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Xceed Votes For Bank Status

XceedIn a special shareholder meeting today, stockholders of Xceed Mortgage voted to convert to a chartered bank.

Pending OSFI approval, Xceed Mortgage will become “Xceed Bank” (“Banque Xceed” en Francais). 

Chairman, Ivan Wahl, didn’t have a firm timeline for federal bank approval, but said he hopes to operate as a bank by Xceed’s first quarter.

Earlier in the day, Xceed posted a $7.5 million quarterly loss.  Its stock fell 14.7% on the news.  Xceed attributed the loss primarily to a “difficult funding environment.” (See details in its report.)

Here are a few other nuggets from today’s earnings release. Xceed said:

  • "Sufficient financing to fund uninsured mortgages remains either unavailable or uneconomic…”
  • All new originations in its pipeline are insured mortgages. 

(This has been the case for a while with Xceed, which was a big subprime lender just a few years ago. It will try to get back to that line of business if/when it receives chartered bank status. Then it can use deposits, in part, to fund a new lineup of non-prime mortgages.)

  • “We believe that being a deposit-taking financial institution will provide Xceed with a new avenue of accessing stable capital at a reasonable cost, which will significantly increase the company's underwriting capacity.”
  • “Some Canadians, even if they have maintained their monthly mortgage payments, are still having problems renewing their mortgages if their overall credit condition has not improved sufficiently for them to qualify now for an insured mortgage. This is particularly true for non-conventional, uninsured mortgages.”
  • Xceed “is unable to finance renewals of many uninsured mortgages at their maturity as the result of the market conditions, including for customers with good payment records.”
  • For the time being, Xceed’s strategy is to continue focusing on “originating mortgages that qualify for insurance and for sale under the Canada Mortgage Bond Program…”
  • Gains from new mortgages were “down as a result of spread compressions from intensified competition during the late spring and summer housing market.” 

(That’s not surprising. For many lenders, margins in the insured mortgage business are garbage, and slowly getting worse. There are various reasons for that:

  1. Funding costs are still higher than normal for non-deposit-taking lenders.
  2. Most insured mortgages are a dime a dozen. (i.e.,  For the most part, consumers see little differentiation among them.)
  3. The ease of comparing mortgages on the Internet is driving borrowers to be highly rate-sensitive.

The net effect: eroding lender margins.


Xceed Mortgage Corporation, based in Toronto, is a Canadian provider of insured residential mortgages. The company has about 46 employees and $2 billion of mortgages/assets under administration.

Xceed's shares trade on the Toronto Stock Exchange under symbol XMC.