2019 earnings presentation February 21, 2020 1
Forward-looking statements From time to time Home Capital Group Inc. (the Company) 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 2019 Annual and Fourth 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 in the 2019 Annual and Fourth 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, 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 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. 2
Overview Yousry Bissada, CEO 3
Helping Canadians build their financial future Mortgage customers Broker partners Oaken depositors Employees 4
2019: A year of growth and innovation Continued Successful Deposit Growth in Launch of value creation launch of growth originations Ignite through first cross- through our and loans Program strategic return border Oaken under and first of capital RMBS channel administration deliverables 5
Financial results Brad Kotush, CFO 6
Q4 highlights Net income - millions Earnings per share $42.0 $0.80 $40.0 $41.2 $0.72 $0.60 $0.65 $38.0 $36.0 $0.40 $37.2 $0.46 $35.8 $34.0 $0.20 $32.0 $30.0 $- Q4 2018 Q4 2019 Q4 2019 Adjusted¹ Q4 2018 Q4 2019 Q4 2019 Adjusted¹ Book value per share Shares outstanding at year-end (millions) $30.00 64.0 62.0 $29.33 $28.00 62.1 60.0 $26.00 58.0 $26.43 56.0 57.3 $24.00 54.0 $22.00 52.0 $20.00 50.0 Q4 2018 Q4 2019 Q4 2018 Q4 2019 1 See definition of Adjusted Net Income and Adjusted Diluted Earnings per Share in the Company’s 2019 Annual and Fourth Quarter Consolidated Financial Report. 7
Q4 earnings per share increase driven by net interest income growth and share repurchases $1.00 0.25 $0.90 (0.05) $0.80 0.07 0.72 $0.70 0.65 0.17 (0.17) (0.01) $0.60 $0.50 0.46 $0.40 $0.30 $0.20 $0.10 $0.00 Share repurchases Non-interest income Other Adj. for Ignite Program Q4 2018 EPS Net interest income Non-interest expense Q4 2019 EPS Adjusted Q4 2019 EPS 8
Summary of adjustments related to Home Trust’s Ignite Program Q4 2019 Q3 2019 Adjustment for Adjustment for Reported Adjusted 1 Reported Adjusted 1 Ignite Program Ignite Program Net income (millions) $37.23 $3.92 $41.15 $39.02 $2.93 $41.95 Adjustment for Adjustment for Reported Adjusted 1 Reported Adjusted 1 Ignite Program Ignite Program Earnings per share $0.65 $0.07 $0.72 $0.67 $0.05 $0.72 Efficiency ratio (TEB) 55.6% (4.3%) 51.3% 51.3% (3.5%) 47.8% Return on equity 9.0% 0.9% 9.9% 9.5% 0.7% 10.2% (annualized) Resulting from changes in estimated useful life of legacy IT investment and implementation expenses 1 See definition of Adjusted Net Income, Adjusted Earnings per Share, Adjusted Efficiency Ratio and Adjusted Return on Shareholders’ Equity under Non-GAAP Measures in the Company’s 2019 Annual and Fourth Quarter 9 Consolidated Financial Report.
Single-family residential originations for 2019 Full year Quarterly $1,400 $5,000 $4,500 $1,200 $197.4 $86.3 $48.0 $4,000 $237.4 $1,000 $3,500 $3,000 $800 Millions Millions $2,500 +11.2% +0.8% $600 $4,179.9 $1,112.1 $1,120.5 $2,000 $3,757.7 $1,500 $400 $1,000 $200 $500 $0 $0 2018 2019 Q4 2018 Q4 2019 Classic single-family Accelerator single-family Classic single-family Accelerator single-family 10
Loan growth Total loan portfolio (billions) $17.5 $17.0 $17.2 +5.5% y/y $17.0 $16.5 $16.7 $16.5 $16.3 $16.0 $15.5 $15.0 $14.5 $14.0 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 11
Continuing improvement in net interest margin Net interest margin (TEB 1 ) 2.35% 2.31% 2.30% 2.22% Higher yields on 2.25% most asset 2.20% classes 2.15% 2.09% 2.10% 2.03% 2.02% 2.05% 2.01% Benefit of 1.99% 2.00% 1.91% favourable asset 1.95% mix 1.90% 1.85% Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 1 Net interest margin is a measure of profitability of assets. Net interest margin (TEB) is calculated by taking net interest income, on a taxable equivalent basis, divided by the average total assets. 12
Oaken deposits continue to grow with focus on GICs Broker and Oaken deposits in $billions Oaken deposits by product in $billions $16.0 $3.4 $13.6 $3.5 $13.5 $13.5 $13.5 $12.9 $14.0 16.4% $0.6 $3.0 $2.9 $12.0 $3.1 $3.3 $3.4 $2.7 $2.5 $10.0 $2.0 $8.0 $1.5 83.6% $6.0 $2.8 $10.6 $10.4 $10.2 $10.2 $10.2 $1.0 $4.0 $2.0 $0.5 $- $0.0 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q4 2019 Broker Oaken Total GICs Savings accounts Total Oaken now accounts for 24.6% of deposits with majority in the form of term deposits 13
Update on RMBS Ø First transaction has been well-received by the market Ø Credit, maturity and prepayment experience in line with initial estimates Ø Announcement of new RMBS issuer is positive for market development Ø We plan to be a serial issuer of RMBS going forward 14
High Beacon scores and low average loan to value measurements Weighted average loan to value Weighted-average Beacon score 80.0% 800 70.9% 704 696 70.0% 700 61.5% 60.0% 600 50.0% 500 40.0% 400 30.0% 300 20.0% 200 10.0% 0.0% 100 New uninsured single-family All uninsured single-family residential 0 residential mortgages originated in mortgages Q4 Classic originations during Q4 Total Classic portfolio Credit quality of our single-family residential mortgage book is evidence of our sustainable risk culture 15
Net non-performing loans and NPL allowance 0.50% 30.0% 0.45% 0.44% 0.40% 25.2% 25.0% 0.35% 0.31% 0.30% 20.0% 0.25% 0.20% 15.0% 0.15% 0.10% 10.0% 0.05% 0.00% 5.0% 6 6 6 6 7 7 7 7 8 8 8 8 9 9 9 9 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q Q 0.0% Net Non-Performing Loans as a % of Gross Loans Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2018 2018 2018 2018 2019 2019 2019 2019 Net Non-Performing Single-Family Residential Loans as a % of NPL Allowance as a Percentage of Gross NPL Gross Single-Family Residential Loans Results in 2018 and 2019 are reported under IFRS 9 and results in 2017 are reported under IAS 39 which may limit comparability to prior periods. 16
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