Home Capital Group Inc. (“Home Capital” or “the Company”) (TSX: HCG) today reported financial results for the three and nine months ended September 30, 2020. This press release should be read in conjunction with the Company’s 2020 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 on SEDAR at www.sedar.com.
“We are proud to support our customers and partners through these exceptional circumstances, while making progress on our Ignite Program and improving our operating performance,” said Yousry Bissada, Chief Executive Officer. “We have grown our mortgage originations, improved our net interest margin and prudently managed expenses.”
Net Income: $1.12 per share in Q3 2020 compared with $0.67 in Q3 2019
Asset Growth: Mortgage originations grew by 26.6% over Q3 2019
Funding: Deposits through our Oaken channel of $3.87 billion make up 27.7% of total deposits
Credit Quality: Credit provisions of (0.16)% of gross loans compared with 0.43% in Q2 2020 and 0.09% in Q3 2019
Outlook
Home Capital believes that the impact of COVID-19 on its operations will depend on the duration of COVID-19 related restrictions on economic activity, the effectiveness of relief programs at mitigating the economic effects on our customers and the resulting impact on the markets for real estate and consumer credit. The allowance for expected credit losses (“ECL”) is sensitive to the inputs used in models, including macroeconomic variables in the forward-looking scenarios and their respective probability weightings as at the reporting date, among other factors. The Company’s ECL was determined as of September 30, 2020 based on forecasts and other information available at that date, as IFRS 9 does not permit the use of hindsight in measuring ECL. Since that date, forecasts around the impact of COVID-19 on the economy and the timing of recovery have continued to evolve. Any changes in forward-looking information subsequent to September 30, 2020 will be reflected in the measurement of ECL in future quarters as appropriate. This may add significant volatility to ECL.
“Our people have worked effectively to manage through the effects of this pandemic and deliver on our strategic priorities. I thank our team for their hard work on behalf of all stakeholders,” said Mr. Bissada. “We have the capability, the financial strength, and the resolve to continue to fulfill our very important purpose of helping people own homes.”
Third Quarter 2020 Results Conference Call and Slide Presentation Webcast
The conference call will take place by webcast on Wednesday, November 11, 2020, at 8:00 a.m. EST. Participants may register in advance for the webcast by visiting: http://www.directeventreg.com/registration/event/5231238. 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. The archived audio webcast will be available for 90 days on Home Capital’s website at www.homecapital.com.
Financial Highlights |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
||||||||||
|
For the three months ended |
For the nine months ended |
|||||||||||||
(000s, except Percentage and Per Share Amounts) |
September 30 |
|
June 30 |
|
September 30 |
|
September 30 |
|
September 30 |
||||||
|
2020 |
|
2020 |
|
2019 |
|
2020 |
|
2019 |
||||||
INCOME STATEMENT HIGHLIGHTS |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
||||||||||
Net Interest Income |
$ |
121,085 |
$ |
115,815 |
$ |
103,048 |
$ |
351,352 |
$ |
292,360 |
|||||
Net Interest Margin (TEB1) |
|
2.51% |
|
2.40% |
|
2.22% |
|
2.43% |
|
2.11% |
|||||
Efficiency Ratio (TEB1) |
|
47.2% |
|
50.5% |
|
51.3% |
|
48.2% |
|
54.7% |
|||||
Adjusted Efficiency Ratio (TEB1)2 |
|
44.2% |
|
47.9% |
|
47.8% |
|
45.5% |
|
51.4% |
|||||
|
|
|
|
|
|
||||||||||
Provision as a Percentage of Gross Loans (annualized) |
|
(0.16)% |
|
0.43% |
|
0.09% |
|
0.32% |
|
0.12% |
|||||
Net Write-Offs as a Percentage of Gross Loans (annualized) |
|
0.55% |
|
0.02% |
|
0.06% |
|
0.20% |
|
0.06% |
|||||
|
|
|
|
|
|
||||||||||
Net Income |
$ |
58,499 |
$ |
34,132 |
$ |
39,020 |
$ |
120,347 |
$ |
98,750 |
|||||
Adjusted Net Income2 |
|
61,574 |
|
36,648 |
|
41,953 |
|
128,098 |
|
106,826 |
|||||
Diluted Earnings per Share |
$ |
1.12 |
$ |
0.65 |
$ |
0.67 |
$ |
2.28 |
$ |
1.64 |
|||||
Adjusted Diluted Earnings per Share2 |
|
1.18 |
|
0.70 |
|
0.72 |
|
2.43 |
|
1.78 |
|||||
Return on Shareholders' Equity (annualized) |
|
14.7% |
|
8.9% |
|
9.5% |
|
9.7% |
|
8.0% |
|||||
Adjusted Return on Shareholders’ Equity (annualized)2 |
|
15.5% |
|
9.5% |
|
10.2% |
|
10.3% |
|
8.7% |
|||||
ORIGINATIONS |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
||||||||||
Total Mortgage Originations |
$ |
1,956,122 |
$ |
1,495,173 |
$ |
1,545,364 |
$ |
5,068,507 |
$ |
4,038,085 |
|||||
Single-Family Residential Mortgage Originations |
|
1,502,757 |
|
1,127,846 |
|
1,186,968 |
|
3,680,358 |
|
3,170,558 |
|||||
|
|
|
|
|
|
||||||||||
|
|
|
|
|
As at |
|
|
||||||||
|
September 30 |
|
June 30 |
|
September 30 |
|
|
||||||||
|
2020 |
|
2020 |
|
2019 |
|
|
||||||||
BALANCE SHEET HIGHLIGHTS |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
||||||||||
Total Assets |
$ |
19,235,828 |
$ |
19,153,701 |
$ |
18,934,256 |
|
|
|||||||
Total Assets Under Administration3 |
|
24,805,110 |
|
24,665,030 |
|
24,776,872 |
|
|
|||||||
Total Loan Portfolio4 |
|
17,436,899 |
|
17,207,847 |
|
16,994,631 |
|
|
|||||||
Total Loans Under Administration3 |
|
23,063,012 |
|
22,875,730 |
|
22,968,969 |
|
|
|||||||
Deposits |
|
13,959,124 |
|
14,010,512 |
|
13,520,776 |
|
|
|||||||
FINANCIAL STRENGTH |
|
|
|
|
|
||||||||||
|
|
|
|
|
|
||||||||||
Capital Measures5 |
|
|
|
|
|
||||||||||
Common Equity Tier 1 Capital Ratio |
|
19.35% |
|
18.48% |
|
19.67% |
|
|
|||||||
Leverage Ratio |
|
7.59% |
|
7.38% |
|
7.80% |
|
|
|||||||
|
|
|
|
|
|
||||||||||
Credit Quality |
|
|
|
|
|
||||||||||
Net Non-Performing Loans as a Percentage of Gross Loans |
|
0.47% |
|
0.42% |
|
0.49% |
|
|
|||||||
NPL Allowance as a Percentage of Gross NPL6 |
|
21.2% |
|
31.0% |
|
23.6% |
|
|
|||||||
|
|
|
|
|
|
||||||||||
Share Information |
|
|
|
|
|
||||||||||
Book Value per Common Share |
$ |
31.28 |
$ |
30.11 |
$ |
28.64 |
|
|
|||||||
Number of Common Shares Outstanding |
|
51,812 |
|
51,805 |
|
57,331 |
|
|
1 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Company’s 2020 Third Quarter Report. |
2 See definition of Adjusted Efficiency Ratio, Adjusted Net Income, Adjusted Diluted Earnings per Share, and Adjusted Return on Shareholders’ Equity under Non-GAAP Measures in the Company’s 2020 Third Quarter Report and the Reconciliation of Net Income to Adjusted Net Income in Table 1 of the Company’s 2020 Third Quarter Report. |
3 Total assets and loans under administration include both on- and off-balance sheet amounts. Total on-balance sheet loans include loans held for sale and are presented gross of allowance for credit losses. |
4 Total loan portfolio is presented gross of allowance for credit losses and excludes loans held for sale. |
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 2020 Third 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 the 2020 Third Quarter 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 2020 Third 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, the impacts of the novel coronavirus disease (COVID-19) pandemic and government responses to it, 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, climate change, 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 2020 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 2020, management made certain assumptions about the Canadian economy, employment conditions, interest rates, levels of housing activity, household debt service levels and the Company’s continued access to broker mortgage and deposit markets. These assumptions are discussed in greater detail in the Company’s 2019 Annual Report.
The global pandemic related to the outbreak of COVID-19 resulted in significant changes to these assumptions. Updated forward-looking macroeconomic assumptions have been incorporated into the models used in the Company’s expected credit loss estimation process. Please see note 5(C) to the unaudited interim consolidated financial statements included in the 2020 Third Quarter Report for more information on these assumptions. The full extent of the impact that COVID-19, including government and/or regulatory responses to the outbreak, will have on the Canadian economy and the Company’s business remains uncertain and difficult to predict. Please see the Impact of COVID-19, the Outlook and the Risk Management sections in the 2020 Third Quarter Report for more information.
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. 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 2020 Third 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 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.
View source version on businesswire.com: https://www.businesswire.com/news/home/20201111005256/en/
FOR FURTHER INFORMATION:
Jill MacRae
Director, Investor Relations
(416) 933-4991
[email protected]