EQB Inc. T.EQB

Alternate Symbol(s): T.EQB.P.C | EQGPF

Financial Services

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, insurance lending, and payment infrastructure partnerships. Its savings products are offered through EQ Bank, Equitable Bank, Equitable Trust, and a network of independent financial planners and brokers. Its Commercial Banking segment lends loans through a network of mortgage and leasing brokers, lending partners, and other financial institutions. Commercial loans involve lending on multi-unit residential, industrial and office buildings, and other commercial properties. It also specializes in the creation, structuring, and management of pooled Canadian commercial mortgage funds.

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Post by retiredcfon Nov 09, 2022 3:16pm

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Post# 35086246

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.

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).
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.
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).
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).
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.