February 12, 2015 / 10:35 PM / 4 years ago

Home Capital CEO sees little impact from oil price slump

TORONTO (Reuters) - Canadian mortgage lender Home Capital Group Inc (HCG.TO) is not being hurt by the oil price collapse and does not have any significant exposure to the Alberta market, its chief executive officer told Reuters on Thursday.

Worries about oil prices CLc1 LCOc1, down 52 percent since the middle of last year, have hit the Canadian energy sector and weighed on other stocks, including financials. Home Capital shares have dropped 21 percent since reaching near-record levels in early November.

“We’re quite comfortable with the exposure we have to the Alberta market. We haven’t seen any arrears to date,” CEO Gerald Soloway told Reuters.

About 5.1 percent of Home Capital’s total lending portfolio is in Alberta, and a significant portion is insured by the Canada Mortgage and Housing Corporation, he said.

“We are well insulated,” he said. “We can withstand any type of a downturn, even if it’s more severe. We think we’re in good shape there.”

Another drag on the stock has been fears of a Canadian housing market slowdown.

Soloway said 2015 will not be as robust as last year for the Canadian housing industry, but added: “I don’t see any bubble, and I don’t see any big rollback.”

Home Capital posted a rise in fourth-quarter profit on Wednesday and raised its dividend by 10 percent. The stock rose 1.3 percent on Thursday.

“They reported a very solid quarter. They continue to grow nicely and post very limited loan losses,” said Tim Caulfield, director of equity research at Franklin Bissett Investment Management, a unit of Franklin Templeton Investments and one of Home Capital’s biggest shareholders.

Despite the recent weakness, the stock has climbed almost 100 percent in the last five years, compared with a 33 percent gain in the benchmark TSX index.

“We’ve viewed the recent weakness as an interesting opportunity. We have a favorable view of its long-term prospects,” Caulfield said.

“We view the business as being very attractively valued when taking into account both of those elements of risk and reward,” he added.

Home Capital applied for a banking license in November to expand and diversify its deposit base. It currently collects deposits via brokers and financial planners and through its consumer brand, Oaken Financial.

Soloway expects to receive the banking license by the end of the year or the beginning of next year. The banking deposit segment could provide a “significant” boost to the overall business, he said.

Editing by Lisa Shumaker

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