Home Capital Reports Second Quarter 2021 Results
Home Capital reports 118% growth in net income per share
TORONTO–(BUSINESS WIRE)–Home Capital Group Inc. (“Home Capital” or “the Company”) (TSX: HCG) today reported financial results for the three and six months ended June 30, 2021. This press release should be read in conjunction with the Company’s 2021 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 on SEDAR at www.sedar.com.
“I’m very pleased with the accomplishments of the team at Home Capital this quarter,” said Yousry Bissada, President and Chief Executive Officer. “We are creating value for shareholders with growth in originations, the expansion of our whole loan sale program, and the conclusion of another successful cross-border RMBS offering.”
Net Income: $1.42 per share in Q2 2021 compared with $0.65 in Q2 2020
- Net income of $72.8 million or $1.42 per share in Q2 2021, an increase of 14.5% from $1.24 per share in Q1 2021 and 118.5% from $0.65 per share in Q2 2020.
- Adjusted net income of $73.9 million or $1.44 per share in Q2 2021, an increase of 14.3% from $1.26 per share in Q1 2021 and 105.7% from $0.70 per share in Q1 2020. Results are adjusted for items of note related to implementing our Ignite Program.
- Net interest margin of 2.61% in Q2 2021, compared with 2.61% in Q1 2021 and 2.40% in Q2 2020.
- Non-interest expenses of $58.5 million, compared with $64.1 million in Q1 2021 and $66.9 million in Q2 2020.
Asset Growth: Mortgage originations increased by 42% over Q2 2020
- Mortgage originations of $2.13 billion in Q2 2021, compared with $1.60 billion in Q1 2021 and $1.50 billion in Q2 2020.
- Single-family mortgage originations of $1.84 billion in Q2 2021, compared with $1.33 billion in Q1 2021 and $1.13 billion in Q2 2020.
- Total loan portfolio of $17.16 billion at the end of Q2 2021, a decrease of 0.7% from the end of Q1 2021 and 0.3% from the end of Q2 2020.
- Loans under administration of $22.82 billion at the end of Q2 2021, up 0.2% from the end of Q1 2021 and down 0.3% from the end of Q2 2020.
Funding: Deposits through our Oaken channel of $4.16 billion make up 30.9% of total deposits
- Total deposits of $13.47 billion at the end of Q2 2021, compared with $13.77 billion at the end of Q1 2021 and $14.01 billion at the end of Q2 2020.
- Total Oaken deposits of $4.16 billion at the end of Q2 2021, an increase of 2.5% from the end of Q1 2021 and 13.3% from the end of Q2 2020.
- Oaken’s share of total deposits was 30.9% at the end of Q2 2021, compared with 29.5% at the end of Q1 2021 and 26.2% at the end of Q2 2020.
Credit Quality: Release of credit provisions of 0.44% of gross loans compared with 0.28% in Q1 2021
- Release of provision for credit losses (“PCL”) of $18.8 million in Q2 2021 compared with $12.1 million in Q1 2021 and a provision expense of $18.7 million in Q2 2020.
- Allowance for credit losses of 0.23% of gross loans, compared with 0.34% at the end of Q1 2021 and 0.63% at the end of Q2 2020.
- Net recoveries were below one basis point in Q2 2021, compared to net write-offs as a percentage of gross loans of 0.01% in Q1 2021 and 0.02% in Q2 2020.
- Net non-performing loans (represented by Stage 3 loans under IFRS 9) were 0.24% of gross loans at the end of Q2 2021, compared with 0.38% at the end of Q1 2021 and 0.42% at the end of Q2 2020.
Outlook
“We see considerable opportunities in a strong housing market, diversifying our funding options and adding new capabilities that drive sustainable growth,” said Mr. Bissada. “As the economy continues to open up, we believe we are well-positioned to drive progress in all our focus areas.”
Second Quarter 2021 Results Conference Call and Slide Presentation Webcast
The conference call will take place by webcast on Friday, August 13, 2021, at 8:00 a.m. EDT. Participants may register in advance for the webcast by visiting this link. The call will also be accessible in listen-only mode on Home Capital’s website at www.homecapital.com in the Investor Relations section of the website. The archived audio webcast will be available for 90 days on Home Capital’s website at www.homecapital.com.
Financial Highlights |
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| For the three months ended | For the six months ended | ||||||||||||||||||
(000s, except Percentage and Per Share Amounts) | June 30 | March 31 | June 30 | June 30 | June 30 | |||||||||||||||
INCOME STATEMENT HIGHLIGHTS |
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Net Interest Income | $ | 123,742 |
| $ | 125,936 |
| $ | 115,815 |
| $ | 249,678 |
| $ | 230,267 |
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Net Interest Margin (TEB1) |
| 2.61 | % |
| 2.61 | % |
| 2.40 | % |
| 2.61 | % |
| 2.39 | % | |||||
Efficiency Ratio (TEB1) |
| 42.1 | % |
| 45.9 | % |
| 50.5 | % |
| 44.0 | % |
| 48.6 | % | |||||
Adjusted Efficiency Ratio (TEB1)2 |
| 41.0 | % |
| 44.7 | % |
| 47.9 | % |
| 42.9 | % |
| 46.2 | % | |||||
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Provision as a Percentage of Gross Loans (annualized) |
| (0.44 | )% |
| (0.28 | )% |
| 0.43 | % |
| (0.36 | )% |
| 0.57 | % | |||||
Net (Recoveries) Write-Offs as a Percentage of Gross Loans (annualized) |
| 0.00 | % |
| 0.01 | % |
| 0.02 | % |
| 0.00 | % |
| 0.03 | % | |||||
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Net Income | $ | 72,756 |
| $ | 64,503 |
| $ | 34,132 |
| $ | 137,259 |
| $ | 61,848 |
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Adjusted Net Income2 |
| 73,879 |
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| 65,701 |
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| 36,648 |
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| 139,580 |
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| 66,524 |
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Diluted Earnings per Share | $ | 1.42 |
| $ | 1.24 |
| $ | 0.65 |
| $ | 2.65 |
| $ | 1.17 |
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Adjusted Diluted Earnings per Share2 |
| 1.44 |
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| 1.26 |
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| 0.70 |
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| 2.70 |
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| 1.26 |
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Return on Shareholders’ Equity (annualized) |
| 16.6 | % |
| 15.2 | % |
| 8.9 | % |
| 15.9 | % |
| 7.6 | % | |||||
Adjusted Return on Shareholders’ Equity (annualized)2 |
| 16.9 | % |
| 15.5 | % |
| 9.5 | % |
| 16.1 | % |
| 8.2 | % | |||||
ORIGINATIONS |
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Total Mortgage Originations | $ | 2,130,106 |
| $ | 1,600,418 |
| $ | 1,495,173 |
| $ | 3,730,524 |
| $ | 3,112,385 |
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Single-Family Residential Mortgage Originations |
| 1,840,597 |
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| 1,327,988 |
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| 1,127,846 |
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| 3,168,585 |
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| 2,177,601 |
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| As at |
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| June 30 | March 31 | June 30 |
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BALANCE SHEET HIGHLIGHTS |
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Total Assets | $ | 18,833,004 |
| $ | 18,952,048 |
| $ | 19,153,701 |
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Total Assets Under Administration3 |
| 24,473,401 |
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| 24,447,737 |
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| 24,665,030 |
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Total Loan Portfolio4 |
| 17,155,654 |
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| 17,275,610 |
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| 17,207,847 |
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Total Loans Under Administration3 |
| 22,815,744 |
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| 22,772,565 |
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| 22,875,730 |
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Deposits |
| 13,467,613 |
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| 13,769,162 |
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| 14,010,512 |
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FINANCIAL STRENGTH |
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Capital Measures5 |
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Common Equity Tier 1 Capital Ratio |
| 22.27 | % |
| 21.01 | % |
| 18.48 | % |
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Leverage Ratio |
| 8.70 | % |
| 8.28 | % |
| 7.38 | % |
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Credit Quality |
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Net Non-Performing Loans as a Percentage of Gross Loans |
| 0.24 | % |
| 0.38 | % |
| 0.42 | % |
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NPL Allowance as a Percentage of Gross NPL6 |
| 18.7 | % |
| 16.5 | % |
| 31.0 | % |
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Share Information |
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Book Value per Common Share | $ | 35.32 |
| $ | 33.85 |
| $ | 30.11 |
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Number of Common Shares Outstanding |
| 50,342 |
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| 50,842 |
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| 51,805 |
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1 See definition of Taxable Equivalent Basis (TEB) under Non-GAAP Measures in the Company’s 2021 Second Quarter Report.
2 See definition of Adjusted Efficiency Ratio, Adjusted Net Income, Adjusted Diluted Earnings per Share, and Adjusted Return on Shareholders’ Equity under Non-GAAP Measures in the Company’s 2021 Second Quarter Report and the Reconciliation of Net Income to Adjusted Net Income in Table 1 of the Company’s 2021 Second Quarter Report.
3 Total assets and loans under administration include both on- and off-balance sheet amounts. Total on-balance sheet loans include loans held for sale and are presented gross of allowance for credit losses.
4 Total loan portfolio is presented gross of allowance for credit losses and excludes loans held for sale.
5 These figures relate to the Company’s operating subsidiary, Home Trust Company.
6 NPL indicates non-performing loans, defined as Stage 3 loans under IFRS 9 Financial Instruments. See definition of impaired or non-performing loans under Glossary of Terms in the Company’s 2021 Second Quarter Report.
Caution Regarding Forward-Looking Statements
From time to time Home Capital Group Inc. makes written and verbal forward-looking statements. These are included in the Annual Report, periodic reports to shareholders, regulatory filings, press releases, Company presentations and other Company communications. Forward-looking statements are made in connection with business objectives and targets, Company strategies, operations, anticipated financial results and the outlook for the Company, its industry, and the Canadian economy. These statements regarding expected future performance are “financial outlooks” within the meaning of National Instrument 51-102. Please see the risk factors, which are set forth in detail in the Risk Management section of the 2021 Second Quarter Report, as well as the Company’s other publicly filed information, which is available on the System for Electronic Document Analysis and Retrieval (SEDAR) at www.sedar.com, for the material factors that could cause the Company’s actual results to differ materially from these statements. These risk factors are material risk factors a reader should consider, and include credit risk, liquidity and funding risk, structural interest rate risk, operational risk, investment risk, strategic risk, reputational risk, compliance risk and capital adequacy risk along with additional risk factors that may affect future results. Forward-looking statements can be found in the Report to the Shareholders and the Outlook section of the 2021 Second Quarter Report. Forward-looking statements are typically identified by words such as “will,” “believe,” “expect,” “anticipate,” “intend,” “should,” “estimate,” “plan,” “forecast,” “may,” and “could” or other similar expressions.
By their very nature, these statements require the Company to make assumptions and are subject to inherent risks and uncertainty, general and specific, which may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These risks and uncertainties include, but are not limited to, the impacts of the novel coronavirus disease (COVID-19) pandemic and government responses to it, global capital market activity, changes in government monetary and economic policies, changes in interest rates, inflation levels and general economic conditions, legislative and regulatory developments, climate change, competition and technological change. The preceding list is not exhaustive of possible factors.
These and other factors should be considered carefully and readers are cautioned not to place undue reliance on these forward-looking statements. The Company presents forward-looking statements to assist shareholders in understanding the Company’s assumptions and expectations about the future that are relevant in management’s setting of performance goals, strategic priorities and outlook. The Company presents its outlook to assist shareholders in understanding management’s expectations on how the future will impact the financial performance of the Company. These forward-looking statements may not be appropriate for other purposes. The Company does not undertake to update any forward-looking statements, whether written or verbal, that may be made from time to time by it or on its behalf, except as required by securities laws.
Assumptions about the performance of the Canadian economy in 2021 and its effect on Home Capital’s business are material factors the Company considers when setting strategic priorities and outlook. In determining expectations for economic growth, both broadly and in the financial services sector, the Company primarily considers historical and forecasted economic data provided by the Canadian government and its agencies and other third-party providers. In setting and reviewing its strategic priorities and outlook for 2021, management makes certain assumptions about the Canadian economy, employment conditions, interest rates, levels of housing activity, household debt service levels and the Company’s continued access to broker mortgage and deposit markets.
The global pandemic related to the outbreak of COVID-19 significantly impacts these assumptions. Updated forward-looking macroeconomic assumptions have been incorporated into the models used in the Company’s expected credit loss estimation process. Please see Note 5(C) to the unaudited interim consolidated financial statements included in the Company’s 2021 Second Quarter Report for more information on these assumptions. The full extent of the impact that COVID-19, including government and/or regulatory responses to the outbreak, will have on the Canadian economy and the Company’s business remains uncertain and difficult to predict. Please see the Impact of COVID-19, the Outlook and the Risk Management sections in the Management’s Discussion and Analysis included in the 2021 Second Quarter Report for more information.
Non-GAAP Measures
The Company has adopted IFRS as its accounting framework. IFRS are the generally accepted accounting principles (GAAP) for Canadian publicly accountable enterprises. The Company uses a number of financial measures to assess its performance. Some of these measures are not calculated in accordance with GAAP, are not defined by GAAP, and do not have standardized meanings that would ensure consistency and comparability between companies using these measures. Definitions of non-GAAP measures can be found under Non-GAAP Measures in the Management’s Discussion and Analysis included in the Company’s 2021 Second Quarter Report.
Regulatory Filings
The Company’s continuous disclosure materials, including interim filings, annual Management’s Discussion and Analysis and audited consolidated financial statements, Annual Information Form, Notice of Annual Meeting of Shareholders, and Proxy Circular are available on the Company’s website at www.homecapital.com and on the Canadian Securities Administrators’ website at www.sedar.com.
About Home Capital
Home Capital Group Inc. is a public company, traded on the Toronto Stock Exchange (HCG), operating through its principal subsidiary, Home Trust Company. Home Trust is a federally regulated trust company offering residential and non-residential mortgage lending, securitization of residential mortgage products, consumer lending and credit card services. In addition, Home Trust offers deposits via brokers and financial planners, and through a direct-to-consumer brand, Oaken Financial. Home Trust also conducts business through its wholly owned subsidiary, Home Bank. Licensed to conduct business across Canada, we have offices in Ontario, Alberta, British Columbia, Nova Scotia, and Quebec.
Contacts
Jill MacRae
VP, Investor Relations and ESG
(416) 933-4991
[email protected]