Author Topic: HCG.to - Home Capital Group  (Read 89888 times)

πv

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Re: HCG.to - Home Capital Group
« Reply #260 on: January 23, 2018, 08:12:36 AM »
Liberty - This does trouble me some although the low interest rates at the moment seem to reduce the risk; I do take comfort in the following  Q3 Total Capital Ratio: 22% /  Q3 Leverage Ratios: 8%/  Q3 LTV:54% / Q3 Default Ratio 0.31%
A margin of safety does seem to be present; although I would like to see their efficiency ratio return to normal ;D  Currently at 114.5% vs   ~38% in 2016.

LightWhale- The initial revolver loan / attempt to buy 40% of the shares was intriguing; thankfully HCG paid off the loan so BRK is just a shareholder at the moment although the high interest rate revolver remains available.  You make a good point in regards to BRK not being able to beat the index by much, they simply have so much money that they are forced to invest in capital heavy business.  However, this is not a Union Pacific, GM or Delta this is out of his old preferred playbook; what intrigues me the most is that he is even playing with these small figures...  Perhaps he sees an expansion potential in the company throughout Canada?  Currently they are mostly out of the Toronto area.


frank87

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Re: HCG.to - Home Capital Group
« Reply #261 on: January 23, 2018, 08:21:59 AM »
Hcg's  lending as explained in the KPMG report sounds shockingly bad. That should be read by anyone prior to investing.

To make matters worse they have no reserves. At even 2% reserves, slightly above US average (they are subprime lender...) would wipe more than 25% of its equity out.

If Cad housing keeps dropping this is likely a 0. If not maybe it does ok. Keep in mind new regs drastically favour bigger banks so think volumes drop

It's embarrassing how little you know, Tim.

LightWhale

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Re: HCG.to - Home Capital Group
« Reply #262 on: January 23, 2018, 08:34:36 AM »
thanks for being blunt Frank, comment removed, the first part of it was ill-informed

TBW

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Re: HCG.to - Home Capital Group
« Reply #263 on: January 23, 2018, 08:40:20 AM »
Enlighten me

πv

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Re: HCG.to - Home Capital Group
« Reply #264 on: January 23, 2018, 08:54:14 PM »
I was not aware of the KPMG report thanks for the mention of that; the fact that it was an internal report makes it seem like people had the right idea but keeping shareholders in the dark was dumb...  (Unrelated - It is funny how KPMG just got a black eye for that same timeframe in the WSJ  ;D ;D ;D)

Their reserve numbers seem adequate: Q3 2017 Total Capital Ratio/Common Equity Tier 1 Capital Ratio: 21.25% / Leverage Ratio: 7.89%  I believe Canada has slightly different definitions but FDIC defines Well Capitalized at TCR> 10% / T1CR >6% / Leverage Ratio >5% 
Cash on hand: 2.6bi and that damn 2bi BRK revolver; also LTV: 53.7% seems pretty good

From what I have seen so far the new regulations may make things interesting.  Potential boost for HCG?  Interesting article below.
https://www.theglobeandmail.com/report-on-business/new-mortgage-stress-tests-could-disqualify-10-of-buyers-bank-of-canada/article37109981/

HCG themselves is undecided  :o

from Q3 Report -
"It is unclear what impact the revisions to B-20 will have on the real estate and mortgage markets as a whole, particularly
when combined with changes under the Ontario Fair Housing Plan announced by the Ontario Ministry of Finance in April
2017. The Company has identified a number of strategies to mitigate the impact of stress testing and co-lending changes
while maintaining overall credit quality. However, management will require a period of time to fully assess the market impact
from the changes and what the net impact will be on the Company’s addressable market and product suite offering. The
Company will attend OSFI information sessions before the end of the year to receive further clarity on certain revisions such
as income verification and co-lending standards."

50centdollars

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Re: HCG.to - Home Capital Group
« Reply #265 on: January 24, 2018, 04:04:18 AM »
Hcg's  lending as explained in the KPMG report sounds shockingly bad. That should be read by anyone prior to investing.

To make matters worse they have no reserves. At even 2% reserves, slightly above US average (they are subprime lender...) would wipe more than 25% of its equity out.

If Cad housing keeps dropping this is likely a 0. If not maybe it does ok. Keep in mind new regs drastically favour bigger banks so think volumes drop

It's embarrassing how little you know, Tim.

Frank - why don't you actually say something instead of idiotic one liners. Please tell us what went on at Home Capital. I need a good laugh.
50centdollars

gurjot

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Re: HCG.to - Home Capital Group
« Reply #266 on: February 14, 2018, 11:23:08 PM »
earnings released today.  little lower than what i was hoping for.  any comments from anyone?

πv

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Re: HCG.to - Home Capital Group
« Reply #267 on: February 15, 2018, 12:42:43 PM »
A deliberate recovery effort is ongoing; Q2 really hurt 2017.  Lets hope for a uneventful 2018.  The great unknown is still the overall Canadian housing market (hence the discount price); interesting discussions albeit heated at times throughout this forum.  There is also a decent summary behind the Financial Times paywall if interested from last week. 

Curious to see if Insiders continue to buy like they did after Q3.

 




πv

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Re: HCG.to - Home Capital Group
« Reply #268 on: February 25, 2018, 02:47:48 PM »
Small Insider Buy from new independent director seems to be it for this quarter

3136470   2018-02-16   2018-02-21   Control or Direction :
Paul Haggis and Bonnie Haggis   10 - Acquisition or disposition in the public market   +5,950   16.9764       5,950   

Bio - http://www.homecapital.com/directors_officers.asp

frank87

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Re: HCG.to - Home Capital Group
« Reply #269 on: January 03, 2020, 10:40:28 AM »
Hcg's  lending as explained in the KPMG report sounds shockingly bad. That should be read by anyone prior to investing.

To make matters worse they have no reserves. At even 2% reserves, slightly above US average (they are subprime lender...) would wipe more than 25% of its equity out.

If Cad housing keeps dropping this is likely a 0. If not maybe it does ok. Keep in mind new regs drastically favour bigger banks so think volumes drop

It's embarrassing how little you know, Tim.

Frank - why don't you actually say something instead of idiotic one liners. Please tell us what went on at Home Capital. I need a good laugh.

I just looked back on this thread and found interesting just how sheepish a lot of the posters in this thread were. Instead of actually informing themselves of facts, they read into innuendo and took the word of an aggressive short pack at face value. Now with two years past, I think a post mortem is appropriate.

As regards to your response, how about starting with the fact that the crisis that Home faced had nothing to do with the quality of its mortgage book - it was a run on the bank triggered by 1) flighty demand deposits directed by brokers who bought into the BS following the OSC's publication of findings related to the income verification issue back in 2015; 2) spurred by rampant misinformation spread on social media by said shorts; and to a lesser extent 3) hysteria surrounding Canadian real estate and the financial system writ large at the time.

As for the actual income verification fraud, the numbers bandied about at the height of the crisis was a complete obfuscation, either willingly or ignorantly spread. The suspended brokers accounted for $2 billion of (mostly insured) mortgages at the time - it didn't mean that $2 billion were underwritten with made-up income. In fact, when the whole investigation was wrapped up in 2016, the company found about 7% of the mortgages underwritten by the suspended brokers had income issues. Moreover, there was never any performance issues with the mortgages in question - both CMHC and Genworth came out with statements that Home's Accelerator (insured) mortgages perform better than their overall portfolios. Also, the problem mortgages were basically completely discharged by the time the OSC leveled its allegations in 2017.

At the heart of the OSC complaint was the timeliness of disclosure to public shareholders. And in contrast to the prevailing opinion at the time, Home did disclose immediately to their mortgage insurers (CMHC and Genworth) and to OSFI once they discovered the problem. They didn't disclose immediately to public shareholders probably because their lawyers didn't view it as material. Reasonable people can disagree on this point. The issue related to a handful of brokers and insured mortgages earn a tiny spread and are not material to profitability. On the other hand, I subscribe to the view that any meaningful bad news should be reported immediately and I question past management's judgment on abdicating their duty to a bunch of cover-your-ass lawyers here.

As for the actual business, there has not been some mortgage market armaggeddon as many suggested - despite steeply falling prices in a few major Canadian markets and a cooling down of others. Despite what many think, falling prices does not mean the mortgages suddenly default in masse. Home's mortgage portfolio continues to perform very well and the credit quality of their typical borrower have even improved after B-20 as the prime bucket shrank (the CEO of the largest monoline in Canada recently said that today's Alt-A was prime just 5 years ago). Moreover, Home's operations and profitability continues to improve as they grow back into their previous size. And because their balance sheet has remained strong throughout their liquidity crisis, they've been able to buy back nearly 30% of their shares at very cheap prices since the end of 2018 (a price level, of course, that was available thanks to the misinformed or the plain dishonest).
« Last Edit: January 03, 2020, 10:50:30 AM by frank87 »