Home Capital Reports Third Quarter 2021 Results and Capital Plan

Home Capital Group Inc. (“Home Capital” or “the Company”) (TSX: HCG) today reported financial results for the three and nine months ended September 30, 2021. This press release should be read in conjunction with the Company’s 2021 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.

“Our team delivered another quarter of consistent financial performance. I am pleased that we are in position to begin returning capital to shareholders with a $300 million substantial issuer bid,” stated Yousry Bissada, President and Chief Executive Officer. “We continue to deliver value to shareholders by executing on our objectives of service excellence, origination growth, funding diversification and investing for the future. In keeping with our objective of diversifying our funding sources, we have recently completed our third RMBS transaction and participated in a bank-sponsored securitization conduit, adding an additional $675 million of liquidity to our funding mix.”

Net Income: $1.08 per share in Q3 2021 compared with $1.12 in Q3 2020

• Net income of $54.8 million or $1.08 per share in Q3 2021, a decrease of 23.9% from $1.42 per share in Q2 2021 and 3.6% from $1.12 per share in Q3 2020.
• Adjusted net income of $56.0 million or $1.10 per share in Q3 2021, a decrease of 23.6% from $1.44 per share in Q2 2021 and 6.8% from $1.18 per share in Q3 2020. Results are adjusted for items of note related to implementing our Ignite Program.
• Net interest margin of 2.58% in Q3 2021, compared with 2.61% in Q2 2021 and 2.51% in Q3 2020.
• Non-interest expenses of $64.6 million, compared with $58.5 million in Q2 2021 and $64.5 million in Q3 2020.

Asset Growth: Mortgage originations increased by 23% over Q3 2020

• Mortgage originations of $2.41 billion in Q3 2021, compared with $2.13 billion in Q2 2021 and $1.96 billion in Q3 2020.
• Single-family mortgage originations of $2.01 billion in Q3 2021, compared with $1.84 billion in Q2 2021 and $1.50 billion in Q3 2020.
• Total loan portfolio of $17.55 billion at the end of Q3 2021, an increase of 2.3% from the end of Q2 2021 and 0.6% from the end of Q3 2020.
• Loans under administration of $23.35 billion at the end of Q3 2021, up 2.3% from the end of Q2 2021 and 1.2% from the end of Q3 2020.

Funding: Deposits through our Oaken channel of $4.25 billion make up 31.0% of total deposits

• Total deposits of $13.71 billion at the end of Q3 2021, compared with $13.47 billion at the end of Q2 2021 and $13.96 billion at the end of Q3 2020.
• Total Oaken deposits of $4.25 billion at the end of Q3 2021, an increase of 2.1% from the end of Q2 2021 and 9.9% from the end of Q3 2020.
• Oaken’s share of total deposits was 31.0% at the end of Q3 2021, compared with 30.9% at the end of Q2 2021 and 27.7% at the end of Q3 2020.

Credit Quality: Reversal of credit provisions of 0.09% of gross loans compared with 0.44% in Q2 2021

• Reversal of provision for credit losses (“PCL”) of $3.8 million in Q3 2021 compared with $18.8 million in Q2 2021 and $7.0 million in Q3 2020.
• Allowance for credit losses of 0.20% of gross loans, compared with 0.23% at the end of Q2 2021 and 0.45% at the end of Q3 2020.
• Net write offs as a percentage of gross loans were 0.01% in Q3 2021, compared to net recoveries of less than one basis point in Q2 2021 and net write-offs as a percentage of gross loans of 0.55% in Q3 2020.
• Net non-performing loans (represented by Stage 3 loans under IFRS 9) were 0.15% of gross loans at the end of Q3 2021, compared with 0.24% at the end of Q2 2021 and 0.47% at the end of Q3 2020.

Substantial Issuer Bid

The Board has authorized the initiation of a substantial issuer bid (SIB) pursuant to which the Company will offer to purchase for cancellation up to $300 million of its common shares. The Company expects that the bid will be completed by the end of the fourth quarter.

Outlook

On November 4, 2021, OSFI updated its expectations on capital distribution by federally regulated financial institutions and the Company may now increase dividends from its regulated entities. The Board and management have finalized a capital plan with a view to reaching the stated target range of 14% to 15% CET1 ratio by the end of 2022. “Today’s announcement of our $300 million substantial issuer bid marks a significant first step towards achieving our target CET1 ratio,” said Mr. Bissada.

Third Quarter 2021 Results Conference Call and Webcast

The conference call will take place by webcast on Friday, November 12, 2021, at 8:00 a.m. EST. Participants may register in advance for the webcast by visiting this link. 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.

¹ See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Company’s 2021 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 2021 Third Quarter Report and the Reconciliation of Net Income to Adjusted Net Income in Table 1 of the Company’s 2021 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 2021 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 2021 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 of the 2021 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 2021 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 2021, management makes 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.

The global pandemic related to the outbreak of COVID-19 significantly impacts 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 Company’s 2021 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 Management’s Discussion and Analysis included in the 2021 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 2021 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 and its wholly owned subsidiary, Home Bank, offer deposits via brokers and financial planners, and through a direct-to-consumer brand, Oaken Financial. Licensed to conduct business across Canada, we have offices in Ontario, Alberta, British Columbia, Nova Scotia, and Quebec.

View source version on businesswire.com: https://www.businesswire.com/news/home/20211112005404/en/

Jill MacRae
VP, Investor Relations and ESG
(416) 933-4991
[email protected]