TORONTO — Shares of Home Capital Group closed at their lowest level in months, plunging nearly 10 per cent Tuesday, a day after the mortgage lender fired its president and CEO.
The Toronto-based company (TSX:HCG), which has seen its stock value and earnings decline recently, announced after markets closed Monday that it was terminating Martin K. Reid effective immediately. Reid had been appointed CEO just over a year ago.
Home Capital’s stock closed down 9.60 per cent, or $2.66, to $25.06 on the Toronto Stock Exchange on Tuesday.
Cormark Securities analyst Jeff Fenwick said the leadership change likely relates to issues that started back in 2014 when the company discovered that some loan applications have been falsified. The following year, Home Capital announced it was severing ties with 45 brokers for allegedly committing fraud.
More recently, the lender has also come under scrutiny from the Ontario Securities Commission.
Last month, Home Capital said it received an enforcement order from the regulator, which concluded that the company had failed to meet its continuous disclosure obligations in 2014 and 2015 regarding the impact of the income falsification and the remedial actions taken.
“Part of the issue is just that it’s taken a lot longer to resolve those issues and to begin to move the business forward than anyone would have liked or expected,” Fenwick said.
“We’re now over two years later and Home (Capital) is still working to push through all those operational improvements and roll out new technology to the broker platform.”
The company’s loan originations have also dipped, stalling earnings growth, said Fenwick.
“They finally reached a point where they decided they needed to change leadership right at the top — to find somebody that could put a new direction behind the business and begin to move it forward again,” said Fenwick.
Bonita J. Then, a member of the company’s board of directors, will serve as interim leader while until a permanent replacement is found.