TORONTO, Feb. 25, 2025 - EQB Inc. (TSX: EQB) today reported strong financial results for the three months ended January 31, 2025, supported by accelerated year-over-year growth in loans under management and net interest income, as well as increasing non-interest revenue from higher multi-unit residential securitization and contributions from its alternative asset manager, ACM Advisors.
Highlights from Q1 2025 compared to the previous quarter and year include:
- Adjusted ROE1 15.2% (reported 14.1%)
- Adjusted diluted EPS1 $2.98, +8% y/y, +19% q/q (reported $2.77, +4% y/y, +42% q/q)
- Book value per share $79.71, +12% y/y, +3% q/q
- Adjusted revenue $323 million, +8% y/y, +0.3% q/q (reported +8% y/y, +3% q/q)
- Net interest margin2 2.07%, +6bps y/y, 0 bps q/q (reported +7bps q/q)
- Adjusted PPPT3 $170 million, +3% y/y, -2% q/q (reported $163 million, +3% y/y, +3% q/q)
- Adjusted net income1 $116 million, +7% y/y, +11% q/q (reported $108 million, +3% y/y, +36% q/q)
- Total AUM + AUA2 $132 billion, +11% y/y, +4% q/q
- EQ Bank customer growth +26% y/y, +4% q/q to over 536,000
- Common share dividends $0.51 per share, +21% y/y, +4% q/q
- Total capital ratio 15.5% with CET1 of 14.1% and liquidity coverage ratio well in excess of 100%
"We enter fiscal 2025 confident in EQB's growth opportunities and ready to build on our exceptional performance this quarter," said Andrew Moor, president and CEO, EQB. "Our confidence is well-founded. Canadians – in growing numbers – are responding to our innovative EQ Bank digital offerings and choosing us as their primary bank. We enjoy leadership positions in insured multi-unit residential, single-family residential and decumulation markets where needs for capital are substantial. The tailwind of recent interest rate cuts provides a constructive backdrop for enhanced loan growth and improving credit metrics. While we will need to manage second-order effects of cross-border tariff threats carefully, our purely domestic market presence, focus on lending in large Canadian urban centres with diversified economies and the highly competitive nature of our Challenger Bank services support a positive outlook."
EQ Bank experiences double-digit customer growth +26% y/y, +4% q/q to 536,000
- Steady increase in payroll customers, now representing an accelerating ratio of total demand balances, confirm EQ Bank's growing reputation as a primary bank of choice and go-to source for innovative savings and spending options with long-term relationship intent
- Strong US Dollar Account deposit growth as customers embrace refreshed CAD/USD foreign exchange rates and no fee, high interest offering, further elevating full suite of international banking features – including cost-effective global transfers with Wise and seamless spending with the EQ Bank Card – in line with commitment to redefining value and convenience
- The Notice Savings Account, an innovative and powerful alternative to GICs and traditional savings vehicles, continued to drive customer growth and launched in Québec subsequent to quarter end, uniquely positioning Banque EQ to meet surging demand for challenger bank offerings in the province
Personal Banking LUM steady on strong customer retention and promising origination levels, bolstered by significant decumulation growth +47% y/y
- Single-family uninsured originations grew +23% in Q1 reflecting stronger activity in the housing market and Equitable Bank's leadership position based on customer service excellence and well-regarded advocacy of the broker channel; loan growth expected to accelerate with the spring housing market as borrowers respond to a more favourable interest rate environment
- Decumulation lending (including reverse mortgages and insurance lending) grew +47% y/y, +9% q/q as successful advertising, exceptional broker service and value to borrowers worked to broaden category awareness among growing number of Canadians choosing to enjoy the benefits of a reverse mortgage
- Loans undermanagement (LUM) grew +2% y/y, +1% q/q to $20.2 billion with sequential growth fueled by strong originations and renewals, despite reduction in single-family insured lending (-15% y/y, -4% q/q to $8.8 billion) reflecting EQB's earlier decision to exit this part of the market
Commercial Banking LUM +18% y/y to $37.0 billion, supported by +30% y/y expansion in multi-unit residential loans LUM
- EQB continues to prioritize insured lending for multi-unit residential properties (primarily rental apartments) in major cities across the country with 82% of its total commercial LUM insured through various CMHC programs
- CMHC-insured multi-unit residential LUM grew +30% y/y, +5% q/q to $27.5 billion and insured commercial construction lending grew +48% y/y, +13% q/q to $3.0 billion, driven by both new originations and construction draws on existing commitments
Provisions in-line with EQB's expectations and reflect anticipated moderation in equipment finance
- Adjusted provision for credit losses (PCL)2 of $13.7 million (reported $18.7 million in Q1) reflects the impacts of evolving macroeconomic forecasts, expected credit loss modelling and improved Stage 3 provisions of $10.1 million (reported $13.8 million), down -12% y/y, -62% q/q
- Net impaired loans increased by $59.3 million in Q1 to $683.0 million, corresponding to 147 bps of total loan assets compared to 132 bps at Q4 2024 and 94 bps at Q1 2024; nearly one-third of new impaired loans are attributable to a single multi-unit residential loan insured by CMHC
- The Bank is appropriately reserved for credit losses with net allowances as a percentage of total loan assets of 28 bps, compared to 32 bps at Q4 2024 and 22 bps at Q1 2024; decline in Q1 net allowance rate driven by writing down loans to expected recoverable amount
- Following decisive action in previous quarters related to equipment finance, long-haul transportation portfolio fundamentals continued to progress as expected with an improvement in delinquency rates; exposure to this market continues to tighten in favour of higher-quality, prime leases
EQB increases common share dividend and shares capital management guidance
- EQB's Board of Directors declared a dividend of $0.51 per common share payable on March 31, 2025, to shareholders of record as of March 14, 2025, representing a 4% increase from the dividend paid in December 2024 and 21% above the payment made in March 2024
- For the purposes of the Income Tax Act (Canada) and any similar provincial legislation, dividends declared are eligible dividends, unless otherwise indicated
- Equitable Bank continually optimizes its capital structure to support strategic objectives and maintain strong overall capital levels; following its recent Internal Capital Adequacy Assessment Process (ICAAP) for 2025, the Bank established that it will operate above 15% Total Capital and expects that up to 300 bps of Total Capital could be contributed by Alternative Tier 1 and Tier 2 capital in 2027 and beyond, while maintaining consistent CET1 guidance at 13%+ for the balance of fiscal 2025
"We are pleased with EQB's strong start to 2025 and are invigorated by external recognition of our growth potential, reinforcing the calibre of our challenger business model and ability to consistently generate 15%+ ROE," said Chadwick Westlake, CFO, EQB. "EQB has excellent momentum from purposeful asset class expansion with strategic funding diversification progress importantly in EQ Bank. We continue to cement our position as a leading player in multi-unit residential lending and, paired with growing real estate market activity, these positive dynamics validate our outlook for the year as we remain well-positioned to deliver long-term shareholder value."
Analyst conference call and webcast: 8:00 a.m. ET February 26, 2025
Andrew Moor, president and CEO, Chadwick Westlake, CFO, and Marlene Lenarduzzi, CRO, will host EQB's first quarter conference call and webcast. The listen-only webcast with accompanying slides will be available at: eqb.investorroom.com. To access the conference call with operator assistance, dial 416-945-7677 five minutes prior to the start time.
1 Adjusted measures and ratios are Non-Generally Accepted Accounting Principles (GAAP) measures and ratios. Adjusted measures and ratios are calculated in the same manner as reported measures and ratios, except that financial information included in the calculation of adjusted measures and ratios is adjusted to exclude the impact of the Concentra Bank and ACM acquisition and integration related costs, and certain items which management determines would have a significant impact on a reader's assessment of business performance. For additional information and a reconciliation of reported results to adjusted results, see the "Non-GAAP financial measures and ratios" section. |
2 These are non-GAAP measures, see the "Non-GAAP financial measures and ratios" section. |
3 PPPT represents pre-provision-pre-tax income, a non-GAAP measure of financial performance. |
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet (unaudited)
($000s) As at | January 31, 2025 | October 31, 2024 | January 31, 2024 |
Assets: | |||
Cash and cash equivalents | 810,017 | 591,641 | 543,759 |
Restricted cash | 817,025 | 971,987 | 662,759 |
Securities purchased under reverse repurchase agreements | 1,800,014 | 1,260,118 | 805,612 |
Investments | 1,571,754 | 1,627,314 | 2,025,978 |
Loans – Personal | 32,303,971 | 32,273,551 | 32,680,816 |
Loans – Commercial | 14,036,424 | 14,760,367 | 15,111,488 |
Securitization retained interests | 892,258 | 813,719 | 607,822 |
Deferred tax assets | 28,841 | 36,104 | 14,871 |
Other assets | 971,520 | 899,120 | 645,770 |
Total assets | 53,231,824 | 53,233,921 | 53,098,875 |
Liabilities and Shareholders' Equity | |||
Liabilities: | |||
Deposits | 34,616,801 | 33,739,612 | 32,245,509 |
Securitization liabilities | 13,711,167 | 14,594,304 | 15,389,417 |
Obligations under repurchase agreements | - | - | 482,574 |
Deferred tax liabilities | 190,419 | 177,933 | 141,543 |
Funding facilities | 768,813 | 946,956 | 1,332,903 |
Other liabilities | 723,188 | 636,931 | 589,879 |
Total liabilities | 50,010,388 | 50,095,736 | 50,181,825 |
Shareholders' Equity: | |||
Preferred shares | - | - | 181,411 |
Common shares | 506,160 | 505,876 | 489,944 |
Other equity instruments | 147,360 | 147,440 | - |
Contributed deficit | (17,437) | (17,374) | (23,055) |
Retained earnings | 2,564,315 | 2,483,309 | 2,272,116 |
Accumulated other comprehensive income (loss) | 11,200 | 8,555 | (15,826) |
Total equity attributable to equity holders of EQB | 3,211,598 | 3,127,806 | 2,904,590 |
Non-controlling interests | 9,838 | 10,379 | 12,460 |
Total equity | 3,221,436 | 3,138,185 | 2,917,050 |
Total liabilities and shareholders' equity | 53,231,824 | 53,233,921 | 53,098,875 |
Consolidated statement of income (unaudited)
($000s, except per share amounts) Three-month period ended | January 31, 2025 | January 31, 2024 |
Interest income: | ||
Loans – Personal | 481,370 | 468,954 |
Loans – Commercial | 222,117 | 262,881 |
Investments | 13,400 | 17,876 |
Other | 25,370 | 22,099 |
742,257 | 771,810 | |
Interest expense: | ||
Deposits | 347,809 | 358,562 |
Securitization liabilities | 125,432 | 127,253 |
Funding facilities | 5,547 | 15,283 |
Other | 83 | 14,702 |
478,871 | 515,800 | |
Net interest income | 263,386 | 256,010 |
Non-interest revenue: | ||
Fees and other income | 22,920 | 16,615 |
Net gains on loans and investments | 2,304 | 4,993 |
Gain on sale and income from retained interests | 24,872 | 19,409 |
Net gains on securitization activities and derivatives | 9,153 | 1,745 |
59,249 | 42,762 | |
Revenue | 322,635 | 298,772 |
Provision for credit losses | 18,678 | 15,535 |
Revenue after provision for credit losses | 303,957 | 283,237 |
Non-interest expenses: | ||
Compensation and benefits | 75,934 | 65,369 |
Other | 83,321 | 74,116 |
159,255 | 139,485 | |
Income before income taxes | 144,702 | 143,752 |
Income taxes: | ||
Current | 16,739 | 38,534 |
Deferred | 20,253 | 836 |
36,992 | 39,370 | |
Net income | 107,710 | 104,382 |
Dividends on preferred shares | - | 2,357 |
Distribution to LRCN holders | - | - |
Net income available to common shareholders and non-controlling interests | 107,710 | 102,025 |
Net income attributable to: | ||
Common shareholders | 107,402 | 101,875 |
Non-controlling interests | 308 | 150 |
107,710 | 102,025 | |
Earnings per share: | ||
Basic | 2.79 | 2.68 |
Diluted | 2.77 | 2.66 |
Consolidated statement of comprehensive income (unaudited)
($000s) Three-month period ended | January 31, 2025 | January 31, 2024 |
Net income | 107,710 | 104,382 |
Other comprehensive income – items that will be reclassified subsequently to income: | ||
Debt instruments at Fair Value through Other Comprehensive Income: | ||
Net change in gains on fair value | 12,440 | 41,561 |
Reclassification of net gains to income | (10,066) | (35,827) |
Other comprehensive income – items that will not be reclassified subsequently to income: | ||
Equity instruments designated at Fair Value through Other Comprehensive Income: | ||
Net change in gains (losses) on fair value | 1,071 | (1,580) |
Reclassification of net gains to retained earnings | (378) | - |
3,067 | 4,154 | |
Income tax expense | (917) | (1,143) |
2,150 | 3,011 | |
Cash flow hedges: | ||
Net change in unrealized losses on fair value | (4,210) | (12,230) |
Reclassification of net gains to income | (3,424) | (6,694) |
(7,634) | (18,924) | |
Income tax recovery | 2,031 | 5,161 |
(5,603) | (13,763) | |
Total other comprehensive loss | (3,453) | (10,752) |
Total comprehensive income | 104,257 | 93,630 |
Total comprehensive income attributable to: | ||
Common shareholders | 103,949 | 93,480 |
Non-controlling interests | 308 | 150 |
104,257 | 93,630 |
Consolidated statement of changes in shareholders' equity (unaudited)
($000s) Three-month period ended January 31, 2025 | ||||||||||
Common | Contributed (deficit) | Retained | Accumulated other comprehensive | |||||||
Other | Cash | Financial | Total | Attributable | Non- | Total | ||||
Balance, beginning of period | 505,876 | 147,440 | (17,374) | 2,483,309 | 21,617 | (13,062) | 8,555 | 3,127,806 | 10,379 | 3,138,185 |
Net Income | - | - | - | 107,402 | - | - | - | 107,402 | 308 | 107,710 |
Realized losses on sale of shares, net of tax | - | - | - | (5,718) | - | - | - | (5,718) | - | (5,718) |
Transfer of AOCI losses to retained earnings, net of tax | - | - | - | - | - | 6,004 | 6,004 | 6,004 | - | 6,004 |
Transfer of AOCI losses to income, net of tax | - | - | - | - | - | 94 | 94 | 94 | - | 94 |
Other comprehensive loss (gain), net of tax | - | - | - | - | (5,603) | 2,150 | (3,453) | (3,453) | - | (3,453) |
Exercise of stock options | 460 | - | - | - | - | - | - | 460 | - | 460 |
Common shares repurchased and cancelled | (275) | - | - | (1,832) | - | - | - | (2,107) | - | (2,107) |
Issuance cost, net of tax | - | (80) | - | - | - | - | - | (80) | - | (80) |
Dividends: | ||||||||||
Common shares | - | - | - | (18,846) | - | - | - | (18,846) | (849) | (19,695) |
Put option – non-controlling interest | - | - | (1,131) | - | - | - | - | (1,131) | - | (1,131) |
Stock-based compensation | - | - | 1,167 | - | - | - | - | 1,167 | - | 1,167 |
Transfer relating to the exercise of stock options | 99 | - | (99) | - | - | - | - | - | - | - |
Balance, end of period | 506,160 | 147,360 | (17,437) | 2,564,315 | 16,014 | (4,814) | 11,200 | 3,211,598 | 9,838 | 3,221,436 |
($000s) Three-month period ended January 31, 2024 | ||||||||||
Preferred | Common | Contributed (deficit) | Retained | Accumulated other comprehensive | ||||||
Cash | Financial | Total | Attributable | Non- | Total | |||||
Balance, beginning of period | 181,411 | 471,014 | 12,795 | 2,185,480 | 43,618 | (48,775) | (5,157) | 2,845,543 | - | 2,845,543 |
Non-controlling interests on acquisition | - | - | - | - | - | - | - | - | 12,310 | 12,310 |
Net Income | - | - | - | 104,232 | - | - | - | 104,232 | 150 | 104,382 |
Transfer of AOCI losses to income, net of tax | - | - | - | - | - | 83 | 83 | 83 | - | 83 |
Other comprehensive loss, net of tax | - | - | - | - | (13,763) | 3,011 | (10,752) | (10,752) | - | (10,752) |
Common share issued | - | 11,000 | - | - | - | - | - | 11,000 | - | 11,000 |
Exercise of stock options | - | 6,958 | - | - | - | - | - | 6,958 | - | 6,958 |
Dividends: | ||||||||||
Preferred shares | - | - | - | (2,357) | - | - | - | (2,357) | - | (2,357) |
Common shares | - | - | - | (15,239) | - | - | - | (15,239) | - | (15,239) |
Put option – non-controlling interest | - | - | (35,891) | - | - | - | - | (35,891) | - | (35,891) |
Stock-based compensation | - | - | (35,891) | - | - | - | - | (35,891) | - | (35,891) |
Transfer relating to the exercise of stock options | - | 972 | (972) | - | - | - | - | - | - | - |
Balance, end of period | 181,411 | 489,944 | (23,055) | 2,272,116 | 29,855 | (45,681) | (15,826) | 2,904,590 | 12,460 | 2,917,050 |
Consolidated statement of cash flows (unaudited)
($000s) Three-month period ended | January 31, 2025 | January 31, 2024 |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | 107,710 | 104,382 |
Adjustments for non-cash items in net income: | ||
Financial instruments at fair value through income | (20,498) | 16,537 |
Amortization of premiums/discount | (2,830) | 3,130 |
Amortization of capital and intangible assets | 14,823 | 11,441 |
Provision for credit losses | 18,678 | 15,535 |
Securitization gains | (17,616) | (14,516) |
Stock-based compensation | 1,167 | 1,013 |
Income taxes | 36,992 | 39,370 |
Securitization retained interests | 39,957 | 27,933 |
Changes in operating assets and liabilities: | ||
Restricted cash | 154,962 | 104,436 |
Securities purchased under reverse repurchase agreements | (539,896) | 103,221 |
Loans receivable, net of securitizations | 625,297 | (492,116) |
Other assets | (21,739) | (1,326) |
Deposits | 848,736 | 201,362 |
Securitization liabilities | (893,246) | 883,231 |
Obligations under repurchase agreements | - | (645,664) |
Funding facilities | (178,143) | (398,684) |
Other liabilities | 51,673 | (5,962) |
Income taxes paid | (39,231) | (26,112) |
Cash flows from (used in) operating activities | 186,796 | (72,789) |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from issuance of common shares | 460 | 17,958 |
Common shares repurchased | (2,107) | - |
Limited recourse capital notes | (80) | - |
Dividends paid on preferred shares | - | (2,357) |
Dividends paid on common shares | (19,695) | (15,239) |
Cash flows (used in) from financing activities | (21,422) | 362 |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of investments | (3,730) | (336,419) |
Acquisition of subsidiary | - | (75,528) |
Proceeds on sale or redemption of investments | 31,366 | 465,401 |
Net change in Canada Housing Trust re-investment accounts | 41,409 | 18,005 |
Purchase of capital assets and system development costs | (16,043) | (4,747) |
Cash flows from investing activities | 53,002 | 66,712 |
Net increase (decrease) in cash and cash equivalents | 218,376 | (5,715) |
Cash and cash equivalents, beginning of period | 591,641 | 549,474 |
Cash and cash equivalents, end of period | 810,017 | 543,759 |
Cash flows from operating activities include: | 218,376 | (5,715) |
Supplemental statement of cash flows disclosures | ||
Interest received | 709,697 | 688,329 |
Interest paid | (416,436) | (371,620) |
Dividends received | 218 | 549 |
About EQB Inc.
EQB Inc. (TSX: EQB) is a leading digital financial services company with $132 billion in combined assets under management and administration (as at January 31, 2025). It offers banking services through Equitable Bank, a wholly owned subsidiary and Canada's seventh largest bank by assets, and wealth management through ACM Advisors, a majority owned subsidiary specializing in alternative assets. As Canada's Challenger Bank™, Equitable Bank has a clear mission to drive change in Canadian banking to enrich people's lives. It leverages technology to deliver exceptional personal and commercial banking experiences and services to over 700,000 customers and more than six million credit union members through its businesses. Through its digital EQ Bank platform (eqbank.ca), its customers have named it one of Canada's top banks on the Forbes World's Best Banks list since 2021.
Please visit eqb.investorroom.com for more details.
Investor contact:
Mike Rizvanovic
Managing Director, Investor Relations
investor_enquiry@eqb.com
This News is brought to you by Qube Mark, your trusted source for the latest updates and insights in marketing technology. Stay tuned for more groundbreaking innovations in the world of technology.
