Impairment Provisions: Hero or Zero?
Quote:
Originally Posted by
Snoopy
A problem is bank balance dates provide a snapshot of what is happening. But a 'snapshot of impaired assets' is just that. Impaired assets are dynamic and changing. From an investment perspective I want to know what will happen in the future.
For this morning's 'question of the day' I am reverting to my favourite subject - impairment :-) - and specifically the non-core property portfolio of FY2013 (or is that the non-core dairy portfolio of FY2017).
Now, a Heartland banker who makes an impairment provision is seen as
A/ prudent, far sighted, managing debts to best practice and responsible.
OTOH a Heartland banker who has to write off a loan is seen as
B/ reckless, lacking in due diligence, ill disciplined and squandering resources.
Now the curious bit. At the end of the day whether a loan is written off in advance by 'provisioning' or written off immediately in an 'expense' makes no difference to the long term position of Heartland bank. So my question is, are Heartland's senior loan managers best characterised by A/ or B/ ?
SNOOPY