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Home Capital Reports Another Strong Quarter:

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  • Diluted Earnings per Share up 13.2% year over year to $1.72;
  • Adjusted Diluted Earnings per Share* up 19.1% year over year to $1.81;
  • Assets Under Administration Surpass $20 billion and Shareholders' Equity Increases to over $1 billion

TORONTO, May 8, 2013 /CNW/ - Home Capital Group (TSX: HCG) today reported another quarter of strong results for the three months ended March 31, 2013.

The Company's First Quarter Report, including Management's Discussion and Analysis, is available on Home Capital's website at www.homecapital.com and the Canadian Securities Administrators website at www.sedar.com.

* Table 2 provides a reconciliation of net income to adjusted net income and adjusted diluted earnings per share.

FINANCIAL HIGHLIGHTS

                 
(Unaudited) For the three months ended
(000s, except Per Share and Percentage Amounts) March 31   December 31   March 31

  2013     2012     2012
OPERATING RESULTS                
Net Income $  59,725   $  58,965   $  52,534
Total Revenue    231,194      227,649      214,682
Diluted Earnings per Share $  1.72   $  1.70   $  1.52
Return on Shareholders' Equity   24.0%     25.0%     26.2%
Return on Average Assets   1.3%     1.2%     1.2%
Net Interest Margin (TEB)1   2.17%     2.13%     2.02%
Provision as a Percentage of Gross Loans (annualized)   0.11%     0.09%     0.11%
Efficiency Ratio (TEB)1   28.3%     27.3%     27.7%
                As at
    March 31     December 31     March 31
    2013     2012     2012
BALANCE SHEET HIGHLIGHTS              
Total Assets $  19,358,563   $  18,800,079   $  17,995,256
Total Assets Under Administration2    20,377,074      19,681,750      17,995,256
Total Loans3,4    17,429,982      17,159,913      16,451,745
Securitized Loans On-Balance Sheet3    6,710,556      6,706,160      8,001,414
Total Loans Under Administration3,4,5    18,448,493      18,041,584      16,451,745
Liquid Assets    823,973      771,772      683,511
Deposits    10,642,280      10,136,599      8,297,126
Shareholders' Equity    1,021,813      968,213      828,036
FINANCIAL STRENGTH                
Capital Measures6                
Risk-Weighted Assets    5,738,257      5,491,513      4,704,529
Common Equity Tier 1 Capital Ratio   16.57%     N/A     N/A
Tier 1 Capital Ratio   16.57%     17.01%     17.49%
Total Capital Ratio   19.82%     20.68%     21.62%
Assets to Regulatory Capital Multiple   13.98     13.98     13.64
Credit Quality                
Net Non-Performing Loans as a Percentage of Gross Loans   0.32%     0.33%     0.28%
Allowance as a Percentage of Gross Non-Performing Loans   59.9%     57.0%     67.6%
Share Information                
Book Value per Common Share $  29.53   $  27.96   $  23.83
Common Share Price - Close $  58.74   $  59.07   $  50.34
Market Capitalization $  2,032,404   $  2,045,594   $  1,749,365
Number of Common Shares Outstanding    34,600      34,630      34,751
 
1 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures of the unaudited interim consolidated financial report.
2Total assets under administration include total on-balance sheet assets and off-balance sheet loans.
3In the quarter the Company classified Home Trust mortgages used as CMB replacement assets as securitized mortgages.  In prior periods these were classified as pledged securities.  Prior periods have been restated to reflect the current classification.
4 Total loans include loans held for sale.
5Loans under administration includes total loans and off-balance sheet loans.
6These figures relate to the Company's operating subsidiary, Home Trust Company and are calculated under Basel III for 2013 and Basel II for 2012.


FIRST QUARTER 2013 HIGHLIGHTS

Key results for Q1 2013 included:

  • Net income increased to $59.7 million, up 13.7% over Q1 2012 and 1.3% over Q4 2012. Net income reflects $1.8 million in after tax charges related to IFRS implementation (see the Non-Interest Income section of the MD&A) and $1.5 million in after-tax charges related to the resolution of disputed loans to commercial condominium corporations (see the Provision and Allowance for Credit Losses section of the MD&A). Without these charges, adjusted net income, as defined in Table 2, was $63.0 million representing an increase of 20.0% over Q1 2012.
     
  • Diluted earnings per share were $1.72 for the quarter representing increases of 13.2% over the $1.52 earned in Q1 2012 and increases of 1.2% over the $1.70 earned in Q4 2012.  Adjusting for charges for IFRS implementation and the condominium loan resolution, adjusted diluted earnings per share1 were $1.81, 19.1% higher than Q1 2012.

  • Net interest income, before provisions, continued its upward trend, reaching $101.9 million in Q1 2013, increasing 15.5% over the $88.2 million recorded in Q1 2012 and 2.0% over the $99.9 million earned in Q4 2012. This reflects net on-balance sheet loan growth and improving total net interest margin.

  • Net interest margin (TEB) increased to 2.17% in Q1 2013 from 2.02% in Q1 2012 and 2.13% in Q4 2012. The increase reflects the combination of the shift to higher yielding traditional mortgages relative to securitized mortgages and, when compared to Q1 2012, improved spreads earned on non-securitized lending.

  • Return on equity at 24.0% for the quarter remains strong and continues well in excess of the Company's minimum performance objective of 20%.

  • The loan portfolio credit quality remains solid with continued low non-performing loans and credit losses well within expected levels. Net non-performing loans as a percentage of gross loans (NPL ratio) ended the quarter at 0.32% compared to 0.33% at the end of 2012 and 0.28% at the end of Q1 2012. The annualized credit provision as a percentage of gross loans (PCL ratio) remains within expectations at 0.11%, compared to 0.09% in Q4 2012 and 0.11% in Q1 2012. Excluding the provisions related to the resolution of disputed loans to the two condominium corporations the PCL ratio would have been 0.06% in the quarter.

  • Home Trust adopted the new Basel III capital requirements in Q1 2013 and continues to significantly exceed regulatory minimums. Under Basel III, Home Trust's Common Equity Tier 1 ratio (CET 1 ratio) was 16.57%, while Tier 1 and Total Capital Ratios were 16.57% and 19.82%, respectively.  Home Trust's assets to capital multiple was 13.98 at the end of the quarter compared to 13.98 at December 31, 2012 and 13.64 at March 31, 2012.

  • Total loans under administration, which includes securitized mortgages that qualify for off-balance sheet accounting, grew to $18.45 billion, reflecting increases of $2.00 billion or 12.1% from $16.45 billion one year ago, and $0.41 billion or 2.3% from $18.04 billion at the end of 2012 (9.0% on an annualized basis). At this point the Company still expects to meet its loans under administration growth target of 10-15% year over year.

  • Product demand was strong in the quarter, with $1.38 billion in total mortgage originations up from $1.19 billion originated in Q1 2012. Even though Q1 2012 benefited from milder weather and increased activity ahead of mortgage insurance changes, the Company was able to increase year over year originations. Q1 2013 originations were behind Q4 2012 originations of $1.47 billion primarily due to seasonal factors.

  • Traditional mortgage originations increased to $0.99 billion in Q1 2013 from $0.92 billion in Q1 2012 and declined seasonally from $1.16 billion in Q4 2012. The Company continues to experience strong demand for its traditional product offerings combined with high credit quality. This continues to enhance profitability and asset quality.
  • Accelerator (insured) mortgage originations declined to $121.6 million in Q1 2013 from $172.7 million in Q1 2012 and from $174.2 million in Q4 2012 reflecting the Company's continued preference for high margin assets on balance sheet.

  • The Company continues to pursue strategies for transactions that will qualify lower margin, insured single-family residential mortgages for off-balance sheet treatment and lead to increased growth in this loan portfolio.  Ongoing dialogue with regulators and other interested parties regarding these strategies has continued and management remains cautiously optimistic that a solution can be attained.

  • Multi-unit residential mortgage originations were $202.6 million in Q1 2013 compared to $27.5 million in Q1 2012 and $57.2 million in Q4 2012.  In the quarter the Company securitized and sold $156.2 million of insured multi-unit residential mortgages that qualified for off-balance sheet accounting compared to $64.6 million last quarter.  These transactions resulted in securitization gains of $1.4 million in the quarter compared to $0.7 million last quarter. This securitization program was initiated in the second quarter of 2012.  The Company is pleased with the results and anticipates that this program will continue to enhance profitability and experience modest growth.

  • Store and apartment mortgage advances were $23.6 million in Q1 2013 compared to $37.9 million in Q1 2012 and $24.8 million in Q4 2012.

  • Commercial mortgage advances were $30.7 million in Q1 2013 compared to $27.7 million in Q1 2012 and $52.4 million in Q4 2012.  The Company continues to be selective and focuses on opportunities that present strong credit and risk profiles.

1Table 2 provides a reconciliation of net income to adjusted net income and adjusted diluted earnings per share.


Data from the Canadian Real Estate Association indicates that real estate markets have softened in the first quarter of 2013 with an overall decline in housing activity of approximately 15% when compared to the first quarter of 2012.  Average prices across Canada rose marginally in the quarter and the rate of appreciation of home prices has moderated, with pockets of pricing declines in certain markets.  The Company's view and observations are that housing markets remain in balanced territory and remain healthy overall. Declines in housing activity were not unexpected given the strong start to spring last year, ahead of changes to mortgage insurance rules. While the Company experienced overall originations below the last quarter of 2012, the activity was within management's expectations given seasonality and the slower start to the spring housing market this year. The Company continues to observe good demand for its traditional mortgage products from customers with strong credit profiles and originations in this product were up over the same period last year.  The Company anticipates that demand for its traditional products to continue to be robust, but recognizes that overall markets have softened and demand could be reduced in future quarters.  Management is prepared to adjust its strategy in such a situation. 

During the quarter the Company continued its deposit diversification initiative by further building balances in its brokered high interest savings account and in GICs directly with customers.  These efforts will be further bolstered by the launch of a direct to consumer savings account later this year combined with continued advertising and business development activities and investment in information technology infrastructure to build the direct deposit channel and enhance deposit diversification.

Beginning on January 1, 2013 the Company's subsidiary Home Trust was subject to, and fully compliant with, the new regulatory capital rules known as Basel III. Generally, the new rules introduced higher minimum capital targets along with requirements for higher quality capital. Home Trust was well positioned to adopt the new rules as it already well exceeded minimum regulatory capital ratios and maintained a simple structure of high quality capital.

To further strengthen the Company's Board of Directors, Ms. Diana Graham will stand as a nominee for election to the board at the upcoming Annual General Meeting. Ms. Graham brings extensive experience to the Board, including governance, credit, operational, market and enterprise risk management, in both the United States and Canada, most recently retiring from the position of Chief Risk Officer at a Canadian financial institution. We are confident that Ms. Graham's significant experience and depth of knowledge will be assets to the Board and the Company.

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 a quarterly dividend of $0.26 per Common share, payable on June 1, 2013 to shareholders of record at the close of business on May 17, 2013.

The Company continues to deliver solid results in terms of growth and increased returns. 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 continues to expect the positive performance the Company experienced during the first quarter of 2013 to continue for the remainder of year. 

(Signed)

GERALD M. SOLOWAY 
Chief Executive Officer 

(Signed)

KEVIN P.D. SMITH
Chair of the Board
May 8, 2013    

Additional information concerning the Company's targets and related expectations for 2013, including the risks and assumptions underlying these expectations, may be found in Management's Discussion and Analysis (MD&A) of the quarterly report.

Conference Call and Webcast

First Quarter Results Conference Call
The conference call will take place on Thursday, May 9, 2013 at 10:30 a.m. ET. 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. ET Thursday, May 9, 2013 and midnight ET Thursday, May 16, 2013 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 36458511). 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.

Annual Meeting Notice

The Annual Meeting of Shareholders of Home Capital Group Inc. will be held at the Design Exchange, Trading Floor, Second Floor, 234 Bay Street, Toronto, Ontario, on Wednesday, May 15, 2013 at 11:00 a.m. local time.  Shareholders and guests are invited to join Directors and Management for lunch and refreshments following the Annual Meeting.  All shareholders are encouraged to attend. 

Consolidated Statements of Income

 
    For the three months ended
thousands of Canadian dollars, except per share amounts   March 31   December 31   March 31
(Unaudited)   2013     2012     2012
Net Interest Income Non-Securitized Assets                
Interest from loans $  148,031   $  144,310   $  117,565
Dividends from securities    3,193      3,502      3,964
Other interest    1,456      949      1,047
       152,680      148,761      122,576
Interest on deposits    62,938      61,873      53,128
Interest on senior debt    1,583      1,825      1,653
Net interest income non-securitized assets    88,159      85,063      67,795
                 
Net Interest Income Securitized Loans and Assets                
Interest income from securitized loans and assets    61,337      64,351      76,616
Interest expense on securitization liabilities      47,610      49,506      56,192
Net interest income securitized loans and assets    13,727      14,845      20,424
                 
Total Net Interest Income    101,886      99,908      88,219
Provision for credit losses    4,667      3,685      4,498
       97,219      96,223      83,721
Non-Interest Income                
Fees and other income    14,972      11,059      10,897
Securitization income    1,587      5,659      -
Net realized and unrealized gains (losses) on securities and mortgages    2,274      (883)      308
Net realized and unrealized (loss) gain on derivatives    (1,656)      (1,298)      4,285
       17,177      14,537      15,490
       114,396      110,760      99,211
Non-Interest Expenses                  
Salaries and benefits      16,950      14,991      13,999
Premises      2,445      2,562      1,998
Other operating expenses    14,574      14,067      13,171
       33,969      31,620      29,168
                   
Income Before Income Taxes    80,427      79,140      70,043
Income taxes                
  Current    23,456      22,649      19,055
  Deferred    (2,754)      (2,474)      (1,546)
       20,702      20,175      17,509
NET INCOME $  59,725   $  58,965   $  52,534
                 
NET INCOME PER COMMON SHARE                
Basic $  1.72   $  1.70   $  1.52
Diluted $  1.72   $  1.70   $  1.52
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING                
Basic    34,630      34,655      34,550
Diluted    34,825      34,779      34,593
                   
Total number of outstanding common shares    34,600      34,630      34,751
Book value per common share $  29.53   $  27.96   $  23.83
                 


Consolidated Statements of Comprehensive Income

 
   For the three months ended
  March 31     December 31     March 31
 thousands of Canadian dollars (Unaudited)   2013     2012     2012
                 
 NET INCOME  $  59,725    $  58,965    $  52,534
                 
 OTHER COMPREHENSIVE INCOME                
                 
 Available for Sale Securities                
 Net unrealized gains on securities available for sale    7,165      1,471      4,393
 Net (gains) losses reclassified to net income    (1,946)      457      (364)
     5,219      1,928      4,029
 Income tax expense    1,381      509      1,167
     3,838      1,419      2,862
                 
 Cash Flow Hedges                
 Net unrealized gains on cash flow hedges    -      -      26
 Net losses reclassified to net income    367      376      353
     367      376      379
 Income tax expense    95      99      110
     272      277      269
                 
 Total other comprehensive income    4,110      1,696      3,131
                 
 COMPREHENSIVE INCOME  $  63,835    $  60,661   $  55,665
                 


Consolidated Balance Sheets

             
             
      March 31     December 31
 thousands of Canadian dollars (Unaudited)   2013     2012
 ASSETS           
 Cash and Cash Equivalents  $  631,080   $  301,863
 Available for Sale Securities    404,254      414,344
 Loans held for sale    43,434      21,921
 Loans          
 Securitized mortgages    6,710,556      6,706,160
 Non-securitized mortgages and loans    10,675,992      10,431,832
       17,386,548      17,137,992
 Collective allowance for credit losses    (30,300)      (30,000)
       17,356,248      17,107,992
 Other          
 Restricted cash    130,083      137,424
 Pledged securities    551,008      588,069
 Derivative assets      44,643      45,388
 Other assets    114,528      100,983
 Goodwill and intangible assets    83,285      82,095
       923,547      953,959
     $  19,358,563   $  18,800,079
 LIABILITIES AND SHAREHOLDERS' EQUITY          
 Liabilities          
 Deposits          
 Deposits payable on demand  $  96,513   $  105,923
 Deposits payable on a fixed date    10,545,767      10,030,676
       10,642,280      10,136,599
 Senior Debt    152,092      150,684
 Securitization Liabilities          
 Mortgage-backed security liabilities    1,271,879      1,301,693
 Canada Mortgage Bond liabilities    6,036,475      6,034,202
       7,308,354      7,335,895
 Other          
 Derivative liabilities    2,941      2,386
 Other liabilities    198,037      170,502
 Deferred tax liabilities    33,046      35,800
       234,024      208,688
       18,336,750      17,831,866
 Shareholders' Equity          
 Capital stock    61,850      61,903
 Contributed surplus    6,729      6,224
 Retained earnings    952,869      903,831
 Accumulated other comprehensive income (loss)    365      (3,745)
       1,021,813      968,213
     $  19,358,563   $  18,800,079
           


Consolidated Statements of Changes in Shareholders' Equity

 
                             
         Net Unrealized  Net Unrealized  Total  
         Gains (Losses)  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, 2012  $  61,903  $  6,224  $  903,831  $  432  $  (4,177)  $  (3,745)  $  968,213
 Comprehensive income    -    -    59,725    3,838    272    4,110    63,835
 Amortization of fair value of                            
 employee stock options    -    505    -    -    -    -    505
 Repurchase of shares    (53)    -  
 (1,693)

 

 -

 

 -
   -    (1,746)
 Dividends paid                            
 ($0.26 per share)    -    -    (8,994)    -    -    -    (8,994)
 Balance at March 31, 2013  $  61,850  $  6,729  $  952,869  $  4,270  $  (3,905)  $  365  $  1,021,813
                             
 Balance at December 31, 2011  $  55,104  $  5,873  $  722,999  $  (4,141)  $  (5,050)  $  (9,191)  $  774,785
 Comprehensive income    -    -    52,534    2,862    269    3,131    55,665
 Stock options settled    6,431    (1,254)    -    -    -    -    5,177
 Amortization of fair value of                            
 employee stock options    -    588    -    -    -    -    588
 Repurchase of shares    (41)    -    (1,159)    -    -    -    (1,200)
 Dividends paid                            
 ($0.20 per share)    -    -    (6,979)    -    -    -    (6,979)
 Balance at March 31, 2012  $  61,494  $  5,207  $  767,395  $  (1,279)  $  (4,781)  $  (6,060)  $  828,036
                             


Consolidated Statements of Cash Flows

 
      For the three months ended
      March 31     March 31
 thousands of Canadian dollars (Unaudited)   2013     2012
 CASH FLOWS FROM OPERATING ACTIVITIES          
 Net income for the period  $  59,725    $  52,534
 Adjustments to determine cash flows relating to operating activities:          
    Deferred income taxes    (2,754)      (1,546)
    Amortization of capital assets    686      705
    Amortization of intangible assets     1,927      1,591
    Amortization of net premium on securities    477      929
    Amortization of securitization and senior debt transaction costs    3,114      3,460
    Provision for credit losses    4,667      4,498
    Change in accrued interest payable    40,909      39,292
    Change in accrued interest receivable    (2,105)      (667)
    Net realized and unrealized gains on securities and mortgages    (2,274)      (308)
  Realized gain on securitization    (1,587)      -
    Settlement of derivatives    3,115      -
    Loss (gain) on derivatives    1,857      (4,285)
    Net increase in mortgages    (679,017)      (313,250)
    Net increase in  credit card loans and other consumer retail loans    (6,667)      (4,810)
    Net increase in deposits    505,681      375,002
    Proceeds from obligations under repurchase agreement    -      49,720
    Proceeds from sale of mortgage-backed securities    143,553      -
    Proceeds from securitization of mortgage-backed security liabilities    285,616      -
    Settlement and repayment of securitization liabilities    (316,334)      (181,242)
  Amortization of fair value of employee stock options    505      588
    Changes in taxes payable and other    (6,039)      (19,777)
 Cash flows provided by operating activities    35,055      2,434
 CASH FLOWS FROM FINANCING ACTIVITIES          
 Repurchase of shares    (1,746)      (1,200)
 Exercise of employee stock options    -      5,177
 Dividends paid to shareholders    (9,003)      (6,954)
 Cash flows used in financing activities    (10,749)      (2,977)
 CASH FLOWS FROM INVESTING ACTIVITIES          
 Activity in securities          
 Purchases    (895,985)      (243,855)
 Proceeds from sales    321,975      7,145
 Proceeds from maturities    883,337      7,058
 Purchases of capital assets    (1,299)      (1,629)
 Purchases of intangible assets    (3,117)      (2,890)
 Cash flows provided by (used in) investing activities    304,911      (234,171)
 Net  increase (decrease) in cash and cash equivalents during the period    329,217      (234,714)
 Cash and cash equivalents at beginning of the period    301,863      534,394
 Cash and Cash Equivalents at End of the Period  $  631,080    $  299,680
 Supplementary Disclosure of Cash Flow Information          
 Dividends received on investments  $  1,768    $  4,671
 Interest received    147,027      194,561
 Interest paid    23,613      74,681
 Income taxes paid    38,744      33,571


Home Capital published its financial objectives for 2013 on page 18 of the Company's 2012 Annual Report. The following table compares actual performance to date against each of these objectives.

Table 1: 2013 Targets and Performance

               
                 
          For the three months ended March 31, 2013
      2013 Targets   Actual Results   Amount   Increase over 2012
Growth in net income   13%-18%   13.7% $  59,725  $  7,191
Growth in diluted earnings per share   13%-18%   13.2%    1.72    0.20
Growth in total loans under administration1   10%-15%   9.0%    18,448,493    406,909
Return on shareholders' equity   20.0%   24.0%        
Efficiency ratio (TEB)2   28.0% - 34.0%   28.3%        
Provision as a percentage of gross loans (annualized)   0.10% - 0.18%   0.11%        
  1 Change represents growth over December 31, 2012 on an annualized basis and includes loans held for sale.
2 See definition of TEB under Non-GAAP Measures in the unaudited interim consolidated financial report.

 

Table 2: Reconciliation of Net Income to Adjusted Net Income


 
    Quarter
(000s, except % and per share amounts)   Q1   Q4 %   Q1 %
Reconciliation of Net Income to Adjusted Net Income                
Net income per Consolidated Statements of Income $  59,725  $  58,965 1.3%  $  52,534 13.7%
Adjustment for derivative restructuring - IFRS conversion (net of tax)    1,783  $  2,602 (31.5)%    - -
Adjustment for disputed loans to condominium corporations (net of tax)    1,508    - -    - -
Adjusted Net Income1 $  63,016  $  61,567 2.4%  $  52,534 20.0%
Adjusted Basic Earnings per Share1 $  1.82  $  1.78 2.2%  $  1.52 19.7%
Adjusted Diluted Earnings per Share1 $  1.81  $  1.77 2.3%  $  1.52 19.1%
                 
  1 Adjusted net income and Adjusted earnings per share are defined in the Non-GAAP section of the MD&A.

 

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 on pages 55 through 68 of the Company's 2012 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 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," "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 2013 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 and forecasted economic data provided by the Canadian government and its agencies.  In setting and reviewing the outlook and objectives for the remainder of 2013, management's expectations continue to assume:

  • The Canadian economy will produce modest growth in 2013 with relatively stable to modestly improving employment conditions in most regions. The economy will continue to 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% to 3%.

  • The Bank of Canada continues to indicate that increases to its target overnight interest rate are not imminent and, as such, the Company is assuming the rate will remain at its current level for most of 2013. This is expected to continue to support low mortgage interest rates.

  • The housing market will remain relatively stable with balanced supply and demand conditions in most regions supported by continued low interest rates, relatively stable to modestly improving employment, and immigration.  There will be declines in housing starts and resale activity compared to prior years with stable to modestly declining prices throughout most of Canada.

  • Consumer debt levels will remain serviceable by Canadian households.

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 2013 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 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 offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.

 

 

SOURCE Home Capital Group Inc.



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