- Total Loans Growth: 10% YoY growth driven by 36% surge in CMHC-insured multi-unit residential mortgages.
- EQ Bank Performance: 18% YoY customer growth and $10 billion in deposits, with $140 million in small business deposits by October.
- Restructuring Impact: $92 million pretax restructuring charge, targeting $45 million annual savings by 2026 and $0.57/share dividend hike.
- 2026 Outlook: ROE expected to rise to ~12% from 7.5%, with EPS growth of 12–15% and loan growth of 9–11%.
- PC Financial Acquisition: CET1 ratio maintained at 13%, with high-return portfolio and 4% loss ratio supporting long-term growth.
Loan Growth and Credit Quality
The company's total loans under management grew 10% year-over-year, driven by 36% growth in off-balance sheet CMHC insured multi-unit residential mortgage business. However, credit quality was a concern, with allowances for credit losses (ACL) increasing to 41 basis points, driven by higher performing PCLs in personal and commercial lending. Gross impaired loans increased by 7% quarter-over-quarter to $871 million. Management is cautiously optimistic about credit improvement in the second half of 2026.
Guidance and Outlook
For 2026, EQB expects ROE to improve materially from 7.5%, potentially approaching 12%, and diluted EPS growth to land within the medium-term range of 12% to 15% growth. The company is focused on improving its funding mix by sourcing a higher percentage from lower-cost sources, including deposits. Management expects low single-digit expense growth into 2026 and is focused on maintaining capital flexibility to pursue strategic growth.
Valuation and Dividend Yield
With a P/TBV ratio of 1.12, EQB's valuation appears reasonable compared to its peers. The company's dividend yield is 2.15%, which is attractive for income investors. As the company focuses on improving its ROE and driving growth, investors will be watching to see if EQB can achieve its targets and deliver long-term value.
Acquisition and Strategic Initiatives
The acquisition of PC Financial is expected to close with a CET1 capital position of 13% and is expected to generate a high return on equity. The company is also focused on building a wealth platform, likely through inorganic means, with a focus on distribution rather than manufacturing. These strategic initiatives are expected to drive growth and improve EQB's competitive position.