Fitch changes Home Capital Group outlook to negative

Fitch Ratings said it revised Home Capital Group, Inc.'s outlook to negative from stable and affirmed its long-term issuer default rating at BBB, senior debt at BBB, viability rating at bbb, short-term issuer default rating at F2, support rating at 5 and support floor at No Floor.

The agency said the outlook revision is based on emerging concerns regarding home price valuations and household debt levels in Canada, which could potentially translate into increased credit costs given Home Capital's focus on non-conventional borrowers. These risks could potentially be magnified by the company's concentrated business model, Fitch added.

The ratings continue to reflect Home Capital's consistently robust earnings supported by a strong niche franchise, solid asset quality and stringent cost controls, the agency said. The ratings are further supported by the company's sufficient liquidity and sound capital levels.

Nonetheless, Fitch said the company's geographic concentration, narrow product mix and limited franchise continue to present rating constraints.

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