TORONTO, June 1 (Reuters) - Canadian Western Bank CWB.TO said on Thursday it was experiencing higher-than normal demand for mortgages as a result of challenges faced by its largest competitor, Home Capital Group HCG.TO .
Home Capital has scaled back on lending to focus on repairing its balance sheet following rapid deposit withdrawals after a management shake-up and accusations brought by a regional regulator that it had misled investors about its mortgage business. The company has said the accusations are without merit. Western Bank, based in Canada's oil-rich Alberta province, said in a statement alongside its second-quarter results that it is being very selective in approving new loans.
The bank said impaired loans within its mortgage book are expected to increase in view of softer housing market conditions, particularly in Alberta. It said it is continuing to carefully monitor its entire mortgage portfolio for signs of weakness.
Canadian authorities have taken a number of measures to cool housing markets including tightening rules on mortgage underwriting following sharp rises in prices, particularly in the cities of Vancouver and Toronto.
Reuters reported on Wednesday that Home Capital's struggles were pushing more borrowers towards less regulated mortgage providers, raising the risks for them and the wider property market. Western Bank reported second-quarter earnings which were ahead of market expectations and up 44 percent on the previous year, during which it had been impacted by the weak oil price.
The bank reported earnings per share, excluding one-off items, of C$0.59 compared with C$0.41 a year ago. Analysts had on average expected earnings of C$0.57, according to Thomson Reuters I/B/E/S data.
Last year's performance was impacted by the bank setting aside funds to cover bad loans to clients in the energy sector struggling as a result of very low oil and gas prices.