Heartland - TSB Synergy Benefits

[Basil]

What do you think ?

[Red Baron]

What do you think ?

Zhey hedged zheir 'integration cost zaving bet', by carefully leaving out any costs related to computer system integration!

RB

[Shareguy]

Insert from Craigs

Merger synergies and transaction costs
HGH estimates merger synergies of $34m to be realised over three years. This does not
appear excessive given TSB's high CTI ratio of over 65%, and pro-forma merged CTI ratio of
approx. 60% (see figure 4 below). $34m of synergies would bring the pro forma CTI to the
low-50% level which we think appears more achievable based on HGH's run-rate and existing
targets.
These synergies do not include technology related items, which is surprising given we would
expect IT costs could be a material source of opex savings. HGH management indicated they
have yet to decide on which IT system will be used by the merged company, although we
think it is likely the HGH system will be chosen given 1) it is a relatively new Oracle-based
system compared to TSB which we understand is an in-house development, and 2) the TSB
products (mainly retail mortgages) appear simpler to integrate than the peculiarities of
reverse mortgages, livestock lending, and MV loans.
One-off integration costs of $34m are also expected to be incurred over three years.
HGH also indicated $7m of transaction costs to be reported in FY26 and a further $8m of
transaction costs in FY27, with the most of the $8m in FY27 contingent on the deal
proceeding.


 

[Left Field]

What do you think ?

I think you are searching for evidence via this rather poorly designed survey that your negative views of the HGH/TSB merger are correct.

The Challenger acquisition in Aus has proved beneficial for HGH and in the fullness of time the HGH/TSB merger is likely to be a good move too.

In the months ahead all will be revealed by the market - not by a dubious survey like this.

[Shareguy]

Thought this was good. Salt have skin in the game in their long/short fund.

https://youtu.be/1zZI50E7Qsc?si=eljlM-bHYMXzIZPy

[LoungeLizard]

I was highly critical of HGH's move into Australian banking. It was ill-timed and not enough due diligence. That might turn out to be ok, but initially my fears were realised.

 I am less worried about their move into NZ retail banking, but still worried. On the positive side, I see this as a natural evolution from being predominantly a rural lender to a more visible high-street bank, albeit still a small fish in the pond. I would have preferred they had done this first, then thought about getting into OZ.

 My biggest concern is that HGH's management have a large credibility gap with the smaller investor. Their series of capital raises favoured institutions and every single one left retail investors worse off. Their forecasts for growth were hopelessly over-optimistic. The other thing is their technical competence. They made a bit of a mess with Challenger and the jury is out whether they can really bring the synergy's into fruition. Maybe TSB's expertise will be of help in this regard.
The share registry is also going to balloon out - can they generate the revenue to preserve or enhance eps and dividends. Answer: don't know.

All up, I support the move but I'm waiting to get more detail before I decide to jump in.