Investor presentation May 21 st , 2019 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 First 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 First 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
Discussion topics • Home Capital helps Canadians own homes • New immigrants • Business for self • Growth in our mortgage business • Credit quality • Growth in Oaken channel • IT Roadmap • Substantial Issuer Bid 2018 • Capital position and NCIB activity • Valuation and consensus 3
Helping Canadians own homes The Canadian mortgage market $300 million return of capital to Canadian mortgage debt ($Billions) • $1.5 trillion in mortgage debt outstanding as at shareholders $2,000 December 2018 $1,542 $1,500 • Big 5 banks hold 72.6% compared with 75.3% in $1,000 2017 (Source: Teranet) $500 $- • Home Trust lends to several target market segments: • New Canadians Source: Bank of Canada • Self-employed • Bruised credit Geographic segmentation as at March 2019 • Other Difference is in the process used to underwrite, BC and 7% Ontario not the quality of the underwriting Alberta 14% BC and Alberta • Home Trust borrowers are subject to stress test Other and income verification requirements Ontario 79% 4
Helping Canadians own homes - Immigration Population of new Canadians expected to grow Historical and target immigration figures 360,000 340,000 340,000 330,000 320,000 300,000 310,000 25% in 296,346 300,000 five years 280,000 280,700 271,660 260,000 257,900 259,000 260,400 240,000 248,700 220,000 200,000 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 (target) (planned) (planned) (planned) Source: Minister of Immigration, Refugees and Citizenship October 31 Report to Parliament 5
Helping Canadians own homes – Self-employed Our clients are entrepreneurs Self-employment in Canada Number of self-employed workers in 2,900 17.00% 15.24% Canada has grown Percentage self-employed 15.32% 16.50% 2,850 15.38% 15.81% 16.00% 2,800 15.31% Important segment for Home Capital: 15.46% 15.43% 15.50% 15.33% 2,750 15.36% Significant percentage of our 15.00% 2,700 originations in 2018 14.50% 2,650 14.00% 2,600 13.50% This is a segment we know well, and 2,550 13.00% know how to underwrite 2010 2011 2012 2013 2014 2015 2016 2017 2018 Number of self-employed Percentage self-employed Source: Statistics Canada 6
Growth in single-family mortgage originations 2018 versus 2017 Q1 2019 versus Q1 2018 $1,000 $4,500 $950 $4,000 +19.5% +7.4% $900 $3,500 $850 $3,000 $800 (000s) (000s) $2,500 $750 $2,000 $700 $1,500 $650 $1,000 $600 $500 $550 $- $500 2017 2018 Q1 2018 Q1 2019 Strength in 2018 carrying over into 2019 Large banks have stated their expected growth in 2019 is “mid single - digits” Q1 2018 volumes increased by pull-through of pre-B20 demand 7
High credit quality of our residential loan portfolio 720 706 710 700 High Beacon scores 690 703 680 670 660 650 Stable and moderate loan- 640 to-value (LTV) levels on both new originations and Wt. Avg. Original Beacon Wt. Avg. Current Beacon overall portfolio Weighted-Average LTV on new Uninsured Single-Family Residential Mortgages Originated in the period 80.0% Evidence of underwriting Weighted-Average LTV on all Uninsured Single-Family Residential Mortgages 70.1% discipline and active risk 70.0% management 59.0% 60.0% 50.0% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2016 2017 2018 2019 8
Credit experience – compares well to the large Canadian banks Provisions for credit losses 2018 Provisions and loss experience 0.25% 0.50% 0.42% 0.15% 0.40% 0.40% 0.25% 0.15% 0.18% 0.02% 0.20% 0.30% 0.24% 0.23% 0.22% 0.05% 0.20% 0.13% 0.12% (0.05%) 0.10% (0.15%) 0.00% Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Bank Bank Bank Bank Bank Bank Bank Bank HCG 2017 2017 2017 2018 2018 2018 2018 2019 Provisions for credit losses as a % of gross loans Provisions (annualized) as a % of gross loans Average of top 8 banks Net write-offs (annualized) as % of gross loans Results in 2018 and 2019 are reported under IFRS9 and results in 2017 are Our borrowers are: reported under IAS39 which may limit comparability to prior periods Hard-working High quality Creditworthy 9
Growth in deposits at Oaken Financial – March 2019 Oaken deposits 21.8% of total Deposit growth of over 10% in Q1 2019 $16.0 $3,200 $11.5 $11.7 $12.1 $12.0 $12.9 $13.5 $12.5 $12.8 $14.0 $3,000 $12.0 $2.9 $2.2 $1.8 $2.7 $2.4 $2.6 +10.2% $2.0 $2.2 (Billions) $10.0 $2,800 $8.0 $6.0 $2,600 $4.0 $2,400 $2.0 $0.0 $2,200 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2017 2017 2017 2018 2018 2018 2018 2019 $2,000 Broker Oaken Total Q4 2018 Q1 2019 Owning our client base Less reliance on brokers Over 95% fixed-term GICs 10
IT Roadmap launched in Q1 2019 MIGRATION TO THE CLOUD For scalable computing on demand PAPERLESS LENDING Paperless underwriting and funding well underway NEAR STRAIGHT THROUGH PROCESSING LAUNCHED For mortgages and GICs 11
Substantial issuer bid 2018: $300 million at $16.50/share Shares 2019E EPS Q3 2018 One year to May 13, 2019 outstanding (Consensus) book value per share $20.00 Prior to SIB 80,246,349 $1.63 $23.82 $19.00 $18.00 Post SIB 62,064,531 $2.11 $25.96 $17.00 5 $16.00 3 (18,181,818) Change 29.3% 9.0% 4 $15.00 $14.00 1 Event Closing price $13.00 2 1 Q2 2018 earnings $13.77 $12.00 $11.00 2 Q3 2018 earnings and SIB $17.46 announcement $10.00 3 SIB execution price $16.50 4 Q4 2018 earnings $16.99 5 Q1 2018 earnings $18.01 Price MA (50D) 12
Capital position at March 31, 2019 1 and NCIB Basel III Common Equity Tier 1 NCIB activity CET1 ratio as of Q1 2019 ➢ Continue to buy back 18.99% 20.00% 18.00% shares under NCIB 16.00% 14.00% 10.83% 12.00% ➢ Up to 10% of public 10.00% 7.00% 8.00% float or ~4.7 million 6.00% 4.00% common shares in 2.00% 0.00% 2019 Home Regulatory Minimum Average of top 8 banks ➢ Capital ratio is not reduced by NCIB Post SIB capital levels still above industry average and regulatory minimums purchases 1 Ratios are based only on Home Trust Company’s consolidated financial position. 13
Recommend
More recommend
