EQB Inc.
Allllrighty then: Q3/22 EPS was well above our forecast and +7% dividend increase
TSX: EQB | CAD 45.33 | Outperform | Price Target CAD 69.00
Sentiment: Positive
Our take: EQB reported very strong Q3/22 results and announced a +7% dividend increase that should please Ace Ventura’s investment portfolio (if he even has one). EQB largely reiterated 2022 guidance with 2023 guidance largely in line with our forecasts. While the housing market continues to slow, we think EQB continues to execute on its growth strategy.
Q3/22 normalized EPS of $2.35 was well above our $2.12 forecast and $2.11 consensus (range of $1.99 – $2.23). The higher- than-forecast result relative to our forecast reflected higher-than-forecast net interest income and non-interest income, partially offset by higher-than-forecast non-interest expenses. On a pre-tax, pre-PCL basis (excl. gains/losses), earnings were $111.7MM ($3.24/share), slightly ahead of our $106.6MM ($3.09/share) forecast. Given the uncertainty regarding potential changes in credit loss provisions, we focus a bit more on this metric.
Other key things we think investors are focused on include:
• Q3/22 provisions for credit losses were a provision of -$5.4MM, which was largely in line with our -$5.5MM provision forecast. • Q3/22 originations of $3.35B were slightly below our $3.51B forecast, due to lower-than-forecast Personal/Residential originations, partially offset by higher-than-forecast Commercial originations.
• Loans under administration (including off balance sheet mortgages) of $43.9B were slightly ahead of our $43.1B forecast and were +3% Q/Q and +18% Y/Y.
• Dividend increased by +7% Q/Q to $1.32/share annualized, payable on December 30, 2022 to shareholders of record December 15, 2022.
2022 guidance largely unchanged + 2023 preliminary guidance introduced. Overall, 2022 guidance was reaffirmed other than a few minor changes (e.g., lower prime insured lending growth and EQ Bank Deposits, stronger NIM) while the new 2023 preliminary guidance was largely in line with our forecasts and consensus (see Exhibit 2 on page 2 for more details). EQB plans to refine its preliminary 2023 guidance when it reports Q4/22 results in February 2023.
Conference call today at 8:30am ET; dial-in: (416) 764-8609.