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03-02-2017, 10:07 PM
The very competitive banking environment has kept HLF's NIM & ROE lower than its peers; the big 3 banks is able to attract deposits with lower rates, and is able to earn more with riskier loans such as credit cards.
HLF has to offer higher rates to attract deposits, but yet competes in the mass market segment of financing; namely home loans and car loans. The problem is the rates for home and car loans are very competitive and the bigger banks can price it low due to their economies of scale. HLF will then have to price their loans as low to stay in the game, which hurts their NIM. The saving grace is that they are conservative in the loans they make.
Although HLF is heavily discounted, i think it is fair given the very low ROE and also the lack of any catalyst for growth. Will it get a full banking license? That doesn't seem to be the case any time soon.
HLF is very likely to continue paying stable dividends over the long term so I'd expect its value to remain likewise. I wouldn't be expecting capital appreciation.
HLF has to offer higher rates to attract deposits, but yet competes in the mass market segment of financing; namely home loans and car loans. The problem is the rates for home and car loans are very competitive and the bigger banks can price it low due to their economies of scale. HLF will then have to price their loans as low to stay in the game, which hurts their NIM. The saving grace is that they are conservative in the loans they make.
Although HLF is heavily discounted, i think it is fair given the very low ROE and also the lack of any catalyst for growth. Will it get a full banking license? That doesn't seem to be the case any time soon.
HLF is very likely to continue paying stable dividends over the long term so I'd expect its value to remain likewise. I wouldn't be expecting capital appreciation.