Home Capital Group Inc.

Good morning. My name is Rex, and I will be your conference operator today. At this time, I would like to welcome everyone to the conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. At this time, I would like to hand the call over to Head of Ambassador Relations, Jill McRae. You may begin your conference.

Good morning, everybody, and thank you for joining us for Home Capital's Q2 conference call. I'd like to apologize for the delay and for the technical issues we are having with our admin platform. I'm not able to advance the slides, but I would like you to know that the presentation is available on our website for you to follow along with the speaker's remarks. We're going to begin with remarks by our CEO, Yusri Basada, followed by a discussion by our CFO, Brad Kodesh, and we'll take Q&A at the end. I'd like to caution you that today's remarks may contain forward-looking statements and that today's remarks rely on both adjusted and non-GAAP measures, and a description of such is included in the presentation. I'd like to turn it over right now to Yusri Basada.

Thank you, Jill, and good morning, everyone. It's been an eventful few months since we last spoke. That's true both in terms of the macroeconomic environment as well as the housing market. Real estate, and therefore the mortgage industry, is a fundamental and important part of the Canadian economy. Canadians' dream of home ownership has never been higher, with current supplies below current demand. We have entered a new phase of higher borrowing costs. The Bank of Canada tries to bring inflation down to its target level. We're also seeing increasing evidence of a correction in the autonomy and housing market. There is uncertainty in the world and in the evolving macroeconomic scene. This has caused concern about real estate values and about potential credit issues. You will hear today the number of ways Home is responding in this environment. The company is well positioned to perform and generate value as we navigate through the changing economic landscape. We believe in home's ability to weather volatility and deliver value for our customers, partners, and our investors. We're confident because our core mortgage business is a key part of the economy with a supportive underlying trend. This industry and our company are historically very resilient. Our business is built to be a fortress precisely in case of challenging times. We are experienced. We have seen higher rates before. We have seen softening markets. We know how to manage through times like this. If delinquencies do increase, we have experienced people and processes to support our clients through difficult times. We are committed to delivering sustainable value to our shareholders. We are making progress in all our businesses. We are delivering on our goals. We know this is a period of concern about the economy and the looming of a recession and the potential impact this has on the housing and mortgage market. I'll talk more about our outlook for the business at the end of my remarks and why our strong fundamentals have set us up to weather this well. But first, Brad and I will walk you through our performance in the second quarter. In this quarter, we added assets and customers in our residential mortgage and credit cards business. We reported strong growth in our commercial mortgage book. And we continue to build a high-quality lending portfolio underpinned by our disciplined risk management. On the deposit side, we added new customers to our Okin channel and made further progress in our strategy of funding diversification. And we continue to invest in the technology that will support and fuel our long-term goals. Our diluted earnings per share were $0.97. This compares to $1.02 in the first quarter and $1.42 in Q2 of last year. Both prior periods included reversals of credit provisions. As we noted in Q1, rapidly rising interest rates continue to pressure margins. We continue to report solid asset growth and we remain confident in the long-term returns that our portfolio will produce. Brad will give you more color on why rapidly rising interest rates affect our margins. Our portfolio growth was driven by another solid quarter of originations of just over $3 billion. Originations grew by 43% compared with a strong second quarter in 2021. Both residential and both commercial and residential originations more than double compared with Q2 2021. Our originations drove significant growth of 17% year over year in our loans and on balance sheet and loans under administration.