Australian (ASX) Stock Market Forum

BEN - Bendigo Bank

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sinner said:
What's with the magical post above from Garpal Gumnut, dated 2013 but has a chart from Jan 2016?
Click to expand...

The chart in Garpal Gumnut's post is hotlinked directly from BigCharts rather than being attached to the post, so the data displayed is current.
 
Knobby22 said:
A homeowner sells a percentage of the future sale proceeds of their home (to a maximum of 50 per cent) in return for an immediate lump sum cash payment.
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Say I sell 50% of equity in my home. How large is the lump sum cash payment? I'm assuming it's not for the full equity at current home values?

Correct me if I'm wrong but what you're describing sounds like BEN is long on a sort of futures contract for a host of non-liquid assets without a specified delivery date.
 
sinner said:
Say I sell 50% of equity in my home. How large is the lump sum cash payment? I'm assuming it's not for the full equity at current home values?

Correct me if I'm wrong but what you're describing sounds like BEN is long on a sort of futures contract for a host of non-liquid assets without a specified delivery date.
Click to expand...

I imagine they'd be using actuarial tables to work out when sinner is likely to fall off his perch, and from that they determine how much they'll give you now for half your equity. It's doesn't seem like much more than a reverse mortgage.
 
sinner said:
Correct me if I'm wrong but what you're describing sounds like BEN is long on a sort of futures contract for a host of non-liquid assets without a specified delivery date.
Click to expand...
Yep, that's my understanding of it too.

Which is why a revaluation entry is included each period on the profit & loss statement. There's also an asset on the balance sheet recording their estimate of the proceeds they'll receive at the time of sale (which moves with the market values of the underlying property). So far, so good because the property market has been appreciating.

Besides a few fees here and there, they don't receive any cash from the customer until the property is sold or the person dies. There is no interest income and the customer cannot default or go into negative equity like a reverse mortgage (although there are regulations in Australia which probably stop that happening any way).

They do, as McLovin mentioned use an actuary. It's actually a joint-venture with a high-profile actuary by the sounds of it (Peter Szabo, who seems to have came up with the idea in the first place).

I believe they do build a bit of a buffer into the calculations to cover some of the downside. But surely, if the property market blows up they're exposed if it's still low when the time comes for these properties under the scheme are sold.

They are effectively giving the customer cash now, in exchange for the chance of getting more cash later when the property is sold.

Seems like the maximum is 50% for a lump sum payment. There's of course a whizz bang formula which decides what this 50% is based on.

Income from a bank's perspective on a reverse mortgage is based on interest income received (usually at a later date because it is also capitalised until the house is sold or the person dies). It's probably a similar result if the market is far lower at the time the loan needs to be repaid, but I assume with a reverse mortgage the bank has recourse to any other assets of the person, and Homesafe doesn't.
 
They don't pay full value for the asset due to the time constraint.
I note that if the person dies or sells within a short time frame their family gets a bonus.
 
Ves said:
Yep, that's my understanding of it too.

Which is why a revaluation entry is included each period on the profit & loss statement. There's also an asset on the balance sheet recording their estimate of the proceeds they'll receive at the time of sale (which moves with the market values of the underlying property). So far, so good because the property market has been appreciating.

Besides a few fees here and there, they don't receive any cash from the customer until the property is sold or the person dies. There is no interest income and the customer cannot default or go into negative equity like a reverse mortgage (although there are regulations in Australia which probably stop that happening any way).

They do, as McLovin mentioned use an actuary. It's actually a joint-venture with a high-profile actuary by the sounds of it (Peter Szabo, who seems to have came up with the idea in the first place).

I believe they do build a bit of a buffer into the calculations to cover some of the downside. But surely, if the property market blows up they're exposed if it's still low when the time comes for these properties under the scheme are sold.

They are effectively giving the customer cash now, in exchange for the chance of getting more cash later when the property is sold.

Seems like the maximum is 50% for a lump sum payment. There's of course a whizz bang formula which decides what this 50% is based on.

Income from a bank's perspective on a reverse mortgage is based on interest income received (usually at a later date because it is also capitalised until the house is sold or the person dies). It's probably a similar result if the market is far lower at the time the loan needs to be repaid, but I assume with a reverse mortgage the bank has recourse to any other assets of the person, and Homesafe doesn't.
Click to expand...

Interesting. I'm surprised they have no recourse to the house beyond the amount of equity they have agreed to. That's a pretty big matzah ball to have on the balance sheet. It is much closer to what Sinner described than my first lazy look suggested. I actually though initially the maximum 50% number was so that they had some buffer built in.
 
McLovin said:
Interesting. I'm surprised they have no recourse to the house beyond the amount of equity they have agreed to.
Click to expand...
I don't think they have 'recourse' to anything. They've effectively paid cash for a fixed share of the future proceeds. If the future proceeds are lower than expected they have to wear the difference.

My understanding, and knobby22 also mentioned this above, is that they do build in a buffer at the time of buying the share. Not sure how big the buffer is. This is because of the uncertainty of the sale timing and also because they have no effective control over the asset (the homeowner can do as they please basically, besides destroying it).
 
McLovin said:
Interesting. I'm surprised they have no recourse to the house beyond the amount of equity they have agreed to. That's a pretty big matzah ball to have on the balance sheet. It is much closer to what Sinner described than my first lazy look suggested. I actually though initially the maximum 50% number was so that they had some buffer built in.
Click to expand...


Surely they'd package all these deals and on sell them as a "Bond" type thing?

If so - is Bendigo exposed to a property slump or sitting pretty?
 
Ves said:
They've effectively paid cash for a fixed share of the future proceeds.
Click to expand...

It's still not clear to me how much the approx lump sum might be as a % of the total they are entitled to, so I thought I would check out the website and spotted this which made me laugh...

Screenshot_2016-02-18_17-42-32.png

An appropriate title might be "I like big buts..."

Apparently they are convinced it is such a sure fire bet that you can get anything from $25,000 to $1,000,000 as the lump sum...
 
sinner said:
It's still not clear to me how much the approx lump sum might be as a % of the total they are entitled to, so I thought I would check out the website and spotted this which made me laugh...
Click to expand...

Lol at the quote... that's an article from the Fin Review and they copied it word for word, and highlighting the best line first.

And really did they read the content? It talks about how much money Homesafe made for BEN. More profit for BEN = worse deal for the Homesafe participant (is that the right word?).

To me this is really no different to BEN buying partial shares in a bunch of residential properties, but with little control in terms of upkeep and sale. Admittedly they think they are buying at a discount... but the proof really won't come for another 15-20 years when the contracts reach the exit phase.
 
Hold on Mr Burns. It's turning.
I am sure its oversold. I need another 70c rise to break even. Mucked it up a bit.
 
ANZ is getting sued for rate fixing. if they lose you can be sure the other big 3 will be targeted. Bendigo is right out of that.

Also, BENs loans to mining are tiny as a percentage of loans, just a couple of mil.

They didn't lose on Dick Smith like some of the big banks (I think it was NAB and CBA from memory).

I have no problems with Homesafe. Does anyone really think the housing market will crash to the extent that it will hurt the bank? ...and even if it did, at least they aren't chasing delinquent loans because they don't exist under this model.The other banks will have to.

At these prices the yield is 7.7%!

They did raise the dividend unlike the big banks.

Finally as you stated they benefit from the statutory cash reserve ratio.

The market is acting irrationally. The shares have to be worth $10.90 as a minimum imo.
That said the buying will be partly by short termers seeking the dividend so don't be surprised with a big drop when it goes ex.
 

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