In a move that few saw coming, non-prime lender Equity Financial Trust (EFT) has parted ways with its President Nick Kyprianou and Chief Risk Officer (CRO) Darryl Ivan.
Prior to today, investors had placed big bets that Kyprianou would deliver the same magic to EFT that he did to Home Trust. While at Home Trust, he helped build that company into the country’s biggest alternative lender.
As a result, investors took this news as disappointing and hammered EFT’s stock price by 17%.
“It was a board led decision,” Paul Smith, CEO of parent company Equity Financial Holdings Inc., told CMT. “And I executed on it.”
When asked about the reasoning, he added, “It was a problem with organizational fit.”
While hunting for Kyprianou’s replacement, Smith says, “One name that came up over and over again was Mike Jones.” Jones, who was formerly at Xceed Mortgage for more than a decade, becomes EFT’s new president on Monday.
As for Ivan, replacing your Chief Risk Officer might suggest to some that the company’s loans are underperforming. But Smith told us clearly, “There is nothing wrong with the loan book.”
(Natasha Sharp, former Sun Life CRO, is coming off the company’s board to fill Ivan’s role.)
Since we first wrote about EFT (formerly “Grey Horse”) in 2010, it has flown under the radar versus its peers. Brokers, in general, don’t see a ton of marketing from the company—like they do with Home Trust and Equitable Trust. And that’s intentional to some degree.
As a young lender, you can do “only so many originations per year,” says Smith, who notes that federally regulated lenders are monitored extra closely by OSFI during the first few years.
Part of EFT’s constraint has been capital related. Trust companies can only lend out a certain multiple of their capital base. Come January 1, 2014, however, EFT will apply the $90 million it generated from selling its transfer business to boost its regulatory capital. That should let it ramp up lending and make 2014 a strong growth year for originations, suggests Smith.
Rob McLister, CMT
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