Scotia Capital Financials Summit 2008€¦ · Scotia Capital Financials Summit 2008 15 G R O W T H...

Scotia CapitalFinancials Summit 2008

September 10, 2008

Gerald M. SolowayCEO

3Scotia Capital Financials Summit 2008

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.”


Home Capital Today

• Trades on the Toronto Stock Exchange (TSX:HCG)

• Company is a member of the S&P/TSX Composite Index

• Market cap: $1.2B (September 9, 2008)

• Home Capital Group owns 100% of Home Trust Company

• Member of Canada Deposit Insurance Corporation

• Funding is from Retail Deposits

• Total assets: $5.4B (June 30, 2008), $7.0B incl. MBS

• 388 full-time employees

• Company has grown by organic growth (only one minor acquisition)

• Senior Management: CEO, President, COO with Home Capital for over 15 years


Positive 2007 Results

RETURN ON EQUITY

28.9%

Diluted EPS GROWTH

32.8%

TOTAL ASSETS

27.4%to

$5.0B

Despite turbulent financial markets


First Six Months of 2008 Results

RETURN ON EQUITY

27.8%

Diluted EPS GROWTH

19.4%

TOTAL ASSETS

24.5%to

$5.4B

Despite turbulent financial markets


Home Capital is Well-Positioned

• Exclusively focused on Canada

• Vigilant for signs of house price deterioration in Canada

• Zero exposure to US subprime debt and Canadian ABCP

• Consistent, steady low-risk business model

Well-positioned for challenging

times


We Focus on Businesses we Know and Understand

Core Business –Residential Mortgage

Lending

• Originated $2.3B mortgages in 2007 -up 17% yoy

• $1.4B during first six months of 2008 – up 29% from comparable period in 2007

Visa CardLending

• Balances up 37% in 2007 -growing strongly

• Grew to $350 million in Q208 – up 23% from Q207

Commercial Mortgage Lending

• Positive results• Grew to $699 million

in Q208• No non-performing

loans

Nick KyprianouPresident


Home Capital will Continue to Grow

$5.4B$5.0B

$0.5B

$7.0B

$6.4B

$0.5B

1998 2007 Q208

Total Assets/TA incl. MBS under admin.

$1.48

$2.59

$0.19

1998 2007 Q208*

Diluted EPS

*First 6 months of 2008


Prudent Approach to Managing Risk = Solid Platform

Conservative lending activities− residential mortgages -83% of total lending

portfolio− 99.6% of total mortgages represented by first

mortgages− net write-offs –only 2.0 basis points over past 10

yearsLowRisk

Profile

1

Expanded general allowance− reflects growth in portfolio− $23.9 million

2

Capital ratios above regulatory requirements− tier 1 and capital ratios strong at 12.45% and 13.82%,

respectively

3

Strong liquidity − liquid asset totaled $481M

4


Market Dynamics Growth Opportunities

Mortgage lending companies

withdrawing from market

Growth opportunities


G R O W T H D R I V E R S

The “Accelerator” New in 2008

• Huge opportunity to expand penetration of mortgage broker network

• “One Stop Shopping”

• Results to date above our expectation

A D V A N T A G E SN E W B U S I N E S S

• Separate operating group

• All mortgages insured by CMHC or AIG

• High quality borrowers



Expanding in Quebec

• Excellent progress

• Over $75M in originations in 2007

• Untapped opportunity – 20% of Canadian market

• On track to exceed $100M in 2008

• Only lending in major centers –Montreal, Quebec City

• Good growth opportunities

• Careful growth strategy



VISA Card Business: Solid Growth

• Evolved since 2000– Cash secured– Equity Plus– Equityline VISA

$23M

$15M

2006 2007 2008E

VISA Earnings Pre-Tax

Estimated$28-30M



Commercial Mortgage Division – Another Complementary Growth Business

• Started in Q406

• Identified underserved market opportunity

• New team grew portfolio to $699M end of Q208

• No arrears

• Very conservative underwriting philosophy

Continuing to execute proven growth strategy



Continue to Focus on Cost Management

29.1%

60.9%

Major Banks Home Capital

Superior Efficiency Ratio (taxable equivalent basis)the lower the better(As at June 30, 2008)


Why We Will Keep Growing

Core mortgage business

Geographic expansion

VISA products

Commercial mortgage lending

100% insured high ratio mortgages

New initiatives

Gerald M. SolowayCEO


Solid Results in 2008 – Q2 Highlights

Net Earnings of $26.6M + 20.6%

Diluted EPS of $0.76 + 20.6%

Total Assets and Securitized Mortgages of $7.0B + 27.0%

Return on Equity 27.7%


Momentum is Clearly Continuing

• Mortgage originations of $1.75B, up 50.0%

• Focus on risk

• Adjust geographical areas where we lend and modify LTV

• Net impaired loans - 0.71% of total portfolio

• Net write-offs - only 2.0 basis points over past 10 years

First six months of 2008 Highlights


Increased Dividends – 14th Time in 8 Years

52.0¢

44.0¢

31.0¢

18.0¢

13.0¢8.0¢6.0¢5.0¢4.0¢2.0¢

1999 2000 2001 2002 2003 2004 2005 2006 2007 June2008


HCG Stock Price Performance

$34.67

$1.63 $1.75 $2.05$2.95

$5.58

$7.25

$16.63

$31.25$34.75

$34.05

$39.50$41.90

97 98 99 00 01 02 03 04 05 06 07 Q208 Sep8/08

December 31

40%compound

annual growth over

thedecade


Our Goals Going Forward

Return on equity: 25%

Goals

1

2

3

Growth in net earnings and EPS: 20%

Growth in total assets and securitized mortgages: 20%


A great team of 388 talented, experienced, hard-working people

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