Scotiabank Financials Summit. September 5, 2013

Transcription

1 Scotiabank Financials Summit September 5,

2 Disclaimer This presentation provides management with the opportunity to discuss the financial performance and condition of Home Capital Group Inc. and Home Trust Company and, as such, may contain forward-looking information about strategies and expected financial results. Various factors, many difficult to predict and to control, could cause actual results to differ materially from results projected in the forward-looking statements. Accordingly, the audience is cautioned against undue reliance on these remarks. 2 2

3 Agenda Company profile Strategic priorities Performance update Housing market outlook 3 3

4 COMPANY PROFILE Home Capital Group Inc. Listed on the Toronto Stock Exchange (Symbol: HCG) Operates primarily through Home Trust Company: Federally regulated deposit taking institution Member of Canada Deposit Insurance Corporation Canada s one-stop mortgage lender * A subsidiary of Home Capital Group Inc. MORTGAGE LENDING CONSUMER LENDING DEPOSIT INVESTMENTS E-COMMERCE SOLUTIONS Classic Alt-A (non-prime) mortgages Accelerator Prime insured mortgages Commercial Mortgage Lending Equityline Visa Secured Visa product Preferred (unsecured) Visa product Retail Credit Registered and non registered term deposit products High Interest Savings Account (HISA) Direct to consumer savings accounts Online merchant storefronts Payment processing Prepaid card solutions 44

5 COMPANY PROFILE Home Capital Group Inc. Investment grade ratings DBRS Fitch S&P Home Capital BBB BBB BBB- Home Trust BBB BBB BBB Solid credit ratings 5 5

6 Strategic Priorities Build and maintain Canada s leading alternative financial institution Focus on underserved segments Maintain a strong and conservative balance sheet and solid financial position Conservative capital ratios Prudent risk profile Strong liquidity position Maintain stable, flexible funding sources Build on operational excellence Invest in industry-leading: Corporate governance Risk management Customer service Technology solutions 66

7 STRATEGIC PRIORITIES Growing Mortgage Sector Total residential mortgage market in Canada is approximately $1.3 trillion Mortgages not meeting lending criteria at traditional financial institutions is approximately $260 billion (~20%) Home Capital is largest lender in this space: ~3% market share of alternative mortgage sector Growth potential enhanced by tighter rules Lots of room to grow our business 7 7

8 STRATEGIC PRIORITIES Focusing our Mortgage Business Maintain our leadership position in alternative mortgage business Uninsured mortgages ( Classic product) Classic originations represented the majority of total originations in 2012 and Q1 & Q Insured mortgages ( Accelerator product) Regulatory approval of capital treatment relief for securitized mortgages positions Home for growth in this market Profitable for years to come 88

9 STRATEGIC PRIORITIES Growth in Our Other Businesses Commercial lending Well-diversified and low risk portfolio Equityline Visa New guidelines limit home equity lines of credit Anticipate increase in portfolio growth in 2014 Retail Credit Considerable opportunity in the home improvement market Q assets increased ~55% versus Q PSiGate Prepaid card/payment solutions (SelectCore) Expect continued growth ahead in all business lines 99

10 STRATEGIC PRIORITIES New Products to Diversify and Strengthen Our Business Deposit initiatives High interest savings account Available through financial advisors via the Fundserve network High yield, liquid, CDIC-eligible Direct to consumer savings account New products expand portfolio, diversify our business 10

11 STRATEGIC PRIORITIES Changing Financial Sector Regulation Robust, resilient capital base Basel III comprehensive measures Regulation, supervision, risk management Capacity to absorb financial shocks Improve risk management, transparency, disclosure Home has the financial resources for new benchmarks Common Equity Tier 1 (CET1) Tier 1 Capital (16.6%) Total Capital (19.7%) Growth for shareholders and security for depositors 11 11

12 STRATEGIC PRIORITIES Building a Strong Foundation for Growth and Profitability Improving our efficiency and effectiveness SAP banking platform optimizes business processes and drives operational efficiencies New information management system (OpenText) Moving towards a fully digital and paperless business Strengthening our operational foundation in order to support future growth Risk management Internal audit, compliance Human resources Systems and programs to support growth 12

13 STRATEGIC PRIORITIES Home Capital Team is Our Greatest Asset Strengthened management teams Strengthened operations Applying a Six-Sigma approach to operations and financial services Established training, development, career advancement programs Managing growth Toronto head office expansion Regional expansion Executing Home Capital s vision 13

14 PERFORMANCE UPDATE 14

15 PERFORMANCE UPDATE Home s 2013 Objectives Net earnings and diluted EPS: 13% 18% Total loans under administration: 10% 15% Return on shareholders equity: 20% On track to meet all goals 15

16 PERFORMANCE UPDATE Continuing Strength in Q Q results: Net Income $61.6 million (+14.7% over Q2 2012) Diluted EPS $1.77 (+14.9% over Q2 2012) ROE 23.6% Total loans under administration $18.84 billion (+10% over Q2 2012) 2013 Milestones Assets Under Administration >$21 billion Shareholders Equity >$1 billion Market capitalization >$2 billion Building solid, stable earnings growth 16

17 PERFORMANCE UPDATE Strong Credit Performance Credit quality of the mortgage portfolio has improved Net impaired loans 0.33% 2012 YE 0.31% 2013 Q2 Overall applicant quality has improved High quality borrowers = solid portfolio performance 17

18 PERFORMANCE UPDATE Rewarding Our Investors HCG 25% S&P Financial 10% S&P/TSX 9% HCG Stock Price Performance Closing Price as of December 31 $16.63 $31.25 $34.75 $34.05 $41.90 $19.80 $41.85 $51.79 $49.10 $59.07 Share prices have been restated to reflect two-for-one stock split on January 29,

19 HOUSING MARKET OUTLOOK 19

20 HOUSING MARKET OUTLOOK A Balanced Housing Market in Canada Continues Canada s strong position Lower unemployment Strong real estate fundamentals Canadians servicing debts Home Capital strategies Grow traditional alternative mortgage business Grow the Accelerator portfolio Grow the Commercial mortgage business and our other retail products Canadian housing remains in an enviable position 20

21 HOUSING MARKET OUTLOOK No Housing Bubble in Canada Home sales in Canada Volumes have eased Prices remain stable Housing experts, including CMHC, say no clear evidence of housing bubble Continuing strong demand for all our mortgage products Improved quality of applications Positive signs for further growth, solid performance 21

22 HOUSING MARKET OUTLOOK Changing Regulatory Environment CMHC 4 sets of changes to lending criteria over the past 2 years OSFI B20 Guidelines introduced in 2012 More conservative loan-to-value ratios Reduced amortization periods Increased opportunities for Home 22

23 Outlook Focus on core competencies and strategic priorities Continue to build business and deliver superior returns Increase profitability and dividends An exciting, profitable and rewarding future 23

24 Questions? 24

25 Media/Investor Relations Contacts Investor Relations Home Capital Group Inc. Attention: Investor Relations 145 King St. West, Suite 2300 Toronto, ON, M5H 1J8 Canada Phone: (416) Toll Free Phone: (800) Inquiries: Media Relations Gerald M. Soloway, Chief Executive Officer or Martin Reid, President To arrange an interview: Margaret Kingerski Phone: (416) Toll Free Phone: (800) Upcoming Events November 6, 2013 Q3 Earnings Release 25