TSX:EQB - Post Discussion
Post by
retiredcf on Feb 29, 2024 9:16am
RBC Raises Target
Their upside scenario target is also raised to $119.00. GLTA
February 29, 2024
EQB Inc.
Q1/24 results were not up the (Schitt’s) Creek
Our View: Paying homage to EQB spokespeople Eugene and Dan Levy's award-winning TV show, we think EQB’s Q1/24 results were solid on the whole. Originations were well ahead of our forecast with loan growth right in line with our forecast. EPS was largely in line with our forecast and credit trends were a bit mixed (ACLs flat, impairments up slightly Q/Q). The dividend was increased 5%, which was right in line with our forecast. Bigger picture, we think EQB continues to execute well on its growth strategy. Increasing target to $107 (was $101) and maintaining our Outperform rating.
Key points:
Q1/24 normalized EPS of $2.76 was largely in line with our $2.79 forecast, but slightly below $2.83 consensus (range of $2.78 – $2.88). Relative to our forecast, lower-than forecast net interest income and higher-than-forecast OpEx was mostly offset by higher non-interest income (e.g., gain-on-sale).
Q1/24 originations of $4.71B were ahead of our $3.93B forecast, with Personal loan originations ahead of our forecast ($1.95B vs. RBC at $1.71B) while Commercial originations were well ahead of forecast ($2.77B vs. RBC at $2.22B).
Q1/24 provisions for credit losses were $15.5MM were in line with our $15.0MM provision forecast. However, worse-than-forecast mortgage PCLs ($10.2MM vs. RBC at $7.0MM) and equipment finance PCLs ($12.7MM vs. RBC at $7.0MM) were largely offset by much lower-than- forecast consumer loan PCLs ($7.3MM recovery vs. RBC at provision of $1.0MM) with the recovery primarily reflecting EQB entering into a new agreement with a consumer lending partner that reduced EQB’s credit risk. Total allowance for credit losses (net of cash reserves) were 0.22% of on- balance sheet loans in Q1/24, unchanged Q/Q.
+5% dividend increase announced to $1.68/share annualized, right in line with our forecast. EQB’s Board also amended its DRIP to remove the 2% discount.
Increasing our target to $107/share (was $101) and maintaining our Outperform rating. The increased target is due to a slightly higher valuation multiple (1.35x P/BV, was 1.25x) reflecting slightly higher ROE/ROTCE forecasts. Conference call today at 10:00am ET; dial-in: (888)-390-0605 or webcast link on EQB website.
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