Former RBC executive on Home Capital board

TORONTO — Home Capital Group is adding a former Royal Bank of Canada executive to its board, replacing company founder Gerald Soloway, in a bid to renew its leadership and boost investor confidence.

Shares of the Toronto-based mortgage lender jumped more than 11 per cent after the appointment of Alan Hibben was announced, but ended the day at $5.85, down 16 cents or 2.66 per cent.

“This is the start of our governance renewal,” board chairman Kevin Smith said in a statement, adding more changes are coming.

“We have made considerable progress in identifying new candidates for the board and in our search for a new chief executive officer. The new CEO will in turn be involved in the hiring of a new chief financial officer, providing a major refresh in our corporate leadership as part of the process of rebuilding the company.”

Home Capital’s share price has been under pressure in recent weeks as the company grapples with a loss of deposits following allegations from Ontario’s securities watchdog.

Customers have been pulling their money out after staff at the Ontario Securities Commission alleged that Home Capital, Soloway, former CEO Martin Reid and current CFO Robert Morton misled investors in their handling of a scandal involving falsified loan applications.

The company has said that the allegations are without merit and has vowed to defend itself. Lawyers for all three men did not respond to a request for comment on Thursday. Reid declined to comment several weeks ago when the OSC first announced the allegations. The OSC has scheduled a June 2 hearing to deal with that matter.

There have been concerns that Home Capital’s problems could spread into the wider economy, but at no point has Finance Minister Bill Morneau’s office considered the situation a systemic issue, according to a source familiar with the file. The minister’s office views the situation as unique to the lender, the source added.

Home Capital has secured a $2-billion line of credit from the Healthcare of Ontario Pension Plan to help make up lost capital.

Veritas analyst Mike Rizvanovic said bringing in someone as credible as Hibben is a small positive, but noted Home Capital is still dealing with an outflow of the cash it uses to fund lending.

“We can’t say that bringing new people in is going to necessarily stem the outflow of deposits,” Rizvanovic said.

“It’s not like you bring this individual in and then suddenly they’ve got their access back to the deposit market. It’s way too early to know that.”