Gerald Soloway – Chief Executive Officer Martin Reid – President

Geoffrey Kwan – RBC Capital Markets Shubha Khan – National Bank Finance Stephen Boland – GMP Securities Graham Ryding – TD Securities Aren Hoffman – National Bank Finance

Thank you. Thank you, operator.

Good morning, ladies and gentlemen. I'm delighted to report to you on Home Capital's 2014 fourth quarter and full year results.

I’m also pleased to report that Home Capital delivered a solid performance in 2014 against all of its objectives for the year. The net income was $313 million in 2014, which increased by $56.6 million or 22.1% from the net income reported in 2013.

And during the fourth quarter, the company received a $32.7 million gain or approximately $24 million after tax related to the prepayment of $234.9 million of water heater loans that was repaid by a customer. This was a very good transaction for Home as we were repaid the loans and collected a $32.7 million prepayment penalty.

The prepayment penalty compensates the company in excess of the future net interest margin that will be lost as a result of the sale. If we deleted the $32.7 million gain on the water heater sale and a few other small items, the adjusted net income was $288.4 million, an increase of some $30.7 million or a 11.9% from adjusted net income in 2013 which reflected higher loan balances in the traditional mortgage portfolio, sound net interest margins, low credit provisions and a consistently low efficient ratio.

Diluted earnings per share were $4.45 for the year, up 22% from the $3.66 reported last year where adjusted diluted earnings per share were $4.09 compared to $3.68 one year prior, an increase of 11%. The total adjusted revenue exceeded $1 billion for the first time in 2014 and we know that when Homes revenue exceeds $1 billion in a year, it really feels that the company is starting to grow up.

The return on average shareholders’ equity always an important margin of how the shareholders are doing in the company was some 23.8% for 2014 and the adjusted return on equity was 22%. 2014 marked the seventeenth consecutive year when return on equity exceeded 20%, a record in history we were very proud of.

The credit quality of the portfolio remained strong. Even though total loans under administration increased to $22.56 billion, the provision for credit losses was only $13.1 million, a decrease from the $15.9 million recorded the previous year, almost $3 million less.

In addition, the net non-performing loans as a percentage of gross loans ended the year at 0.30% compared to 0.35% at the end of last year. The net write-offs for the year also improved and they were only $10.3 million, representing 0.06% of gross loans compared to 0.09% of gross loans the year before in 2013.

So the credit quality of the company has been and remains very strong and we see that continuing going forward. There has been a lot of comment and concern about the Alberta real estate market since the 60% drop in oil prices over the last six months.

And I will outline for you Home’s very modest exposure to the Alberta housing and real estate market. As I stated at December 31, Home had total loans under administration of $22.56 billion and of that total, 5.1% or $1.15 billion were in Alberta.

And of that total, 53% of those Alberta loans were insured by CMHC or Genworth. Now, the total uninsured loans in Alberta were only 47% of the Alberta portfolio and only 2.4% of the total loans for the whole of the Company.

The 47% comes out to $546 million. Now of that 2.4% or $546 million in uninsured loans in Alberta, the largest category were single family loans with an average loan to value of 64.9%.

Lots of room if the real-estate market in Alberta sites the slip of that. The balance of the portfolio in Alberta of approximately a $100 million is predominantly either commercial loans or residential units that are more than 4 units, which are classified as the commercial category.

And the average loan to value on all the commercial loans in Alberta was 46.3%, so we’ve been a very careful lender on the non-residential and it’s at a very low loan to value. I might add that our arrears in Alberta are also substantially lower than our whole portfolio.

So, I repeat that our Alberta uninsured loans are only $546 million out of $22.56 billion. They are performing very well and they are very considerable on low loan to value.

And I give you these numbers to illustrate that although that our Alberta loan book is not a concern, although we continue to monitor it very carefully. At this point, a very conservative portfolio that is performing very well.

Now during the first quarter of 2015, Home plans to launch a new mortgage originations platform. This new technology will increase efficiency and enhance the accuracy of our underwriting practices.

This is the first phase of our long term investment to add features, controls and metrics to our procedures and supports our goal of continuous improvement in the mortgage process. This platform is currently being tested and we expect to go live by March 31, 2015.

As you know today is February 12, just two days before Valentine’s Day. Home’s Board of Directors has declared a Valentine’s Day gift to all shareholders in the form of a dividend increase.

And to all of Home’s shareholders we dedicate this little poem, which you may have heard before “roses are red, violets are blue, this dividend increase is just for you.” As a result of the Company’s solid performance, profitability, and strong financial position the Board of Directors has declared an increase in the quarterly dividend up $0.02 to $022 per common share payable on March 1, 2015.

This represents a year-to-date increase of some 37.5% in dividends paid to shareholders. This dividend increase is the 22nd dividend increase in the past 10 years.

When appropriate, we will work to continue this trend of increasing dividends in the future. On a slightly different note, on February 6, Central Mortgage and Housing Corporation released their 2015 housing market outlook for Canada and they expected sales to remain flat and the average house price to increase by a modest 1.5% across Canada.

What is interesting to us is there was no talk of a housing bubble and there is absolutely no talk of an interest rate increase. If anything there is more talk about an interest rate decrease at this point.

So, we think, Home thinks that 2015 will be a good year for the housing market with modest price increases. We go along with that trend and we see a steady level of activity all year long.

We also see a very good year for the commercial lending between the low rates and the level of activity for businesses, we see an increase in the storing apartment and small commercial market for Home. We have added senior staff to the underwriting group who are in place now and additional senior staff to the control groups and credit and we anticipate good growth in the small commercial portfolio throughout the coming year.

Home has previously set targets on an annual basis. Like most major financial institutions Home has now moved to setting mid-term targets of 3 years to 5 years.

Accordingly, we have set the following goals on a 3 year to 5 year basis. First the diluted earnings per share, we will try hard to achieve on average annual growth of adjusted diluted earnings per share of 8% to 13%.

If we can do better find, but we set a target that we think is sustainable for us over the next 3 years to 5 years. The return on shareholder’s equity, we hope to achieve on average an annual return on equity in excess of 20%.

As stated, we have exceeded 20% return on equity for the past 17 years and we will try very hard to continue that trend. On capital ratios, maintain strong capital ratios and exceed regulatory minimums by a safe margin commensurate with our risk portfolio.

And the dividend payout ratio, we look for a payout on average 19% to 26% of our earnings to the shareholders. We remain cautiously optimistic that 2015 will be another record year for Home in all facets of its business.

Thank you for your attention and I’ll now be happy to take questions.

Hi, good morning. First question I had was, in the quarter on the securitization gains on the prime side, I think it was 69 basis points, that as you talked about is, been there has been competition in the prime space, just wondering where do you see that today because it has come down quite a bit over the course of the years, is this kind of more representative of what we might see over the next few quarters?

Yeah. Sorry.

My question, I was asking about – on the securitization gains on the prime side. I think in Q4 you guys had 69 basis points and I think that’s come down over the course of the year and just wondering the way you see things right now over the next few quarters is what we saw in Q4 indicative of what we might see in the upcoming quarters or whether may be more one time things in nature that was driving it down to that 69 basis point level.

Okay. Thanks, Geoff.

First of all, my apologize to everyone. I inadvertently was moving the phone so that I could have – it could be an access for others to answer the question, but I think I did something that got disconnected.

But anyway to answer Geoff’s question, at this time the margin seem to be fairly flat. I don’t see an uptick in the margins on the insured loans.

It remains a very competitive area. I think with the rates as low as they are, clearly all of the – I think you’ll find throughout the lending community that margins on the government insured product will be fairly tight for the next little while and there is a fair amount of competition.

So I think that – we think we can get the volumes up and that will happen naturally because we have good relationships but I don’t see much expanding on the margin front in the near future. It remains quite competitive and quite tight.

Okay. Thanks.

And the next question I had was on the PCL, on the consumer loan and credit card portfolio. If you kind of take the total provision and a percentage of total loans in that category, if I have my math right I think it went up quarter-over-quarter from 57 basis points to 79 basis points.

But when I take a look at it like total dollar provision stayed unchanged but I would have thought that also you would have – with the water heater sale coming down, like was it just a function of I guess there weren’t really any provisions in the water heater portfolio or?

Okay, just one sec, I have Martin to answer that, Martin Reid.

Hi, Geoff, it’s much more a function of the change in the outstanding portfolio.

Okay. So it was a function of the mix just post the water heater goes well?

Exactly.

Okay, okay. And just may be one last question, in terms of what you’re seeing so far this quarter on origination activity and potentially any early signs of any credit issues specifically in the originations I ask that because with the late start to the housing season last year, Q4 was arguably stronger than – what would be expected for the seasonal perspective in Q1 often also being seasonally weak.

I just wanted to get some color on what you’re seeing?

Well, the color so far is, our numbers are surprisingly similar to CMHC’s. It’s similar to last year.

The quality coming in is good. We are doing good business, but we haven’t seen any kind of a surge year-over-year.

I don’t know whether it’s the weather, we just – we don’t see any big expansion on the residential market based on the first five weeks of the year. But January is a very unpredictable month, it’s real worse than last year, it’s slightly ahead but I don’t know some would say January is the coolest month of the year, its weather related, it’s a whole bunch of things and peeps.

We don’t have much analytics on it, but we don’t see the housing market going crazy over the next few months. We see last year plus a bit of an uptick.

Yeah. Geoff, its Martin here.

You are seeing softness in the Calgary market, sales were down about 38% there and [indiscernible] things were up. If you look at Vancouver, Toronto are holding in quite strong and little bit of softness in Montreal but generally across the country fairly healthy.

Okay. So I guess the rate cut doesn’t seem so far they’ll be having much of an impact and then I’m guessing on the credit side you’re not really seeing anything kind of early signs of anything coming up?

No. Credit remains very strong.

Okay.

People are still paying their bills.

Great. Thanks.

Hi, thanks. Good morning.

Good morning, Shubha.

Morning. I have a follow-up to Geoff’s first question there on the – spuds on insured mortgages or accelerated mortgages.

I guess when I’m looking at – based on the data that I’m looking at, mortgage rates have barely moved but then coupons on NHA MBS and CMB seem to have fallen in line with the bond yields, so I would have thought it would be reasonable to expect income from securitization to rebound early this year. Is that a fair assumption to make that because or your earlier comment suggest that, that’s probably not fair.

I’m wondering where they’re missing something in terms of what we are seeing on five year mortgage rates and then to NHA MBS coupons et cetera.

I’m going to let Martin Reid answer that Shubha.

Hi, Shubha. Yeah, mortgage rates haven’t come down to the same extent that the bond rates and the bank calendar rate came down, but we are just at the early stages and coming into sort of the busy season, the more competitive season.

We do anticipate that that will be a lot tougher and a lot more competitive. There is opportunity there that it does widen out a little bit but we wouldn’t anticipate any major widening.

I see. So if I understand you correctly then you’re assuming that the competitive conditions are such that you expect mortgage rates to come down in line with NHA MBS coupons et cetera.

Yeah. And Shubha, what happens is, many companies don’t pose the lower rate but they will do specials with brokers.

And for the political reasons – and I’m not making critical of this, but we will find out that many large issuers of CMHC will say okay to a broker, here is a special discount here, the special and they may not pose that across the whole company. But in the securitized CMHC marketplace, we find the spreads have not widened out to the extent that it may have – by looking at the posted rate, so that’s what we are saying.

I don’t want you to anticipate automatically we’ve got that extra 20. Everybody seems they’ve reacted one way or another with the broker network, while let’s see if we can do a little more volume now.

And if that happens, we will be glad to tell you about it, but I just don’t want to say that we see it there automatically.

Gotcha, understood. And in terms of accelerator originations, which also moderated in the quarter and I guess you attributed that to competitive conditions in prime insured as well, but if I recall correctly you previously indicated that you’re looking to ramp that originations in that business up to $300 million, $350 million a month over time, does the competitive environment, the current competitive environment sort of de-rail that plan in any way or - and what sort of steps might you need to take to regain whatever market share you may have lost in insured mortgages?

Well, it’s a very price competitive product more so than probably anything else we have and we are in the business for the long term and we think we get some efficiency gains out of our new origination portfolio. We think that it will also help to put greater controls, greater efficiency and we will look to - you can increase the volume very easily in that business by adjusting rates and I guess whether we put a lot of energy into increasing the volume when the rates were very tight, we just - we look at these things on a continuous basis.

I think it will be there. Historically, the threads are a little higher than what they have been lately.

I think they should widen out a little bit more for the companies back to where they were earlier in the year, but the only thing is I didn’t want to promise that it was there already when I hadn’t seen it fully developing. But it’s one of the business that we - we know what you have to do if you want to increase the volume, you drop the rates, the volume increases.

It’s a real, for an economic experiment it’s a real unusual - it’s a real efficient method. It is a little bit like term deposits on money coming in.

You can attract a lot more money with an extra 10 basis points and you can attract a lot more volume on the insured market with 10 basis points discount, but you’ve got to figure out at the end of the day, can you do it efficiently just to do volume for the sake of volume has not never been our objective, we’d like to get a decent return for shareholders. So, we see last year’s volumes continuing, we don’t know if there is going to be a big ramp up, or just continue sort of last year’s volume and we’ll look at the market and the opportunity.

If the markets are there, we are going to be there, Jack the Bear will be right there. But if we are doing it to spin dollars, we may step aside and just do a smaller volume, like it’s one of those things we continuously monitor.

Okay got it. One final question, and this is related to uninsured or your traditional product, should we anticipate more sort of downward pressure on the margins there given the higher volumes of originations that you’ve been doing post B20, the higher credit quality that you’ve been originating since B20 was introduced?

No, I think it’s leveled out quite well at this point. I think what I smell there is even more of a passive bump upward than I do on the insured.

I’m quite comfortable those margins are holding in quite well and they may creep up a little bit as the year goes on. So, I don’t see quite the same pressure on the uninsured market as there is on the insured.

Yeah that’s perfect. Thank you so much.

Good morning.

Good morning Stephen.

I guess I would take you a little bit back, if we can go back a few years with the credit crisis, Home did a very good job at shifting product mix to insured products, increasing liquidity on the balance sheet, protecting the balance sheet and really felt [indiscernible] with the other credit crisis, what I guess I’m hearing now is that despite all the hype with western economy and oil price pressure there really isn’t a - in your view a need to do that kind of similar action or similar shift, I just want to make sure I’m reading that correctly.

Well you are reading correctly as we keep analyzing we’ve got far most robust treasury, a far more robust risk group that looks it down on a continuous basis and we sit with above regulatory requirements of approximately 300 million, 400 million more than the regulatory requirement. So, we have chunk of extra capital.

Not that we hoard it like a miser hoards their gold, but we are not going to spend it foolishly, but we’ve got a big capital cushion. We monitor all our businesses, it is like what we’ve done in Alberta, we always had a little more concern about the marketplace that we are so dependent on oil and I think when you heard about our balance there we feel very comfortable that no matter what happens in Alberta we’ll come through okay.

We’re comfortable with the portfolio across the rest of the country. We don’t see at this moment, the same kind of crisis that sort of been annunciated by some of the media, I think Alberta will have a difficult year and the oil problems and layoffs are very legitimate concerns and we are pleased that our portfolio is where it is in Alberta; as I say it’s under 65% and under 50% on the non-residential.

So we’re quite comfortable with where we are at there. We think across the county we are also in good shape.

We - for an old goat like me who has seen the 90s where you can get 25%, 30% of the value whipped out in a few years in Ontario and the 87 crisis, 2001 crisis in the state, we’ve seen it several times and we continue to operate on a fairly cautious basis. So, I don’t think at this point we are planning any dramatic changes, but Martin’s got a few points.

I see even - you know as Gerry pointed out we’re taking a cautious approach and we did lower our guidance and a lot of that is really just acknowledging that there are increased risks out there. We are not seeing anything in terms of the housing market that would spook us, but we do recognize that the risks are -- the downside risks are a little bit greater with what’s happening in Alberta etcetera.

So, your mid-term guidance, this is published in August or September may have looked a little bit more robust, is that fair to say?

Correct, yes. We sort of took the whole energy crisis out of it, probably would have been a little bit more robust.

Okay. Thanks very much.

Good morning Graham.

Good morning. Maybe I could just start with the origination platform that you’re building out or you launching in Q1, is this really an expense initiative or what’s behind the thought process here?

I will give that one to Martin.

Yeah, it’s a combination of things, so part of it is on the efficiency side and we do see - it’s not going to happen immediately, but we do see further down the road improved efficiencies on the underwriting side and then part of it is going to be better service to the mortgage brokers, you know as well as sort of enhancing the control framework within the organization. So - and this platform sits on top of SAP.

Okay and is this a material expense that we are going to notice or CAPEX stand or how should we think about impacting it?

It’s not a dramatic expense, no. $5 million to $6 million will be amortized over time.

Okay. And the dividend, you gave guidance that you are looking at 19% to 26% dividend payout range on earnings, how should we think about that in context with the recent increases you know three-quarters in a row now dividend increases, is this just you sort of try quickly get up to that range?

It’s one of those things that that’s’ what we are targeting and it’s hard to talk about future dividends because so much happens in the world in 90 days from now, but what we will try to do is give you our perspective, we raised it some 22 times in the last 10 years. We do want to keep enhancing the yield with the guidance as the highest that’s been since we started in the dividend trail.

We’re looking to try to increase it quarter-by-quarter and we do that cautiously like the way we run our business. We want that – when people get the dividends, they have the comfort of knowing that they will be sustained and that they bounce around.

And so I guess we got to look at how the world unfolds 90 days from now as to what the – what our next move is. But I should tell you it was because both the results we had and on the boards opinion and management submissions where everyone felt that we could comfortably bump the guidance upward and bump the dividend upward.

And I guess for any company we can’t promise we’re going to do it every quarter but we’re going to look to see whenever the market conditions are proper and the business is good, and we don’t see arrears as a problem, we will keep looking to increase dividends. I don’t know, it’s one of those I can’t give you a hot answer.

Yeah, you provide some color. I just wanted to get a feel whether you’re looking for regular dividend increases or you are more focused on the dividend payout ratios you got?

Well, I think both.

I mean because we just increased the range over the next little while, it will be much more about the growth of the income and in growing with that, but over the longer term we’ll look to continue increasing that range.

Okay, that’s helpful. And then maybe just last quickly if I could, the banking license application, is there any update around that or your expected timing perhaps?

And then how should we think about how you’re going to leverage any branding around that? Do you keep focusing on the whole trust brand or do you shift towards a Home Capital bank brand if you get the application?

Well, maybe I can answer that very quickly. In terms of the application itself, it’s all been submitted.

We’ve given all the notices. There was a number of advertisements in Canada because of that [ph] people had a chance to object to the best of my knowledge, there were no objections.

The application is not there in out a while pending I guess coming up to which turning the pile and we expect at some point over the course of the year we’ll be hearing more about it. At this point, we’ve heard nothing and we think in due course that will be – it will come forward, we may have more color on it but so far there has been no objections to it.

It’s just a matter these things take time. What we didn’t plan to do is when we had the retail, we had it to drive the retail deposit taking through the bank.

There is in the Canadian public a little more comfort around the bank name than there is around the trust companies name, all our research showed that. There is very few large deposit taking institutions left in Canada where at one point, there were a number of large ones and all of which have been merged into the bank.

We just think it would make deposit taking a little easier and a little wider appeal to a lot of individuals. Even though both entities have the same deposit insurance with Canada deposit insurance, perception is such that the Home Trust bank would be a safer place than Home Trust.

So we are looking at it and we hope we’ll have more news for you in coming quarters, but the main purpose was not to go often do something different than we’re doing. It’s usually is a tool to how to make our own business a little better and use it mainly as a deposit taking mechanism.

Great. And would you consider leveraging that bank ran towards the direct-to-consumer platform or you’re going to keep Oaken Financial separate?

Hi, Graham, it’s Martin. So Oaken Financial will likely sit on top of the bank, so Oaken Financial will still be that brand for the customer and it will sit on top of the bank.

So right now, it flows through to the Trusco, it will flow through to the bank. So the bank is just a carve out of our existing business with Oaken Financial.

Okay. Thank you.

Thanks.

Good morning, Gerald.

Good morning, Aren. How you’re doing?

Good, good. I noticed that management at Home Capital is expecting lower real estate prices in the coming year.

Do you expect that to contribute to slower lending and slower lending environment at Home Capital?

Whether the executives say that or was it in the quarter, I don’t recall that?

It’s in the quarterly report, it talks about management’s expectations and one of the assumptions that management and I’m quoting here “There will be modest declines in housing starts and resale activity with stable to modestly declining prices throughout most of Canada.” This is at the very last page of the quarterly report on the assumptions, is that their last assumption?

Okay, well. The accounting people are always very cautious and I think that, that was prepared by the accounting people.

I think and it’s wise to be cautious. I think from the business people, I gave you the update really.

I think the CMHC comments are really in line with where we are at. We do think that it will be a flat year to modest increases in prices although Alberta may be down a bit, but I think across the rest of the country is going to be fine, the prices will be modestly picked up but we are just not – I guess all of us whether it’s the accounting people or the President, we’re all sort of say the CEO, we’re all saying it’s going to be a very flat year we think in prices and maybe parts of the country may be down a little bit, but we don’t see anything, any drastic move.

Even in Alberta I think the movement downward in prices will be fairly modest compared to other recessions. I think the lending by all the lenders in Alberta has been fairly cautious.

I think people have substantial equity and although there are going to be people because of the lost jobs will be moving out and certain amount of activity, we’re not that concerned. We think that the country as a whole will have a fairly decent year.

Does that help you?

Sure. And I just wondering if this is going to slow your loan growth down the fact that as you said relatively flat prices, how does that – do you expect that to slowdown your loan growth?

Not much. We think that we can gain market share because we now – what has happened is, we now have products at the cheaper end of the uninsured.

We are dipping into the bank range on some of the products we’re doing, not all of them but some stuff that might get approved with the bank with some difficulty. People are coming because of the lower rates and the B20.

There has been some shift at quite high credit quality. So we think we can increase our market share.

We think that all the initiatives we have growing should be pretty strong for the year.

Okay. The next question here, I noticed you have lower loan loss provisions on uninsured loans this quarter, this doesn’t strike me as Home Capital being very cautious, any comments on that?

Well, I’ve got. When we do as we have loan loss reserves about anybody who is in arrears, we have a general reserve that gets added to every month and maybe we can look up and get you, do we have – we published how much we have in the general?

Yes, we do.

Okay. Just see if you could find it.

I know it’s up year-over-year and I think there is – and what is that compared to a year ago. We’re going to look that up.

Maybe you go on to another question and we’re looking that up. Here we are, wait a sec, here we are.

So $34.1 million in our general reserves.

Yeah.

And that’s up by just under $3 million increase.

Okay. So although the arrears have gone down, the general reserve is up $3 million which is unallocated to anything of a specific nature, that continue to upward as we set that aside on a monthly basis unrelated to the losses and the actual specifics relate to loans that have missed payments, so we have some knowledge that there is a problem or there is something there.

We don’t do a specific on a performing loan. I don’t think that’s the practice in the industry.

The specifics are down because everybody is paying.

That’s a good thing, that’s not a bad thing and the non-performing - the non-performing is down so the specifics are down.

So you are lower - I mean what is see is slightly lower loan loss provisions that’s just a reflection of what delinquency amounts basically you are taking as provision based on days in arrears?

Yes and actual loss experience.

Great.

No, no. If we got to notice, let’s say, just - I’ll tell you how early we would get on it, let’s say it was a person hadn’t missed a payment, but we heard that he was going out of business, we would immediately look at that as an arrear situation and put an allowance on it even though the second may keep us in good standing for a month or two.

We would not - we would be proactive in looking at whether there could be a loss on that down the line, but as a normal performing loan, residential loan and there is no indication of NSF or arrears or problems, we don’t put a specific on it, that’s covered by the general and where we keep adding to the general is the portfolio growth. So, in terms of losses, the general is there, which in actual experience is more than a couple of years of losses, is all built into the general that never gets clawed back, you only increase it from time to time.

And so we have, even if we didn’t put anything up there specific, we have is part of our financial statements, the next two or three years of specifics has already baked into the general, but the general never gets clawed back, it’s just part of operating procedure.

So, for example you have an increased loan loss provisions for Alberta just because of the weakening economy there that’s not - you do it based on the delinquency, the amount of days, the loan is delinquent example.

Yes.

Okay just one more question here, I noticed Home has lower targets for growth in adjusted net income and growth in total loans and administration for 2015, is this a reflection of Home’s cautious outlook?

It’s not for 2015, it is for the next 3 years to 5 years and part of this is - as I mentioned earlier, we do acknowledge that there are greater downside risks, we are not seeing anything in the marketplace at this point that is a cause for concern, but we do recognize our downside risks.

We don’t want to put too high a number out there and disappoint anyone, we wanted to feel that even if we do, if the oil problems in Alberta and the peace in the Ukraine doesn’t hold together and it becomes uglier with the financial turmoil, if the Greece [ph] situation and the euro becomes worse, we don’t want to project too high a growth figure, we look to see MAC, we looked to a lot of economists, so we say, you know maybe we really have to listen to all those and the projection. And also now that we’re - at the size we are at 22 billion you can’t crank it up and grow as fast as we were at half the size.

So, we just thought we’d give goals that we felt highly confident about being able to achieve over the 3 year to 5 year period.

I thought you had set those targets lower because you missed this past year in terms of those figures, you didn’t achieve your targets in those two …

Sure. It’s a matter of reality.

You look at all of it. You look at the market, you look at how well you are growing, you look at how - to us growth is good and we like growth, but we also like profitability in loan losses.

We are old fashion, we don’t like to lose money and sort of we got to see the opportunities there, we got to see the margins and we won’t lend just for the sake of lending. So, opportunities in products come and go and sometimes – I am just saying that we have a degree of caution over the next period of time between all the things that are happening in the world and in Canada.

So I think those clearly reflect a little more caution then maybe we might have expressed a year ago.

So you are not putting the pedal to the metal or just you’re being a bit more careful with your lending and you’re most concerned about being conservative in that regard.

We are always careful, but we are telling you what we see ahead. We see that there is probably more bumps in the Canadian economy and we don’t see that we can grow our book 20% this year.

And I think it’s sort of as simple as that. We see goals that we think we are pretty comfortable.

I’ve told you one area that we think we can do a nice little uptick in the commercial. We see some good opportunities there.

All the collateral businesses are growing, but if the housing market is relatively flat, it’s going to be hard to do more than – by creeping into market share of other people to be more than the guidance we gave you, it’s just a reality. Could be the housing market starts to grow a little faster, then we’re going to grow faster.

I guess the fundamental principle of how we operate is, we won’t do growth just for the sake of growth, it’s got to be sound, profitable and economic make sense. And I don’t know, that’s the bottom line in all of these predictions.

We just think it might be a bit slower than last year in terms of growth and year-over-year growth, and so we are just trying to reflect that.

Great. Now, it sounds like you’ve been prudent and I appreciate that.

Thank you for your time.

Okay. We always try to be prudent.

You’re very welcome.

Good morning all.

Good morning, Joe.

I guess considering the line of discussion on growth that your fourth quarter adjusted diluted earnings per share grew by just over 6%, some $0.98 to $1.04 which is well below your previous guidance of 13% to 18% and your new three to five year guidance of 8% to 13%. So just want to understand what happened in Q4 that your growth was that much lower and I thought I heard you say earlier that January was not particularly strong.

So I’m just wondering what happened in Q4 and what makes you believe that your new target of 8% to 13% is achievable given the 6% growth in Q4?

Okay. Just – Martin is going to answer the question.

Part of that in Q4 was the sale of the water heater business. So the sale of the water heater business - interest income that wasn’t received for part of the quarter.

So if you added that back in, we would have been either right on the bottom end of the range or very close to it.

Okay. So you would have been closer to 8% bottom end of the new range is that what you’re saying?

Yeah.

No, above that, close to the bottom end of the old range.

Oh, close to 13%.

Correct.

I see. Okay, so that puts in a new line.

So some of that interest income is embedded in that gain on sale which we backed out to normalize.

Okay, but knowing that interest income will not be there in Q1 of 2015.

Yeah.

How does that impact your ability to hit the new target?

So again that’s shifting those targets down a little bit lower. We still see that business growing.

So getting the whole retail credit business fairly good growth in that business and over a period of time getting back to where we were on that.

Okay. Thank you.

Okay, thank you, everybody. Thanks for listening in today.

We continue on target, we stick to our netting. We think we know what we are doing on a day-to-day and month-to-month basis.

We don’t plan any revolutionary new businesses. We’ll stick to the businesses we know and I look forward to reporting to you at the end of first quarter.

And thank you.