Home Capital Reports Q1 2019 Results

TORONTO--()--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%

  • Mortgage originations of $1.22 billion in Q1 2019, compared with $1.61 billion in Q4 2018 and $1.16 billion in Q1 2018
  • Single-family mortgage originations of $933.2 million in Q1 2019, compared with $1,160.1 million in Q4 2018 and $869.7 million in Q1 2018
  • Total loans at the end of the quarter of $16.68 billion, an increase of 1.7% from Q4 2018 and 9.6% from Q1 2018
  • Loans under administration of $23.11 billion up 0.8% from Q4 2018 and up 2.5% from Q1 2018

Funding: Oaken share of total deposits reaches 21.8%

  • Total deposits of $13.57 billion compared with $12.98 billion at the end of Q4 2018 and $12.08 billion at the end of Q1 2018
  • Total Oaken deposits of $2.95 billion, an increase of 10.2% year to date and 34.3% from the end of Q1 2018
  • Oaken’s share of total deposits was 21.8% at the end of Q1 2019 compared with 20.7% at the end of Q4 2018 and 18.2% at the end of Q1 2018

Net income: Net income of 45 cents per share up 4.7% from 43 cents per share in Q1 2018

  • Net income of $27.8 million or 45 cents per share, compared with $35.8 million or 46 cents per share for Q4 2018 and $34.6 million or 43 cents per share for Q1 2018
  • Adjusted net income of $30.2 million or 49 cents per share, up 14.0% over Q1 2018 after adjustment for incremental amortization of legacy information systems in connection with investment in IT Roadmap
  • Net interest margin of 2.01% compared with 1.99% in Q4 2018 and 2.02% in Q1 2018
  • Non-interest expenses of $60.0 million compared with $55.7 million in Q4 2018 and $51.4 million in Q1 2018, an increase of 7.8% from Q4 2018 and 16.8% from Q1 2018
  • Expense growth attributed to number of active employees returning to more normalized staffing levels compared to one year ago, in addition to $3.2 million of incremental amortization of legacy information systems adjusted as an item of note. There were no items of note in Q4 2018 or Q1 2018.

Credit Quality: Net write-offs of 0.02% of gross loans compared with 0.03% in Q1 2018

  • Total provision for credit losses (PCL) of $6.1 million in Q1 2019 compared with $3.9 million in Q4 2018, and $6.0 million in Q1 2018
  • Provision expense of 0.15% of gross loans on an annualized basis compared with 0.10% in Q4 2018 and 0.16% in Q1 2018, largely due to an increase in non-performing other consumer retail loans, offset by a lower allowance estimate on the commercial loan portfolio.
  • Net write-offs as a percentage of gross loans of 0.02% compared with 0.13% in Q4 2018 and 0.03% in Q1 2018
  • Net non-performing loans (represented by Stage 3 loans under IFRS 9) as a percentage of gross loans remained low at 0.49% at the end of Q1 2019 compared to 0.47% at the end of Q4 2018 and up from 0.29% at the end of 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.


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.”


President and Chief Executive Officer

May 8, 2019

Chair of the Board

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


                      For the three months ended
    March 31     December 31 March 31 Year-over-Year
        2019       2018       2018     Change
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
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)
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%
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:

  • The Canadian economy is expected to be relatively stable in 2019. However, it will continue to be influenced by economic conditions in the United States and global markets, including the impact from the renegotiated trade agreement with the United States and Mexico and from other global trade relations; the Company is prepared for potential volatility.
  • Stable employment conditions in the Company’s 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 Bank of Canada overnight interest rate will remain stable 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 2019 Outlook in the Company’s 2019 First Quarter Report for more discussion on the Company’s expectations for the housing market.
  • Debt service levels of Canadian households will remain manageable in 2019; however, high levels of consumer debt make the economy more vulnerable to higher interest rates and any economic weakness.
  • 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 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.


Jill MacRae
Director, Investor Relations
(416) 933-4991


Jill MacRae
Director, Investor Relations
(416) 933-4991