‘Significant doubt’ on lender’s survival
TORONTO Alternative mortgage lender Home Capital Group Inc. said Thursday discussions with potential investors on the sale of certain loan portfolios are on the table to shore up its liquidity, but uncertainty around its future funding abilities casts “significant doubt on the Company’s ability to continue as a going concern.”
Canada’s largest non-bank lender, which released its first-quarter earnings Thursday, made these comments as it continues to see a run on its funding with clients withdrawing their demand deposits from its subsidiary, Home Trust, jeopardizing a funding source for its mortgages.
“Potential future impact resulting from reputational concerns is inherently difficult to predict,” Home Capital said late Thursday, in its management discussion and analysis as part of its latest earnings release. “Therefore management believes that material uncertainty exists that may cast significant doubt on the Company’s ability to continue as a going concern.”
For the quarter ended March 31, Home Capital reported diluted earnings per share of 90 cents and $1.02 adjusted diluted earnings per share basis, compared to 92 cents and 96 cents a year ago.
That beat the 96.5 cents adjusted diluted earnings per share analysts had expected, according to those surveyed by Bloomberg.
Home Capital also reported net income of $58.0 million and adjusted net income of $65.5 million, compared to $67.49 million and $67.5 million in the same period one year ago. Analysts expected adjusted net income of $64.786 million for the latest quarter.
The company will be facing tough questions from analysts on a conference call Friday, as it has suffered liquidity problems and a crisis of confidence since the Ontario Securities Commission filed formal allegations on April 19 against Home Capital, and three of its current and former executives.
The securities regulator has accused them of misleading shareholders.
Home Capital has said the allegations are without merit, and has vowed to defend its approach to disclosure during the OSC proceedings.