Home Capital Group (HCG) - Page 15
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Thread: Home Capital Group (HCG)

  1. #141
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    Interesting tweet from ac_eco

    RBC putting out Research on a Saturday Morning.. Where is $HCG going to find 325 million in a month? ITS OVER

    https://twitter.com/alderlaneeggs/st...84943183478784


  2. #142
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    That is an interesting. Clearly one way to attract (or just as importantly keep existing) deposits is to increase rates. If they do so, there is no issue IF one stays within the CDIC insured limit. I'd seriously consider buying a 3% 5 yr GIC from them.

  3. #143
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    Quote Originally Posted by Lost in Space 2 View Post
    Interesting tweet from ac_eco

    RBC putting out Research on a Saturday Morning.. Where is $HCG going to find 325 million in a month? ITS OVER

    https://twitter.com/alderlaneeggs/st...84943183478784
    Huh? I think I see they have about 1.5 billion in cash.

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  5. #144
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    There is also potential for a run on deposits, i.e. HISA money. I think that could be a tripping point.

  6. #145
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    Why would there be a run? Its all CDIC insured. I don't get it?

  7. #146
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    Quote Originally Posted by Eder View Post
    Why would there be a run? Its all CDIC insured. I don't get it?
    I think a lot of people throw rational behaviour to the wind in volatile situations and vote with their emotions,.. especially with a few mouse clicks these days. Why lie awake at night with that ghost in the woodwork...just for a few ice cream cones more interest over a competitive alternative? All speculative of course... Monday may be an interesting day albeit I will miss it all enroute to a few days of R&R.

    Added: I have no skin in this game. No stock, no HISA, no GICs. Wifey has a few small Home Trust GICs in her RRSP.

  8. #147
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    Quote Originally Posted by AltaRed View Post
    There is also potential for a run on deposits, i.e. HISA money. I think that could be a tripping point.
    I agree, it's a risk. There's a reason I don't ever deposit with Home Capital/Home Trust, Peoples Trust, Equitable, etc.

    Quote Originally Posted by Eder View Post
    Why would there be a run? Its all CDIC insured. I don't get it?
    Because a bank failure is not a fun thing to live through. There might be delays before you get access to your money. Plus the uncertainty.

    There were runs on several US banks starting 2007. For example even though deposits with Indymac Bank were FDIC insured, people still lined up around the block to withdraw their money.

  9. #148
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    Quote Originally Posted by AltaRed View Post
    There is also potential for a run on deposits, i.e. HISA money. I think that could be a tripping point.
    It's probably worth doing some ballpark quantitative figuring here. I'm too lazy to try too much, but it looks like HISA (demand) deposits run to only about 13% of Home's total retail deposits ($15B?). Brokered GICs (70%) and Oaken GICs (9%) make up the rest. Some of the latter would be short-term and slowly coming to term, but there's a limit to how much of the deposit base can flee immediately, even if it wanted to.

    With the recent stock plunge, they seem to be trading at a significant discount to book value (75% of?). I don't know if whatever problematic mortgages they may have in their book could be that serious, but take a ridiculously extreme example and say that Equitable or someone offered $1/share (currently around $20?). 5% of current market cap ($1.2B) would seem to be around $60 million, and unless they've been writing mortgages on Florida swampland instead of Toronto condos, it would seem impossible for Home not to be worth at least that much.

    They could probably also start selling off assets and reduce their balance sheet, even at the cost of growth, share price, etc.
    So CDIC isn't going to be writing anyone any cheques, and Home probably isn't going anywhere (except perhaps acquired). They may have short term liquidity or cost-of-funds issues, or irate shareholders who have taken a bath, or dismal growth prospects given the bad publicity. But some of the nuttier comments here are just that.

  10. #149
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    ^ If they get into a deleveraging stage, things snowball and get worse. This is the problem with banking: it's all fun and games on the (leveraged) way up. It can get pretty horrifying on the way down, if things spiral.

    For example they MAY have to raise more capital. This will involve issuing more equity, pounding the share price even lower. Then their counterparties will require more collateral to be posted, so their cashflow will get drained posting collateral. Or it forces more liquidation.

    Best case scenario: maybe they can manage the situation with appropriate liquidation, reducing risk exposure, and maybe their lenders/counterparties will not freak out and don't demand any more collateral or risk compensation.

    Does anyone know what their off-balance-sheet derivatives situation is? Do they have big positions off balance sheet that could go sour and drain them of cash? These guys aren't a TBTF bank... they can't just borrow limitless free money from government like the Big Five do.
    Last edited by james4beach; 2017-04-22 at 09:32 PM.

  11. #150
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    I doubt they'll have to raise equity; HCG is well capitalized, far more so than the big banks (16% ratio vice 10-11%). HCG also has a Schedule I bank in Home Bank, which they acquired in 2015 (CFF).

    More telling is that you can't borrow shares to short this anymore, almost the entire thing is shorted. You can't short 200% of the stock, so I'm wondering how much lower this actually goes. They don't have to grow the business to be great value, as long as it doesn't shrink, and I believe Q1 is going to show about 6% growth in adjusted EPS. If they're able to grow their loan book despite all of the headline news, then this could be really interesting. Probably though, insanely volatile.


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