probably an undisclosed related-party deal"
http://www.stuff.co.nz/business/opin...ter-than-white
Boop boop de do
Marilyn
Latest view from S&P re NZ banks including Heartland
[URL="http://http://www.interest.co.nz/news/58475/big-four-banks-s-and-p-ratings-going-nowhere-kiwibank-hits-credit-rating-ceiling-tsb-woul"]
I don't see it that way, for several reasons.
- I can't see the big Aussie banks ( assets of several billion dolllars) being interested in a fledgling business of $360m assets, before or after HNZ receives a banking licence.
- NZ's economy isn't exactly a booming proposition for further investment.
- I reckon it suits the big four very well to have a few minor players - Kiwibank, TSB Bank, HNZ (eventually) to share and dilute the anti-bank sentiment that flares up from time to time.
- The Aussies have enough Australian issues to occupy them without taking on any new ones offshore.
Just IMO.
Here is the banking license application for the Heartland Saloon.
Pay no attention to the whiskey drinking brawling cowboys, scheming bar gals, or card sharps in there.
The provincial accountants with director tin stars on their chests who have ducked behind the bar to avoid punches and flying glass are hard-arses who are going to clean up Dodge.
Boop boop de do
Marilyn
Yes, just seemed like a good test of whether they're able to go beyond the equivalent of stopping kids drinking too much lemonade.
I think the antics of self-interested majority or substantial shareholders will always be difficult to regulate, thereby leaving a sour taste in the mouths of small holders. Will be interesting to see at what point moral high-ground meets pragmatism under the new cadre of enthusiastic sheriffs.
Good to see things are all honky dory at HNZ and that they can make more in the 3rd quarter as they made in the first half of the year ..... really good stuff
That'll put a rocket under the shareprice tomorrow ..... up up and away .... maybe 60 cents by the end of the week?
They report third quarter results may just for balance the news of CFO resgination.
Despite the sceptics, this stock appears to be trending upwards.
Yes.
The analytical side of the brain says stay away, but for an interesting punt, it could be fun as long as the finger is hovering over the sell button. Certainly the graphs are heading in the right direction and the 60 cent level may be closer than we think.... On a percentage basis that is not a bad capital gain on todays price. However the analytical side may still be right.
A few positives kicking in :
1. George Kerr out of the way - he has been selling HNZ shares to pay for PGC shares.
2. Market is extrapolating current turnaround profit of $6m into full year's future profit of $24m pa from hereon in = PE of 8 times on current share price.
3. Expectations of banking license?
If they announce banking license, expecting sp will close gap towards NTA of 72 cents?
My opinion is that the banking licence is not a "must have". If it happens it happens. More importantly the company has brought together a few companies that appear to be starting to gel and making money. These companies survived the finance company purge so they must do something right.
PGG Finance was sold to Heartland in the early part of the FY2012. As part of the sale investment banking and corporate finance entity “Northington Partners” did an independent review of the buyer, Heartland.
Heartland is now a listed independent entity in its own right. I think it is useful to look at how the look forward view of Heartland in June 2011 compares with the actual progress made to date.
The Northington Partners review of Heartland concentrates on:
1/the value of the retail funding [term deposits], and
2/the value of the wholesale funding [securitisation (aggregated loans as presold parcels) and available bank facilities].
Critical to the ongoing retail funding is the aimed for 80% term deposit reinvestment rate target (when averaged over a year). This is critical not only in maintaining target asset growth, but also to maintain an adequate liquidity buffer.
Of other performance metrics to monitor, Northingtons were looking for a reduction in the operating expenses to income expenses to happen, a result of improving economies of scale. Stabilization of any impairment expenses was listed as another performance metric to look out for. Failure to obtain bank status was seen as a risk that could lead to a blowout in the cost of funds.
PGW Finance is now part of Heartland. But back in November 2009, PGW Finance was regarded as an integral and ongoing part of PGG Wrightson future in the new capital-raising ‘Simplified Disclosure Prospectus’. The prospectus was issued after the global financial crisis and so encompasses still current thinking on how a financial organization should be structured post GFC. P44 gives the banking syndicate banking facilities restrictions that PGW Finance entered into at the time:
1/ EBIT to interest expense > 1.2
2/ Liquidity buffer ratio (including bank lines) >10%
3/ Gearing Ratio (Total non-risk share liabilities to total non risk tradeable assets) < 90%
4/ Single new customer group exposure (as a percentage of shareholder funds) <10%
5/ Minimum Equity Contribution:
Tier 1 Risk Share Lending (basic equity capital and disclosed reserves) > 20%,
Tier 2 Risk share lending (this applies to undisclosed debts, and provisions against bad debts) > 30%.
Forget all of the results information about profit that Heartland has been headlining. I think that if you wander through the above calculations as they relate to Heartland, then and only then will you discover how Heartland is really doing.
One more quote from the prospectus for those who might be wondering when they might get a dividend out of Heartland
“No distributions (i.e. dividends) will be permitted while the interest cover is less than 1.3 times after such a payment has been made.”
SNOOPY
Yes , looks like HNZ shareprice turning positive at last, its good to see a lot more buyers than sellers too, lets hope it stays that way.
More press for Heartland: http://www.nzherald.co.nz/business/n...ectid=10799352
Sp action smells of banking license decision coming soon.
Time to jump the PGGW Finance hurdles as imposed by their banking syndicate of the day (November 2009). How does Heartland stand up against them? I have gone to the latest half-year report for the
period ended 31st December 2011 (HY2012) to pull out the following figures:
(Note to readers: I haven't attempted to analyze a financial institution like this before. So I could be talking out of a hole in my WW1 goggles. Please feel free to put an alternative interpretation on the
judging criteria and correct me.)
Let the analysis begin!
SNOOPY
1/ EBIT to interest expense > 1.2
EBIT is not listed as that, so I have had to improvise. On p10 (Interim
Statements of Comprehensive Income) we find the 'Interest Income'
figure and I have subtracted from that the selling and administration
costs also on p10.
EBIT = $101.770m-$35.691m= $66.079m
Interest expense is listed as $62.64m.
So (EBIT)/(Interest Expense)= ($66.079)/($62.64)= 1.05 < 1.2
Result: FAIL TEST
SNOOPY
That seems a pretty thin margin of safety vSnoopy ..... EBIT only $3m odd above interest expense
Wouldn't want mch to go wrong
Is the 1.2 a benchmark of good performance or one that is seen as a minimum acceptable level .... like you I know vey littlr about finance companies ..... whats the norm
I think we are all very pleased with the quarter ended 31/3/12,[management a/cs] announced on 10/4/12 .This quarter would give a better indication of future profit. Operating profit for the quarter was $5.3mil compared with the first two quarters combined profit of $3.6mil.The figures up to 31/12/11 were quiet frankly hopeless,and a lot of people thought why bother. All hurdles have been jumped,and banking licence would appear to be on track,and profit now looks to be worth the effort.Finance companies borrow at one figure and lend at a different figure.To get cheap funds it pays to have the word bank in your name.To lend at a higher figure it pays to have the word finance in your name. So we are looking at Heartland Bank borrowing money to be lent by Marac finance.! The difference from what you borrow to what you lend is your margin.Borrow $1mil at 6% and lend at 14% your gross profit is 8%,or $80,000 less your overheads.It is a funny fact that banks/finance companies usually make greater profits when interest rates are higher.Of course the bank that stays in business is the one who gets their loans repaid.
60 cents @ 12:35 :) She is grinding up slowly.
I can't answer if (EBIT)/(Interest Expense) < 1.2 is some kind of 'norm'. All I can do is outline the circumstance in which this hurdle was set:
1/ PGG Wrightson Finance was quite a well respected finance company in its own right at the time. Their answer to NZX queries on their liquidity at the time almost smacked of boasting how good their reinvestment rate was (80%+).
2/ PGG Wrightson, the parent firm, was heavy with debt and in need of a cash issue (hence the prospectus)
3/ The hurdle was set by a banking syndicate who wanted their money back.
My inkling is that the 1.2 figure might contain some margin of safety. But I don't really know. Still as a small investor in HNZ, wouldn't you want some margin of safety?
SNOOPY
I take your point about HNZ being a work in progress Percy. Consequently your argument that the last reported half year report should not be taken as indicative of future half years has merit.
Let's say we are heading for a full year profit of $20m. How does that stack up in context? It turns out, not that well when considered in light of the Tier 1 and Tier 2 lending covenant test.
Criterion 5/ Minimum Equity Contribution:
Tier 1 Risk Share Lending (basic equity capital and disclosed reserves) > 20%,
Tier 2 Risk share lending (this applies to undisclosed debts, and provisions against bad debts) > 30%.
There is no mention of Tier 1 or Tier 2 in the Heartland HY2012 interim report. I am not sure how to apply this test. Perhaps someone will confirm or correct my opinion?
I think the loans have to be grouped into both 'Tier 1' and 'Tier 2' categories. Once this is done then enough equity capital has to be set aside to cover 20% of the gross lending value of 'Tier 1' loans and
likewise 30% of the 'Tier 2' loans. Add these two required amounts of capital together and the figure should not exceed the actual underlying capital on the company balance sheet.
The 'best case' scenario is that all loans are Tier 1. $1,985.55m of loans are outstanding. 20% of that figure is:
0.2 x $1,985.55m = $397.0m
From p3, Heartland has total equity of $360m, which is insufficient no matter what the tier classification of the loans. Even if $20m of profit is booked to boost shareholder capital, there would still be a shortfall of capital of $17m assuming no growth in the loan portfolio.
Result: FAIL TEST
SNOOPY
For an alternative opinion this looks more like noise to me as the SP moves up and down with the market. I think if a banking licence was imminent the share would be trading a lot closer to asset backing. A banking licence as I see it would have two benefits.
1/ An increase in the number of term deposits taken in, due to customer perception the company has become safer.
2/ A decrease in borrowing costs because of reserve bank approval.
But what is the quantitative effect of this in terms of profit? I don't know.
SNOOPY
I am appearing as the voice of caution on this thread not because I don't think Heartland will succeed (I think on balance it will). But I want investors to keep in mind other possible options of Heartland either falling over or coming back to shareholders for more capital.
If current asset backing sits at 90c, and current market norms are to value finance companies at asset backing there is another way of looking at that 60c shareprice. One might say 60c reflects a 2/3 chance of success and a 1/3 chance of failure. A 1/3 chance of failure is not insignificant to those shareholders who want to retain capital. OTOH you could say a 60c to 90c move would be quite a good return if things go well.
I see HNZ as a genuine investment with a decent risk return arbitrage. But a ticket to print money this is not.
I can see myself coming back to HNZ after the 2013 full year results come out. If things continue to go well and I invest then I would be looking at a much lesser return than those buying in today. But I will also face a much lesser risk of losing all my capital! In the meantime HNZ looks like too risky an investment for the likes of me. I will put it out there are a challenge for others to convince me otherwise!
SNOOPY
Within the spectrum of risk of a portfolio I would put this share in the high end at present. However when it was 50c it was worth a short term spec based on price trends and anticipated growth. As I said a few posts ago, I am fighting irrational greed and have a finger hovering over the sell button.
If I believe my own 2/3 chance of coming good, 1/3 chance of falling over, then I agree with you Arbitrage. At 50c HNZ would be a buy. You assume that if the share price suddenly heads south there will be buyers for your stake. As long as your holding is not too large, in relation to your overall wealth protection, then you will probably be right. Of course different shareholders have different risk profiles and that can influence what is 'right ' for 'the average shareholder' to do. It sounds like you have your head screwed on over this. I wish you well.
SNOOPY
Sorry Belg, your earlier cryptic comments made you sound like you missed the buying opportunities. Well done.
I see HNZ on a great growth path of 15 to 20% over the next 3 to 5 years .I see EPS of 10,15 and 20cents.I see PEs of 14.I see the SP trading at 2 or 3 times NTA.
So in 3/4 years time I see a SP of $2.50 to $3.paying big fat divies of 12cents or more.Buy today to enjoy 20% yields in a few years time.
History has shown us that a well run bank or finance company can be one of the fastest growing companies on the sharemarket.
Jeff Greenslade has laid the foundations for a great company.Ticked all the boxes.We are "very well positioned" to reap the full financial benefits that will be generated.
Thought everyone would post I am mad.!!! But Kerr did not organise the recap of PGC to put Marac into Heartland ,for it to do charity work.The idea was to have Marac as a bank,so it would trade on higher multiplies.Kerr could have just recapped Marac and traded on.So why all the work putting Heartland together? Because there is money to be made.I figure big money.!!!! And the ground work is complete.[well just about]
belgarion.With the passage of time I think your pyramid will generate huge wealth for you.!!!!
I guess the gearing ratio would be one important numerical foundation of a company. So how does HNZ stack up?
-------------
Criterion 3/ Gearing Ratio (Total non-risk share liabilities to total non risk tangible assets) < 90%
Once again we look at p12 ('Interim Statements of Financial Position') where we can find the underlying debt of the company: $34,808,000.
To calculate the total underlying company assets we have to (at least) subtract the finance receivables from the total company assets. I would argue that you should also subtract the problem 'Investment Properties' and the unspecified 'Investments' from that total:
$2,380.54m - ($2,075.21m +$58.08m + $24.31) = $222.94m
By contrast the Vehicles on lease should be readily saleable so for this exercise I would count those as non-risk assets.
We are then asked to remove the intangible assets from the equation as well:
$222.94m - $21.98m = $200.96m
Now we have the information needed to calculate the information asked for:
$34.8m/$200.96m= 17.3% < 90%
Result: PASS TEST
-------
So perhaps Jeff Greenslade is right?
SNOOPY
I have had a conceptual problem with this question for a while, so this might be the time to lay the cards I have on the table, using Heartland as an example.
Criterion 3 shows that Heartland's core assets: offices staff and the tools they need to do their job, are quite conservatively financed with plenty of capital.
Criterion 5 shows that in relation to the business and home loans outstanding on the books, Heartland is if anything quite short of capital.
So, does Heartland have adequate capital or not?
SNOOPY
Anyone else picked up on rumor that an overseas bank is looking to JV with HNZ?
Here is my thought experiment answer.
Suppose Heartland were to sack all of their staff and move out of all their premises. To replace everyone a single 'super executive' would be hired. ''Superexec" would possess the knowledge to perform every company task, no matter how complex or menial. "Superexec" could also snap her fingers and stop time. That would prove a handy asset because it would then be possible for a single person to complete every task, because from the perspective of everyone else she would have infinite time available to run the company. Concommitant expenses would be minimal because she would be able to run the entire company from a computer on her kitchen table.
This example would be the lowest cost of capital way to run Heartland: a single salaried employee and a laptop. I cannot see why the Reserve Bank would force Heartland in this situation to raise the money to buy an office building and some furniture, simply because it deemed a single laptop to be inadequate capital for a bank to run on.
What difference does the amount of operational capital a company has on its books make to the mechanics of running a banking business? I would say no difference.
If every customer paid their debenture back on time, no debentures were redeemed early and the lending periods perfectly matched the borrowing periods a perfect finance company would need no lending capital of its own capital at all.
Surely what the reserve bank is after is enough capital to cover the odd loan going bad? And this has nothing whatever to do with the number of Office blocks that Heartland operates from!
SNOOPY
9.58% may satisfy the Reserve Bank Percy, but it may not satisfy the banking syndicate that is behind funding the business!
--------
Criterion 5/ Minimum Equity Contribution:
Tier 1 Risk Share Lending (basic equity capital and disclosed reserves) > 20%,
Tier 2 Risk share lending (this applies to undisclosed debts, and provisions against bad debts) > 30%.
--------
SNOOPY
The objective of this exercise is to try and get you to think for yourself Percy. Ringing the company will only get you the answer that they want you to hear. In its simplest terms 'Equity Ratio' is only one number divided by another. Your challenge (or anyone else who takes it up) is to go to the last released interim report and calculate it.
Because the date of that report is 31st December 2011 not 14th March 2012 it is unlikely to be 13.5% though, even if that figure is likely tpo be 'ballpark correct'.
SNOOPY
Belgarion and myself are just about the only ones to have HNZ in their picks for the competition..
Percy.. I can not see me waiting for 3/4 years for a .. HUGE return.. ( which will come IMO ).
I.. Like i think Belgarion .. Have been accummullating.. ( sp )..
Price has gone up.. Good percentage made.. Time to sell..
My thoughts .. not Belgarions..
I was recently alerted by a friend that HNZ was looking good on charts,and only needed volume to confirm this.I viewed charts of HNZ and added to my wife's and my own holding on 10/4/12 at 49cents.The recent SP run has confirmed the break out.Positve news from the company has also helped.Time to sell? I don't know,however I would warn against selling a share in an up trend.
Balance said;
"Anyone else picked up on rumor that an overseas bank is looking to JV with HNZ? "
It shouldnt be an Aussie European or American bank as thay are capital constrained.
The most likely source of a joint venture, if it exists, is someone recycling petrodollars or the Chinese seeking to convert the value of their US Treasuries before Zimbabwe Ben Bernanke prints them into oblivion.
Boop boop de do
Marilyn
I've heard the Union Bank of Israel and the Bank of Jerusalem could be involved. Something to do with laundering money the Saudis are putting up for the Israelis to cut off the head of the snake, Iran. The whisper is that the Isaelis called on Ben Shalom Bernanke for suggestions, and have gone along with a NZ bank only reluctantly, as NZ has been difficult over their spies.
Under Surveillance are you one of those splitists and counter-revolutionaries from the Judea Peoples Front?
Only us members of the Peoples Front of Judea are in the vanguard of the struggle for Judean freedom.
All together now;
Free Galilee, free Galilee, free Galilee!
Boop boop de do
Marilyn
From p2 of the Heartland HY2012 Interim Report.
"Our intention is to become the only fully New Zealand operated, controlled and managed banking group listed on the New Zealand Stock Exchange. All funding is derived locally and is also on-lent locally
providing support to New Zealand households, small-to-medium sized businesses and farms that form the backbone of the country 's economy."
Can anyone explain how a link up with an overseas bank will help fulfill
this vision?
SNOOPY
According to 'investorwords' (www.investorwords.com) the equity ratio is defined as:
=(Total Equity)/(Total Assets)
Using numbers from the Heartland HY2012 report dated 31-12-2012, page 11
= $360.2m/$2380.5m = 15.1%
The declaration by Heartland on 14/03/2012 of an equity ratio of 13.5% represents a significant deterioration in this statistic. This has to be a worry as if the deterioration keeps up like this hopes of becoming bank will be extinguished in about 18 months. Shareholders would need to budget for a substantial capital raising before then. No warning bells ringing yet Percy?
SNOOPY
The closest I get to Judean freedom is the desire never again to hear Hey Jude (you'll remember the Beatles, and might even have given one or two of them a Ticket To Ride?).
2/ Liquidity buffer ratio (including bank lines) >10%
The hurdle setters don't specify, but I believe that this test is to provide an insight into how current liabilities are matched to current assets. It could be thought of as a 'stress test' on liquidity with a twelve-month time horizon.
From p12 (Interim Statements of Financial Position) we see HNZ has total borrowings of $1,985,551,000, made up principally of term deposits lodged with Heartland. Note 11 is meant to give a breakdown of these borrowings. Strangely there is no breakdown given of current and longer-term borrowings. Nevertheless Note 11 contains this tantalizing hint.
"On 2 August 2011, the Group entered an agreement with its securitisation facility provider to increase the MARAC ABCP Trust 1 securitisation facility by $100m to $300m, and to extend its maturity date to 8 August 2012."
This gives the impression of Heartland almost operating 'hand to mouth' with even this new banking syndicate agreement expiring within just a
year of being signed. To proceed further I can only assume that all funds deposited with Heartland, directly or indirectly (via securitisation) are 'current liabilities'.
This money has been on loaned to customers who want loans. These customers owe HNZ 'Finance Receivables' of $2,075,211,000. Again there is no breakdown as to what loans are current and longer term. Given:
1/ I understand 'liquidity' to be a balance between the maturity profile of current debenture holders VERSES
2/the loan periods associated with those on lent funds are unknown,
then my analysis comes to a full stop. Any ideas as to how to proceed from here, or even opinions on if I am on the right track, would be greatly appreciated.
Result: UNCERTAIN (due to lack of published loan data). But if almost all depositors have put their money with Heartland on a one year or less basis, then I am not encouraged.
SNOOPY
This is the same George Kerr that is so sure of the prospects of Heartland that he has recently sold all of his own shares in HNZ is it?
From
http://www.stuff.co.nz/business/opin...ter-than-white
------------
"Was PGC buying Kerr's shares, thus helping finance its own takeover?
No, said Mogridge. "There has been no buying from Mr Kerr," he told NBR through a spokesman last week.
Really?
NZX disclosures show Kerr's company Pyne Holdings had 7.7 per cent of Heartland last August, a holding it had sold down to 4.99 per cent by January 31. Thereafter no more public disclosures had to be made because the stake was below the 5 per cent threshold.
To find out what happened next, Chalkie checked the share register. On February 8, it showed PGC had yet to buy any more shares, and Pyne Holdings still had 19.3 million shares, or 4.98 per cent.
Pyne sold a few small chunks in the following days, but on February 27 it disposed of 19.1 million shares through broker First NZ Capital Securities. These were then transferred to a holding account at NZ Central Securities Depository.
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Still those warning bells aren't ringing Percy?
SNOOPY
Your industry is commendable, Snoopy.
Somehow I think you're off beam here.
SBS Bank at 31 Dec 2011 had an equity ratio, according to your definition, of 213M/2,845M or 7.5%.
Percy should be pleased that HNZ eclipses at least one banking licence holder in this metric.
Well I could be wrong Under Surveillence. I am in the sights waiting to be shot down. But I don't think anyone has hit me with a straight between the eyes shot yet. It could be there is some different definition of 'equity ratio' that Heartland is using that is not in accordance with the 'investorwords' definition. But unless someone can point out what that is I will stick with what 'investorwords' says.
Your example above is interesting but doesn't disprove anything as it stands.
Apparently the Reserve bank requirement is for an equity ratio of 9.58%. But where has this figure come from? And why is it so precise to two decimal places? Perhaps in pre GFC days the figure was less? Maybe SBS bank qualifed as such when the hurdle was set at a lower level? I am interested if anyone can shed any light on these questions!
SNOOPY
Hopefully we may have some correct answers to so many questions shortly, as I rang the company and advised them of our discussion here on sharetrader.
Yes, but I need to remind readers of this forum of one crucial point. We are trying to determine what a suitable equity ratio for HNZ is. All the figures being bandied about (bar my suggested 20% minimum) are assuming Heartland is a bank. But Heartland is not a bank. Closing your eyes and wishing yourself to be a bank does not cut it with me.
SNOOPY
Just in case anyone gets the wrong idea about my comment. I am not suggesting that HNZ is doing anything improper by not publishing a maturity profile of their debentures. I am sure that the accounts are correct as published and meet all accounting standards.
What I am suggesting is that the NZ finance sector has gone through such a rough time that publishing the bare bones legal requirements on what the accounting standards set out may not be enough engender investor confidence. And this is an issue that all finance sector companies must face.
SNOOPY