Home Capital Reports Another Record Quarter and Dividend Increase
- Diluted Earnings per Share of $1.65 up 18.7% Year over Year;
- Dividend Increase of 18.2%, or 4 Cents per Share to $0.26 Quarterly;
- Return on Equity Continues Strong at 25.6% for the Quarter and 25.7% Year to Date
TORONTO, Nov. 7, 2012 /CNW/ - Home Capital Group (TSX: HCG) today reported another quarter of strong results for the three months ended September 30, 2012.
|(Unaudited)||For the three months ended||For the nine months ended|
|(000s, except Per Share and Percentage Amounts)||September 30||June 30||September 30||September 30||September 30|
|Adjusted Net Income1||57,254||53,230||48,417||163,018||142,172|
|Earnings per Share - Basic/Diluted||$||1.65/1.65||$||1.54/1.54||$||1.40/1.39||$||4.70/4.68||$||4.03/4.02|
|Adjusted Earnings per Share - Basic/Diluted1||1.65/1.65||1.54/1.54||1.40/1.39||4.70/4.68||4.10/4.09|
|Return on Shareholders' Equity||25.6%||25.1%||27.0%||25.7%||27.4%|
|Return on Average Assets||1.2%||1.2%||1.2%||1.2%||1.1%|
|Net Interest Margin (TEB)2||2.14%||2.09%||2.14%||2.08%||2.06%|
|Net Interest Margin Non-Securitized Assets (TEB)2||3.17%||3.05%||3.11%||3.09%||3.04%|
|Net Interest Margin Securitized Assets||0.89%||1.05%||1.35%||0.97%||1.28%|
|Provision as a Percentage of Gross Loans (annualized)||0.10%||0.05%||0.06%||0.09%||0.04%|
|Efficiency Ratio (TEB)2||28.1%||27.8%||27.4%||27.9%||28.2%|
|As at||September 30||June 30||December 31||September 30|
|BALANCE SHEET HIGHLIGHTS|
|Securitized Loans On-Balance Sheet||7,238,946||7,582,154||8,243,350||8,502,466|
|Loans Under Administration4||17,460,528||17,039,727||16,089,648||15,782,646|
|Tier 1 Capital Ratio||16.97%||17.09%||17.29%||17.67%|
|Total Capital Ratio||20.78%||21.09%||20.46%||21.05%|
|Non-Performing Loans as a Percentage of Gross Loans||0.28%||0.31%||0.25%||0.32%|
|Allowance as a Percentage of Gross Non-Performing Loans||64.7%||58.7%||74.9%||62.6%|
|Book Value per Common Share||$||26.53||$||25.05||$||22.38||$||21.10|
|Common Share Price - Close||$||51.44||$||45.18||$||49.10||$||43.60|
|Number of Common Shares Outstanding||34,668||34,711||34,625||34,649|
1 See definition of Adjusted Net Income under Non-GAAP Measures of the
unaudited interim consolidated financial report and reconciliation to
net income in Table 2 of the Management's Discussion and Analysis.
2 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures of the unaudited interim consolidated financial report.
3 Total loans include loans held for sale.
4 Loans under administration includes total loans and off-balance sheet loans.
5 These figures relate to the Company's operating subsidiary, Home Trust Company
THIRD QUARTER 2012 HIGHLIGHTS
Key results for the third quarter of 2012 included:
Net income increased to $57.3 million in the third quarter and to $163.0
million for the nine months ended September 30, 2012, representing
increases of 18.3% and 16.7% over the $48.4 million and $139.7 million
earned in the comparable periods of 2011. The second quarter included
an unfavourable tax adjustment of $2.0 million related to Ontario tax
rate adjustments and, excluding this adjustment, net income is up 18.1%
year over year. Net income for the third quarter is also up 7.6% from
the $53.2 million recorded in the second quarter of 2012. These results
put the Company solidly within the 13%-18% net income growth target for
Diluted earnings per share were $1.65 for the quarter and $4.68 for the
first nine months of 2012 representing increases of 18.7% and 16.4%
from $1.39 and $4.02 for the respective periods of 2011.
Net interest income, before provisions, continued its upward trend,
reaching $99.5 million in the third quarter and $281.6 million year to
date. This represents increases of 13.6% over the $87.6 million
recorded in the third quarter of 2011 and 14.7% over the $245.5 million
earned in the first nine months of 2011 and reflects solid loan growth
and continued strong demand for the Company's products.
Net interest margin (TEB) of 2.14% in the third quarter was consistent
with 2.14% in the third quarter of 2011 and up from 2.09% in the second
quarter of 2012. On a year-to-date basis, net interest margin (TEB)
increased to 2.08% compared to 2.06% in the same period last year. Net
interest margin (TEB) on non-securitized assets rose to 3.17% compared
to 3.11% in the third quarter of 2011 and 3.05% in the second quarter
Net interest margin on securitized assets was 0.89%, a decline from
1.35% one year ago and 1.05% last quarter. During the second quarter
the Company benefited from higher than expected prepayment penalties in
the securitized portfolio producing an increase in the net interest
margin. Compared to a year ago, the utilization of lower yielding
assets as replacement assets in the CMB program and the maturity of
higher yielding MBS portfolios are the primary contributors to lower
margins in the securitized asset group.
Return on equity at 25.6% for the quarter and 25.7% year to date remains
solid and continues well in excess of the Company's minimum performance
objective of 20%.
The credit quality of the loans portfolio remains solid and credit
losses are well within expected levels. Net non-performing loans ended
the quarter at 0.28% of the total loans portfolio, up marginally from
0.25% at the end of 2011 and down from 0.31% at the end of the second
quarter. The provision for credit losses remains within expectations at
0.10% of gross loans on an annualized basis, compared to 0.06% in the
third quarter of 2011 and 0.05% in the second quarter of 2012. The
provision for credit losses ratio is within the Company's objective of
0.05% to 0.15% of gross loans. The increase in provisions reflects the
repositioning of the portfolio to a higher proportion of uninsured
Tier 1 and Total capital ratios of 16.97% and 20.78%, respectively, at
September 30, 2012 remain well above the Company's minimum targets.
Home Trust's asset to capital multiple was 14.07 at the end of the
quarter compared to 14.44 at December 31, 2011 and 13.78 at the end of
the second quarter. The Company continues growing its assets, revenue
and net income while maintaining prudent levels of capital.
Total loans grew to $17.29 billion, reflecting increases of $1.51
billion or 9.6% from $15.78 billion one year ago, $1.20 billion or 7.5%
from $16.09 billion at the end of 2011 (10.0% on an annualized basis)
and $325.4 million or 1.9% over $16.97 billion at the end of last
quarter. Total loans under administration, which includes mortgages
securitized that qualify for off-balance sheet accounting, were $17.46
billion, representing an annualized increase of 11.4%. Annualized
growth of loans and loans under administration year to date remains
below the Company's growth target due to a higher than planned net
reduction of insured loans which repositioned the loan portfolio to a
smaller than planned, yet more profitable, total portfolio. The Company
expects year-over-year loan growth to remain below the target range of
13%-18% for the balance of 2012, while net income remains solidly
within the target range.
The total value of mortgages originated in the third quarter grew to
$1.68 billion from $1.30 billion originated in the third quarter of
2011. Originations were $4.53 billion for the first nine months of the
year compared to $3.87 billion in the same period last year.
Originations of traditional mortgages increased to $1.26 billion in the
third quarter and $3.39 billion year to date from $941.1 million and
$2.57 billion in the comparable periods of 2011. The Company is
experiencing strong demand for its traditional product offerings
combined with high credit quality. This continues to enhance
Accelerator (insured) mortgage originations declined to $236.7 million
in the third quarter and $630.5 million year to date from $293.5
million and $915.1 million in the comparative periods of 2011. The
Company expects to increase the rate of origination of Accelerator
mortgages in the coming months.
Multi-unit residential mortgage originations were $114.3 million in the
quarter and $229.6 million year to date compared to $7.0 million and
$130.5 million in the comparable periods of 2011. The Company
securitized and sold $96.5 million of multi-unit residential mortgages
in the quarter and $72.8 million last quarter. These transactions
qualified for off-balance sheet and gain on sale accounting and
resulted in securitization gains of $1.2 million in the quarter and
$1.3 million last quarter. This securitization program was initiated in
the second quarter of this year. The Company is pleased with the
results and anticipates that this program will experience modest growth
Non-residential mortgage advances were $46.6 million in the quarter and
$157.8 million year to date compared to $32.4 million and $140.7
million in the comparable periods of 2011. The Company continues to be
very selective and focuses on opportunities that present strong credit
and risk profiles and that are within the Company's risk tolerance.
Store and apartment advances were $18.2 million for the quarter and
$93.9 million year to date compared to $26.8 million and $87.4 million
in the comparable periods of 2011.
- The Company opened 847 new Visa accounts in the third quarter compared to 2,108 accounts opened in the third quarter of 2011 and 1,793 accounts last quarter. The decline through the current year reflects the Company's caution in marketing, approvals and advances and the anticipated adoption of OSFI's B-20 draft guideline provisions. After further review and confirmation of the requirements of B-20, the Company is pleased that it can resume prudent growth of its Equityline Visa program within the requirements of Guideline B-20 and the Company's risk appetite. The Company will again increase focus on this product segment and expects growth to resume within its risk tolerance and OSFI's guidelines, beginning in the fourth quarter.
Favourable market opportunities continue to support the Company's strategy and the Company has been able to expand the loans portfolio while generally improving credit quality. The average credit score for traditional mortgage originations for the first nine months of 2012 is up from the same period of 2011, while loan to value ratios are relatively stable. The Company remains proactive and prudent in its lending practices, taking into account local economic and market conditions. Continued low levels of loan losses reflect the Company's diligent underwriting combined with strong collection standards and loan resolution strategies. As mentioned last quarter, OSFI released Final Guideline B-20 - Residential Mortgage Underwriting Practices and Procedures requiring full implementation by the end of 2012. The Company has already made changes, where required, to comply with a significant number of the B-20 provisions and will be fully compliant before the end of 2012. The changes required for B-20 are not expected to materially affect the Company's growth or progress.
This quarter marked the beginning of two exciting new initiatives for the Company, a high interest savings account and a preferred Visa product. The high interest savings account provides an alternative to financial advisors for their clients who are looking for higher interest savings. This initiative is an important part of a wider strategy to diversify funding sources over time. Late in the third quarter, the Company also launched a new preferred Visa card product focused exclusively on existing mortgage customers of the Company. The program offers an unsecured Visa with modest credit limits at attractive rates to customers who have demonstrated good credit behavior. This product further broadens the array of products and services available to the Company's customers. These initiatives further position the Company for growth, but did not have a significant impact on quarterly results.
Also during the quarter, OSFI released the anticipated draft guidelines for Basel III, which will become effective in January 2013. The changes that affect Home Trust primarily relate to the components and definitions of regulatory capital, minimum capital targets and new liquidity requirements. The Company's analysis indicates that Home Trust presently meets the requirements of Basel III. Please see the Capital Management section of the MD&A for further discussion.
Subsequent to the end of the quarter, and in light of the Company's solid performance, profitability and strong financial position, the Board of Directors declared an increase of $0.04 in the quarterly dividend to $0.26 per Common share, payable on December 1, 2012 to shareholders of record at the close of business on November 16, 2012.
The Company continues to deliver solid results in terms of growth, increased returns and increased dividends. Despite the persistent international economic instability and modest economic improvement in Canada, the Company's performance continues to reflect the strength and the successful execution of the Company's core strategy.
With solid performance in all aspects of Home Capital's business, management expects that the positive performance the Company experienced during the first three quarters of 2012 will continue in the fourth quarter and into 2013.
|GERALD M. SOLOWAY||KEVIN P.D. SMITH|
|Chief Executive Officer||Chairman of the Board|
|November 7, 2012|
Additional information concerning the Company's targets and related expectations for 2012, including the risks and assumptions underlying these expectations, may be found in Management's Discussion and Analysis (MD&A) of this quarterly report.
Conference Call and Webcast
Third Quarter Results Conference Call
The conference call will take place on Thursday, November 8, 2012, 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, November 8, 2012 and midnight Thursday, November 15, 2012 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 39208745). 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.
2012 OBJECTIVES AND PERFORMANCE
Home Capital published its financial objectives for 2012 on page 15 of the Company's 2011 Annual Report. The following table compares actual performance to date against each of these objectives.
|Table 1: 2012 Targets and Performance|
|For the nine months ended September 30, 2012|
|2012 Targets1||Actual Results1||Amount||Increase over 2011|
|Growth in net income||13%-18%||16.7%||$||163,018||$||23,271|
|Growth in diluted earnings per share||13%-18%||16.4%||4.68||0.66|
|Growth in total loans2||13%-18%||10.0%||17,292,395||1,202,747|
|Return on shareholders' equity||20.0%||25.7%|
|Efficiency ratio (TEB)3||28.0% - 34.0%||27.9%|
|Tier 1||Minimum of 13%||16.97%|
|Total||Minimum of 14%||20.78%|
|Provision as a percentage of gross loans (annualized)||0.05% - 0.15%||0.09%|
1 Objectives and results for net income and diluted earnings per share
are for the current year.
2 Change represents growth over December 31, 2011 on an annualized basis and includes loans held for sale.
3 See definition of TEB under Non-GAAP Measures in the unaudited interim consolidated financial report.
4 Based on the Company's wholly owned subsidiary, Home Trust Company.
|Consolidated Statements of Income|
|For the three months ended||For the nine months ended|
|thousands of Canadian dollars, except per share amounts||September 30||June 30||September 30||September 30||September 30|
|Net Interest Income Non-Securitized Assets|
|Interest from loans||$||138,271||$||125,576||$||102,617||$||381,412||$||289,932|
|Dividends from securities||3,172||3,533||4,887||10,669||13,858|
|Interest on deposits||58,962||56,043||48,160||168,133||140,368|
|Interest on senior debt||1,648||1,705||1,644||5,006||2,691|
|Net interest income non-securitized assets||81,926||72,291||59,034||222,012||164,977|
|Net Interest Income Securitized Loans and Assets|
|Interest income from securitized loans and assets||70,618||76,286||84,195||223,520||248,615|
|Interest expense on securitization liabilities||53,053||54,723||55,617||163,968||168,052|
|Net interest income securitized loans and assets||17,565||21,563||28,578||59,552||80,563|
|Total Net Interest Income||99,491||93,854||87,612||281,564||245,540|
|Provision for credit losses (note 5(E))||4,239||2,298||2,349||11,035||4,540|
|Fees and other income||12,485||12,025||9,697||35,407||26,703|
|Realized net gains and unrealized losses on securities and mortgages||(1,172)||1,676||1,224||812||5,394|
|Net realized and unrealized gain (loss) on derivatives (note 14)||2,136||(1,275)||(5,260)||5,146||(6,873)|
|Salaries and benefits||15,465||14,501||13,509||43,965||39,339|
|Other operating expenses||14,304||13,404||10,530||40,879||32,787|
|Income Before Income Taxes||76,636||74,100||64,888||220,779||188,329|
|Income taxes (note 12(A))|
|NET INCOME PER COMMON SHARE|
|AVERAGE NUMBER OF COMMON SHARES OUTSTANDING|
|Total number of outstanding common shares (note 9(A))||34,668||34,711||34,649||34,668||34,649|
|Book value per common share||$||26.53||$||25.05||$||21.10||$||26.53||$||21.10|
|The accompanying notes are an integral part of these unaudited interim consolidated financial statements.|
|Consolidated Statements of Comprehensive Income|
|For the three months ended||For the nine months ended|
|September 30||June 30||September 30||September 30||September 30|
|thousands of Canadian dollars (Unaudited)||2012||2012||2011||2012||2011|
|OTHER COMPREHENSIVE INCOME (LOSS)|
|Available for Sale Securities (note 4(B))|
|Net unrealized gains (losses) on securities available for sale||1,667||(1,069)||(9,221)||4,991||(9,302)|
|Net losses (gains) reclassified to net income||1,141||(1,348)||(1,499)||(571)||(5,989)|
|Income tax expense (recovery)||742||(643)||(2,707)||1,266||(3,875)|
|Cash Flow Hedges (note 14)|
|Net unrealized losses on cash flow hedges||-||(396)||(3,430)||(370)||(6,747)|
|Net losses reclassified to net income||376||357||189||1,086||280|
|Income tax expense (recovery)||99||(89)||(843)||120||(1,682)|
|Total other comprehensive income (loss)||2,343||(1,724)||(10,411)||3,750||(16,201)|
|The accompanying notes are an integral part of these unaudited interim consolidated financial statements.|
|Consolidated Balance Sheets|
|September 30||June 30||December 31|
|thousands of Canadian dollars (Unaudited)||2012||2012||2011|
|Cash Resources (note 4(A))||$||543,825||$||301,330||$||665,806|
|Securities (note 4(B))|
|Available for sale||401,830||425,834||391,754|
|Pledged securities (notes 4(C) and 6(B))||784,098||628,836||341,588|
|Loans held for sale||36,405||29,811||-|
|Loans (note 5)|
|Securitized residential mortgages (note 6)||7,238,946||7,582,154||8,243,350|
|Personal and credit card loans||567,079||568,127||560,193|
|Collective allowance for credit losses (note 5(E))||(29,800)||(29,500)||(29,440)|
|Derivative assets (note 14)||57,651||59,284||72,424|
|Other assets (note 7)||102,741||84,534||79,650|
|LIABILITIES AND SHAREHOLDERS' EQUITY|
|Deposits payable on demand||$||31,736||$||42,098||$||62,746|
|Deposits payable on a fixed date||9,838,955||8,965,366||7,859,378|
|Senior Debt (note 13)||153,724||152,524||153,336|
|Securitization Liabilities (note 6(C))|
|Mortgage-backed security liabilities||1,923,017||2,078,300||2,417,801|
|Canada Mortgage Bond liabilities||6,155,475||6,160,259||6,231,274|
|Obligations related to securities sold under repurchase agreement (notes 4(C) and 5(F))||-||43,418||-|
|Derivative liabilities (note 14)||3,767||4,043||3,458|
|Income taxes payable||8,689||15,893||17,628|
|Other liabilities (note 8)||168,743||156,320||136,025|
|Deferred tax liabilities (note 12(C))||38,275||38,798||40,040|
|Capital stock (note 9)||61,873||61,662||55,104|
|Accumulated other comprehensive loss (note 11)||(5,441)||(7,784)||(9,191)|
|The accompanying notes are an integral part of these unaudited interim consolidated financial statements.|
|Consolidated Statements of Changes in Shareholders' Equity|
|Net Unrealized||Net Unrealized||Total|
|(Losses) Gains||Losses on||Accumulated|
|on Securities||Cash Flow||Other||Total|
|thousands of Canadian dollars,||Capital||Contributed||Retained||Available for||Hedges,||Comprehensive||Shareholders'|
|except per share amounts (Unaudited)||Stock||Surplus||Earnings||Sale, after Tax||after Tax||(Loss) Income||Equity|
|Balance at December 31, 2011||$||55,104||$||5,873||$||722,999||$||(4,141)||$||(5,050)||$||(9,191)||$||774,785|
|Stock options settled (note 9(A))||6,988||(1,379)||-||-||-||-||5,609|
|Amortization of fair value of|
|employee stock options (note 10(A))||-||1,353||-||-||-||-||1,353|
|Repurchase of shares (note 9(A))||(219)||-||(5,743)||-||-||-||(5,962)|
|($0.64 per share)||-||-||(22,935)||-||-||-||(22,935)|
|Balance at September 30, 2012||$||61,873||$||5,847||$||857,339||$||(987)||$||(4,454)||$||(5,441)||$||919,618|
|Balance at December 31, 2010||$||50,427||$||4,571||$||567,681||$||5,906||$||-||$||5,906||$||628,585|
|Stock options settled (note 9(A))||4,237||(933)||-||-||-||-||3,304|
|Amortization of fair value of|
|employee stock options (note 10(A))||-||1,815||-||-||-||-||1,815|
|Repurchase of shares (note 9(A))||(175)||-||(5,724)||-||-||-||(5,899)|
|($0.56 per share)||-||-||(20,135)||-||-||-||(20,135)|
|Balance at September 30, 2011||$||54,489||$||5,453||$||681,569||$||(5,510)||$||(4,785)||$||(10,295)||$||731,216|
|Consolidated Statements of Cash Flows|
|For the nine months ended|
|September 30||September 30|
|thousands of Canadian dollars (Unaudited)||2012||2011|
|CASH FLOWS FROM OPERATING ACTIVITIES|
|Net income for the period||$||163,018||$||139,747|
|Adjustments to determine cash flows relating to operating activities:|
|Deferred income taxes||(1,766)||(1,832)|
|Amortization of capital assets||2,477||2,181|
|Amortization of intangible assets||4,854||65|
|Amortization of net premium on securities||2,046||33|
|Amortization of securitization and senior debt transaction costs||10,141||6,736|
|Provision for credit losses||11,035||4,540|
|Change in accrued interest payable||31,090||21,581|
|Change in accrued interest receivable||(6,733)||(3,647)|
|Realized net gains and unrealized losses on securities and mortgages||(812)||(5,394)|
|Settlement of derivatives||(370)||(6,747)|
|(Gain) loss on derivatives||(5,147)||6,265|
|Net increase in mortgages||(1,205,378)||(1,602,452)|
|Net increase in personal and credit card loans||(7,112)||(92,742)|
|Net increase in deposits||1,948,567||624,538|
|Activity in securitization liabilities|
|Proceeds from securitization of mortgage-backed security liabilities||152,303||1,044,863|
|Settlement and repayment of securitization liabilities||(710,644)||(456,891)|
|Amortization of fair value of employee stock options||1,353||1,815|
|Changes in taxes payable and other||(28,162)||8,720|
|Cash flows provided by (used in) operating activities||360,760||(308,621)|
|CASH FLOWS FROM FINANCING ACTIVITIES|
|Repurchase of shares||(5,962)||(5,899)|
|Exercise of employee stock options||5,609||3,304|
|Issuance of senior debt||-||149,072|
|Dividends paid to shareholders||(22,233)||(19,440)|
|Cash flows (used in) provided by financing activities||(22,586)||127,037|
|CASH FLOWS FROM INVESTING ACTIVITIES|
|Activity in securities|
|Proceeds from sales||325,515||273,078|
|Proceeds from maturities||2,137,912||87,158|
|Purchases of capital assets||(4,270)||(1,774)|
|Purchases of intangible assets||(7,279)||(13,199)|
|Cash flows used in investing activities||(460,155)||(247,539)|
|Net decrease in cash and cash equivalents during the period||(121,981)||(429,123)|
|Cash and cash equivalents at beginning of the period||665,806||846,824|
|Cash and Cash Equivalents at End of the Period (note 4(A))||$||543,825||$||417,701|
|Supplementary Disclosure of Cash Flow Information|
|Dividends received on investments||$||8,898||$||13,034|
|Income taxes paid||72,262||27,952|
Caution Regarding Forward-Looking Statements
From time to time Home Capital Group Inc. (the "Company" or "Home Capital") 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 on pages 48 through 58 of the Company's 2011 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, liquidity and funding risk, structural interest rate risk, operational risk, investment risk, strategic and business risk, reputational risk and regulatory and legal 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," "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 2012 and its effect on Home Capital's business are material factors the Company considers when setting its objectives and outlook. In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical economic data provided by the Canadian government and its agencies. In setting and reviewing the outlook and objectives for 2012, management's expectations assume:
- The Canadian economy will continue to produce modest growth in 2012, but will be heavily influenced by the economic conditions in the United States and global markets. Inflation will generally be within the Bank of Canada's target of 1%-3%.
- Interest rates will remain at current rates for the balance of 2012 as the Bank of Canada leaves its target for the overnight rate at its current level.
- The housing market will remain resilient to global uncertainty with balanced supply and demand conditions in most regions. Declining housing starts and softening resale activity on stable prices through most of Canada will continue with the market moderating from previous activity levels.
- Unemployment will remain stable or improve slightly as the economy grows, while a larger labour force will tend to offset job growth.
- Consumer debt levels will remain serviceable by Canadian households.
- Net interest margins overall are expected to remain in the current range. Margins are expected to remain stable as returns on the increased traditional portfolio offset declining returns on the securitized portfolio throughout 2012.
- Credit quality will remain sound with actual losses within the low end of Home Capital's historical range.
- The recent changes to Canada Mortgage and Housing Corporation (CMHC) policies will continue to temper the real estate market.
The Company applies International Financial Reporting Standards (IFRS) which are the generally accepted accounting principles (GAAP) for Canadian publically 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 Third Quarter 2012 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.
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 deposits, residential and non-residential mortgage lending, securitization of insured residential first mortgage products, consumer lending and credit card services. 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.