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While many alternative mortgage lenders are struggling to survive, business is brisk at Home Capital Group Inc. and is expected to stay that way for the rest of 2008.
"In some ways, we're like the little engine that just keeps on chugging away quarter after quarter," chief executive officer Gerald Soloway said on a conference call after the company released its first-quarter results yesterday.
The Toronto-based holding company provides mortgage and credit card lending services through its principal subsidiary, Home Trust Co.
It reported first-quarter profit of $25.2-million, up 19 per cent from $21.2-million in the same period last year. That included a $2.1-million after-tax hit on its Quebecor World Inc. preferred shares, its first loss on such an investment in 15 years, Mr. Soloway said. In Canada a number of subprime lenders have run into difficulty because they relied on securitization of their loans to fund new mortgages, a business model that has collapsed alongside the market for non-bank asset backed commercial paper (ABCP).
As a deposit-taking organization, whose eligible deposits and financial products are insured by Canada Deposit Insurance Corp., Home Trust has a much different business model, Mr. Soloway said in an interview after the call. It hasn't had any exposure to ABCP or the U.S. subprime mortgage crisis, he added.
Most of the growth in its mortgage operations has been internal, and should continue to benefit from Canada's healthy housing market, he added.
"There may be fewer transactions, but the market is continuing to grow for the banks and for us," he said.
Home Trust has also purchased credit-worthy mortgages and gained some customers from its troubled competitors, Mr. Soloway said.
"I think they've had a problem growing, some have closed, some have slowed down, and they're not as formidable a competitor as a group as they were, say a year ago," he said during the interview.
His firm is sitting on $734-million of liquidity, a much larger amount than usual. This more cautious approach will continue until the resolution of the liquidity problem in the Canadian economy, he said on the call.
"There's nothing like having some money in your jeans to keep up a vigorous lending program," he said. HCG (TSX) rose $1.52 to $39.82.
© The Globe and Mail
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