- Diluted Earnings per Share up 14.9% year over year to $1.77;
- Dividend Increase of 7.7%, or 2 Cents per Share to $0.28 Quarterly;
- Quarterly Net Income increases 15.7% year over year.
TORONTO, July 31, 2013 /CNW/ - Home Capital today reported another quarter of solid results and strong origination volumes.
The Company's Second Quarter Report, including Management's Discussion and Analysis, is available on Home Capital's website at www.homecapital.com and the Canadian Securities Administrators' website at www.sedar.com.
|(Unaudited)||For the three months ended||For the six months ended|
|(000s, except Per Share and Percentage Amounts)||June 30||March 31||June 30||June 30||June 30|
|Diluted Earnings per Share||$||1.77||$||1.72||$||1.54||$||3.48||$||3.07|
|Return on Shareholders' Equity||23.6%||24.0%||25.1%||23.8%||25.7%|
|Return on Average Assets||1.3%||1.3%||1.2%||1.3%||1.2%|
|Net Interest Margin (TEB)1||2.14%||2.17%||2.09%||2.15%||2.05%|
|Provision as a Percentage of Gross Loans (annualized)||0.10%||0.11%||0.05%||0.10%||0.08%|
|Efficiency Ratio (TEB)1||28.6%||28.3%||27.8%||28.4%||27.8%|
|June 30||March 31||December 31||June 30|
|BALANCE SHEET HIGHLIGHTS|
|Total Assets Under Administration 2||20,577,505||20,377,074||19,681,750||18,599,224|
|Total Loans 3,4||17,794,420||17,429,982||17,159,913||17,049,785|
|Securitized Loans On-Balance Sheet 3||6,570,837||6,710,556||6,706,160||7,664,978|
|Total Loans Under Administration 3,4,5||18,838,967||18,448,493||18,041,584||17,122,551|
|Capital Measures 6|
|Common Equity Tier 1 Capital Ratio||16.63%||16.57%||N/A||N/A|
|Tier 1 Capital Ratio||16.63%||16.57%||17.01%||17.09%|
|Total Capital Ratio||19.74%||19.82%||20.68%||21.09%|
|Assets to Regulatory Capital Multiple||13.86||13.98||13.98||13.78|
|Net Non-Performing Loans as a Percentage of Gross Loans||0.31%||0.32%||0.33%||0.31%|
|Allowance as a Percentage of Gross Non-Performing Loans||58.3%||59.9%||57.0%||58.7%|
|Book Value per Common Share||$||30.83||$||29.53||$||27.96||$||25.05|
|Common Share Price - Close||$||55.53||$||58.74||$||59.07||$||45.18|
|Number of Common Shares Outstanding||34,647||34,600||34,630||34,711|
| 1See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures of the unaudited interim consolidated financial report.
2Total assets under administration include total on-balance sheet assets and off-balance sheet loans.
3In 2013 the Company classified Home Trust mortgages used as CMB replacement assets as securitized mortgages. In 2012 these were classified as pledged securities. Prior periods in 2012 have been restated to reflect the current classification.
4Total loans include loans held for sale.
5Loans under administration includes total loans and off-balance sheet loans.
6These figures relate to the Company's operating subsidiary, Home Trust Company and are calculated under Basel III for 2013 and Basel II for 2012.
SECOND QUARTER 2013 HIGHLIGHTS
Key results for the second quarter and the first six months of 2013 included:
- Net income increased to $61.6 million for the second quarter and to $121.3 million for the first six months of 2013, up 15.7% and 14.7% over the comparable periods in 2012. Net income was reduced by $2.3 million in after tax charges related to IFRS implementation (see the Non-Interest Income section of the MD&A) offset by an increase from $2.0 million in investment tax credit benefits, after tax, related to a portion of the Company's development of a new banking platform (see the Income Taxes section of the MD&A). Without these items, adjusted net income, as defined in Table 2, was $61.9 million for Q2 2013 and $124.9 million for the first six months of 2013, representing increases of 16.3% and 18.1% over the comparable periods of 2012. This was a marginal decline from adjusted net income of $63.0 million in Q1 2013, primarily due to lower income from gains on securitization.
- Diluted earnings per share were $1.77 for the quarter and $3.48 year to date representing increases of 14.9% and 13.4% over the $1.54 and $3.07 earned in the comparable periods of 2012 and an increase of 2.9% over the $1.72 last quarter. Adjusted diluted earnings per share1 were $1.78 for the quarter and $3.59 year to date, 15.6% and 16.9% higher than the same periods of 2012 and 1.7% below adjusted diluted earnings per share of $1.81 last quarter.
- Net interest income, before provisions, continued in an upward trend, reaching $102.5 million in the second quarter and $204.4 million year to date, increasing from $93.9 million and $182.1 million recorded in the same periods of 2012 and from $101.9 million earned in Q1 2013. The growth in net interest income reflects strong net on-balance sheet loan growth in the traditional loan portfolio, offset by continued reduction of the securitized portfolio, combined with strong total net interest margin.
- Net interest margin (TEB) was 2.14% in the quarter and 2.15% on a year to date basis. This is up from 2.09% and 2.05% in the same periods of 2012 and slightly below the 2.17% recorded last quarter. The increase year over year reflects the combination of the shift to higher yielding traditional mortgages relative to securitized mortgages and improved spreads earned on non-securitized lending.
- Return on equity at 23.6% for the quarter remains solid and continues to be in excess of the Company's minimum performance objective of 20%.
- The credit quality of the loan portfolio remains strong with continued low non-performing loans and credit losses that are well within expected levels. Net non-performing loans as a percentage of gross loans (NPL ratio) ended the quarter at 0.31% compared to 0.32% at the end of last quarter and 0.31% one year ago. The annualized credit provision as a percentage of gross loans (PCL ratio) ratio remains within expectations at 0.10%, compared to 0.11% in last quarter and 0.05% one year ago.
- Capital ratios under Basel III remain robust with Home Trust's Common Equity Tier 1 ratio (CET 1 ratio) ending the quarter at 16.63%, while Tier 1 and Total Capital Ratios were 16.63% and 19.74%, respectively. Home Trust's assets to capital multiple was 13.86 at the end of the quarter compared to 13.98 at March 31, 2013 and 13.78 one year ago.
- Total loans under administration, which includes securitized mortgages that qualify for off-balance sheet accounting, increased to $18.84 billion, reflecting increases of $1.72 billion or 10.0% from $17.12 billion one year ago, and $0.80 billion or 4.4% from $18.04 billion at the end of 2012 (8.8% on an annualized basis).
- The Company continued to experience strong loan demand in the quarter, with growth over Q1 2013 and last year in residential lending. Total mortgage originations were $1.63 billion compared to $1.38 billion last quarter. This was down marginally from $1.67 billion in Q2 2012 reflecting lower multi-unit and non-residential originations offset by higher originations in residential lending. Year-to-date loan originations were $3.01 billion, up from $2.85 billion in 2012.
- Traditional mortgage originations increased to $1.24 billion in the quarter, up from $1.19 billion in Q2 2012 and $0.99 billion in Q1 2013. Year-to-date traditional mortgage originations were $2.23 billion, up from $2.10 billion last year. The Company continues to experience strong demand for its traditional product offerings, which continue to be of high credit quality. This continues to enhance profitability and asset quality.
- Accelerator (insured) residential mortgage originations increased to $260.3 million in the quarter, up from $121.6 million last quarter and $221.1 million in Q2 2012. Year-to-date originations of $381.9 million are slightly below the $393.8 million originated in the same period last year as current year Q1 originations were lower given the slower start to the spring market in 2013. The Company continues to pursue strategies for transactions that will qualify lower margin, insured single-family residential mortgages for off-balance sheet treatment and lead to increased growth in this loan portfolio. The dialogue with regulators and other interested parties regarding these strategies has continued and management remains cautiously optimistic that a solution can be attained.
- Multi-unit residential mortgage originations were $54.3 million in the quarter and $257.0 million year to date compared to $87.8 million and $115.4 million in the same periods last year and $202.6 million last quarter. The Company securitized and sold $47.8 million in Q2 2013 resulting in $0.4 million in securitization gains. The insured multi-unit residential market is relatively limited and the Company participates as appropriate opportunities are available through various origination channels. Consequently, origination volumes can vary significantly from quarter to quarter.
- Commercial mortgage advances were $44.0 million for the quarter and $74.7 million year to date compared to $106.0 million and $133.7 million in the comparable periods of 2012 and $30.7 million last quarter. Store and apartment mortgage advances were $27.5 million in the quarter and $51.1 million year to date compared to $37.8 million and $75.7 million in the comparable periods of 2012 and $23.6 million last quarter. The Company continues to be selective and focuses on opportunities that present strong credit and low risk profiles.
- The consumer retail credit portfolio, which includes durable household goods, such as water heaters and larger-ticket home improvement items, reached $310.9 million in Q2 2013, up 55.3% from $200.2 million one year ago. The Company has been successful at expanding relationships with its business partners to increase this portfolio which offers attractive returns for the risk profile.
1 Table 2 provides a reconciliation of net income to adjusted net income and adjusted diluted earnings per share.
Although real estate market activity was relatively weak in the early part of the current year, resulting in reduced levels of loan growth, the Company experienced increased demand for its mortgage lending products in the second quarter. The real estate market now appears to have adjusted to the changes in the Canada Mortgage and Housing Corporation ("CMHC") rules and the Office of the Superintendent of Financial Institutions Canada ("OSFI)" lending guideline which were introduced in 2012. Recent information indicates that modest increases in sales volumes and prices occurred in the quarter, suggesting that the objectives of the policy changes have been accomplished. This is consistent with the Company's expectations and indicates a healthy market with listings and sales in balance. The Company has not observed evidence of a "housing bubble" and expects that it will be able to continue to expand its share of the market through its network of brokers and its business development staff.
Late in the quarter, major flooding occurred in the province of Alberta. This event caused property damage and hardship for many Albertans and the Company has been responding to requests from borrowers. In order to assess the risk of losses arising from the flooding, the Company dispatched a team of evaluators from its Calgary, Vancouver and Toronto offices. While a number of borrowers were directly affected by this difficult situation, the preliminary indications are that the Company will not face significant losses as a result of the flooding. No additional provisions were recorded in this connection. Following the end of the quarter, the town of Lac-Mégantic, Quebec experienced a terrible accident and losses of lives and property. Although it did not have any direct association or losses as a result of this tragic situation, the Company recognizes the severe impact that this tragedy has had on the residents and their friends and relatives. Also following the quarter end, the Greater Toronto Area experienced a record amount of rainfall and consequent flooding, which disrupted the lives and businesses of many people. The Company does not expect that this unusual event will result in significant credit losses.
Senior Management and the Board of Directors are pleased to announce that the Company further strengthened its risk management group during the quarter with the appointment of David J. Novak to the position of Senior Vice President and Chief Risk Officer. Mr. Novak brings with him significant experience in quantitative analysis, risk management and asset liability management, having served in senior roles in the private sector and more recently with OSFI.
Subsequent to the end of the quarter, and in light of the Company's solid performance, profitability and strong financial position, the Board of Directors declared an increased quarterly dividend of $0.28 per common share, payable on September 1, 2013 to shareholders of record at the close of business on August 12, 2013.
The Company continues to deliver solid results in terms of growth, high returns and increased dividends. Despite the persistent international economic instability and modest economic improvement in Canada, the Company's performance continues to reflect the strength and the successful execution of its core strategy.
With solid performance in all aspects of Home Capital's business, management continues to expect the positive performance the Company experienced during the first half of 2013 to continue for the remainder of year.
|GERALD M. SOLOWAY||KEVIN P.D. SMITH|
|Chief Executive Officer||Chair of the Board|
|July 31, 2013|
Additional information concerning the Company's targets and related expectations for 2013, including the risks and assumptions underlying these expectations, may be found in Management's Discussion and Analysis (MD&A) of the quarterly report.
Second Quarter Results Conference Call
The conference call will take place on Thursday, August 1, 2013 at 10:30 a.m. Participants are asked to call 5 to 15 minutes in advance, 647-427-7450 in Toronto or toll-free 1-888-231-8191 throughout North America. The call will also be accessible in listen-only mode via the Internet at www.homecapital.com.
Conference Call Archive
A telephone replay of the call will be available between 1:30 p.m. Thursday, August 1, 2013 and midnight Thursday, August 8, 2013 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 16265448). The archived audio web cast will be available for 90 days on CNW Group's website at www.newswire.ca and Home Capital's website at www.homecapital.com.
|Consolidated Statements of Income|
|For the three months ended||For the six months ended|
|thousands of Canadian dollars, except per share amounts||June 30||March 31||June 30||June 30||June 30|
|Net Interest Income Non-Securitized Assets|
|Interest from loans (note 5(F))||$||153,598||$||148,031||$||125,576||$||301,629||$||243,141|
|Dividends from securities||2,795||3,193||3,533||5,988||7,497|
|Interest on deposits||65,640||62,938||56,043||128,578||109,171|
|Interest on senior debt||1,601||1,583||1,705||3,184||3,358|
|Net interest income non-securitized assets||90,930||88,159||72,291||179,089||140,086|
|Net Interest Income Securitized Loans and Assets|
|Interest income from securitized loans and assets (note 5(F))||57,953||61,337||76,286||119,290||152,902|
|Interest expense on securitization liabilities||46,351||47,610||54,723||93,961||110,915|
|Net interest income securitized loans and assets||11,602||13,727||21,563||25,329||41,987|
|Total Net Interest Income||102,532||101,886||93,854||204,418||182,073|
|Provision for credit losses (note 5(E))||4,429||4,667||2,298||9,096||6,796|
|Fees and other income||15,406||14,972||10,757||30,378||21,654|
|Net realized and unrealized (losses) gains on securities and mortgages||(215)||2,274||1,676||2,059||1,984|
|Net realized and unrealized gain (loss) on derivatives (note 13)||632||(1,656)||(1,275)||(1,024)||3,010|
|Salaries and benefits||16,673||16,950||14,501||33,623||28,500|
|Other operating expenses||15,160||14,574||13,404||29,734||26,575|
|Income Before Income Taxes||80,262||80,427||74,100||160,689||144,143|
|Income taxes (note 11(A))|
|NET INCOME PER COMMON SHARE|
|AVERAGE NUMBER OF COMMON SHARES OUTSTANDING|
|Total number of outstanding common shares (note 9(A))||34,647||34,600||34,711||34,647||34,711|
|Book value per common share||$||30.83||$||29.53||$||25.05||$||30.83||$||25.05|
|Consolidated Statements of Comprehensive Income|
|For the three months ended||For the six months ended|
|June 30||March 31||June 30||June 30||June 30|
|thousands of Canadian dollars (Unaudited)||2013||2013||2012||2013||2012|
|OTHER COMPREHENSIVE (LOSS) INCOME|
|Available for Sale Securities|
|Net unrealized (losses) gains on securities available for sale||(10,737)||7,165||(1,069)||(3,572)||3,324|
|Net gains reclassified to net income||(1,162)||(1,946)||(1,348)||(3,108)||(1,712)|
|Income tax (recovery) expense||(3,151)||1,381||(643)||(1,770)||524|
|Cash Flow Hedges (note 13)|
|Net unrealized losses on cash flow hedges||-||-||(396)||-||(370)|
|Net losses reclassified to net income||372||367||357||739||710|
|Income tax expense (recovery)||97||95||(89)||192||21|
|Total other comprehensive (loss) income||(8,473)||4,110||(1,724)||(4,363)||1,407|
|Consolidated Balance Sheets|
|June 30||March 31||December 31|
|thousands of Canadian dollars (Unaudited)||2013||2013||2012|
|Cash and Cash Equivalents (note 4(A))||$||707,240||$||631,080||$||301,863|
|Available for Sale Securities (note 4(B))||396,557||404,254||414,344|
|Loans Held for Sale||25,508||43,434||21,921|
|Loans (note 5)|
|Securitized mortgages (note 6)||6,570,837||6,710,556||6,706,160|
|Non-securitized mortgages and loans||11,198,075||10,675,992||10,431,832|
|Collective allowance for credit losses (note 5(E))||(30,500)||(30,300)||(30,000)|
|Restricted cash (note 4(A))||136,165||130,083||137,424|
|Pledged securities (notes 4(B) and 6(C))||304,269||551,008||588,069|
|Derivative assets (note 13)||28,739||44,643||45,388|
|Other assets (note 7)||110,958||114,528||100,983|
|Goodwill and intangible assets||85,110||83,285||82,095|
|LIABILITIES AND SHAREHOLDERS' EQUITY|
|Deposits payable on demand||$||172,370||$||96,513||$||105,923|
|Deposits payable on a fixed date||10,996,269||10,545,767||10,030,676|
|Senior Debt (note 12)||148,300||152,092||150,684|
|Securitization Liabilities (note 6(A))|
|Mortgage-backed security liabilities||1,103,266||1,271,879||1,301,693|
|Canada Mortgage Bond liabilities||5,820,394||6,036,475||6,034,202|
|Derivative liabilities (note 13)||1,704||2,941||2,386|
|Other liabilities (note 8)||186,744||198,037||170,502|
|Deferred tax liabilities (note 11(C))||35,894||33,046||35,800|
|Capital stock (note 9)||64,662||61,850||61,903|
|Accumulated other comprehensive (loss) income (note 10)||(8,108)||365||(3,745)|
|Consolidated Statements of Changes in Shareholders' Equity|
|Net Unrealized||Net Unrealized||Total|
|Gains (Losses)||Losses on||Accumulated|
|on Securities||Cash Flow||Other||Total|
|thousands of Canadian dollars,||Capital||Contributed||Retained||Available for||Hedges,||Comprehensive||Shareholders'|
|except per share amounts (Unaudited)||Stock||Surplus||Earnings||Sale, after Tax||after Tax||Loss||Equity|
|Balance at December 31, 2012||$||61,903||$||6,224||$||903,831||$||432||$||(4,177)||$||(3,745)||$||968,213|
|Stock options settled (note 9(A))||2,825||(746)||-||-||-||-||2,079|
|Amortization of fair value of|
|employee stock options (note 9(B))||-||941||-||-||-||-||941|
|Repurchase of shares (note 9(A))||(66)||-||(2,077)||-||-||-||(2,143)|
|($0.52 per share)||-||-||(18,008)||-||-||-||(18,008)|
|Balance at June 30, 2013||$||64,662||$||6,419||$||1,005,044||$||(4,478)||$||(3,630)||$||(8,108)||$||1,068,017|
|Balance at December 31, 2011||$||55,104||$||5,873||$||722,999||$||(4,141)||$||(5,050)||$||(9,191)||$||774,785|
|Stock options settled (note 9(A))||6,692||(1,302)||-||-||-||-||5,390|
|Amortization of fair value of|
|employee stock options (note 9(B))||-||972||-||-||-||-||972|
|Repurchase of shares (note 9(A))||(134)||-||(3,436)||-||-||-||(3,570)|
|($0.42 per share)||-||-||(15,309)||-||-||-||(15,309)|
|Balance at June 30, 2012||$||61,662||$||5,543||$||810,018||$||(3,053)||$||(4,731)||$||(7,784)||$||869,439|
|Consolidated Statements of Cash Flows|
|For the six months ended|
|June 30||June 30|
|thousands of Canadian dollars (Unaudited)||2013||2012|
|CASH FLOWS FROM OPERATING ACTIVITIES|
|Net income for the period||$||121,298||$||105,764|
|Adjustments to determine cash flows relating to operating activities:|
|Deferred income taxes||(142)||(1,244)|
|Amortization of capital assets||1,444||1,569|
|Amortization of intangible assets||3,875||3,218|
|Amortization of net premium on securities||1,210||1,461|
|Amortization of securitization and senior debt transaction costs||6,185||6,604|
|Provision for credit losses||9,096||6,796|
|Change in accrued interest payable||23,608||20,108|
|Change in accrued interest receivable||(1,184)||(3,104)|
|Net realized and unrealized gains on securities and mortgages||(2,059)||(1,984)|
|Realized gain on securitization||(2,195)||(1,268)|
|Settlement of derivatives||3,115||(370)|
|Loss (gain) on derivatives||1,224||(3,010)|
|Net increase in mortgages||(1,085,637)||(947,215)|
|Net decrease (increase) in pledged assets||539,277||(287,247)|
|Net increase in credit card loans and other consumer retail loans||(18,301)||(7,904)|
|Net increase in deposits||1,032,040||1,085,340|
|Proceeds from obligations under repurchase agreement||-||43,418|
|Activity in securitization liabilities|
|Proceeds from sale of mortgage-backed securities derecognized||198,522||72,733|
|Proceeds from sale of mortgage-backed securities||536,149||125,886|
|Settlement and repayment of securitization liabilities||(943,608)||(527,249)|
|Amortization of fair value of employee stock options||941||972|
|Changes in taxes payable and other||(3,231)||(12,814)|
|Cash flows provided by operating activities||421,627||(319,540)|
|CASH FLOWS FROM FINANCING ACTIVITIES|
|Repurchase of shares||(2,143)||(3,570)|
|Exercise of employee stock options||2,079||5,390|
|Dividends paid to shareholders||(18,004)||(14,598)|
|Cash flows used in financing activities||(18,068)||(12,778)|
|CASH FLOWS FROM INVESTING ACTIVITIES|
|Activity in securities|
|Proceeds from sales||129,223||185,453|
|Purchases of capital assets||(3,269)||(3,475)|
|Purchases of intangible assets||(6,890)||(5,450)|
|Cash flows provided by (used in) investing activities||1,818||(40,941)|
|Net increase (decrease) in cash and cash equivalents during the period||405,377||(373,259)|
|Cash and cash equivalents at beginning of the period||$||301,863||$||534,394|
|Cash and Cash Equivalents at End of the Period (note 4(A))||707,240||161,135|
|Supplementary Disclosure of Cash Flow Information|
|Dividends received on investments||$||3,985||$||6,227|
|Income taxes paid||54,965||43,874|
Home Capital published its financial objectives for 2013 on page 18 of the Company's 2012 Annual Report. The following table compares actual performance to date against each of these objectives.
|Table 1: 2013 Targets and Performance|
|For the six months ended June 30, 2013|
|2013 Targets||Actual Results||Amount||Increase over 2012|
|Growth in net income||13%-18%||14.7%||$||121,298||$||15,534|
|Growth in diluted earnings per share||13%-18%||13.4%||3.48||0.41|
|Growth in total loans under administration1||10%-15%||8.8%||18,838,967||797,383|
|Return on shareholders' equity||20.0%||23.8%|
|Efficiency ratio (TEB)2||28.0% - 34.0%||28.4%|
|Provision as a percentage of gross loans (annualized)||0.10% - 0.18%||0.10%|
| 1 Change represents growth over December 31, 2012 on an annualized basis and includes loans held for sale.
2 See definition of TEB under Non-GAAP Measures in the unaudited interim consolidated financial report.
|Table 2: Reconciliation of Net Income to Adjusted Net Income|
|Quarter||Year to date|
|(000s, except % and per share amounts)||Q2||Q1||%||Q2||%||%|
|Reconciliation of Net Income to Adjusted Net Income|
|Net income per above||$||61,573||$||59,725||3.1%||$||53,230||15.7%||$||121,298||$||105,764||14.7%|
|Adjustment for derivative restructuring - IFRS conversion (net of tax)||2,309||1,783||29.5%||-||-||4,092||$||-||-|
|Adjustment for disputed loans to condominium corporations (net of tax)||-||1,508||(100.0)%||-||-||1,508||-||-|
|Adjustment for investment tax credit benefits (net of tax)||(1,985)||-||-||-||-||(1,985)||-||-|
|Adjusted Net Income1||$||61,897||$||63,016||(1.8)%||$||53,230||16.3%||$||124,913||$||105,764||18.1%|
|Adjusted Basic Earnings per Share1||$||1.79||$||1.82||(1.6)%||$||1.54||16.2%||$||3.61||$||3.07||17.6%|
|Adjusted Diluted Earnings per Share1||$||1.78||$||1.81||(1.7)%||$||1.54||15.6%||$||3.59||$||3.07||16.9%|
|1 Adjusted net income and Adjusted earnings per share are defined in the Non-GAAP section of the MD&A.|
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 on pages 55 through 68 of the Company's 2012 Annual 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 legal 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 2013 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 2013, management's expectations continue to assume:
- The Canadian economy will produce modest growth in 2013 with relatively stable to modestly improving employment conditions in most regions and inflation will generally be within the Bank of Canada's target of 1% to 3%, leading to stable credit losses and continued strong demand for the Company's lending products.
- The Canadian economy will continue to be heavily influenced by the economic conditions in the United States and global markets and, as such, the Company is prepared for the variability to plan that this may lead to.
- The Bank of Canada continues to indicate that increases to its target overnight interest rate are not imminent and, as such, the Company is assuming the rate will remain at its current level for the balance of 2013 and then begin a slow and measured increase. This is expected to continue to support relatively low mortgage interest rates for the foreseeable future.
- The housing market will remain relatively stable with balanced supply and demand conditions in most regions supported by continued low interest rates, relatively stable to modestly improving employment, and immigration. There will be declines in housing starts and resale activity compared to prior years with stable to modestly declining prices throughout most of Canada. This supports continued stable credit quality and strong demand for the Company's products.
- Consumer debt levels will remain serviceable by Canadian households.
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 2013 Report.
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. 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