Home Capital shares up as Q3 earnings rise, mortgage originations up

TORONTO — Shares of Home Capital Group Inc. were up more than 11 per cent in midday trading Wednesday as earnings rose along with a rebounding mortgage market.

“We had the benefit of a healthy housing market this quarter,” said company CEO Yousry Bissada on a conference call.

“The pickup in the activity that began in Q2 in our major markets has continued into Q3. Economic conditions, including low interest rates, and strong employment data are supportive of a balanced market. We expect these conditions to remain in place for the rest of the year.”

Home Capital shares were trading up $3.31, or 11.41 per cent, at $32.31 at midday on the Toronto Stock Exchange. 

The company’s stock has seen steady gains this year, recovering to where it was before the company was embroiled in reporting issues in 2017, which saw shares dive to a low of $5.85. They are still well off the high of over $50 reached in 2014.

Bissada, who was brought on as CEO in 2017 to help right the company, said its focus on digital investments to help streamline services, along with marketing and customer service are helping Home Capital get ahead.

“While we’re enjoying the benefits of a rebound in our key housing markets, the growth and profitability that we are reporting today is not only the result of helpful tail winds in the industry.”

The company said it earned $39 million or 67 cents per diluted share for the quarter ended Sept. 30, up from a profit of $32.6 million or 41 cents per diluted share in the same quarter last year.

On an adjusted basis, Home Capital says it earned 72 cents per diluted share for its most recent quarter, up from an adjusted profit of 41 cents per diluted share a year ago.

Analysts on average had expected a profit of 56 cents per share, according to financial markets data firm Refinitiv.

Net interest income was $103.1 million, up from $89.9 million for the same quarter last year, while total provisions for credit losses amounted to $3.7 million in the most recent quarter compared with $6.1 million in its second quarter and $4.0 million in the third quarter last year.

Total mortgage originations came in at nearly $1.55 billion in the quarter, up 7.6 per cent from last year, while single-family residential mortgage originations were up by 16.8 per cent. The company’s total loan portfolio grew 6.4 per cent year over year to $16.99 billion.

Home Capital is working through an extensive digital revamp, including a new broker portal, content management system, migrating data to the cloud, and automating mortgage discharges.

This report by The Canadian Press was first published Nov. 13, 2019.

Companies in this story: (TSX:HCG)

Ian Bickis, The Canadian Press