S&P lowers Home Capital view to negative

Standard & Poor’s said it revised the outlook on Home Capital Group Inc. and its bank subsidiary, Home Trust Co., to negative from stable.

The agency also said it affirmed the ratings, including the BBB- and A-3 ratings on Home Capital Group, along with the BBB and A-2 issuer credit ratings on Home Trust.

The outlook revision reflects both external macroeconomic and idiosyncratic factors that make Home Capital more vulnerable to a downturn or disruption in the Canadian housing market, S&P said.

A weakening economy in Canada – combined with Home Capital’s heavy concentration in non-prime residential mortgages – makes the company particularly susceptible to further economic deterioration, the agency said.

Recent headwinds associated with the fraudulently originated mortgages also have reduced the confidence in Home Capital’s risk management framework, S&P added.

Home Capital’s concentrated exposure to the Canadian prime- and nonprime-residential mortgage sector is also considered a material risk in a potential market downturn.

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