Home Capital Reports Q2 Earnings

  • Diluted Earnings per Share of $1.03
  • Quarterly Dividend of $0.22 per Common Share

TORONTO, July 29, 2015 /CNW/ - Home Capital today reported results for the second quarter ended June 30, 2015.

This press release should be read in conjunction with the Company's Second Quarter Report, including Financial Statements and Management's Discussion and Analysis. In addition, this press release should be read in conjunction with the Company's press release entitled "Home Capital Group Inc. Provides Additional Disclosures Regarding Broker Suspensions and Revises Material Change Report," issued July 29, 2015. These materials 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

For the six months ended

(000s, except Percentage, Multiples and Per Share Amounts)

June 30

March 31

June 30

June 30

June 30



2015


2015


2014


2015


2014

OPERATING RESULTS











Net Income

$

72,317

$

72,286

$

73,745

$

144,603

$

143,481

Net Interest Income


117,210


115,524


115,143


232,734


225,530

Total Revenue

$

250,879

$

249,232

$

255,448

$

500,111

$

503,348

Diluted Earnings per Share


1.03


1.03


1.05


2.05


2.04

Return on Shareholders' Equity


19.1%


19.7%


23.1%


19.4%


23.0%

Return on Average Assets


1.4%


1.4%


1.4%


1.4%


1.4%

Net Interest Margin (TEB)1


2.29%


2.28%


2.26%


2.28%


2.23%

Provision as a Percentage of Gross Uninsured Loans (annualized)


0.07%


0.07%


0.10%


0.07%


0.10%

Provision as a Percentage of Gross Loans (annualized)


0.05%


0.05%


0.07%


0.05%


0.07%

Efficiency Ratio (TEB)1


32.2%


30.4%


28.3%


31.3%


28.4%




















As at




June 30


March 31


December 31


June 30





2015


2015


2014


2014



BALANCE SHEET HIGHLIGHTS











Total Assets

$

20,516,247

$

20,514,613

$

20,082,744

$

20,503,526



Total Assets Under Administration2


25,456,212


25,066,234


24,281,366


23,716,585



Total Loans3


17,982,475


18,190,841


18,364,910


18,022,175



Total Loans Under Administration2,3


22,922,440


22,742,462


22,563,532


21,235,234



Liquid Assets


1,815,817


1,825,775


1,058,297


1,766,314



Deposits


14,966,544


14,741,902


13,939,971


13,747,625



Shareholders' Equity


1,536,099


1,487,259


1,448,633


1,313,159



FINANCIAL STRENGTH











Capital Measures4











Risk-Weighted Assets

$

7,634,392

$

7,454,175

$

7,186,132

$

6,874,353



Common Equity Tier 1 Capital Ratio


18.03%


17.95%


18.30%


17.45%



Tier 1 Capital Ratio


18.03%


17.94%


18.30%


17.45%



Total Capital Ratio


20.53%


20.50%


20.94%


20.20%



Leverage Ratio5


6.94


6.75


N/A


N/A



Credit Quality











Net Non-Performing Loans as a Percentage of Gross Loans


0.33%


0.25%


0.30%


0.32%



Allowance as a Percentage of Gross Non-Performing Loans


62.9%


78.2%


64.4%


60.4%



Share Information











Book Value per Common Share

$

21.87

$

21.18

$

20.67

$

18.74



Common Share Price – Close

$

43.28

$

42.56

$

47.99

$

47.83



Dividend paid during the quarter ended

$

0.22

$

0.22

$

0.20

$

0.16



Market Capitalization

$

3,040,290

$

2,988,819

$

3,363,907

$

3,350,922



Number of Common Shares Outstanding


70,247


70,226


70,096


70,059



1 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the unaudited interim consolidated financial report.
2 Total assets and loans under administration include both on and off-balance sheet amounts.
3 Total loans include loans held for sale.
4 These figures relate to the Company's operating subsidiary, Home Trust Company.
5 Effective Q1 2015, the Assets to Regulatory Capital Multiple has been replaced with the Basel III leverage ratio.  See definition of the leverage ratio under Non-GAAP Measures in the unaudited interim consolidated financial report.

SECOND QUARTER 2015 HIGHLIGHTS

Home Capital today reported financial results for the second quarter ended June 30, 2015. The Company continued to deliver strong results across its business, including a stable net interest margin, a healthy loan portfolio evidenced by low non-performing loans and credit losses, and a strong capital position, despite lower residential mortgage originations in the first half of 2015.

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, its diverse sources of growth and the Company's expectation of improving origination volumes for the remainder of the year. 

Q2 Financial Highlights:

  • Q2 2015 reported net income of $72.3 million and $144.6 million for the first six months of 2015, down 1.9% compared to $73.7 million in Q2 2014 and up 0.8% compared to $143.5 million in the first half of 2014. Q2 2015 net income was in line with $72.3 million earned in Q1 2015.

  • Q2 2015 reported diluted earnings per share (EPS) of $1.03 and $2.05 for the first six months of 2015, compared to $1.05 and $2.04 earned in the comparable periods of 2014. Q2 2015 diluted EPS was consistent with $1.03 earned in Q1 2015.

  • Return on common shareholders' equity was 19.1% for Q2 2015 and 19.4% for the first six months of 2015.

  • Provision for credit losses as a percentage of gross uninsured loans of 0.07% on an annualized basis for both Q2 2015 and the first six months of 2015, down from 0.10% in both the comparable periods of 2014 and stable as compared to Q1 2015.

  • Q2 2015 Common Equity Tier 1 ratio of 18.03% and Tier 1 and Total capital ratios of 18.03% and 20.53%, respectively.

Growing Our Core Business

Home Capital, through its principal subsidiary Home Trust Company, continued in Q2 2015 to build on its presence as Canada's leading alternative financial institution serving an established, but underserved and growing, market niche.

The Company's results reflect its continued profitability as measured by a stable net interest margin in the quarter of 2.29%, a healthy loan portfolio as evidenced by continued low non-performing loans and credit losses, and a strong capital position.

Home Capital reported Q2 2015 traditional (uninsured single-family) residential mortgage originations of $1.29 billion, as compared to $1.53 billion in Q2 2014, and Accelerator originations of $279.5 million for Q2 2015, as compared to $619.6 million for Q2 2014, decreases of 15.4% and 54.9%, respectively.

Mortgage originations were impacted directly by, among other things, the Company suspending, during the period of September 2014 to March 2015, its relationship with 18 independent mortgage brokers and 2 brokerages, for a total of approximately 45 individual mortgage brokers, and a loss of originations from these sources.

Mortgages originated by this group in 2014 could be expected to contribute approximately $6 million to the Company's net income over a full year, or approximately 2% of the total net income of $313.2 million reported in 2014. This group of brokers originated $960.4 million of single-family residential mortgages in 2014, or 5.3% of the outstanding loan assets on the Company's balance sheet. The majority (approximately 60%) of loans originated by this group were the Company's lower margin Accelerator mortgages. The total value of single-family residential mortgage originations for 2014 was $7.65 billion.

The Company continues to actively monitor the subject mortgages and notes that there have been no unusual credit issues.

Home Capital also continuously revises its underwriting procedures to ensure best practices. Following the suspension of brokers, the Company further enhanced its income verification procedures to ensure new loans continue to reflect Home Capital's risk appetite, which remains unchanged. These enhancements include requests for more detailed documentation and income verification from brokers, which may have increased approval time for some applications and led some customers to turn to other funding sources in the short-term.

In addition to these factors, originations were also affected by the current competitive market for prime insured mortgages and the Company's conservative approach to growing its residential mortgage business in the current Canadian economic environment.

Home Capital has taken several steps to improve origination volumes in the second half of 2015, including sales measures to build on the Company's pipeline for residential mortgage originations and to leverage the solid demand for its traditional mortgages within its established regions. Home Capital also expects origination volumes to improve as brokers adjust to the Company's enhanced approval processes.

The Company has already seen an increase in originations near the end of the reporting period compared to the first half of 2015, and expects this trend to continue.

Building on Operational Excellence

Home Capital continues to experience strong credit performance, with net non-performing loans as a percentage of gross loans (NPL ratio) at 0.33% at the end of Q2 2015, compared to 0.32% at the end of Q2 2014. 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.

Home Capital also continued to make disciplined and measured investments in other areas related to the longer-term growth of the business. These investments include, among other things, continuing to update the Company's loans-origination platform, which is designed for more efficient processing of loan applications, as well as ongoing investments to build an IT security platform for its fast growing online banking service, which we view as vital to protecting our customers and maintaining their trust.

Overall, expenses, while higher for these reasons, remain in line with the Company's financial plan.

While most of the increase in expenses incurred by the Company continue to be associated with ongoing efforts to build on Home Capital's operational excellence and dedication to providing service to clients and business partners, the Company has incurred additional expenses of less than $1 million cumulatively from Q4 2014 related to its efforts to realign some of its business partnerships following the suspension of a small number of brokers.

Home Capital's efficiency ratio rose in Q2 to 32.2% (Q2 2014 28.3%), reflecting the increased expenses in the quarter set against the flat revenue numbers. As revenues increase, the Company expects the efficiency ratio to return to levels more in line with historical averages and to remain relatively consistent.

Strong Shareholder Returns, Strong and Conservative Financial Position

Home Capital continued to focus on maintaining its strong and conservative financial position in Q2 2015 and delivered a return on average shareholders' equity of 19.1%.

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 $0.22 per common share, payable on September 1, 2015 to shareholders of record at the close of business on August 14, 2015.

In summary, the Company has maintained its solid fundamentals, despite the short-term impact of decreased originations. Home Capital's focus remains on providing the best service and support to our customers and valued partners, generating future growth that is sustainable and prudent, and making the investments in our business that help us to achieve those goals.

Looking ahead, the Board of Directors and management expect that Home Capital will continue generating solid shareholder returns in 2015 and beyond.

GERALD M. SOLOWAY

KEVIN P.D. SMITH

Chief Executive Officer

Chair of the Board

July 29, 2015                                                                


Additional information concerning the Company's targets and related expectations for 2015, including the risks and assumptions underlying these expectations, may be found in the Management's Discussion & Analysis (MD&A) of the quarterly report.

Second Quarter Results Conference Call
The conference call will take place on Thursday, July 30, 2015 at 10:30 a.m. Participants are asked to call 5 to 15 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, July 30, 2015 and midnight Thursday, August 6, 2015 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 79685033). 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 second quarter unaudited interim consolidated financial report, as well as the Company's 2014 Annual Report.  


Consolidated Statements of Income







For the three months ended

For the six months ended

thousands of Canadian dollars, except per share amounts

June 30

March 31

June 30

June 30

June 30

(Unaudited)


2015


2015


2014


2015


2014

Net Interest Income Non-Securitized Assets











Interest from loans

$

190,559

$

186,900

$

176,182

$

377,459

$

347,425

Dividends from securities


2,677


2,738


2,898


5,415


5,629

Other interest


2,303


2,108


4,109


4,411


7,575




195,539


191,746


183,189


387,285


360,629

Interest on deposits and other


80,669


79,395


76,718


160,064


149,740

Interest on senior debt


1,516


1,544


1,542


3,060


3,122

Net interest income non-securitized assets


113,354


110,807


104,929


224,161


207,767













Net Interest Income Securitized Loans and Assets











Interest income from securitized loans and assets


26,279


30,394


45,494


56,673


90,769

Interest expense on securitization liabilities


22,423


25,677


35,280


48,100


73,006

Net interest income securitized loans and assets


3,856


4,717


10,214


8,573


17,763













Total Net Interest Income


117,210


115,524


115,143


232,734


225,530

Provision for credit losses


2,266


2,403


3,232


4,669


6,437




114,944


113,121


111,911


228,065


219,093

Non-Interest Income











Fees and other income


21,390


21,219


18,439


42,609


35,233

Securitization income


9,251


5,409


7,494


14,660


16,224

Net realized and unrealized gains on securities


-


1,444


1,187


1,444


1,939

Net realized and unrealized losses on derivatives


(1,580)


(980)


(355)


(2,560)


(1,446)




29,061


27,092


26,765


56,153


51,950




144,005


140,213


138,676


284,218


271,043

Non-Interest Expenses











Salaries and benefits


21,603


22,014


19,872


43,617


40,080

Premises


3,260


3,134


3,014


6,394


5,769

Other operating expenses


22,511


18,515


17,636


41,026


33,613




47,374


43,663


40,522


91,037


79,462













Income Before Income Taxes


96,631


96,550


98,154


193,181


191,581

Income taxes












Current


25,193


24,551


24,405


49,744


49,518


Deferred


(879)


(287)


4


(1,166)


(1,418)




24,314


24,264


24,409


48,578


48,100

NET INCOME

$

72,317

$

72,286

$

73,745

$

144,603

$

143,481













NET INCOME PER COMMON SHARE











Basic

$

1.03

$

1.03

$

1.06

$

2.06

$

2.06

Diluted

$

1.03

$

1.03

$

1.05

$

2.05

$

2.04

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING











Basic


70,230


70,137


69,743


70,184


69,617

Diluted


70,488


70,467


70,496


70,488


70,352













Total number of outstanding common shares


70,247


70,226


70,059


70,247


70,059

Book value per common share

$

21.87

$

21.18

$

18.74

$

21.87

$

18.74


 

Consolidated Statements of Comprehensive Income






For the three months ended

For the six months ended


June 30

March 31

June 30

June 30

June 30

thousands of Canadian dollars (Unaudited)


2015


2015


2014


2015


2014












NET INCOME

$

72,317

$

72,286

$

73,745

$

144,603

$

143,481












OTHER COMPREHENSIVE (LOSS) INCOME






















Available for Sale Securities and Retained Interest











Net unrealized (losses) gains

$

(12,860)

$

(25,572)

$

5,265

$

(38,432)

$

9,268

Net gains reclassified to net income


-


(1,443)


(1,187)


(1,443)


(1,939)



(12,860)


(27,015)


4,078


(39,875)


7,329

Income tax (recovery) expense


(3,422)


(7,156)


1,080


(10,578)


1,940



(9,438)


(19,859)


2,998


(29,297)


5,389












Cash Flow Hedges











Net unrealized gains (losses)


345


(814)


(295)


(469)


(670)

Net losses reclassified to net income


370


366


362


736


726



715


(448)


67


267


56

Income tax expense (recovery)


188


(119)


18


69


15



527


(329)


49


198


41












Total other comprehensive (loss) income

$

(8,911)

$

(20,188)

$

3,047

$

(29,099)

$

5,430












COMPREHENSIVE INCOME

$

63,406

$

52,098

$

76,792

$

115,504

$

148,911


 

Consolidated Balance Sheets












As at



June 30

March 31

December 31

thousands of Canadian dollars (Unaudited)


2015


2015


2014

ASSETS







Cash and Cash Equivalents

$

915,674

$

882,252

$

360,746

Available for Sale Securities


449,216


463,669


582,819

Loans Held for Sale


21,304


55,068


102,094

Loans







Securitized mortgages


2,814,301


3,313,567


3,945,654

Non-securitized mortgages and loans


15,146,870


14,822,206


14,317,162




17,961,171


18,135,773


18,262,816

Collective allowance for credit losses


(35,300)


(34,700)


(34,100)




17,925,871


18,101,073


18,228,716

Other







Restricted assets


733,185


539,033


421,083

Derivative assets


63,123


82,452


38,534

Other assets


287,598


274,848


235,616

Goodwill and intangible assets


120,276


116,218


113,136




1,204,182


1,012,551


808,369



$

20,516,247

$

20,514,613

$

20,082,744

LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities







Deposits







Deposits payable on demand

$

1,435,924

$

1,187,517

$

1,064,152

Deposits payable on a fixed date


13,530,620


13,554,385


12,875,819




14,966,544


14,741,902


13,939,971

Senior Debt


151,930


154,280


152,026

Securitization Liabilities







Mortgage-backed security liabilities


365,884


388,078


471,551

Canada Mortgage Bond liabilities


3,144,960


3,436,112


3,831,912




3,510,844


3,824,190


4,303,463

Other







Derivative liabilities


3,059


3,578


2,266

Other liabilities


312,383


267,137


199,831

Deferred tax liabilities


35,388


36,267


36,554




350,830


306,982


238,651




18,980,148


19,027,354


18,634,111

Shareholders' Equity







Capital stock


89,603


88,862


84,687

Contributed surplus


3,474


3,285


3,989

Retained earnings


1,490,726


1,433,905


1,378,562

Accumulated other comprehensive loss


(47,704)


(38,793)


(18,605)




1,536,099


1,487,259


1,448,633



$

20,516,247

$

20,514,613

$

20,082,744


 
 


Consolidated Statements of Changes in Shareholders' Equity




















Net Unrealized








Losses

Net Unrealized

Total






on Securities and

Losses on

Accumulated









Retained Interest

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, 2014

$

84,687

$

3,989

$

1,378,562

$

(16,242)

$

(2,363)

$

(18,605)

$

1,448,633

Comprehensive income


-


-


144,603


(29,297)


198


(29,099)


115,504

Stock options settled


4,920


(1,323)


-


-


-


-


3,597

Amortization of fair value of
















employee stock options


-


808


-


-


-


-


808

Repurchase of shares


(4)


-


(124)


-


-


-


(128)

Dividends















($0.44 per share)


-


-


(32,315)


-


-


-


(32,315)

Balance at June 30, 2015

$

89,603

$

3,474

$

1,490,726

$

(45,539)

$

(2,165)

$

(47,704)

$

1,536,099
















Balance at December 31, 2013

$

70,233

$

5,984

$

1,119,959

$

(15,823)

$

(2,656)

$

(18,479)

$

1,177,697

Comprehensive income


-


-


143,481


5,389


41


5,430


148,911

Stock options settled


12,615


(3,388)


-


-


-


-


9,227

Amortization of fair value of
















employee stock options


-


1,088


-


-


-


-


1,088

Repurchase of shares (note 8(A))


-


-


-


-


-


-


-

Dividends















($0.32 per share)


-


-


(23,764)


-


-


-


(23,764)

Balance at June 30, 2014

$

82,848

$

3,684

$

1,239,676

$

(10,434)

$

(2,615)

$

(13,049)

$

1,313,159



Consolidated Statements of Cash Flows






For the three months ended

For the six months ended


June 30

June 30

June 30

June 30

thousands of Canadian dollars (Unaudited)


2015


2014


2015


2014

CASH FLOWS FROM OPERATING ACTIVITIES









Net income for the period

$

72,317

$

73,745

$

144,603

$

143,481

Adjustments to determine cash flows relating to operating activities:










Amortization of net premium on securities


29


517


23


1,194


Provision for credit losses


2,266


3,232


4,669


6,437


Gain on sale of mortgages or residual interest


(7,804)


(6,971)


(12,231)


(14,901)


Net realized and unrealized gains on securities


-


(1,187)


(1,444)


(1,939)


Amortization of capital and intangible assets


3,423


3,219


6,347


6,196


Amortization of fair value of employee stock options


389


449


808


1,088


Deferred income taxes


(879)


4


(1,166)


(1,418)

Changes in operating assets and liabilities










Loans, net of securitization and sales


214,733


(129,338)


391,509


7,523


Restricted assets


(194,152)


33,634


(312,102)


38,473


Derivative assets and liabilities


19,525


3,936


(23,529)


(2,555)


Accrued interest receivable


1,274


2,021


1,320


625


Accrued interest payable


(15,426)


(14,623)


20,780


25,229


Deposits


224,642


662,688


1,026,573


981,671


Securitization liabilities


(313,346)


(567,496)


(792,619)


(782,460)


Taxes receivable or payable and other


46,108


38,151


47,167


32,550

Cash flows provided by operating activities


53,099


101,981


500,708


441,194

CASH FLOWS FROM FINANCING ACTIVITIES









Repurchase of shares


(43)


-


(128)


-

Exercise of employee stock options


543


9,159


3,597


9,227

Dividends paid to shareholders


(15,450)


(11,165)


(30,880)


(22,283)

Cash flows used in financing activities


(14,950)


(2,006)


(27,411)


(13,056)

CASH FLOWS FROM INVESTING ACTIVITIES









Activity in securities










Purchases


-


(371,493)


-


(423,910)


Proceeds from sales


-


153,047


76,924


154,848


Proceeds from maturities


2,932


60,562


19,593


85,562

Purchases of capital assets


(870)


367


(2,693)


(853)

Capitalized intangible development costs


(6,789)


(7,510)


(12,193)


(12,569)

Cash flows (used in) provided by investing activities


(4,727)


(165,027)


81,631


(196,922)

Net increase (decrease) in cash and cash equivalents during the period


33,422


(65,052)


554,928


231,216

Cash and cash equivalents at beginning of the period


882,252


1,029,440


360,746


733,172

Cash and Cash Equivalents at End of the Period (note 4(A))

$

915,674

$

964,388

$

915,674

$

964,388

Supplementary Disclosure of Cash Flow Information









Dividends received on investments

$

2,463

$

2,448

$

4,948

$

4,513

Interest received


220,829


231,197


440,619


446,249

Interest paid


121,989


130,118


190,476


200,671

Income taxes paid


27,351


20,421


75,506


38,729










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 the quarterly 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 and regulatory and legislative 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 2015 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 2015, management's expectations continue to assume:

  • The Canadian economy is expected to produce modest growth on balance in 2015; however, there continues to be some uncertainty about the full impact of the oil price adjustment. While the Company has limited exposure in energy producing regions, it has plans for geographic expansion in Canada. There is some uncertainty as to the timing and extent of expansion given the economic conditions.
  • Generally the Company expects stable employment conditions in its established regions. Unemployment rates in energy producing regions are expected to continue to increase through 2015. 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 see an increase, but given the Company's limited exposure and lending practices, 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 2015. This is expected to continue to support relatively low mortgage interest rates for the foreseeable future.
  • In the Company's established regions the expectation is the housing market will remain stable with balanced supply supported by continued low interest rates, relatively stable employment, and immigration. There will be stable housing starts and resale activity with relatively stable prices, with regional disparities, throughout most of Canada. This supports continued stable credit losses and stable demand for the Company's lending products in its established regions.
  • 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 Second Quarter 2015 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 deposit brand, Oaken Financial. Licensed to conduct business across Canada, Home Trust has branch 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

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http://www.homecapital.com

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