Money HSBC Canada Not Interested in Home Capital Assets, CEO Says

21:40  19 may  2017
21:40  19 may  2017 Source:   Bloomberg

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HSBC Canada , which leapfrogged small Canadian competitors by acquiring failing Bank of British Columbia in 1986, wouldn’t be interested in Home Capital if the embattled mortgage lender put itself up for sale or sold off assets such as its mortgage portfolio.

Paulo Maia President and Chief Executive Officer HSBC Bank Canada . Vancouver, Canada 21 February 2014. Global lines of business net interest income reflects internal funding charges and credits on the global lines of business assets , liabilities and capital , at market rates, taking into

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(Bloomberg) -- One of the last times a Canadian bank ran into trouble, HSBC Holdings Plc came to the rescue. Don’t expect history to repeat itself in the case of Home Capital Group Inc.

HSBC Canada, which leapfrogged small Canadian competitors by acquiring failing Bank of British Columbia in 1986, wouldn’t be interested in Home Capital if the embattled mortgage lender put itself up for sale or sold off assets such as its mortgage portfolio.

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HSBC Bank Canada

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Home Capital draws $250M more from emergency fund

  Home Capital draws $250M more from emergency fund TORONTO - Home Capital Group says it has drawn down a further $250 million this week from its emergency line of credit to repay deposit notes due Wednesday. That leaves the Toronto-based mortgage company (TSX:HCG) with $350 million left from a $2 billion line of credit provided by the Healthcare of Ontario Pension Plan late last month. The pension plan provided the loan after Home Capital's customers began to drain their high-interest savings accounts. That leaves the Toronto-based mortgage company (TSX:HCG) with $350 million left from a $2 billion line of credit provided by the Healthcare of Ontario Pension Plan late last month.

Commenting on the results, Lindsay Gordon, President and Chief Executive Officer of HSBC Bank Canada , said Net interest margin increased by 9 basis points to 2.49 per cent, while average interest earning assets increased by C

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In Maintenance.

25.44
+0.04
+0.16%
Home Capital Group Inc

HCG

9.18
+0.31
+3.49%
Canadian Western Bank

CWB

25.87
+0.27
+1.05%
Royal Bank of Canada

RY.PR.A

25.23
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+0.24%

“This isn’t something for us right now," Sandra Stuart, chief executive officer of HSBC’s Canadian unit said Thursday in an interview in her Vancouver office. “We were in the subprime business and we had a subprime portfolio that performed very well, and we took a decision to exit it. We understand deeply what it takes to run a subprime book, and at this stage I would say we’re not interested."

Home Capital has been seeking to stabilize itself after losing almost C$1.9 billion ($1.4 billion) in high-interest deposits since the end of March, forcing it to secure a costly C$2 billion rescue loan from a pension fund. The company also hired investment banks to advise on financing and “strategic options" that may include a sale of the company or assets.

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Other Canadian financial firms earlier this month ruled out an outright purchase of Home Capital, including Canadian Western Bank and alternative lender Equitable Group Inc. HSBC’s case is noteworthy because of the bank’s history in Canada.

Bank Fails

Stuart has first-hand experience with a bank failure. She was a teller of Bank of British Columbia in Vancouver’s suburb of Burnaby when the lender ran into trouble. She became a part of HSBC when the Bank of British Columbia was acquired by the London-based lender in November 1986.

“Reflecting on it, it happened so quickly," Stuart said. “I remember when HSBC made the purchase and how exhilarating that was to have a foreign bank take over a little British Columbia bank and absolutely overnight the prospect for the whole business changed. It was really exiting."

Bank of British Columbia’s woes followed the failures of Canadian Commercial Bank and Northland Bank of Canada in 1985, when rising interest rates and a slumping dollar caused their real estate and energy-heavy loan books to deteriorate, according to a Bank of Canada report. The failure of two small Western Canadian lenders eroded the confidence of other banks that relied on wholesale deposit funding, leaving Bank of British Columbia unable to weather the storm.

Home Capital Garners Some Bay Street Support in Survival Fight

  Home Capital Garners Some Bay Street Support in Survival Fight (Bloomberg) -- The black sheep of Canada’s mortgage industry is starting to see support from the flock.  Even as Home Capital Group Inc. issues warnings about the company’s ability to stay in business, a growing number of financial firms, brokers and money managers are backing the company. It now remains to be seen if the support will be enough for the mortgage lender to survive without a backstop from the country’s biggest banks.

In 1985, Barclays bought the assets of Wells Fargo Bank ( Canada ), consisting of its operations in Alberta and Florida, so that Wells Fargo could re-focus on its home market. HSBC Capital ( Canada ).

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The B.C. bank was run at the time by Edgar Kaiser Jr., an industrialist whose holdings included Canada’s biggest coal company, and the Denver Broncos of the National Football League, according to a New York Times obituary published when he died in 2012.

Expansion Plan

The B.C. purchase bolstered HSBC’s Canadian presence five years after entering the country, and the deal became the first of a string of purchases over 22 years in the bank’s strategy to expand across the nation.

HSBC Canada hasn’t seen much impact from Home Capital’s woes, Stuart said.

“If anything, we’ve seen our deposits increase over the last little while," Stuart said, adding that she doesn’t expect Home Capital’s troubles will spread to other financial firms. “It’s a C$20 billion book, it’s going to play out as it’s going to play out. We don’t feel any contagion to us, so I’m suspecting it’s probably going to be isolated."

Home Capital rose a second straight day, adding 5.9 percent to C$9.39 in Toronto. The stock is still down 70 percent on the year.

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net.

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net, Peter Eichenbaum at peichenbaum@bloomberg.net, Stephen Wicary

©2017 Bloomberg L.P.

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Can Home Capital Group Inc. Stop the Bleeding? .
Home Capital Group Inc.'s (TSX:HCG) has agreed to sell $1.5 billion of mortgages to raise liquidity. While many consider this a prudent short-term move, is Home Capital still viable in the long run?On Tuesday, Home Capital announced that it will sell off the equivalent of approximately 10% of its mortgage book to the unnamed buyer in the form of newly generated mortgages and soon-to-be-renewed mortgages, rather than selling mortgages the company is holding on its balance sheet.

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