Home Capital Reports Continued Strong Earnings:

• Diluted Earnings per Share up 3.0% Year over Year to $1.03
• Surpassed $25 Billion in Assets under Administration

TORONTO, May 6, 2015 /CNW/ - Home Capital today reported another quarter of strong earnings.

This press release should be read in conjunction with the Company's First Quarter Report, including Financial Statements and Management's Discussion and Analysis, which are available on Home Capital's website at www.homecapital.com and the Canadian Securities Administrators' website at www.sedar.com.   

FIRST QUARTER 2015 HIGHLIGHTS

Key results for the first quarter of 2015 included:

• Net income of $72.3 million increased 0.5% from adjusted net income of $71.9 million in Q4 2014 (as defined in the Non-GAAP measures section of the unaudited interim consolidated financial report) and 3.7% over Q1 2014 net income of $69.7 million.
• Diluted earnings per share were $1.03 for the quarter, representing an increase of 1.0% over the adjusted diluted earnings per share of $1.02 last quarter and an increase of 3.0% over the $1.00 earned in the comparable period of 2014.
• Return on average shareholders' equity of 19.7% remained solid for the quarter.
• Total net interest income increased to $115.5 million, up $5.1 million or 4.7% over the $110.4 million earned in the comparable period of 2014 and down $0.9 million or 0.8% over last quarter, reflecting increases in non-securitized net interest income combined with expected decreases in securitized net interest income in line with the decreasing on-balance sheet securitized portfolio. Net interest margin (TEB) of 2.28% was up compared to 2.19% in Q1 2014 and 2.27% in Q4 2014 reflecting lower average deposit rates resulting from declining interest rates.
• Net interest income on non-securitized assets was $110.8 million in Q1 2015, increasing from $102.8 million in the comparable quarter of 2014 and $109.6 million last quarter on higher average balances. Net interest margin (TEB) on this portfolio was 2.81% for Q1 2015, down from 2.91% in Q1 2014 and up from 2.79% in Q4 2014. The decrease in net interest margin over the comparable period of 2014 reflects higher average credit quality on new originations over the past year end. The improvement from last quarter was driven by the decrease in average deposit rates.
• Total income earned from securitization, which includes net interest income on the on-balance sheet portfolio and securitization income from off-balance sheet sales, was $10.1 million for Q1 2015 compared to $16.3 million in Q1 2014 and $11.8 million in Q4 2014. Securitization income includes gains of $4.4 million in Q1 2015 on $429.7 million in notional sales compared to gains of $7.9 million on $697.7 million of notional sales in Q1 2014 and gains of $4.4 million on $612.8 million of notional sales in Q4 2014. Net interest income on the on-balance sheet securitized portfolio declined to $4.7 million for the quarter from $7.5 million in Q1 2014 and $6.8 million in Q4 2014. The decline reflects the continued net run-off and the maturity of higher yielding MBS and CMB pools and the use of lower yielding assets as replacement assets in the CMB program.
• The credit quality of the loan portfolio remains very strong with low non-performing loans and credit losses. Provisions for credit losses were $2.4 million for the quarter, a decrease from the $3.2 million recorded both last quarter and in the comparable period of 2014. The provision as a percentage of gross uninsured loans was 0.07% in the quarter on an annualized basis, down from 0.09% last quarter and 0.11% in Q1 2014. Net non-performing loans as a percentage of gross loans (NPL ratio) ended the quarter at 0.25% compared to 0.30% at the end of last quarter, and 0.33% one year ago.
• Home Trust's capital levels remained strong, as indicated by the Common Equity Tier 1 ratio of 17.95% and the Tier 1 and Total capital ratios of 17.94% and 20.50%, respectively, at March 31, 2015. Effective January 1, 2015, the assets to regulatory capital multiple was replaced by the OSFI-prescribed Basel III leverage ratio. The leverage ratio at March 31, 2015 was 6.75.
• Total assets under administration surpassed $25 billion in the quarter. Total loans under administration, including off-balance sheet mortgages, increased by $178.9 million in Q1 2015 to $22.74 billion from $22.56 billion in Q4 2014 and increased 11.1% from $20.48 billion one year ago.
• Total Q1 2015 mortgage originations were $1.38 billion for Q1 2015, compared to $2.29 billion for Q4 2014 and $1.68 billion for Q1 2014. The first quarter was characterized by a traditionally slow real estate market, exacerbated by very harsh winter conditions. The Company has remained cautious in light of continued macroeconomic conditions and continues to perform ongoing reviews of its business partners, ensuring that quality is within the Company's risk appetite. During Q1 2015, the Company launched the first phase of a new originations technology platform, which will allow the Company to increase its capacity and operational efficiency to support future growth of its loans portfolio.
• Traditional (uninsured single-family) residential mortgage originations were a seasonally lower $0.96 billion in Q1 2015, compared to $1.48 billion in Q4 2014 and $1.07 billion in the comparable period of 2014. The Company remains focused on growing its traditional residential mortgage lending portfolio. Traditional originations remain healthy, as the Company continues to originate new mortgages with sustainable credit profiles.
• Accelerator (insured single-family) residential mortgage originations were $180.0 million for the quarter, down from $353.0 million in Q4 2014 and $289.5 million in Q1 2014. The Company views the market for insured prime mortgages as continuing to be highly competitive especially in the traditional home buying seasons, and therefore applies a conservative approach to growing the Accelerator business.
• Multi-unit residential mortgage originations were $103.0 million in Q1 2015, compared to $299.5 million last quarter and $213.6 million in the comparable period of 2014. Multi-unit residential mortgage originations are mostly insured and subsequently securitized through programs that qualify for off-balance sheet accounting resulting in a portion of the securitization gains discussed above.
• Commercial mortgage and other loan advances, which include store and apartments, were $139.6 million in Q1 2015 compared to $153.4 million last quarter and $99.6 million in the comparable period of 2014.
• Consumer retail advances, including durable household goods, such as water heaters and larger ticket home improvement items, were $35.5 million in Q1 2015, down from $45.7 million at the end of last quarter and up from $27.2 million one year ago. Q1 2015 advances have decreased, as periods prior to Q1 2015 include loans originated as part of the water heater portfolio sold in Q4 2014. The Company continues to focus on building this business following the sale of the portfolio.
• Total deposits reached $14.74 billion, up 5.8% from the end of 2014 and 12.7% from one year ago. Total deposits raised through the Company's deposit diversification initiatives, Oaken Financial, high interest savings accounts and institutional deposits now total $2.83 billion, an increase of $409.3 million or 16.9% over Q4 2014 and $1.72 billion or 255.6% over one year ago.

Subsequent to the end of the quarter, the Board of Directors approved a quarterly dividend of $0.22 per common share, payable on June 1, 2015 to shareholders of record at the close of business on May 15, 2015.

The continued depressed oil prices increased the uncertainty with respect to Canada's economic performance during the first quarter of 2015.  Recently the economic outlook for Canada has brightened somewhat with a stronger view for the economy based upon the recent rally in oil prices and the Bank of Canada providing an opinion that the impact of the oil shock may have been felt early and things may improve from here on out. The Company's exposure to the energy producing regions of Canada (Alberta, Saskatchewan, and Newfoundland and Labrador) continues to remain low at 4.2% of its uninsured loans with an average loan to value (LTV) of 55.7%. Given its limited exposure, current performance and ongoing lending practices, the Company does not expect a significant increase in its credit losses from these regions. The Company expects that its portfolios in Ontario and the rest of Canada, which represent 95.8% of the uninsured portfolios, will continue to experience relatively low credit losses, even with the near-term moderately negative economic conditions, given the current low interest rate environment and the expectation that housing prices will remain relatively stable or experience only modest declines.  

The Company is focusing on its medium-term objectives introduced in the 2014 Annual Report in order to continue to provide shareholder value by generating sustainable earnings growth, maintaining a strong capital base commensurate with our risk profile and generating solid returns for our shareholders.  These objectives will be achieved through continued focus and prudent lending in the Company's traditional mortgage portfolio.  Despite a challenging and uncertain economic environment to start the year, the Company has achieved solid performance, while building a high quality loan portfolio.  The Company anticipates continued and sustainable demand for its lending products as the year progresses, and it expects that it will continue to increase its market share through its broker network and business development programs.

The Company continues to deliver solid results in terms of growth, returns and dividends. Despite the challenges facing the Canadian economic climate, the Company's performance continues to reflect the strength and the successful execution of its core strategy. 

Additional information concerning the Company's targets and related expectations for 2015, including the risks and assumptions underlying these expectations, may be found in the Management's Discussion and Analysis (MD&A) of the quarterly report.

First Quarter Results Conference Call
The conference call will take place on Thursday, May 7, 2015 at 10:30 a.m. Participants are asked to call 5 to 15 minutes in advance, 647-427-7450 in Toronto or toll-free 1-888-231-8191 throughout North America. The call will also be accessible in listen-only mode via the Internet at www.homecapital.com.

Conference Call Archive
A telephone replay of the call will be available between 1:30 p.m. Thursday, May 7, 2015 and midnight Thursday, May 14, 2015 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 21685791). The archived audio web cast will be available for 90 days on CNW Group's website at www.newswire.ca and Home Capital's website at www.homecapital.com.

Supplemental Financial Information
Home Capital has provided a Supplemental Financial Information package available at the Company's website at www.homecapital.com to improve readers' understanding of the financial position and performance of the Company. This information should be used in conjunction with the Company's first quarter unaudited interim consolidated financial report, as well as the Company's 2014 Annual Report.

Annual and Special Meeting Notice
The Annual and Special Meeting of Shareholders of Home Capital Group Inc. will be held at One King West, Grand Banking Hall, Toronto, Ontario, on Wednesday, May 13, 2015 at 11:00 a.m. local time. Shareholders and guests are invited to join Directors and Management for lunch and refreshments following the Annual and Special Meeting. All shareholders are encouraged to attend.

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 2014 Annual report, as well as its other publicly filed information, which are 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, funding and liquidity risk, structural interest rate risk, operational risk, investment risk, strategic and business risk, reputational risk and regulatory and legislative 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 quarterly report. Forward-looking statements are typically identified by words such as "will,"  "believe," "expect," "anticipate," "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 uncertainties, 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 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 2015 and its effect on Home Capital's business are material factors the Company considers when setting its objectives, targets 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. In setting and reviewing its targets, objectives and outlook for the remainder of 2015, management's expectations continue to assume:

• While the Canadian economy is expected to produce modest growth in 2015 there is some uncertainty about the effect and timing that oil prices will have on the broader Canadian economy. While the Company has limited exposure in energy producing regions, it has plans for geographic expansion in Canada. There is some uncertainty as to the timing and extent of expansion given the economic conditions.
• Generally the Company expects stable employment conditions in most regions, except potentially for the energy producing regions, and also expects inflation will generally be within the Bank of Canada's target of 1% to 3%, leading to stable credit losses and consistent demand for the Company's lending products in its established regions. Credit losses and delinquencies in the energy producing regions may see an increase, but given the Company's limited exposure and lending practices, this is not expected to be significant to the Company's credit losses.
• The Canadian economy will continue to be influenced by the economic conditions in the United States and global markets and the continued volatility in oil prices; as such, the Company is prepared for the variability to plan that may result.
• The Company is assuming that overnight interest rates will remain at the current very low rate for 2015. This is expected to continue to support relatively low mortgage interest rates for the foreseeable future.
• In the Company's established regions the expectation is the housing market will remain stable with balanced supply supported by continued low interest rates, relatively stable employment, and immigration. There will be stable housing starts and resale activity with relatively stable prices, with regional disparities, throughout most of Canada. This supports continued stable credit losses and stable demand for the Company's lending products in its established regions.
• Consumer debt levels will remain serviceable by Canadian households.
• The Company will have access to the mortgage and deposit markets through broker networks.

Non-GAAP Measures

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 First Quarter 2015 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 first mortgage products, consumer lending and credit card services. In addition, Home Trust offers deposits via brokers and financial planners, and through its direct to consumer deposit brand, Oaken Financial. Licensed to conduct business across Canada, Home Trust has branch offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.

SOURCE Home Capital Group Inc.

Related Links

http://www.homecapital.com