Rural Loan Impairments FY2014 to FY2019
Quote:
Originally Posted by
winner69
In that Heartland announcement They said that 6% of loans are dairy related.
but i am puzzled as to why they added these sentences, especially the 2nd one - "The average loan to value ratio (LVR) for Heartland’s dairy exposures is 61%. However, it is important to note that LVRs are only one of the indicators of loan quality"
Do we interpret that as Heartland themselves think the 61% is a high/risky number but its all OK because other things are alright. If so why even mention all this as everybody was excited at being told the exposure was low.
One thing I have learned over many years announcements have to be read carefully to really try to understand what is being said.
Just adding to Rogers note - even if 5% of these dairy loans go bad that's a decent chunk of the $50m profit gone.
Not too much point debating dairy anymore. Those who believe are happy as so no problems. Those who have concerns manage the risk best they can. Whatever happens you can either praise or blame yourself, what you do is up to you.
I still hold until the annual accounts. I believe there is more risk with heartland than a while ago and will manage accordingly.
If anybody is interested have a look at sector analysis in recent accounts and track impairment expense under rural for the last 3 to 4 quarters.
After five years I have decided to take up Winner's suggestion to get a handle on these Rural Loan bad debts once and for all. The only change I am making is that I am looking at six month periods, not quarters, because Heartland no longer reports quarterly. 'Rural loans' cover 'Rural land loans' and 'Rural stock loans'.
Period |
Declared Rural Asset Impairment Expense |
Half Year Rural Asset Impairment Expense |
HY2020 |
$0.189m |
$0.189m |
FY2019 |
($0.132m) |
|
2HY2019 |
|
$0.003m |
HY2019 |
|
($0.135) |
FY2018 |
$1.157m |
|
2HY2018 |
|
($0.205m) |
HY2018 |
|
$1.362m |
FY2017 |
$0.317m |
|
2HY2017 |
|
($0.060m) |
HY2017 |
|
$0.375m |
FY2016 |
$2.959m |
|
2HY2016 |
|
$2.585m |
HY2016 |
|
$0.374m |
FY2015 |
$0.135m |
|
2HY2015 |
|
$0.063m |
HY2015 |
|
$0.072m |
The figures in brackets are impairments written back. Heartland have said they are not chasing any new rural land loans. So the impairments since FY2016 must either be 'rural land loans' that have further deteriorated since FY2016 or stock loans on which they have lost money. My memory is that the last three years have been relatively favourable for stock. It is only the drought combined with COVID-19 trade restrictions that have really made life difficult for stock in 2HY2020, a period for which the HGH results are not yet released. This means I am picking that the HY2020 rural 'write down' does relate to land and probably dairy farm land (from market data dairy fam land sales are the worst affected). The situation for stock and farmland has got worse since January 2020. So it wouldn't surprise me if the rural write-down for 2HY2020 at least matches the rural write-down for HY2020. Will the full year rural write-down match the near $3m figure from FY2016? I think it is possible.
SNOOPY