accumulation, page-10

Let me get this straight – you think a loan book the size of RAMS ( one of the largest in the country – larger than all of Australian Building Socieity’s combined – larger than the loan portfolios of Citibank, Bendigo Bank and Bank of Queensland ) will just disappear – become worthless. Yer right.
There will be run-off but that is silly.
Few other points you may wish to consider are that RAMS has over 55000 loans in its loan book, Depending on when the loan was written the break fees are between 1% and 2% with Rams stating the av. @ 1.24%. So if in your senario if every loan terminated that’s $172M fee income or .50c odd per share, income for RAMS. My value of the loan book is something like this – assuming an rate of something like 90bps (currently 118 bps ) margin and allow for a high run-off rate of say 30% - than that’s about 70 cents per share. This will only improve if the credit market continues to correct and rams can finance at closer to par rate. If not RAMS simply raises rates to customers to maintain its margin and collects a higher termination fees while experiencing a higher run-off rate. Either way - the loan book has a value and its higher than current share price – least that my oponion and the reason I was buying today. Still - This is not one for the faint hearted with little or no risk tolerance but I like the contrarian trade and find buying the unloved is often very profitable – I may also be wrong and have been before. Do your own research