Q4 2020 Home Capital Group Inc Earnings Call

Throughout the first two months of the quarter.

Yeah.

Hi, Chi and by the way the funding costs have been.

Healthy for us.

What happened and the second quarter of 2020.

When the bank of Canada dropped rates fairly rapidly to offset what was happening and the economy.

Over a few weeks the GIC rates, followed them and widen our spreads to mortgages over the year the mortgage.

Rates have come down our competitors as well as ourselves have come down and brought the margins a little closer to normal but still healthy.

Healthy and we're able to keep our rates.

Competitive yet.

Not the cheapest guys and towns and we compete as you as you've heard me say before a lot of them on our service and relationships and education.

So the.

I think the margins for now are healthy there is more competition in this space and there is Ken and tend to be one or two that are trying to buy market share with price, which can be a short term, okay, but and the all day space theres much more into it and then just rate and the complexity of the deal and understanding the risk within that deal.

And so that helps.

From the <unk> business, where you might get somebody just going on rate. There has been very low rates of 139 $1 59 on the <unk> side.

That are very commodity that is a very very basic mortgage and as long as we qualify you can have it but and the Alt a side theres a lot more complexity, whereas the mortgage net income proof. So it tends to leave it a little more.

Normal spread I think our competitors and us do a lot more work to do that so we required a spread to be successful.

I appreciate that and let me just seven.

And so a little bit more detail, there and talk to them.

And you just mentioned and I and looking to come to market for another RMB up issue and the first half and this year.

And and growth initiatives to increase your oaken deposits and your overall.

Deposit book.

Do you think then that and.

And there are your NIM of Q4.

And are pretty strong is that sustainable over the course, and your and I think there'll be some volatility there or how should we think about that going forward.

Well I think that.

Yep.

The big assumption and Theyre all of this is there's no.

Movement, either and the government rates as well as some consistent cash.

Competition on the per broker deposits.

As well as on on the asset side. So all of those sort of stay similar to where they are today.

Day, then we expect that.

We will be able to maintain.

NIM.

At current levels.

Probably certainly and.

And Q1, and and that's kind of where we have safe too.

Burkhart some confidence.

Okay.

And just with respect to the open branches and it.

Across these growth good growth and internally sourced.

Deposit growth.

And so there isn't about money and how do you think about the strategy and volume physical locations now and with post pandemic world going forward and.

And I'm looking here at work there.

We think it will still be important channel.

And number of our clients are over the age of 50, and they still value coming into the branch and the relationship and being able to do that like everyone else They pivoted and.

And.

And to using digital to continue to deal with us, but we had.

And the last year.

Certain branches will open and close again, and Toronto, and Vancouver, and Calgary, They're still open and.

And it was our first test to see what happens when the branch openings and it got very busy even with social distancing and Lockdowns and so.

So we really believe that it is going to continue to be and are an important part of the oak and service.

But now we've even added digital so that we will have more.

To do so so there is still.

A certain amount of clients that value these relationships and trust and then those who want to deal with us digitally.

We've made ourselves much better from last year for them.

Okay and just.

And one more question from me.

And operation organic growth opportunity zone.

And quite strong book to the tier how.

How do you think there may be more strategic decision and with longer term.

Have you evaluated any acquisitions or potential new verticals or.

Perhaps acquisitions to boost the mortgage business, how do you think about from a strategic perspective kind of beyond this year over the next three to five years and.

And organic growth opportunities.

Yeah.

<unk>.

Very focused.

And our foundation and building the company to be stronger and stronger I mentioned.

At night and building our technology.

Not complete we're about halfway through what we want to achieve there it allows us to more be more digitally competitive to be more.

Data management to competitive CRM competitive.

And just.

Updates home and many many.

Level, so that's our focus.

But if there's some opportunity came up that was on strategy and.

And maintenance.

And we would like we would look for sure I don't think anybody wouldn't book if it didn't make sense.

I think we're in a good position and our capital base allows us lots of lots of options.

That makes sense that was accretive it would be a choice for us and this.

We have the opportunity to give capital back to our.

Our shareholders. So when a good seats in terms of those.

Sop process.

Thank you.

And as a reminder to ask a question you will need to press star one on your telephone.

And your next question comes from Graham Graham Ryding from TD Securities.

Good morning.

Just following on that last topic with ignite.

I think.

From the adjustments from your expenses I think did and going for a couple of years now should we expect.

Adjustments to continue for another couple of years or what's the outlook there with true.

Ignite related adjustments.

Okay, Great and we expect this this fiscal year will be the last year, but wont be making those adjustments.

Okay perfect.

And then.

On the sort of the ECL modeling and whatnot and was there any sort of material changes year to date relative to.

Some of the key HPA and employment inputs that you would've put in.

As of December 31.

Uh huh.

That you would want to flag or could flag for us.

Well.

Yeah.

Again, it's all subject to significant.

Volatility.

We have so far seen.

Improvements and the HPA forecast as well as the unemployment measures.

Yes, okay.

That makes sense, because there was obviously a bit of a.

A decline and the sort of employment picture, just at the year and but.

And it sounds like offsetting and the outlook for employment has actually got a little bit better. Since then is that.

I guess I'd just leave you with debt.

Volatile.

And.

But.

So so far we've seen.

And improvements.

Got it and then my.

The last question would just be.

Appreciate it.

One of the slides you gave the FICO score.

Is that from your total residential book and Youre accelerating and your classic and if so what would it be for just your uninsured single family or your classic portfolio has that FICO score changed at all over 2020.

Yeah.

Yes.

Sorry, Brad and I are remote I was.

And I don't have that handy I don't know if you do Brett we can look into it.

I don't have the history.

And we'll get back to you.

Okay.

No problem. Thank you.

Your next question comes from.

Steven <unk> with Raymond James.

How are you sort of just one follow up for Brian.

Just on your tier one capital ratio, maybe the highest machine now and a couple of years.

It brings and not normal with buybacks and dividends and things of that sort, but.

When things do normalize what what capital level, our tier one would you like to be running out or what do you think you'd like to took that down to.

We've operated.

Yeah.

Over the past and.

And looking back.

And between 15% to 17%.

Yeah.

So that was kind of book.

Yes.

Our revenue run rate that we could get to over time.

Okay. Thanks, Brian.

I'm showing no further questions at this time I would like to turn the call back to CEO you Threep Masada.

Thank you Cindy and thank you everyone for joining us.

Safe and we look forward to seeing you live and the near future.

Yes.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

Yeah.

Okay.

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