Lender weighing options to rebuild reputation
Alternative mortgage lender Home Capital Group Inc. is considering a sale of its non-core assets such as certain loan portfolios, but will “be taking the time” to evaluate its options to shore up its liquidity and help restore its reputation, says its new board chairwoman.
Brenda Eprile — who was appointed as chair on Monday as part of a governance overhaul to reassure the market as Home Capital faces a partial run on its funding and a crisis of confidence — said on Friday that the mortgage lender’s investment bankers are looking at a range of options to address their near-term liquidity and long-term funding issues.
“Sale of some non-core assets is being considered ... With the couple of deals that have been announced, we’ve got some breathing room,” she said in an interview. “So, now we’re taking the time to try to carefully see what are the options. A lot of parties have come forward, but we want to be smart about what we do.”
Eprile’s comments come a day after Home Capital put out its first-quarter earnings release, in which the company said that the recent reputational hit has impacted its future funding abilities and cast “significant doubt on the Company’s ability to continue as a going concern.”
Canada’s largest non-bank lender has been mired in liquidity issues after a series of executive departures and formal allegations filed against the company, and three of its former and current executives last month by the Ontario Securities Commission. The allegations, which the company has said are “without merit”, are in connection with the discovery of fraud in its broker channel and the termination of 45 brokers in 2014 and 2015.
Shares of Home Capital slipped as much as 18 per cent to $8.84 on Friday. The Toronto-based company’s stock is down more than 63 per cent since the end of March.
For the quarter ended March 31, Home Capital reported diluted earnings per share of 90 cents and $1.02 adjusted diluted earnings per share, compared to 92 cents and 96 cents a year ago, it said late Thursday. That beat the 96.5 cents adjusted diluted earnings per share analysts had expected, according to those surveyed by Bloomberg.
Total loans on its balance sheet were worth $18.6 billion, up from $17.9 billion in the same period a year ago. Of that, $11.4 billion were single-family residential mortgages.
New government rules introduced last October to cool down the housing market were actually “positive to Home’s core business,” said Eprile. “If we didn’t have these other problems, recent problems, it would have been a great year.” Financial Post With files from Barbara Shecter aligaya@postmedia.com