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Full year growth of 45% in diluted earnings per share

TORONTO–(BUSINESS WIRE)–Home Capital Group Inc. (“Home Capital” or “the Company”) (TSX: HCG) today reported financial results for the three and twelve months ended December 31, 2020. This press release should be read in conjunction with the Company’s 2020 Annual and Fourth Quarter Consolidated Financial 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.

Home Capital demonstrated the strength and resilience of its business model in the face of the challenging circumstances created by COVID-19 throughout most of 2020,” said Yousry Bissada, Chief Executive Officer. “We successfully delivered solid operating results, as shown by the growth in earnings per share by 45%, while offering support to our customers, employees, and business partners and achieving key milestones in our Ignite Program, Home’s technology transformation initiative.

Net Income: $3.33 per share in 2020 up by 45.4% from $2.29 in 2019

  • Net income of $175.7 million or $3.33 per share in 2020, compared with $136.0 million or $2.29 per share in 2019. Fourth quarter net income of $55.3 million or $1.06 per share compared with $58.5 million or $1.12 per share in Q3 2020 and $37.2 million or $0.65 per share in Q4 2019.
  • Adjusted net income of $186.6 million or $3.54 per share in 2020, up 42.2% from $2.49 per share in 2019. Fourth quarter adjusted net income of $58.5 million or $1.11 per share compared with $1.18 per share in Q3 2020 and up 54.2% from $0.72 per share in Q4 2019. Results are adjusted for items of note related to implementing our Ignite Program.
  • Net interest margin of 2.46% in 2020, compared with 2.16% in 2019. Net interest margin of 2.55% in Q4 2020 compared with 2.51% in Q3 2020 and 2.31% in Q4 2019.
  • Non-interest expenses of $262.6 million in 2020, compared with $250.5 million in 2019. Fourth quarter non-interest expenses of $71.8 million, compared with $64.5 million in Q3 2020 and $68.9 million in Q4 2019.

Asset Growth: Positive year-over-year growth in 2020 mortgage originations of 22.8% and total loan portfolio of 1.8%

  • Mortgage originations of $6.95 billion in 2020, compared with $5.66 billion in 2019. Mortgage originations of $1.88 billion in Q4 2020, compared with $1.96 billion in Q3 2020 and $1.62 billion in Q4 2019.
  • Single-family mortgage originations of $5.18 billion in 2020, compared with $4.38 billion in 2019. Single-family mortgage originations of $1.50 billion in Q4 2020, consistent with $1.50 billion in Q3 2020 and compared with $1.21 billion in Q4 2019.
  • Total loan portfolio of $17.47 billion at the end of 2020, an increase of 1.8% from the end of 2019 and 0.2% from the end of Q3 2020.
  • Loans under administration of $22.95 billion at the end of 2020, down less than 0.1% from the end of 2019 and down 0.5% from the end of Q3 2020.

Funding: Deposits through our Oaken channel of $3.97 billion make up 28.5% of total deposits

  • Total deposits of $13.93 billion at the end of 2020, compared with $13.72 billion at the end of 2019 and $13.96 billion at the end of Q3 2020.
  • Total Oaken deposits of $3.97 billion at the end of 2020, an increase of 17.7% from the end of 2019 and 2.6% from the end of Q3 2020.
  • Oaken’s share of total deposits was 28.5% at the end of 2020, compared with 24.6% at the end of 2019 and 27.7% at the end of Q3 2020.

Credit Quality: Credit provisions of 0.20% of gross loans in 2020 compared with 0.12% in 2019

  • Total provision for credit losses (“PCL”) of $34.1 million in 2020, compared with $19.8 million in 2019. A release of $7.7 million in Q4 2020, compared with a release of $7.0 million in Q3 2020 and a provision for credit losses of $3.9 million in Q4 2019.
  • Allowance for credit losses of 0.41% of gross loans, compared with 0.45% at the end of Q3 2020 and 0.36% at the end of Q4 2019.
  • Net write-offs as a percentage of gross loans of 0.15% in 2020, compared to 0.05% in 2019. Net recoveries as a percentage of gross loans of 0.01% in Q4 2020, compared to net write-offs as a percentage of gross loans of 0.55% in Q3 2020 and 0.04% in Q4 2019.
  • Net non-performing loans (represented by Stage 3 loans under IFRS 9) as a percentage of gross loans at 0.57% at the end of 2020, compared with 0.44% at the end of 2019 and 0.47% at the end of Q3 2020.

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 December 31, 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 December 31, 2020 will be reflected in the measurement of ECL in future quarters as appropriate. This may add significant volatility to ECL.

“Home’s sustainable risk culture was a key source of our resilience in 2020,” said Mr. Bissada. “Looking ahead to 2021, we will continue to execute our strategic objectives, develop our Oaken franchise, and build our capability to help more Canadians achieve the stability and security of home ownership.”

Fourth Quarter 2020 Results Conference Call and Slide Presentation Webcast

The conference call will take place by webcast on Thursday, February 18, 2021, at 8:00 a.m. EST. Participants may register in advance for the webcast by visiting:http://www.directeventreg.com/registration/event/3085869. 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 year ended

(000s, except Percentage and Per Share Amounts)

December 31

September 30

December 31

December 31

December 31

 

 

2020

 

2020

 

2019

 

2020

 

2019

INCOME STATEMENT HIGHLIGHTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Interest Income

$

123,483

$

121,085

$

109,887

$

474,835

$

402,247

Net Interest Margin (TEB1)

 

2.55%

 

2.51%

 

2.31%

 

2.46%

 

2.16%

Efficiency Ratio (TEB1)

 

51.2%

 

47.2%

 

55.6%

 

49.0%

 

54.9%

Adjusted Efficiency Ratio (TEB1)2

 

48.2%

 

44.2%

 

51.3%

 

46.2%

 

51.3%

 

 

 

 

 

 

 

 

 

 

 

Provision as a Percentage of Gross Loans (annualized)

 

(0.18)%

 

(0.16)%

 

0.09%

 

0.20%

 

0.12%

Net (Recoveries) Write-Offs as a Percentage of Gross Loans (annualized)

 

(0.01)%

 

0.55%

 

0.04%

 

0.15%

 

0.05%

 

 

 

 

 

 

 

 

 

 

 

Net Income

$

55,343

$

58,499

$

37,236

$

175,690

$

135,986

Adjusted Net Income2

 

58,476

 

61,574

 

41,153

 

186,574

 

147,979

Diluted Earnings per Share

$

1.06

$

1.12

$

0.65

$

3.33

$

2.29

Adjusted Diluted Earnings per Share2

 

1.11

 

1.18

 

0.72

 

3.54

 

2.49

Return on Shareholders’ Equity (annualized)

 

13.4%

 

14.7%

 

9.0%

 

10.5%

 

8.2%

Adjusted Return on Shareholders’ Equity (annualized)2

 

14.2%

 

15.5%

 

9.9%

 

11.1%

 

8.9%

ORIGINATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Mortgage Originations

$

1,882,094

$

1,956,122

$

1,619,890

$

6,950,601

$

5,657,975

Single-Family Residential Mortgage Originations

 

1,495,006

 

1,502,757

 

1,206,791

 

5,175,364

 

4,377,349

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

As at

 

 

 

 

 

December 31

September 30

December 31

 

 

 

 

 

 

2020

 

2020

 

2019

 

 

 

 

BALANCE SHEET HIGHLIGHTS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Assets

$

19,356,227

$

19,235,828

$

19,157,597

 

 

 

 

Total Assets Under Administration3

 

24,834,794

 

24,805,110

 

24,792,643

 

 

 

 

Total Loan Portfolio4

 

17,467,453

 

17,436,899

 

17,153,810

 

 

 

 

Total Loans Under Administration3

 

22,951,192

 

23,063,012

 

22,955,512

 

 

 

 

Deposits

 

13,932,812

 

13,959,124

 

13,716,306

 

 

 

 

FINANCIAL STRENGTH

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Capital Measures5

 

 

 

 

 

 

 

 

 

 

Common Equity Tier 1 Capital Ratio

 

19.82%

 

19.35%

 

17.64%

 

 

 

 

Leverage Ratio

 

7.79%

 

7.59%

 

7.07%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Credit Quality

 

 

 

 

 

 

 

 

 

 

Net Non-Performing Loans as a Percentage of Gross Loans

 

0.57%

 

0.47%

 

0.44%

 

 

 

 

NPL Allowance as a Percentage of Gross NPL6

 

15.0%

 

21.2%

 

25.2%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share Information

 

 

 

 

 

 

 

 

 

 

Book Value per Common Share

$

32.42

$

31.28

$

29.33

 

 

 

 

Number of Common Shares Outstanding

 

51,841

 

51,812

 

57,346

 

 

 

 

1

See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Company’s 2020 Annual and Fourth Quarter Consolidated Financial 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 Annual and Fourth Quarter Consolidated Financial Report and the Reconciliation of Net Income to Adjusted Net Income in Tables 2 and 24 of the Company’s 2020 Annual and Fourth Quarter Consolidated Financial 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 Annual and Fourth Quarter Consolidated Financial 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 Annual and Fourth Quarter Consolidated Financial 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 Annual 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. These assumptions are discussed in greater detail in the 2020 Annual and Fourth Quarter Consolidated Financial Report.

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 consolidated financial statements included in the Company’s 2020 Annual and Fourth Quarter Consolidated Financial 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 Annual and Fourth Quarter Consolidated Financial 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 Annual and Fourth Quarter Consolidated Financial 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.

Contacts

Jill MacRae

Director, Investor Relations

(416) 933-4991

[email protected]

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