After a slow start to the year caused by some softening of sales in Canada's real estate market, things are turning around, according to the country's largest non-bank mortgage lender.
That was reflected in net profits at Home Capital Group Inc., which rose nearly 16 per cent to $61.6-million in its second-quarter earnings reported after the market close. The Toronto-based lender attributed the gains to strong mortgage origination volumes.
"We are seeing a pick-up," said Home Capital's chief executive Gerald Soloway in an interview. "There's really a stable housing market in Canada, coast to coast."
The company specializes in lending to customers who might have difficulty getting a bank loan, and also takes deposits and issues credit cards.
The demand for loans grew stronger at Home Capital, with total mortgage originations up to $1.6-billion from $1.4-billion in the first quarter of the year.
The company attributed these gains largely to customer interest in residential mortgages, which are Home Capital's traditional product offering. Home Capital has also maintained relatively solid credit levels, which slipped slightly to 0.31 per cent from 0.33 per cent this time last year.
But there were two weaker spots. Multi-unit residential mortgage originations dropped to $54.3-million in the quarter from $87.8-million at the same point last year, and from a whopping $202.6-million last quarter. This is because these mortgages are for apartment buildings, which are large purchases that tend to vary in volume from quarter to quarter depending on how many deals the team is able to close. Mr. Soloway said he expects the levels to return to their average of about $150-million in the next quarter.
Commercial mortgage advances were $44-million for the quarter, down from $106-million in the same period last year. Store and apartment mortgage advances were down, and Home Capital said in its release that it "continues to be selective and focuses on opportunities that present strong credit and low risk profiles."
The severe storms in southern Alberta and the Greater Toronto Area that caused widespread devastation are not expected to cause significant losses to Home Capital's mortgage portfolio, although the company said it did dispatch evaluators to Alberta to assess the damage. Mr. Soloway said that whenever disasters like these occur, the company reconsiders how and where it would consider lending.
The company also increased its dividend to 28 cents per share from 26 cents, which Home Capital president Martin Reid said should be taken as a sign of confidence in the Canadian real estate market. "If you look at sales-to-new listings across the country… there's no big overhang in any of the urban centres," he said. "The markets are looking quite healthy, without some of the exuberance of late 2011 and early 2012."