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Apr 24, 2017

‘Kind of mediocre’: Home Capital shake-up falls flat on Bay Street

Former Home Capital Group CEO Gerald Soloway

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Home Capital Group co-founder and former CEO Gerald Soloway is preparing to step down from the embattled lender's board of directors.

The company announced Monday Soloway "feels it is in the best interests of the company if he steps down as soon as the board has attracted a strong director with financial services expertise." Home Capital said "well-qualified" candidates have already been short-listed. Precise timing of the replacement is uncertain, and Soloway is still planning to stand for re-election at the company's annual meeting next month.

The announcement was made less than a week after the Ontario Securities Commission alleged Home Capital, Soloway, former President Martin Reid and CFO Robert Morton played various roles in misleading shareholders in 2015.

Home Capital (HCG.TO) said on Morton will be replaced after first-quarter financials have been filed, at which time director and former CFO Robert Blowes will step into the role on an interim basis. Morton will be reassigned to "special projects outside the financial reporting group."

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Is Home Capital doing enough to rebuild investor confidence?

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    "These are important steps in rebuilding confidence and putting the focus back on our profitable underlying business and its solid performance," Home Capital Chair Kevin Smith said in a statement. "We know that we have not met the full expectations of some of our valued stakeholders, which we deeply regret. These changes will ultimately result in enhanced management and governance leadership, and bring valuable new perspectives to Home Capital."

    However, there’s also a view on Bay Street that Home Capital isn’t doing enough to wipe its slate clean.

    “This kind of mediocre, ‘Oh, we’re going to keep [Morton] on,’ and all this stuff – that does more damage than anything else,” said Avenue Investment Management Portfolio Manager Paul Harris, who doesn’t hold shares of Home Capital, in an interview with BNN. “This seems kind of half-hearted in my view.”

    Home Capital also said Scotiabank intends to resume offering Home Trust deposit products on Monday, with a $100,000 limit per client.