EQB changed its fiscal year in 2023 to end October 31, resulting in a one-time ten-month transition year and a four-month final quarter of 2023. As a result, the comparisons below are shown year-over-year from the fourth quarter ending October 31, 2023, as the most similar and comparable three-month period ("y/y"). The information contained in this news release is unaudited.
TORONTO, Dec. 4, 2024 - EQB Inc. (TSX: EQB) today reported record financial results for the fiscal year ended October 31, 2024, underpinned by 9% annual growth in loans under management, higher non-interest revenue and a substantial increase in EQ Bank customer accounts crossing over half a million. On the strength of this performance and a favourable outlook for personal and commercial loan originations in fiscal 2025, EQB raised its common share dividend and issued medium-term growth guidance anchored in a 15%+ ROE.
"This year marks our second decade as a publicly traded company and our most profitable year on record, with annual revenue surpassing $1 billion for the first time. Shareholder value creation, including ROE at 15% and four consecutive quarters of dividend increases, once again reflected efficient capital allocation and underlying business strength," said Andrew Moor, president and CEO, EQB.
While EQB generated record earnings for fiscal 2024, its Q4 results were negatively impacted by credit provisions in its equipment financing portfolio, including one particular credit exposure. This resulted in higher-than-anticipated provisions for credit losses (PCLs) for the quarter. As part of its continued strategic review of the equipment financing business, EQB has instated measures to derisk and diversify this modest portfolio, including shifting to higher credit quality exposures.
- Adjusted ROE1 Q4 13.1% and FY24 15.0% (reported Q4 10.2% and FY24 13.8%)
- Adjusted diluted EPS1 Q4 $2.51 and FY24 $11.03 (reported Q4 $1.95 and FY24 $10.11)
- Book value per share $77.51, +2% q/q, +10% y/y
- Adjusted revenue Q4 $321.6 million and FY24 $1,264.2 million (reported Q4 $312.8 million and FY24 $1,255.4 million)
- Net interest margin2 Q4 2.07% and FY24 2.05%
- Adjusted PPPT3 Q4 $173.0 million and FY24 $692.9 million (reported Q4 $159.1 million and FY24 $661.3 million)
- Adjusted net income1 Q4 $101.4 million, and FY24 $438.0 million (reported Q4 $79.4 million and FY24 $401.7 million)
- Total AUM + AUA2 $127.0 billion, +1% q/q, +14% y/y
- EQ Bank customer growth +6% q/q and +28% y/y to over 513,000 customers
- Common share dividends $0.49 per share declared, increasing 2 cents or +4% q/q, +23% y/y
- Total capital ratio 15.6% with CET1 of 14.3%
"Looking to 2025, we expect easing monetary policy will provide welcome relief for borrowers and drive loan origination growth across the bank. This new rate cycle will also bring into sharp focus the compelling value of our high interest, no-fee EQ Bank offerings as we enter our next phase of growth. I thank all members of Canada's Challenger Bank™ for driving change in Canadian banking to enrich people's lives with the innovation and value for which we are known," added Mr. Moor.
EQ Bank welcomes over 28,000 customers in Q4 growing to 513,000, +6% q/q and +28% y/y
- The Notice Savings Account, launched mid-year, continues to act as a significant customer and deposit growth driver for EQ Bank, deepening its everyday bank value proposition
- Beta launch of the EQ Bank Business Account, a high-interest, no-fee everyday bank account uniquely designed to suit Canadian small business owners' needs, warmly welcomed by the small business community in Canada with roll-out continuing through 2025
- EQ Bank named Brand of the Year by strategy magazine, recognized for its recent "Second Chance" and "Deuxième Chance" campaigns and corresponding impact on brand awareness
Personal Banking LUM steady on strong customer retention, decumulation business grows +47% y/y in line with guidance
- The single-family uninsured portfolio increased 1% q/q to $20.0 billion, as strong customer retention offset the impact of slower housing market activity on new originations
- Single-family insured lending declined 7% q/q to $9.2 billion as a result of a purposeful shift away from lower margin prime mortgages; going forward, EQB will focus on growing uninsured single-family lending through its differentiated and well recognized customer and broker experience advantage
- Decumulation lending (including reverse mortgages and insurance lending) +10% q/q and +47% y/y to $2.1 billion with growth accelerating as a result of successful consumer advertising that bolstered public awareness, strong broker service and value to borrowers
Commercial Banking LUM led by 30% y/y expansion in multi-unit residential to $26.1B
- EQB continues to prioritize insured lending for multi-unit residential properties (primarily rental apartments) in major cities across the country with 81% of its total commercial loans under management (LUM) insured through various CMHC programs; insured multi-unit residential LUM +8% q/q and +30% y/y to $26.1 billion
- As a result of the Bank's lending focus on properties where people live, it maintains limited exposure to the Canadian commercial office real estate market (~0.5% of loan assets), and those balances declined in Q4; consistent with the Bank's long-term risk appetite, commercial office lending is generally confined to multi-tenanted, mixed-used properties occupied by medical and professional businesses
Increased PCL primarily driven by equipment financing with expected improvement in FY25
- The Bank is appropriately reserved for credit losses with net allowances as a percentage of total loan assets of 32 bps, compared to 26 bps at July 31, 2024, and 22 bps at October 31, 2023
- Total Q4 adjusted PCL of $31.9 million (reported $48.0 million in Q4), or 27bps of total loan assets, includes $16 million from equipment financing PCL, $5.2 million from personal and $10.7 million from commercial excluding equipment financing
- Of FY24 adjusted PCL of $89.2 million, 71% is attributable to equipment financing, including anomalous losses associated with Pride Group exposure; following elevated provisions and losses booked in Q4, performance is expected to significantly improve in FY25
- Reflected in Q4 reported results is the Bank's previously identified operational exposure and losses associated with Pride Group; as part of the active Companies' Creditors Arrangement Act process for Pride Group and the operational exposure associated with suspected irregularities, expected credit losses associated with these leases have been separated from normal course business but remain accounted for in PCL
- Net impaired loans increased by $97.0 million to $623.7 million, or 132 bps of total loan assets, compared to 109 bps at July 31, 2024, and 76 bps from October 31, 2023; half of which can be attributed to one commercial loan. While the pace of resolutions is improving, declines in impaired loans are expected by the second half of fiscal 2025
EQB increases common share dividend
- EQB's Board of Directors declared a dividend of $0.49 per common share payable on December 31, 2024, to shareholders of record as of December 13, 2024, representing a 4% increase from the dividend paid in September 2024 and 23% above the payment made in December 2023
- For the purposes of the Income Tax Act (Canada) and any similar provincial legislation, dividends declared are eligible dividends, unless otherwise indicated
EQB issues updated growth guidance
- FY25 and medium term guidance for adjusted pre-provision pre-tax earnings, adjusted diluted EPS, adjusted ROE, dividends, book value per share, CET1 ratio and balance sheet growth are found in Supplementary Management Information in the Financials section of EQB's investor website at eqb.investorroom.com and which will be included in EQB's Q4 2024 MD&A to be filed under EQB's profile on www.sedarplus.ca
- EQB has a Normal Course Issuer Bid (NCIB) that expires in January 2025 and intends to renew and increase the size of its NCIB for the following twelve-month period which gives it additional options for capital deployment.4
"We are proud of EQB's strategic progress in fiscal 2024, particularly considering the economic environment and atypical pressure in our credit book. The diversification and strength of our business model translated to solid ROE and excellent growth in key asset classes. Excluding the elevated equipment financing credit losses, EQB would have achieved the high-end of 2024 expectations," said Chadwick Westlake, CFO, EQB. "Our updated growth guidance reflects our bullish view on loan origination prospects, tailwinds for provisioning given steps taken in equipment financing in Q4 and the expectation for significant improvement in impaired loans. While our first priority in capital allocation remains organic lending growth, we continue to assess select inorganic growth opportunities, and we have levers for returning capital to shareholders that collectively position us for strength in 2025."
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 other non-recurring 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. |
4 Subject to regulatory approvals. |
Analyst conference call and webcast: 10:30 a.m. ET December 5, 2024
EQB's Andrew Moor, president and CEO, Chadwick Westlake, CFO, and Marlene Lenarduzzi, CRO, will host the company's fourth 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.
Further information
Further information on EQB's unaudited Q4 and 2024 results may be found under the Financials section of the EQB investor website at eqb.investorroom.com.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet (unaudited)
($000s) As at | October 31, 2024 | October 31, 2023 |
Assets: | ||
Cash and cash equivalents | 591,641 | 549,474 |
Restricted cash | 971,987 | 767,195 |
Securities purchased under reverse repurchase agreements | 1,260,118 | 908,833 |
Investments | 1,627,314 | 2,120,645 |
Loans – Personal | 32,273,551 | 32,390,527 |
Loans – Commercial | 14,760,367 | 14,970,604 |
Securitization retained interests | 813,719 | 559,271 |
Deferred tax assets | 36,104 | 14,230 |
Other assets | 899,120 | 652,675 |
Total assets | 53,233,921 | 52,933,454 |
Liabilities and Shareholders' Equity | ||
Liabilities: | ||
Deposits | 33,739,612 | 31,996,450 |
Securitization liabilities | 14,594,304 | 14,501,161 |
Obligations under repurchase agreements | - | 1,128,238 |
Deferred tax liabilities | 177,933 | 128,436 |
Funding facilities | 946,956 | 1,731,587 |
Other liabilities | 636,931 | 602,039 |
Total liabilities | 50,095,736 | 50,087,911 |
Shareholders' Equity: | ||
Preferred shares | - | 181,411 |
Common shares | 505,876 | 471,014 |
Other equity instruments | 147,440 | - |
Contributed (deficit) surplus | (17,374) | 12,795 |
Retained earnings | 2,483,309 | 2,185,480 |
Accumulated other comprehensive income (loss) | 8,555 | (5,157) |
3,127,806 | 2,845,543 | |
Non-controlling interests | 10,379 | - |
Total equity | 3,138,185 | 2,845,543 |
Total liabilities and equity | 53,233,921 | 52,933,454 |
Consolidated statement of income (unaudited)
($000s, except per share amounts) Year/Period ended | 2024 | 2023 |
Interest income: | ||
Loans – Personal | 1,945,011 | 1,410,571 |
Loans – Commercial | 1,019,682 | 860,363 |
Investments | 66,766 | 65,362 |
Other | 108,082 | 70,123 |
3,139,541 | 2,406,419 | |
Interest expense: | ||
Deposits | 1,490,075 | 1,077,520 |
Securitization liabilities | 522,673 | 402,443 |
Funding facilities | 50,940 | 44,527 |
Other | 25,364 | 43,650 |
2,089,052 | 1,568,140 | |
Net interest income | 1,050,489 | 838,279 |
Non-interest revenue: | ||
Fees and other income | 81,087 | 46,895 |
Net gains on loans and investments | 20,279 | 34,442 |
Gain on sale and income from retained interests | 89,020 | 56,384 |
Net gains (losses) on securitization activities and derivatives | 14,567 | (336) |
204,953 | 137,385 | |
Revenue | 1,255,442 | 975,664 |
Provision for credit losses | 107,013 | 38,856 |
Revenue after provision for credit losses | 1,148,429 | 936,808 |
Non-interest expenses: | ||
Compensation and benefits | 272,346 | 199,752 |
Other | 321,753 | 234,991 |
594,099 | 434,743 | |
Income before income taxes | 554,330 | 502,065 |
Income taxes: | ||
Current | 134,253 | 84,066 |
Deferred | 18,405 | 46,409 |
152,658 | 130,475 | |
Net income | 401,672 | 371,590 |
Dividends on preferred shares | 8,140 | 6,998 |
Distribution to LRCN holders | 2,586 | - |
Net income available to common shareholders and non-controlling interests | 390,946 | 364,592 |
Net income attributable to: | ||
Common shareholders | 389,836 | 364,592 |
Non-controlling interests | 1,110 | - |
390,946 | 364,592 | |
Earnings per share: | ||
Basic | 10.19 | 9.67 |
Diluted | 10.11 | 9.59 |
Consolidated statement of comprehensive income (unaudited)
($000s) Year/Period ended | 2024 | 2023 |
Net income | 401,672 | 371,590 |
Other comprehensive income – items that will be reclassified subsequently to income: | ||
Debt instruments at Fair Value through Other Comprehensive Income: | ||
Reclassification of losses from AOCI on sale of investments | (2,051) | - |
Net change in unrealized gains (losses) on fair value | 68,127 | (36,208) |
Reclassification of net (gains) losses to income | (52,096) | 37,432 |
Other comprehensive income – items that will not be reclassified subsequently to income: | ||
Equity instruments designated at Fair Value through Other Comprehensive Income: | ||
Reclassification of losses from AOCI on sale of investments | (31,340) | (10,951) |
Net change in unrealized gains (losses) on fair value | 1,176 | (34,767) |
Reclassification of net losses to retained earnings | 31,588 | 11,042 |
15,404 | (33,452) | |
Income tax (expense) recovery | (4,063) | 9,210 |
11,341 | (24,242) | |
Cash flow hedges: | ||
Net change in unrealized (losses) gains on fair value | (22,798) | 40,951 |
Reclassification of net gains to income | (7,377) | (38,718) |
(30,175) | 2,233 | |
Income tax recovery (expense) | 8,174 | (631) |
(22,001) | 1,602 | |
Total other comprehensive loss | (10,660) | (22,640) |
Total comprehensive income | 391,012 | 348,950 |
Total comprehensive income attributable to: | ||
Common shareholders | 389,902 | 348,950 |
Non-controlling interests | 1,110 | - |
391,012 | 348,950 |
Consolidated statement of changes in shareholders' equity (unaudited)
($000s) | 2024 | |||||||||||
Preferred | Common | Contributed | Retained | Accumulated other comprehensive | ||||||||
Other equity | Cash | Financial | Total | Attributable | Non- | Total | ||||||
Balance, beginning of year | 181,411 | 471,014 | - | 12,795 | 2,185,480 | 43,618 | (48,775) | (5,157) | 2,845,543 | - | 2,845,543 | |
Non-controlling interest on acquisition | - | - | - | - | - | - | - | - | - | 10,770 | 10,770 | |
Net Income | - | - | - | - | 400,562 | - | - | - | 400,562 | 1,110 | 401,672 | |
Realized losses on sale of shares, net of tax | - | - | - | - | (23,056) | - | - | - | (23,056) | - | (23,056) | |
Transfer of AOCI losses to retained earnings, net of tax | - | - | - | - | - | - | 22,875 | 22,875 | 22,875 | - | 22,875 | |
Transfer of AOCI losses to income, net of tax | - | - | - | - | - | - | 1,497 | 1,497 | 1,497 | - | 1,497 | |
Other comprehensive loss, net of tax | - | - | - | - | - | (22,001) | 11,341 | (10,660) | (10,660) | - | (10,660) | |
Common shares issued | - | 11,000 | - | - | - | - | - | - | 11,000 | - | 11,000 | |
Exercise of stock options | - | 20,290 | - | - | - | - | - | - | 20,290 | - | 20,290 | |
Redemption of preferred shares | (181,411) | - | - | - | (2,371) | - | - | - | (183,782) | - | (183,782) | |
Limited recourse capital notes issued | - | - | 150,000 | - | - | - | - | - | 150,000 | - | 150,000 | |
Issuance cost, net of tax | - | - | (2,560) | - | - | - | - | - | (2,560) | - | (2,560) | |
Limited recourse capital note distributions, net of tax | - | - | - | - | (2,586) | - | - | - | (2,586) | - | (2,586) | |
Dividends: | ||||||||||||
Preferred shares | - | - | - | - | (8,140) | - | - | - | (8,140) | - | (8,140) | |
Common shares | - | - | - | - | (66,580) | - | - | - | (66,580) | (1,501) | (68,081) | |
Share tender rights | - | - | - | (30,613) | - | - | - | - | (30,613) | - | (30,613) | |
Stock-based compensation | - | - | - | 4,016 | - | - | - | - | 4,016 | - | 4,016 | |
Transfer relating to the exercise of stock options | - | 3,572 | - | (3,572) | - | - | - | - | - | - | - | |
Balance, end of year | - | 505,876 | 147,440 | (17,374) | 2,483,309 | 21,617 | (13,062) | 8,555 | 3,127,806 | 10,379 | 3,138,185 | |
($000s) 2023 | |||||||||||
Preferred | Common | Contributed | Retained | Accumulated other comprehensive | |||||||
Cash | Financial | Total | Attributable | Non- | Total | ||||||
Balance, beginning of year | 181,411 | 462,561 | 11,445 | 1,870,100 | 42,016 | (32,578) | 9,438 | 2,534,955 | - | 2,534,955 | |
Net Income | - | - | - | 371,590 | - | - | - | 371,590 | - | 371,590 | |
Realized losses on sale of shares, net of tax | - | - | - | (7,722) | - | - | - | (7,722) | - | (7,722) | |
Transfer of AOCI losses to retained earnings, net of tax | - | - | - | - | - | 8,045 | 8,045 | 8,045 | - | 8,045 | |
Transfer of AOCI losses to net income, net of tax | - | - | - | - | - | - | - | - | - | - | |
Other comprehensive loss, net of tax | - | - | - | - | 1,602 | (24,242) | (22,640) | (22,640) | - | (22,640) | |
Exercise of stock options | - | 13,161 | - | - | - | - | - | 13,161 | - | 13,161 | |
Share Issuance cost, net of tax | - | (6,230) | - | - | - | - | - | (6,230) | - | (6,230) | |
Dividends: | |||||||||||
Preferred shares | - | - | - | (6,998) | - | - | - | (6,998) | - | (6,998) | |
Common shares | - | - | - | (41,490) | - | - | - | (41,490) | - | (41,490) | |
Stock-based compensation | - | - | 2,872 | - | - | - | - | 2,872 | - | 2,872 | |
Transfer relating to the exercise of stock options | - | 1,522 | (1,522) | - | - | - | - | - | - | - | |
Balance, end of period | 181,411 | 471,014 | 12,795 | 2,185,480 | 43,618 | (48,775) | (5,157) | 2,845,543 | - | 2,845,543 | |
Consolidated statement of cash flows (unaudited)
($000s) Year/Period ended | 2024 | 2023 |
CASH FLOWS FROM OPERATING ACTIVITIES | ||
Net income | 401,672 | 371,590 |
Adjustments for non-cash items in net income: | ||
Financial instruments at fair value through income | 13,152 | 45,533 |
Amortization of premiums/discount on investments | (56,548) | 7,678 |
Amortization of capital and intangible costs | 60,036 | 39,155 |
Provision for credit losses | 107,013 | 38,856 |
Securitization gains | (66,348) | (46,948) |
Stock-based compensation | 4,016 | 2,871 |
Dividend income earned, not received | - | (28,380) |
Income taxes | 152,658 | 130,475 |
Securitization retained interests | 129,719 | 75,304 |
Changes in operating assets and liabilities: | ||
Restricted cash | (204,792) | (29,539) |
Securities purchased under reverse repurchase agreements | (351,285) | (708,401) |
Loans receivable, net of securitizations | (89,825) | (1,126,698) |
Other assets | (53,917) | (57,566) |
Deposits | 1,614,275 | 865,734 |
Securitization liabilities | 81,156 | (519,066) |
Obligations under repurchase agreements | (1,128,238) | 462,931 |
Funding facilities | (784,631) | 491,883 |
Other liabilities | 8,314 | 108,201 |
Income taxes paid | (98,042) | (90,318) |
Cash flows (used in) from operating activities | (278,243) | 33,295 |
CASH FLOWS FROM FINANCING ACTIVITIES | ||
Proceeds from issuance of common shares | 31,290 | 6,931 |
Redemption of preferred shares | (183,782) | - |
Net proceeds from issuance of limited recourse notes | 147,440 | - |
Distributions to other equity holders | (2,586) | - |
Dividends paid on preferred shares | (8,140) | (6,998) |
Dividends paid on common shares | (66,580) | (41,490) |
Cash flows used in financing activities | (82,358) | (41,557) |
CASH FLOWS FROM INVESTING ACTIVITIES | ||
Purchase of investments | (401,650) | (989,055) |
Proceeds on sale or redemption of investments | 921,021 | 1,007,663 |
Acquisition of subsidiary | (75,483) | - |
Investment in associate | (50,000) | - |
Net change in Canada Housing Trust re-investment accounts | 76,243 | 78,988 |
Purchase of capital assets and system development costs | (67,363) | (34,966) |
Cash flows from investing activities | 402,768 | 62,630 |
Net increase in cash and cash equivalents | 42,167 | 54,368 |
Cash and cash equivalents, beginning of year | 549,474 | 495,106 |
Cash and cash equivalents, end of year | 591,641 | 549,474 |
Cash flows from operating activities include: | ||
Supplemental statement of cash flows disclosures | ||
Interest received | 2,922,693 | 2,137,216 |
Interest paid | (1,747,235) | (1,221,598) |
Dividends received | 1,944 | 31,243 |
About EQB Inc.
EQB Inc. (TSX: EQB) is a leading digital financial services company with $127 billion in combined assets under management and administration (as at October 31, 2024). 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 nearly 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
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