HGH - Heartland Group Holdings

[Basil]

Indicative pricing for the bond issue
https://announcements.nzx.com/detail/410004
At the mid point of the indicated margin range and based on the 5 year swap rate on Friday HGH will be paying 7.57% on these bonds.

Gosh, they must be VERY keen to get the money in the door to pay that much.  That, and investors perceive this as quite a risky investment.

With them now paying 6% on 1 year term deposits and this much on corporate bonds, there's surely going to be a significant effect on the net interest margin going forward as they have about $1.3 billion of motor vehicle loans previously written at much lower prevailing fixed interest rates than what those loans would be priced at today.

[BlackPeter]

Indicative pricing for the bond issue
https://announcements.nzx.com/detail/410004
At the mid point of the indicated margin range and based on the 5 year swap rate on Friday HGH will be paying 7.57% on these bonds.

Gosh, they must be VERY keen to get the money in the door to pay that much.  That, and investors perceive this as quite a risky investment.

With them now paying 6% on 1 year term deposits and this much on corporate bonds, there's surely going to be a significant effect on the net interest margin going forward as they have about $1.3 billion of motor vehicle loans previously written at much lower prevailing fixed interest rates than what those loans would be priced at today.

Don't forget - these are their junk bonds (BB+) ... so I guess paying an interest rate hardly above inflation is not really expensive.

Did they say what they want to use this money for? I assumed (potentially wrong) it is for their Equity release mortgages - and in that case there still should be some margin left for them. I see they currently charge a variable interest rate of 9.5% for their reverse mortgages. A nearly 2% difference between what they pay and what they charge their customers (hey, that's a 20% margin) does not look bad - and don't forget either that Heartland gets a much better security (a mortgage with huge headroom for property prices to fall) then the poor bastards buying Heartlands junk bonds ...

I'd say its a good time to own Heartland shares ;

[kiwi2007]

   https://www.ft.com/content/abf6b2ff-6abe-416e-8479-d89216cc5f09

"....Average yields on double-B rated US bonds — the top rung of the non-investment-grade ladder, comprising half the overall junk bond market — have fallen to 6.8 per cent from a peak of 7.5 per cent in mid-March, trading close to levels seen in early February.

By contrast, borrowers with weaker ratings have remained under pressure. An index of triple-C and lower bonds tracked by Ice Data Services currently yields 15.3 per cent — down slightly from a high of 15.6 per cent on March 20, but still well above levels from two months ago...."

Perhaps Heartland are being a touch overgenerous towards potential bond investors?
 

[Basil]

Don't forget - these are their junk bonds (BB+) ... so I guess paying an interest rate hardly above inflation is not really expensive.

Did they say what they want to use this money for? I assumed (potentially wrong) it is for their Equity release mortgages - and in that case there still should be some margin left for them. I see they currently charge a variable interest rate of 9.5% for their reverse mortgages. A nearly 2% difference between what they pay and what they charge their customers (hey, that's a 20% margin) does not look bad - and don't forget either that Heartland gets a much better security (a mortgage with huge headroom for property prices to fall) then the poor bastards buying Heartlands junk bonds ...

I'd say its a good time to own Heartland shares ;

Interest rate set at 7.51% and they took all the oversubscriptions so yes a 2% margin at this point in time, (against a historic NIM until very recently north of 4%).  Thing is floating rates are probably close to a peak so when they start coming down again, hopefully in 2024, Heartland is stuck paying 7.51% for several more years so this bond issue with not help with challenges going forward around maintaining decent margins.

Reducing NIM for American regional banks is getting a lot of airtime on CNBC at present due to the higher deposit rates regionals are having to pay to attract funds.  (We're seeing that here with Heartland too)
More talk about how reduced levels of funding will reduce regional's ability to grow their loan book too.

Interesting times (headwinds), for Heartland going forward and I note they have already well and truly underperformed the NZX50 over the last 5 years.

[Clearasmud]

The

Interest rate set at 7.51% and they took all the oversubscriptions so yes a 2% margin at this point in time, (against a historic NIM until very recently north of 4%).  Thing is floating rates are probably close to a peak so when they start coming down again, hopefully in 2024, Heartland is stuck paying 7.51% for several more years so this bond issue with not help with challenges going forward around maintaining decent margins.

Reducing NIM for American regional banks is getting a lot of airtime on CNBC at present due to the higher deposit rates regionals are having to pay to attract funds.  (We're seeing that here with Heartland too)
More talk about how reduced levels of funding will reduce regional's ability to grow their loan book too.

Interesting times (headwinds), for Heartland going forward and I note they have already well and truly underperformed the NZX50 over the last 5 years.

They haven't underperformed the NZX50C.
I doubt their NIM will drop the way they are raising there reverse mortgage interest rate -now 9.5%

[Basil]

Maybe a sign of things to come...
https://www.interest.co.nz/banking/121082/half-year-profit-drops-westpac-nz-bank-warns-worsening-economic-outlook

[Waltzing]

DIV is heading up though as they cut expenses and its an AUS company which means no matter how badly they are run the AUS GDP over the next 10 years lifts even the leaky boats.....

go the Kangas... ANZ back up to 80 and this leaky boat back to 70....

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/WBC/411046/393891.pdf

dazzle them with graphs....

[snapiti]

UDC latest result is a indication that HGH will also have increased impairments.....UDC profit down 14% yoy

[Crackity]

UDC latest result is a indication that HGH will also have increased impairments.....UDC profit down 14% yoy

But HGH is a bank - UDC is only a finance company

[snapiti]

still apples......one being a cranny smith the other a braeburn, both facing a stormy future.
IMO HGH will have higher impairments happening right now and in the foreseeable future....do you not agree Crackity
I can see $1.35 coming

[Crackity]

still apples......one being a cranny smith the other a braeburn, both facing a stormy future.
IMO HGH will have higher impairments happening right now and in the foreseeable future....do you not agree Crackity
I can see $1.35 coming

Jeez mate - I suggested it was possible they could go broke and had my head bitten off - so no - everything is as sweet as a pot pourri in the bathroom

Back to reading my copy of Black Swan - it's all good 

[Untamed]

If you're currently part of the "Disillusioned with Sharesies" brigade - as I am, just ignore the fact that this is a Sharesies podcast - the guy doing the interview is actually from Business Desk.

Quite an interesting podcast - different angle than what we are used to as shareholders, but I found it very helpful, and learned a thing or two I wasn't aware of before.

https://podcasters.spotify.com/pod/show/sharesies/episodes/A-small-bank-in-a-big-bank-world-with-Heartland-Group-e24vis9

Jeff is a good speaker.

[Onemootpoint]

If you're currently part of the "Disillusioned with Sharesies" brigade - as I am, just ignore the fact that this is a Sharesies podcast - the guy doing the interview is actually from Business Desk.

Quite an interesting podcast - different angle than what we are used to as shareholders, but I found it very helpful, and learned a thing or two I wasn't aware of before.

https://podcasters.spotify.com/pod/show/sharesies/episodes/A-small-bank-in-a-big-bank-world-with-Heartland-Group-e24vis9

Jeff is a good speaker.

As already indicated - thanks for the link.

Stock is up a bit today. Must be your link.

[snapiti]

As a term deposit holder with HGH I have to say there service is dreadful. Been trying for a month now to call them and have left several call back requests which have not been returned.

[Untamed]

Message them via the website or app. Depending on the day of the week and time of day I have messaged, I have usually had a response within 24 hours. If you are wanting to amend your term deposit instructions, I think you can do that yourself - but don't take my word for that.

As a term deposit holder with HGH I have to say there service is dreadful. Been trying for a month now to call them and have left several call back requests which have not been returned.