- In Q2-2024, BCF recorded its highest-ever Q2 revenue (up 3% YoY), amid higher lending rates, but missed our estimate by 5% due to lower than expected mortgage advancements.
- EPS was flat YoY, driven by higher loan loss provisions, missing our estimate by 4%. Annual regular dividends remained unchanged at $0.80/share, reflecting a yield of 8.9%.
- Stage three mortgages (impaired) decreased QoQ, from 2.3% to 1.7% of mortgages. However, for conservatism, management raised loan loss allowances by 0.2 pp QoQ to 2.73% of mortgages, aligning with our estimate.
- We believe the portfolio’s risk profile has decreased due to lower stage three mortgages and enhanced geographical diversification.
- The company is pursuing a $50M bond financing. We believe this financing is indicative of the company’s robust pipeline of mortgages. Bondholders will participate on a pari passu (equal) basis with shareholders.
- BCF’s lending rates have started declining following the Bank of Canada’s recent rate cuts. Today, the BoC lowered its benchmark rate by 25 bp, marking its third consecutive cut since June. With cooling inflation and a softer jobs market, we expect further rate cuts, and a boost in BCF’s transaction volumes in H2-2024.
- In our May 2024 report, we predicted a rally in MIC/financial stocks driven by lower rates, and sector multiples have since risen by 8%. We remain bullish on MIC and financial stocks, expecting further rallies with additional rate cuts.
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