- Diluted Earnings per Share up 19.3% Year over Year to $1.05
- Dividend Increase of 12.5% or 2 Cents per Share to $0.18 Quarterly
- Quarterly Net Income Increases 19.8% Year over Year
TORONTO, July 30, 2014 /CNW/ - Home Capital today reported another quarter of increased earnings and strong originations.
This press release should be read in conjunction with the Company's Second Quarter Report, including Financial Statements and Management's Discussion and Analysis, which are available on Home Capital's website at www.homecapital.com and the Canadian Securities Administrators' website at www.sedar.com.
|(Unaudited)||For the three months ended||For the six months ended|
|(000s, except Per Share and Percentage Amounts)||June 30||March 31||June 30||June 30||June 30|
|Diluted Earnings per Share1||$||1.05||$||1.00||$||0.88||$||2.04||$||1.74|
|Return on Shareholders' Equity||23.1%||23.1%||23.6%||23.0%||23.8%|
|Return on Average Assets||1.4%||1.4%||1.3%||1.4%||1.3%|
|Net Interest Margin (TEB)2||2.26%||2.19%||2.14%||2.23%||2.15%|
|Provision as a Percentage of Gross Uninsured Loans (annualized)||0.10%||0.11%||0.17%||0.10%||0.17%|
|Provision as a Percentage of Gross Loans (annualized)||0.07%||0.07%||0.10%||0.07%||0.10%|
|Efficiency Ratio (TEB)2||28.3%||28.5%||28.6%||28.4%||28.4%|
|June 30||March 31||December 31||June 30|
|BALANCE SHEET HIGHLIGHTS|
|Total Assets Under Administration3||23,716,585||22,871,407||21,997,781||20,577,505|
|Total Loans Under Administration3,4||21,235,234||20,475,143||19,941,832||18,838,967|
|Common Equity Tier 1 Capital Ratio||17.45%||17.22%||16.80%||16.63%|
|Tier 1 Capital Ratio||17.45%||17.22%||16.80%||16.63%|
|Total Capital Ratio||20.20%||20.06%||19.69%||19.74%|
|Assets to Regulatory Capital Multiple6||13.04||13.02||13.19||13.36|
|Net Non-Performing Loans as a Percentage of Gross Loans||0.32%||0.33%||0.35%||0.31%|
|Allowance as a Percentage of Gross Non-Performing Loans||60.4%||57.7%||52.4%||58.3%|
|Book Value per Common Share1||$||18.74||$||17.82||$||16.95||$||15.41|
|Common Share Price - Close1||$||47.83||$||44.65||$||40.47||$||27.77|
|Dividend paid during the period ended1||$||0.16||$||0.16||$||0.14||$||0.13|
|Number of Common Shares Outstanding1||70,059||69,491||69,488||69,294|
1During Q1 2014, the Company paid a stock dividend of one common share
per each issued and outstanding common share. Accordingly, diluted
earnings per share is reduced to half and the number of shares
disclosed is doubled for all periods prior to the dividend presented
for comparative purposes.
2See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures of the unaudited interim consolidated financial report.
3Total assets and loans under administration include both on and off-balance sheet amounts.
4Total loans include loans held for sale.
5These figures relate to the Company's operating subsidiary, Home Trust Company.
6Commencing in Q3 2013, the Company excluded from its assets, for purposes of calculating the Assets to Regulatory Capital Multiple, mortgages that are off-balance sheet as a result of sales of residual interest in light of regulatory communications confirming this treatment. The comparative multiple for Q2 2013 have been restated to reflect this treatment.
SECOND QUARTER 2014 HIGHLIGHTS
Key results for the second quarter and the first six months of 2014 included:
Net income increased to $73.7 million for the second quarter and to
$143.5 million for the first six months of 2014, up 19.8% and 18.3%
from the comparable periods of 2013 and 5.7% over Q1 2014.
Diluted earnings per share were $1.05 for the quarter and $2.04 year to
date, representing increases of 19.3% and 17.2% over the $0.88 and
$1.74 earned in the comparable periods of 2013 and 5.0% over the $1.00
Total net interest income, before provisions, increased to $115.1
million for the quarter and $225.5 million year to date from the $102.5
million and $204.4 million in the comparable periods of 2013 and up
4.3% from the $110.4 million last quarter. Net interest income on the
non-securitized portfolio continued its increasing trend reaching
$104.9 million in the quarter and $207.8 million year to date, up 15.4%
and 16.0% from the comparable periods of 2013 and up 2.0% from last
quarter, reflecting strong and consistent growth in the traditional
portfolio. Securitized net interest income declined to $10.2 million
in the quarter and $17.8 million year to date, from $11.6 million and
$25.3 million in the comparable periods of 2013, consistent with the
Company's business strategy to replace net interest income with gains
on sale of insured mortgages (please see below).
Net interest margin (TEB) was 2.26% in the quarter and 2.23% year to
date, up from 2.14% and 2.15% in the comparable periods of 2013 and up
from 2.19% last quarter. Net interest margin (TEB) continues to be
favourably influenced by the relative shift to higher yielding
mortgages on balance sheet, partially offset by lower spreads on
traditional uninsured single family mortgages. This is reflective of
higher average credit quality on new originations over the past year
and higher overall average levels of liquidity. Additionally,
prepayment penalties on insured multi-unit residential mortgages during
the quarter contributed to the increase in overall net interest margin.
Securitization income, including gains on sale mentioned above, was $7.5
million for the quarter and $16.2 million year to date compared to $0.5
million and $2.0 million in the comparable periods of 2013 and $8.7
million last quarter.
Return on equity was strong at 23.1% for the quarter and 23.0% for the
first six months of 2014 and continues to be in excess of the Company's
minimum performance objective of 20%.
The credit quality of the loan portfolio remains strong with continued
low non-performing loans and credit losses. 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 last quarter, 0.35% at the end of 2013
and 0.31% one year ago. Included in the non-performing loans is an
insured multi-unit residential property with an outstanding amount of
$9.7 million, where the Company expects no losses. In the absence of
this fully insured CMHC loan the NPL ratio would have been 0.26%. The
annualized credit provision as a percentage of gross uninsured loans of
0.10% has decreased from 0.11% in Q1 2014 and 0.17% in Q2 2013,
reflecting lower individual provisions and remains below the target
range of 0.15%-0.25%.
Capital ratios remain high with Home Trust's Common Equity Tier 1 ratio
(CET 1 ratio) ending the quarter at 17.45%, while Tier 1 and Total
Capital ratios were 17.45% and 20.20%, respectively. Home Trust's
Assets to Capital multiple (ACM) was 13.04 at the end of the quarter
compared to 13.02 last quarter, 13.19 at the end of 2013 and 13.36 one
Total loans under administration, which includes securitized mortgages
that qualify for off-balance sheet accounting, reached $21.24 billion
from $18.84 billion one year ago, reflecting an increase of $2.40
billion or 12.7% and an increase of $1.29 billion or 6.5% from $19.94
billion at the end of 2013 (13.0% on an annualized basis).
Total mortgage originations reflected very strong activity in the
quarter reaching $2.33 billion and increasing by 39.0% from $1.68
billion last quarter and 42.7% from $1.63 billion in the same quarter
last year. Year-to-date mortgage originations of $4.01 billion
increased 33.0% from $3.01 billion last year. The increase in mortgage
originations over 2013 reflect the continued strong demand for the
Company's residential lending product offerings and increased activity
in Accelerator originations.
Traditional residential mortgage originations increased by 23.7% to
$1.53 billion from $1.24 billion in the same quarter of 2013 and also
increased 42.5% from $1.07 billion in a seasonally slower Q1 2014.
Year-to-date traditional mortgage originations increased 16.7% to $2.60
billion from $2.23 billion last year. The Company continues to
experience strong demand for its traditional product offerings, which
continue to be of high credit quality. This continues to enhance
profitability and asset quality.
Accelerator (insured) residential mortgage originations experienced
significant growth in the quarter, more than doubling to $619.6 million
from $260.3 million in Q2 2013 and $289.5 million last quarter.
Year-to-date originations increased to $909.1 million from $381.9
million last year, an increase of 138.0%. The favourable regulatory
ruling regarding the sale of residual interests in Q3 2013 led the
Company to increase its activity in insured lending during the second
half of 2013 and into 2014.
Multi-unit residential mortgage originations were $64.5 million in the
quarter and $278.1 million year to date compared to $54.3 million and
$257.0 million in the comparable periods of 2013 and $213.6 million
last quarter. Multi-unit residential mortgage originations are mostly
insured and subsequently securitized through programs that qualify for
off-balance sheet accounting resulting in the securitization gains
Commercial mortgage and other loan advances were $78.5 million for the
quarter and $150.5 million year to date compared to $54.2 million and
$92.7 million in the comparable periods of 2013 and $72.0 million last
quarter. Store and apartment mortgage advances were $37.7 million in
the quarter and $65.3 million year to date compared to $27.5 million
and $51.1 million in the comparable periods of 2013 and $27.6 million
in last quarter.
The consumer retail credit portfolio, which includes loans to purchase
durable household goods, such as water heaters and larger-ticket home
improvement items, reached $359.0 million at the end of Q2 2014, up
3.5% from $346.9 million at the end of last quarter, up 5.6% from
$340.0 million at the end of 2013 and up 15.5% from $310.9 million one
year ago. The Company continues to be successful at expanding
relationships with its business partners to increase this portfolio
which offers attractive returns for the risk profile.
During the quarter the Company reached an agreement with a major
customer for the prepayment of approximately $240 million of water
heater loans and leases and other loans, pending sale of the customer's
business. As part of this proposed transaction, the Company will
receive a prepayment penalty, expected to be in the range of $32 to $38
million. This penalty will more than compensate the Company for future
interest margin that will be lost as a result of the prepayment. The
transaction is pending regulatory approval of the customer's business
sale and will be recorded when such approval is received. On
completion of the transaction, the Company will reinvest the funds in
lending assets and earn additional interest margin.
Total deposits reached $13.75 billion, up 5.1% from last quarter, 7.7%
from the end of 2013 and 23.1% from one year ago.
The Company initiated three new programs over the last year to diversify
its deposit-taking model, a high-interest savings account, Oaken
Financial direct-to-consumer deposit brand and an institutional deposit
program. During the quarter, Oaken Online Banking was launched,
providing Oaken customers with greater banking convenience, including
security features to safeguard client personal and financial
information. This initiative represents Oaken's ongoing aim of
becoming the leading alternative for Canadians to securely save and
invest their money and the Company's commitment to diversify its
sources of funding.
- Oaken deposits at the end of the quarter increased by 22.6% over the balance last quarter, 55.0% over the balance at the end of 2013 and to over two times the balance one year ago, and the Oaken offerings were further strengthened by the successful launch of the Oaken Online Banking during the quarter. The high-interest saving accounts also grew significantly reaching a balance at the end of the quarter of $577.1 million, representing an increase of 28.0% over $450.9 million last quarter, an increase of 71.1% over $337.2 million at the end of 2013 and over four times the balance of $108.1 million one year ago. During the quarter, the Company issued $500 million of institutional deposits, for a total of $800 million since the program was initiated in December 2013. These deposits are for fixed terms and have overall costs that are comparable with yields on individual deposits received through the deposit broker channel.
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 approved an increase in the quarterly dividend of 12.5% to $0.18 per common share, payable on September 1, 2014 to shareholders of record at the close of business on August 11, 2014.
The Company continues to deliver solid results in terms of growth, high returns and increased dividends. Despite the modest economic improvement in Canada, the Company's performance continues to reflect the strength and the successful execution of its core strategy.
|GERALD M. SOLOWAY||KEVIN P.D. SMITH|
|Chief Executive Officer||Chair of the Board|
|July 30, 2014|
Additional information concerning the Company's targets and related expectations for 2014, including the risks and assumptions underlying these expectations, may be found in the Management's Discussion and Analysis (MD&A) of the quarterly report.
Second Quarter Results Conference Call
The conference call will take place on Thursday, July 31, 2014 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, July 31, 2014 and midnight Thursday, August 7, 2014 by calling 416-849-0833 or 1-855-859-2056 (enter passcode 26905840). 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 introduced 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 second quarter unaudited interim consolidated financial report, as well as the Company's 2013 Annual Report.
|Consolidated Statements of Income|
|For the three months ended||For the six months ended|
|thousands of Canadian dollars, except per share amounts||June 30||March 31||June 30||June 30||June 30|
|Net Interest Income Non-Securitized Assets|
|Interest from loans||$||176,182||$||171,243||$||153,598||$||347,425||$||301,629|
|Dividends from securities||2,898||2,731||2,795||5,629||5,988|
|Interest on deposits||76,718||73,022||65,640||149,740||128,578|
|Interest on senior debt||1,542||1,580||1,601||3,122||3,184|
|Net interest income non-securitized assets||104,929||102,838||90,930||207,767||179,089|
|Net Interest Income Securitized Loans and Assets|
|Interest income from securitized loans and assets||45,494||45,275||57,953||90,769||119,290|
|Interest expense on securitization liabilities||35,280||37,726||46,351||73,006||93,961|
|Net interest income securitized loans and assets||10,214||7,549||11,602||17,763||25,329|
|Total Net Interest Income||115,143||110,387||102,532||225,530||204,418|
|Provision for credit losses||3,232||3,205||4,429||6,437||9,096|
|Fees and other income||18,439||16,794||15,406||35,233||30,378|
|Net realized and unrealized gains on securities||1,187||752||1,163||1,939||3,109|
|Net realized and unrealized loss on derivatives||(355)||(1,091)||(646)||(1,446)||(1,893)|
|Salaries and benefits||19,872||20,208||16,673||40,080||33,623|
|Other operating expenses||17,636||15,977||15,160||33,613||29,734|
|Income Before Income Taxes||98,154||93,427||80,262||191,581||160,689|
|NET INCOME PER COMMON SHARE|
|AVERAGE NUMBER OF COMMON SHARES OUTSTANDING|
|Total number of outstanding common shares||70,059||69,491||69,294||70,059||69,294|
|Book value per common share||$||18.74||$||17.82||$||15.41||$||18.74||$||15.41|
|During Q1 2014, the Company paid a stock dividend of one common share per each issued and outstanding common share.|
|Accordingly, both basic and diluted net income per common share is reduced to half and the number of shares disclosed is doubled|
|for all periods ending before Q1 2014 presented for comparative purposes.|
|Consolidated Statements of Comprehensive Income|
|For the three months ended||For the six months ended|
|June 30||March 31||June 30||June 30||June 30|
|thousands of Canadian dollars (Unaudited)||2014||2014||2013||2014||2013|
|OTHER COMPREHENSIVE INCOME (LOSS)|
|Available for Sale Securities and Retained Interest|
|Net unrealized gains (losses)||$||5,265||$||4,003||$||(10,736)||$||9,268||$||(3,571)|
|Net gains reclassified to net income||(1,187)||(752)||(1,163)||(1,939)||(3,109)|
|Income tax expense (recovery)||1,080||860||(3,151)||1,940||(1,770)|
|Cash Flow Hedges|
|Net unrealized losses||(295)||(375)||-||(670)||-|
|Net losses reclassified to net income||362||364||372||726||739|
|Income tax expense (recovery)||18||(3)||97||15||192|
|Total other comprehensive income (loss)||$||3,047||$||2,383||$||(8,473)||$||5,430||$||(4,363)|
|Consolidated Balance Sheets|
|June 30||March 31||December 31|
|thousands of Canadian dollars (Unaudited)||2014||2014||2013|
|Cash and Cash Equivalents||$||964,388||$||1,029,440||$||733,172|
|Available for Sale Securities||615,700||453,082||424,272|
|Loans Held for Sale||47,847||121,252||137,975|
|Non-securitized mortgages and loans||13,554,728||12,789,843||12,671,905|
|Collective allowance for credit losses||(32,900)||(32,100)||(31,500)|
|Goodwill and intangible assets||96,331||92,034||89,157|
|LIABILITIES AND SHAREHOLDERS' EQUITY|
|Deposits payable on demand||$||637,632||$||504,308||$||429,269|
|Deposits payable on a fixed date||13,109,993||12,580,629||12,336,685|
|Mortgage-backed security liabilities||577,245||613,495||660,964|
|Canada Mortgage Bond liabilities||4,413,359||4,944,605||5,112,100|
|Deferred tax liabilities||33,007||33,003||34,425|
|Accumulated other comprehensive loss||(13,049)||(16,096)||(18,479)|
|Consolidated Statements of Changes in Shareholders' Equity|
|(Losses) Gains||Net Unrealized||Total|
|on Securities and||Losses||Accumulated|
|Retained Interest||on Cash Flow||Other||Total|
|thousands of Canadian dollars,||Capital||Contributed||Retained||Available||Hedges,||Comprehensive||Shareholders'|
|except per share amounts (Unaudited)||Stock||Surplus||Earnings||for Sale, after Tax||after Tax||Loss||Equity|
|Balance at December 31, 2013||$||70,233||$||5,984||$||1,119,959||$||(15,823)||$||(2,656)||$||(18,479)||$||1,177,697|
|Stock options exercised||12,615||(3,388)||-||-||-||-||9,227|
|Amortization of fair value of|
|employee stock options||-||1,088||-||-||-||-||1,088|
|Repurchase of shares||-||-||-||-||-||-||-|
|($0.32 per share)||-||-||(23,764)||-||-||-||(23,764)|
|Balance at June 30, 2014||$||82,848||$||3,684||$||1,239,676||$||(10,434)||$||(2,615)||$||(13,049)||$||1,313,159|
|Balance at December 31, 2012||$||61,903||$||6,224||$||903,831||$||432||$||(4,177)||$||(3,745)||$||968,213|
|Stock options exercised||2,825||(746)||-||-||-||-||2,079|
|Amortization of fair value of|
|employee stock options||-||941||-||-||-||-||941|
|Repurchase of shares||(66)||-||(2,077)||-||-||-||(2,143)|
|($0.26 per share)||-||-||(18,008)||-||-||-||(18,008)|
|Balance at June 30, 2013||$||64,662||$||6,419||$||1,005,044||$||(4,478)||$||(3,630)||$||(8,108)||$||1,068,017|
|During Q1 2014, the Company paid a stock dividend of one common share per each issued and outstanding common share.|
|Accordingly, dividends per share are reduced by half for all periods prior to the dividend presented for comparative purposes.|
|Consolidated Statements of Cash Flows|
|For the three months ended||For the six months ended|
|June 30||June 30||June 30||June 30|
|thousands of Canadian dollars (Unaudited)||2014||2013||2014||2013|
|CASH FLOWS FROM OPERATING ACTIVITIES|
|Net income for the period||$||73,745||$||61,573||$||143,481||$||121,298|
|Adjustments to determine cash flows relating to operating activities:|
|Amortization of net premium on securities||517||733||1,194||1,210|
|Provision for credit losses||3,232||4,429||6,437||9,096|
|Gain on sale of mortgages or residual interest||(7,177)||(443)||(15,271)||(1,851)|
|Net realized and unrealized gains on securities||(1,187)||(1,163)||(1,939)||(3,109)|
|Amortization of capital and intangible assets||3,219||2,706||6,196||5,319|
|Amortization of fair value of employee stock options||449||436||1,088||941|
|Deferred income taxes||4||2,612||(1,418)||(142)|
|Changes in operating assets and liabilities|
|Loans, net of securitization and sales||(129,132)||(368,612)||7,893||(641,497)|
|Derivative assets and liabilities||3,936||15,039||(2,555)||16,706|
|Accrued interest receivable||2,021||921||625||(1,184)|
|Accrued interest payable||(14,623)||(17,301)||25,229||23,608|
|Taxes receivable or payable and other||38,151||10,771||32,550||(13,632)|
|Cash flows provided by operating activities||101,981||93,992||441,194||422,903|
|CASH FLOWS FROM FINANCING ACTIVITIES|
|Repurchase of shares||-||(397)||-||(2,143)|
|Exercise of employee stock options||9,159||2,079||9,227||2,079|
|Dividends paid to shareholders||(11,165)||(9,001)||(22,283)||(18,004)|
|Cash flows used in financing activities||(2,006)||(7,319)||(13,056)||(18,068)|
|CASH FLOWS FROM INVESTING ACTIVITIES|
|Activity in securities|
|Proceeds from sales||213,609||68,202||240,410||129,223|
|Purchases of capital assets||367||(1,970)||(853)||(3,269)|
|Capitalized intangible development costs||(7,510)||(3,773)||(12,569)||(6,890)|
|Cash flows (used in) provided by investing activities||(165,027)||(10,544)||(196,922)||1,818|
|Net (decrease) increase in cash and cash equivalents during the period||(65,052)||76,129||231,216||406,653|
|Cash and cash equivalents at beginning of the period||1,029,440||639,370||733,172||308,846|
|Cash and Cash Equivalents at End of the Period||$||964,388||$||715,499||$||964,388||$||715,499|
|Supplementary Disclosure of Cash Flow Information|
|Dividends received on investments||$||2,448||$||2,217||$||4,513||$||3,985|
|Income taxes paid||20,421||16,221||38,729||54,965|
Home Capital published its annual financial objectives for 2014 on page 17 of the Company's 2013 Annual Report. The following table compares actual performance to date against each of these objectives.
|Table 1: 2014 Targets and Performance|
|For the six months ended June 30, 2014|
|2014 Targets||Actual Results||Amount||Increase over 2013|
|Growth in net income||13%-18%||18.3%||$||143,481||$||22,183|
|Growth in diluted earnings per share1||13%-18%||17.2%||2.04||0.30|
|Growth in total loans under administration2||15%-20%||13.0%||21,235,234||1,293,402|
|Return on shareholders' equity||20.0%||23.0%|
|Efficiency ratio (TEB)3||28.0% - 32.0%||28.4%|
|Provision as a percentage of gross uninsured loans (annualized)||0.15% - 0.25%||0.10%|
1The Company's diluted earnings per share has been presented as if the
stock dividend was retrospectively applied to all comparative periods
2Change represents growth over December 31, 2013 on an annualized basis and includes loans held for sale.
3See definition of TEB under Non-GAAP Measures of the unaudited interim consolidated financial report.
|Table 2: Reconciliation of Net Income to Adjusted Net Income|
|Quarter||Year to date|
|(000s, except % and per share amounts)||Q2||Q1||%||Q2||%||%|
|Reconciliation of Net Income to Adjusted Net Income|
|Adjustment for derivative restructuring - IFRS conversion (net of tax)||827||917||(9.8)%||2,309||(64.2)%||1,744||$||4,092||(57.4)%|
|Adjustment for disputed loans to condominium corporations (net of tax)||-||-||-||-||-||-||1,508||(100.0)%|
|Adjustment for investment tax credit benefits (net of tax)||(956)||(515)||85.6%||(1,985)||(51.8)%||(1,471)||(1,985)||(25.9)%|
|Adjusted Net Income2||$||73,616||$||70,138||5.0%||$||61,897||18.9%||$||143,754||$||124,913||15.1%|
|Adjusted Basic Earnings per Share1,2||$||1.06||$||1.01||5.0%||$||0.89||19.1%||$||2.06||$||1.80||14.4%|
|Adjusted Diluted Earnings per Share1,2||$||1.04||$||1.00||4.0%||$||0.89||16.9%||$||2.04||$||1.79||14.0%|
|1The Company's basic and diluted earnings per share for periods ending in 2013, have been reduced to half for all periods reflecting the impact of the stock dividend|
|declared in Q1 2014.|
|2 Adjusted net income and Adjusted earnings per share are defined in the Non-GAAP section of the unaudited interim 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 on pages 54 through 67 of the Company's 2013 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 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 2014, management's expectations continue to assume:
The Canadian economy will continue to produce modest growth in 2014 with
stable to modestly improving employment conditions in most regions, and
inflation will generally be within the Bank of Canada's target of 1% to
3% leading to stable credit losses and strong demand for the Company's
The Canadian economy will continue to be influenced by the economic
conditions in the United States and global markets; as such, the
Company is prepared for the variability to plan that may result.
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 rate, for the remainder of
2014. This is expected to continue to support relatively low mortgage
interest rates for the foreseeable future.
The housing market will likely remain stable with balanced supply and
demand conditions in most regions supported by continued low interest
rates, relatively stable to improving employment, and immigration.
There will be modest declines in housing starts and resale activity
with stable prices throughout most of Canada. This supports continued
stable credit losses and strong demand for the Company's lending
Consumer debt levels will remain serviceable by Canadian households.
- The Company will have access to the mortgage and deposit markets through broker networks.
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 Second Quarter 2014 Report.
The Company's continuous disclosure materials, including interim filings, annual Management's Discussion and Analysis and audited consolidated financial statements, Annual Information Form, Notice of Annual Meeting of Shareholders and Proxy Circular are available on the Company's website at www.homecapital.com, and on the Canadian Securities Administrators' website at www.sedar.com.
About Home Capital
Home Capital Group Inc. is a public company, traded on the Toronto Stock
Exchange (HCG), operating through its principal subsidiary, Home Trust
Company. Home Trust is a federally regulated trust company offering
deposits, 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.