Home Capital Announces Third Quarter Results along with Board Approval for a Substantial Issuer Bid of up to $300 Million in the Fourth Quarter and Intention to Apply to the TSX for a Normal Course Issuer Bid Effective 2019

TORONTO--()--Home Capital Group Inc. (“Home Capital” or “the Company”) (TSX:HCG) today reported financial results for the three and nine months ended September 30, 2018. This press release should be read in conjunction with the Company’s 2018 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 third quarter results demonstrate continued progress in all lines of business,” said Yousry Bissada, Chief Executive Officer. “Our commitment to servicing the customer in partnership with the broker community, and the development of our Oaken product line, have proven to be the right strategy for long-term success in our business. We are excited to take the next steps in our digital journey. Our plans for a substantial issuer bid and a normal course issue bid demonstrate our confidence in our business and outlook.”

Income Statement


Net interest margin was 2.03% compared with 1.91% in Q2 2018 and 1.85% in Q3 2017. Net interest margin in the quarter increased due to the reduced cost associated with the standby credit facility that was replaced at the end of Q2 2018. An improved asset mix also contributed to the increase.


Non-interest expenses increased by $176 thousand or 0.3% from Q2 2018 resulting from an increase in salaries and benefits offset largely by lower operating expenses. The result from Q2 included a reversal of $1.8 million of estimated severance expenses in Q2 2018 related to the Project EXPO expense savings initiative completed in 2017.

Non-interest expenses declined $4.3 million or 7.2% from Q3 2017 mainly due to a decrease in both salaries and benefits, and other operating expenses related to the liquidity event in Q2 2017.

Net income:

Net income for the third quarter was $32.6 million or 41 cents per share, an increase of 10.1% over Q2 net income of $29.6 million or 37 cents per share and an 8.7% increase over net income of $30.0 million or 37 cents per share reported in Q3 2017.

Balance Sheet

Asset growth:

Mortgage originations were $1.44 billion in Q3 2018, up 16.7% over Q2 originations of $1.23 billion and up 272.9% over originations of $385.1 million in Q3 2017.

  • Single-family residential mortgage originations were $1.02 billion in Q3 2018, an increase of $66.7 million or 7.0% from Q2 2018 and $792.0 million from Q3 2017.

Total loans at the end of the quarter were $16.04 billion, an increase of $594.8 million or 3.9% from Q2 2018 and an increase of $973.1 million or 6.5% from Q4 2017.

Loans under administration were $22.82 billion, up 1.4% from Q2 2018 and up 1.3% from the end of 2017.


Total deposits were $12.36 billion compared to $12.50 billion at the end of Q2 2018 and $12.17 billion at the end of Q4 2017.

  • Brokered GICs totaled $9.27 billion compared with $9.55 billion at the end of Q2 2018 and $9.35 billion at the end of Q4 2017. Oaken GICs totaled $2.37 billion compared with $2.23 billion at the end of Q2 2018 and $1.81 billion at the end of Q4 2017.

Credit Quality:

Total provision for credit losses was $4.0 million in Q3 2018 compared with $6.5 million in Q2 2018, and recovery of $4.3 million in Q3 2017. Provision expense as a percentage of gross uninsured loans was 0.13% compared to 0.22% in Q2 2018. Provisions in Q3 were driven mainly by activity in both the residential and commercial mortgage portfolios. Provisions for credit losses were calculated under IFRS 9 for 2018 and under IAS 39 for 2017. As provisions for credit losses for 2017 were not restated, comparability of the provision is reduced to some extent.

Net non-performing loans (represented by Stage 3 loans under IFRS 9) as a percentage of gross loans remained low at 0.34% at the end of Q3 2018, unchanged from Q2 2018 and up from 0.30% at the end of Q4 2017.

Leadership Appointments:

Dr. Hossein Rahnama, previously an advisor to the Board of Directors, has now joined the Board of Directors effective November 6, 2018. We had previously announced that Sue Hutchison joined the Board of Directors effective September 27, 2018. In preparation for the next steps in the advancement of the Company’s vision for company-wide digital capability, Benjy Katchen, Executive Vice President, Deposits and Consumer Lending, has been appointed to the new role of Chief Digital and Strategy Officer.

Substantial Issuer Bid and Normal Course 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 terms of the bid will be announced on or about Monday, November 12, 2018 and that the bid will be completed by the end of the fourth quarter. Upon completing the SIB, the Company intends to apply to the Toronto Stock Exchange (“TSX”) for a Normal Course Issuer Bid to be effective in its next fiscal year.


The Company expects that market conditions experienced in the third quarter will continue for the balance of 2018. The growth in originations suggests our lending market has begun to absorb the impact of the new mortgage rules and is adjusting to a higher interest rate environment. “We are confident that our focus on service excellence, underpinned by a robust internal risk culture, will continue to drive growth and profitability in our core business,” said Mr. Bissada. “We are excited to embark on the next phase of transforming our business, including executing our substantial issuer bid and investing in digital enablement.”




President and Chief Executive Officer Chair of the Board

The Company’s 2018 Third Quarter Report, including Management’s Discussion and Analysis, for the three and nine months ended September 30, 2018 is available at www.homecapital.com and on the Canadian Securities Administrators’ website at www.sedar.com.

Third Quarter 2018 Results Conference Call and Slide Presentation Webcast

The conference call will take place on Wednesday, November 7, 2018, at 8:00 a.m. ET. Participants are asked to call approximately 10 minutes in advance at toll-free 1-844-899-4831 throughout North America. Participants calling from outside of North America may dial 1-647-689-5401. 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, November 7, 2018 and midnight ET Wednesday, November 14, 2018 by calling 416-621-4642 or 1-800-585-8367 (enter passcode 6382499). The archived audio webcast will be available for 90 days on Home Capital’s website at www.homecapital.com.



(Unaudited)   For the three months ended
(000s, except Percentage and Per Share Amounts)   September 30   June 30   September 30   Sequential
      2018     2018     2017     Change
Net Interest Income $ 89,847 $ 84,129 $ 88,762


Net Interest Margin (TEB)2 2.03% 1.91% 1.85% 12 bps
Efficiency Ratio (TEB)2 52.9% 54.5% 62.7% (160) bps
Provision for Credit Losses $ 3,990 $ 6,487 $ (4,257) (38.5)%
Provision as a Percentage of Gross Loans (annualized) 0.10% 0.17% (0.11)% (7) bps
Net Income $ 32,600 $ 29,606 $ 29,983 10.1%
Diluted Earnings per Share $ 0.41 $ 0.37 $ 0.37 10.8%
Return on Shareholders’ Equity (annualized)     6.9%     6.4%     6.8%     50 bps
Total Mortgage Originations $ 1,435,793 $ 1,230,208 $ 385,065 16.7%
Single-Family Residential Mortgage Originations     1,015,998     949,339     223,964     7.0%
                        As at
September 30 June 30 December 31 YTD
      2018     2018     2017     Change
Total Assets $ 17,882,017 $ 17,935,799 $ 17,591,143 1.7%
Total Assets Under Administration3 24,657,402 25,001,732 25,040,182 (1.5)%
Total Loans4 16,042,702 15,447,928 15,069,636 6.5%
Total Loans Under Administration3,4 22,818,087 22,513,861 22,518,675 1.3%
Total Deposits 12,361,030 12,496,704 12,170,454 1.6%
Demand Deposits     419,664     411,056     539,364     (22.2)%
Capital Measures5
Common Equity Tier 1 Capital Ratio 23.27% 23.21% 23.17%
Leverage Ratio 9.20% 8.96% 8.70%
Credit Quality
Net Non-Performing Loans as a Percentage of Gross Loans 0.34% 0.34% 0.30%
Allowance as a Percentage of Gross Non-Performing Loans 71.0% 71.0% 79.5%
Share Information
Book Value per Common Share $ 23.82 $ 23.40 $ 22.60
Number of Common Shares Outstanding     80,246     80,246     80,246      

1 The amounts pertaining to 2018 have been prepared in accordance with IFRS 9 Financial Instruments (IFRS 9); prior period amounts have not been restated and have been prepared in accordance with IAS 39 Financial Instruments: Recognition and Measurement (IAS 39). Please see Note 2 in the unaudited interim consolidated financial statements included in the 2018 Third Quarter Report for further information.
2 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures included in the 2018 Third 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, for all periods presented.
5 These figures relate to the Company’s operating subsidiary, Home Trust Company.

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 2018 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 2018 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, 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 2018 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 2018, management’s expectations continue to assume:

  • The Canadian economy is expected to be relatively stable for the remainder of 2018. However, the impact of the renegotiated trade agreement with the United States and Mexico remains uncertain as does the impact from other global trade relations.
  • Stable employment conditions in its established regions. 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 demand for the Company’s lending products in its established regions.
  • The Canadian economy will continue to be influenced by the economic conditions in the United States and global markets; as such, the Company is prepared for the variability that may result.
  • The Bank of Canada is expected to continue to raise interest rates in 2019.
  • Current and expected levels of housing activity indicate a relatively stable real estate market overall and in particular for the Company’s key Greater Toronto Area (GTA) market. Please see Market Conditions under the 2018 Outlook in the Company’s 2018 Third Quarter Report for more discussion on the Company’s expectations for the housing market.
  • Debt service levels will remain manageable by Canadian households in 2018, however high levels of consumer debt make the economy more vulnerable to rising interest rates and any economic weaknesses resulting from trade disputes.
  • Access to the mortgage and deposit markets through broker networks will be maintained.

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 2018 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 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.


Home Capital Group Inc.
Jill MacRae, 416-933-4991
Director, Investor Relations


Home Capital Group Inc.
Jill MacRae, 416-933-4991
Director, Investor Relations