title of presentationeqbank.investorroom.com/download/eq+2016+q4... · record fourth quarter...
TRANSCRIPT
1
F o u r t h Q u a r t e r 2 0 1 6February 17, 2017
T S X E Q B / E Q B . P R . C
2
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 or
written, made by itself or on its behalf except in accordance with applicable
securities laws.
3
2016 Performance Headlines
Up 26% to $21B Mortgages Under Management
Grew Lending Market Share
Without Sacrificing Credit Quality
$1.1B EQ Bank Deposits
$0.07 EPS Accretion from Acquisition of NHA MBS Pools
$138.3M Net Income
ROE 16.9%
Remained a Performance
Leader Among Canadian Banks
$17MInvested In Future Growth
Became a Digital Bank
Maintained Entrepreneurial
Culture
4
Consistent Performance Leadership
5.115.82
6.537.73
8.49
2012 2013 2014 2015 2016
29.8335.14
40.9046.57
54.96
2012 2013 2014 2015 2016
18.7 18.1 17.4 17.9 16.9
2012 2013 2014 2015 2016
Earnings Per Share($)
Book Value Per Share($)
Return On Equity(%)
CAGR 17%
CAGR 17%
Net Income($million)
81.293.5
106.7125.9
138.3
2012 2013 2014 2015 2016
CAGR 17%
5-Year CdnBank Av.
15.6%1
1. Represents the average of the eight largest publicly traded banks in Canada.
5
Five Year Shareholder Return
1. Performance assumes common share dividend reinvestment
TSX Capped Financial Index
EQB1
101%
160%
6
Positioned As A Branchless Challenger Bank
7
Record Fourth Quarter Results
1.93
1.71
2.052.16
2.56
Q4 Q1 Q2 Q3 Q4
Earnings Per Share Diluted($)
2015 2016
17.0
14.7
17.1 17.2
19.3
Q4 Q1 Q2 Q3 Q4
Return On Equity(%)
2015 2016
31.4
28.0
33.435.2
41.7
Q4 Q1 Q2 Q3 Q4
Net Income($ millions)
2015 2016
8
Performance Driven by Franchise Growth
Third Consecutive $2B+ Quarter of Originations
OriginationsQ4 2016
ChangeYear over Year
Mortgage Principal At
Dec. 31, 2016
ChangeYear over Year
Single Family $930M 29% $7.9B 22%
Commercial $378M 46% $2.8B 27%
Securitization Financing MUM $10.3B 29%
Prime (third-party sourced) $527M 38%
Prime (internally generated) $125M 16%
Multi-Unit Residential $220M 19%
Total $2.2B 25% $21.0B 26%
9
719
930
Q4 2015 Q4 2016
Alternative Single Family Lending
4.34.6
4.95.4
5.7 5.96.2 6.4
6.87.2
7.57.9
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q42014 2015 2016
Record Q4 Originations Due to Service Quality, Share Gains, and Market Growth
Mortgage Principal($ billions)
Annualized CAGR 24%
Mortgage Originations($ millions)
29%
10
Commercial Lending
2.42.3 2.3 2.3 2.3 2.3
2.2 2.22.3
2.4
2.72.8
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Realizing Benefits of Refined Market Focus
260
378
Q4 2015 Q4 2016
46%
Mortgage Principal($ billions)
Mortgage Originations($ millions)
2014 2015 2016
11
Securitization Financing
108125
381
527
Q4 2015 Q4 2016
Internal
3rd party
38%
Prime Originations($ millions)
MUM Growth Due to Prime Volumes
Mortgages Under Management($ billions)
5.5 5.5 5.76.1
6.46.8
7.58.0
8.69.1
9.710.3
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Annualized CAGR 23%
2014 2015 2016
16%
12
Extending Our Dividend Growth Track Record
0.230.22
0.210.20
0.190.18
0.170.16
0.150.14
0.12
2011 2012 2013 2014 2015 2016 2017
Quarterly Dividends
13
Private Placement Rationale
At December 31, 2016
CET1
$50M (809,585 shares)
Decision based on a critical assessment
of immediate and mid-term growth
opportunities
Supported by recent growth in risk-
weighted assets
Allows us to pursue value creation
without sacrificing the Bank’s strong
capital ratios
14
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
04 05 06 07 08 09 10 11 12 13 14 15 16
Best in Class Credit Performance ContinuesNet Realized Credit Losses as a % of Total Loans
Well Protected By Allowance for Credit Losses
Net impaired mortgage assets $36.8M, up from Q3 but still only 0.21% of total mortgage book
Allowance for credit losses to total mortgage assets ratio of 0.19% much higher than Bank’s average loss rate of 0.04% over past decade
PCL was 0.02% of average mortgage principal in Q4 reflecting quality of book
EQB
Comparative Group1
1. Represents eight largest publicly traded banks
15
Focus On Alberta and SaskatchewanDelinquencies/Impaired Mortgages(% of total mortgage principal)
Expect Arrears Rates Could Rise in 2017 in These Provinces
Delinquencies down from early 2016 and small in context of overall Bank though impaired loans trending upward
Do not expect material losses
Cautious approach to market reflected in portfolio stats:
59% of assets insured
87% uninsured in Calgary & Edmonton
65% LTV for residential uninsured
0.00
0.02
0.04
0.06
0.08
0.10
0.12
0.14
0.16
0.18
0.20
Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Delinquencies Impaired Mortgages2014 2015 2016
16
Record Fourth Quarter Earnings
1.93
1.71
2.052.16
2.56
Q4 Q1 Q2 Q3 Q4
Earnings Per Share Diluted($)
Driven by asset growth plus:
$0.07 of accretion from Maple NHA-MBS acquisition
Other Maple related gains
$0.10 of EPS from combination of high prepayment income and derivative gains
2015 2016
17.0
14.7
17.1 17.2
19.3
Q4 Q1 Q2 Q3 Q4
Return On Equity(%)
2015 2016
17
Profitability TrendsNet Interest Margin – TEB
Record Q4 NII of $78M, 23% above last year on:
High prepayment income in Securitization Financing
Growth in higher margin Commercial portfolio
Favourable GIC pricing and other deposits
2.60 2.58 2.55 2.62 2.56 2.64 2.50 2.55 2.60 2.64
0.31 0.34 0.29 0.31 0.34 0.22 0.31 0.22 0.19 0.24
Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Core Lending Securitization Financing
2014 2015 2016
Expect NII to Grow at Mid to High Teen Rates in 2017
TotalNIM
1.74 1.76 1.74 1.79 1.73 1.69 1.62 1.61 1.64 1.70
18
2015 2016
Investing For Our Future
32.4 32.8 33.435.7
43.2
38.2 37.033.9
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Other non-interest expenses $26M (17% higher y-o-y and 3% above Q3) primarily due to FTE
Q4 investments in strategic initiatives of $4.1M, 69% higher than 2015 (flat compared to Q3)
Expect mid 30% Efficiency Ratio in 2017 as we continue to invest for the future
Remain Canada’s Most Efficient Schedule I Bank
Efficiency Ratio(%)
19
5.1
14.0
16.6
Solid Capital Ratios December 31, 2016 (%)
Basel III minimumTotal Capital level of 10.5%Basel III
minimum CET1 target of 7.0%
Full compliance with new standard
Leverage Ratio CET1 Total Capital
Equity Issued Will Be Reflected in EPS and ROE Beginning in Q1
20
Consistent Delivery Of
Superior Results
Looking Ahead
Entering 2017 With Strong Momentum
Proven Branchless Approach
Customer Service Focus
21
New EQ Bank Features
EQ to EQ transfers
Inter-institutional account linking
Pre-authorized deposits and payments
22
Growing and Diversifying Our Deposit Sources
4.5
5.6
6.4
7.48.1 0.8 1.0
1.01.1
2011 2012 2013 2014 2015 Q1 Q2 Q3 Q4
Annualized CAGR 17% 9.7
9.2
9.08.7
Deposit Principal($ billions)
EQ Bank Now Serves 27,000+ Customers
2016
23
Strong Growth Opportunities In Lending
2016 Mortgage Growth Adds To 2017 Earnings
Differentiate Equitable with solutions-driven service
Well positioned for future market share gains
Complement and leverage our competitive advantages
24
Summary
2016 was a transformative year
Successful EQ Bank launch advanced our branchless bank vision & leadership
All lending businesses performed at record levels & poised to grow
Sustained multi-year record as one of Canadian banking’s best value creators