Fri, May 12, 2017 - Page 10 News List

Street Capital sees openings as Home Capital deposits fall

ASSETS LOSS:Moody’s downgraded the credit ratings of Canada’s six largest banks on concern over their exposure to heavy consumer debt


Street Capital Group Inc said it is treating recent turbulence in the Canadian mortgage lending market as an opportunity, while embattled rival Home Capital Group Inc continues to see deposits dwindle.

“The issues faced by our mortgage lending peers are not representative of the risk we face today at Street Capital,” chief executive officer Ed Gettings said on Wednesday in a conference call.

He did not elaborate on the opportunities he sees, but separately said the company plans to expand into uninsured mortgages starting this month and is evaluating non-government sponsored residential mortgage-backed securities.

Street Capital slipped to a first-quarter net loss of C$2.57 million (US$1.9 million) from profit of C$3 million a year earlier, citing in its earnings statement a C$2.65 million “executive retiring allowance” and challenges, including “sustained margin pressure on new insured volumes” amid regulatory changes.

Gettings said new mortgage originations could drop between 20 and 30 percent this year from last year.

Street Capital said it is “confident” it will achieve sufficient deposit flows to support C$150 million to C$200 million in uninsured mortgage funding this year.

However, Home Capital’s high interest savings deposits slid to about C$134 million on Wednesday and guaranteed investment certificate deposits were C$12.58 billion as of Monday, the Toronto-based lender said in a statement on Wednesday.

A run on deposits at Home Capital intensified after Ontario’s securities regulator on April 19 accused the firm of misleading investors about an internal probe into falsified mortgage applications two years ago.

Home Capital has since taken a costly rescue loan and on Tuesday agreed to sell as much as C$1.5 billion worth of mortgage renewals to an unidentified buyer to help shore up its balance sheet.

The company’s available liquidity and credit capacity totaled C$1.61 billion, including an undrawn C$600 million of a C$2 billion line of credit led by Healthcare of Ontario Pension Plan.

Liquid assets stood at C$1.01 billion on Tuesday versus C$1.1 billion the previous day.

Home Capital was scheduled to report first-quarter earnings after regular trading yesterday, after pushing back the date from Wednesday last week.

In other news, six of Canada’s largest banks had credit ratings downgraded by Moody’s Investors Service on concern that over-indebted consumers and high housing prices have left lenders vulnerable to potential losses on assets.

Toronto-Dominion Bank, Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, National Bank of Canada and Royal Bank of Canada had their long-term debt and deposit ratings lowered one level, Moody’s said on Wednesday in a statement.

The ratings agency also cut its counterparty risk assessment for the firms, excluding Toronto-Dominion.

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