Does EQB traded on TSE represent EQ Bank? | Page 2 | EQ Bank | Discussion forum

I agree with NorthernRaven and others. With all due respect, "Top It Up," you're feeding this mass hysteria and I'd kindly ask that you refrain from such activities. 🙂

Also, to clarify either a misunderstanding or false statement in one of your posts that you could be sitting on "CDIC (cash) payouts in your RRSP account," that would only happen if CDIC's deposit insurance regime had to be tapped and they couldn't find another CDIC member institution to takeover those customer's HISA and GIC deposits. Even if the "assuming FI" felt that some of the GIC rates were too high, they'd likely still honour them even if it meant marginally reduced profitability until they matured. I can't envision, frankly, a scenario where CDIC has to tap its deposit insurance funds to cover deposits. CDIC also has the ability, since 2008, to "step in" and basically run the bank and even own the bank, to set it up for a takeover by another bank. My point is...tapping deposit insurance funds is a last resort. 🙂

NorthernRaven's point about solvency and liquidity differences is a key one, the former being more problematic but, even then, may not cause CDIC deposit insurance to be tapped as most of Home Trust's mortgages are CMHC-, Genworth- or Canada Guaranty-insured, the first of which being fully government guaranteed (there's talk of mortgage lenders having to pay a 'deductible' in the case of mortgages that go bad but it hasn't come to pass yet) and even in the latter two's case, their mortgage insurance is 90% guaranteed by the federal government, meaning Genworth and Canada Guaranty are only on the hook for the first 10% of the mortgage. 😉

HCG has secured this line of credit to bolster its capital structure and likely satisfy regulators. As long as they can prevent mass GIC deposits from withdrawing at maturity, which could be done, in part, with higher rates, they'll be fine and this line of credit acts as a short-term "cushion" in that respect. On profitability, however, the next few quarters are going to be "messy," to put it lightly, and that may even effect things like dividends for shareholders.

In all of this mass hysteria created by "short sellers" and the media, particularly, it is shareholders that are the hardest hit, as well as HCG in its ability to operate as an independent company, potentially. Depositors are well-protected, both in knowing their deposits (over and above their CDIC limit) will either be assumed by another Canadian FI or, in the worse case, CDIC's deposit insurance regime would be tapped up to applicable limits. 🙂

Cheers,
Doug

NorthernRaven said

Doug said

NorthernRaven's point about solvency and liquidity differences is a key one, the former being more problematic but, even then, may not cause CDIC deposit insurance to be tapped as most of Home Trust's mortgages are CMHC-, Genworth- or Canada Guaranty-insured, the first of which being fully government guaranteed (there's talk of mortgage lenders having to pay a 'deductible' in the case of mortgages that go bad but it hasn't come to pass yet) and even in the latter two's case, their mortgage insurance is 90% guaranteed by the federal government, meaning Genworth and Canada Guaranty are only on the hook for the first 10% of the mortgage. 😉

One clarification - from their 2015 annual report, Home had a $20 billion balance sheet, and ~60% of this was "Traditional single-family residential mortgages", and I think most of this is uninsured - average interest income is 5%, and would be their subprime bread and butter. They had over $ 1 billion of their "Accelerator" mortgages (guaranteed), and 2-3 billion in securitized stuff they still have some interest in (obviously guaranteed), and some commercial/multifamily stuff and some credit card. I think a lot of their guaranteed stuff goes off-balance sheet into fully-offloaded securitized "under management" - they probably service this, and I think are responsible to maintain payments for delinquents to the mortgage bonds until insurance kicks in.

It would be interesting to know how much book-value of mortgages they had to pledge to HOOPP for that expensive credit facility, and whether HOOPP somehow got to pick and choose.  

Are you talking EQ Bank or Home Trust/Home Bank, NorthernRaven? I didn't think the institutional investor had been revealed. I suspected it was either an existing Canadian bank or maybe a pension plan but didn't think it'd been revealed, in the case of Home Trust/Home Bank. 🙂

Also, if EQ Bank you're talking about, yeah, 60% uninsured portfolio is probably reasonable with 40% government-insured. I'm not exactly sure how all that securitization off-balance sheet crap comes into play. You're probably right about them being responsible for the first few months of payments on a mortgage under foreclosure. Even if their portfolio has been securitized under a NHA Act mortgage bond program, wouldn't that mean EQ Bank had to buy bulk portfolio insurance from CMHC (or equivalent insurer) to qualify for its inclusion?

At any rate, we're kind of "getting into the weeds" a bit on stuff either of has only a cursory understanding, at best, so I think we should just leave it so as not to continue this hysterical discussion. 🙂

Cheers,
Doug