Company Website:
http://www.homecapital.com
TORONTO -- (Business Wire)
Home Capital Group Inc. (“Home Capital” or “the Company”) (TSX:HCG)
today reported financial results for the three and nine months ended
September 30, 2018. This press release should be read in conjunction
with the Company’s 2018 Third Quarter Report including Financial
Statements and Management’s Discussion and Analysis which are available
on Home Capital’s website at www.homecapital.com
and on SEDAR at www.sedar.com.
“Our third quarter results demonstrate continued progress in all lines
of business,” said Yousry Bissada, Chief Executive Officer. “Our
commitment to servicing the customer in partnership with the broker
community, and the development of our Oaken product line, have proven to
be the right strategy for long-term success in our business. We are
excited to take the next steps in our digital journey. Our plans for a
substantial issuer bid and a normal course issue bid demonstrate our
confidence in our business and outlook.”
Income Statement
Income:
Net interest margin was 2.03% compared with 1.91% in Q2 2018 and
1.85% in Q3 2017. Net interest margin in the quarter increased due to
the reduced cost associated with the standby credit facility that was
replaced at the end of Q2 2018. An improved asset mix also contributed
to the increase.
Expenses:
Non-interest expenses increased by $176 thousand or 0.3% from Q2
2018 resulting from an increase in salaries and benefits offset largely
by lower operating expenses. The result from Q2 included a reversal of
$1.8 million of estimated severance expenses in Q2 2018 related to the
Project EXPO expense savings initiative completed in 2017.
Non-interest expenses declined $4.3 million or 7.2% from Q3 2017 mainly
due to a decrease in both salaries and benefits, and other operating
expenses related to the liquidity event in Q2 2017.
Net income:
Net income for the third quarter was $32.6 million or 41 cents
per share, an increase of 10.1% over Q2 net income of $29.6 million or
37 cents per share and an 8.7% increase over net income of $30.0 million
or 37 cents per share reported in Q3 2017.
Balance Sheet
Asset growth:
Mortgage originations were $1.44 billion in Q3 2018, up 16.7%
over Q2 originations of $1.23 billion and up 272.9% over originations of
$385.1 million in Q3 2017.
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Single-family residential mortgage originations were $1.02 billion in
Q3 2018, an increase of $66.7 million or 7.0% from Q2 2018 and $792.0
million from Q3 2017.
Total loans at the end of the quarter were $16.04 billion, an
increase of $594.8 million or 3.9% from Q2 2018 and an increase of
$973.1 million or 6.5% from Q4 2017.
Loans under administration were $22.82 billion, up 1.4% from Q2
2018 and up 1.3% from the end of 2017.
Funding:
Total deposits were $12.36 billion compared to $12.50 billion at
the end of Q2 2018 and $12.17 billion at the end of Q4 2017.
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Brokered GICstotaled $9.27 billion compared with $9.55 billion
at the end of Q2 2018 and $9.35 billion at the end of Q4 2017. Oaken
GICstotaled $2.37 billion compared with $2.23 billion at the
end of Q2 2018 and $1.81 billion at the end of Q4 2017.
Credit Quality:
Total provision for credit losses was $4.0 million in Q3 2018
compared with $6.5 million in Q2 2018, and recovery of $4.3 million in
Q3 2017. Provision expense as a percentage of gross uninsured loans was
0.13% compared to 0.22% in Q2 2018. Provisions in Q3 were driven mainly
by activity in both the residential and commercial mortgage portfolios.
Provisions for credit losses were calculated under IFRS 9 for 2018 and
under IAS 39 for 2017. As provisions for credit losses for 2017 were not
restated, comparability of the provision is reduced to some extent.
Net non-performing loans (represented by Stage 3 loans under IFRS
9) as a percentage of gross loans remained low at 0.34% at the end of Q3
2018, unchanged from Q2 2018 and up from 0.30% at the end of Q4 2017.
Leadership Appointments:
Dr. Hossein Rahnama, previously an advisor to the Board of Directors,
has now joined the Board of Directors effective November 6, 2018. We had
previously announced that Sue Hutchison joined the Board of Directors
effective September 27, 2018. In preparation for the next steps in the
advancement of the Company’s vision for company-wide digital capability,
Benjy Katchen, Executive Vice President, Deposits and Consumer Lending,
has been appointed to the new role of Chief Digital and Strategy Officer.
Substantial Issuer Bid and Normal Course Issuer Bid:
The Board has authorized the initiation of a substantial issuer bid
(SIB) pursuant to which the Company will offer to purchase for
cancellation up to $300 million of its common shares. The Company
expects that the terms of the bid will be announced on or about Monday,
November 12, 2018 and that the bid will be completed by the end of the
fourth quarter. Upon completing the SIB, the Company intends to apply to
the Toronto Stock Exchange (“TSX”) for a Normal Course Issuer Bid to be
effective in its next fiscal year.
Outlook:
The Company expects that market conditions experienced in the third
quarter will continue for the balance of 2018. The growth in
originations suggests our lending market has begun to absorb the impact
of the new mortgage rules and is adjusting to a higher interest rate
environment. “We are confident that our focus on service excellence,
underpinned by a robust internal risk culture, will continue to drive
growth and profitability in our core business,” said Mr. Bissada. “We
are excited to embark on the next phase of transforming our business,
including executing our substantial issuer bid and investing in digital
enablement.”
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YOUSRY BISSADA | | | | | | PAUL DERKSEN |
President and Chief Executive Officer
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Chair of the Board
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The Company’s 2018 Third Quarter Report, including Management’s
Discussion and Analysis, for the three and nine months ended September
30, 2018 is available at www.homecapital.com
and on the Canadian Securities Administrators’ website at www.sedar.com.
Third Quarter 2018 Results Conference Call and Slide Presentation
Webcast
The conference call will take place on Wednesday, November 7, 2018, at
8:00 a.m. ET. Participants are asked to call approximately 10 minutes in
advance at toll-free 1-844-899-4831 throughout North America.
Participants calling from outside of North America may dial
1-647-689-5401. The call will also be accessible in listen-only mode on
Home Capital’s website at www.homecapital.com
in the Investor Relations section of the website.
Conference Call Archive
A telephone replay of the call will be available between 11:00 a.m. ET
Wednesday, November 7, 2018 and midnight ET Wednesday, November 14, 2018
by calling 416-621-4642 or 1-800-585-8367 (enter passcode 6382499). The
archived audio webcast will be available for 90 days on Home Capital’s
website at www.homecapital.com.
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FINANCIAL HIGHLIGHTS |
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(Unaudited)
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For the three months ended
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(000s, except Percentage and Per Share Amounts) |
| September 30 |
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June 30
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September 30
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| Sequential |
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| 2018 |
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2018
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2017
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| Change |
INCOME STATEMENT HIGHLIGHTS1 | | | | | | | | | | |
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Net Interest Income
| | $ | 89,847 | |
$
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84,129
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$
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88,762
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6.8%
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Net Interest Margin (TEB)2 | | | 2.03% | | |
1.91%
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1.85%
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12 bps
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Efficiency Ratio (TEB)2 | | | 52.9% | | |
54.5%
| | |
62.7%
| | |
(160) bps
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| | | | | | | | | | | |
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Provision for Credit Losses
| | $ | 3,990 | |
$
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6,487
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$
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(4,257)
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(38.5)%
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Provision as a Percentage of Gross Loans (annualized)
| | | 0.10% | | |
0.17%
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(0.11)%
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(7) bps
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Net Income
| | $ | 32,600 | |
$
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29,606
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$
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29,983
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10.1%
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Diluted Earnings per Share
| | $ | 0.41 | |
$
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0.37
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$
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0.37
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10.8%
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Return on Shareholders’ Equity (annualized)
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| 6.9% |
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6.4%
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6.8%
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50 bps
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ORIGINATIONS | | | | | | | | | | | | |
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Total Mortgage Originations
| | $ | 1,435,793 | |
$
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1,230,208
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$
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385,065
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16.7%
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Single-Family Residential Mortgage Originations
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| 1,015,998 |
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949,339
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223,964
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7.0%
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As at
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| | September 30 | | |
June 30
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December 31
| | YTD |
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| 2018 |
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2018
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2017
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| Change |
BALANCE SHEET HIGHLIGHTS1 | | | | | | | | | | | | |
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Total Assets
| | $ | 17,882,017 | |
$
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17,935,799
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$
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17,591,143
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1.7%
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Total Assets Under Administration3 | | | 24,657,402 | | |
25,001,732
| | |
25,040,182
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(1.5)%
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Total Loans4 | | | 16,042,702 | | |
15,447,928
| | |
15,069,636
| | |
6.5%
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Total Loans Under Administration3,4 | | | 22,818,087 | | |
22,513,861
| | |
22,518,675
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1.3%
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| | | | | | | | | | | |
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Total Deposits
| | | 12,361,030 | | |
12,496,704
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12,170,454
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1.6%
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Demand Deposits
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| 419,664 |
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411,056
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539,364
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(22.2)%
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FINANCIAL STRENGTH1 | | | | | | | | | | | | |
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Capital Measures5 | | | | | | | | | | | | |
Common Equity Tier 1 Capital Ratio
| | | 23.27% | | |
23.21%
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23.17%
| | | |
Leverage Ratio
| | | 9.20% | | |
8.96%
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8.70%
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Credit Quality | | | | | | | | | | | | |
Net Non-Performing Loans as a Percentage of Gross Loans
| | | 0.34% | | |
0.34%
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0.30%
| | | |
Allowance as a Percentage of Gross Non-Performing Loans
| | | 71.0% | | |
71.0%
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79.5%
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Share Information | | | | | | | | | | | | |
Book Value per Common Share
| | $ | 23.82 | |
$
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23.40
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$
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22.60
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Number of Common Shares Outstanding
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| 80,246 |
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80,246
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80,246
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1 The amounts pertaining to 2018 have been prepared in
accordance with IFRS 9 Financial Instruments (IFRS 9); prior
period amounts have not been restated and have been prepared in
accordance with IAS 39 Financial Instruments: Recognition and
Measurement (IAS 39). Please see Note 2 in the unaudited interim
consolidated financial statements included in the 2018 Third Quarter
Report for further information.
2 See definition of
Taxable Equivalent Basis (TEB) under Non-GAAP Measures included in the
2018 Third Quarter Report.
3 Total assets and loans
under administration include both on- and off-balance sheet amounts.
4
Total loans include loans held for sale and are presented gross of
allowance for credit losses, for all periods presented.
5 These
figures relate to the Company’s operating subsidiary, Home Trust Company.
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 in the Risk Management
section of the 2018 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 2018 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.
Assumptions about the performance of the Canadian economy in 2018 and
its effect on Home Capital’s business are material factors the Company
considers when setting strategic priorities 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 and other third-party providers. In setting and reviewing its
strategic priorities and outlook for the remainder of 2018, management’s
expectations continue to assume:
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The Canadian economy is expected to be relatively stable for the
remainder of 2018. However, the impact of the renegotiated trade
agreement with the United States and Mexico remains uncertain as does
the impact from other global trade relations.
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Stable employment conditions in its established regions. Also, the
Company expects inflation will generally be within the Bank of
Canada’s target of 1% to 3%, leading to stable credit losses and
demand for the Company’s lending products in its established regions.
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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 that may result.
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The Bank of Canada is expected to continue to raise interest rates in
2019.
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Current and expected levels of housing activity indicate a relatively
stable real estate market overall and in particular for the Company’s
key Greater Toronto Area (GTA) market. Please see Market Conditions
under the 2018 Outlook in the Company’s 2018 Third Quarter Report for
more discussion on the Company’s expectations for the housing market.
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Debt service levels will remain manageable by Canadian households in
2018, however high levels of consumer debt make the economy more
vulnerable to rising interest rates and any economic weaknesses
resulting from trade disputes.
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Access to the mortgage and deposit markets through broker networks
will be maintained.
Non-GAAP Measures
The Company has adopted IFRS as its accounting framework. IFRS are the
generally accepted accounting principles (GAAP) for Canadian publicly
accountable enterprises for years beginning on or after January 1, 2011.
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 2018 Third Quarter 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
residential and non-residential mortgage lending, securitization of
insured residential mortgage products, consumer lending and credit card
services. In addition, Home Trust offers deposits via brokers and
financial planners, and through a direct to consumer brand, Oaken
Financial. Home Trust also conducts business through its wholly owned
subsidiary, Home Bank. Licensed to conduct business across Canada, we
have offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec
and Manitoba.
View source version on businesswire.com: https://www.businesswire.com/news/home/20181107005296/en/
Contacts:
Home Capital Group Inc.
Jill MacRae, 416-933-4991
Director,
Investor Relations
Jill.MacRae@hometrust.ca
Source: Home Capital Group Inc.
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