Home Capital Reports Q3 Earnings

  • Diluted Earnings per Share of $1.03
  • Quarterly dividend of $0.22 per common share

TORONTO, Nov. 4, 2015 /CNW/ - Home Capital today reported results for the third quarter ended September 30, 2015.

This press release should be read in conjunction with the Company's Third 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

For the nine months ended

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

September 30

June 30

September 30

September 30

September 30



2015


2015


2014


2015


2014

OPERATING RESULTS











Net Income

$

72,443

$

72,317

$

73,755

$

217,046

$

217,236

Net Interest Income


121,698


117,210


117,583


354,432


343,113

Total Revenue

$

247,194

$

250,879

$

255,046

$

747,305

$

758,394

Diluted Earnings per Share


1.03


1.03


1.05


3.09


3.09

Return on Shareholders' Equity


18.7%


19.1%


22.0%


19.2%


22.7%

Return on Average Assets


1.4%


1.4%


1.4%


1.4%


1.4%

Net Interest Margin (TEB)1


2.38%


2.29%


2.29%


2.32%


2.25%

Provision as a Percentage of Gross Uninsured Loans (annualized)


0.08%


0.07%


0.11%


0.07%


0.10%

Provision as a Percentage of Gross Loans (annualized)


0.06%


0.05%


0.08%


0.06%


0.07%

Efficiency Ratio (TEB)1


30.8%


32.2%


29.9%


31.1%


28.9%




















As at




September 30


June 30


December 31


September 30





2015


2015


2014


2014



BALANCE SHEET HIGHLIGHTS











Total Assets

$

20,314,220

$

20,516,247

$

20,082,744

$

20,561,608



Total Assets Under Administration2


25,404,219


25,456,212


24,281,366


24,226,114



Total Loans3


18,336,736


17,982,475


18,364,910


18,488,902



Total Loans Under Administration2,3


23,426,735


22,922,440


22,563,532


22,153,408



Liquid Assets


1,477,493


1,815,817


1,058,297


1,298,938



Deposits


14,949,842


14,966,544


13,939,971


14,022,132



Shareholders' Equity


1,569,230


1,536,099


1,448,633


1,371,985



FINANCIAL STRENGTH











Capital Measures4











Risk-Weighted Assets

$

7,797,987

$

7,634,392

$

7,186,132

$

7,115,046



Common Equity Tier 1 Capital Ratio


18.06%


18.03%


18.30%


17.58%



Tier 1 Capital Ratio


18.06%


18.03%


18.30%


17.58%



Total Capital Ratio


20.51%


20.53%


20.94%


20.24%



Leverage Ratio5


7.17


6.94


N/A


N/A



Credit Quality











Net Non-Performing Loans as a Percentage of Gross Loans


0.30%


0.33%


0.30%


0.27%



Allowance as a Percentage of Gross Non-Performing Loans


69.4%


62.9%


64.4%


69.9%



Share Information











Book Value per Common Share

$

22.37

$

21.87

$

20.67

$

19.57



Common Share Price – Close

$

32.03

$

43.28

$

47.99

$

50.39



Dividend paid during the quarter ended

$

0.22

$

0.22

$

0.20

$

0.18



Market Capitalization

$

2,247,225

$

3,040,290

$

3,363,907

$

3,532,591



Number of Common Shares Outstanding


70,160


70,247


70,096


70,105




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.

THIRD QUARTER 2015 HIGHLIGHTS

Home Capital today reported financial results for the third quarter ended September 30, 2015. The Company delivered solid results across its business, including an increased net interest margin, a healthy loan portfolio evidenced by low non-performing loans and credit losses, a further improvement in single-family mortgage originations, growth in commercial and consumer lending and a strong capital position. 

Home Capital continues to demonstrate positive results, reflecting the continued strength of the overall business, its diverse sources of growth and the Company's expectation of further progress towards improving origination volumes for the remainder of the year. 

Q3 Financial Highlights:

  • Q3 2015 net income of $72.4 million and $217.0 million for the first nine months of 2015, down 1.8% compared to $73.8 million in Q3 2014 and flat compared to $217.2 million in the first nine months of 2014.  Q3 2015 net income was 0.2% higher than Q2 2015.

  • Q3 2015 diluted earnings per share (EPS) of $1.03 and $3.09 for the first nine months of 2015, compared to $1.05 and $3.09 earned in the comparable periods of 2014.  Q3 2015 diluted EPS was flat compared to Q2 2015.

  • Return on common shareholders' equity was 18.7% for Q3 2015 and 19.2% for the first nine months of 2015.

  • Net non-performing loans as a percentage of gross loans (NPL ratio) was 0.30% at the end of Q3 2015, compared to 0.33% at the end of Q2 2015, and 0.30% at the end of Q4 2014.

  • Q3 2015 Common Equity Tier 1 and Tier 1 ratios of 18.06% and Total capital ratio 20.51%. 

Growing Our Core Business

Home Capital, through its principal subsidiary Home Trust Company, continued in Q3 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 an increased net interest margin (TEB) in the quarter of 2.38%, a healthy loan portfolio as evidenced by continued low non-performing loans and credit losses, and a strong capital position. In addition, the Company is making solid progress on efforts to increase originations of single-family residential mortgages, and seeing strong growth in other lines of business.

Total mortgage advances in the quarter were $2.50 billion, an increase of 23.5% from $2.02 billion in Q2 2015, driven by a marked improvement in single-family residential mortgage originations and increases in residential and non-residential commercial mortgage originations.

Home Capital reported traditional (uninsured single-family) residential mortgages originations of $1.51 billion, as compared to $1.29 billion in Q2 2015, an increase of 17.0%.  Accelerator originations for Q3 2015 were $416.3 million, as compared to $279.5 million in Q2 2015, a 48.9% increase.  Originations from all other sources increased 26.3% to $567.3 million.

Total mortgage advances were 2.2% lower than Q3 2014, when they totaled $2.55 billion, as strength in non-residential and residential commercial mortgage originations offset a decrease in single-family residential mortgages. 

On a year-over-year basis, traditional residential originations declined 14.7% from $1.78 billion in Q3 2014, while Accelerator originations declined 20.4% from $522.9 million in Q3 2014. 

In Q2 2015, the Company disclosed that its mortgage origination volumes 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. 

The total value of outstanding loans at September 30, 2015 that were originated by the suspended brokers was $1.72 billion.  This compares to $1.93 billion as at June 30, 2015.  The Company expects this balance to decline as customers pay down loans.  The Company continues to actively monitor the subject mortgages and notes that there have been no unusual credit issues. 

The Company is reviewing and re-validating, where appropriate, the income documentation related to the identified group of mortgages and taking corrective action accordingly.  The Company is approaching a quarter of the way through its review process, with plans to complete these efforts by the end of 2016.  Of the accounts reviewed, the Company has determined that over 90% of the mortgages reviewed to date could be eligible for renewal.

Home Capital has taken several steps to improve origination volumes through the remainder of 2015, including sales measures to strengthen the Company's pipeline for residential mortgage originations and to leverage the solid demand for its traditional mortgages within its established regions. In addition, the Company has renewed focus on expanding its commercial lending products, seeking to expand its footprint, as appropriate opportunities arise.  The Company expects to see further progress from these efforts to improve origination volumes in the fourth quarter.

The Company is also pursuing other growth initiatives.

Other lending, comprising credit cards, and other consumer retail loans, continue to be an important source of loan assets with attractive returns.  While representing 3.3% of the total on-balance sheet loan portfolio, these assets generated 6.4% of the interest income for the quarter.

On October 5, 2015, the Company announced that it launched two new Visa credit card programs.  The Union Plus Canada Visa card and Optimax Visa card are issued by Home Trust on behalf of Union Plus Canada and Optimax Credit Inc., respectively.  These credit card programs leverage the brand, customer affinity and distribution channels of these organizations.

Subsequent to the end of the quarter, on October 1, 2015, the Company, through its subsidiary Home Trust Company finalized the acquisition of all outstanding common shares of CFF Bank for a purchase price of $17.8 million, subject to final adjustments.  On the date of acquisition, Home Trust injected $35.0 million in capital in order to stabilize CFF Bank.  The acquisition of CFF Bank, a Schedule 1 chartered bank, achieves the Company's strategic priority of obtaining a bank license and supports the Company's long-term strategy to continue to develop its deposit diversification initiatives and potentially its product suite.  In addition, the Company has a distribution agreement in place with certain owner-managed Canadian First Financial Centres, which had a prior relationship with CFF Bank, located across Canada, helping the Company to expand its distribution networks.

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 0.30% at the end of Q3 2015, compared to 0.33% at the end of Q2 2015 and 0.27% at the end of Q3 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 in the third quarter to make disciplined and measured investments in other areas related to the longer-term growth of the business. These investments include, among other things, ongoing investments in technology related to operating as a digital enterprise, as well as continuing to update the Company's loans-origination platform, which is designed for more efficient processing of loan applications.  In addition, the Company incurred certain expenses in the quarter related to closing the acquisition of CFF Bank.

While most of the increase in expenses incurred by the Company in 2015 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 approximately $1.4 million cumulatively from Q4 2014 related to its efforts to realign some of its business partnerships following the suspension of the small number of brokers.

Strong Shareholder Returns, Strong and Conservative Financial Position

Home Capital continued to focus on maintaining its strong and conservative financial position while delivering returns to shareholders in Q3 2015, and our success in doing so is evident in our return on average shareholders' equity of 18.7%.

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 December 1, 2015 to shareholders of record at the close of business on November 13, 2015. 

The Company is pleased to announce the appointment of William J. Walker to the Board of Directors, on November 4, 2015. Mr. Walker is a partner at Gowling Lafleur Henderson LLP, one of Canada's largest law firms. He has over 30 years of experience practicing in the area of banking law with an emphasis on the rights and remedies of mortgage lenders, and has had dealings with OSFI and CDIC over the years. We are confident that his broad experience in the mortgage industry, depth of knowledge of financial institutions, and legal expertise will be valuable assets to the Board, the Company and its stakeholders.   

In summary, the Company has maintained its solid fundamentals, and seen improvements in originations quarter over quarter. 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 for the remainder of 2015 and beyond. 

(signed)       





(signed)







GERALD M. SOLOWAY





KEVIN P.D. SMITH

Chief Executive Officer        





Chair of the Board

November 4, 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 MD&A of the quarterly report.

Third Quarter Results Conference Call
The conference call will take place on Thursday, November 5, 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, November 5, 2015 and midnight Thursday, November 12, 2015 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 52432581). 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 third 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 nine months ended

thousands of Canadian dollars, except per share amounts

September 30

June 30

September 30

September 30

September 30

(Unaudited)


2015


2015


2014


2015


2014

Net Interest Income Non-Securitized Assets











Interest from loans

$

195,051

$

190,559

$

183,101

$

572,510

$

530,526

Dividends from securities


2,597


2,677


2,955


8,012


8,584

Other interest


1,846


2,303


3,855


6,257


11,430




199,494


195,539


189,911


586,779


550,540

Interest on deposits and other


80,771


80,669


80,428


240,835


230,168

Interest on senior debt


1,512


1,516


1,610


4,572


4,732

Net interest income non-securitized assets


117,211


113,354


107,873


341,372


315,640













Net Interest Income Securitized Loans and Assets











Interest income from securitized loans and assets


24,315


26,279


40,163


80,988


130,932

Interest expense on securitization liabilities


19,828


22,423


30,453


67,928


103,459

Net interest income securitized loans and assets


4,487


3,856


9,710


13,060


27,473













Total Net Interest Income


121,698


117,210


117,583


354,432


343,113

Provision for credit losses


2,849


2,266


3,511


7,518


9,948




118,849


114,944


114,072


346,914


333,165

Non-Interest Income











Fees and other income


20,096


21,390


17,736


62,705


52,969

Securitization income


5,788


9,251


5,665


20,448


21,889

Net realized and unrealized (losses) gains on securities


(542)


-


521


902


2,460

Net realized and unrealized (losses) gains on derivatives


(1,957)


(1,580)


1,050


(4,517)


(396)




23,385


29,061


24,972


79,538


76,922




142,234


144,005


139,044


426,452


410,087

Non-Interest Expenses











Salaries and benefits


19,382


21,603


20,533


62,999


60,613

Premises


3,149


3,260


2,884


9,543


8,653

Other operating expenses


22,424


22,511


19,484


63,450


53,097




44,955


47,374


42,901


135,992


122,363













Income Before Income Taxes


97,279


96,631


96,143


290,460


287,724

Income taxes












Current


23,189


25,193


20,144


72,933


69,662


Deferred


1,647


(879)


2,244


481


826




24,836


24,314


22,388


73,414


70,488

NET INCOME

$

72,443

$

72,317

$

73,755

$

217,046

$

217,236













NET INCOME PER COMMON SHARE











Basic

$

1.03

$

1.03

$

1.05

$

3.09

$

3.11

Diluted

$

1.03

$

1.03

$

1.05

$

3.09

$

3.09

AVERAGE NUMBER OF COMMON SHARES OUTSTANDING











Basic


70,218


70,230


70,089


70,195


69,776

Diluted


70,380


70,488


70,480


70,337


70,355













Total number of outstanding common shares


70,160


70,247


70,105


70,160


70,105

Book value per common share

$

22.37

$

21.87

$

19.57

$

22.37

$

19.57

 

Consolidated Statements of Comprehensive Income






For the three months ended

For the nine months ended


September 30

June 30

September 30

September 30

September 30

thousands of Canadian dollars (Unaudited)


2015


2015


2014


2015


2014












NET INCOME

$

72,443

$

72,317

$

73,755

$

217,046

$

217,236












OTHER COMPREHENSIVE (LOSS) INCOME






















Available for Sale Securities and Retained Interest











Net unrealized (losses) gains

$

(29,730)

$

(12,860)

$

(2,552)

$

(68,162)

$

6,716

Net losses (gains) reclassified to net income


460


-


(521)


(983)


(2,460)



(29,270)


(12,860)


(3,073)


(69,145)


4,256

Income tax (recovery) expense


(7,760)


(3,422)


(813)


(18,338)


1,127



(21,510)


(9,438)


(2,260)


(50,807)


3,129












Cash Flow Hedges











Net unrealized gains (losses)


130


345


217


(339)


(453)

Net losses reclassified to net income


369


370


370


1,105


1,096



499


715


587


766


643

Income tax expense


133


188


156


202


171



366


527


431


564


472












Total other comprehensive (loss) income

$

(21,144)

$

(8,911)

$

(1,829)

$

(50,243)

$

3,601












COMPREHENSIVE INCOME

$

51,299

$

63,406

$

71,926

$

166,803

$

220,837

 

Consolidated Balance Sheets












As at



September 30

June 30

December 31

thousands of Canadian dollars (Unaudited)


2015


2015


2014

ASSETS







Cash and Cash Equivalents

$

612,218

$

915,674

$

360,746

Available for Sale Securities


413,381


449,216


582,819

Loans Held for Sale


162,432


21,304


102,094

Loans







Securitized mortgages


2,900,586


2,814,301


3,945,654

Non-securitized mortgages and loans


15,273,718


15,146,870


14,317,162




18,174,304


17,961,171


18,262,816

Collective allowance for credit losses


(35,900)


(35,300)


(34,100)




18,138,404


17,925,871


18,228,716

Other







Restricted assets


494,133


733,185


421,083

Derivative assets


77,875


63,123


38,534

Other assets


292,331


287,598


235,616

Goodwill and intangible assets


123,446


120,276


113,136




987,785


1,204,182


808,369



$

20,314,220

$

20,516,247

$

20,082,744

LIABILITIES AND SHAREHOLDERS' EQUITY







Liabilities







Deposits







Deposits payable on demand

$

1,562,081

$

1,435,924

$

1,064,152

Deposits payable on a fixed date


13,387,761


13,530,620


12,875,819




14,949,842


14,966,544


13,939,971

Senior Debt


153,652


151,930


152,026

Securitization Liabilities







Mortgage-backed security liabilities


327,837


365,884


471,551

Canada Mortgage Bond liabilities


2,990,281


3,144,960


3,831,912




3,318,118


3,510,844


4,303,463

Other







Derivative liabilities


2,922


3,059


2,266

Other liabilities


283,421


312,383


199,831

Deferred tax liabilities


37,035


35,388


36,554




323,378


350,830


238,651




18,744,990


18,980,148


18,634,111

Shareholders' Equity







Capital stock


89,683


89,603


84,687

Contributed surplus


3,775


3,474


3,989

Retained earnings


1,544,620


1,490,726


1,378,562

Accumulated other comprehensive loss


(68,848)


(47,704)


(18,605)




1,569,230


1,536,099


1,448,633



$

20,314,220

$

20,516,247

$

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


-


-


217,046


(50,807)


564


(50,243)


166,803

Stock options settled


5,136


(1,377)


-


-


-


-


3,759

Amortization of fair value of















  employee stock options


-


1,163


-


-


-


-


1,163

Repurchase of shares


(140)


-


(3,238)


-


-


-


(3,378)

Dividends















($0.66 per share)


-


-


(47,750)


-


-


-


(47,750)

Balance at September 30, 2015

$

89,683

$

3,775

$

1,544,620

$

(67,049)

$

(1,799)

$

(68,848)

$

1,569,230
















Balance at December 31, 2013

$

70,233

$

5,984

$

1,119,959

$

(15,823)

$

(2,656)

$

(18,479)

$

1,177,697

Comprehensive income


-


-


217,236


3,129


472


3,601


220,837

Stock options settled


14,350


(3,858)


-


-


-


-


10,492

Amortization of fair value of















  employee stock options


-


1,524


-


-


-


-


1,524

Repurchase of shares


(18)


-


(754)


-


-


-


(772)

Dividends















($0.50 per share)


-


-


(37,793)


-


-


-


(37,793)

Balance at September 30, 2014

$

84,565

$

3,650

$

1,298,648

$

(12,694)

$

(2,184)

$

(14,878)

$

1,371,985

 


Consolidated Statements of Cash Flows






For the three months ended

For the nine months ended


September 30

September 30

September 30

September 30

thousands of Canadian dollars (Unaudited)


2015


2014


2015


2014

CASH FLOWS FROM OPERATING ACTIVITIES









Net income for the period

$

72,443

$

73,755

$

217,046

$

217,236

Adjustments to determine cash flows relating to operating activities:










Amortization of net premium on securities


29


321


52


1,515


Provision for credit losses


2,849


3,511


7,518


9,948


Gain on sale of mortgages or residual interest


(4,453)


(4,448)


(16,684)


(19,349)


Net realized and unrealized losses (gains) on securities


542


(521)


(902)


(2,460)


Amortization of capital and intangible assets


3,657


3,323


10,004


9,519


Amortization of fair value of employee stock options


355


436


1,163


1,524


Deferred income taxes


1,647


2,244


481


826

Changes in operating assets and liabilities










Loans, net of securitization and sales


(351,858)


(465,168)


39,651


(457,645)


Restricted assets


239,052


(56,830)


(73,050)


(18,357)


Derivative assets and liabilities


(14,390)


(1,961)


(37,919)


(4,516)


Accrued interest receivable


(496)


(2,071)


824


(1,446)


Accrued interest payable


(6,235)


(1,634)


14,545


23,595


Deposits


(16,702)


274,507


1,009,871


1,256,178


Securitization liabilities


(192,726)


(264,443)


(985,345)


(1,046,903)


Taxes receivable or payable and other


(15,737)


(31,348)


31,430


1,202

Cash flows (used in) provided by operating activities


(282,023)


(470,327)


218,685


(29,133)

CASH FLOWS FROM FINANCING ACTIVITIES









Repurchase of shares


(3,250)


(772)


(3,378)


(772)

Exercise of employee stock options


162


1,265


3,759


10,492

Dividends paid to shareholders


(15,454)


(12,619)


(46,334)


(34,902)

Cash flows used in financing activities


(18,542)


(12,126)


(45,953)


(25,182)

CASH FLOWS FROM INVESTING ACTIVITIES









Activity in securities










Purchases


-


(76,166)


-


(500,076)


Proceeds from sales


-


18,555


76,924


173,403


Proceeds from maturities


4,139


73,075


23,732


158,637

Purchases of capital assets


(981)


(1,164)


(3,674)


(2,017)

Capitalized intangible development costs


(6,048)


(8,134)


(18,241)


(20,703)

Cash flows (used in) provided by investing activities


(2,890)


6,166


78,741


(190,756)

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


(303,455)


(476,287)


251,473


(245,071)

Cash and cash equivalents at beginning of the period


915,674


964,388


360,746


733,172

Cash and Cash Equivalents at End of the Period

$

612,219

$

488,101

$

612,219

$

488,101

Supplementary Disclosure of Cash Flow Information









Dividends received on investments

$

2,366

$

2,630

$

7,314

$

7,143

Interest received


220,343


225,074


660,962


671,323

Interest paid


106,381


112,159


296,857


312,830

Income taxes paid


26,883


21,770


102,389


60,499

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 adverse effects related to the drop and fluctuations in oil prices and other commodities.  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 Third 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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