Q u a r t e r 2 0 1 6 November 11, 2016 1 Forward-Looking - - PowerPoint PPT Presentation

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Q u a r t e r 2 0 1 6 November 11, 2016 1 Forward-Looking - - PowerPoint PPT Presentation

Oct 10, 2023 678 likes •890 views

T S X E Q B / E Q B . P R . C T h i r d Q u a r t e r 2 0 1 6 November 11, 2016 1 Forward-Looking Statements Certain forward-looking statements may be made in this presentation, including statements regarding possible future business,

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T h i r d Q u a r t e r 2 0 1 6

November 11, 2016

T S X E Q B / E Q B . P R . C

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Forward-Looking Statements

Certain forward-looking statements may be made in this presentation, including statements regarding possible future business, financing and growth

  • bjectives. Investors are cautioned that such forward-looking statements

involve risks and uncertainties detailed from time to time in the Company’s periodic reports filed with Canadian regulatory authorities. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Equitable Group

  • Inc. does not undertake to update any forward-looking statements, oral or

written, made by itself or on its behalf except in accordance with applicable securities laws.

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Today’s Main Topic

Drivers of record Q3 earnings that supported second dividend increase of 2016

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Our Best Quarter Ever For Franchise Growth

Our First $2B+ Quarter of Originations, MUM Closing In On $20B

Originations Q3 2016 Change Year over Year Mortgage Principal At Sept.30, 2016 Change Year over Year

Single Family $1.1B 41% $7.5B 21% Commercial $367M 56% $2.7B 19% Securitization Financing MUM $9.7B 31% Prime (third-party sourced) $268M 37% Prime (internally generated) $228M 130% Multi-Unit Residential $244M 9% Total $2.2B 22% $19.9B 25%

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744

Q3 2015 Q3 2016

Alternative Single Family Lending

4.3 4.6 4.9 5.4 5.7 5.9 6.2 6.4 6.8 7.2 7.5 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 2014 2015 2016

Record Originations Driven By Service Quality, Market Share

Mortgage Principal

($ billions)

Annualized CAGR 24.6%

Mortgage Originations

($ millions)

41% 1.1B

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Commercial Lending

2.4 2.3 2.3 2.3 2.3 2.3 2.2 2.2 2.3 2.4 2.7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Realizing Benefits of Refined Market Focus

236 367

Q3 2015 Q3 2016

56%

Mortgage Principal

($ billions)

Mortgage Originations

($ millions) 2014 2015 2016

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Securitization Financing

99 228 424 268

Q3 2015 Q3 2016 Internal 3rd party

Prime Originations

($ millions)

MUM Growth Due to Success in Building Prime Business

Mortgages Under Management

($ billions) 5.5 5.5 5.7 6.1 6.4 6.8 7.5 8.0 8.6 9.1 9.7 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Annualized CAGR 22.1%

2014 2015 2016

130%

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Recently Recognized For Excellence

2017 PLATINUM CANADA

Employee Engagement Drives Shareholder Value Creation

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Record Quarterly Earnings

1.93 1.71 2.05 2.16

Q3 Q1 Q2 Q3

Earnings Per Share Diluted

($)

  • EPS 12% higher than last year
  • EPS 5% higher than Q2 2016
  • Driven by top line growth

Best-ever EPS Even With $0.19 Impact of Strategic Investments

2015 2016

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Creating Value for Our Shareholders

17.5 18.2 17.5 19.2 17.9 18.0 17.8 16.0 17.9 19.8 17.5 17.0 14.7 17.1 17.2

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

ROE (%)

1 Average of all publicly traded Canadian banks, excluding Equitable

Consistent ROE and Retained Earnings Drives Ongoing Value Creation

12.1% Canadian bank average in Q31 2013 2014 2015 2016 In line with longer- term average and up from Q1 and Q2

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11 0.0% 0.1% 0.2% 0.3% 0.4% 0.5%

04 05 06 07 08 09 10 11 12 13 14 15 Q3 2016

Best in Class Credit Performance Continues

Net Realized Credit Losses as a % of Total Loans

Well Protected By Allowance for Credit Losses

  • Allowance for credit losses of total

mortgage assets 0.20% much higher than Bank’s average loss rate of 0.04% over past decade

  • PCL was 0.03% of average

mortgage principal in Q3 reflecting quality of book

  • Expect Single Family arrears rates

and losses to remain low in most regions for remainder of 2016

EQB Comparative Group1

  • 1. Represents eight largest publicly traded banks
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Focus On Alberta and Saskatchewan

Delinquencies/Impaired Mortgages

(% of total mortgage principal)

Provision for credit losses $0.6 million YTD on impaired mortgages

  • Early-stage delinquencies down

from Q2 2016

  • Cautious approach to market

reflected in:

  • 60% of assets insured
  • 40% uninsured with vast

majority in Calgary & Edmonton

  • 66% uninsured LTV

0.00 0.02 0.04 0.06 0.08 0.10 0.12 0.14 0.16 0.18 0.20 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Delinquencies Impaired Mortgages 2014 2015 2016

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New Department Of Finance Mortgage Rules

Overall

  • Increase conventional market, decrease

insured market

  • May affect overall level of housing

activity and pricing

  • Will take time to get full visibility on the

impact

Equitable

  • Pressure on prime originations

(potentially offset by increased market share)

  • Alternative portfolio should continue to

grow at high rates – not directly impacted

  • Certain funding costs may increase but

diversified sources of deposits provide key advantage

Expected Market Impact Expected Equitable Impact

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Our Preliminary View of Rule Changes

  • No need to alter core strategies, use of service as a

differentiator

  • Expect changes to be neutral to our overall earnings

prospects

New Rules Should Create More Market Stability Over The Long Run

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Profitability Trends

Net Interest Margin – TEB

  • Record Q3 net interest income
  • f $71M, 15% above last year
  • n higher average asset

balances

  • NIM trend reflects shift in asset

mix to Securitization Financing and decline in NIM within that business

2.60 2.58 2.55 2.62 2.56 2.64 2.50 2.55 2.60 0.31 0.34 0.29 0.31 0.34 0.22 0.31 0.22 0.19

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3

Core Lending Securitization Financing

2014 2015 2016

Expect NII to Grow at Mid to High Teen Rates YoY in Q4

Total NIM 1.74 1.76 1.74 1.79 1.73 1.69 1.62 1.61 1.64

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Investing For Our Future

32.4 32.8 33.4 35.7 43.2 38.2 37.0

Q1 Q2 Q3 Q4 Q1 Q2 Q3

  • Investments in strategic initiatives of $4.1M,

180% higher than last year (20% above Q2 2016)

  • Other non-interest expenses up $4.3M (21%)

year over year (flat to Q2 2016)

  • Expect Efficiency Ratio to remain in the mid

30% range in Q4 and in 2017 as we continue to invest for future

Remain Canada’s Most Efficient Schedule I Bank

Efficiency Ratio

(%) 2015 2016

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4.9 13.4 16.2

Solid Capital Ratios

September 30, 2016 (%)

Basel III minimum Total Capital level of 10.5% Basel III minimum CET1 target

  • f 7.0%

Full compliance with new standard

Leverage Ratio CET1 Total Capital Asset Derecognition Will Continue As Warranted by Asset Growth

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Subsequent Event

  • Became successor issuer on $3.1 B
  • f NHA MBS pools
  • Transaction closed October 18,

2016

  • Expected to be accretive to EPS

through 2020

  • Excess spread income, net of costs,

will be reported as “other income” Excellent Use of Cash Without Impact on Capital Ratios

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A Transformative Year

9.2

4.5 5.6 6.4 7.4 8.1 8.7 9.0 1.0 2011 2012 2013 2014 2015 Q1 Q2 Q3

Annualized CAGR 16.6%

Deposit Principal

($ billions)

EQ Bank Now Serves 26,000 Customers

2016

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Summary

Record Q3 earnings demonstrate the value of our franchise Significant growth potential in all Bank lines

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