Second Quarter 2015 August 14, 2015 Forward-Looking Statements - - PowerPoint PPT Presentation

Second Quarter 2015

August 14, 2015

Forward-Looking Statements

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

• r written, made by itself or on its behalf except in accordance with applicable securities

laws.

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www.eqbank.ca

Your Hosts

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Andrew Moor

President and Chief Executive Officer

Tim Wilson

Vice-President and Chief Financial Officer

Best Ever Quarterly Earnings Performance

4 15.7 22.1 22.9 26.8 33.5 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015 25%

• Strong fundamentals

produced excellent loan and deposit growth

• ROE at 19.8% above 5-

year average of 17.5%

• Investment gain added

10 cents to Q2 EPS

• Even without gain, best

ever quarter of earnings

16.8 21.1 18.2 18.0 19.8 Q2 2011 Q2 2012 Q2 2013 Q2 2014 Q2 2015

ROE

(%)

Net Income

($ millions)

Consistently Growing Shareholder Value

5 24.05 27.46 32.55 38.16 43.80 2011 2012 2013 2014 Q2 2015

15%

0.45 0.52 0.60 0.68 0.76 2011 2012 2013 2014 Q2 2015

12%

Book Value

($)

Annualized Common Share Dividends

($)

Q2 2014 Q2 2015 641

Single Family Lending

6 3.4 3.6 3.8 4.1 4.3 4.6 4.9 5.4 5.7 5.9 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

28%

2013 2014 2015

Mortgage Principal up 30% on High Quality Originations

501

Mortgage Originations

($ millions)

Mortgage Principal

($ billions)

Building Our Brand: A Recent Example

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• Opened Regional office in June to enhance responsiveness, growth capacity
• Now have $352M book in B.C. along with excellent partnerships

Prime Mortgage Market Progress

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• Differentiating on service
• Closed $380M of prime mortgages

in Q2 inclusive of direct and third party-sourced volumes

• Positive reception in GTA, Calgary

and Edmonton

Q2 2014 Q2 2015

Commercial Lending

9 2.2 2.2 2.4 2.4 2.4 2.3 2.3 2.3 2.3 2.3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2013 2014 2015

Building Partnerships While Maintaining ROE Discipline

187 200

7% Mortgage Originations

($ millions)

Mortgage Principal

($ billions)

Securitization Financing MUM

10 5.8 5.5 6.8 Q2 2013 Q2 2014 Q2 2015

• 25% growth with strong

contribution from prime mortgage business

• Positive earnings power from

prime SF portfolio

• “Stored value” of prime Single

Family assets at June 30th of

• approx. $5M

Securitization Financing MUM

($ billions)

0.0% 0.1% 0.2% 0.3% 0.4% 0.5% 0.6% 2004 05 06 07 08 09 10 11 12 13 14 Q1 Q2 Equitable Bank

Best in Class Credit Performance

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Net Realized Credit Losses as a % of Total Loans

Strong Relative Performance Highlights Portfolio Quality

• Impairment provision less

than 1 bps of total mortgage assets (impaired loans decreased 30%)

• Added $0.7M to collective

allowance (provisioning running ahead of actual loan losses and impairments)

• Expect arrears rates and

impairment provision to remain low nationally in 2015

EQB Big Six Peer Grp.

2015

Our Underwriting Risk Management System

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3rd line Internal Audit 2nd line Risk Management and Compliance

R I S K

Designed to protect against fraudulent activity

1st line Operational Management Control

Supported by a culture of risk management awareness and integrity

EQB Sales

Maintain Relationships and Build Sales

Our Underwriting Risk Management System

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M o r t g a g e B r o k e r

Submits Application Supporting Documentation 1st line: Operational Management Control Underwriter

• Assesses credit

and determines terms of deal Mortgage Officer

• Reviews and verifies documents
• Verifies income through independent

sources 2nd line: Risk Management and Compliance

• Quality assurance and compliance teams review ~ 100 files monthly
• Senior lenders, including CEO, review an additional 30 files monthly

3rd line: Internal Audit

• Conducts independent audits of single family lending at least annually

• Expect alternative single family loan

growth rates in the range of Q2 actuals supported by continued high

• riginations
• Originations expected to increase in

Q3 sequentially and year over year

• Q4 originations unlikely to beat

all-time record of $758M last year

Second Half Expectations

14 3.6 3.8 4.1 4.3 4.6 4.9 5.4 5.7 5.9 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2013 2014 2015

Service, Geographic and Product Expansion Key Drivers

Single Family Mortgage Principal

($ billions)

• 1. Digital banking platform on track

for Q4 launch

• 2. Consumer awareness program

planned to support the launch

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Preparing for Next Wave Initiatives

Growing Both Sides of the Balance Sheet

16 12.3 12.8 13.8 14.4 15.1 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 6.4 7.0 7.4 7.6 8.1 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015

Deposits

($ billions)

Mortgages Under Management

($ billions)

Margin Trends

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Net Interest Margin – TEB

• 22% growth in net interest

income and 11 bp increase in NIM over last year

• Core Lending NIM up 7bp
• ver last year
• Expect net interest income

to grow at mid to high teen rates for balance of 2015 while NIM decreases slightly compared to Q2

2.40 2.46 2.50 2.53 2.57 2.66 2.61 2.60 2.64 0.35 0.32 0.40 0.37 0.31 0.28 0.30 0.23 0.29

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

Core Lending Securitization Financing Total NIM 1.46 1.52 1.63 1.66 1.70 1.76 1.76 1.73 1.81

2013 2014 2015

Investing For Our Future

18 31.9 35.4 32.4 32.8 Q1 2014 Q4 2014 Q1 2015 Q2 2015

• Non-interest expenses up

$4.8M (29%) year-over-year

• 95% of increase due to growth

in our franchise, 5% for strategic investments

• Expect second half ratio to

increase with $3 to 5M of spending on marketing; continued investments in growth

Branchless Model Makes Us One of Canada’s Most Efficient Banks

Efficiency Ratio

(%)

5.3 13.5 17.2

Solid Capital Ratios

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Equitable Bank Capital Ratios (%)

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

• f 7%

Full compliance with new confidential standard

Leverage Ratio CET1 Total Capital

Adding to Our Cost-Effective Funding Sources

• In addition to $8B deposit business,

$7B securitization funding and Deposit Notes we secured:

• $350M revolving credit facility for single

family mortgages prior to securitization

• $350M of access to a bank sponsored

program that provides matched funding for uninsured single family mortgages

• Brought the amount of new funding

sources since 2002 to five, with a current value of almost $2B and potential to grow

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Summary

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• All-time record quarterly financial

performance

• Built on strong fundamentals, service,

good strategic execution, rigorous risk management processes

• Progressing on plan with our

growth initiatives

• Positive outlook

Expect More Growth and High ROE