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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.”
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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
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Positive 2007 Results
RETURN ON EQUITY
28.9%
Diluted EPS GROWTH
32.8%
TOTAL ASSETS
27.4%to
$5.0B
Despite turbulent financial markets
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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
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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
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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
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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
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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
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Market Dynamics Growth Opportunities
Mortgage lending companies
withdrawing from market
Growth opportunities
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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
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G R O W T H D R I V E R S
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
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G R O W T H D R I V E R S
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
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G R O W T H D R I V E R S
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
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G R O W T H D R I V E R S
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)
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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
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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%
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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
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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
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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
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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%
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A great team of 388 talented, experienced, hard-working people