goeasy Ltd T.GSY

Why the big drop in share price?

[DarkReins]

Thinking of picking this up but wondering why there was such a big drop in the share price today?

[cpeczek]

There is a rumour that the Federal Budget released today will lower the max interest rate to 35% (which is likely true because it was disclosed by an unnamed staffer). So that will mean that GSY will have to drop their max loan value from 46% to 35% and it will impact earnings. Mix that in with the loss they are taking on Canada Drives, recession talks and interest rates and that's where you

[McRambus]

They do not charge 46% they charge max 35% on personal loans.

[peter82828]

According to their most recent annual information form (available on sedar), they originate loans up to $100,000 with rates between 9.9% and 46.9%,

[cpeczek]

They do charge 46%. Not sure where you got that information from. Even on their website under unsecured loans it says "starting at 35%". Secured loans are under that. 

[TimeScape]

According to the Annual Information Form GoEasy released in February, the weighted average interest rate they charge on their loans has dropped from 46% in 2017 to 30.5 in 2022. There are rumours every year that the budget will implement some kind of interest rate cap.  We'll see in a few minutes if it happens this year.

[RusticHit]

46% in this country wow could ,nt believe it  Crazy MOney they are printing 

[McRambus]

  These are unsecured loans. Lots of chance of default and the only thing that happens is another black mark on an already black marked credit score. Quebec has been 35% max for years. 

[pierrelebel]

You want to know why?  Read this: On March 20, 2023, 1195407 B.C. Ltd., Canada Drives Ltd., USA Drives Ltd., and Canada Drives Auto Finance Ltd. (Canada Drives) sought and obtained an Initial Order of the Supreme Court of British Columbia pursuant to the Companies’ Creditors Arrangement Act (CCAA). As at March 17, 2023, Canada Drives Entities owed $87.56 million, consisting of

[TimeScape]

$41 million is only 2.5% on the market cap of GSY.  The stock fell 9% today.  Even if the entire $41 million is lost, the stock shouldn't drop anywhere near 9%.

[cpeczek]

They were right. Interest is capped at 35% now. As well they changed the way financial firm's dividends are taxed in the government's favour. Not great for GSY, this will definitely impact earnings but like someone else said they have been working to lower the average interest charged by doing more secure loans and other types of loans through Lendcare and autofinancing. 

[TimeScape]

Yes, interest capped at 35%.  Will be interesting to see if GSY comments on how much impact this has on their earnings. To clarify about the dividends - the change to the way financial firm's dividends are taxed is pertaining to dividends they RECEIVE, not dividends they PAY.  No impact on the dividend tax credit to individuals who reveive dividends.

[Torontojay]

 Management was well aware of the risks on this matter which is why they have been lowering the average yield to consumer loans charged over the years. The forecast for 2023 is for yields on consumer loans to be 34.5% or 36.5% if we include ancillary fees. This is to be in the 33-35% range by 2025. They have diversified away from these higher risk loans and moved into securitized loans with

[CHECKMATE77]

Great comment thanks 

[TimeScape]

Good, quick response just released by the company.  They point out that they still expect to see an increase in adjusted eps even with the cap.  The current consumer loan portfolio average interest rate is 30% and new originations average 30% as well.  Revised estimates for 2023 will be released with the next earnings report, in May. Note that the ceiling is applied on a prospective

[MrDales62]

Crooks are sad that they can't charge more than 35%? F them!!!

[cpeczek]

Why don't you start a business lending to no or bad credit consumers at a lower rate if they are crooks?