Mr. Andrew Moor reports

EQB REPORTS BEST-EVER QUARTERLY EPS, RAISES 2023 GUIDANCE, INCREASES DIVIDEND 23% Y/Y

EQB Inc. has released its results for the three and six months ended June 30, 2023. This performance reflects portfolio growth, sequential margin expansion, higher non-interest revenue, efficiency improvement as annualized Concentra Bank integration cost saving targets were realized ahead of plan and a one-time benefit from a strategic investment. Due to the strong year-to-date performance, EQB increased and updated relativE2-month earnings guidance, including raising diluted EPS (earnings per share) guidance to plus 18 to 22 per cent from plus 10 to 15 per cent. See additional detail in EQB's Q2 management's discussion and analysis (MD&A).

Second quarter 2023 compared with second quarter 2022:

• Adjusted Q2 2023 ROE (return on equity) 18.3 per cent (reported 20.8 per cent);
• Adjusted Q2 2023 net income $115.5-million plus 88 per cent (plus 14 per cent Q/Q (quarter over quarter)), reported $130.9-million plus 123 per cent (plus 32 per cent Q/Q), with net interest margin expanding seven bps (basis points) Q/Q to 1.99 per cent;
• Adjusted Q2 diluted EPS $2.98 plus 70 per cent (plus 14 per cent Q/Q), reported $3.39 plus 103.0 per cent (plus 32 per cent Q/Q);
• EQ Bank customer growth plus 31 per cent to 367,790 with deposits plus 8 per cent to $8.2-billion (plus 1 per cent Q/Q) and customer engagement of 51 per cent;
• Total AUM plus AUA $108-billion plus 3 per cent Q/Q $53.3-billion of on-balance sheet assets plus 35 per cent (plus 3 per cent Q/Q); 51 per cent of total loans under management are insured;
• Total capital ratio 15.4 per cent with CET at 14.1 per cent; total liquid assets $4.1-billion or 7.7 per cent of total assets;
• Book value per share $67.33, plus 14 per cent (plus 4 per cent Q/Q);
• Common share dividends declared 38 cents per share for Q2 2023, plus 23 per cent (plus 3 per cent Q/Q).

Year to date 2023 compared with year to date 2022:

• Adjusted YTD 2023 ROE 17.5 per cent (reported 18.6 per cent) ahead of 15 per cent plus guidance;
• Adjusted YTD 2023 net income $217.2-million (plus 41 per cent), reported $230.4-million (plus 57 per cent) with adjusted net interest margin expanding 11 bps to 1.95 per cent (reported 1.97 per cent);
• Adjusted YTD diluted EPS $5.60 (plus 27 per cent), reported $5.95 (plus 42 per cent).

"By consistently applying our Challenger Bank philosophy, Equitable delivered record-breaking EPS and an ROE performance that exceeded our own industry-leading long-term average. These are meaningful accomplishments that allowed us to increase earnings guidance. At a time when Canadians need more and better value from the banking industry, Equitable Bank is providing it. Whether it's our no-fee, high-interest EQ Bank digital services, our recently launched fully digital first home savings account or the loans we make to build much-needed affordable housing, we are living our social purpose and in return rewarding our investors. Significant growth in our customer base, strong customer engagement and our plans to continue to bring innovation to the market give me well-founded confidence that we are set to thrive in the years ahead," said Andrew Moor, president and chief executive officer.

First half of 2023 performance trending ahead of 2023 guidance on record Q2 results

• Adjusted Q2 revenue plus 72 per cent Y/Y (year over year) and plus 8 per cent Q/Q to $284.6-million on lending growth, net interest margin expansion and higher non-interest revenue (reported revenue plus 90 per cent Y/Y, plus 17 per cent Q/Q to $312.5-million);
• Adjusted Q2 net interest income plus 50 per cent Y/Y and plus 6 per cent Q/Q to $251.7-million with NIM of 1.99 per cent, plus 18 bps Y/Y and seven bps Q/Q (Q2 reported plus 51 per cent Y/Y with NIM of 1.99 per cent, plus 19 bps Y/Y and plus four bps Q/Q);
• Adjusted Q2 non-interest revenue plus $35.4-million Y/Y, (reported $60.8-million) on higher fee income (including Concentra Bank) and continued strength in multiunit insured lending gains on sale and securitization income, relative to a loss in Q2 2022. Reported non-interest revenue included a one-time revenue benefit of $28.0-million that was not included in adjusted results revenue.

EQ Bank customers plus 31 per cent Y/Y and deposits plus 9 per cent Y/Y

• EQ Bank customer base grew to 367,790 at June 30 with strong account opening momentum from its high-impact Make Bank marketing campaign (customer sign-ups increased 133 per cent versus Q2 2022), the launch of EQ Bank Card (now enabled with mobile wallet technology) and the introduction of services in Quebec. EQ Bank customer everyday engagement remained at a quarterly high of 51 per cent.
• EQ Bank is positioned for continued growth in 2023, offering customers more solutions to meet their everyday banking needs, including the advantages of free cash withdrawals at any ATM nationally, cash back rewards on all card purchases and no foreign exchange fees on international purchases. In July, EQ Bank launched a fully digital first home savings account to help Canadians save money faster to buy their first home.

Personal banking assets plus 35 per cent Y/Y to $32.3-billion

• Single-family portfolio plus 29 per cent Y/Y to $30.3-billion reflecting Equitable Bank's consistent and prudent approach to credit risk management. Of the single-family residential portfolio, 36 per cent of single-family residential lending is insured and the average customer beacon for uninsured mortgage customers is 714 (new originations 740).
• Reverse mortgage assets plus 143 per cent Y/Y and plus 10 per cent Q/Q to $1,025-million. Growth reflected increased awareness of Equitable Bank's reverse mortgage solutions among Canadians nearing or in retirement and the bank's share of an expanding market.
• Insurance lending assets plus 57 per cent Y/Y and plus 16 per cent Q/Q to $115-million.

Commercial banking assets plus 25 per cent Y/Y to $15.1-billion

• Commercial loans under management (LUM) plus 7 per cent Q/Q to $27.7-billion with more than 70 per cent of this growth driven by EQB's insured businesses, and plus 50 per cent Y/Y with the addition of Concentra Bank. CMHC insured multiunit residential mortgages represents more than 65 per cent of commercial LUM and nearly 80 per cent of the growth in LUM for the quarter.
• Commercial uninsured loan portfolio plus 19 per cent Y/Y and plus 0.4 per cent Q/Q to $8.2-billion. Equipment Financing plus 46 per cent Y/Y and plus 4 per cent Q/Q to $1.3-billion.
• Insured multiunit residential loans under management plus 63 per cent Y/Y and plus 8 per cent Q/Q to $18.1-billion.

Credit quality indicators reflect prudence in a higher interest rate environment

• Provision for credit losses (PCL) $13.0-million in Q2 related to continued portfolio growth and stability in macroeconomic forecasts and loss modelling. Stage 2 was $5.9-million, and stage 3 was $7.2-million
• Net impaired loans 47 bps of total assets at June 30, 2023, plus 29 bps from prior year and plus 15 bps from prior quarter. Annualized realized loss rate for Q2 2023 was four bps of total loan assets ($4.6-million), compared with less than one bps ($1.5-million) in Q2 2022.
• The bank remains well reserved for credit losses with allowances as a percentage of total loan assets of 20 bps at June 30, 2023, versus 19 bps at March 31, 2023.

Diversification and stability of funding sources generating consistent high liquidity

• Equitable Bank increased total deposits in Q1 to $32-billion, plus 2 per cent Q/Q and plus 35 per cent Y/Y, supported by diverse financing sources growth and EQ Bank deposit expansion.
• In May, the bank successfully completed its fourth issuance of Covered Bonds in Europe (a three-year, 300-million-euro offering at 52 bps over the euro mid-swap rate), to bring the total value of this lowest cost source of wholesale funding to 1.2 billion euros.

Second full quarter of Concentra Bank earnings, annualized cost synergy targets achieved

• The acquisition of Concentra Bank in Q4 2022 introduced complementary asset growth, diversification in funding and revenue sources plus enhanced distribution capabilities.
• The target was $30-million in cost synergy and mid-single digit EPS accretion within 12 to 18 months, both have been realized on a run-rate basis, with updated 2023 EQB guidance incorporating the outperformance.
• EQB continues to build and expand its credit union relationships, and Concentra Trust performance is delivering non-interest revenue ahead of expectations for 2023.

EQB announces an increase in common share dividend for Q2 2023

• EQB's board of directors declared a commnon share dividend of 38 cents per common share payable on Sept. 30, 2023, to shareholders of record as of Sept. 15, 2023.
• EQB's board of directors declared a quarterly dividend of 37.3063 cents per preferred share, payable on Sept. 30, 2023, to shareholders of record at the close of business Sept. 15, 2023.
• For the purposes of the Income Tax Act (Canada) and any similar provincial legislation, dividends declared will be eligible dividends, unless otherwise indicated.
• To account for the transition to EQB's new fiscal year, there will be a one-time, 10-month reporting period ending Oct. 31, 2023. See this quarter's MD&A for both upgraded 12-month guidance, as well as new guidance for this 10-month period.

"EQB's standout performance relative to guidance and bank peers reflects our consistent long-term approach to allocating capital and generating leading ROE, anchored in exceptional credit, liquidity and capital management. This remains a dynamic time globally for banks, but with our deeply customer-focused challenger operating model and performance year to date, we have conviction in our increased 2023 guidance and look forward to starting our new fiscal year on Nov. 1 with improved comparability of EQB to peers," said Chadwick Westlake, EQB's chief financial officer.

Analyst conference call and webcast: 8:30 a.m. ET, Aug. 2, 2023

EQB will host its second quarter conference call and webcast on Wednesday, Aug. 2, 2023. To access the call with operator assistance, dial 416-764-8609 five minutes prior to the start time. Or to join without operator assistance, you may register your phone number up to 15 minutes in advance of start time to receive an automatic call-back connection to the conference.

Call archive

A replay of the conference call with the accompanying slides will be archived on EQB's investor relations website.

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About EQB Inc.

Equitable Bank -- Canada's Challenger Bank -- is a wholly owned subsidiary of EQB, which trades on the Toronto Stock Exchange and serves more than 515,000 customers. Equitable Bank's wholly owned subsidiary Concentra Bank supports Canadian credit unions and their more than six million members. With nearly $105-billion in combined assets under management and administration, Equitable Bank has a clear mandate to drive change in Canadian banking to enrich people's lives. Founded more than 50 years ago, Canada's Challenger Bank provides diversified personal and commercial banking solutions, and through its digital EQ Bank platform, it was named the best bank in Canada on Forbes's World's Best Banks list in 2021, 2022 and 2023.

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