At First National, our Capital Markets Group is responsible for managing funding and securitization for all commercial and residential mortgage originations and protecting our book from interest-rate risk. It’s a big job for a small but expert team of professionals led by Thomas Kim. Thomas joined us in 2012 and was appointed Executive Vice President and Managing Director, Capital Markets in January 2022.
Thomas, what’s it like working in the Capital Markets group?
I would say it’s dynamic and ever-changing. Our team is small with six team members and we wear many different hats. We look after all of First National’s trading operations – bonds, interest-rate swaps, MBS, repos – we manage the company’s securitization programs, we’re the front office for funding partner relations and we’re the main hub for information and advice for most operational areas of the company: servicing, underwriting, originations, legal and finance as well as senior management. This is not the kind of place where you can sit back and wait to react to emerging issues. We are paid to be ahead of the game. Based on our size and operational reach, I would also say we are probably the most efficient capital markets team in the whole industry.
What is the most important part of your job?
Managing different time scales. By that, I mean executing projects that have a here-and-now urgency to them while also making sure that medium and long-term initiatives around things like funding strategies keep moving along so we’re prepared for the future. Like any business, First National can only grow if we have the resources and financial capacity to keep pace with that growth. It may take several months to negotiate a funding agreement with a new securitization program or whole loan investor because it involves due diligence, contract negotiation, the creation of the deal structure, arriving at the price of the trade and the allocation of the risk. Using time wisely is critical.
Thomas, when you were young, did you envision becoming the leader of a capital markets group at Canada’s largest non-bank mortgage lender?
No, I don’t think I had a very clear sense of what I would be doing. At the University of Toronto, I completed an undergraduate degree in industrial engineering, which on the surface seems unrelated to what I do now but provided a lot of useful training and exposure to analytical and quantitative theories and methodologies. Engineering forces students to manage unreasonable quantities of really challenging work. I don’t think there is anything in the business world that’s as large and scary as engineering school, so in that sense, it was good preparation.
Why didn’t you pursue an industrial engineering career?
I was always more interested in business. And remember that industrial engineering has a lot of crossovers to business, particularly operations and management.
You have a CFA designation; was it the ticket to your role in the capital markets?
I wouldn’t say on its own that it was, no. The point was to gain a foundation of knowledge. Coming from a non-business background as I did, it certainly ensured I wasn’t behind everyone else in my level of understanding. I would recommend CFA training for anyone starting out in the industry. Completing the courses shows a level of seriousness and commitment.
You joined First National in 2012. How did your hiring come about?
I was always aware of First National and I had also met Jason Ellis who was at that time in the capital markets group. Like me, Jason was a Manulife alumnus but that didn’t really help my cause because he didn’t remember meeting me! ResMor was in its final stages of being sold; in fact, my last job there was to divest its mortgage portfolio, so it was time for me to move on. First National was making changes in its capital markets group, so the stars aligned, and I was hired as Senior Treasury Analyst. The department was called Treasury back then.
How different is First National now from when you started eight years ago?
Very different in size, scale and complexity. I mean our book has grown, our originations have grown, the number of employees has grown, the number of funding facilities we have has expanded, the number of investors we have has increased, just about everything has grown. I’m sure if you asked Jason that same question eight years ago, he probably would have said the same thing about the previous decade.
You said it is different in terms of complexity.
That’s right, nothing ever gets easier in the mortgage business. Government regulations and policies change and that alone makes life more complicated. There is also greater complexity in the type of transactions we do.
Years ago, there was an ad with the tagline “When EF Hutton Speaks, People Listen.” When you speak, who is listening and what kind of insight do they want from you?
We communicate externally with investing partners and internally with all operational areas of our company. Investors want to know what’s going on inside our business and with their portfolios. Internally, our teams consult on a variety of topics including funding. Funding very much affects mortgage product design including underwriting criteria as well as our potential for growth so it’s a key topic.
When you talk to investors or others in the capital markets, what are you listening for and what do hope to learn from those kinds of exchanges?
I’m always listening for clues as to what’s going on with their businesses and to keep tabs on any pending regulatory changes that might affect them or First National. If rates or spreads or moving, I’m also seeking context to understand why. I’m also on the lookout to see if there is any stress in an area of the capital markets that might affect us.
How many individual transactions does your team oversee a year?
Uncountable. If you measure it based on originations and renewals, we’re close to $37 billion a year that has to be funded and that’s excluding conventional bespoke commercial business that does not come across our desks in capital markets. We manage a number of activities for all of the single family and CMHC multi-family business that make up that $28 billion, including funding loans as they come in, hedging interest rate risk, securitization and sales to whole investors.
What has surprised you most about First National in the years since you joined?
What surprises me is that despite our size, we’ve managed to maintain a positive and happy culture. It’s 30 years since we were a start up but from what I can see, the underlying spirit hasn’t changed. It’s a very collegial atmosphere and it’s probably more common for companies to lose that over time and in the pursuit of growth but we haven’t.
What’s the one thing your colleagues don’t about you that would surprise them?
I eat potato chips using chopsticks.
Final question: what do you hope to accomplish in your role going forward?
Simply put, to support the continued growth of First National. To do that, we’ll work with the broader First National management team to make sure we have the right resources to support origination growth and service our investors well.
Final question: what do you hope to accomplish in your role going forward?
Simply put, to support the continued growth of First National. To do that, we’ll add people to our team to make sure we have the right resources to both support origination growth and service our investors well.