Home Capital Reports Strong Earnings with Net Income up 16.8% Year over Year

Home Capital Reports Strong Earnings with Net Income up 16.8% Year over Year 
--  Diluted Earnings per Share up 16.3% Year over Year to $1.00 


    --  Return on Equity Solid at 23.1% for the Quarter

TORONTO, May 7, 2014 /CNW/ - Home Capital today reported another quarter of 
growth and increased earnings.

The Company's First Quarter Report, including Management's Discussion and 
Analysis, is available on Home Capital's website at www.homecapital.com and 
the Canadian Securities Administrators' website at www.sedar.com.

FINANCIAL HIGHLIGHTS
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FIRST QUARTER 2014 HIGHLIGHTS

Key results for the first quarter of 2014 included:
    --  Net income increased to $69.7 million for the first quarter, up
        1.3% from Q4 2013 and 16.8% over Q1 2013.
    --  Diluted earnings per share(1) were $1.00 for the quarter,
        representing increases of 2.0% and 16.3% over the $0.98 and
        $0.86 earned in Q4 2013 and Q1 2013, respectively.
    --  Total net interest income, before provisions, of $110.4 million
        was down slightly from the $111.0 million in Q4 2013 and up
        8.3% from the $101.9 million in Q1 2013. The slight decrease
        from last quarter reflects $3.7 million in lower net interest
        income on securitized loans which, consistent with the
        Company's business strategy, has been replaced with gains on
        sale of $8.1 million in the quarter compared to $4.6 million in
        Q4 2013 and $1.4 million in Q1 2013 (please see below). Net
        interest income on the non-securitized portfolio exceeded $100
        million for the first time, reaching $102.8 million in the
        quarter, up 3.1% from last quarter and 16.7% from one year ago,
        reflecting strong and consistent growth in the traditional
        portfolio.
    --  Net interest margin (TEB) was 2.19% in the quarter, down from
        2.22% last quarter and up from 2.17% one year ago. Higher
        liquidity balances and lower net interest margins on
        securitized mortgages contributed to the decline from last
        quarter while spreads on traditional mortgages remained
        consistent
    --  Securitization income, including gains on sale mentioned above,
        was $8.7 million compared to $5.8 million in Q4 2013 and $1.5
        million in Q1 2013. The gains consisted of $6.7 million on the
        sale of residual interests related to $486.2 million of
        underlying single-family mortgages and gains of $1.4 million on
        the sale of $211.5 million of multi-unit residential mortgages.
    --  Return on equity was strong at 23.1% for the quarter and
        continues to be in excess of the Company's minimum performance
        objective of 20%.
    --  The credit quality of the loan portfolio remains strong with
        continued low non-performing loans and credit losses. Net
        non-performing loans as a percentage of gross loans (NPL ratio)
        ended the quarter at 0.33% compared to 0.35% at the end of last
        quarter and 0.32% one year ago. Included in the non-performing
        loans is an insured multi-unit residential property with an
        outstanding amount of $9.7 million, where the Company expects
        no losses. In the absence of this fully insured CMHC loan the
        NPL ratio would have been 0.27%. The annualized credit
        provision as a percentage of gross uninsured loans of 0.11% has
        decreased from the 0.14% in Q4 2013 and the 0.18% in Q1 2014,
        reflecting lower individual provisions.
    --  Capital ratios remain high with Home Trust's Common Equity Tier
        1 ratio (CET 1 ratio) ending the quarter at 17.22%, while Tier
        1 and Total Capital ratios were 17.22% and 20.06%,
        respectively. Home Trust's Assets to Capital multiple (ACM) was
        13.02 at the end of the quarter compared to 13.19 at December
        31, 2013 and 13.45 one year ago. The sale of residual interests
        and resulting off-balance sheet treatment of mortgages lowered
        the ACM in the quarter.
    --  Total loans under administration, which includes securitized
        mortgages that qualify for off-balance sheet accounting,
        reached $20.48 billion, reflecting increases of $2.03 billion
        or 11.0% from $18.45 billion one year ago, and $0.53 billion or
        2.7% from $19.94 billion at the end of 2013 (10.7% on an
        annualized basis).
    --  Total mortgage originations in the quarter decreased seasonally
        to $1.68 billion from $1.91 billion last quarter and increased
        from $1.38 billion from the same quarter last year. First
        quarter originations, while seasonally lower as expected,
        remained strong despite the slow start to real estate markets
        which was reflective of the harsh winter conditions that kept
        many Canadians out of the market for much of the first quarter.
    --  Traditional residential mortgage originations of $1.07 billion
        in the quarter also decreased seasonally from $1.23 billion in
        Q4 2013 and increased from $0.99 billion in Q1 2013. The
        Company continues to experience strong demand for its
        traditional product offerings, which continue to be of high
        credit quality. This continues to enhance profitability and
        asset quality.
    --  Accelerator (insured) residential mortgage originations of
        $289.5 million in the quarter decreased seasonally from $357.1
        million in Q4 2013 and increased 138.1% from $121.6 million in
        Q1 2013. The favourable regulatory ruling regarding the sale of
        residual interests in Q3 2013 led the Company to increase its
        activity in insured lending during the second half of 2013 and
        into 2014.
    --  Multi-unit residential mortgage originations were $213.6
        million in the quarter compared to $239.9 million last quarter
        and $202.6 million in the same period last year. Multi-unit
        residential mortgage originations are mostly insured and
        subsequently securitized through programs that qualify for
        off-balance sheet accounting resulting in the securitization
        gains discussed above.
    --  Commercial mortgage and other loan advances were $72.0 million
        for the quarter compared to $60.5 million in Q4 2013 and $38.6
        million in Q1 2013. Store and apartment mortgage advances were
        $27.6 million in the quarter compared to $24.5 million in Q4
        2013 and $23.6 million in Q1 2013.
    --  The consumer retail credit portfolio, which includes durable
        household goods, such as water heaters and larger-ticket home
        improvement items, reached $346.9 million at the end of Q1
        2014, up 2.0% from $340.0 million at the end of last quarter
        and up 21.7% from $285.1 million at the end of Q1 2013. The
        Company continues to be successful at expanding relationships
        with its business partners to increase this portfolio which
        offers attractive returns for the risk profile.
    --  Total deposits reached $13.08 billion, up 2.5% from last
        quarter and 23.0% from one year ago.
    --  The Company initiated two new programs over the last year in to
        further diversify its deposits from a predominately large
        broker funded model, a high-interest savings account and Oaken
        Financial, a direct-to-consumer deposit brand. Oaken deposits
        at the end of the quarter increased by 25.9% over the balance
        at Q4 2013 and to over three times the balance one year ago.
        The high-interest saving accounts also grew significantly
        reaching a balance at the end of the quarter of $450.9 million,
        representing an increase of 33.7% over the $337.2 million at
        the end of 2013 and over ten times the balance of $42.3 million
        one year ago.

Subsequent to the end of the quarter, and in light of the Company's solid 
performance, profitability and strong financial position, the Board of 
Directors approved a quarterly dividend of $0.16 per common share, payable on 
June 1, 2014 to shareholders of record at the close of business on May 16, 
2014.

While winter and early spring real estate activity was reduced by poor weather 
and a limited supply of homes for sale, recent transaction levels suggest a 
recovery in the late spring and summer.  The slow market conditions in the 
early part of 2014 will have an impact on the timing and level of 
securitization and gains on sale of mortgages during the balance of the year.  
On an overall basis, the Company anticipates growing demand for all its 
lending products as the year progresses and expects that it will also be able 
to further increase its market share through its network of brokers and its 
business development programs, leading to achievement of the annual goals set 
out in Table 1 of this press release.

The Company continues to deliver solid results in terms of growth, high 
returns and increased dividends. Despite the modest economic improvement in 
Canada, the Company's performance continues to reflect the strength and the 
successful execution of its core strategy.
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(1) For comparative presentation purposes, the prior period diluted earnings 
per share amounts were restated to half of the previously reported amounts to 
reflect the stock dividend of one common share per outstanding share declared 
during the first quarter of 2014.

Additional information concerning the Company's targets and related 
expectations for 2014, including the risks and assumptions underlying these 
expectations, may be found in the Management's Discussion and Analysis (MD&A) 
of the quarterly report.

First Quarter Results Conference Call The conference call will take place on 
Thursday, May 8, 2014 at 10:30 a.m. Participants are asked to call 5 to 15 
minutes in advance, 647-427-7450 in Toronto or toll-free 1-888-231-8191 
throughout North America. The call will also be accessible in listen-only mode 
via the Internet at www.homecapital.com.

Conference Call Archive A telephone replay of the call will be available 
between 1:30 p.m. Thursday, May 8, 2014 and midnight Thursday, May 15, 2014 by 
calling 416-849-0833 or 1-855-859-2056 (enter passcode 26905840). The archived 
audio web cast will be available for 90 days on CNW Group's website at 
www.newswire.ca and Home Capital's website at www.homecapital.com.

Annual Meeting Notice The Annual Meeting of Shareholders of Home Capital Group 
Inc. will be held at One King West, Grand Banking Hall, Toronto, Ontario, M5H 
1A1, on Wednesday, May 14, 2014 at 11:00 a.m. local time. Shareholders and 
guests are invited to join Directors and Management for lunch and refreshments 
following the Annual Meeting. All shareholders are encouraged to attend.
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Home Capital published its annual financial objectives for 2014 on page 17 of 
the Company's 2013 Annual Report. The following table compares actual 
performance to date against each of these objectives.

Table 1: 2014 Targets and Performance
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Table 2: Reconciliation of Net Income to Adjusted Net Income
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Caution Regarding 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 on pages 
54 through 67 of the Company's 2013 Annual Report, as well as its other 
publicly filed information, which are 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, funding and liquidity risk, 
structural interest rate risk, operational risk, investment risk, strategic 
and business risk, reputational risk and regulatory and legal 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 quarterly report.   Forward-looking statements are typically 
identified by words such as "will,"  "believe," "expect," "anticipate," 
"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 uncertainties, 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 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.

Assumptions about the performance of the Canadian economy and its effect on 
Home Capital's business are material factors the Company considers when 
setting its objectives, targets and outlook.  In determining expectations for 
economic growth, both broadly and in the financial services sector, the 
Company primarily considers historical and forecasted economic data provided 
by the Canadian government and its agencies.  In setting and reviewing its 
targets, objectives and outlook for the remainder of 2014, management's 
expectations continue to assume:
    --  The Canadian economy will continue to produce modest growth in
        2014 with stable to modestly improving employment conditions in
        most regions, and inflation will generally be within the Bank
        of Canada's target of 1% to 3% leading to stable credit losses
        and strong demand for the Company's lending products.
    --  The Canadian economy will continue to be influenced by the
        economic conditions in the United States and global markets; as
        such, the Company is prepared for the variability to plan that
        may result.
    --  The Bank of Canada continues to indicate that increases to its
        target overnight interest rate are not imminent and, as such,
        the Company is assuming the rate will remain at its current
        rate, with the potential for modest increases later in the
        year. This is expected to continue to support relatively low
        mortgage interest rates for the foreseeable future.
    --  The housing market will likely remain stable with balanced
        supply and demand conditions in most regions supported by
        continued low interest rates, relatively stable to improving
        employment, and immigration. There will be modest declines in
        housing starts and resale activity with stable prices
        throughout most of Canada. This supports continued stable
        credit losses and strong demand for the Company's lending
        products.
    --  Consumer debt levels will remain serviceable by Canadian
        households.
    --  The Company will have access to the mortgage and deposit
        markets through broker networks.

Non-GAAP Measures

The Company uses a number of financial measures to assess its performance.  
Some of these measures are not calculated in accordance with GAAP, are not 
defined by GAAP, and do not have standardized meanings that would ensure 
consistency and comparability between companies using these measures.  
Definitions of non-GAAP measures can be found under Non-GAAP Measures in the 
Management's Discussion and Analysis included in the Company's First Quarter 
2014 Report.

Regulatory Filings

The Company's continuous disclosure materials, including interim filings, 
annual Management's Discussion and Analysis and audited consolidated financial 
statements, Annual Information Form, Notice of Annual Meeting of Shareholders 
and Proxy Circular are available on the Company's website at 
www.homecapital.com, and on the Canadian Securities Administrators' website at 
www.sedar.com.

About Home Capital

Home Capital Group Inc. is a public company, traded on the Toronto Stock 
Exchange (HCG), operating through its principal subsidiary, Home Trust 
Company. Home Trust is a federally regulated trust company offering deposits, 
residential and non-residential mortgage lending, securitization of insured 
residential first mortgage products, consumer lending and credit card 
services. Licensed to conduct business across Canada, Home Trust has branch 
offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and 
Manitoba.



SOURCE  Home Capital Group Inc. 
Gerald M. Soloway, CEO, or Martin Reid, President, 416-360-4663, 
www.homecapital.com 
To view this news release in HTML formatting, please use the following URL: 
http://www.newswire.ca/en/releases/archive/May2014/07/c3296.html 
CO: Home Capital Group Inc.
ST: Ontario
NI: FIN ERN CONF  
-0- May/07/2014 21:00 GMT
 
 
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