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Home Capital Group shares sink after analyst downgrades

Home Capital Group was downgraded by several analysts Monday after the company reported single-family residential mortgage originations were down more than expected in the second quarter.

Home Capital Group Inc.’s shares dropped 19 per cent Monday morning, following the company reported that new single-family residential mortgages fell a lot more than expected in the second quarter.

The holding company, which operates through mortgage provider Home Trust Co., was also downgraded by several analysts Monday on the disappointing figures.

“We\’ve reduced our EPS estimates to reflect a lower origination and loan growth outlook,” said TD Securities analyst Graham Ryding, who downgraded the organization to hold from buy and changed his 12-month price target to $46 from $53. “Our outlook for expenses and margins are largely unchanged. We believe that Home Capital\’s medium-term guidance looks somewhat optimistic in light of the slower growth delivered YTD.”

RBC Dominion Securities analyst Geoffrey Kwan also downgraded the company, from sector perform to underperform. He explained the downgrade was due to growth concerns, and not any deterioration in the company’s credit.

Kwan lowered his target around the company as well, to $39 from $48. Home Capital’s shares were down $5.95, or 14.2 per cent, to $36.06 in morning trading.

Home Capital on Friday in a release in front of earnings (which will be issued July 29) asserted new traditional mortgages were $1.29 billion in the second quarter, compared to $1.53 billion in the last year. New insured single-family residential mortgages, meanwhile, were $280 million?during the period, when compared with $619.6 million last year.

In addition to the TD and RBC downgrades, Home Capital seemed to be downgraded by Cormark Securities (from buy to market perform) and Macquarie (from outperform to neutral).