The commencement of proceedings
Quote:
Originally Posted by
Snoopy
...PT was of the opinion that any capital over and above the minimum reserve bank requirements should be regarded as 'surplus capital'....
Snoopy
The Dog House
Lower New Zealand
Dear Canine
With reference to the above quote from your recent post I refer you to this post: [http://www.sharetrader.co.nz/showthr...=1#post620346] where the Paper Tiger clearly clarified the meaning of his statement.
Your willful, deliberate & repeated misinterpretation of the Paper Tiger's generous guidance to you through your impossible task of trying to prove that a perfectly sound bank hereafter called Heartland Bank is a bit of a fizzer leaves the Paper Tiger no options.
Therefore you are challenged to a duel at 9am tomorrow (Saturday 28th May 2016) above the fields of Wanaka. The choice of World War I fighter planes is yours.
On behalf of the Paper Tiger
Manfred
PS. The Baroness says thanks for the scone recipe and asks can you use fruit instead of the cow's liver?
Customer Concentration Test HY2016
Quote:
Originally Posted by
Snoopy
I am rather overdue for our once a year peak into customer ‘asset distribution’ and ‘asset quality’. Our concentration test is that:
Highest single new customer group exposure (as a percentage of shareholder funds) <10%
Regional Risk
From AR2015 Note 18b, the greatest regional area of credit risk in dollar terms is Auckland, with $830.027m worth of assets. This represents:
$830.027m/ $3,234.025m = 26% of all loans
This is slightly up on FY2014. But I don’t rate that concentration of loans in Auckland as being an issue. Particularly so when ‘Auckland’ is such a varied catch all group.
Industry Group Risk
From AR2015 Note 18c, the greatest 'business group' risk in dollar terms is Agriculture, with $537.286m worth of assets. This represents:
$537.286m/ $3,234.025m = 17% of all loans
This is slightly up on FY2014, when agriculture was
$469.020m/ $2,891.597 = 16% of all loans
Both these figures are quite high and trending in the wrong direction for FY2015. Given that Heartland is nominally a specialist agricultural lender I wouldn't be too concerned. But if agricultural loans go above 20% of the total (or dairy representing about half the agricultural loans above 10%), then I would sound an alarm bell. This situation will need careful watching when the FY2016 result details are released IMO.
Now a word on Asset Loan Quality.
Looking at Note 19d, the Grade 6 monitor assets have come down from $115.76m to $99.849m. Good news!
Next, the sum of the grade 7, 8 and 9 assets is now $26.533m, down from $31.765m. This is a useful improvement.
When these loans appear on the balance sheet, they are netted off against provisions for impaired assets already made. The provision for collectively impaired assets is now $10.201m, up from $6.999m. So a few more losses have been 'taken on the chin'.
The $8m ‘fair value adjustment for present value of future losses’ in FY2014, has reduced to $6.242m in FY2015. This provision relates to the Home Equity Release Loans acquired in FY2014. I cannot explain why this reduction has occurred
Overall, ‘problem assets’ (grade 6, 7, 8 and 9 combined) total $126.382m. This is down 14% on the $147.591m recorded in FY2014.
Updating these risk calculations based on the last half year reporting date, using figures found here.
http://shareholders.heartland.co.nz/...ment-dec15.pdf
Our test requirement is:
Highest single new customer group exposure (as a percentage of shareholder funds) <10%
Regional Risk
From reference Note 12b, the greatest regional area of credit risk in dollar terms is Auckland, with $779.242m worth of assets. This represents:
$779.242m/ $3,237.047m = 24% of all loans
This is two percentage point reduction on FY2014. Still high. But I don’t rate that concentration of loans in Auckland as being an issue. Particularly so when ‘Auckland’ is such a varied catch all group.
Industry Group Risk
From reference Note 12c, the greatest 'business group' risk in dollar terms is Agriculture, with $570.735m worth of assets. This represents:
$570.735m/ $3,237.047m = 18% of all loans
This is slightly up on FY2015, when agriculture was
$537.286m/ $3,234.025m = 17% of all loans
These figures are quite high and continue trending in the wrong direction for HY2016. Given that Heartland is nominally a specialist agricultural lender I wouldn't be too concerned. But if agricultural loans go above 20% of the total (or dairy representing about half the agricultural loans above 10%), then I would sound an alarm bell. This situation will need careful watching when the FY2016 result details are released IMO.
Now a word on Asset Loan Quality.
In the half year result, ther is no breakdown of the 'judgement loan' category of lending. Judgement loans consist of business an rural lending, the latter in particular of interest in this climate of dairy industry turmoil. This means that accounting provisions on dairy loans are largely hidden in these half year accounts.
In the half year presentation p14, Rural impairments are up $0.3m to $0.4m, "which remains very low." Total impairments across all loan categories are now $5.6m. I wonder how realistic that rural sector provision is given a very recent Fronterra milk solid payout forecast of $4.20? I would be happier if the rural provisioning at Heartland was higher! But all will be revealed when the greater disclosure on these judgement loans is released at the full year reporting date.
When these loans appear on the balance sheet, they are netted off against provisions for impaired assets already made. The provision for collectively impaired assets is now $12.029m, up from $10.201m at full year balance date. This has risen largely because new provisions have exceeded actual write offs over the last six months.
The $5.599m ‘fair value adjustment for present value of future losses’ in HY2016, is slightly reduced compared to the $6.242m for all of FY2015. This provision relates to the Home Equity Release Loans acquired in FY2014. I believe this provision is a requirement of accounting standards and in the past has overestimated actual losses. So is this an indicator of HBL writing net less home equity release business going forwards? IOW their home equity release portfolio is unwinding as it shrinks, in real terms? I note that the interim presentation p19 states "steady increase in new business" but "high repayment levels".
SNOOPY