Home Capital Profit Falls as Mortgage Originations Decline 6%

Home Capital Group Inc., Canada’s largest alternative mortgage provider, reported profit that missed analyst estimates as mortgage originations fell in the fourth quarter.

Net income at the Toronto-based company fell 27 percent to C$70.2 million ($55.6 million) in the quarter ended Dec. 31, compared with C$95.9 million a year earlier. Profit excluding some items of C$1.02 a share missed the C$1.05 a share estimate of nine analysts surveyed by Bloomberg and compares with C$1.02 a year ago.

The company signed C$2.15 billion in mortgages in the period, down 6 percent from C$2.29 billion a year ago, the firm said in a statement today. Traditional mortgage originations, or uninsured single-family loans, which are the company’s largest product, decreased 12 percent to C$1.3 billion from C$1.48 billion a year ago, while insured loans rose 46 percent to C$515.9 million from C$353 million.

Home Capital Group has been grappling with the fallout from last year when the company cut ties with 45 mortgage brokers after they submitted mortgage applications with falsified information. Removing the brokers, who had originated about C$2 billion in loans, contributed to a 55 percent drop in new loans in the second quarter.

The company said it’s about 40 percent done with its review and is on track to be completed it in 2016. The total value of mortgages on the company’s books originated by those brokers declined to C$1.55 billion.

Home Capital shares fell 1.9 percent at 4 p.m. market close in Toronto Wednesday to C$25.35 and are down 42 percent in the last 12 months.

The company is hosting an earnings conference call Thursday at 10:30 a.m. Toronto time, reachable by telephone at 647-427-7450 or 888-231-8191.

Before it's here, it's on the Bloomberg Terminal.