Q2 2020 Home Capital Group Inc Earnings Call
[music].
Ladies and gentlemen, thank you for standing by welcome to the human capital group's second quarter financial results Conference call.
At this time, all participants Arnie listen only mode. After just speakers presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your children.
Be advised that today's conference is being recorded if you require any further assistance. Please press star zero for the operator I.
I would now like to him the conference over and Ms. Jill Macquarie of Investor Relations the floor is yours.
Thank you Silvia and good morning, everybody. Thank you for joining us today I know you'll have a busy earnings calendar right now.
Well begin the call with a much can you speak to set up President and Chief Executive Officer, followed by a review of our financials type Brad coatings, Chief Financial Officer.
With this on the call up into your question to Ed card has he VP of sales and marketing my voice GDP of underwriting in funding and she catching chief digital and strategy Officer, David Class Chief Risk officer, They to do we feel chief information Officer, and James Pellicane SPP as commercial.
Although our team members are at different physical locations for this call. So please understand it for sound quality in response time or not at their usual level.
Before we begin I'd like to caution or webcast participants that discussion during this call.
May contain forward looking statements about home capital strategies and expected financial results.
Various factors could cause actual results to differ materially from those contained in these forward looking statements. Accordingly, the audience is cautioned against undue reliance on these remarks, please refer to our advisory on forward looking statements on slide two at the Investor presentation.
Finally, a link to the slides accompanying thislife webcast is available on our website at home capital Dot Com.
And now I'd like to turn the call over to use free.
Thank you and the good morning.
I'm pleased to welcome you to our second quarter results Conference call.
I'm happy to report said this was a quarter of growth for us at home capital.
We grew our net income and our net income per share goes on a sequential and year over year basis.
We accomplished this even while we were prudently added to our credit allowance to account for deterioration since Q1 in our forward looking economic models as a result of cold 90.
Today, we have another quarter of covert experienced behind us and we're beginning the process of cautious reopening across the country.
We are able to do that thanks to the coordinated efforts of our political leaders government agencies and health professionals working together to keep the health of Canadians. That's the most important consideration and reopening policies.
We believe that focusing on long term objectives and putting people first is the right strategy for this country.
She this crisis through to the end and beyond.
Focusing on long term shareholder strict stakeholder objectives, including putting our customers and our people first is how we operate at home capital.
Today, I will discuss what we accomplished in Q2.
Our efforts, that's supporting our borrowers to financial uncertainty.
And our activities for the balance of the year.
Beginning with our Q2 results.
Capitals net income grew on a sequential and year over year basis.
I think at a significant though we were able to grow earnings even after taking a larger than historical credit provision.
As Brad will discuss in more detail decreased provision was not driven by a decline in the quality of our loan book, but by a deterioration in our forward looking economic models for the second quarter compared with the first quarter.
If you look at our pre provision income it was substantially higher than the same quarter last year.
We also reported year over year improvement in our efficiency ratio and return on equity.
In all our major markets the local real estate boards are reporting higher sales volume higher prices and more new listings.
After some slow spring sales the recent Toronto Real estate Board data reported the highest recorded sales for the month of July in the past 10 years.
This kind of activity, it's possible to manage in this environment because the industry is finding ways to use technology and safe contact measures in all phases of the home buying process.
Brokers Realtors lawyers inspectors buyers and sellers, everyone is working together to enable home purchases to happen.
A lot of businesses have slowed down during this time of shutdown, but ours is not one of them.
I could not be prouder of our industry our partners our people and the work we all do to help Canadians find and purchase their homes.
Here at home I'm pleased to report that we grew our originations this quarter compared with 2009 Pete.
With growth in both our residential and commercial lending.
This has as much about the importance of what we do as it does about our success in doing it.
And it is evidence of a market that has stayed healthy and resilient. Despite despite all the predictions to the country.
Importantly, we have achieved this growth in a quarter, where we had adjusted our risk appetite inline with the prevailing conditions a financial uncertainty that is more cautious underwriting.
Our open deposits continued to grow in dollar value and as a percentage of our deposit funding.
This growth took place in a quarter when our open stores were closed.
Overtime and as local health authorities permit we plan to reopen our open stores.
It has always been our strategy to put the wishes of our customers first and served them that way they want to be served.
I'm customers still prefer the personal of experience of in store service and we'll be happy to offer that again.
In addition to our phone and unlike options.
Another aspect of our operations has not changed.
It is our commitment to our digital transformation.
Were moving forward with home Trust Ignite program.
Well our project.
Teams have successfully adapted to remote work environment and projects are moving forward.
We launched a new CRM released with improved sales reporting and loan servicing functionality for all our contact center and launch two additional ignite projects digital banking and loan origination.
The progress we have made so far has given us the flexibility to adapt to a work from home model and still provide high levels of privacy and security to our customer data.
This flexibility made it possible to increase our quality of service to our brokers and blowers, even while meeting high volumes of customer requests.
I look forward to sharing developments with you.
Turning to the subject of our customer support measures during this health crisis.
It is now nearly six months since the World Health organization declared cobot 19 to be a global pandemic.
From the beginning we needed our top priority to provide help and support to our people our partners and our customers.
You can see from the results we're reporting today that people still want to on homes and not even a global health crisis has changed up.
As we report our last as we reported in our last quarterly update.
Offered payment deferrals and over 9000 loans totaling nearly 4 billion in asset value.
For 23% of our loan portfolio as of April Thirtyth.
As of July 30, Onest those figures have declined the fewer than 3000 law.
And less than 1.3 billion or roughly 7.5% of our loans.
And we expect to continue to see a decline in the deferrals.
Brad will talk about the numbers later in the call, but I want to tell you a little bit about the process and how it ties with our unique value proposition.
In the early days of the shutdown people feared for the security of their homes, even as they depended on their homes for isolation and safety.
Our response was we're here to help.
Home gave two months payment deferrals to any borrower, whose account was in good standing and who told us that they had been impacted by the pandemic.
We were happy to do that.
Home was able to pivot from not only helping Canadians own their homes.
To helping people keep their homes.
Beyond the initial two months, we follow the different process.
Borrowers were required to file a new application for relief.
We looked at the financial picture of each customer educated them on the impact of different relieve ops relief options and worked with them to determine the best way forward.
In some cases that meant additional deferral support.
For some borrowers with meant adjusting their payments.
In other cases, we help them understand that it was not in their best interest to take additional debt and counsel them on how to find ways to return to regular payments.
Indeed extraordinary circumstances, we can serve our customers best by listening to their stories and helping them make the best decisions for their unique situations.
The two month approach gave us the opportunity to support our customers when they need to that most but also the opportunity to gain valuable insight and our customers borrowers in our borrower's ability to repay before granting additional relief.
We believe the economic environment in which we find ourselves will create an ongoing need for individual lending solutions and we have the experience to me that need.
Now looking ahead to the balance of the year.
The latest data on sales activity and housing prices are consistent with a healthy and resilient real estate market.
Our people have shown that they can execute effectively in this environment and we are confident they will continue to do so.
We will move ahead with our plans for reopening our workspace, while committing to our employees they will be able to return safely.
And we're proceeding with our strategy for digital transformation to our ignite program.
In the event of a second wave of depend demick.
We're now even more well equipped to face these unique challenges and continue to operate our business with agility resiliency and integrity.
Cobot 19 has created a lot of disruption to the economy and to our business.
While we look forward to an eventual recovery, we can't be certain of its timing and magnitude.
We are using this period of restricted operations as an opportunity for learning and development.
The deferral programs that we put in place have been an opportunity to have meaningful conversations with our borrowers to listen to their stories and then how we can best help them.
Remote working has given us opportunities to engage with our employees and to learn more about what they need to carry on the important work we do.
We are engaging with brokers and learning how we can be a better partner to them.
We're able to make use of this opportunity because we had all the elements in place to function successfully before the health crisis began to affect all our lives.
We had and continue to have a strong capital position.
Abundant liquidity.
He sustainable risk culture underlying all our interactions.
A culture that emphasizes service excellence.
And an unparalleled group of team members, who are dedicated to the important work we do.
I will now ask Brad to discuss our financial results.
Thanks history and good morning, everyone. We appreciate you taking the time to join us.
The presentation on our financial results because on slide seven.
As easterly mentioned, we've made significant efforts over the past three years to allow our business to perform in any conditions.
The fact that we're navigating a global pandemic with a strong balance sheet and ample liquidity to support our customers is evidence of the success of that effort.
Our people capabilities values and sustainable risk culture has been put to the test and the results are showing the resilience of our business model.
We're pleased to report diluted earnings per share, where 65 cents on a reported basis and 70 cents on an adjusted basis, an increase in more than 20% relative to both last quarter and the same quarter last year.
Net income also grew on both a sequential and year over year basis.
Our Q2 net income grew by 23% over Q1 and by 7% over Q2 of 29 team.
On an adjusted basis net income grew by 23% over Q1, 2020 and by 5% over Q2 2019.
The growth in net income that we reported this quarter.
It's all the more significant because we achieved it in a quarter in which the majority of her team was working remotely actually took sizable provisions to strengthen our balance sheet is forecasted deteriorating economic conditions.
Slide eight breaks on some of the components of that growth.
You will see that net income per share. This quarter was helped by improved net interest margins and by a lower number of shares outstanding.
You can also see our credit provisions in the quarter reduced earnings per share on a relative basis by 18 cents.
Slide nine shows originations for the quarter.
We increased originations in both residential and commercial mortgages.
Lower volumes in the alternative market were more than offset by higher accelerator volumes.
Commercial volumes grew by 60% over last year.
Slide 10 shows our total loan portfolio with growth of 3% year over year broadly in line with the market.
As you can see on slide 11, we adjusted our risk appetite at the end of Q1, which resulted in tighter underwriting standards.
The impact on our portfolio is evident with a higher FICO score this quarter on new originations compared with Q1 and by a higher FICO score on the overall portfolio.
Slide 12 shows the progress of our net interest margin, which reached 2.4% this quarter compared with 2.38% last quarter and 2.09% in the same quarter last year.
This quarter NIM was enhanced by higher yield on loans and lower deposit costs.
But it was also negatively impacted by a higher average volume of low yielding liquid assets on the balance sheet relative to Q1.
Despite the drag on our NIM, we continue to hold the substantial volume of liquid assets on our balance sheet.
We believe this is a correct strategy for an economic environment, which is still uncertain.
Another aspect of our liquidity risk management shows through in the management of our own can channel on slide 13.
We continue to attract deposits to okay, which has now reached over 3.7 billion over 26% of our total deposit funding.
84% of those deposits are in the form of term deposits.
Turning to a discussion of customer deferrals and credit beginning on slide 14.
During our Q1 call we reported that we had granted payment deferrals on over 9900 loans, representing over 3.9 billion principal balance as of April Thirtyth.
I was at July 31st loans under deferral had declined by 73% 200 2700 lows.
And the principal value of the loans under deferral declined by 67% to approximately.
One.
3 billion.
On Slide 15, you can see we took additional credit provisions of 18.7 million this quarter.
The provisions related to a deterioration in the economic outlook over the life of those loans.
Details on our models are in page 53 of the notes to our financial statements and all scenarios unemployment is not expected to returned to pre cobot levels until 2022.
All scenarios are forecasting a decline in housing prices over the next 12 months.
Although the latest data on the Canadian housing market shows it to be active this has not yet been incorporated in the economic models behind our credit provisioning decisions.
Write offs during the quarter remain modest at two basis points of assets even under these conditions.
Underscoring the quality of our loans and our security.
As you can see on slide 16.
Net nonperforming loans are stable at <unk>, 0.42% of gross loans, 10.37% of gross single family residential loans.
The right hand chart tells you that stage the loans were 31% covered by stage three allowances at the end of Q to.
Versus 24.3% at this time last year.
Looking at the components of our allowance for credit losses on Slide 17, and 18, you can see that we increased our allowances for expected credit losses in residential commercial and consumer retail lending.
As we mentioned earlier, 94% of the increase this quarter was attributable to stage one in stage two loans that are currently performing.
Its economic conditions involving away that is consistent with the predictions and the credit loss models subject to any other unexpected changes our current level of provisions are expected to be sufficient to cover expected losses.
Future conditions are forecast to be worse in the scenarios in our models initial additional provisions are expected to be required.
If the future is more favorable than the models are predicting it is reasonable to expect that a portion of the credit allowance will be reverse back into earnings.
Slide 19 illustrates our liquidity risk management with a high volume of liquid assets supported by a high volume of near term maturities.
Slide 20, Skus as some of the additional funding and liquidity options available to the company.
Access to multiple sources of liquidity as required by our sustainable risk culture has never been more important than in this time of crisis.
Finally, as you have come to expect our capital leverage ratios are comfortably in excess of regulatory requirements.
This quarter, we added 75 basis points to RCT when capital through our normal operations.
And now I will turn the call back over to use street for closing remarks.
Thank you Brad.
I began this call by talking about putting people first and making decisions based on long term objectives.
This approach to our operations is fundamental to our sustainable risk culture, and our value of protect our home.
It is doing.
Unprecedent events like this that we can truly take stopped or what is important for us is helping Canadians achieved their dream of owning and protecting their home.
Although the futures on certain I'm confident that we have the right strategy and resources to come through even stronger than before.
I'd now turn it over to the operator for questions.
Ladies and gentlemen, if you would like to ask a question. Please press Star then the number one on your telephone keypad again to asking question. Please press star one when your telephone keypad well pause for just a moment to compile the Q1 day roster.
Your first question comes from the line, so Han Tuncay from Stifel.
Oh, Hi, Tim Good morning, just wanted to just getting a little bit more on the NIM.
Could you talk to how those dynamics between your either your spreads that you're getting have changed you know between Q2.
And what we've seen so far in Q3 are those spreads maintaining or like on your on your mortgage rates than deposits or.
Potentially is there anything you can do to lower your deposit rates, even further going forward.
<unk>.
Oh.
Thanks, Chad.
I think the deposit rates are in particular on the deposit boards are our competitive and we've seen the decline it's hard to predict if they've they've actually hit bottom I think the bank can't while I know the bank account has talked about.
What their expectations or an overall rates so.
While we may see some decreases.
It's unlikely that we will see the rapid decline or that was apparent over the last quarter or the.
But we haven't seen a decrease in in the spreads that we're able to earn for the past month.
We hope to be able to continue that but again with competitive pressure.
In particular, where we're seeing more on all the Oh near Prime uninsured space.
We are still working on maintaining.
Our spread on those again, that's competitive but we have not seen a decline in spreads.
Since last quarter.
Thanks, Brad and maybe just a follow up to that you know that it seems that sentimental overall has picked up somewhat from from where we were several months ago. How do you think about where your deposit levels or today and just overall liquidity position it looks like.
That was a little bit of a drag on on NIM performance for the corner just wondering how to think about 'em liquidity going forward or or rather any changes to your sentiment on liquidity now versus where you were in Q2.
Oh I I agree with your Steven I think people are are feeling.
I'll say more confident and.
We have.
We are carrying lower levels of liquidity than we had a at the beginning of Q2.
Okay. Thank you and maybe just one last follow up question, if I could sneak one more and it looks like there was a uptake in the efficiency ratio I'm just wondering.
If we can talk about if there's any other levers we can pull on the expense side in the back half of the year and then maybe also just school the why that sufficiency ratio number one higher from the core.
Sure I'll I'll continue or are the.
The last quarter, we had increase or we made a provision are truly go contingencies. There was only 10 million that that help fill drive up Oh noninterest expenses.
And Oh, we do expect to see some increased or we're forecasting some increased activity in relation to.
Our ignite program, which covers our safety reimplementation as well as digital initiatives. When you think to invest in the company for the long term. So we do think that we will see a higher.
Levels of of non interest expense relative to Q1, but a slightly lower than we saw in Ah Q2.
Thank you.
Your next question comes from the line of Jeff won with RBC capital markets.
[noise] Hi, good morning, I'm just.
Question on the deferrals and based on how you're describing how you're handling it would it be accurate to say that the.
Current deferral balance outstanding would represent people who are let's call it truly having.
Financial difficulty and therefore, not using deferrals for financial flexibility.
Hi, I'm sorry go ahead, but go ahead.
Hey, Jeff first of all so probably were both answer a little bit as I mentioned in my comments every deferral. We've now talk to every client and understand the situation and offered a number of options and as.
You can see the number of deferrals outcome has come down significantly.
So the ones who are still there or are there are people who.
Our having more difficulty even though it's a smaller portion, but we are somewhat comforted in not an average of deferrals. The loan to value is still in the low sixtys, 60% to 63% and that their FICO scores around 700.
Its it slightly differently for X. So what we call accelerated a product versus the classic, but very close around 700. So we're working through it would keep giving them options. We understand these are as a case by case basis and we do expect it's going to continue to go down as we help them up.
Work through it short of a second wave of unemployment or cold it but just the way it is going at the at the moment got Brad any anything today.
Oh, no yesterday, I think that Oh that out of the was responses to the question.
Okay, and and I guess.
I'm trying to understand you know if you have a situation, where you know someone's loss or job and if you completely ignored what their credit score was for example, what the loan to value or on on the mortgage would be but in your assessments that this person wouldn't.
Likely still beat delinquents.
After six months, if you work to do that how are you treating them are you still willing to extending the six months if needed for if you have that you like I said that you think they're going to go delinquent regardless.
Would you be looking too.
Try to deal with that sooner.
So yeah you know.
We first of all would look at a number of options. You know, we can increase amortization, which would reduce the payment you know there's a number of things we would do but you were act a bit of like their financial consultant I mean, if the mortgage overseas. There is no out and they're not going to get employed you're going to going to play for a while yet but the same time. They have 62 were 63%.
Loan to value, there's a good chance to market is still very capable they'll sell to get out of did that and take what they've got so back to the way you asked a question I mean, we can differ longer it's an option for us we wouldn't get the relief that the regular <unk> like regulators have allowed a for sort of this.
Period of up to six months starting back in March we wouldn't get to relief it looks like any other irrs and then we would work it as we would and the regular process.
Eventually the.
Mortgage or will be able to recover and pay back and or capitalize what's been deferred have a larger markets and you know because they are employed payback for men and the worst an absolute last case is they sell to home we help them sell to home kit to get out does that answer Jeff that it would be options like it yeah. Yeah, you know you serious.
If I can.
Just just to sort of it and the initial part of your question you were mentioning six months, we've never granted six month deferrals, we've only gone I'm actually on the two loans. So we expect to have a lot of as history said like we expect to have a lot of resolution.
In in the credit situation of of the deferrals and or to get more insight as we go along like were adjudicating almost all of these loans and our team is working with our borrowers. So we're we're very confident with.
The individuals in that deferral user yet so the let's sit out a number of options that those borrowers would have.
Yeah, I mean, what if there's a granted it's would be an extreme example, and yes, I mean, I know that you get into deferrals fairly for a couple of months, but you know looking the banks that have done six months.
What if you Hadnt again, a situation we had a borrower that you know.
May not well would likely be delinquent if you kept them to six months you know even if your where did you. All these different modifications were like that that still not going to solve it and if they if you could not convinced them to sell their home.
My question was like would you look to take action earlier than that or is there something you know other factors that you would still be willing to extends for the full six months that other lenders you have grant yet it's still kind of understand.
No I think I understand your question better enough I, if I don't just tell me, but no. So after two months.
Before before after after about a month, we start talking to them again, and it's like an underwriting process for deferral.
If we feel the situation is it is temporary there's good solutions coming up the other end will approve them for the flow. If we don't then it goes into the arrears like any other mortgage that having that's having difficulty. So after two months if we we will read.
For lack of a better word underwriting re look at the file and extend up to two months and all these various options I've already talked about and then again at the end of two months, we'll do it again to a maximum of six and then at that point. It would be you know going through but if we to answer your question specifically, if we felt someone had no opportunity we wouldn't approval for a deferral.
And they begin in the process of being in arrears.
Got it Okay. That's that's where I was getting it okay. And then just my other question was just on a accelerator Oh it was higher than what you kind of normally done how how to think about what that profile might look like over the next couple of quarters.
So accelerator is something we've been working on for quite a long time to put it in a position that we are.
Today as you know, Jeff accelerator doesn't really make sense to put on balance sheet, given the NIM spread it's more eye off balance sheet securitization. So our treasury team has worked hard to to put in place opportunities for us to do accelerator mortgages and get them off balance sheet. So I think it's not gonna be problematic for us we will continue to be.
In this space it will probably never Oh, China, our classic, which is our bread and butter, but we expect to be more competitive more like more as we have done in the past quarter as opposed to the way, we look a year ago and you accelerated mark.
Got it perfect. Thank you.
[noise] [noise], ladies and gentlemen, I would like to remind everyone. If you would like to asking question. Please press star one on your telephone keypad.
Your next question comes from Racine Funky from T D.
Oh, yeah, screenwriter here, but.
Just on that when you adjust to borrowers payment in a in a situation like that does that still.
Qualify as a deferral situation or does that moved into.
You know how do you groups out there or treat that mortgage is it treated as impaired at all or how do you treated and you're reporting or you're managing the book.
Yeah, So hi, Graham if you yeah. The way you adjust the payment is you can change the.
Amortization.
Or you can go to you know biweekly versus monthly if that helps so if you change the amortization and recalculate, the payment and they're making payments they're not in arrears. They may have capitalized, but they've deferred so far one or two or three months or they may have paid back and then resumed from there every situation is slightly different if.
If you recalculate the payment based on moving amortization and they don't pay or don't partially paid then it looks like in arrears, it's no longer a deferral.
Got it okay that makes sense.
And then on the credit credit side I, just want to confirm that you did make some changes to your sort of naco assumptions that go into your credit model and do those.
Ah deteriorate.
Somewhat from what was in your credit model as of Q1 20.
Sorry, Graham and I'm not sure I fully understand did we change our underwriting guidelines is that what you mean no no in your credit in your view of.
Ah forecasted in credit losses, and whatnot, the macro assumptions that you use around closed yesterday that house prices and GDP did those decline.
With respect to what you had assumed out so Q1 20.
Okay, I think Brad it's best to answer it up.
It gets sure Graham Yeah. So if you we've we've got our scenarios for base upside and downside.
And from March 31st the June Thirtyth, the average unemployment rate had increase and the HDR housing price index declines moderated.
Our models hubs.
Bigger.
Effect on or the average unemployment rate drives a probability of default so any increases in average unemployment rate tend to offset.
Litigation in house price declines.
So for example, our base case at March 31st had an unemployment rate average unemployment rate of 8.62 at June Thirtyth that was 10.07 and similarly for the H.T.I. The base was a decline of 8.16% and at June Thirtyth. It was 5.48%.
But the unemployment was more of.
More of the.
Influx Gandhi host press that but that's correct.
And did did I it looked like Youre.
The changes in your macro assumptions, they actually led to a decline in your residential Pcls put an increase in your commercial Pcls did I interpret that correctly.
Oh, we were actually up and and single family commercial and and other consumer we had a small recovery and credit card.
Okay.
Okay and then just my last question just on Okay. The new originations that you brought in through the open channel.
In the quarter were those all digitally sourced given your branches were shut down and when when do you expect the branches to reopen.
Yes, they were digitally sourced because we were or shutdown, we shut down the branches.
Annually, we're following the protocols of each city and our own guidelines in terms of when we will reopen.
It's probably over the next few weeks, but no certainty on that until everything has been.
Yeah.
Okay great.
That's it for me thank you.
Your next question comes from the line of Stephens Olin from RJ.
Hi, good morning, everyone I'm.
So we brought at much are supposed to answer this but I guess I'm I'm trying to understand user in your opening remarks that you mentioned.
I can remember as the channel housing border or whoever said that you know there's an expectation that housing prices would decline. So for those people on deferrals are you also mentioned that you factor in the loan to value and if the route 60% or 70%.
Then you may give them some leeway so how do you how do you balance that you know the thought of.
Talk to you in awhile.
So.
What I was referring to is there's a lot of.
Various people predicting real estate decline such a <unk> has been quite.
Public about what they believe are going to be.
Klein and values over the next year year, and a half but that hasn't happened yet.
So far there have been increases and values.
N G T. A N G V. A the market has been exceptionally hotmail and I referred in the script the Toronto Real estate Board numbers for the month of July are the highest they've been in the last 10 years.
When you compare the last 10 July.
So.
By a lot by almost a thousand more sales so it hasn't happened yet so we we're actually going the other way so if somebody who's willing to value 62 per cent, if maybe coming down based on what's going on.
Right now, but Ah, having said that we don't know if they're gonna be right in the future or not so the way we look at it as we know approximately are a cost if we have to go and sell that home. We know approximately what it will take we factor that in and then we see if there's lots of room are enough room for.
For movement and the L. T V. So at 62% on average there's plenty of room.
For the for US before we take a dollar have lost quite quite a bit of room.
And the provisions as they stand based on I F or S. Nine is is we've discussed are all about forward looking were not experiencing anything bad in our current portfolio more than normal to basis points of losses about normal for the last few years. It is all about forward looking in is Brad mentioned the unemployment that's expected the H B I that's expected.
It looks at every single alone, but it would take a substantial decline in the values in a substantial amount of default before we actually used all their allowance, but accounting is accounting and we're sticking to it and keeping conservative all the way through.
I always like to check if I answered your question cause I digress, a little bit but did I answer your question on the on the first part.
Yeah.
I think.
Yeah I'll take you did in terms of I mean is it your view than like that that housing prices will.
Continue to be study up or down I mean is what's your view as opposed to some of the you know the source of them.
That's so hard to answer Steve I don't have the crystal ball and but what what I. What I do know is that we are.
Prepared for a decline that's what all these are allowances are are doing that prepared for decline and we're ready for it with the high unemployment.
But there's so many factors that I'm just can't put together is they're going to be a second wave are is unemployment than a spike is the market <unk>.
<unk> down again.
I can't I'm, not an economist to kind of add all evening, but all we do.
[noise], we always say as we look at one deal at a time the market's been very hot you have been done much more prudent underwriting in this hot market and are very comfortable with what we're doing.
Can withstand.
A lot of variation in the future.
We've got a very strong balance sheet now to withstand up now and for a long time.
Okay. That's that's all I know he was really cute.
Thanks.
Yeah have a follow up question from 10.
Stifel.
Oh, hi, guys or just a couple of quick follow up for me. The three gallon sense at all of you know given the crawling origination volume that you just spoke about.
You have a sense at all.
If you're seeing increased demand for single family.
Holmes versus suburban <unk>.
Caused by karvonen them and everything and some of this increased.
On the first person level or overall activity level, you have any sense at all whether or not covered.
Reading too structural change in demand flow from urban to some urban how he reviews that would support outlook for persons.
Yeah. So we're hearing from realtors and brokers of some activity.
That regard I I don't think it's significant enough to declare a shift but there are people.
Who are saying.
<unk> I'm gonna work from home for a long time <unk> for the rest of my career. That's all I want so I don't need to be in a 400 square foot condo in downtown Toronto, Although move where I can get some green in Saint Catharines or ancaster somewhere further up so we're hearing some of that.
And I I think more of it will happen whether it becomes significant yet.
Too early to say.
Are you there sham.
Oh, Yeah, sorry, that's my ozone near there.
Yeah I just wanted to follow up on like I didn't have any other follow up question right.
Thanks.
Sure no further questions.
For any closing remarks.
Perfect.
Timing a constant car today.
You can contact you email industrial relations. Thanks again.
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