News Releases

Equitable Group Reports Record Quarterly Results, Strong Credit Performance, and Increases Dividend

TORONTO, Nov. 8, 2018 /CNW/ - Equitable Group Inc. (TSX: EQB and EQB.PR.C) ("Equitable" or the "Company") today reported financial results for the three and nine months ended September 30, 2018 that reflected record performance of Equitable Bank (the "Bank"), its wholly owned subsidiary.

Equitable Group Inc. (CNW Group/Equitable Group Inc.)

THIRD QUARTER HIGHLIGHTS

  • Diluted earnings per share were $2.80, up 27% from $2.21 in the same period of 2017
  • Return on Shareholders' Equity was 15.9% compared to 14.4% in Q3 2017
  • Single Family Lending mortgage principal at September 30, 2018 was $10.2 billion, up 13% from $9.1 billion a year ago on strong originations and high renewal rates
  • Commercial Lending mortgage principal at September 30, 2018 was $3.6 billion, up 27% from $2.9 billion a year ago reflecting record origination activity
  • Deposits at September 30, 2018 were $12.9 billion, up 23% from $10.5 billion a year ago as the Bank grew its EQ Bank deposits to $2.1 billion, a 31% year-over-year increase
  • The Provision for Credit Losses ("PCL") was $0.5 million or 0.01% of mortgage principal in Q3 2018, which reflects the credit quality of the Bank's assets
  • Common Equity Tier 1 Capital Ratio was 13.8% compared to 14.8% at September 30, 2017 and remains above the levels of the other eight publicly listed Schedule I Canadian banks

DIVIDEND DECLARATIONS AND INCREASE

The Board of Directors today declared a dividend of $0.28 per common share, payable on January 3, 2019 to common shareholders of record at the close of business December 14, 2018. This represents a 12% increase over the dividend declared in November 2017 and a 4% increase over the dividend declared in August 2018. The Board also declared a quarterly dividend in the amount of $0.396875 per preferred share, payable on December 31, 2018, to preferred shareholders of record at the close of business on December 14, 2018.

COMMENTARY ON PERFORMANCE AND OUTLOOK

"Strong asset growth in all of the Bank's business lines, coupled with lower backstop facility costs yielded our best-ever quarterly earnings," said Andrew Moor, President and Chief Executive Officer. "With market uncertainty around B-20, we entered the year expecting portfolio growth in Alternative Single Family lending of 2% to 4%. As result of superior customer service we now expect growth in this portfolio of 11% to 13% in 2018 which creates a great foundation for future earnings. With the costs of our backstop facility being lower beginning this quarter, our ROE also better reflected the underlying value creation capability of our franchise."

Management expects earnings to continue increasing and ROE to be in the range of 15% in Q4, as a result of the Bank's growing loan portfolio and stable margins. ROE will still be below our 10-year average of 17.2% due to ongoing costs associated with successfully navigating through funding market disruptions that occurred in 2017 (see the Company's Q1 and Q2 2017 MD&As), a high level of common equity capital, and investments in key strategic initiatives. Management's complete business outlook can be found in Management's Discussion and Analysis for the three and nine months ended September 30, 2018 which is available on SEDAR and on Equitable's website.

GROWTH AND DIVERSIFICATION IN SECURED LENDING

Equitable continues to expand its position as Canada's Challenger Bank™. In Commercial Lending, the Bank recently established programs to finance other specialist lenders' activities in attractive markets such as equipment leasing. In addition, it began lending on CMHC-insured construction projects. Similarly, the PATH Home Plan™, introduced earlier this year, established Equitable as one of only two lenders in the growing reverse mortgage market. Recently, Equitable committed to invest in a new Portag3 Ventures fund, furthering our role as Canada's Challenger Bank™ by supporting the fintech ecosystem and building strategic partnerships with these businesses as they scale and flourish. Equitable believes that investing in this way allows start-ups and incumbents to work together and learn from each other in a symbiotic relationship.

SUSAN ERICKSEN APPOINTED TO BOARD OF DIRECTORS

The Board of Directors of Equitable Group is pleased to announce the appointment of Susan Ericksen as a Director, effective immediately. Ms. Ericksen is an expert in the design, development, implementation and management of innovative, large-scale technologies and technology workforces. She has had a distinguished 35-year career with Fortune 500 companies, serving most recently as Managing Director, Global Technology Operations for The Coca-Cola Company in Atlanta, where she was responsible for worldwide information technology operations in 193 countries. Before that, she was Chief Technology Officer for Fiserv, Inc., a global leader in the development of financial technology solutions used by more than 12,000 financial institutions and corporate customers. Ms. Ericksen's financial services experience is extensive. She served as Chief Information Officer or Chief Technology Officer at New York Life (one of the largest life insurance companies in the United States), Merrill Lynch Bank and Trust, Merrill Lynch Bank USA, CitiFinancial, and Citi Cards. Ms. Ericksen holds a Master of Science (Computer Science) from the University of Colorado and a Bachelor of Arts (Business Administration) from Mount St. Mary's College, Los Angeles.

CONFERENCE CALL AND WEBCAST

Equitable will hold its third quarter conference call and webcast at 8:30 a.m. eastern Friday November 9, 2018. To access the call live, please dial (416) 764-8609 five minutes prior. 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 November 16, 2018 and it can be accessed by dialing (416) 764-8677 and entering passcode 451647 followed by the number sign. Alternatively, the call will be archived on the Company's website for three months.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS


CONSOLIDATED BALANCE SHEETS (unaudited)

AS AT SEPTEMBER 30, 2018

With comparative figures as at December 31, 2017 and September 30, 2017

($ THOUSANDS)













September 30, 2018(1)



December 31, 2017


September 30, 2017











Assets:










Cash and cash equivalents


$

755,952


$

660,930


$

724,314

Restricted cash



359,283



366,038



397,365

Investments



159,034



107,442



112,255

Mortgages receivable – Core Lending



13,873,668



12,304,741



11,921,274

Mortgages receivable – Securitization Financing



7,797,670



6,993,807



6,866,074

Securitization retained interests



111,202



104,429



102,715

Other assets



90,805



96,863



97,208



$

23,147,614


$

20,634,250


$

20,221,205











Liabilities and Shareholders' Equity










Liabilities:











Deposits


$

13,021,485


$

11,114,313


$

10,594,205


Securitization liabilities



8,175,776



7,565,545



7,730,776


Obligations under repurchase agreements 



299,028



452,001



316,087


Deferred tax liabilities



38,990



35,802



31,869


Other liabilities



178,946



199,601



191,289


Bank facilities



173,514



128,871



193,654


Debentures



-



-



65,000




21,887,739



19,496,133



19,122,880











Shareholders' equity:











Preferred shares



72,557



72,557



72,557


Common shares



200,760



198,660



197,488


Contributed surplus



6,707



6,012



5,870


Retained earnings



980,272



866,109



830,976


Accumulated other comprehensive loss



(421)



(5,221)



(8,566)




1,259,875



1,138,117



1,098,325



$

23,147,614


$

20,634,250


$

20,221,205











(1)

The amounts for the period ended September 30, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated.

 

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2018

With comparative figures for the three and nine month periods ended September 30, 2017

($THOUSANDS, EXCEPT PER SHARE AMOUNTS)













Three months ended

Nine months ended



September 30, 2018(1)

September 30, 2017

September 30, 2018(1)

September 30, 2017











Interest income:











Mortgages – Core Lending


$

164,775

$

129,372

$

461,413

$

376,934


Mortgages – Securitization Financing



50,701


43,368


141,640


133,480


Investments



1,496


65


4,042


3,563


Other



4,964


4,296


12,932


7,339




221,936


177,101


620,027


521,316

Interest expense:











Deposits



77,908


54,004


209,584


150,815


Securitization liabilities



47,581


43,647


135,968


129,959


Bank facilities



3,423


6,536


20,685


9,027


Debentures



-


950


-


2,850




128,912


105,137


366,237


292,651

Net interest income



93,024


71,964


253,790


228,665

Provision for credit losses



517


40


1,455


1,156

Net interest income after provision for credit losses



92,507


71,924


252,335


227,509

Other income:











Fees and other income



4,843


7,492


16,767


22,149


Net gain/(loss) on investments



131


(100)


(101)


(888)


Gains on securitization activities and income from












 securitization retained interests               



5,500


4,797


11,461


11,263




10,474


12,189


28,127


32,524

Net interest and other income



102,981


84,113


280,462


260,033

Non-interest expenses:











Compensation and benefits



19,406


16,495


57,041


49,385


Other



18,391


15,147


53,089


46,572




37,797


31,642


110,130


95,957

Income before income taxes



65,184


52,471


170,332


164,076

Income taxes:











Current



17,124


15,773


43,848


39,860


Deferred



254


(1,171)


974


4,045




17,378


14,602


44,822


43,905

Net income


$

47,806

$

37,869

$

125,510

$

120,171

Dividends on preferred shares



1,191


1,191


3,573


3,573

Net income available to common shareholders


$

46,615

$

36,678

$

121,937

$

116,598











Earnings per share:











Basic


$

2.82

$

2.23

$

7.38

$

7.08


Diluted


$

2.80

$

2.21

$

7.33

$

7.03











(1)

The amounts for the period ended September 30, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated.

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2018

With comparative figures for the three and nine month periods ended September 30, 2017

($ THOUSANDS)













Three months ended

Nine months ended



September 30, 2018(1)

September 30, 2017

September 30, 2018(1)

September 30, 2017











Net income


$

47,806

$

37,869

$

125,510

$

120,171











Other comprehensive income – items that will be











reclassified subsequently to income:












Debt instruments at Fair Value through Other













Comprehensive Income/Available for sale:












Net unrealized (losses)/gains from change in fair value



(4)


1,755


(30)


11,835



Reclassification of net losses to income



17


11


17


412











Other comprehensive income – items that will not be











reclassified subsequently to income:












Equity instruments designated at Fair Value through













Other Comprehensive Income:












Net unrealized losses from change in fair value



831


N/A


603


N/A



Reclassification of net losses to retained earnings



14


N/A


8


N/A




858


1,766


598


12,247

Income tax expense



(228)


(469)


(159)


(3,221)




630


1,297


439


9,026











Cash flow hedges:










Net unrealized gains from change in fair value



3,533


3,501


2,564


5,333

Reclassification of net (gains)/losses to income



(4)


758


1,441


2,086




3,529


4,259


4,005


7,419

Income tax expense



(936)


(1,131)


(1,062)


(2,028)




2,593


3,128


2,943


5,391

Total other comprehensive income



3,223


4,425


3,382


14,417

Total comprehensive income


$

51,029

$

42,294

$

128,892

$

134,588











(1)

The amounts for the period ended September 30, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated.

 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)

FOR THE THREE MONTH PERIOD ENDED SEPTEMBER 30, 2018

With comparative figures for the three month period ended September 30, 2017

($ THOUSANDS)












Accumulated other
comprehensive
income (loss)


September 30, 2018


Preferred
shares

Common
shares

Contributed
surplus

Retained
earnings

Cash flow
hedges

Financial
instruments
at FVOCI(1)

Total

Total

















Balance, beginning of period


$

72,557

$

199,305

$

6,612

$

938,122

$

3,503

$

(7,147)

$

(3,644)

$

1,212,952

Net income



-


-


-


47,806


-


-


-


47,806

Other comprehensive income, net of tax



-


-


-


-


2,593


630


3,223


3,223

Exercise of stock options



-


1,229


-


-


-


-


-


1,229

Dividends:



















Preferred shares                                      



-


-


-


(1,191)


-


-


-


(1,191)


Common shares



-


-


-


(4,465)


-


-


-


(4,465)

Stock-based compensation



-


-


321


-


-


-


-


321

Transfer relating to the exercise of stock options



-


226


(226)


-


-


-


-


-

Balance, end of period


$

72,557

$

200,760

$

6,707

$

980,272

$

6,096

$

(6,517)

$

(421)

$

1,259,875















































Accumulated other

comprehensive

income (loss)


September 30, 2017


Preferred
shares

Common
shares

Contributed
surplus

Retained
earnings

Cash flow
hedges

Available

for sale
investments

Total

Total



















Balance, beginning of period


$

72,557

$

197,439

$

5,594

$

798,253

$

(510)

$

(12,481)

$

(12,991)

$

1,060,852

Net income



-


-


-


37,869


-


-


-


37,869

Other comprehensive income, net of tax



-


-


-


-


3,128


1,297


4,425


4,425

Exercise of stock options



-


40


-


-


-


-


-


40

Dividends:



















Preferred shares                                      



-


-


-


(1,191)


-


-


-


(1,191)


Common shares



-


-


-


(3,955)


-


-


-


(3,955)

Stock-based compensation



-


-


285


-


-


-


-


285

Transfer relating to the exercise of stock options



-


9


(9)


-


-


-


-


-

Balance, end of period


$

72,557

$

197,488

$

5,870

$

830,976

$

2,618

$

(11,184)

$

(8,566)

$

1,098,325



















(1)

Current period balance is classified as at FVOCI for debt and equity instruments, however, balance at the beginning of the period is classified as Available for Sale under IAS 39.

 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)

FOR THE NINE MONTH PERIOD ENDED SEPTEMBER 30, 2018

With comparative figures for the nine month period ended September 30, 2017

($ THOUSANDS)












Accumulated other

comprehensive

income (loss)



September 30, 2018


Preferred
shares

Common
shares

Contributed
surplus

Retained
earnings

Cash flow
hedges

Financial
instruments
at FVOCI(1)


Total


Total



















Balance, beginning of period


$

72,557

$

198,660

$

6,012

$

866,109

$

3,153

$

(8,374)

$

(5,221)

$

1,138,117

Cumulative effect of adopting IFRS 9(2)



-


-


-


5,450


-


1,418


1,418


6,868

Restated balance as at January 1, 2018



72,557


198,660


6,012


871,559


3,153


(6,956)


(3,803)


1,144,985

Net income



-


-


-


125,510


-


-


-


125,510

Other comprehensive income, net of tax



-


-


-


-


2,943


439


3,382


3,382

Net realized losses on sale of equity investments



-


-


-


(6)


-


-


-


(6)

Exercise of stock options



-


1,754


-


-


-


-


-


1,754

Dividends:



















Preferred shares                                      



-


-


-


(3,573)


-


-


-


(3,573)


Common shares



-


-


-


(13,218)


-


-


-


(13,218)

Stock-based compensation



-


-


1,041


-


-


-


-


1,041

Transfer relating to the exercise of stock options



-


346


(346)


-


-


-


-


-

Balance, end of period


$

72,557

$

200,760

$

6,707

$

980,272

$

6,096

$

(6,517)

$

(421)

$

1,259,875















































Accumulated other

comprehensive

income (loss)



September 30, 2017


Preferred
shares

Common
shares

Contributed
surplus

Retained
earnings

Cash flow
hedges

Available
for sale
investments


Total


Total



















Balance, beginning of period


$

72,557

$

196,608

$

5,056

$

725,912

$

(2,773)

$

(20,210)

$

(22,983)

$

977,150

Net income



-


-


-


120,171


-


-


-


120,171

Other comprehensive income, net of tax



-


-


-


-


5,391


9,026


14,417


14,417

Exercise of stock options



-


737


-


-


-


-


-


737

Dividends:



















Preferred shares                                      



-


-


-


(3,573)


-


-


-


(3,573)


Common shares



-


-


-


(11,534)


-


-


-


(11,534)

Stock-based compensation



-


-


957


-


-


-


-


957

Transfer relating to the exercise of stock options



-


143


(143)


-


-


-


-


-

Balance, end of period


$

72,557

$

197,488

$

5,870

$

830,976

$

2,618

$

(11,184)

$

(8,566)

$

1,098,325


(1)

Current period balance is classified as at FVOCI for debt and equity instruments, however, balance at the beginning of the period is classified as Available for Sale under IAS 39.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

FOR THE THREE AND NINE MONTH PERIODS ENDED SEPTEMBER 30, 2018

With comparative figures for the three and nine month periods ended September 30, 2017

($ THOUSANDS)






















Three months ended

Nine months ended



September 30, 2018(1)

September 30, 2017

September 30, 2018(1)

September 30, 2017

CASH FLOWS FROM OPERATING ACTIVITIES










Net income for the period


$

47,806

$

37,869

$

125,510

$

120,171

Adjustments for non-cash items in net income:











Financial instruments at fair value through income



(416)


640


(4,136)


1,989


Amortization of premiums/discount on investments



1,873


2,775


6,410


7,559


Amortization of capital assets and intangible costs



2,431


2,343


7,190


6,516


Provision for credit losses



517


40


1,455


1,156


Securitization gains



(5,500)


(2,504)


(11,461)


(8,791)


Net loss on sale or redemption of investments



-


100


-


888


Stock-based compensation



321


285


1,041


957


Income taxes



17,378


14,602


44,822


43,905


Securitization retained interests



7,055


6,479


20,755


18,088

Changes in operating assets and liabilities:











Restricted cash



(11,998)


14,671


6,755


(149,487)


Securities purchased under reverse repurchase












agreements                                  



-


-


-


199,401


Mortgages receivable, net of securitizations



(1,214,589)


(532,881)


(2,366,993)


(1,029,493)


Other assets



(3,138)


6,849


12,118


(12,697)


Deposits



544,511


499,201


1,909,474


837,681


Securitization liabilities



591,449


(19,227)


610,542


(30,901)


Obligations under repurchase agreements



96,101


(112,898)


(152,972)


203,599


Bank facilities



(77,297)


51,839


44,643


143,654


Other liabilities



(5,733)


(37,099)


(25,879)


(28,381)

Income taxes paid



(15,485)


(10,709)


(49,183)


(48,330)

Cash flows (used in)/from operating activities



(24,714)


(77,625)


180,091


277,484

CASH FLOWS FROM FINANCING ACTIVITIES










Dividends paid on preferred shares



(1,191)


(1,191)


(3,573)


(3,573)

Dividends paid on common shares



(4,461)


(3,955)


(12,879)


(14,977)

Proceeds from issuance of common shares



1,229


40


1,754


737

Cash flows used in financing activities



(4,423)


(5,106)


(14,698)


(17,813)

CASH FLOWS FROM INVESTING ACTIVITIES










Purchase of investments



(4,847)


-


(57,469)


(40,462)

Proceeds on sale or redemption of investments



-


76


45


70,219

Net change in Canada Housing Trust re-investment











Accounts



(12)


12


26


239

Purchase of capital assets and system development costs



(3,740)


(4,508)


(12,973)


(9,532)

Cash flows (used in)/from investing activities



(8,599)


(4,420)


(70,371)


20,464

Net (decrease)/increase in cash and cash equivalents



(37,736)


(87,151)


95,022


280,135

Cash and cash equivalents, beginning of period



793,688


811,465


660,930


444,179

Cash and cash equivalents, end of period


$

755,952

$

724,314

$

755,952

$

724,314











Cash flows from operating activities include:










Interest received


$

210,403

$

174,746

$

601,246

$

520,521

Interest paid



(67,545)


(92,216)


(211,782)


(250,221)

Dividends received



1,517


1,112


4,091


3,571











(1)

The amounts for the period ended September 30, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated.

 

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™, is the country's ninth largest independent Schedule I bank and offers a diverse suite of residential lending, commercial lending and savings solutions to Canadians. Through its proven branchless approach and customer service focus, Equitable Bank has grown to over $27 billion of Assets Under Management. EQ Bank, the digital banking arm of Equitable Bank, provides state-of-the-art digital banking services to more than 66,000 Canadians. Equitable Bank employs more than 650 dedicated professionals across the country, and is a 2019 recipient of Canada's Best Employer Platinum Award, the highest bestowed by AON. 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 Management's Discussion and Analysis 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 Return on Shareholders' Equity, provision for credit losses rate, Common Equity Tier 1 Capital Ratio, Mortgages Under Management, and Assets Under Management 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 third quarter 2018 Management's Discussion and Analysis provides a detailed description of each non-GAAP measure and should be read in conjunction with this release. The Management's Discussion and Analysis 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.

For further information: Andrew Moor, President and Chief Executive Officer, 416-515-7000; Tim Wilson, Senior Vice President and Chief Financial Officer, 416-515-7000