Q3 2019 earnings presentation November 13, 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 Third 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 Third 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
Delivering on our commitment to growth and profitability Successful Renewed Healthy Significant Continued launch of commitment volumes progress in progress on first cross- to capital and pricing financial IT roadmap border distribution in our major results initiative RMBS markets 4
IGNITE project on track and making progress LAUNCHED NEW LOFT LAUNCHED NEW CRM BROKER PORTAL SYSTEM Fully mobile, responsive Greater functionality for with enhanced flexibility sales team MIGRATION TO THE IMPLEMENTED ROBOTIC PROCESS AUTOMATION CLOUD 70% of mortgage Seamless transfer of discharges now automated Data Centre is complete 5
Financial results Brad Kotush, CFO 6
Successful launch of RMBS ➢ First cross-border RMBS ➢ First transaction since 2007 backed by near-prime mortgages ➢ ‘A’ tranche received AAA(sf) / Aaa(sf) ratings from DBRS and Moody’s ➢ Reduces reliance on competitive GIC market and provides funding flexibility ➢ Combined effort of multiple teams across the organization 7
Share repurchases and improved NIM continue to drive earnings per share growth 8
Summary of adjustments in connection with IT roadmap Q3 2019 Q2 2019 Adjustment for IT Adjustment for IT Reported Adjusted 1 Reported Adjusted 1 Roadmap Roadmap Net income (millions) $39.02 $2.93 $41.95 $31.91 $2.81 $34.72 Adjustment for IT Adjustment for IT Reported Adjusted 1 Reported Adjusted 1 Roadmap Roadmap Earnings per share $0.67 $0.05 $0.72 $0.53 $0.05 $0.58 Efficiency ratio (TEB) 51.3% (3.5%) 47.8% 55.4% (3.5%) 51.9% Return on equity 9.5% 0.7% 10.2% 7.7% 0.7% 8.4% (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 Third Quarter Report. 9
Single-family residential originations $1,187.0 $1,200.0 $42.3 $1,150.0 $1,016.0 $1,100.0 $1,050.0 Millions +16.8% $1,000.0 $56.9 $950.0 $1,144.7 $900.0 $959.1 $850.0 $800.0 $750.0 Q3 2018 Q3 2019 Classic single-family Accelerator single-family 10
Loan growth Total loan portfolio (billions) $17.50 +6.4% y/y $17.00 $16.99 $16.50 $16.67 $16.50 $16.26 $16.00 $15.98 $15.50 $15.44 $15.00 $14.50 $14.00 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 11
Continuing improvement in net interest margin Net interest margin (TEB 1 ) 2.25% 2.22% Disciplined, 2.20% risk-based loan pricing 2.15% 2.09% 2.10% 2.05% 2.01% 1.99% Higher rates 2.00% 2.03% on new loan 1.95% 1.91% originations 1.90% and renewals 1.85% Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 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 continues to grow Broker and Oaken deposits in $ billions Oaken deposits by product $16.0 100.00% $13.5 $13.5 $13.5 90.00% $12.9 $14.0 $12.0 80.00% $12.0 $2.9 $3.1 $3.3 $2.7 70.00% $2.6 $10.0 60.00% $8.0 50.00% 86.9% 40.00% $6.0 $10.6 $10.4 $10.2 $10.2 30.00% $9.4 $4.0 20.00% $2.0 10.00% $- 0.00% Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q3 2019 GICs Savings accounts Broker Oaken Total Oaken now accounts for 24% of deposits with emphasis on term deposits 13
Consistent high quality Classic single-family residential loan book Weighted-average Beacon score Weighted-average loan to value 800 80.0% 72.7% 703 691 70.0% 700 58.8% 60.0% 600 50.0% 500 40.0% 400 30.0% 300 20.0% 200 10.0% 100 0.0% 0 Uninsured mortgages originated in All uninsured single-family Classic originations in Q3 2019 Total Classic portfolio Q3 2019 residential mortgages We are comfortable with our loan quality as higher Beacon scores make up a greater share of our loan portfolio 14
Net non-performing loans as % of gross loans 0.60% 0.49% 0.50% 0.37% 0.40% 0.30% 0.20% 0.10% 0.00% Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Net Non-Performing Loans as a Percentage of Gross Loans Net Non-Performing Single-Family Residential Loans as a % of Gross Single- Results in 2018 and 2019 are reported under IFRS9 and results in 2017 are reported under IAS39 which may limit comparability to prior periods. Family Loans Loans are stable, well-provisioned and within internal risk tolerance 15
Provisions for credit loss and write-offs Provisions and loss experience • Provisions for credit 0.25% losses of 0.09% of 0.20% gross loans on an 0.09% annualized basis 0.15% 0.10% • Net write-offs of 0.05% 0.06% of gross loans on an 0.00% 0.06% annualized basis (0.05%) (0.10%) • Single family (0.15%) residential mortgage Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 net write-offs remain 2016 2016 2016 2016 2017 2017 2017 2017 2018 2018 2018 2018 2019 2019 2019 low at 0.02% in the quarter and 0.02% Provisions (annualized) as a % of gross loans year to date Net write-offs (annualized) as % of gross loans Results in 2018 and 2019 are reported under IFRS9 and results in 2017 are reported under IAS39 which may limit comparability to prior periods. 16
Liquidity risk management Liquid assets and near-term maturities Liquid assets at carrying value Non-Securitized Contractual Loan Maturities As % of Total assets Contractual Fixed Term Deposit Maturities $2,000 12.00% $16.0 $1,817 $13.9 $1,800 $14.0 $12.9 10.00% $1,288 $1,323 $1,600 $12.0 $1,376 $1,358 $1,341 $1,400 8.00% $10.0 Millions Billions $1,200 $7.6 6.00% $8.0 $1,000 $6.0 $4.9 $4.7 $800 4.00% $4.0 $3.0 $2.7 $600 $1.9 2.00% $1.4 $2.0 $400 $0.6 $200 0.00% $0.0 Q2 Q3 Q4 Q1 Q2 Q3 0-3 3-12 1-3 years Over 3 Total 2018 2018 2018 2019 2019 2019 months months years Aggregate available liquidity of $1.84 billion at the end of Q3 including $500 million Near-term loan maturities exceed deposit undrawn credit facility maturities 17
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