Equitable Group Reports Record Results, Increases Common Share Dividend

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Equitable Group Reports Record Results, Increases Common Share Dividend

Canada NewsWire

TORONTO, May 9, 2019 /CNW/ - Equitable Group Inc. (TSX: EQB and EQB.PR.C) ("Equitable" or the "Company") today reported record financial results for the three months ended March 31, 2019 that reflected strong and diversified growth in its wholly owned subsidiary, Equitable Bank (the "Bank" or "Canada's Challenger Bank™") and the positive impact of its Bennington Financial Corp. ("Bennington") acquisition.

FIRST QUARTER HIGHLIGHTS

  • Adjusted Diluted earnings per share were a record $2.72, up 16% from $2.34 in Q1 2018.
  • Adjusted Return on Shareholders' Equity was 15.0% compared to 14.5% in Q1 2018.
  • Retail loan principal outstanding at March 31, 2019 was $16.6 billion, up 25% from $13.4 billion a year ago on strong originations and lower attrition.
  • Commercial loan principal outstanding at March 31, 2019 was $7.7 billion, up 24% from $6.2 billion a year ago as a result of organic growth and the addition of Bennington's $449 million equipment leasing portfolio.
  • The Provision for Credit Losses ("PCL") was $9.6 million or 0.16% of average loan principal outstanding and included a one-time, IFRS 9-related charge of $5.7 million on the Bennington acquisition.
  • Deposits at March 31, 2019 were $14.6 billion, up 23% from $11.9 billion a year ago and included a 28% year-over-year increase in EQ Bank deposits and a 20% increase in brokered deposits.
  • The Bank's Common Equity Tier 1 Capital Ratio at March 31, 2019 was 12.9% compared to 14.7% at March 31, 2018 due to asset growth and the Bennington acquisition.

Q1 2019 reported Diluted earnings per share ("EPS") were $2.42 and reported Return on Shareholders' Equity ("ROE") was 13.4%.  Adjusted results exclude the negative impact of the $5.7 million provision for credit losses on performing leases recorded immediately after the acquisition of Bennington on January 1, 2019 and mark-to-market losses of $0.9 million on certain preferred shares investments and derivative transactions.

DIVIDEND DECLARATIONS AND INCREASE
The Board of Directors today declared a dividend of $0.31 per common share, payable on June 28, 2019 to common shareholders of record at the close of business June 14, 2019.  This is a 15% increase over the dividend declared in May 2018 and a 3% increase over the dividend declared in February 2019.  The Board also declared a quarterly dividend in the amount of $0.396875 per preferred share, payable on June 28, 2019, to preferred shareholders of record at the close of business June 14, 2019.

COMMENTARY ON PERFORMANCE AND OUTLOOK
"Equitable got off to a great start in Q1," said Andrew Moor, President and Chief Executive Officer.  "Our award-winning EQ Bank digital platform added 5,000 customers to reach over 76,000 Canadians with differentiated daily banking solutions.  Our retail and commercial businesses grew assets to all-time highs and we completed the accretive acquisition of Bennington to establish our place as a leader in the equipment leasing market.  These advancements generated record adjusted earnings and supported our second dividend increase of 2019.  Equally important, they demonstrated that Equitable has realized on its aspirations of being Canada's Challenger Bank with the introduction of differentiated products and innovative services that are in high demand.  Strategically, we will continue to expand EQ Bank's positioning by adding to our digital product portfolio and partnerships with industry leaders and fintechs, while becoming the first bank in Canada to migrate our core banking system to the cloud.  As the Canadian government contemplates the creation of an open banking eco-system, the actions we're taking this year will secure Equitable's place at the epicentre of the banking industry of the future."

Based on current market assessments, the Bank's growing loan portfolio, the outlook for higher margins and the Bennington acquisition, management believes that strong growth will continue for the balance of this year with assets expected to increase 10% to 12%, adjusted earnings to be up 15% to 17% and ROE to remain in the 15% range.  The Bank will also organically replenish its capital position over the next few quarters, which will further strengthen Equitable's foundation.

The Bank also announced today that, effective May 13th, it has chosen to reduce its secured backstop funding facility to $400 million from $850 million due to ongoing success enhancing its liquidity position and favourable funding market conditions.  Further, the Bank intends to renew the secured backstop at $400 million for a two-year period beginning in June 2019.  As a result of this decision, the Bank expects its quarterly interest expenses to decline by $1.6 to $1.7 million starting in Q3, adding approximately $0.07 to EPS.

Impaired loans increased during the quarter, as expected, due to the acquisition of Bennington.  The equipment leasing business has a higher risk profile than our traditional mortgage business but earns a higher margin to compensate for this risk.  Impaired loan balances increased further because of a default on a $39 million commercial mortgage that has a 39% loan-to-value ratio and on which management does not expect any losses.  The balance of the impaired loans relates to a number of smaller commercial and residential mortgages, which in aggregate represent 22 basis points of overall mortgage assets.

Management's complete business outlook can be found in Management's Discussion and Analysis ("MD&A") for the three months ended March 31, 2019 which is available on SEDAR and on Equitable's website.

Effective in the first quarter and consistent with the way it manages its business, Equitable now reports results for two segments: Retail and Commercial Lending. To help readers to make year-over-year comparisons, the Company has posted eight quarters of historical Retail and Commercial Lending results to its website.

CONFERENCE CALL AND WEBCAST

Equitable will hold its first quarter conference call and webcast at 8:30 a.m. ET Friday, May 10, 2019.  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 May 17, 2019 at midnight and it can be accessed by dialing (416) 849-0833 and entering passcode 2794058 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 MARCH 31, 2019










With comparative figures as at December 31, 2018 and March 31, 2018







($ THOUSANDS)























March 31, 2019



December 31, 2018



March 31, 2018











Assets:










Cash and cash equivalents


$

486,422


$

477,243


$

698,359

Restricted cash



381,144



327,097



333,097

Securities purchased under reverse repurchase agreements



547,620



250,000



-

Investments



198,321



193,399



148,072

Loans – Retail(1)



16,734,424



16,203,137



13,465,350

Loans – Commercial(1)



7,712,028



7,323,267



6,211,340

Securitization retained interests



119,183



115,331



106,222

Other assets



148,322



147,671



92,323



$

26,327,464


$

25,037,145


$

21,054,763











Liabilities and Shareholders' Equity










Liabilities:










Deposits


$

14,821,107


$

13,668,521


$

11,999,157

Securitization liabilities



9,926,375



9,236,045



7,554,866

Obligations under repurchase agreements



-



342,010



104,652

Deferred tax liabilities



59,366



42,610



38,162

Other liabilities



206,648



177,961



176,454

Bank facilities



-



289,971



-




25,013,496



23,757,118



19,873,291











Shareholders' equity:










Preferred shares



72,557



72,557



72,557

Common shares



204,492



200,792



199,123

Contributed surplus



6,907



7,035



6,309

Retained earnings



1,049,208



1,014,559



906,235

Accumulated other comprehensive loss



(19,196)



(14,916)



(2,752)




1,313,968



1,280,027



1,181,472



$

26,327,464


$

25,037,145


$

21,054,763











(1)

Effective January 1, 2019, the Company has changed the presentation of its loan products.  Prior period presentation has been updated accordingly.

 

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2019

With comparative figures for the three month period ended March 31, 2018

($ THOUSANDS, EXCEPT PER SHARE AMOUNTS)















Three months ended




   March 31, 2019


March 31, 2018







Interest income:






Loans – Retail(1)


$

159,222

$

122,467

Loans – Commercial(1)



97,629


65,524

Investments



1,821


1,046

Other



5,934


3,805




264,606


192,842

Interest expense:






Deposits



93,696


62,284

Securitization liabilities



62,903


43,562

Bank facilities



2,655


5,726




159,254


111,572

Net interest income



105,352


81,270

Provision for credit losses



9,628


770

Net interest income after provision for credit losses



95,724


80,500

Other income:






Fees and other income



5,644


5,377

Net loss on investments



(821)


(370)

Gains on securitization activities and income from securitization retained interests



2,065


2,937




6,888


7,944

Net interest and other income



102,612


88,444

Non-interest expenses:






Compensation and benefits



24,284


18,603

Other



21,827


15,207




46,111


33,810

Income before income taxes



56,501


54,634

Income taxes:






Current



13,576


14,320

Deferred



1,264


147




14,840


14,467

Net income


$

41,661

$

40,167

Dividends on preferred shares



1,191


1,191

Net income available to common shareholders


$

40,470

$

38,976







Earnings per share:






Basic


$

2.44

$

2.36

Diluted


$

2.42

$

2.34

(1)

Effective January 1, 2019, the Company has changed the presentation of its interest income relating to loan products. Prior period presentation has been updated accordingly.  

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2019

With comparative figures for the three month period ended March 31, 2018

($ THOUSANDS)















Three months ended




  March 31, 2019


March 31, 2018







Net income


$

41,661

$

40,167







Other comprehensive income – items that will be reclassified subsequently to income:






Debt instruments at Fair Value through Other Comprehensive Income:






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



402


(3)







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)/gains from change in fair value



(1,832)


889

Reclassification of net gains/(losses) to retained earnings



11


(6)




(1,419)


880

Income tax recovery/(expense)



377


(233)




(1,042)


647







Cash flow hedges:






Net unrealized losses from change in fair value



(4,589)


(604)

Reclassification of net losses to income



179


1,154




(4,410)


550

Income tax recovery/(expense)



1,172


(146)




(3,238)


404

Total other comprehensive (loss)/income



(4,280)


1,051

Total comprehensive income


$

37,381

$

41,218







 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)











FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2019












With comparative figures for the three month period ended March 31, 2018












($ THOUSANDS)













































March 31, 2019













Accumulated other

comprehensive

income (loss)

























Preferred
shares


Common
shares


Contributed
surplus


Retained
earnings


Cash flow
hedges


Financial
instruments
at FVOCI


Total


Total



















Balance, beginning of period


$

72,557

$

200,792

$

7,035

$

1,014,559

$

2,649

$

(17,565)

$

(14,916)

$

1,280,027

Cumulative effect of adopting IFRS 16(1)



-


-


-


(840)


-


-


-


(840)

Restated balance as at January 1, 2019



72,557


200,792


7,035


1,013,719


2,649


(17,565)


(14,916)


1,279,187

Net income



-


-


-


41,661


-


-


-


41,661

Transfer of gains on sale of equity instruments



-


-


-


8


-


(8)


(8)


-

Other comprehensive loss, net of tax



-


-


-


-


(3,238)


(1,034)


(4,272)


(4,272)

Exercise of stock options



-


3,133


-


-


-


-


-


3,133

Dividends:


















Preferred shares



-


-


-


(1,191)


-


-


-


(1,191)

Common shares



-


-


-


(4,989)


-


-


-


(4,989)

Stock-based compensation



-


-


439


-


-


-


-


439

Transfer relating to the exercise of stock options



-


567


(567)


-


-


-


-


-

Balance, end of period


$

72,557

$

204,492

$

6,907

$

1,049,208

$

(589)

$

(18,607)

$

(19,196)

$

1,313,968




















































March 31, 2018













Accumulated other

comprehensive

income (loss)

























Preferred
shares


Common
shares


Contributed
surplus


Retained
earnings


Cash flow

hedges


Financial

instruments
at FVOCI


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



-


-


-


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



-


-


-


40,167


-


-


-


40,167

Transfer of losses on sale of equity instruments



-


-


-


(6)


-


6


6


-

Other comprehensive income, net of tax



-


-


-


-


404


641


1,045


1,045

Exercise of stock options



-


374


-


-


-


-


-


374

Dividends:


















Preferred shares



-


-


-


(1,191)


-


-


-


(1,191)

Common shares



-


-


-


(4,294)


-


-


-


(4,294)

Stock-based compensation



-


-


386


-


-


-


-


386

Transfer relating to the exercise of stock options



-


89


(89)


-


-


-


-


-

Balance, end of period


$

72,557

$

199,123

$

6,309

$

906,235

$

3,557

$

(6,309)

$

(2,752)

$

1,181,472

(1)

The Company adopted IFRS 16 effective January 1, 2019 using the modified retrospective approach, with the cumulative effect of initially applying the standard recognized in opening retained earnings at the date of initial application.  The adjustment of $840 is net of tax.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)






FOR THE THREE MONTH PERIOD ENDED MARCH 31, 2019






With comparative figures for the three month period ended March 31, 2018






($ THOUSANDS)















Three months ended




March 31, 2019


March 31, 2018

CASH FLOWS FROM OPERATING ACTIVITIES






Net income for the period


$

41,661

$

40,167

Adjustments for non-cash items in net income:






Financial instruments at fair value through income



2,075


3,265

Amortization of premiums/discount on investments



1,329


2,290

Amortization of capital assets and intangible costs



3,898


2,335

Provision for credit losses



9,628


770

Securitization gains



(1,780)


(2,937)

Stock-based compensation



439


386

Income taxes



14,840


14,467

Securitization retained interests



7,334


6,734

Changes in operating assets and liabilities:






Restricted cash



(11,469)


32,941

Securities purchased under reverse repurchase agreements



(297,620)


-

Loans receivable, net of securitizations



(499,679)


(375,137)

Other assets



50,466


5,302

Deposits



1,138,365


886,837

Securitization liabilities



300,697


(10,287)

Obligations under repurchase agreements



(342,010)


(347,349)

Bank facilities



(320,421)


(128,871)

Other liabilities



(7,207)


(24,741)

Income taxes paid



(13,157)


(18,343)

Cash flows from operating activities



77,389


87,829

CASH FLOWS FROM FINANCING ACTIVITIES






Proceeds from issuance of common shares



3,133


374

Dividends paid on preferred shares



(1,191)


(1,191)

Dividends paid on common shares



(9,623)


(4,124)

Cash flows used in financing activities



(7,681)


(4,941)

CASH FLOWS FROM INVESTING ACTIVITIES






Purchase of investments



(12,507)


(42,670)

Acquisition of subsidiary



(47,065)


-

Proceeds on sale or redemption of investments



4,140


45

Net change in Canada Housing Trust re-investment accounts



136


19

Purchase of capital assets and system development costs



(4,600)


(2,853)

Cash flows used in investing activities



(59,896)


(45,459)

Net increase in cash and cash equivalents



9,812


37,429

Cash and cash equivalents, beginning of period



476,610


660,930

Cash and cash equivalents, end of period


$

486,422

$

698,359







Cash flows from operating activities include:






Interest received


$

256,470

$

191,269

Interest paid



(100,160)


(63,903)

Dividends received



1,553


1,102

 

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 BankTM, 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 approximately $31 billion of Assets Under Management.  EQ Bank, the digital banking arm of Equitable Bank, provides state-of-the-art digital banking services to over 76,000 Canadians and was the 2018 recipient of the Best Mobile App in Canada at the World Finance Digital Banking Awards. 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 – currently 2.30% – 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 employs over 800 dedicated professionals across the country and is a 2019 recipient of Canada's Best Employer Platinum Award, the highest bestowed by AON Hewitt.  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, Provision for credit losses – rate, Common Equity Tier 1 Capital Ratio, 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 first quarter 2019 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.

View original content: http://www.newswire.ca/en/releases/archive/May2019/09/c1073.html

Copyright CNW Group 2019

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