EQB (EQB) Q4 2024 earnings summary

Executive summary

• Achieved record annual earnings of CAD 438 million and revenue over CAD 1 billion for the first time, with ROE at 15% and four dividend increases in fiscal 2024.

• Loans under management grew 9% year-over-year to CAD 68 billion, with strong growth in multi-unit residential and decumulation lending.

• EQ Bank deposits reached CAD 9.1 billion, up 10% year-over-year, with customer count up 28% to 513,000, driven by new product launches.

• Q4 results were below expectations due to elevated provisions for credit losses in equipment financing, mainly from Pride Group exposure, but management remains confident in 2025 and medium-term growth.

• Fiscal year-end changed to October 31, resulting in a one-time ten-month transition year and a four-month final quarter for 2023.

Financial highlights

• Adjusted ROE for FY24 was 15.0% (reported 13.8%), with adjusted diluted EPS of CAD 11.03 and book value per share up 10% to CAD 77.51.

• Adjusted provision for credit losses (PCL) for FY24 was CAD 89.2 million, with 71% from equipment financing; Q4 adjusted PCL was CAD 31.9 million.

• Net interest margin expanded 10 bps year-over-year to 2.07%, with net interest income exceeding CAD 1 billion.

• Non-interest revenue rose 2% sequentially in Q4 and averaged 55% higher than fiscal 2023, driven by asset management and payment services.

• Efficiency ratio was about 45% for the year.

Outlook and guidance

• Medium-term guidance targets 15%-17% ROE, 12%-15% annual diluted EPS growth, and dividend growth of 13%+ annually.

• Loans under management expected to grow 8%-12% in 2025, with a rebound in single-family uninsured mortgage originations and continued growth in insured multi-unit residential lending.

• PCL ratio forecasted to improve to 12 basis points in 2025, with most improvement in the second half.

• Net interest margin guided to remain above 2% in 2025, with flexibility due to prepayment income and funding mix.

• Performance in equipment financing expected to improve significantly in FY25 following elevated provisions and losses in Q4.