Canada NewsWire
TORONTO, Nov. 11, 2016
Stock market symbol
TSX: MKP
TORONTO, Nov. 11, 2016 /CNW/ - MCAN Mortgage Corporation ("MCAN", the "Company" or "we") reported earnings today for the third quarter of 2016. Net income of $9.8 million increased by 36% from Q3 2015 and earnings per share of $0.43 increased by 34% from Q3 2015.
Highlights
Net Income
Q3 2016
Year to Date 2016
Dividend
Corporate Activity
Q3 2016
Year to Date 2016
Securitization Activity
Credit Quality
Capital
Outlook
The Bank of Canada's forecasted 2016 GDP growth rate for Canada has been reduced to 1.7%, with expected moderation in the last quarter of the year. With relatively low levels of economic growth, the probability of increased interest rates is low. We expect housing markets to continue to benefit from historically low interest rates, but we also expect a slowdown as a result of the impact of regulatory changes to mortgage insurance.
Canadian real estate markets continue to experience mixed conditions, as some regional economies adjust to the negative impact of weak oil prices on employment while other regional economies benefit from the lower Canadian dollar and employment strength in the manufacturing sector. The Canadian dollar has continued to weaken because of a stronger U.S. economy and the potential for interest rate increases in the U.S.
We expect financial markets to remain volatile through the end of 2016, with fluctuations in stock markets as slowing global growth and volatility in international currencies impact corporate earnings and valuations. In Canada, the impact of a weak oil sector and soft commodity prices continues to affect a significant portion of the market. Concerns over low or negative economic growth and increases in unemployment rates are expected to have a spillover effect on consumer confidence.
Ontario and British Columbia have continued to exhibit strong fundamentals and growth, with GDP growth driven by exports and immigration. In Alberta, housing markets continued to slow as a result of impacts of the weakness in oil prices and weakening employment. We continue to focus our origination in Ontario and British Columbia and moderate our exposure to Alberta. We are closely monitoring the performance of the residential construction projects with particular vigilance in Alberta.
The Toronto and Vancouver housing markets have experienced significant price inflation for the year to date, well in excess of supporting employment and income growth. While some of the price inflation is driven by low mortgage rates and lot supply shortages, we believe that price inflation at the current high levels increases the risk of a price correction. We are operating with tightened underwriting policies for uninsured mortgages, specifically for self-employed applicants.
We have seen slower sales in Vancouver caused by the newly legislated 15% tax on non-resident real estate purchases, which was intended to help restore housing affordability for residents in the Metro Vancouver Area by raising non-residents' cost of purchasing and, on the margin, discouraging foreign speculation. The government intends to use some of these new tax revenues to help boost housing supply. The change in the use of the principal residence exemption for taxable gains on home sales is expected to impact demand.
Subsequent to quarter end, the Department of Finance announced new mortgage regulations. The most significant regulations to MCAN are as follows:
We expect the impact of these new regulations to be as follows:
The Department of Finance also launched a consultation subsequent to quarter end on lender risk sharing for government backed insured mortgages. We expect the impact of potential risk sharing to be as follows:
We are continuing to evaluate the impact of these regulatory changes to the market and MCAN. We believe that the effect of these changes will likely require a minimum of 6-12 months to begin providing clarity on the direction of the mortgage market in Canada.
We will continue to monitor housing market developments as they evolve and will continue to ensure our mortgage lending book remains well positioned. MCAN has a stated annual growth target of 10% growth of corporate assets per annum. With the declining single family uninsured balance, and other changes on our balance sheet, growth in the corporate assets was 5% year to date for 2016.
We believe that MCAN is well positioned to adapt to changes in mortgage and housing markets given that we, as a regulated financial institution, have access to both the insured securitization market as well as the term deposit funding market.
Dividend Reinvestment Plan
The Dividend Reinvestment Plan ("DRIP") is a program that provides MCAN with a reliable source of new capital and existing shareholders an opportunity to acquire additional shares at a discount to market value. Under the DRIP, dividends paid to shareholders are automatically reinvested in common shares issued out of treasury at the weighted average trading price for the 5 days preceding such issue less a discount of 2%. For further information on how to enrol in the DRIP, please refer to the Management Information Circular dated March 11, 2016 or visit our website at www.mcanmortgage.com/investor-relations/investor-materials.
Non-IFRS Measures
The following metrics are considered to be Non-IFRS measures and are defined in the "Non-IFRS Measures" section of the MD&A: Return on Average Shareholders' Equity, Taxable Income, Taxable Income Per Share, Average Interest Rate, Net Interest Income, Impaired Mortgage Ratios, Mortgage Arrears, Common Equity Tier 1, Tier 1 and Total Capital Ratios, Total Exposures, Regulatory Assets, Leverage Ratio, Assets to Capital Multiple; Risk Weighted Assets Ratios, Tier 1, Tier 2, Tier 3 and Total Liquid Assets and Liquidity Ratios, Income Tax Assets, Income Tax Liabilities, Income Tax Capital, Income Tax Assets to Capital Ratio, Income Tax Asset Capacity, Market Capitalization, Book Value per Common Share and Limited Partner's At-Risk Amount.
Further Information
Complete copies of the Company's 2016 Third Quarter Report will be filed on the System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com and on the Company's website at www.mcanmortgage.com.
MCAN is a public company listed on the Toronto Stock Exchange ("TSX") under the symbol MKP and is a reporting issuer in all provinces and territories in Canada. MCAN also qualifies as a mortgage investment corporation ("MIC") under the Income Tax Act (Canada) (the "Tax Act").
The Company's primary objective is to generate a reliable stream of income by investing its corporate funds in a portfolio of mortgages (including single family residential, residential construction, non-residential construction and commercial loans), as well as other types of financial investments, loans and real estate investments. MCAN employs leverage by issuing term deposits eligible for Canada Deposit Insurance Corporation ("CDIC") deposit insurance up to a maximum of five times capital (on a non-consolidated tax basis in the MIC entity) as permitted by the Tax Act. The term deposits are sourced through a network of independent financial agents. As a MIC, MCAN is entitled to deduct from income for tax purposes 100% of dividends, except for capital gains dividends, which are deducted at 50%. Such dividends are received by the shareholders as interest income and capital gains dividends, respectively.
MCAN's wholly-owned subsidiary, Xceed, is an originator of residential first-charge mortgage products across Canada. As such, Xceed operates primarily in one industry segment through its sales team and mortgage brokers.
MCAN is also an NHA MBS issuer.
A CAUTION ABOUT FORWARD-LOOKING INFORMATION AND STATEMENTS
This press release contains "forward-looking statements" within the meaning of applicable Canadian securities laws. The words "may," "believe," "will," "anticipate," "expect," "planned," "estimate," "project," "future," and other expressions that are predictions of or indicate future events and trends and that do not relate to historical matters identify forward-looking statements. Such statements reflect management's current beliefs and are based on information currently available to management. The forward-looking statements in this press release include, among others, statements and assumptions with respect to:
The material factors or assumptions that were identified and applied by us in drawing conclusions or making forecasts or projections set out in the forward-looking statements include, but are not limited to:
Reliance should not be placed on forward-looking statements because they involve known and unknown risks, uncertainties and other factors, which may cause the actual results to differ materially from the anticipated future results expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially from those set forth in the forward-looking statements include, but are not limited to:
Subject to applicable securities law requirements, we undertake no obligation to publicly update any forward-looking statements whether as a result of new information, future events or otherwise. However, any further disclosures made on related subjects in subsequent reports should be consulted.
SOURCE MCAN Mortgage Corporation