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 Vice President and Managing Director, Capital Markets in November 2018. To better understand this important role and the man performing it, we present Part II of Up Close and Personal.
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.
The first stop in your career was at a large life insurance company.
Correct, I had an internship at Manulife for about a year during university and then they gave me a role after graduation in a pretty unique department that supported commercial mortgages and private debt. One of the traders left to go to a company called Nereus Financial, which was a boutique securitization firm. I followed.
I wanted to try working for a very small, entrepreneurial company serving a defined niche. If you recall the financial crisis of 2008, and the role of collateralized debt obligations, that’s the niche I’m talking about. I was an investment analyst there with responsibility for portfolio monitoring. That firm ended up being acquired by its largest shareholder.
From your resume, it looks like you jumped from there to a trust company; so big to small to big.
I would say big to small to big to medium-sized. After Nereus my next employer was Towers Perrin where I served in the Asset Consulting Group and then on to ResMor Trust, which was a trust company owned by a much larger international firm. ResMor’s business involved originating mortgages through the broker channel, so similar to what First National does but on a smaller scale. I was performing a capital markets role similar to what I do today involving funding, securitization and trading. Other than size, the one other difference was that ResMor took deposits whereas consumer deposits are not part of First National’s funding mix.
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.
Does anything stand out about the hiring process?
I think I went through three interviews, two with Jason and one with Stephen Smith. I remember that Stephen, being a Queens engineering graduate, asked me where I went to university. I told him U of T engineering and he said, I guess that’s an ok school. Stephen is always true to his alma mater. He also told me he liked my socks. So a nice compliment.
Was there anything in your background that you think led to your hiring?
I think it was good to have had varied experiences at different types and sizes of companies because it allowed me to demonstrate some knowledge of the broader world. Those experiences absolutely helped me to relate to other participants in the market and understand people I work with, particularly investors. First National partners with a number of different types of lenders, some OSFI regulated, some not, some large, some smaller. I think it would have been a disadvantage to me to grow up in one company and only know one way of doing things. Getting a background early on in securitization and then in the mortgage space was key to walking into First National and hitting the ground running.
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.
How many individual transactions does your team oversee a year?
Uncountable. If you measure it based on originations and renewals, we’re close to $28 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 about personal milestones over the years?
I don’t really think in those terms. I almost think of myself as an extension of First National. My job is to make sure the company can grow as fast as it needs to and is ready for the future. My successes and milestones track First National’s.
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.
To hear more from Thomas, please watch for his periodic Market Commentaries.