Friday, Quest Capital Corp. (QC.TO, QCC, QCC.L), a Canadian mortgage investment corporation, reported a decline in fourth-quarter profit, negatively impacted by provision for loan losses. Further, Quest said that it has decided not to pay executive bonuses for 2008 and dividend for the first quarter.
Fourth-quarter net income was C$1.85 million or C$0.01 per share, lower than prior year's C$3.65 million or C$0.02 per share.
In the quarter, interest income grew 5% to C$11.59 million from C$11.13 million in the prior year quarter. Provision for loan losses was C$10.69 million, while there was no such provision in the previous year.
Loans receivable as of December 31, 2008 were C$372.1 million, an increase of 34% from C$277.7 million as of December 31, 2007.
In the preceding third quarter, Quest Capital's net earnings grew 21% to C$6.4 million or C$0.043 per share from C$5.3 million or C$0.035 per share a year ago, helped by growth in loan portfolio, reduction of non-interest expenses and utilization of MIC tax rules.
For the fiscal year 2008, Quest Capital's net income fell 4% to C$22.83 million from C$23.67 million in 2007. Meanwhile, earnings per share remained at the prior year level of C$0.16.
In the year, the company's net interest income grew 11% to C$43.85 million from C$39.36 million in 2007, as a result of the increased mortgage portfolio. Quest has recorded C$13.7 million in specific provisions for loan losses in 2008.
The company's total assets increased 18% to C$384.3 million as of December 31, 2008 from C$325.7 million a year earlier.
Commenting on the results, Stephen Coffey, President and Chief Executive Officer, stated, The Company's conservative financial structure allowed it to remain profitable in both the fourth quarter and the full year, notwithstanding the rapid economic deceleration in the second half of 2008.
Quest said that it has decided to forego paying a first quarter dividend, owing to the company's strategy to improve financial flexibility at this point in the cycle. Also, Quest has decided not to pay executive bonuses for 2008, and currently intends to pay the 2009 preferred shares dividends in common shares of Quest rather than in cash.
Murray Sinclair, Co-Chair, said, These measures will allow us to accelerate debt repayment and reduce our leverage even more. This is a necessary and appropriate measure for the times. We are committed to reinstating the common share dividend as soon as possible.
The company noted that it has shifted the focus from loan origination to problem loan remediation and capital preservation, aiming to address deteriorating market conditions. This, according to the company, is an appropriate strategy that helps to better withstand the current economic crisis.
QC.TO closed trading on Thursday at C$1.00, up C$0.01, on a volume of 172 thousand shares.
QCC closed Thursday's trading at US$0.8099.
QCC.L is currently trading at 56.50 pence on the London Stock Exchange, up 9.00 pence or 18.95%.
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