Fitch Affirms Home Capital Group's Ratings; Maintains Positive Outlook

The affirmation and Positive Outlook reflect HCG's consistently robust earnings, which have been driven by a solid net interest margin (3.0% for nine months 2008), strong income-producing asset growth, steady revenue increases across all business segments, good asset quality metrics, and stringent cost controls. Predominantly a residential mortgage lender, HCG focuses on borrowers who do not qualify for prime mortgages offered by the major Canadian banks; typical clients consist of the self-employed, small business owners, individuals with poor or limited credit histories, as well as newly arrived immigrants. These seemingly higher risk borrowers have not translated into higher credit losses for the company, as net impaired loans to gross loans remained flat at 0.72% from Sept. 30, 2008 to Dec. 31, 2007. While other major financial institutions rely primarily on automated underwriting processes, HCG conducts a labor-intensive customized credit evaluation for this type of residential mortgage lending, with a conservative loan-to-value focus, which has been paramount in maintaining sound asset quality. Furthermore, Fitch views the company's capital and reserve levels as sound, which also facilitate in mitigating risks.

Despite the on-going challenges in global credit markets, the Canadian market has fared better than most. HCG has continued to retain sufficient liquidity and possesses no direct exposure to any non-bank sponsored asset backed commercial paper or U.S. sub-prime lending. With no debt at the holding company or any term debt at Home Trust, the company has an increased reliance on CMHC mortgage securitizations for funding and capital management.

Though recent initiatives have helped improve HCG's narrow franchise, a limited product mix, geographic concentrations, and the company's relatively new entry into commercial mortgage lending, continue to bear monitoring. While Fitch views HCG's risk management positively, given the challenging economic conditions, pressure may rise on capital and provisioning needs. If the company is able to maintain solid financial performance despite the challenging macroeconomic environment that is envisioned for 2009, an upgrade of HCG's ratings would be likely.

Fitch has affirmed the following ratings with a Positive Outlook:

Home Capital Group, Inc.

--Long-term Issuer Default Rating (IDR) 'BBB-';

--Short-term IDR 'F3';

--Individual 'B/C';

--Support '5';

--Support Floor 'NF'.

Home Trust Company

--Long-term IDR 'BBB-';

--Short-term IDR 'F3';

--Individual 'B/C';

--Support '5';

--Support Floor 'NF'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

SOURCE: Fitch Ratings

Fitch Ratings Amy R. Shanle, 212-908-0821 Joseph Scott, 212-908-0624 Tyrene Frederick-Mack, 212-908-0540 (Media Relations) tyrene.frederick-mack@fitchratings.com