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Home Capital Group placed on CreditWatch negative

S&P Global Ratings on March 30 put Home Capital Group Inc.'s ratings on CreditWatch, with negative implications. This affects the parent's BBB- long-term and A-3 short-term issuer credit ratings, Home Trust Co.'s BBB long-term and A-2 short-term issuer credit ratings, and Home Trust's BBB senior unsecured debt ratings.

The rating agency said the Ontario Securities Commission's enforcement notices and a proposed class-action lawsuit increase the reputational hit that the company may take from the falsified mortgage loan applications discovered in 2014 and 2015. On top of that, the termination of President and CEO Martin Reid — among other executive changes in recent years — implies increased uncertainty regarding the company's strategic direction and may distract the company from its core business objectives.

S&P Global Ratings also thinks Home Capital Group's nonprime residential mortgage concentration makes it more vulnerable than most Canadian banks in the current economic environment.

S&P Global Ratings and S&P Global Market Intelligence are owned by S&P Global.