Bank vault door.Getty Images/iStockphoto
Home Capital Group is edging closer to deciding whether it will convert its operations from being a trust to being a bank. But one this is certain: it won't be calling itself "Home Bank."
Chief executive Gerald Soloway joked about naming the company after a Canadian bank that collapsed in 1923 (after making a series of bad loans) at the company's annual shareholder meeting in Toronto on Wednesday. "We didn't think that was a good name to build on. It's still available, but that was not our first choice," Mr. Soloway told the crowd, chuckling. "And then there are numerous Home Banks in the United States."
But joking aside, he said that Home Trust Bank was the name the management team and board were considering. "I think we'll have more to say about it over the course of the next six months or so," he said.
Mr. Soloway was responding to an audience question about whether the parent company of Home Capital, Canada's largest non-traditional mortgage lender, would consider mirroring competitor Equitable Trust's plans to convert itself into Equitable Bank. The process would involve applying for a licence from the Office of the Superintendent of Financial Institutions Canada and the Minister of Finance. The change would mean the company would be regulated under the Bank Act. Mr. Soloway said he's still considering the option.
Equitable Trust described the advantages of becoming a bank as the ability to "appeal to a new generation of borrowers and depositors," as well as the potential to raise capital more easily, but said at the time that the change wouldn't change the business model of the company.
While Home Capital hasn't made a decision to apply, converting from a trust to a bank has been discussed at the board level, where data is being reviewed, Mr. Soloway said. But it has been hard to find comparable figures because of the company's position as the largest lender in its category. The Toronto-based subsidiary of Home Trust Co. primarily offers alternative mortgages to people who would have trouble getting a loan at a bank. Home Capital also takes deposits and issues credit cards.
"In the investment community… it's an easier task to put Home Capital against banks or small banks," Mr. Soloway said. "We're almost in a category of our own – we're the only large trust company that's not owned by another financial institution like a bank or a life company. And the only one comparable in our space, at a little over half our size, is Equitable Trust, and they're about to become a Bank."
Should the company decide to pursue the change, Mr. Soloway predicts a time horizon of about a year to get the necessary approvals. When B2B Trust converted itself into a bank in 2012, the process took a couple of years.
(Jacqueline Nelson is a Globe and Mail Financial Services Reporter.)
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