Canadian Western Bank sees increased mortgage demand

Canadian Western Bank
said on Thursday it was experiencing higher-than normal demand
for mortgages as a result of challenges faced by its largest
competitor, Home Capital Group.

Home Capital has scaled back on lending to focus on
repairing its balance sheet following rapid deposit withdrawals
after a management shake-up and accusations brought by a
regional regulator that it had misled investors about its
mortgage business. The company has said the accusations are
without merit.

Canadian Western Bank, based in Canada’s oil-rich Alberta
province, said in a statement alongside its second-quarter
results that it is being very selective in approving new loans.

The bank said impaired loans within its mortgage book are
expected to increase in view of softer housing market
conditions, particularly in Alberta. It said it is continuing to
carefully monitor its entire mortgage portfolio for signs of
weakness.

Canadian authorities have taken a number of measures to cool
housing markets including tightening rules on mortgage
underwriting following sharp rises in prices, particularly in
the cities of Vancouver and Toronto.

Reuters reported on Wednesday that Home Capital’s struggles
were pushing more borrowers towards less regulated mortgage
providers, raising the risks for them and the wider property
market.

Canadian Western Bank reported second-quarter earnings which
were ahead of market expectations and up 44 percent on the
previous year, during which it had been impacted by the weak oil
price.

The bank reported earnings per share, excluding one-off
items, of C$0.59 compared with C$0.41 a year ago. Analysts had
on average expected earnings of C$0.57, according to Thomson
Reuters I/B/E/S data.

Last year’s performance was impacted by the bank setting
aside funds to cover bad loans to clients in the energy sector
struggling as a result of very low oil and gas prices.

(Reporting by Matt Scuffham; Editing by Chizu Nomiyama)