Home Capital Group Inc. has chosen a mortgage industry veteran with a technology background as its new full-time president and chief executive, tasking Yousry Bissada with getting the beleaguered Toronto-based company “running on all cylinders” again.

Even after last month’s major investment by Warren Buffett’s Berkshire Hathaway — which made the renowned investor Home Capital’s largest shareholder while staunching the decline in deposit balances at its subsidiary — the 57-year-old former banking executive will face a daunting task when he starts on Aug. 3.

That includes determining how to begin growing the company’s mortgage book again, even as Home Capital and other non-prime lenders are poised to take a hit from proposed regulations that would tighten lending standards for uninsured mortgages.

Bissada, however, said he is undeterred by the hurdles.

“I’ve never been afraid of transforming and taking something from one point until the other,” he told the Financial Post in an interview Wednesday.

“I felt the nucleus of this company, as many people in the mortgage industry do, is really good. From the day the job was available I was very interested and put up my hand, and all the way along through the process, the further I got into the process, the more excited I was.”

Bissada, who is currently president and chief executive of Kanetix Ltd., which operates an online insurance and mortgage marketplace where consumers can comparison shop, will take over the role of chief executive from board member Bonita Then, who has been serving on an interim basis.

The appointment of a new chief executive after a months-long search is a key step for Home Capital as it aims to get back on track after it saw a partial run on its funding after regulators accused the company, founder Gerald Soloway, former chief executive Martin K. Reid and former chief financial officer Robert Morton of misleading shareholders. The company and these executives reached a settlement for these allegations, and a related class-action lawsuit, last month.

Stephen Boland, an analyst with GMP Securities, said Bissada’s appointment was “a key development to restart growth in the company.”

“Bissada has an impressive background in financial services technology through Filogix and serving on the boards of Paradigm Quest and Solidifi,” he said in a note to clients Wednesday. “Although these names may not be well-known to investors, they are key digital platforms in the mortgage industry. We believe that improving HCG’s technology and systems is crucial for HCG to compete in the future.”

Bissada will be appointed to the board of Home Capital and its subsidiaries effective with his appointment, and will be responsible for completing the alternative lender’s search for a new chief financial officer.

Brenna Phelan, an analyst with Raymond James, said they see Bissada’s mortgage market experience as a “positive” given recent sector-wide regulatory reform proposals, such as the Office of Superintendent of Financial Institutions’ proposed changes to its B-20 guidelines.

These draft changes are “likely to put pressure on both the growth outlook for non-prime mortgage originations, the business on which HCG has stated it will retain its focus (and direct its available funding), and on the non-prime, uninsured mortgage market in general,” she said in a note to clients.

Bissada said his first priority is to do a review of the company and develop a plan, but it is unclear what the most pressing challenge will be until that process is complete.

“After the first quarter, I either will have a plan or a good opinion of how long my plan will take,” he said.

Other hurdles ahead include navigating a special shareholder vote in September on the second tranche of Berkshire’s $400 million investment, which would boost Buffett’s shareholding from 19.99 to 38.39 per cent.

“The shareholders have the right to vote any way they want and as they see fit for the company,” said Bissada. “I am not on the board yet, but the board is obviously recommending to do it. But it is up to the shareholders, and whether they see if it is better for them or not.”

Also, the incoming CEO must also determine Home Capital’s business model going forward: whether it will maintain mortgages on its balance sheet, as it always has, or potentially sell or securitize them.

“We’re going to have to have as many tools as possible for funding mortgages,” Bissada said. “We have some great capabilities today and we’ve got to explore others that are out there. And, we’ll just have to talk to the investment community and find out what our capabilities are.”

Shares of Home Capital rose as much as 2.5 per cent, before closing down 1.37 per cent at $14.39.

aligaya@postmedia.com
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