Equitable Group Reports Q2 2020 Results Including Earnings Growth of 64% from Q1

TORONTO, July 28, 2020 /CNW/ - Equitable Group Inc. (TSX: EQB) (TSX: EQB.PR.C) ("Equitable", "Company" or "Bank") today announced its financial results for the three months ended June 30, 2020, a period in which it generated reported earnings of $52.5 million and adjusted earnings of $49.3 million while strengthening its capital position.

"Against a tough backdrop, Equitable's earnings snapped back from the first quarter of the year as our team adjusted quickly to new realities," said Andrew Moor, President and Chief Executive Officer. "Our original emergency responses to the crisis proved to be more than sufficient to protect our employees, support our customers and safeguard our institution. Now that the economy is reopening, we see room for further performance improvements in the back half of 2020. By challenging ourselves to create unique value for Canadians whenever they interact with Equitable, and adding innovative new features to our increasingly popular all-digital EQ Bank platform, we will play our part in the country's recovery and continue to change banking for good as Canada's Challenger Bank™."

The Bank's second quarter earnings on both a reported and adjusted basis rebounded from the first quarter of 2020 as a result of a reduction in the forward-looking Provision for Credit Losses ("PCL") on performing loans. PCLs were still elevated compared with historical levels due to a deterioration in the macroeconomic forecasts used in the Company's loss modelling. Actual realized losses and write-offs in Q2 2020 amounted to $4.2 million or just 6 bps of total loan assets annualized.

SECOND QUARTER HIGHLIGHTS

• The Bank's CET1 Capital Ratio at June 30, 2020 of 14.0% was at the top end of management's target range and compares with 13.5% at March 31, 2020 and 13.1% at June 30, 2019.
• Liquid assets were $1.9 billion or 6.4% of total assets at June 30, 2020 compared to $1.6 billion or 6.0% of assets at June 30, 2019.
• PCLs of $8.8 million were down from $35.7 million in Q1 2020 and up from $1.4 million in Q2 2019, as economic forecasts remained weak but most future expected losses were recorded in Q1.
• Adjusted Diluted earnings per share ("EPS") were $2.86, up 68% from Q1 2020 and down 10% from $3.18 in Q2 2019.
• Adjusted Return on Shareholders' Equity ("ROE") was 13.8%, up from 8.4% in Q1 but lower than 16.9% in Q2 2019.
• Book value per common share of $84.89 at June 30, 2020 was up 10% or $7.67 per share from a year ago and 4% or $2.89 higher than March 31, 2020
• Deposits at June 30, 2020 were $15.6 billion, up 8% from $14.5 billion a year ago.
• EQ Bank, Equitable's digital platform, experienced 46% year-over-year growth in deposits on a 52% increase in its customer base which stood at approximately 124,000 at quarter end.
• Retail loan principal outstanding at June 30, 2020 was $19.0 billion, up 12% from $16.9 billion a year ago on growth in all retail asset categories.
• Commercial loan principaloutstanding at June 30, 2020 was $8.6 billion, up 10% from $7.9 billion a year ago on growth in all commercial asset categories.

Reported Diluted EPS was $3.05 and reported ROE was 14.7% in Q2 2020 and $3.15 and 16.8% in Q2 2019. Adjusted Q2 2020 results exclude the impact of $4.4 million of net mark-to-market gains on certain security investments, loans, and derivative positions.

DIVIDEND DECLARATIONS

The Board of Directors ("Board") today declared a dividend of $0.37 per common share, payable on September 30, 2020 to common shareholders of record at the close of business September 15, 2020, unchanged from the dividend paid in June 2020 but a 12% increase over the dividend declared in July 2019. The Board's previously announced plan to increase the dividend remains on hold as a result of regulatory guidance from OSFI to all federally regulated banks.

The Board declared a quarterly dividend in the amount of $0.373063 per preferred share, payable on September 30, 2020 to preferred shareholders of record at the close of business on September 15, 2020.

COMMENTARY ON PERFORMANCE AND OUTLOOK

"2020 so far has been a year of unprecedented challenges and significant achievements for most businesses," said Mr. Moor. "Our cloud-based, state-of-the-art systems provided a strong platform on which to adapt our own business to this new environment. Our employees have done a great job of maintaining focus on customer service. Our people have shown true character by assisting customers in need with loan payment deferrals, continuing to lend to good quality retail and commercial customers across the country, and balancing those decisions with our tighter risk appetite.

"At EQ Bank, we saw dramatic growth in new account openings during the quarter, almost tripling our historical average over the past 12 months. This is a sign that our business is benefitting as consumers increasingly adopt digital services in all areas of their lives – including banking. Adding to momentum, in July we launched a joint savings account for EQ Bank customers. The EQ Bank team did a fantastic job in creating joint account functionality that is both simple and intuitive for accountholders to use. The account opening process eliminates all of the needless complexities including travelling to a branch that are commonplace with joint account creation at traditional banks. This is another great example of bringing real innovation to the market. For every EQ Bank customer drawn to us by features such as no everyday banking fees, great rates and our international money service, Equitable gains tangible franchise value that is important to our future."

As the duration of COVID-19 is not known, the timetable for an economic recovery is also uncertain. Management is therefore not providing a specific quantitative outlook for the Bank's 2020 financial performance. Qualitatively, earnings in Q3 to Q4 2020 are expected to trend positively from the earnings reported in Q2 while the Bank's CET1 ratio is expected to increase. Assuming economic forecasts do not worsen, PCLs should decrease in subsequent quarters. The duration and depth of the economic contraction, as well as the impact of government support initiatives, will be the key determinants of the defaults and loan losses that are ultimately realized. A positive signal for defaults is that total active mortgage payment deferrals as at July 17, 2020 were down to 30% of peak levels. The Bank's liquidity position is solid and management will evaluate reducing liquid asset balances as the economy improves.

"Equitable marks its 50th anniversary this year with a simple pledge: we will continue to challenge the status quo and challenge ourselves to provide an exceptional banking experience for our customers," said Mr. Moor. "This is a challenge we undertake knowing that we have the expertise, resources and purpose-built digital capabilities including our cloud-based architecture to make thoughtful and meaningful contributions to a banking industry that will benefit from new ways of thinking and acting."

Management's updated business outlook can be found in Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2020 which is available on SEDAR and on Equitable's website.

CONFERENCE CALL AND WEBCAST

Equitable will hold its second quarter conference call and webcast at 8:30 a.m. ET Wednesday, July 29, 2020. To access the call live, please dial (647) 427-7450 five minutes prior to the start time. The listen-only webcast with accompanying slides will be available at www.equitablebank.ca under Investor Relations. The call will be hosted by Andrew Moor, President and Chief Executive Officer.

A replay of the call will be available until August 5, 2020 at midnight and it can be accessed by dialing (416) 849-0833 and entering passcode 7891509 followed by the number sign. Alternatively, the call will be archived on the Company's website for three months.

ABOUT EQUITABLE GROUP INC.

Equitable Group Inc. is a growing Canadian financial services business that operates through its wholly-owned subsidiary, Equitable Bank. Equitable Bank, Canada's Challenger Bank™, has grown to become the country's ninth largest independent Schedule I bank through its proven branchless approach and customer service focus in providing residential lending, commercial lending and savings solutions to Canadians. EQ Bank, the digital banking platform offered by Equitable Bank, provides state-of-the-art digital banking services. The EQ Bank Savings Plus Account reimagines banking for Canadians by offering the functionality of a chequing account to perform daily banking with ease, as well as a great everyday interest rate to help transactional balances grow into bigger savings. From unlimited Interac e-Transfers® and bill payments to payroll deposits and no monthly fees, everyday banking is now a richer prospect for Canadians. Equitable Bank is a member of Canada Deposit Insurance Corporation (CDIC) and employs over 900 dedicated professionals across the country. For more information about Equitable Bank and its products, please visit equitablebank.ca.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements made by the Company in the sections of this news release, in other filings with Canadian securities regulators and in other communications include forward-looking statements within the meaning of applicable securities laws ("forward-looking statements"). These statements include, but are not limited to, statements about the Company's objectives, strategies and initiatives, financial performance expectations and other statements made herein, whether with respect to the Company's businesses or the Canadian economy. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "planned", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases which state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved", or other similar expressions of future or conditional verbs. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, closing of transactions, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements, including but not limited to risks related to capital markets and additional funding requirements, fluctuating interest rates and general economic conditions, legislative and regulatory developments, changes in accounting standards, the nature of our customers and rates of default, and competition as well as those factors discussed under the heading "Risk Management" in the MD&A and in the Company's documents filed on SEDAR at www.sedar.com. All material assumptions used in making forward-looking statements are based on management's knowledge of current business conditions and expectations of future business conditions and trends, including their knowledge of the current credit, interest rate and liquidity conditions affecting the Company and the Canadian economy. Although the Company believes the assumptions used to make such statements are reasonable at this time and has attempted to identify in its continuous disclosure documents important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Certain material assumptions are applied by the Company in making forward-looking statements, including without limitation, assumptions regarding its continued ability to fund its mortgage business, a continuation of the current level of economic uncertainty that affects real estate market conditions, continued acceptance of its products in the marketplace, as well as no material changes in its operating cost structure and the current tax regime. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws.

NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") FINANCIAL MEASURES

This news release references certain non-GAAP measures such as Adjusted Diluted earnings per share, Adjusted Return on Shareholders' Equity, Reported Return on Shareholders' Equity, Liquid Assets, Book value per common share and CET1 Capital Ratio that management believes provide useful information to investors regarding the Company's financial condition and results of operations. The "NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") FINANCIAL MEASURES" section of the Company's second quarter 2020 MD&A provides a detailed description of each non-GAAP measure and should be read in conjunction with this release. The MD&A also provides a reconciliation between all non-GAAP measures and the most directly comparable GAAP measure, where applicable. Readers are cautioned that non-GAAP measures often do not have any standardized meaning, and therefore, may not be comparable to similar measures presented by other companies.

SOURCE Equitable Group Inc.

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