Q2 2020 earnings presentation August 6, 2020 1
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 2020 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 in the 2020 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. 2
Overview Yousry Bissada, CEO 3
Highlights of Q2 2020 All Ignite Worked with Industry Launched Growth in teams new borrowers to residential and activity shows transitioned projects in commercial find optimal evidence of to working digital loan solutions healthy and remotely – banking originations beyond initial resilient real projects and loan from Q2 2019 deferral period estate market moving origination forward 4
Supporting our borrowers beyond payment deferrals • Up to two months’ payment deferral to borrowers First request in good standing (Stage 1 or Stage 2) • Full review of financial situation with borrower Later requests • Understanding the impact of different solutions Additional payment Other forms of Return to scheduled deferral accommodation payments 5
Financial results Brad Kotush, CFO 6
Q2 highlights Net income - millions Earnings per share $40.0 $0.80 $36.0 $0.60 $0.70 $36.6 $0.65 $32.0 $34.7 $34.1 $0.58 $0.53 $0.40 $31.9 $28.0 $0.20 $24.0 $- $20.0 Q2 2019 Q2 2019 Q2 2020 Q2 2020 Q2 2019 Q2 2019 Q2 2020 Q2 2020 Adjusted¹ Adjusted¹ Adjusted¹ Adjusted¹ Book value per share Return on equity $32.00 10.0% $30.00 9.5% 8.0% 8.9% 8.4% $30.11 $28.00 7.7% 6.0% $27.80 $26.00 4.0% $24.00 2.0% $22.00 0.0% $20.00 Q2 2019 Q2 2019 Q2 2020 Q2 2020 Q2 2019 Q2 2020 Adjusted¹ Adjusted¹ 1 See definition of Adjusted Net Income, Adjusted Diluted Earnings per Share and Adjusted Return on Shareholders’ Equity in the Company’s 2020 Second Quarter 7 Report.
Impact of higher revenue offset by higher provisions expense 8
Origination growth in Accelerator and Commercial offsets slowdown in Classic $400.0 $272.9 $1,200.0 $37.7 $350.0 $110.1 $1,000.0 $300.0 $800.0 $250.0 Millions Millions $200.0 +7.4% $600.0 $119.3 $1,012.7 +62.3% $150.0 $854.9 $400.0 $257.2 $100.0 $200.0 $106.9 $50.0 $0.0 $- Q2 2019 Q2 2020 Q2 2019 Q2 2020 Classic single-family Accelerator single-family Residential commercial Non-residential commercial 9
On-balance sheet loan portfolio Total loan portfolio (billions) +3.3% y/y $17.5 $17.2 $17.0 $17.2 $17.1 $17.0 $16.7 $16.5 $16.0 $15.5 $15.0 $14.5 $14.0 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 10
Upward trend in credit quality during Q2 in line with sustainable risk culture Weighted-average FICO score Weighted-average loan to value 800 80.0% 711 710 705 69.6% 682 700 70.0% 60.3% 600 60.0% 500 50.0% 400 40.0% 300 30.0% 200 20.0% 100 10.0% 0 0.0% Classic originations Classic originations Total Classic Total Classic during Q1 during Q2 portfolio at end of portfolio at end of New uninsured single-family All uninsured single-family Q1 Q2 residential mortgages originated residential mortgages at end of in Q2 2020 Q2 Loans are of high quality and secured by assets at a low LTV 11
Net interest margin 31 bps higher compared with Q2 2019 Net interest margin (TEB 1 ) Increased due to : 2.45% 2.40% 2.38% Higher average yields 2.35% 2.31% on non-securitized products 2.22% 2.25% Lower rates on 2.15% 2.09% deposit liabilities 2.03% 2.05% 2.01% Partially offset by : 1.99% 1.95% Higher balance of low- yielding liquid assets 1.85% Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 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
Growing deposits through our Oaken channel Broker and Oaken deposits in $billions Oaken deposits by product in $billions $16.0 $3.7 $13.9 $4.0 $13.6 $14.0 $13.5 $13.5 $14.0 $3.5 16.4% $3.5 $3.7 $0.6 $12.0 $3.1 $3.4 $3.3 $3.0 $10.0 $2.5 $8.0 $2.0 83.6% $6.0 $3.1 $1.5 $10.4 $10.4 $10.3 $10.2 $10.2 $4.0 $1.0 $2.0 $0.5 $- $0.0 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q2 2020 Broker Oaken Total GICs Savings accounts Total Oaken now accounts for 26.2% of deposits with majority in the form of term deposits 13
Substantial decline in loans in payment deferral program Accelerator Classic Commercial Other Total deferrals Loans: April 30 1,879 6,859 358 807 9,903 Loans: July 31 684 1,987 23 4 2,698 Change in number (64%) (71%) (94%) (100%) (73%) of loans Principal: April 30 $526.5 $3,154.5 $185.1 $67.5 $3,933.6 (millions) Principal: July 31 $205.1 $1,078.4 $15.0 $0.5 $1,299.0 (millions) Change in principal (61%) (66%) (92%) (99%) (67%) balance 14
Provisions and write-offs as a percentage of gross loans 0.80% 0.70% • Provisions for credit 0.60% 0.43% losses of 0.43% of gross loans on an 0.50% annualized basis 0.40% 0.30% • Net write-offs of 0.02% of gross loans 0.20% on an annualized 0.02% 0.10% basis 0.00% • Net write-offs of -0.10% single-family -0.20% residential Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 mortgages were less 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 than one basis point Provisions (annualized) as a % of gross loans Net write-offs (annualized) as a % of gross loans Results in 2018, 2019 and 2020 are reported under IFRS 9 and results in 2016 and 2017 are reported under IAS 39 which may limit comparability to prior periods. 15
Net non-performing loans and credit allowance 0.60% $120.0 40.0% 35.0% 0.50% 31.0% 0.42% $100.0 30.0% 0.40% 34.3% 25.2% $80.0 24.3% 23.6% 0.37% Millions 25.0% 0.30% $60.0 20.0% 0.20% 15.0% 0.10% $40.0 10.0% 0.00% $20.0 5.0% $- 0.0% Net Non-Performing Loans as % of Gross Loans Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Net Non-Performing Single-Family Residential Loans as % of Total Stage 3 Loans (Gross) NPL Allowance as % of Gross NPL Gross Single-Family Residential Loans Results in 2018, 2019 and 2020 are reported under IFRS 9 and results in 2016 and 2017 are reported under IAS 39 which may limit comparability to prior periods. 16
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