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