How Depositors are 'expected' to behave: FY2015 update
Quote:
Originally Posted by
Paper Tiger
Can I just point out that the figures you use are not the expected maturity numbers but the contractual maturity figures.
When looking at company liquidity, it is useful to have an estimate of how depositors are expected to behave in the coming year, rather than just looking at the maturiity dates of their cash funds/debentures.
Over FY2014 Heartland managment provided this information. But from FY2015 they do not. Below I have tabulated the 'expected' and 'contractual' depositor behaviour.
FY2013 Deposit Maturity (Financial Liabilities) |
Expected |
Contracted |
E/C |
On Demand |
$4.522m |
$452.201m |
1.00% |
0-6 months |
$413.371m |
$881.306m |
46.9% |
6-12 months |
$235.172m |
$648.567m |
36.2% |
FY2014 Deposit Maturity (Financial Liabilities) |
Expected |
Contracted |
E/C |
On Demand |
$18.922m |
$629.125m |
3.01% |
0-6 months |
$242.431m |
$748.129m |
32.4% |
6-12 months |
$195.682m |
$538.050m |
36.4% |
Of particular interest is the very small redemption rate from the on demand account, across both teh FY2013 and FY2014 years.
During FY2013 Heartland was still establishing a 'depositors profile'. So in my judgement the best indicative figures we have for FY2015 come from FY2014. My table of expected depositor behaviour for FY2015 follows:
FY2015 Deposit Maturity (Financial Liabilities) |
Expected |
Contracted |
E/C |
On Demand |
$22.450m |
$748.332m |
3.01% |
0-6 months |
$395.102m |
$1213.450m |
32.4% |
6-12 months |
$249.762m |
$686.159m |
36.4% |
SNOOPY
How Loan customers are 'expected' to behave: FY2015 Update
Quote:
Originally Posted by
Paper Tiger
Can I just point out that the figures you use are not the expected maturity numbers but the contractual maturity figures.
FY2013 Loan Maturity (Financial Liabilities) |
Expected |
Contracted |
E/C |
On Demand |
$185.782m |
$185.782m |
100% |
0-6 months |
$611.342m |
$628.167m |
97.3% |
6-12 months |
$542.352m |
$387.031m |
140% |
FY2014 Loan Maturity (Financial Receivables) |
Expected |
Contracted |
E/C |
On Demand |
$50.254m |
$50.254m |
100% |
0-6 months |
$629.445m |
$477.190m |
132% |
6-12 months |
$483.727m |
$367.564m |
132% |
Of particular interest is the very significant early cashing up of loans, (except for loans that are already payable on demand).
During FY2013, Heartland was still liquidating the problem property portfolio. So in my judgement the best indicative figures we have for an FY2015 forecast come from FY2014. My table of calculated expected customer loan initiator behaviour for FY2015 follows:
FY2015 Loan Maturity (Financial Receivables) |
Expected |
Contracted |
E/C |
On Demand |
$37.012m |
$37.012m |
100% |
0-6 months |
$877.215m |
$664.557m |
132% |
6-12 months |
$594.842m |
$450.638m |
132% |
SNOOPY
Liquidity Buffer Ratio FY2015: Iteration 2
As PT pointed out, my liquidity calculation used contractual cashflows not expected cashflows. This will likely give an incorrect result by assuming nothing is rolled over. Heartland no longer publishes 'expected' cashflows. This means I need to take an educated guess to derive them. I have previously posted my educated guesses on expected loan agreement maturities and debenture and call deposit maturities for FY2015. I repeat this information below:
Quote:
Originally Posted by
Snoopy
My table of calculated expected customer loan initiator behaviour for FY2015 follows:
FY2015 Loan Maturity (Financial Receivables) |
Expected |
Contracted |
E/C |
On Demand |
$37.012m |
$37.012m |
100% |
0-6 months |
$877.215m |
$664.557m |
132% |
6-12 months |
$594.842m |
$450.638m |
132% |
Quote:
My table of expected depositor behaviour for FY2015 follows:
FY2015 Deposit Maturity (Financial Liabilities) |
Expected |
Contracted |
E/C |
On Demand |
$22.450m |
$748.332m |
3.01% |
0-6 months |
$395.102m |
$1213.450m |
32.4% |
6-12 months |
$249.762m |
$686.159m |
36.4% |
Time to update the Liquidity Buffer ratio for FY2015, the balance between monies borrowed and monies lent and matching up those maturity dates using a one year time horizon. The equation we are looking to satisfy is:
(Total Current Money to Draw On)/(Net Current Loans Outstanding) > 10%
On the numerator of the equation, we have borrowings.
HNZ BORROWINGS
1/ Term deposits lodged with Heartland. |
$2,097.458m |
2/ Bank Borrowings |
$465.779m |
3/ Securitized Borrowings total |
$258.630m |
4/ Subordinated Bonds |
$3.378m |
Total Borrowings of (see note 13) |
$2,825.245m |
Note 13 does not contain a clear breakdown of current and longer-term borrowing amounts and their maturity dates.
Banking facilities are provided by CBA Australia but for both Australia and New Zealand. These facilities are, I believe, in relation to the recently acquired reverse mortgage portfolio. These banking facilities are secured over the homes on which the reverse mortgages have been taken out. These loans have a maturity date of 30th September 2019. That means they are classed as ‘long term’ for accounting purposes. Heartland can’t rely on CBA Australia as a source of short-term funds.
The information given in note 13 on the securitized borrowing facilities is as follows:
-------
|
Total FY2015 |
Total FY2014 |
Facility Maturity Date FY2015 |
Securitized bank facilities total all in relation to the Heartland ABCP Trust 1 |
$350.000m |
$400.000m |
3rd February 2016 (*) |
less Current level of drawings against this facility |
$258.630m |
$228.623m |
equals Borrowing Headroom |
$91.370m {A} |
$171.377m |
(*) I do not expect any problem in rolling this facility over for another year.
--------
Bank borrowings no longer explicitly rank equally with the securitized bonds. Therefore, I think it is safe to assume that if HNZ got into cashflow difficulty, the different classes of borrowings would be repaid in the following order:
1/ Bank Borrowings,
2/ Securitized Borrowings,
3/ Subordinated Bond (new from FY2014 but only worth $3.378m) and finally
4/ deposits from debenture holding customers.
IMO that represents a large new incremental risk for Heartland depositors that has received almost no media attention.
All four sources of drawn funds itemized have been "on loaned" to customers who want loans.
HNZ LENDINGS
Customers owe HNZ 'Finance Receivables' of $2,862,070,000. There is no breakdown in note 11 as to what loans are current or longer terms. However, if we look at note 20, we can derive the expected maturity profile of total finance receivables due over the next twelve months.
|
On Demand |
0-6 Months |
6-12 Months |
Total |
Expected Receivables Due |
$37.012m |
+ $877.215m |
+ $594.842m |
= $1,509.069m |
less Expected Deposits for Repayment |
$22.450m |
+ $395.102m |
+ $249.762m |
= $667.314m |
equals Net Expected Cash Into Business |
$14.562m |
$482.112m |
$345.080m |
$841.755m {B} |
If more money is coming in from customer loans being repaid, than is having to be repaid to the debenture holders, then this is a good thing for liquidity. That now is the case here.
Summing up:
(Total Current Money to Draw On)/(Net Expected Cashflow into Business)
= {A} / {B}
= $91.370m / $841.755m
= 10.8% > 10%
=> Pass Short term liquidity test (reversing the result of my most likely incorrect first iteration)
|
FY2015 |
FY2014 |
Amount lent to Customers (Receivables) |
$2,862.070m (+9.7%) |
$2,607.393m |
Total Borrowings |
$2,825.245m (+11.9%) |
$2,524.460m |
Amount borrowed from Customers (Debentures and Deposits) |
$2,097.458m (+20.8%) |
$1,736.751m |
Securitized borrowing facilities have gone down by $50m ($400m to $350m) over the same annual comparative period. So Heartland have upped their current period risk profile by having a smaller declared available loan buffer to cover any mismatch between maturing borrowings and maturing receivables.
SNOOPY