current value, page-2

Interesting analysis, and I would counter with a few observations:

1. RHG cannot simply "lose" half their loan book through being unable fund. If the borrowers did not choose to leave RHG, then they would need to foreclose on the mortgage (with proper reason).

2. "Logically" the only way RHG will reduce their book is via loan repayments and through the better quality borrowers seeking alternative finance as, and when, RHG raises their lending rate on existing loans.

3. With 3 month BAB's running at 7.20% (6mth 7.37% and 12 mth 7.58%) I would expect RHG to need to pay a significant premium to these rates. As such I reckon using your average loan rate of 8%, they would be lucky to make 25bp margin.

Until things settle down after the WBC purchase of the franchise, and RHG issue some detailed financials I would steer well clear.

The "at worst" (in my eyes) scenario is that all the quality borrowers flee RHG for cheaper rates elsewhere, RHG is left with a portfolio of sub-sub loans for which they cannot obtain funding, and the Government forces a "bail-out" by another financial institution. In this situation the shareholders of RHG would get nothing.

Better odds at the casino I reckon (lol)