TSX:EQB - Post Discussion
Post by
retiredcf on Nov 09, 2022 3:16pm
TD
EQB Inc.
(EQB-T) C$45.33
Earnings Beat and Constructive 2023 Guidance
Event
Q3/22 Results
Impact: POSITIVE
Q3/22 results were a strong beat, reflecting higher NIMs, solid originations, and expense discipline. Earnings and loan growth trends suggest that EQB will comfortably meet or beat 2022 guidance. Credit trends look stable, with arrears up only modestly. Preliminary 2023 guidance (including Concentra, which closed on November 1, 2022) indicates solid earnings and BVPS growth expectations, and muted Alt-A growth offset by solid commercial loan growth. Valuation at 0.7x P/B is attractive, in our view. We reiterate our C$75.00 target price and BUY rating.
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Adjusted EPS of $2.35 was comfortably ahead of our $2.12 estimate and consensus of $2.10. This compares with $1.75 q/q and $2.07 y/y. NIM of 1.94% was up notably from 1.81% q/q and ahead of our 1.80% estimate (growth in high-yielding conventional loans). The quarterly dividend was increased by 7% to $0.33/share (up from $0.31/share and ahead of our forecast).
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Loan growth and originations were above our forecast. Loans of $43.9bln were +18% y/y, driven by both Alt-A and conventional commercial growth.
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Preliminary 2023 guidance (including Concentra) indicates EPS and BVPS growth is expected to persist. The highlights include EPS growth of 10-15%, BVPS growth of 12-15%, and ROEs of 15%+. Notably, EQB expects Alt-A loan growth to be fairly muted (3-5%), while commercial growth will be much stronger (~10-15% for most core areas).
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Credit trends were stable, with PCLs slightly below our estimate. PCLs of $5.4mm were slightly below our $5.9mm estimate. Net impaired loans were 23bps (of assets), up from 18bps q/q, but unchanged y/y. ACLs (as a percentage of total loans) are 15bps (in line with pre-pandemic levels).
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Conference call at 8:30 a.m. ET (November 9). 416-764-8609 or here.
TD Investment Conclusion
We are encouraged with the strong results in 2022 (ahead of guidance) and constructive outlook for earnings and BVPS growth in 2023 (including Concentra). Management is executing well on NIM expansion in a rising rate environment. Loan growth is strong, but it is expected to moderate in line with guidance. Credit trends continue to be solid, though we expect some normalization. The digital EQ Bank is a valuable and differentiating asset, in our view.
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