Home Capital Reports Q1 Earnings

  • Diluted Earnings per Share of $0.92; adjusted diluted earnings per share of $0.96
  • Dividend of $0.24 per common share.

TORONTO, May 4, 2016 /CNW/ - Home Capital today reported financial results for the first quarter ended March 31, 2016.

This press release should be read in conjunction with the Company's First Quarter Report, including Financial Statements and Management's Discussion and Analysis, which are available on Home Capital's website at www.homecapital.com and the Canadian Securities Administrators' website at www.sedar.com.  



FINANCIAL HIGHLIGHTS














(Unaudited)

For the three months ended

(000s, except Per Share and Percentage Amounts)

March 31

December 31

March 31



2016


2015


2015

OPERATING RESULTS







Net Income

$

64,248

$

70,239

$

72,286

Adjusted Net Income1


67,497


71,811


72,286

Net Interest Income


122,517


126,658


115,524

Total Adjusted Revenue1


241,197


246,406


249,232

Diluted Earnings per Share

$

0.92

$

1.00

$

1.03

Adjusted Diluted Earnings per Share1

$

0.96

$

1.02

$

1.03

Return on Shareholders' Equity


15.7%


17.6%


19.7%

Adjusted Return on Shareholders' Equity1


16.4%


18.0%


19.7%

Return on Average Assets


1.2%


1.4%


1.4%

Net Interest Margin (TEB)2


2.38%


2.46%


2.28%

Provision as a Percentage of Gross Uninsured Loans (annualized)


0.04%


0.04%


0.07%

Provision as a Percentage of Gross Loans (annualized)


0.03%


0.03%


0.05%

Efficiency Ratio (TEB)2


39.6%


36.0%


30.4%

Adjusted Efficiency Ratio (TEB)1,2


36.3%


33.7%


30.4%







As at



March 31


December 31


March 31



2016


2015


2015

BALANCE SHEET HIGHLIGHTS







Total Assets

$

20,672,422

$

20,512,019

$

20,514,613

Total Assets Under Administration3


27,945,030


27,301,433


25,066,234

Total Loans4


17,949,915


18,268,708


18,190,841

Total Loans Under Administration3,4


25,222,523


25,058,122


22,742,462

Liquid Assets


2,459,859


2,095,145


1,825,775

Deposits


15,824,899


15,665,958


14,741,902

Shareholders' Equity


1,661,759


1,621,106


1,487,259

FINANCIAL STRENGTH







Capital Measures5







Risk-Weighted Assets

$

8,169,818

$

7,985,498

$

7,454,175

Common Equity Tier 1 Capital Ratio


18.28%


18.31%


17.95%

Tier 1 Capital Ratio


18.28%


18.30%


17.94%

Total Capital Ratio


20.63%


20.70%


20.50%

Leverage Ratio


7.46%


7.36%


6.75%

Credit Quality







Net Non-Performing Loans as a Percentage of Gross Loans


0.34%


0.28%


0.25%

Allowance as a Percentage of Gross Non-Performing Loans


62.9%


74.0%


78.2%

Share Information







Book Value per Common Share

$

23.75

$

23.17

$

21.18

Common Share Price – Close

$

35.06

$

26.92

$

42.56

Dividend paid during the period ended

$

0.24

$

0.22

$

0.22

Market Capitalization

$

2,453,008

$

1,883,808

$

2,988,819

Number of Common Shares Outstanding


69,966


69,978


70,226

1  

See definition of Adjusted Net Income, Total Adjusted Revenue, Adjusted Diluted Earnings per Share, Adjusted Return on Shareholders' Equity and Adjusted Efficiency Ratio under Non-GAAP Measures in the Company's unaudited interim consolidated financial report and the Reconciliation of Net Income to Adjusted Net Income in the following table.

2

See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Company's unaudited interim consolidated financial report.

3

Total assets and loans under administration include both on- and off-balance sheet amounts.

4

Total loans include loans held for sale.

5

These figures relate to the Company's operating subsidiary, Home Trust Company.




Reconciliation of Net Income to Adjusted Net Income










(000s, except % and per share amounts)

Q1

Q4


Q1




2016

2015

Change

2015

Change

Net income under GAAP

$

64,248

$

70,239

(8.5)%

$

72,286

(11.1)%

Adjustment for gain recognized on acquisition of CFF Bank (net of tax)


(478)


1,572

(130.4)%


-

-

Adjustment for severance and other related costs (net of tax)


3,727


-

-


-

-

Adjusted Net Income1

$

67,497

$

71,811

(6.0)%

$

72,286

(6.6)%

Adjusted Basic Earnings per Share1

$

0.96

$

1.02

(5.9)%

$

1.03

(6.8)%

Adjusted Diluted Earnings per Share1

$

0.96

$

1.02

(5.9)%

$

1.03

(6.8)%

1 Adjusted Net Income and Adjusted Earnings per share are defined in the Non-GAAP section of the Company's unconsolidated interim financial report.

The Company's results were affected by the following items of note that aggregated to a negative impact on after-tax net income of $3.2 million or $0.04 diluted earnings per share in Q1 2016.  The items of note identified in the above table include the following:

  • Adjustment to gain recognized on the acquisition of CFF Bank in the amount of $651 thousand ($478 thousand, after tax).
  • Expenses including severance and other related costs in the amount of $5.1 million ($3.7 million, after tax), that are not expected to be indicative of future results.

The Company's results were affected by the following items of note that aggregated to a negative impact on after-tax net income of $1.6 million or $0.02 diluted earnings per share in Q4 2015:

  • $0.7 million in acquisition costs and $3.5 million in integration costs, less $2.1 million in relation to a bargain purchase gain, for a net of $2.1 million related to the acquisition of CFF Bank in 2015 ($1.6 million after tax).

FIRST QUARTER 2016 HIGHLIGHTS

Home Capital today reported financial results for the first quarter ended March 31, 2016. The Company delivered solid results across its business, including strong net interest margins, a healthy loan portfolio evidenced by low non-performing loans and credit losses, year-over-year single-family mortgage originations growth, and a continued strong capital position. 

On February 29, 2016, Home Capital announced the planned retirement of Chief Executive Officer (CEO) Gerald (Jerry) M. Soloway.  Under Jerry's leadership for the past 30 years, the Company has delivered truly outstanding performance and Home Capital will continue to benefit from Jerry's wisdom and entrepreneurial keenness as a member of the Company's Board.  Following the Company's Annual Meeting on May 11, 2016, the Company will welcome Martin Reid as its next CEO.  Martin is an outstanding executive with a strong track record, having spent the past six years in his role as president of the Company.  Martin will continue to build on the Company's strong foundations and existing strategic vision.  

Home Capital continues to expect that it will meet its three- to five- year mid-term targets, reflecting the continued strength of the overall business and its diverse sources of growth.

Q1 Financial Highlights:

  • Reported Q1 2016 net income was $64.2 million, compared to $70.2 million in Q4 2015 and $72.3 million in Q1 2015. Adjusted Q1 2016 net income was $67.5 million, compared to adjusted net income of $71.8 million in Q4 2015 and $72.3 million in the first three months of 2015.
  • Reported Q1 2016 diluted earnings per share were $0.92, compared to $1.00 in Q4 2015 and $1.03 in Q1 2015. Adjusted Q1 2016 diluted earnings per share was $0.96, compared to $1.02 earned in Q4 2015 and $1.03 in Q1 2015.
  • Included in Q1 2016 reported net income of $64.2 million and reported diluted earnings per share of $0.92 is $5.1 million ($3.7 million after tax and $0.05 diluted earnings per share) related to certain severance and other related costs, $2.0 million of losses ($1.4 million, after tax and $0.02 diluted earnings per share) from continuing operations of CFF Bank and $3.8 million ($2.8 million, after tax and $0.04 diluted earnings per share) of derivative losses related to the senior debt, which was retired early in Q2 2016. These amounts are offset by an adjustment to the gain recognized on acquisition of CFF Bank in the amount of $651 thousand ($478 thousand, after tax and $0.01 diluted earnings per share). The total impact to reported diluted earnings per share of the above amounts is $0.10.
  • Adjusted Return on common shareholders' equity was 16.4% for Q1 2016.
  • Adjusted efficiency ratio of 36.3%, compared to 33.7% in Q4 2015 and 30.4% in Q1 2015. During Q1 2016, the Company incurred additional expenses related to severance and other related costs that are not reflective of ongoing operations.
  • Net non-performing loans as a percentage of gross loans (NPL ratio) were 0.34% at the end of Q1 2016, compared to 0.28% at the end of Q4 2015, and 0.25% at the end of Q1 2015. Included in the Q1 2016 non-performing loans are $9.3 million of non-residential and residential commercial loans that became non-performing in the quarter, with relatively high collateral and accordingly no associated individual allowance. In the absence of these loans, the NPL ratio would have been 0.29%.
  • Q1 2016 Common Equity Tier 1 ratio was 18.28% and Tier 1 and Total capital ratios were 18.28% and 20.63%, respectively.

Growing Our Core Business

Home Capital's first quarter results reflect its continued profitability as measured by its strong net interest margin (TEB) of 2.38%, a healthy loan portfolio as evidenced by continued low non-performing loans and credit losses, and a strong capital position.

Total originations in Q1 2016 were $1.78 billion, an increase of 28.8% from $1.38 billion in Q1 2015.  The Company reported traditional (uninsured single-family) residential mortgage originations of $1.06 billion as compared to $961.3 million in Q1 2015, an increase of 10.7%.  Accelerator originations increased 102.1% to $363.8 million in Q1 2016 when compared to Q1 2015.  Originations from all other sources increased 45.9% to $354.0 million when compared to the same quarter in 2015.  The Company continues to take a prudent approach to growing its traditional residential mortgage business.  

On a quarter-over-quarter basis, total mortgage originations in Q1 2016 were down 17.3% from Q4 2015, reflecting expected seasonality trends.

The Company is approaching three-quarters of the way through its review and re-validation of income documentation related to the suspension of 45 individual mortgage brokers last year, which will be completed at the end of 2016.  The Company has not experienced any unusual credit issues with respect to the identified mortgages.

Home Capital will continue to focus on growing its origination volumes, specifically to take advantage of the solid demand for its traditional mortgages within its established regions. On April 1, 2016, the Company launched its new broker partnership program, Spire, with all broker partners now participating in the program.  Through the first half of 2016, the Company will continue with its roll out of its broker portal technology, Loft, in an effort to enhance the broker experience. 

The Company's commercial lending products continue to demonstrate strength in origination volumes through the first quarter of the year.

Other lending, comprising credit cards, lines of credit and other consumer retail loans, continues to be an important source of loan assets with attractive returns.  While representing 3.9% of the total on-balance sheet loan portfolio, these assets generated 7.2% of the interest income from loans for the quarter.

The balance of Oaken deposits at the end of the quarter was $1.23 billion, up 12.6% from the balance at the end of 2015, demonstrating progress in the Company's efforts towards deposit diversification.

Building on Operational Excellence

Home Capital continues to experience strong credit performance, with an NPL ratio at 0.34% at the end of Q1 2016, compared to 0.28% at the end of Q4 2015 and 0.25% at the end of Q1 2015. These results reflect the high credit quality of the Company's loan portfolio and were supported by the Company's continued investments in its risk oversight and control functions.

In conjunction with the announcement of the succession plan for the Company's CEO, the Company realigned certain resources and incurred certain expenses in order to execute on its strategy and achieve future growth.  Specifically, these items included certain severance and other related costs in the amount of $5.1 million, reducing diluted earnings per share by $0.05, which have been excluded from the Company's adjusted metrics.  The Company does not expect these expenses to be indicative of the Company's ongoing expense base.

Home Capital continued to make disciplined and measured investments related to the long-term growth of the business, including ongoing investments in information technology to move the Company towards operating as a digital enterprise.  In addition, the Company incurred expenses of approximately $0.5 million during the quarter related to its efforts to realign some of its business partnerships.

In 2015, the Company, through its subsidiary Home Trust Company, acquired all of the outstanding common shares of CFF Bank for a purchase price of $23.2 million.  The integration of CFF Bank is proceeding to plan, as the Company decommissions redundant systems and facilities in order to realize cost savings and to facilitate growth.  The operating losses of CFF Bank reduced diluted earnings per share by $0.02 in Q1 2016.

Solid Shareholder Returns, Strong and Conservative Financial Position

Home Capital continued to focus on maintaining its strong and conservative financial position while delivering value to shareholders in Q1 2016.  Home Capital delivered an adjusted return on average shareholders' equity of 16.4% for the first quarter.

On April 18, 2016, Home Capital announced that it had taken up and paid for 3,989,361 common shares at a price of $37.60 per share under the Company's previously announced substantial issuer bid to repurchase for cancellation up to $150 million of the Company's common shares.  Subsequent to the repurchase, the number of issued and outstanding shares was reduced to 65,976,819 and there was a reduction in capital of $150 million.  In addition, today, the Company repaid and retired its senior debt in the principal amount of $150 million, resulting in future savings of the related interest expense of $1.8 million per quarter.         

Subsequent to the end of the quarter, and in light of the Company's performance, profitability and strong financial position, the Board of Directors approved a quarterly dividend of $0.24 per common share, payable on June 1, 2016 to shareholders of record at the close of business on May 16, 2016.

In summary, the Company will continue to focus on delivering success over the long-term, by providing the best service and support to its customers and valued partners, generating future growth that is sustainable and prudent, and making investments in the business that help us to achieve those goals.

Looking ahead, the Board of Directors and management expect that Home Capital will continue generating solid returns for shareholders for the remainder of 2016 and beyond.


(signed)

(signed)



GERALD M. SOLOWAY   

KEVIN P.D. SMITH

Chief Executive Officer 

Chair of the Board

May 4, 2016




Additional information concerning the Company's targets and related expectations for 2016, including the risks and assumptions underlying these expectations, may be found in the MD&A of the quarterly report.  

First Quarter Results Conference Call
The conference call will take place on Thursday, May 5, 2016 at 10:30 a.m. Participants are asked to call 5 to 10 minutes in advance, 647-427-7450 in Toronto or toll-free 1-888-231-8191 throughout North America. The call will also be accessible in listen-only mode via the Internet at www.homecapital.com.

Conference Call Archive
A telephone replay of the call will be available between 1:30 p.m. Thursday, May 5, 2016 and midnight Thursday, May 12, 2016 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 94488806). The archived audio web cast will be available for 90 days on CNW Group's website at www.newswire.ca and Home Capital's website at www.homecapital.com.

Supplemental Financial Information
Home Capital has provided a Supplemental Financial Information package available at the Company's website at www.homecapital.com to improve readers' understanding of the financial position and performance of the Company.  This information should be used in conjunction with the Company's first quarter unaudited interim consolidated financial report, as well as the Company's 2015 Annual Report.


Consolidated Statements of Income


For the three months ended

thousands of Canadian dollars, except per share amounts

March 31

December 31

March 31

(Unaudited)


2016


2015


2015

Net Interest Income Non-Securitized Assets







Interest from loans

$

193,546

$

197,052

$

186,900

Dividends from securities


2,692


2,608


2,738

Other interest


2,528


1,694


2,108



198,766


201,354


191,746

Interest on deposits and other


77,685


77,762


79,395

Interest on senior debt


1,778


1,824


1,544

Net interest income non-securitized assets


119,303


121,768


110,807








Net Interest Income Securitized Loans and Assets







Interest income from securitized loans and assets


20,093


22,853


30,394

Interest expense on securitization liabilities


16,879


17,963


25,677

Net interest income securitized loans and assets


3,214


4,890


4,717








Total Net Interest Income


122,517


126,658


115,524

Provision for credit losses


1,394


1,415


2,403



121,123


125,243


113,121

Non-Interest Income







Fees and other income


19,165


19,927


21,219

Securitization income


7,682


5,760


5,409

Gain on acquisition of CFF Bank


651


2,056


-

Net realized and unrealized (losses) gains on securities


(175)


(66)


1,444

Net realized and unrealized losses on derivatives


(4,334)


(3,422)


(980)



22,989


24,255


27,092



144,112


149,498


140,213

Non-Interest Expenses







Salaries and benefits


28,711


25,874


22,014

Premises


3,851


2,731


3,134

Other operating expenses


25,455


26,076


18,515



58,017


54,681


43,663








Income Before Income Taxes


86,095


94,817


96,550

Income taxes








Current


20,086


25,548


24,551


Deferred


1,761


(970)


(287)



21,847


24,578


24,264

NET INCOME

$

64,248

$

70,239

$

72,286








NET INCOME PER COMMON SHARE







Basic

$

0.92

$

1.00

$

1.03

Diluted

$

0.92

$

1.00

$

1.03

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING







Basic


69,972


70,157


70,137

Diluted


70,047


70,237


70,467








Total number of outstanding common shares


69,966


69,978


70,226

Book value per common share

$

23.75

$

23.17

$

21.18

 

Consolidated Statements of Comprehensive Income


For the three months ended


March 31

December 31

March 31

thousands of Canadian dollars (Unaudited)


2016


2015


2015








NET INCOME

$

64,248

$

70,239

$

72,286








OTHER COMPREHENSIVE INCOME (LOSS)














Available for Sale Securities and Retained Interests







Net unrealized (losses) gains


(13,014)


6,171


(25,572)

Net losses (gains) reclassified to net income


204


66


(1,443)



(12,810)


6,237


(27,015)

Income tax (recovery) expense


(3,421)


1,654


(7,156)



(9,389)


4,583


(19,859)








Cash Flow Hedges







Net unrealized gains (losses)


3,221


(2,110)


(814)

Net losses reclassified to net income


364


369


366



3,585


(1,741)


(448)

Income tax expense (recovery)


951


(462)


(119)



2,634


(1,279)


(329)








Total other comprehensive (loss) income

$

(6,755)

$

3,304

$

(20,188)








COMPREHENSIVE INCOME

$

57,493

$

73,543

$

52,098

 

Consolidated Balance Sheets





As at


March 31

December 31

thousands of Canadian dollars (Unaudited)


2016


2015

ASSETS





Cash and Cash Equivalents

$

1,454,752

$

1,149,849

Available for Sale Securities


488,211


453,230

Loans Held for Sale


70,187


135,043

Loans





Securitized mortgages


2,516,944


2,674,475

Non-securitized mortgages and loans


15,362,784


15,459,190



17,879,728


18,133,665

Collective allowance for credit losses


(36,463)


(36,249)



17,843,265


18,097,416

Other





Restricted assets


293,637


195,921

Derivative assets


63,931


64,796

Other assets


328,013


287,417

Goodwill and intangible assets


130,426


128,347



816,007


676,481


$

20,672,422

$

20,512,019

LIABILITIES AND SHAREHOLDERS' EQUITY





Liabilities





Deposits





Deposits payable on demand

$

2,321,093

$

1,986,136

Deposits payable on a fixed date


13,503,806


13,679,822



15,824,899


15,665,958

Senior Debt


153,283


151,480

Securitization Liabilities





Mortgage-backed security liabilities


863,284


531,326

Canada Mortgage Bond liabilities


1,870,548


2,249,230



2,733,832


2,780,556

Other





Derivative liabilities


1,040


5,447

Other liabilities


273,317


264,941

Deferred tax liabilities


24,292


22,531



298,649


292,919



19,010,663


18,890,913

Shareholders' Equity





Capital stock


90,283


90,247

Contributed surplus


4,230


3,965

Retained earnings


1,639,545


1,592,438

Accumulated other comprehensive loss


(72,299)


(65,544)



1,661,759


1,621,106


$

20,672,422

$

20,512,019

 

Consolidated Statements of Changes in Shareholders' Equity





















Net Unrealized








Losses

Net Unrealized

Total






on Securities and

Losses on

Accumulated









Retained Interests

Cash Flow

Other

Total

thousands of Canadian dollars,

Capital

Contributed

Retained

Available

Hedges,

Comprehensive

Shareholders'

except per share amounts (Unaudited)

Stock

Surplus

Earnings

for Sale, after Tax

after Tax

Loss

Equity

Balance at December 31, 2015

$

90,247

$

3,965

$

1,592,438

$

(62,466)

$

(3,078)

$

(65,544)

$

1,621,106

Comprehensive income


-


-


64,248


(9,389)


2,634


(6,755)


57,493

Stock options settled


53


(12)


-


-


-


-


41

Amortization of fair value of
















employee stock options


-


277


-


-


-


-


277

Repurchase of shares


(17)


-


(346)


-


-


-


(363)

Dividends















($0.24 per share)


-


-


(16,795)


-


-


-


(16,795)

Balance at March 31, 2016

$

90,283

$

4,230

$

1,639,545

$

(71,855)

$

(444)

$

(72,299)

$

1,661,759
















Balance at December 31, 2014

$

84,687

$

3,989

$

1,378,562

$

(16,242)

$

(2,363)

$

(18,605)

$

1,448,633

Comprehensive income


-


-


72,286


(19,859)


(329)


(20,188)


52,098

Stock options settled


4,177


(1,123)


-


-


-


-


3,054

Amortization of fair value of
















employee stock options


-


419


-


-


-


-


419

Repurchase of shares


(2)


-


(83)


-


-


-


(85)

Dividends















($0.22 per share)


-


-


(16,860)


-


-


-


(16,860)

Balance at March 31, 2015

$

88,862

$

3,285

$

1,433,905

$

(36,101)

$

(2,692)

$

(38,793)

$

1,487,259

 


Consolidated Statements of Cash Flows


For the three months ended


March 31

March 31

thousands of Canadian dollars (Unaudited)


2016


2015

CASH FLOWS FROM OPERATING ACTIVITIES





Net income for the period

$

64,248

$

72,286

Adjustments to determine cash flows relating to operating activities:






Amortization of net discount on securities


(135)


(6)


Provision for credit losses


1,394


2,403


Gain on sale of mortgages or residual interest


(5,935)


(4,427)


Net realized and unrealized gains (losses) on securities


175


(1,444)


Amortization of capital and intangible assets


3,646


2,924


Amortization of fair value of employee stock options


277


419


Deferred income taxes


1,761


(287)

Changes in operating assets and liabilities






Loans, net of securitization and sales


323,494


176,776


Restricted assets


(97,716)


(117,950)


Derivative assets and liabilities


43


(43,054)


Accrued interest receivable


1,493


46


Accrued interest payable


17,779


36,206


Deposits


158,941


801,931


Securitization liabilities


(46,724)


(479,273)


Taxes receivable or payable and other


(47,225)


1,059

Cash flows provided by operating activities


375,516


447,609

CASH FLOWS FROM FINANCING ACTIVITIES





Repurchase of shares


(363)


(85)

Exercise of employee stock options


41


3,054

Dividends paid to shareholders


(16,795)


(15,430)

Cash flows used in financing activities


(17,117)


(12,461)

CASH FLOWS FROM INVESTING ACTIVITIES





Activity in securities






Purchases


(85,419)


(1,545)


Proceeds from sales


-


76,929


Proceeds from maturities


37,171


18,201

Purchases of capital assets


(224)


(1,823)

Capitalized intangible development costs


(5,024)


(5,404)

Cash flows (used in) provided by investing activities


(53,496)


86,358

Net increase in cash and cash equivalents during the period


304,903


521,506

Cash and cash equivalents at beginning of the period


1,149,849


360,746

Cash and Cash Equivalents at End of the Period

$

1,454,752

$

882,252

Supplementary Disclosure of Cash Flow Information





Dividends received on investments

$

2,779

$

2,485

Interest received


217,384


219,790

Interest paid


76,619


68,487

Income taxes paid


27,479


48,155

 

Caution Regarding Forward-Looking Statements

From time to time Home Capital Group Inc. makes written and verbal forward-looking statements. These are included in the Annual Report, periodic reports to shareholders, regulatory filings, press releases, Company presentations and other Company communications. Forward-looking statements are made in connection with business objectives and targets, Company strategies, operations, anticipated financial results and the outlook for the Company, its industry, and the Canadian economy. These statements regarding expected future performance are "financial outlooks" within the meaning of National Instrument 51-102.  Please see the risk factors, which are set forth in detail in the Risk Management section of this report, as well as its other publicly filed information, which are available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, for the material factors that could cause the Company's actual results to differ materially from these statements.  These risk factors are material risk factors a reader should consider, and include credit risk, funding and liquidity risk, structural interest rate risk, operational risk, investment risk, strategic and business risk, reputational risk, compliance risk and capital adequacy risk along with additional risk factors that may affect future results.  Forward-looking statements can be found in the Report to the Shareholders and the Outlook Section in the quarterly report.   Forward-looking statements are typically identified by words such as "will,"  "believe," "expect," "anticipate," "estimate," "plan," "forecast," "may," and "could" or other similar expressions. 

By their very nature, these statements require the Company to make assumptions and are subject to inherent risks and uncertainties, general and specific, which may cause actual results to differ materially from the expectations expressed in the forward-looking statements.  These risks and uncertainties include, but are not limited to, global capital market activity, changes in government monetary and economic policies, changes in interest rates, inflation levels and general economic conditions, legislative and regulatory developments, competition and technological change. The preceding list is not exhaustive of possible factors.

These and other factors should be considered carefully and readers are cautioned not to place undue reliance on these forward-looking statements. The Company does not undertake to update any forward-looking statements, whether written or verbal, that may be made from time to time by it or on its behalf, except as required by securities laws.

Assumptions about the performance of the Canadian economy in 2016 and its effect on Home Capital's business are material factors the Company considers when setting its objectives, targets and outlook.  In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical and forecasted economic data provided by the Canadian government and its agencies.  In setting and reviewing its targets, objectives and outlook for the remainder of 2016, management's expectations continue to assume:

  • The Canadian economy is expected to be relatively stable in 2016, supported by expanded Federal Government spending; however, it will continue to be impacted by adverse effects related to fluctuations in oil prices and other commodities. The Company has limited exposure in energy producing regions.
  • Generally the Company expects stable employment conditions, in its established regions; however, unemployment rates in energy producing regions are expected to continue to increase in 2016. Also, the Company expects inflation will generally be within the Bank of Canada's target of 1% to 3%, leading to stable credit losses and consistent demand for the Company's lending products in its established regions. Credit losses and delinquencies in the energy producing regions may increase, but given the Company's limited exposure, this is not expected to be significant.
  • The Canadian economy will continue to be influenced by the economic conditions in the United States and global markets and further adjustments in commodity prices; as such, the Company is prepared for the variability to plan that may result.
  • The Company is assuming that overnight interest rates will remain at the current very low rate for 2016. This is expected to continue to support relatively low mortgage interest rates for the foreseeable future.
  • In the Company's established regions, the Company expects that the housing market will remain stable with reduced, but balanced supply supported by continued low interest rates, and relatively stable employment, depending on location and level of immigration. There will be moderately easing housing starts and resale activity with relatively stable prices throughout most of Canada, with continued regional disparities. This supports continued low credit losses and stable demand for the Company's lending products in its established regions.
  • The Company expects that consumer debt levels, while elevated, will remain serviceable by Canadian households.
  • The Company will have access to the mortgage and deposit markets through broker networks.

Non-GAAP Measures

The Company uses a number of financial measures to assess its performance.  Some of these measures are not calculated in accordance with GAAP, are not defined by GAAP, and do not have standardized meanings that would ensure consistency and comparability between companies using these measures.  Definitions of non-GAAP measures can be found under Non-GAAP Measures in the Management's Discussion and Analysis included in the Company's First Quarter 2016 Report. 

Regulatory Filings

The Company's continuous disclosure materials, including interim filings, annual Management's Discussion and Analysis and audited consolidated financial statements, Annual Information Form, Notice of Annual Meeting of Shareholders and Proxy Circular are available on the Company's website at www.homecapital.com, and on the Canadian Securities Administrators' website at www.sedar.com.

About Home Capital

Home Capital Group Inc. is a public company, traded on the Toronto Stock Exchange (HCG), operating through its principal subsidiary, Home Trust Company. Home Trust is a federally regulated trust company offering deposits, residential and non-residential mortgage lending, securitization of insured residential first mortgage products, consumer lending and credit card services.  In addition, Home Trust offers deposits via brokers and financial planners, and through its direct to consumer brand, Oaken Financial.  Home Trust also conducts business through its wholly owned subsidiary, CFF Bank.  Licensed to conduct business across Canada, Home Trust has offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.

SOURCE Home Capital Group Inc.

For further information: Gerald M. Soloway, CEO, or Martin Reid, President, 416-360-4663, www.homecapital.com

RELATED LINKS
http://www.homecapital.com

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