EQB Inc T.EQB

Alternate Symbol(s): EQGPF

Financial Services

EQB Inc. is a digital financial services company, with combined assets under management and administration. Through its subsidiary, Equitable Bank, offers banking services. It operates through two main divisions: Personal Banking and Commercial Banking. Personal Banking operates through five business lines: EQ Bank, residential lending, wealth decumulation, and consumer lending through partnerships, a segment added with the Concentra Bank acquisition, and payments as a service supporting its fintech partners. Its diversified product suite consists of deposits, single family residential mortgage loans, home equity lines of credit, reverse mortgages, insurance lending, and payment infrastructure partnerships. Commercial Banking operates through seven business lines: business enterprise solutions, commercial finance group, multi-unit insured, specialized finance, equipment leasing, credit union and Concentra trust. It provides personal and commercial banking through its EQ Bank platform.

TSX:EQB - Post by User

EQB Inc

<< Previous

Bullboard Posts

Next >>

Post by retiredcfon May 30, 2024 8:43am

148 Views

Post# 36063994

RBC Raise Targets

Their upside scenario target is also raised to $126.00. GLTA

May 30, 2024

Outperform

TSX: EQB; CAD 78.83

Price Target CAD 109.00 ↑ 107.00

EQB Inc.

Mixed, but slightly positive Q2/24 results. 7% dividend increase announced

Our view: We have a slightly positive view of Q2/24 results as EPS was ahead of our forecast with loan growth in line with our forecast, but NIM yields were up an impressive +10bps Q/Q. However, similar to bank peers, certain credit metrics continued to worsen and despite gross impaired loans declining slightly Q/Q, we expect PCLs to improve exiting 2024. RBC Economics’ forecasts don’t reflect a severe economic recession or housing downturn and as such, with EQB’s shares trading at just above 1.0x P/BV and our forecast of a mid-teen ROE over the next couple of years, we view the shares as attractively valued. Increasing our target to $109 (was $107) and maintaining our Outperform rating.

Key points:

Q2/24 normalized EPS of $2.71 was ahead of our $2.63 forecast and $2.66 consensus (range of $2.51 – $2.73) as higher-than-forecast net interest income (NIM yield was up +10bps Q/Q) was partially offset by higher-than- forecast PCLs and OpEx. We adjusted reported EPS of $2.81 to exclude gains/losses on investments and derivatives.

Q2/24 originations of $4.25B were below our $4.65B forecast, with Personal loan originations well below our forecast ($1.55B vs. RBC at $2.35B) while Commercial originations were ahead of forecast ($2.69B vs. RBC at $2.30B). Furthermore, loans under administration (including off balance sheet mortgages) of $65.5B were in line with our $65.9B forecast.

Q2/24 provisions for credit losses of $22MM were worse than our $19MM provision forecast and $20MM consensus. Mortgage PCLs were better than forecast ($6.8MM vs. RBC at $8.0MM), while equipment finance PCLs remained elevated and were worse than forecast ($14.0MM vs. RBC at $10.0MM) while consumer loan PCLs were slightly worse than forecast ($1.4MM vs. RBC at $1.0MM). Gross impaired loans decreased slightly Q/Q, driven by declines in Commercial (excl. Equipment Financing), mostly offset by increases in Personal (excl. Consumer) lending and Equipment Financing. Of note, Stage 3 ACLs in Commercial (excl. Equipment Financing) had a noticeable Q/Q increase relating to a small handful of loans.

+7.1% dividend increase announced to $1.80/share annualized, slightly better than our $1.76 forecast.

Increasing our 12-month price target to $109/share (was $107) and maintaining Outperform rating. The increased price target reflects the rolling forward of our valuation, partly offset by lower financial forecasts (slower loan growth, higher PCL forecasts) and a slightly lower target multiple (1.30x P/BV, was 1.35x) due to slightly lower ROE forecasts. Conference call scheduled for today (Thursday) at 10am EST; dial-in: 1-888-390-0605 or (416) 764-8609 or webcast link on EQB website.