SCOTIA DOWNGRADES HOME CAPITAL FOLLOWING RALLY

Home Capital Inc. was downgraded by Scotiabank Thursday following a blistering rally this year.

Analyst Phil Hardie downgraded the stock from sector outperformer to sector performer, but maintained his $38 target. Shares were last trading at $ 35.65 on Thursday, a gain of five cents, or 0.14 per cent.

Home Capital was a favoured stock for short sellers last year, following the revelation it had fired dozens of brokers for fraud. But the stock has bounced back from last year’s losses and is now up 35 per cent for 2016.

“With an expected one- year rate of return eight per cent, we are downgrading HCG to sector perform,” Hardie said in a note to clients.

Hardie notes that the company, which is one of the largest alternative lenders in Canada, has gained more than 30 per cent against Canadian banking stocks, which it tends to historically trade at a discount to. The rally has narrowed its price- to- earnings discount against the group to five per cent. While that’s better than the two per cent before last year’s broker firings, Hardie notes it is still lower than the historical nine per cent discount.

Home Capital announced last month that chief executive Gerald Soloway will step down from the company after leading it for nearly 30 years. He will hand over leadership to company president Martin Reid on May 11.