A stricter regulatory environment has led to considerable dividends for alternative mortgage providers like Equitable Group and Home Capital Group.
Consistently elevated prices in markets like Toronto and Vancouver have also bolstered these lenders’ market shares.
Earlier this month, Equitable reported a historic high in its principal retail loans outstanding, growing by 23% year-over-year during Q2 2019 to end up at $16.9 billion. Commercial loans outstanding also increased by 19% annually, up to $7.9 billion.
Equitable added that over the next five years, it will be increasing its dividend at a rate of 20% to 25% per year. This was adjusted from the previous 10% per year target.
At present, the firm holds a 35% share of Canada’s alternative mortgage market.
“We certainly have seen our client portfolio quality improve over the last couple of years,” Equitable CEO Andrew Moor told Bloomberg. “The general risk of a house-price correction gets reduced as these rules now get embedded in the system. It’s a structural permanent shift and we will continue to see higher credit quality than we’ve ever had.”
Meanwhile, Home Capital’s second-quarter earnings defied expectations with $31.9 million, which translated to 53 cents per diluted share. This was a marked uptick from $29.6 million or 37 cents per share during the same period last year.
Home Capital’s mortgage originations also grew by 4% to $1.28 billion, while loans under administration increased by 1.7% to $22.9 billion.
CEO Yousry Bissada assured that should current trends in the Canadian real estate market hold, Home Capital can expect stability and healthy earnings for the rest of the year. This will follow up on “substantial progress in our operations in the first half of 2019,” Bissada said.