Buffett-Backed Home Capital Taps `Very Canadian' Insider CEO

(Bloomberg) -- Home Capital Group Inc., the embattled mortgage lender backed by Warren Buffett, has chosen an industry insider to turn around the company and woo back shareholders and clients.

Yousry Bissada, who takes over as president and chief executive officer on Aug. 3, has worked as a director or executive at banks, alternative lenders and financial-technology firms for the past three decades. He’s served for the past three years as a director at Equity Financial Holdings Inc., Home Capital’s smaller rival, and was chairman of two mortgage lenders, Canadiana Financial Corp. and Paradigm Quest Inc., Toronto-based Home Capital said in a statement Wednesday.

One experience in particular prepares Bissada for his new role, according to insiders in the alternative-lending market: leading Filogix, the main platform that thousands of brokers in Canada use to submit mortgage applications to lenders.

“Here’s an executive that was groomed at the big banks and understands the lending space,” said Andrew Moor, CEO of Equitable Group Inc., a competitor of Home Capital. “He’s a strategic thinker. He thinks about the structure of industry, how things should be organized. Personally, he’s a clear, level-headed, even-handed guy. You won’t see any flashy or volatile things to follow. He’s very Canadian.”

Needed Stability

That stability is just what Home Capital needs as it moves on to the next steps in revamping the firm and winning back the confidence of investors and clients. The company still needs to appoint a chief financial officer and tell investors how it intends to get clients back to replenish savings accounts and buy the guaranteed investment certificates that fund mortgage lending.

Bissada, a self-described “fact-based guy," said his first order of business is meeting with candidates for the CFO role. He declined to name the candidates. He estimated it’ll take him about three months to develop a basic strategy for Home Capital after meeting with “anyone who touches this company.”

“It’s about confidence. When you’ve got something that you believe is working well, but you need people to believe you from outside, it’s just getting the confidence up," he said, adding that he’ll also help develop the financial technology and digital angle for the lender. “All I can focus on is to make sure that Home is doing one deal at a time within our guidelines and standards.”

He said he’s drawn to companies that need fixing, citing his experience developing mortgage and securitization firm FirstLine Trust and at Filogix, where he helped automate and standardize the product for the market.

“Historically, I’ve been involved with companies that have needed some sort of transformation," Bissada said. “That kind of thing doesn’t scare me."

Buffett’s Berkshire Hathaway Inc. agreed last month to buy a 38 percent stake in Home Capital for about C$400 million ($310 million) and extend a credit line, becoming the lender of last resort to the company after an Ontario regulator accused it of misleading shareholders about falsified mortgage applications. The allegations sent its shares tumbling and accelerated deposit withdrawals.

James Laird, founder and president of mortgage brokerage CanWise Financial, which arranges about C$1 billion in loans annually, said Bissada has what it takes to turn Home Capital around.

“He brings skill and experience and discipline,” said Laird, who has met with Bissada regularly in the past decade to discuss industry trends over coffee. “Within the mortgage industry, he is a big name who would bring a lot of confidence to the company.”

Equity Financial

Bissada’s most recent mortgage experience comes from Equity Financial, like Home Capital an alternative lender that typically offers mortgages to borrowers who can’t get funding from traditional banks. Bissada plans to step down from Equity’s board before starting at Home Capital.

Bissada, 57, has been CEO of online insurance platform Kanetix Ltd. since 2011, according to his LinkedIn profile. It lists him as a certified public accountant who attended Queen’s University for an executive program, and University of Toronto, where he studied business and commerce.

He was CEO of Filogix from 2000 through 2007, just after it was acquired by Davis and Henderson for C$212.5 million.

Bissada’s appointment comes after a search that also drew interest from Alan Hibben, the former RBC Capital Markets investment banker who joined Home Capital’s board in May to help restore confidence. Home Capital’s shares have tripled from recent lows and deposits have stabilized.

Home Capital dropped 1.2 percent to C$14.42 at 11:30 a.m. in Toronto. The stock has declined more than 50 percent this year.

Second Wind

The company had been looking for a replacement since CEO Martin Reid was ousted in March, a month before the firm’s woes became public. Bonita Then has been acting as interim CEO. Gerald Soloway, who founded the company in the 1980s and ran it until his retirement in 2016 at the age of 77, left the board in April after the Ontario Securities Commission announced the allegations.

Bissada will take over a firm that was granted a second wind by Buffett after it became a poster child for the ills in Canada’s housing market, which Fitch Ratings and the International Monetary Fund have warned is at risk of a correction. Buffett’s equity investment and credit line for Home Capital suggest he’s not betting on a collapse anytime soon.

“Between his employment experience and board appointments, it appears to us that Mr. Bissada has had meaningful exposure to both the prime and non-prime residential mortgage markets in Canada,” Marc Charbin, an analyst at Laurentian Bank Securities Inc., said in a note to clients. He expects the firm will have a new CFO and revamped business plan in “relatively short order.”

Brent Belzberg, senior managing partner and founder of TorQuest Partners, has known Bissada for two decades and vouched for his integrity, an aspect sure to appease shareholders who fled the firm after the allegations.

“I’ve watched him at various iterations in his career,” Belzberg said in a telephone interview. “If I had to pick a guy who’s going to give confidence to the marketplace, he should be at the top.”

To contact the reporters on this story: Katia Dmitrieva in Toronto at edmitrieva1@bloomberg.net, Doug Alexander in Toronto at dalexander3@bloomberg.net.

To contact the editors responsible for this story: Michael J. Moore at mmoore55@bloomberg.net, Christine Maurus, Dan Reichl