Mortgage lenders' results show 'pockets of concern' in Canada
BNN Bloomberg
Earnings results from alternative mortgage providers including Home Capital Group and EQB show that lenders are turning more cautious on Canada’s rapidly-cooling housing market and the economy.
Home Capital and EQB both missed analysts’ profit estimates as they stockpiled more capital than expected to protect against future loan losses. EQB’s chief executive officer said the firm is tightening lending standards, while Home Capital’s top executive said inflation, softening home prices and a possible recession may cause “stresses to the financial system.”
The comments and the earnings highlight “pockets of concern” arising among lenders, said Jaeme Gloyn, an analyst at National Bank of Canada. Investors will be watching closely to see what top executives at the country’s largest banks say about housing and the economy when they report fiscal third-quarter results this month.
“The provisions for credit losses generally came in a little bit higher than what was expected,” Gloyn said of the mortgage lenders’ results. Some of that is due to loan growth, he said, but it’s also because of changes in the economic models that Canadian lenders use to estimate expected credit losses.
