Home Capital Group May Double Assets in Four Years
https://www.bloomberg.com/apps/news?pid=20601082&sid=adx_0lLSDwY0
June 7 (Bloomberg) -- Home Capital Group Inc., the mortgage lender whose stock outperformed Canada’s eight banks last year, may almost double its assets in the next four years as it competes against fewer companies in the uninsured mortgage market.
“We think we can be a C$20 billion ($18.9 billion)-plus company within three to four years because of the momentum we have,” Chief Executive Officer Gerald Soloway said in a June 4 interview. The Toronto-based company had about C$12 billion in assets at the end of the first quarter, he said.
Home Capital, which primarily offers uninsured mortgages to clients who can’t get loans from Canadian banks, said competitors including General Electric Co.’s GE Money and Accredited Home Lenders have exited the C$200 billion market since the financial crisis began.
“There were about 25 decent competitors in that space,” Home Capital President Martin Reid said. “It’s about half that today.”
Reid, 50, said Home Capital has the largest market share in the uninsured mortgage market, competing with credit unions, trust companies and private lenders. The Toronto-based firm reported record profit of C$41.7 million in the first quarter, and has had a return on equity of more than 20 percent over the past 12 years.
The company hasn’t expanded outside Canada and sticks mostly to lending, credit cards and deposit products.
Lunch-Bucket Bankers
“We’ve been referred to as sort of lunch-bucket bankers in the sense we do things the old way,” said Soloway, 71. “If we lend to people, we expect to get repaid. We expect them to have enough security and enough credit that we can get our money back without any losses.”
Home Capital also may find “opportunities” for acquisitions should Canadian banks be required to conserve more capital, Soloway said. The lender could buy assets of up to C$2 billion without having to raise equity, he said.
“There could be small businesses within what they’re doing, where I think they’re going to say ‘Look. Here are 20 businesses that take up capital. Capital has become more precious. Do we really want to be in these businesses?’” Soloway said.
Home Capital would be interested in assets such as a bank’s leasing operations, he said, although there haven’t been specific offers.
Home Capital fell 48 cents to C$41.12 in 4:10 p.m. trading on the Toronto Stock Exchange. The shares have fallen almost 2 percent this year after more than doubling in 2009.
To contact the reporter on this story: Sean B. Pasternak in Toronto at spasternak@bloomberg.net.
Last Updated: June 7, 2010 16:15 EDT