Home Capital faces two challenges

Article Excerpt

HOME CAPITAL GROUP INC. $16 remains a hold for aggressive investors. The stock (Toronto symbol HCG; Aggressive Growth Portfolio, Finance sector; Shares outstanding: 53.0 million; Market cap: $848.0 million; Price-to-sales ratio: 2.0; Dividend suspended in May 2017; TSINetwork Rating: Speculative; www.homecapital.com) lets you tap a mortgage lender serving borrowers who fail to meet the stricter standards of big banks and traditional lenders. The company cuts its credit risk by identifying problem loans early and adjusting the repayment terms. As of December 31, 2019, bad loans totalled just 0.44% of its total loan portfolio. That’s down from 0.47% a year earlier. However, the coronavirus slowdown will probably cause Home Capital’s bad loans to jump to 0.70% of total loans in 2020. Investors should also keep in mind that Home Capital will have to offer higher-than-average rates to attract depositors and fund new lending. That’s despite the recent drop in interest rates. rates…

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