Higher credit loss allowances hit Canada's largest mortgage investment corporation's bottom line
MCAN Mortgage Corporation, operating as MCAN Financial Group, reported a drop in first-quarter 2025 earnings, largely due to increased provisions for credit losses driven by current economic forecasts and global geopolitical tensions.
For Q1 2025, MCAN posted net income of $16.6 million, or $0.43 per share, down from $23.2 million ($0.65 per share) in the same period last year. Return on average shareholders’ equity fell to 10.99%, compared to 17.09% in Q1 2024.
MCAN recorded a $3.1 million provision for credit losses on its non-securitized mortgage portfolio, compared to a recovery of $0.6 million in Q1 2024. The increase was largely tied to weaker economic forecasts and provisioning for impaired residential construction loans. Despite this, the uninsured residential mortgage portfolio maintained an average loan-to-value (LTV) of 64.3%.
Equity income from MCAP Commercial fell to $5.6 million, down 22% from $7.2 million a year ago.
"Our first quarter results are within our expectations despite an uncertain economic and geopolitical environment impacting our provisions for credit losses, while our credit quality remains resilient as it has since our founding," CEO Derek Sutherland said.
The board declared a second-quarter cash dividend of $0.41 per share, payable on June 30, to shareholders of record as of June 13. As a mortgage investment corporation, MCAN distributes all taxable income through dividends.
Total assets reached $5.4 billion by March 31, 2025, up 1.8% from year-end 2024. Non-securitized assets rose to $3.0 billion, up 5.1% from December, supported by a 2% increase in uninsured residential mortgages. Uninsured residential mortgage originations hit $97 million, up 15% from Q1 2024, while renewals stood at $104 million.
Construction loans totaled $1.1 billion, marking a 2% increase, with $144 million in new originations, offset by $22 million in project completions.
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Securitized mortgages decreased 3% to $2.4 billion. Insured residential mortgage securitization volumes dropped 75% year over year to $53 million, reflecting reduced insured mortgage originations amid broader market challenges.
Net non-securitized mortgage spread income decreased by $1.7 million, mainly due to narrower spreads over term deposit costs, though this improved slightly compared to Q4 2024 due to active hedging and pricing strategies. Meanwhile, net securitized mortgage spread income increased by $0.6 million, thanks to favorable spreads on Government of Canada bond yields.
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