Home Capital Group Inc. is looking to expedite its search for a new CEO, director Allan Hibben said Monday as the mortgage lender tries to right itself in the wake of a funding crisis stemming from allegations from Ontario’s securities watchdog.
Customers have been pulling their deposits out of the cash-strapped lender since the Ontario Securities Commission alleged last month that the company didn’t fulfil its disclosure obligations in its handling of a scandal involving falsified loan applications. Home Capital has said the accusations are without merit.
Hibben, a former Royal Bank executive who joined Home Capital’s board earlier this month, says the Toronto-based company is hoping to complete the CEO search, which is normally a 12-to-20-week process, in just eight weeks.
But Hibben says it’s a challenge because the pool of potential candidates — CEOs willing to step into troubled companies and work to turn them around — is likely not large.
“There’s a group of CEOs that go into a situation where they’re going to manage on a day-to-day basis and it will be very attractive and there’s lots of golf involved,” Hibben said in an interview.
“There are other CEOs that go into situations because they believe that they can make a difference, and they really thrive on turning around situations such as the one that we have here. We need to focus on the latter and not the former.”
Home Capital is also looking to recruit a new chief financial officer, although Hibben says the CEO should be in place first.
“There’s no point in hiring a CFO unless the CEO likes him or her,” Hibben said.
Former CEO Martin Reid and former CFO Robert Morton, who are also under investigation by the OSC, both vacated their roles in recent weeks. Lawyers for the men have not responded to requests for comment.
Hibben also says there will likely be more governance changes at Home Capital, which provides mortgages to people who don’t qualify for a loan from one of the big Canadian banks.
Earlier Monday, the company said the outflow of deposits has slowed in recent days and it continues to have access to sufficient funds, including $600 million that’s undrawn on a $2-billion line of credit provided by the Healthcare of Ontario Pension Plan.
Home Capital had a total of $1.51 billion in available liquidity and credit capacity as of Friday, down $50 million from the previous day.
Deposits at subsidiary Home Trust’s high-interest savings accounts were stable at about $125.4 million, the company said. There was another $12.44 billion deposited with guaranteed investment certificates, down slightly from Thursday.
In addition to changing its governance, Home Capital is also looking to replace the $2 billion line of credit with a longer term source of funding on less onerous terms, Hibben said.
When asked about any risk to the Canadian housing market stemming from Home Capital’s woes, Finance Minister Bill Morneau said Monday the government is monitoring the situation closely.
But, he added, the problem is specific to Home Capital with no risk of contagion, echoing comments that Bank of Canada governor Stephen Poloz made in an interview with the Globe and Mail over the weekend.
—With files from Andy Blatchford