Tier 1 and Tier 2 Lending covenants HY2015 (Period Ended 31/12/2014)
Quote:
Originally Posted by
Snoopy
Once again there is no mention of Tier 1 or Tier 2 in the Heartland HY2014 report.
The 'best case' scenario is that all loans are Tier 1. $2,076.968m of loans are outstanding. 20% of that figure is:
0.2 x $2,076.968m = $415.4m
Heartland has total equity of $382.5m which is still below the 20% of loan target no matter what the tier classification of the loans.
Result: FAIL TEST
PS I do note that while other posters have protested at my 20% of equity to back up the loan measuring stick in the past, it is not too far away from the 17% which by implication is judged acceptable by management under the watchful eye of Reserve Bank chairman Graeme Wheeler. The reserve bank further qualifies their views that a company of Heartlands credit rating still has a 1 in 30 chance of going broke in any year. I prefer to think in business cycles and 30 years will contain around five of those. So you could restate the Reserve Bank's view as saying that HNZ has a one in five chance of going broke at the bottom of the business cycle. For me that investment risk is too high. So I am sticking to my 20% equity requirement, even if the Reserve Bank will settle for less.
Once again there is no mention of Tier 1 or Tier 2 in the Heartland HY2015 report.
The 'best case' scenario is that all capital is Tier 1, which is almost certainly correct. $2,657.084m of loans are outstanding. 20% of that figure is:
0.2 x $2,657.084m = $531.4m
Heartland has total equity of $462.310m which is still below the 20% of loan target no matter what the tier classification of the loans.
Result: FAIL TEST
PS I do note that while other posters have protested at my 20% of equity to back up the loan measuring stick in the past, it is not too far away from the 17% which by implication is judged acceptable by management under the watchful eye of Reserve Bank chairman Graeme Wheeler. The reserve bank further qualifies their views that a company of Heartlands credit rating still has a 1 in 30 chance of going broke in any year. I prefer to think in business cycles and 30 years will contain around five of those. So you could restate the Reserve Bank's view as saying that HNZ has a one in five chance of going broke at the bottom of the business cycle. For me that investment risk is too high. So I am sticking to my 20% equity requirement, even if the Reserve Bank will settle for less.
SNOOPY
Bad Debts HY2015 (Period Ending 31/12/2014)
Quote:
Originally Posted by
Snoopy
New tactics for the HY2014 report. The word 'impairment' isn't even mentioned in the text, which is I suppose another way to make any impaired loans go away.
In the table on page 4 there is at least a nod to 'impaired asset expense' down to $3.3m (HY2014, ended 31st December 2013) from $5.3m in the corresponding prior period (HY2013) and $5.9m in the full year to 30th June 2014. By simple subtraction the bad debt expense for the period 1st January 2013 to 30th June 2013 ( 2HY2013 ) was $22.5m - $5.3m = $17.2m.
'Impaired Asset Expense' is code for having lost all hope. Almost no chance of getting the money back. 'Restructured' and 'past due loans' do not fall under that category. So comparisom with the previous comparable period are - deliberately? - difficult to make.
In the table on page 4 the 'impaired asset expense' has increased to $5.102m (HY2015, ended 31st December 2014) up from from $3.325m in the corresponding prior period (HY2014) and $5.895m in the full year to 30th June 2014 (FY2014). By simple subtraction the bad debt expense for the period 1st January 2014 to 30th June 2014 ( 2HY2014 ) was $5.895m - $5.102m = $0.793m.
In formation of the 'stressed - but not written off- loans' may be found in 'Financial Receivables', Note 12 from IRHY2015
Bad debts are outlined as follows:
At least 90 days past due $30.652m
Individually impaired $25.984m
Restructured assets $4.012m
Allowance for impairment ($19.870)m
PV of Future Losses Adjustment ($6.919)m
Total Stressed Loans (impairments deducted) $33.469m
Gross Financial Receivables $2,749.232m
Total Finance Receivables $2,722.443m
Stressed Loan Percentage (impairment removed)= $33.469 m/ $2,722.443m = 1.59%
SNOOPY