TORONTO, May 29, 2024 /CNW/ - EQB Inc. (TSX: EQB) (TSX: EQB.PR.C)  today reported record revenue and pre-provision, pre-tax earnings for the three and six months ended April 30, 2024 that reflected growth in revenue from margin expansion and higher non-interest revenue including a full quarter of results from ACM Advisors, increasing loans under management and EQ Bank customers and deposits. Equitable Bank reported a net reduction in total Gross Impaired Loans (GILs) from the first quarter driven by a 22% reduction in commercial banking GILs. EQB changed its fiscal year in 2023 to end October 31, resulting in a one-time 10-month transition year and a four-month final quarter of 2023. As a result, the comparisons below are shown year-over-year from the first quarter ending March 31, 2023, as the most similar and comparable three-month period ("y/y"). Second quarter 2024 compared to first quarter of 2024 and 2023: Adjusted ROE1 15.9% (reported 15.1%) Adjusted diluted EPS1 $2.81, +2% q/q, +7% y/y (reported $2.67, +0.4% q/q, +4% y/y) Revenue $317 million, +6% q/q, +20% y/y Net Interest Margin 2.11%, +10 bps q/q, +16 bps y/y PPPT: $173.5 million, +5% q/q, +20% y/y (reported $166.2 million, +4% q/q, +18% y/y) Adjusted net income1 $111 million, +2% q/q, +9% y/y (reported $106 million, +1% q/q, +6% y/y) Total AUM + AUA2 $123.5 billion, +4% q/q, +18% y/y EQ Bank customer growth +7% q/q and +36% y/y to over 457,000 customers Book value per share $73.73, +3% q/q, +14% y/y Common share dividends $0.45 per share, +7% q/q, +22% y/y Total capital ratio 15.3% with CET1 of 14.1% Six months ended April 30, 2024 compared to six months ended March 31, 2023: Adjusted ROE1 15.7% (reported 15.0%) Adjusted diluted EPS1 $5.57, +9% y/y (reported $5.33, +41% y/y) Adjusted net income1 $219.4 million, +13% y/y (reported $210.1 million, +45% y/y) "The execution of our Challenger Bank strategy, guided by our approach to managing risk and allocating capital, is clearly and sustainably delivering exceptional customer and shareholder value," said Andrew Moor, president and CEO. "With the momentum of our Second Chance campaign, over 31,000 new EQ Bank customers joined us for a discernably better banking experience. Arrears in the commercial loan book improved in the quarter, as expected, and we continue to expect moderation in PCLs in the second half of 2024. Continuing development of our EQ Bank digital banking platform with the launches of an innovative Notice Deposit Savings Account and EQ Bank for small business position us to deliver even more value for more customers and expand the value of the Bank's franchise." 1 Adjusted measures and ratios are Non-Generally Accepted Accounting Principles (GAAP) measures and ratios. Adjusted measures and ratios are calculated in the same manner as reported measures and ratios, except that financial information included in the calculation of adjusted measures and ratios is adjusted to exclude the impact of the Concentra Bank and ACM acquisition and integration related costs and other non-recurring items which management determines would have a significant impact on a reader's assessment of business performance. For additional information and a reconciliation of reported results to adjusted results, see the "Non-GAAP financial measures and ratios" section. 2 These are non-GAAP measures, see the "Non-GAAP financial measures and ratios" section. EQ Bank added over 31,000 customers in Q2 growing to 457,000, +7% q/q and +36% y/y The "Second Chance" marketing campaign across English Canada with Eugene and Dan Levy and "Deuxième chance" across Québec with Diane Lavallée et Laurence Leboeuf continued to encourage Canadians to move on from their first-ever bank accounts to EQ Bank / Banque EQ's Personal Account that combines the best features of high interest chequing with no fees EQ Bank continues to challenge the status quo with the launch of an innovative Notice Deposit Savings Account, providing Canadians a new way to earn higher rates on their savings An invite-only launch of EQ Bank's Small Business banking solution was completed at the end of Q2, that will help Canadians manage day-to-day transactions, save and earn more with an easy, secure and differentiated experience. Later this summer this experience will be available to millions of eligible small business owners across Canada Strong funding growth and diversification with EQ Bank increasing 4% q/q to $8.7 billion Equitable Bank total deposits remain more than 95% term or insured and increased +6% q/q and +7% y/y to $33.6 billion, with EQ Bank deposits increasing $325 million in the second quarter On April 8, Equitable Bank issued a $300 million fixed rate deposit note. This was the bank's first issuance since 2022. The offer was 4.2 times oversubscribed and attracted a record 47 investors of which one-third were new to the Equitable Bank program. The successful issuance led to significant narrowing of the bank's credit spread On April 23, Equitable Bank completed the first-ever European Social Covered Bond issued by a Canadian Bank, raising a benchmark €500 million (CAD $735 million) in an 8 times over-subscribed issuance with 100+ investors of which approximately two-thirds are new to Equitable Bank's Covered Bond Programme. Social bond issuance is a natural extension of the Bank's sustainable business practices that enables it to further support lending activities with a social benefit Equitable Bank holds $4.5 billion in liquid assets for regulatory purposes, which cover 74% of all demand deposits with sufficient contingency funding available to cover the balance Personal Banking loans under management reach $32.8 billion with strong retention Single family uninsured portfolio increased to $19.9 billion, +0.5% q/q, as strong customer retention offset the impact of slower housing market activity on new originations Decumulation lending assets (including reverse mortgages and insurance lending) +10% q/q and +57% y/y to $1.7 billion, with growth accelerating as a result of successful consumer advertising that bolstered public awareness, strong broker service and value to the borrower Commercial Banking loans under management +$1.5 billion q/q to $32.7 billion The Bank continues to prioritize multi-unit residential lending in major cities across the country with nearly 77% of its total commercial loans under management ("LUM") insured through various CMHC programs. Insured multi-unit residential LUM +7% q/q and +35% y/y to $22.6 billion The Canadian commercial office real estate market continues to experience significant economic challenges; however, as part of the Bank's risk appetite, only ~1% of the Bank's loan assets are associated with offices, and those balances declined in the quarter. Equitable Bank's office lending is mostly restricted to properties located in major urban centres and to smaller buildings Provisions reflect credit risk at this point in the cycle, expected to moderate The Bank is appropriately reserved for credit losses with net allowances as a percentage of total loan assets of 23 bps, compared to 22 bps at January 31, 2024, and 19 bps at March 31, 2023 Provision for credit losses (PCL) of $22.2 million in Q2 reflected the impacts of both future expected losses driven by macroeconomic forecasts and loss modelling, Stage 3 provisions of $11.1 million associated with residential and commercial lending, and provisions of $14.0 million associated with the equipment financing business. Realized loan losses excluding equipment financing were $1.8 million for the quarter, representing 0.4bps of lending assets Net impaired loans decreased by $10.8 million to $441.9 million, representing 92 bps of total loan assets compared to 94 bps at January 31, 2024, and +60 bps from March 31, 2023. Net commercial impaired loans (excl. equipment financing) declined by $68.4 million to 133 bps from 183 bps at January 31, 2024 and up from 57 bps at March 31, 2023 with several commercial loans resolving EQB increases common share dividend EQB's Board of Directors declared a dividend of $0.45 per common share payable on June 28, 2024, to shareholders of record as of June 14, 2024, representing a +7% increase from the dividend paid in March 2024 and 22% above the payment made in June 2023 The Board declared a quarterly dividend of $0.373063 per preferred share, payable on June 28, 2024, to shareholders of record at the close of business June 14, 2024 For the purposes of the Income Tax Act (Canada) and any similar provincial legislation, dividends declared are eligible dividends, unless otherwise indicated "The first half of 2024 has been trending to our expectations with strong revenue, earnings growth and ROE well-above target at nearly 16% year-to-date. This reflects how the EQB business model is positioned to perform across economic cycles. We have momentum for strong performance in the second half of the year and have high confidence in the quality of our credit book.  We are continuing to invest in growing the long-term value of our Challenger franchise and are pleased to be rewarding our shareholders with another consecutive dividend increase," said Chadwick Westlake, CFO, EQB. Analyst conference call and webcast: 10:00 a.m. Eastern May 30, 2024 EQB's Andrew Moor, president and CEO, Chadwick Westlake, CFO, and Marlene Lenarduzzi, CRO, will host the company's second quarter conference call and webcast. The listen-only webcast with accompanying slides will be available at: eqb.investorroom.com. To access the conference call with operator assistance, dial 416-764-8609 five minutes prior to the start time. INTERIM CONSOLIDATED FINANCIAL STATEMENTS Consolidated balance sheet (unaudited) ($000s) As at April 30, 2024 October 31, 2023 March 31, 2023 Assets: Cash and cash equivalents 657,219 549,474 345,621 Restricted cash 783,148 767,195 666,530 Securities purchased under reverse repurchase agreements 1,399,955 908,833 732,608 Investments 1,817,916 2,120,645 2,483,604 Loans – Personal 32,823,421 32,390,527 32,183,036 Loans – Commercial 15,085,481 14,970,604 14,397,192 Securitization retained interests 663,593 559,271 410,441 Deferred tax assets 14,921 14,230 15,024 Other assets 694,542 652,675 558,962 Total assets 53,940,196 52,933,454 51,793,018 Liabilities and Shareholders' Equity Liabilities: Deposits 34,123,703 31,996,450 31,589,063 Securitization liabilities 15,181,341 14,501,161 15,311,657 Obligations under repurchase agreements - 1,128,238 904,658 Deferred tax liabilities 148,549 128,436 92,417 Funding facilities 839,841 1,731,587 768,717 Other liabilities 630,954 602,039 515,871 Total liabilities 50,924,388 50,087,911 49,182,383 Shareholders' Equity: Preferred shares 181,411 181,411 181,411 Common shares 495,707 471,014 463,862 Contributed (deficit) surplus (24,811) 12,795 12,002 Retained earnings 2,359,116 2,185,480 1,954,394 Accumulated other comprehensive loss (7,804) (5,157) (1,034) 3,003,619 2,845,543 2,610,635 Non-controlling interests 12,189 - - Total equity 3,015,808 2,845,543 2,610,635 Total liabilities and equity 53,940,196 52,933,454 51,793,018 Consolidated statement of income (unaudited) Three months ended Six months ended ($000s, except per share amounts) April 30, 2024 March 31, 2023 April 30, 2024 March 31, 2023 Interest income: Loans – Personal 482,299 391,816 951,253 719,412 Loans – Commercial 257,842 241,768 520,723 460,196 Investments 16,879 21,893 34,755 32,647 Other 27,209 17,352 49,308 36,650 784,229 672,829 1,556,039 1,248,905 Interest expense: Deposits 366,002 293,231 724,564 537,644 Securitization liabilities 131,776 118,174 259,029 211,337 Funding facilities 13,521 7,918 28,804 18,942 Other 5,592 12,709 20,294 21,860 516,891 432,032 1,032,691 789,783 Net interest income 267,338 240,797 523,348 459,122 Non-interest revenue: Fees and other income 20,564 13,898 37,179 24,401 Net gains (losses) on loans and investments 7,129 (3,300) 12,122 (8,514) Gain on sale and income from retained interests 23,177 14,332 42,586 23,579 Net (losses) gains on securitization activities and derivatives (1,548) 2,104 197 3,950 49,322 27,034 92,084 43,416 Revenue 316,660 267,831 615,432 502,538 Provision for credit losses 22,217 6,248 37,752 33,044 Revenue after provision for credit losses 294,443 261,583 577,680 469,494 Non-interest expenses: Compensation and benefits 66,961 58,362 132,330 123,361 Other 83,459 68,186 157,575 142,367 150,420 126,548 289,905 265,728 Income before income taxes 144,023 135,035 287,775 203,766 Income taxes: Current 32,734 28,651 71,268 50,805 Deferred 5,573 6,865 6,409 7,623 38,307 35,516 77,677 58,428 Net income 105,716 99,519 210,098 145,338 Dividends on preferred shares 2,346 2,318 4,703 4,623 Net income available to common shareholders and non- controlling interests 103,370 97,201 205,395 140,715 Net income attributable to: Common shareholders 103,041 97,201 204,916 140,715 Non-controlling interests 329 - 479 - 103,370 97,201 205,395 140,715 Earnings per share: Basic 2.70 2.58 5.38 3.81 Diluted 2.67 2.56 5.33 3.78 Consolidated statement of comprehensive income (unaudited) Three months ended Six months ended ($000s) April 30, 2024 March 31, 2023 April 30, 2024 March 31, 2023 Net income 105,716 99,519 210,098 145,338 Other comprehensive income – items that will be reclassified subsequently to income: Debt instruments at Fair Value through Other Comprehensive Income: Reclassification of losses from AOCI on sale of investments (30) - (143) - Net unrealized (losses) gains from change in fair value (16,240) 14,974 25,321 13,186 Reclassification of net losses (gains) to income 17,217 (12,205) (18,497) (8,220) Other comprehensive income – items that will not be reclassified subsequently to income: Equity instruments designated at Fair Value through Other Comprehensive Income: Reclassification of gains from AOCI on sale of investments - - - 604 Net unrealized gains (losses) from change in fair value 3,132 (793) 1,552 (2,336) Reclassification of net (gains) losses to retained earnings -