It might be time to reconsider Home Capital as a place to tuck away some money. Here’s why:
1. Canada has not seen a bank failure since Security Home Mortgage Corporation went bankrupt in 1996 — and it’s important to note it was a member institution of CDIC. Clients who were impacted by the bankruptcy had their deposits returned in three weeks. CDIC protects eligible deposits to a maximum of $100,000 including principal and interest in seven deposit categories such as RRSPs, TFSAs, joint and trust accounts. Here is what is not protected: securities and investments, like foreign currency or U.S. dollar accounts, stocks and bonds, mutual funds and term deposits longer than five years.
2. Now that the world’s most famous investor has thrown his support behind the company there is no doubt the halo effect will come into play. Buffett also understands real estate and has a proven track record. So, given the backing of CDIC, I for one, am willing to reconsider the strength of the Canadian real estate market based on his endorsement.
3. Who doesn’t want to pick up a little yield? Home Capital is willing to pay up to entice you to give the embattled lender a second chance. As a depositor, Home Capital will pay you north of three per cent in some cases. That yield won’t last forever.
I appreciate that along with a loss of cash there is a loss of confidence in the company. But once you move beyond the emotion, there is security, there is yield, and there is an important endorsement.