Home Capital Reports Third Quarter 2019 Results
TORONTO--(BUSINESS WIRE)--Nov 13, 2019--
Home Capital Group Inc. (“Home Capital” or “the Company”) (TSX: HCG) today reported financial results for the three and nine months ended September 30, 2019. This press release should be read in conjunction with the Company’s 2019 Third 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.
“I’m very pleased with what we accomplished in our third quarter,” stated Yousry Bissada, President and Chief Executive Officer. “The Home team delivered strong financial results, showcased our culture of innovation by completing the first Canadian cross-border Residential Mortgage-Backed Securities offering, and continued to make progress on our digital transformation journey.”
Net Income: 67 cents per share up 63.4% from 41 cents per share in Q3 2018
- Net income of $39.0 million or 67 cents per share, compared with $31.9 million or 53 cents per share for Q2 2019 and $32.6 million or 41 cents per share for Q3 2018
- Adjusted net income of $42.0 million or 72 cents per share, up 24.1% from 58 cents per share in Q2 2019 and up 75.6% from 41 cents per share or $32.6 million in Q3 2018 after adjusting for items of note related to implementing our IT Roadmap
- Net interest margin of 2.22% compared with 2.09% in Q2 2019 and 2.03% in Q3 2018
- Non-interest expenses of $59.9 million compared with $61.7 million in Q2 2019 and $55.6 million in Q3 2018, a decrease of 3.0% from Q2 2019 and an increase of 7.7% from Q3 2018
Asset Growth: Positive year-over-year growth in mortgage originations of 7.6% and total loan portfolio of 6.4%
- Mortgage originations of $1.55 billion in Q3 2019, compared with $1.28 billion in Q2 2019 and $1.44 billion in Q3 2018
- Single-family mortgage originations of $1.19 billion in Q3 2019, compared with $1.05 billion in Q2 2019 and $1.02 billion in Q3 2018
- Total loan portfolio at the end of the quarter of $16.99 billion, an increase of 2.0% from Q2 2019 and 6.4% over Q3 2018
- Loans under administration of $22.97 billion, up 0.3% from Q2 2019 and up 0.7% from Q3 2018
Funding: Deposits through our Oaken channel of $3.27 billion
- Total deposits of $13.52 billion compared with $13.51 billion at the end of Q2 2019 and $12.36 billion at the end of Q3 2018
- Total Oaken deposits of $3.27 billion, an increase of 4.9% from the end of Q2 2019 and 27.7% from the end of Q3 2018
- Oaken’s share of total deposits was 24.2% at the end of Q3 2019 compared with 23.1% at the end of Q2 2019 and 20.7% at the end of Q3 2018
Credit Quality: Annualized credit provisions of 0.09% of gross loans compared with 0.10% in Q3 2018
- Total provision for credit losses (PCL) of $3.7 million in Q3 2019 compared with $6.1 million in Q2 2019, and $4.0 million in Q3 2018
- Provision expense of 0.09% of gross loans compared with 0.15% in Q2 2019 and 0.10% in Q3 2018
- Net write-offs as a percentage of gross loans of 0.06% compared with 0.09% in Q2 2019 and 0.02% in Q3 2018
- Net non-performing loans (represented by Stage 3 loans under IFRS 9) as a percentage of gross loans at 0.49% at the end of Q3 2019 compared with 0.47% at the end of Q2 2019 and 0.34% at the end of Q3 2018
Normal Course Issuer Bid
Effective January 2, 2019, Home Capital commenced a normal course issuer bid (“NCIB”) to permit the repurchase of common shares of Home Capital (“Common Shares”) through the facilities of the Toronto Stock Exchange, designated exchanges and alternative trading systems. As of September 30, 2019, Home Capital had completed all of the repurchases authorized under the NCIB, 4,753,517 common shares, at a cost of $94.3 million.
Home Capital believes that the healthy and balanced market conditions experienced for much of 2019 will continue for the balance of the year. “The results of this quarter reflect the combined efforts and dedication of all parts of the Company in executing our strategy,” said Mr. Bissada. “We will continue on this path to drive our efforts to create value for the long term.”
|YOUSRY BISSADA||PAUL DERKSEN|
|President and Chief Executive Officer||Chair of the Board|
November 13, 2019
The Company’s 2019 Third Quarter Report, including Management’s Discussion and Analysis, for the three months ended September 30, 2019 is available at www.homecapital.com and on the Canadian Securities Administrators’ website at www.sedar.com.
Third Quarter 2019 Results Conference Call and Slide Presentation Webcast
The conference call will take place on Wednesday, November 13, 2019, 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. The conference ID number is 4190467. 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 13, 2019 and midnight ET Wednesday, November 20, 2019 by calling 1-800-585-8367 (enter passcode 4190467). The archived audio webcast will be available for 90 days on Home Capital’s website at www.homecapital.com.
For the three months ended
For the nine months ended
(000s, except Percentage and Per Share Amounts)
INCOME STATEMENT HIGHLIGHTS
Net Interest Income
Net Interest Margin (TEB 1 )
Efficiency Ratio (TEB 1 )
Adjusted Efficiency Ratio (TEB 1 ) 2
Provision as a Percentage of Gross Loans (annualized)
Net Write-Offs as a Percentage of Gross Loans (annualized)
Adjusted Net Income 2
Diluted Earnings per Share
Adjusted Diluted Earnings per Share 2
Return on Shareholders' Equity (annualized)
Adjusted Return on Shareholders' Equity (annualized) 2
Total Mortgage Originations
Single-Family Residential Mortgage Originations
BALANCE SHEET HIGHLIGHTS
Total Assets Under Administration 3
Total Loan Portfolio 4
Total Loans Under Administration 3
Common Equity Tier 1 Capital Ratio
Net Non-Performing Loans as a Percentage of Gross Loans
NPL Allowance as a Percentage of Gross NPL 6
Book Value per Common Share
Number of Common Shares Outstanding
1 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Company’s 2019 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 2019 Third Quarter Report and the Reconciliation of Net Income to Adjusted Net Income in Table 1 of the Company’s 2019 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 exclude 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 2019 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 2019 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 2019 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 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 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 Third 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 in the event of an increase in interest rates and any economic weakness.
- Access to the mortgage and deposit markets through broker networks will be maintained.
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 Third Quarter Report.
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.
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CONTACT: FOR FURTHER INFORMATION:
Director, Investor Relations
KEYWORD: NORTH AMERICA CANADA
INDUSTRY KEYWORD: RESIDENTIAL BUILDING & REAL ESTATE CONSTRUCTION & PROPERTY REIT
SOURCE: Home Capital Group Inc.
Copyright Business Wire 2019.
PUB: 11/13/2019 06:00 AM/DISC: 11/13/2019 06:00 AM