Bullboard - Stock Discussion Forum EQB Inc. T.EQB.PR.C

Primary Symbol: T.EQB Alternate Symbol(s): EQGPF

EQB Inc. operates through its wholly owned subsidiary Equitable Bank. Equitable Bank provides diversified personal and commercial banking through its EQ Bank platform. The Company operates through two main divisions: Personal Banking and Commercial Banking. Its Personal Banking segment consists of deposits, single family residential mortgage loans, home equity lines of credit, reverse mortgages... see more

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TSX:EQB - Post Discussion

EQB Inc. > TD

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Post by retiredcf on Feb 27, 2023 11:30am

TD

EQB Inc.

(EQB-T) C$69.01

NIM Performance Encouraging, Credit Healthy

Event

Q4/22 Conference Call

Impact: POSITIVE

This was an encouraging quarter, in our view. NIM was better than expected and management commentary suggests that this is largely sustainable in 2023. Credit showed some negative migration q/q, but impairments remain in line with historical levels. Guidance for 2023 was reiterated, which, given the soft housing market, we view this as constructive. We are maintaining our BUY rating and $83.00 target price.

Relative to guidance, Equitable delivered across all metrics in 2022, including loan growth (15% organic), EPS growth (9%), ROE (15.7%), and BVPS growth (13%). This gives us comfort that 2023 targets are achievable (including 10-15% EPS growth and 12-15% BVPS growth).
NIM performance was better than expected (1.87% in Q4/22 vs. our 1.76% forecast), driven by low EQ Bank deposit beta and treasury management. Management's commentary for 2023 was constructive, in our view, with some dilution expected in Q1/23, followed by modest expansion as it looks to optimize asset pricing and funding costs.
Credit showed some negative migration (personal and commercial), but impairments (28bps of assets) are flat y/y and in line with the historical average. We are forecasting a PCL rate (percentage of assets) of 9bps/8bps in 2023/2024; these compare with 4bps in 2022 and a 5bps average since 2018. Our outlook appears conservative relative to management's credit commentary (constructive, in our view).
Concentra closed in Q4/22 and integration is underway. Realizing targeted synergies ($10mm by the end of 2023 and $30mm by the end of 2024) should support EPS growth in 2023 (mid-single digit accretive in year 1). Consolidating software, managing headcount, and rationalizing real estate are the near-term focus.

TD Investment Conclusion

We are encouraged with the solid execution on NIM in 2022, which, if sustained, should support earnings growth in 2023. We also believe Concentra should support earnings in 2023 and the long-term outlook (scale, expanded distribution, and funding diversification). Loan growth is expected to moderate in line with guidance. Credit trends continue to be solid, although we do expect some deterioration. The digital EQ Bank is a valuable and differentiating asset, in our view.