Bad Debts HY2016 (period ending 31-12-2015)
Quote:
Originally Posted by
Snoopy
In the table under note 6 of AR2015, the 'impaired asset expense' has increased to $12.105m (FY2015, ended 30th June 2014) up from from $5.895m in the corresponding prior period (FY2014). The HY2015 impaired asset expense was $5.102m. By simple subtraction the bad debt expense for the period 1st January 2015 to 30th June 2015 (2HY2015) was $12.105m -$5.102m = $7.003m.
Information of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 11 from AR2015
Bad debts are outlined as follows:
At least 90 days past due $34.975m
Individually impaired $25.622m
Restructured assets $3.881m
Allowance for impairment ($25.412)m
PV of Future Losses Adjustment ($6.242)m
Total Stressed Loans (impairments deducted) $32.824m
Gross Financial Receivables $2,893.724m
Total Finance Receivables $2,862.070m
Stressed Loan Percentage (impairment removed)= $32.824 m/ $2,862.070m = 1.15%
In the table under note 4 of IRHY2016, the 'impaired asset expense' has increased to $5.610m (HY2016, ended 31st Dec 2015) up from from $5.102m in the corresponding prior period (HY2015). By simple subtraction the bad debt expense for the immediate period 1st January 2015 to 30th June 2015 (2HY2015) was $12.105m -$5.102m = $7.003m.
Information of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 6 from IRHY2016.
Bad debts are outlined as follows:
At least 90 days past due $21.207m
Individually impaired $27.179m
Restructured assets $3.235m
Allowance for impairment ($16.875)m
PV of Future Losses Adjustment ($5.599)m
Total Stressed Loans (impairments deducted) $29.147m
Gross Financial Receivables $2,951.075m
Total Finance Receivables $2,928.621m
Stressed Loan Percentage (impairment removed)= $29.147 m/ $2,928,601m = 1.00%
SNOOPY
A Conceptual Answer to the Finance Company Comparison Question
Quote:
Originally Posted by
winner69
I wonder how Heartlands crop of hair compares to other finance companies. seeing they are really one in drag
This is a great question. The problem is that all finance companies, and I include in that definition finance companies wearing bank suits, are a bit different. An obvious comparison is Heartland vs UDC. But as a potential investor, you can only buy shares in UDC through buying the ultimate ANZ parent in Australia which is a very different beast.
Another obvious comparison is HBL vs Turners Group. The problem there is that TNR now contains the old TUA auctions business which is very different to anything inside HBL. So this is why I have spent some time on the TNR thread, pulling the 'finance' part out of TNR using the segmented information provided in the TNR report. 'TNR Finance' provides a better measuring stick.
When I do a comparison between companies, I like to compare common 'stuff'. With finance companies I consider the basic building blocks of 'stuff' to be 'loans'. The underlying 'resource' that allows a finance company to operate I consider to be EBIT. The more EBIT a finance company can make, relative to the size of their loan book, the more 'naturally profitable' they are. So I consider the driving engine of any finance company to be:
EBIT/ (average loan book size)
Unfortunately in the real world both 'I' and 'T' need to be paid. So the amount of underlying parent bank debt can reduce the strength of this earnings engine.
Now if all loans were equal, then this is the only statistic any analyst would need. But as we know all loans are not equal. 'Haircuts' need to be taken from time to time. Indeed any finance company that does not build 'haircuts' into their normal business model is kidding themselves.
I consider a useful measure of 'possible haircutting' to be:
'impaired loans' / 'shareholder equity'
This is becasue it is ultimately we shareholders who have to pay for these 'haircuts'. And the greater the bad loans in relation to our shareholder equity, the more at risk we shareholders are.
So there we have in essence my way of answering Winners question.
1/ Look at the Earnings Capacity from the loan book on a 'normalised' basis.
2/ Balance this against the likelihood of shareholders having to take haircuts on bad loans.
Putting it all into practice is another step. I wish things could be simpler. But unfortunately, this is as simple as things are liable to get :-(
SNOOPY