Connect with us

Popular World News

Equitable, Home Capital Cash in on Tighter Canada Mortgage Rules By Bloomberg

Equitable, Home Capital Cash in on Tighter Canada Mortgage Rules By Bloomberg


Equitable, Home Capital Cash in on Tighter Canada Mortgage Rules By Bloomberg


(Bloomberg) — Equitable Group Inc. and Home Capital Group Inc. are reaping a windfall from Canada’s tighter mortgage regulations.

Shares of the alternative lenders are surging as homebuyers seek financing outside the big banks in the wake of new mortgage rules imposed last year and as home prices in big cities such as Toronto remain lofty.

Equitable was up 16% to a record C$93.69 at 1:08 p.m. in Toronto after reporting earnings Tuesday that blew past analysts expectations. Home Capital, which was bailed out by Warren Buffett’s Berkshire Hathaway Inc . (NYSE:) in 2017, climbed 7.5% to its highest in more than two years.

The rules are making it difficult for some homebuyers to qualify at the big banks but they’re still good credits, said Equitable Chief Executive Officer Andrew Moor. The company controls about 35% of the alternative mortgage market in Canada and should see more business amid forecasts for lower interest rates and high levels of immigration, he said.

“We certainly have seen our client portfolio quality improve over the last couple of years,” Moor said in an interview. “The general risk of a house-price correction gets reduced as these rules now get embedded in the system. It’s a structural permanent shift and we will continue to see higher credit quality than we’ve ever had.”

Earnings Surprise

Equitable reported record earnings and a surge in principal retail loans outstanding of C$16.9 billion ($12.8 billion), up 23% from a year ago. Commercial loans outstanding rose 19% to C$7.9 billion. The company said it will increase its dividend at a rate of 20% to 25% per year over the next five years, up from a previous target of 10% per year.

Home Capital is due to report on Aug. 7, with profit seen up about 7%, according to analysts surveyed by Bloomberg.

Equitable also operates Equitable Bank, which offers high-interest savings accounts and guaranteed investment certificates at higher rates than the big banks.

“People understand that Equitable challenges banks and we have really embraced the digital future as a bank online platform,” Moor said.

While all the analysts covering the company have increased their price targets, the stock trades at only 7.6 times estimated forward earnings per share, versus 10 times for comparable companies, according to data compiled by Bloomberg.

“We certainly see people interested in buying” the company, Moor said. “Our thinking is that we can keep growing, we are the ninth-largest bank in Canada, we’re growing faster than any of the other ones.”

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.


Source link

Continue Reading
You may also like...
Click to comment

Leave a Reply

Your email address will not be published. Required fields are marked *


To Top
error: Content is protected !!