Major Canadian lenders announce colossal Q3 earnings

First Nat, Home Capital, and others all benefited from this year's unexpected housing boom

Major Canadian lenders announce colossal Q3 earnings

Resurgent consumer purchasing power helped prop up Canadian lenders’ earnings despite the sustained impact of the COVID-19 pandemic, third-quarter data from several key institutions has revealed.

Similar to Equitable’s recently announced strongest-ever Q3 results, First National Financial LP originated a record volume of $7.6 billion in mortgages over the three months ending September 30, representing a massive 36% annual upswing.

First National also saw its renewals swell by 14% year over year to reach $2.4 billion. These trends pushed the lender’s net income up 19.6% annually to $72.5 million.

“All our regional offices achieved double-digit year-over-year production growth,” said Stephen Smith, chairman and CEO of First National. “Unlike in Q2, we saw growth both in insured and conventional mortgage production. As you may recall, we saw some investors in conventional mortgages pause their activities early this year to assess risk, which caused us to focus more heavily on CMHC-insured programs. Now some of these investors are returning.”

Meanwhile, deferrals have shrunk to just 0.7% of First National’s portfolio. The lender said that it is looking to maintain this momentum for at least three more months.

“With COVID-19 uncertainties still prevalent, it is difficult to look too far ahead. However, management is very positive about the fourth quarter and the start of 2021,” First National said, adding that it is projecting “substantially higher seasonal residential origination” in Q4.

Higher home sales volumes and prices in all major markets also propelled Home Capital Group Inc. to a landmark Q3, with net income swelling by 67.2% annually to $58.5 million and total originations growing by 26.5% year over year to $1.96 billion.

“Our performance this quarter is directly linked to the continuing resilience of the housing market,” said Yousry Bissada, CEO of Home Capital.

Deferrals accounted for less than 1% of outstanding loans at Home Capital as of October 31. The lender said that 99% of loans exiting deferrals “have either been discharged or returned to regular payments.”

“When someone buys a home, they generally do whatever they can to keep it. Our experience with deferrals during this year makes that clear,” Bissada said.

Sagen MI Canada also reported a robust Q3 performance, with net income growing by 12% annually to $124 million.

Mortgage payment deferrals fell to 5.9% of outstanding mortgages at Sagen as of September 30, significantly lower than the 13.7% reading in Q2.

“While the economic environment continues to evolve in line with our expectations, there remains a high degree of uncertainty as the country enters a second wave of the COVID-19 pandemic,” said Stuart Levings, CEO at Sagen. “That said, the pace of economic recovery, strength of the housing market and downward trend in mortgage payment deferrals should help us manage through this period, even as the mortgage payment deferral and government wage subsidy programs wind down over the coming months.”