The story remains the same
Quote:
Originally Posted by
Snoopy
The above conclusion, at first glance doesn't make sense. Here we have a mismatch with over a billion dollars worth more of loans maturing than maturing deposits to be paid out. That sounds really good, and is a record surplus from a security of deposits viewpoint. So how can I turn around and fail Heartland on this liquidity test?
Two comments:
1/ The total ability of Heartland to borrow is not declared in the Annual Report. Yes $65.571m can be borrwed from the banking syndicate in Australia. But there is no mention of what the equivalent figure is in New Zealand. This undeclared parent bank borrowing ability will very likely see Heartland pass this liquidity test. It is just on the publicly declared part of their ability to borrow that Heartland fails.
2/ I pulled this liquidity test from a time where the GFC had just happened. This meant that the real risk at the time was with debenture depositors not getting their money back becasue of liquidity issues. This kind of risk with supposedly reputable finance companies stunned me at the time. But I wonder if there is a converse kind of liquyidity risk for on the loan book now? Could it be that Heartland might have a problem lending out their depositors money?
SNOOPY
The simple answer is 'Garbage In, Garbage Out' or to put it a little more kindly:
Have you considered the possibilities that you are using the wrong inputs, failing to understand the original test and are so negatively biased towards Heartland that you can not see the facts for the fiction?
So why not sit down with a bowl of your favourite dog-food and Peanuts.
https://s-media-cache-ak0.pinimg.com...5f3d16c176.jpg
Best Wishes
Paper Tiger
I think Snoopy likes the attention
Quote:
Originally Posted by
Felonius
Percy & Tiger. Why so rude to Snoopy ?
Thanks to you Percy I am a shareholder in HBL. Determining whether it was / is a good investment is beyond me and without your excellent record & advice I would not have considered buying in. Could it be that Snoopy is generously trying to prevent us losing money on a risky investment ?
I can only assume that you have spent time reading his arguments carefully, understand the issues that he is attempting to discuss, and are quite sure that what he is saying does not make sense.
I spend little time reading Snoopy's posts. To my simple mind his views & spreadsheets appear carefully considered & well expressed. Agreed, he does seem somewhat fixated on Heartland Bank and I don't know whether it's warranted or not, but please try to be more kind (or respectful).
Felonius >> felon >> convicted of a serious crime >> robbed a bank :eek2: & got caught :t_down:?
Here is the Tiger take on the important question that Snoopy is trying to answer.
If has a result of some people actually believing Snoopy's posts that Heartland always was, currently is and always will be a failing bank, that 10% of the money on loan to Heartland is [attempted to be] withdrawn at the earliest contractual moment can Heartland actually pay them.
The answer to that would appear to be (from reading the accounts) a pretty definite YES.
Best Wishes
Paper Tiger
Liquidity Buffer Ratio or 'Meads Test' HY2017 (Part 1)
Quote:
Originally Posted by
Snoopy
This is the most imprtant calculation that most nvestors in finance companies never do. I have rechristened it the 'Meads Test'. The Meads Test is way to find out if dear old Colin says a profitable finance company is 'solid as', whether that company will run out of cash when it comes time to repay your debenture. "Liquidity Buffer Ratio" sounds a bit pompous, so I will adopt the term 'Meads Test' in the future, as I think most investors will relate to that term better.
We are looking at the balance between monies borrowed and monies lent and matching up those maturity dates using a one year time horizon. The equation we are looking to satisfy is:
(Total Current Money to Draw On)/(Expected Net Current Loans Outstanding) > 10%
Heartland provides a nice projection of forward cashflows in note 14 of IRFY2016. But these are contacted cashflows. In practice depositors roll over their Heartland debentures. And when customers repay a Heartland loan, they often take out another loan. So what we as investors need to concentrate on is the
expected behaviour of those that take out loans from Heartland and those that loan money to Heartland. Expected behaviour is not written in stone. But we can make an educated guess at this by looking at what happened in prior periods where both 'contracated' behaviour and 'expected' behaviour was tabulated. "Adjustment factors" in the table below:
HY2016 Loan Maturity (Financial Receivables) |
Contracted |
CE Factor |
Expected |
On Demand |
$31.879m |
1.000 |
$31.879m |
0-6 months |
$618,779m |
1.32 |
$816.778m |
6-12 months |
$277.017m |
1.32 |
$345.662m |
HY2016 Deposit Maturity (Financial Liabilities) |
Contracted |
CE Factor |
Expected |
On Demand |
$728.056m |
0.0301 |
$21.914m |
0-6 months |
$1,360.508m |
0.324 |
$440.805m |
6-12 months |
$498.705m |
0.364 |
$181.529m |
Now I have generated the expected cashflow data over the ensuing twelve months, I can proceeed to make some 'Meads Test' calculations.
The 'Meads Test' is way to find out if dear old Colin says a profitable finance company is 'solid as', whether that company will run out of cash when it comes time to repay your debenture. "Liquidity Buffer Ratio" sounds a bit pompous, so I have adopted the term 'Meads Test'. I think most investors will relate to that term better.
We are looking at the balance between monies borrowed and monies lent and matching up those maturity dates using a one year time horizon. The equation we are looking to satisfy is:
(Total Current Money to Draw On)/(Expected Net Current Loans Outstanding) > 10%
Heartland provides a nice projection of forward cashflows in note 14 of IRFY2017. But these are contracted cashflows. In practice depositors roll over their Heartland debentures. And when customers repay a Heartland loan, they often take out another loan. So what we as investors need to concentrate on is the expected behaviour of those that take out loans from Heartland and those that loan money to Heartland. Expected behaviour is not written in stone. But we can make an educated guess at this by looking at what happened in prior periods where both 'contracted' behaviour and 'expected' behaviour were tabulated. "Adjustment factors" in the table below:
HY2017 Loan Maturity (Financial Receivables) |
Contracted |
CE Factor |
Expected |
On Demand |
$69.655m |
1.000 |
$69.655m |
0-6 months |
$802.074m |
1.32 |
$1,058.738m |
6-12 months |
$538.448m |
1.32 |
$710.751m |
HY2017 Deposit Maturity (Financial Liabilites) |
Contracted |
CE Factor |
Expected |
On Demand |
$754.583m |
0.0301 |
$22.713m |
0-6 months |
$1,047.186m |
0.324 |
$339.288m |
6-12 months |
$889.191m |
0.364 |
$323.666m |
Now I have generated the expected cashflow data over the ensuing twelve months, I can proceeed to make some 'Meads Test' calculations.
SNOOPY