Your only supposed to blow the [expletive deleted] doors off
Quote:
Originally Posted by
Snoopy
PT, I have reviewed my calculation. The Seniors acquisition, early in CY2014, was the last time Heartland issued a serious number of new shares to fund an acquisition. So I think it is stilll the best guide we have to that window in management's mind as to what constitutes 'sufficient shareholder capital' for Heartland to keep on the books.
However, this Senior's transaction was before the 14th January 2015 easing in reserve bank capital requirements. From that date Heartland had their 'introductory' 12% of loan book requirement reduced to:
(a)the Total capital ratio of the banking group is not less than 8% (10.5% incl 2.5% buffer ratio);
(b)the Tier 1 capital ratio of the banking group is not less than 6% (8.5% incl 2.5% buffer ratio);
(c)the Common Equity Tier 1 capital ratio of the banking group is not less than 4.5% (7.0% incl 2.5% buffer ratio).
Prior to 14th January 2015, there was no separate 'buffer ratio' requirement for Heartland.
The most streched covenant that Heartland currently must comply with is (a). This means that Heartland have been given an extra 1.5% (12% - 10.5% = 1.5%) "wriggle room" to remain in compliance with their debt covenants. IOW while my calculation I believe was correct at the time it was done, I now need to revise it becasue I am using it as a forecasting tool for today. Specifically I need to take into account the lesser amount of capital that the reserve bank now dictates Heartland must hold.
SNOOPY
Surely the answer to the question what "window in management's mind as to what constitutes 'sufficient shareholder capital'" is answered simply by reading the capital adequacy section from the disclosure statements?
Or am I missing the point here?
Best Wishes
Paper Tiger
PS With regard to the Post Title: See this video clip from the original "The Italian Job" movie, which I watched last night.
Heartland Asset Position : 31-12-2015
Quote:
Originally Posted by
Snoopy
The adjusted 'management acceptable' equity to loan portfolio value ratio is now:
$309.9m / $2,077m = 14.9%
Note: This figure includes an extra margin of 14.9 -10.5 = 4.4 percenatge points above the minimum reserve bank guidelines.
Refer to the interim report of FY2016 for the latest audited Heartland information. Time has rolled on and the total loan portfolio at the latest balance date (31-12-2015) was: $2,928.621m (Interim Statement of Financial Position)
Home equity release loans, which apparently have separate capital requirements total $422.706m (note 18c).
So the loan portfolio, less home equity release loans, was:
$2,928.621m - $422.706m = $2,505.915m
Balance date shareholder equity was: $485.688m
(Explanation: I know that assessable Tier capital is reduced to $428.539m as outlined in note 19a. But this is a recent report disclosure. So I need to use the 'slightly incorrect' earlier quoted higher number to maintain compatability with my previous calculation).
So firstly, I can calculate the 'equity' to support the Reverse Mortgage Business as:
0.114 x $422.706m = $48.188m
And that measn the equity left to support the rest of the business is:
$485.688m - $48.188m = $437.5m
So the equity to loan book ratio, with the reverse mortgage business taken out of the equation, at balance date was:
$437.5m / $2,505.915m = 17.4%
Now let's imagine for a moment that Heartland only had share capital of $373.4m
$373.4m / $2,505.915m = 14.9% (the same value that mangement were comfortable with before).
By this measure then, Heartland currently has:
$437.5m - $373.4m = $64.1m of 'surplus capital' on the books.
The total of individually impaired and restructured assets still on the books amount to just over $30m (note 6). So if the impairment people have done their job correctly, you would have to conclude that Heartland, relative to their position of a year ago, is getting stronger in terms of balance sheet strength. And in absolute terms, if you take management's past judgement as 'reasonable', they are now in 'more than reasonable' shape.
SNOOPY