First the bad news. 

Xceed Mortgage Corporation, formerly one of Canada’s biggest subprime lenders, lost $16.7 million last quarter compared to a $4.7 million profit a year before.  Revenue sank to $2.6 million versus $16.4 million.  Xceed’s funded mortgage volumes fell 55%.

Restructuring costs, a shift to low-margin insured mortgages, lower origination volumes, and lower securitization income contributed to these ugly numbers.  Xceeds stock price is now 1/6 of what it was a year ago.

Now the good news.

Costs are way down.  In March, Xceed let go 74 employees to cut expenses.  That helped the company be cash-flow positive in the 2nd quarter.  CEO, Ivan Wahl now expects Xceed to “return to profitability in the second half of this year.” 

The uncertainty.

Xceed has seemingly completed its transition from subprime mortgages to less risky insured mortgages.  CEO, Ivan Wahl, says: “Xceed now is solely originating mortgages that qualify for insurance and sale to the Canada Mortgage Bond Program.” 

That’s good, except that lots of other lenders have the same strategy.  That means competition is vicious and Xceed’s profits might be paper thin for a while. (Not a fact, just our gut feel)

Xceed’s future may depend on its ability to differentiate itself from the slew of other low-margin competitors.  What has the company got up it’s sleeve in this respect?  We’re anxious to find out.

Last modified: April 26, 2017