TORONTO, Dec. 7, 2015 /CNW/ – Home Capital Group Inc. (TSX: HCG) (“Home Capital” or the “Company”) today announced a revision to its medium-term target for Return on Shareholders’ Equity (ROE). The Company’s other medium-term objectives, including for growth in earnings per share, remain unchanged.
After reviewing its budget, outlook and capital plan, the Company is now targeting average annual ROE of greater than 16% over the mid-term cycle. Home Capital had previously targeted average annual ROE of greater than 20% over the medium term.
The company continues to target growth in diluted earnings per share (adjusted) of 8% to 13% per year, on average, over the medium term. The Company’s previously disclosed objectives of maintaining strong capital ratios and maintaining a dividend payout ratio, on average, of 19% to 26% of earnings remain unchanged.
Home Capital believes that by focusing on medium-term objectives, rather than annual targets, the Company will be well positioned to provide sustainable earnings growth and solid returns to shareholders. This approach allows management the flexibility to take actions in the short term to maximize mid-term and long-term value for shareholders.
“Our goal at Home Capital remains to provide superior returns, while ensuring that our growth remains prudent and profitable,” said Gerald Soloway, Chief Executive Officer of Home Capital Group. “The decision to adjust our ROE target reflects in large part the effect of the substantial equity cushion we have accumulated, further solidifying our balance sheet, as a result of our earnings power in recent years.”
CFF Integration Update
Home Capital and its wholly owned subsidiary, Home Trust Company (“Home Trust”), also today announced the following update on the integration of CFF Bank.
Home Trust acquired CFF Bank on October 1, 2015 for total proceeds of $17.8 million subject to final adjustments, and subsequently injected $35 million of capital. The acquisition supported the Company’s long-term strategy to develop deposit diversification and expand the broker network to build relationships and drive mortgage and loan origination volumes.
The integration is proceeding according to the Company’s plan.
The Company has transitioned all retained former CFF Bank employees to Home Trust, and they have been relocated from their former locations in Calgary and Oakville, Ontario, to Home Trust premises in Calgary and Toronto. The next phase of the integration involves the migration of CFF’s products to Home Trust’s information technology platform. The planning for this is well underway with various deliverables set for 2016. Ultimately, the decommissioning of the redundant systems will allow Home Trust to realize significant cost savings and allow for efficient growth to realize the full benefits of the acquisition.
“We are very pleased with the progress of our integration of CFF Bank,” said Mr. Soloway. “We are already seeing benefits in the form of mortgage originations from new brokers.”
Mortgage Review
Also, as previously disclosed, the Company continues to actively monitor mortgages originated by brokers who were suspended for submitting applications containing falsified income information and notes that there have been no unusual credit issues.
The work the Company is doing in this regard is reviewing and, where appropriate, revalidating the income documentation related to the identified group of mortgages and taking corrective action accordingly.
Caution Regarding Forward-looking Statements
This press release contains forward-looking information within the meaning of applicable Canadian securities legislation. Please refer to the Home Capital’s 2014 Annual Report, available on Home Capital’s website at www.homecapital.com, and on the Canadian Securities Administrators’ website at www.sedar.com, for Home Capital’s Caution Regarding Forward-looking Statements.
About Home Capital and Home Trust
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 first mortgage products, consumer lending and credit card services. In addition, Home Trust offers deposits via brokers and financial planners, and through its direct to consumer deposit brand, Oaken Financial. Licensed to conduct business across Canada, Home Trust has offices in Ontario, Alberta, British Columbia, Nova Scotia, Quebec and Manitoba.
