Home Capital Group Inc. (“Home Capital” or “the Company”) (TSX:HCG) today reported financial results for the three months ended March 31, 2019. This press release should be read in conjunction with the Company’s 2019 First Quarter Report including Financial Statements and Management’s Discussion and Analysis (MD&A), which are available on Home Capital’s website at www.homecapital.com and on SEDAR at www.sedar.com.
“The growth in our mortgage portfolio and deposits with Oaken Financial show that more Canadians are trusting us to look after their financial needs. We have begun to upgrade our information technology infrastructure on a multi-year IT Roadmap that will include an upgrade of our core banking system and new initiatives in digital technologies, customer relationship management and mobile banking. These investments will enable us to improve productivity, accelerate new product introductions and improve the customer experience,” said Yousry Bissada, President and Chief Executive Officer. “We have the capability and desire to continue returning capital through the normal course issuer bid as we grow our mortgage portfolio and make substantial technology investments to build our business for the future,” added Mr. Bissada.
Asset growth: Positive year-over-year growth in both mortgage originations of 4.9% and total loans of 9.6%
Funding: Oaken share of total deposits reaches 21.8%
Net income: Net income of 45 cents per share up 4.7% from 43 cents per share in Q1 2018
Credit Quality: Net write-offs of 0.02% of gross loans compared with 0.03% in Q1 2018
Return of Capital
Effective January 2, 2019, Home Capital commenced a normal course issuer bid (“NCIB”) to permit the purchase of common shares of Home Capital (“Common Shares”) through the facilities of the Toronto Stock Exchange (the “TSX”), designated exchanges and alternative trading systems. The price that Home Capital will pay for any Common Shares will be the market price of such Common Shares at the time of acquisition or such other price as may be permitted.
Under the NCIB, Home Capital may purchase for cancellation up to 4,753,517 of its Common Shares, representing approximately 10% of its public float as of December 21, 2018, calculated in accordance with TSX rules.
As at May 7, 2019, Home Capital had purchased 1,943,585 Common Shares under the NCIB at an average price of approximately $16.88 per Common Share. Purchases under the NCIB will terminate on January 1, 2020, or on such earlier date as Home Capital may complete its purchases pursuant to the Notice of Intention submitted to the TSX.
Outlook
Home Capital expects that the Canadian real estate market will be stable for the balance of 2019 with improving affordability, healthy levels of competition and stable interest rates. “We believe the key drivers of our Q1 results will continue to support our growth for the balance of the year,” said Mr. Bissada. “Through dedication to customer service, attention to risk management and strategic deployment of capital, we expect to continue to create long-term value for our shareholders and our customers.”
YOUSRY BISSADA
President and Chief Executive Officer May 8, 2019 |
PAUL DERKSEN Chair of the Board |
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The Company’s 2019 First Quarter Financial Report, including Management’s Discussion and Analysis, for the three months ended March 31, 2019 is available at www.homecapital.com and on the Canadian Securities Administrators’ website at www.sedar.com.
First Quarter 2019 Results Conference Call and Slide Presentation Webcast
The conference call will take place on Wednesday, May 8, 2019, at 8:00 a.m. ET. Participants are asked to call approximately 10 minutes in advance at toll-free 1-866-393-4306 throughout North America. Participants calling from outside of North America may dial 1-734-385-2616. The call will also be accessible in listen-only mode on Home Capital’s website at www.homecapital.com in the Investor Relations section of the website.
Conference Call Archive
A telephone replay of the call will be available between 11:00 a.m. ET Wednesday, May 8, 2019 and midnight ET Wednesday, May 15, 2019 by calling 1-855-859-2056 (enter passcode 5324937). The archived audio webcast will be available for 90 days on Home Capital’s website at www.homecapital.com.
Financial Highlights |
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For the three months ended | |||||||||||||||
March 31 | December 31 | March 31 | Year-over-Year | ||||||||||||
2019 | 2018 | 2018 | Change | ||||||||||||
INCOME STATEMENT HIGHLIGHTS | |||||||||||||||
Net Interest Income | $ | 91,778 | $ | 90,324 | $ | 88,100 | 4.2% | ||||||||
Net Interest Margin (TEB1) | 2.01% | 1.99% | 2.02% | (1) bps | |||||||||||
Efficiency Ratio (TEB1) | 57.7% | 51.3% | 49.5% | 820 bps | |||||||||||
Adjusted Efficiency Ratio (TEB1)2 | 54.7% | 51.3% | 49.5% | 520 bps | |||||||||||
Provision for Credit Losses | $ | 6,060 | $ | 3,932 | $ | 5,968 | 1.5% | ||||||||
Provision as a Percentage of Gross Loans (annualized) | 0.15% | 0.10% | 0.16% | (1) bps | |||||||||||
Net Income | $ | 27,823 | $ | 35,811 | $ | 34,586 | (19.6)% | ||||||||
Adjusted Net Income2 | 30,152 | 35,811 | 34,586 | (12.8)% | |||||||||||
Diluted Earnings per Share | $ | 0.45 | $ | 0.46 | $ | 0.43 | 4.7% | ||||||||
Adjusted Diluted Earnings per Share2 | 0.49 | 0.46 | 0.43 | 14.0% | |||||||||||
Return on Shareholders' Equity (annualized) | 6.8% | 8.1% | 7.6% | (80) bps | |||||||||||
Adjusted Return on Shareholders' Equity (annualized)2 | 7.3% | 8.1% | 7.6% | (30) bps | |||||||||||
ORIGINATIONS | |||||||||||||||
Total Mortgage Originations | $ | 1,216,066 | $ | 1,614,164 | $ | 1,159,228 | 4.9% | ||||||||
Single-Family Residential Mortgage Originations | 933,220 | 1,160,051 | 869,690 | 7.3% | |||||||||||
As at | |||||||||||||||
March 31 | December 31 | March 31 | YTD Growth/ | ||||||||||||
2019 | 2018 | 2018 | (Decline) | ||||||||||||
BALANCE SHEET HIGHLIGHTS | |||||||||||||||
Total Assets | $ | 18,501,204 | $ | 18,141,689 | $ | 17,458,034 | 2.0% | ||||||||
Total Assets Under Administration3 | 24,935,030 | 24,680,225 | 24,776,803 | 1.0% | |||||||||||
Total Loans4 | 16,678,384 | 16,394,738 | 15,222,310 | 1.7% | |||||||||||
Total Loans Under Administration3,4 | 23,112,210 | 22,933,274 | 22,541,079 | 0.8% | |||||||||||
Deposits | $ | 13,565,828 | $ | 12,977,090 | $ | 12,084,408 | 4.5% | ||||||||
Demand Deposits | 459,659 | 437,046 | 476,038 | 5.2% | |||||||||||
FINANCIAL STRENGTH | |||||||||||||||
Capital Measures5 | |||||||||||||||
Common Equity Tier 1 Capital Ratio | 18.99% | 18.94% | 23.64% | ||||||||||||
Leverage Ratio | 7.60% | 7.54% | 9.02% | ||||||||||||
Credit Quality | |||||||||||||||
Net Non-Performing Loans as a Percentage of Gross Loans | 0.49% | 0.47% | 0.29% | ||||||||||||
NPL Allowance as a Percentage of Gross NPL6 | 23.8% | 19.9% | 23.9% | ||||||||||||
Share Information | |||||||||||||||
Book Value per Common Share | $ | 27.00 | $ | 26.43 | $ | 23.04 | |||||||||
Number of Common Shares Outstanding | 61,031 | 62,065 | 80,246 |
1 See definition of Taxable Equivalent Basis (TEB) under
Non-GAAP Measures in the Company’s 2019 First Quarter Report.
2
See definition of Adjusted Net Income, Adjusted Diluted Earnings
per Share, Adjusted Return on Shareholders’ Equity and Adjusted
Efficiency Ratio under Non-GAAP Measures in the Company’s 2019 First
Quarter Report.
3 Total assets and loans under
administration include both on- and off-balance sheet amounts.
4
Total loans include loans held for sale and are presented gross of
allowance for credit losses.
5 These figures relate to
the Company’s operating subsidiary, Home Trust Company.
6 NPL
indicates non-performing loans, defined as Stage 3 loans under IFRS 9 Financial
Instruments. See definition of impaired or non-performing loans
under Glossary of Terms in the Company’s 2019 First Quarter Report.
Caution Regarding Forward-looking Statements
From time to time Home Capital Group Inc. makes written and verbal forward-looking statements. These are included in the Annual Report, periodic reports to shareholders, regulatory filings, press releases, Company presentations and other Company communications. Forward-looking statements are made in connection with business objectives and targets, Company strategies, operations, anticipated financial results and the outlook for the Company, its industry, and the Canadian economy. These statements regarding expected future performance are “financial outlooks” within the meaning of National Instrument 51-102. Please see the risk factors, which are set forth in detail in the Risk Management section of this report, as well as the Company’s other publicly filed information, which is 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, liquidity and funding risk, structural interest rate risk, operational risk, investment risk, strategic risk, reputational risk, compliance risk and capital adequacy risk along with additional risk factors that may affect future results. Forward-looking statements can be found in the Report to the Shareholders and the Outlook section in the 2019 First Quarter Report. Forward-looking statements are typically identified by words such as “will,” “believe,” “expect,” “anticipate,” “intend,” “should,” “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 uncertainty, 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 presents forward-looking statements to assist shareholders in understanding the Company’s assumptions and expectations about the future that are relevant in management’s setting of performance goals, strategic priorities and outlook. The Company presents its outlook to assist shareholders in understanding management’s expectations on how the future will impact the financial performance of the Company. These forward-looking statements may not be appropriate for other purposes. 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 2019 and its effect on Home Capital’s business are material factors the Company considers when setting strategic priorities 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 and other third-party providers. In setting and reviewing its strategic priorities and outlook for the remainder of 2019, management continues to assume:
Non-GAAP Measures
The Company has adopted IFRS as its accounting framework. IFRS are the generally accepted accounting principles (GAAP) for Canadian publicly accountable enterprises for years beginning on or after January 1, 2011. 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 2019 First Quarter 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 residential and non-residential mortgage lending, securitization of insured residential mortgage products, consumer lending and credit card services. In addition, Home Trust offers deposits via brokers and financial planners, and through a direct to consumer brand, Oaken Financial. Home Trust also conducts business through its wholly owned subsidiary, Home Bank. Licensed to conduct business across Canada, we have offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.
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Jill MacRae
Director, Investor Relations
(416) 933-4991
[email protected]