EQB Inc.

Welcome to EQB's earnings call for the third quarter of 2022 on Wednesday, November 9th, 2022. At this time, all lines are in a listen-only mode. Later, we will conduct a question and answer session for analysts. Instructions will be provided at that time. It is now my pleasure to turn the call over to Mr. Richard Gill, Vice President of Corporate Development and Investor Relations at EQB. Please go ahead.

Thanks, Beth. Your hosts today are Andrew Moore, President and Chief Executive Officer, Chadwick Westlake, Chief Financial Officer, and Ron Trash, Chief Risk Officer. For those on the phone lines only, we encourage you to log on to our webcast as well to see a brief new EQBank MakeBank campaign video embedded at the end of our accompanying quarterly investor presentation that we're very excited about. The quarterly presentation also includes on slide two EQB's caution regarding forward-looking statements. And slide three includes statements concerning non-IFRS measures. All figures today are adjusted, where applicable or otherwise noted. It's now my pleasure to turn the call over to Andrew.

Thanks, Richard, and good morning, everyone. Since the cycle of monetary policy tightened again this spring, our team has done some really great work to serve our customers while doing the things that are important to shareholders. Delivering ROE aligned with our core value creation approach, protecting the bank from heightened market risk with no discernible change in our industry-leading credit metrics, growing net interest margins in a challenging market of quickly moving interest rates, a reflection of our rigorous margin management process, consistently raising our dividend, and doing all that while completing the acquisition of Concentra Bank on November 1st, on schedule and with the support of all stakeholders. The reliability of our value creation strategy is evidenced by strong Q3 earnings built on a high-quality, broad-based conventional loan growth of 29% year-over-year and a 13 basis point expansion in NIM from Q2, resulting in record net interest income and an adjusted ROE of 15.6%. Many factors contribute to these results. I'm particularly encouraged by growth in our securitization business and its impact on our total record revenue this quarter. And to reiterate, we have seen no erosion in our credit position, either in arrears or delinquencies. Our MD&A expands on these positives, so I will turn immediately to our outlook inclusive of Concentra. This is our first call since closing the acquisition on November 1st, and I want to welcome our talented new colleagues, customers, and valued partners in Canada's credit union system. A top priority is operating differentiating value to credit unions and the more than 5 million members they serve, while integrating Concentra to achieve all of the scale and synergy benefits communicated last February. Concentra joined us as anticipated with about $13.6 billion in assets under management, plus close to $40 billion in assets under administration. An entirely new source of business for EQB and all the funding and revenue diversification expected. By the numbers, EQB is Canada's seventh largest independent bank with about $100 billion in combined assets under management and administration. We certainly feel this combination is a two plus two equals five situation. We're beginning the journey with a well-considered plan of integration that began last week. We are ready to deliver. 2020-2023 Guidance Inclusive Concentra I would say right off the top that we aim for another year of superior performance. Using our consistent value creation method and the expected realization of year one concentric synergies, we're guiding to ROE of 15% plus, pre-provision pre-tax earnings growth of 25% to 35%, and annual daily GPS growth of 10% to 15%, including the impact of the additional nearly 3.3 million common shares added when the acquisition closed. All this is subject to refinement as we gain traction in integration efforts and prove out our synergy assumptions. Combined, this should translate to an expected 12% to 15% extension in book value per share in 2023. Part of our hypothesis is we'll grow our conventional lending book by around 9%. We expect the first half of 2023 will feature low single-digit growth in the personal bank, higher in the commercial bank. We expect a stronger second half Although I freely acknowledge the obvious, there's been a downshift in housing activity that's likely to continue in the first half of 2023 before stabilizing. I'm confident of EQB's ability to grow. Diversification, a strong franchise, and more talent on the bench than ever give us many levers to pull. As we've just increased assets by about 30% with Concentra, some of our growth ranges will look a little lighter for 2023. returning to a more normalized pace in 2024. Our focus is on making growth pay, which means properly focusing on properly priced conventional lending, ensuring NIM continues to be managed well, maintaining our highest standards for credit, and continue to build our capital-light securitization fee income. The action we took last spring to rapture back on LTVs in certain areas of the country gives us great comfort in the strength of our credit book. Even with recent house price declines, the average LTV on our uninsured single-family portfolio of 63% provides a very comfortable cushion. As a reminder, the key driver of default is unemployment. Tilting the economy into recession could change the picture, but with a million jobs going unfilled, increasing immigration targets from the federal government, And our emphasis on urban centers where employment source is diverse gives a strong downside protection. Although Bank of Canada's policy has affected every corner of Canada, there is no such thing as a national housing market. We're seeing that now with better activity in Western Canada and Quebec. Our wealth accumulation portfolio should continue their strong trajectory. The fact that our 2023 guidance shows 60 to 80% expansion in the reverse mortgage portfolio simply underscores the tremendous growth potential of this franchise. For commercial loans, we are calling for growth across all portfolios, with guidance ranges similar to those in 2022 for the largest segments, generally around 10% to 15% across business lines. And contributing back to the 2023 guidance is growing and adding value to the digital services offered in our award-winning EQ Bank platform. A top priority is a juicy EQ Bank payments card, thereby solidifying our position as a digital bank Canadians can rely on exclusively in everyday life. I'm delighted to say that as we've done in waves beginning next month and completed in January, a staged rollout orchestrated to ensure that we have the customer service capacity to address any and all first usage questions. Our card includes industry-first features such as fee-free cash withdrawals in any ATM nationally, and the ability to load the card to pay for in-store and online e-commerce purchases with 50 basis points of cash back. When used for purchases internationally, there are no foreign exchange markups. If you don't have an EQ Bank account yet, you're certainly missing something. Get on it. We'll make sure everyone knows about our great digital offerings through our new Make Bank ad campaign. After question period, I encourage you to stay tuned as we pay a clip from that campaign. EQ Bank's most popular services are also on launch for Quebec this year. At initial launch, Quebecers will have access to EQ Bank's enriching value proposition across the All Digital Savings Plus, GIC, TFASA, and joint accounts. We will time our Quebec entree to ensure it gets maximum consumer attention. So watch for launch in the next month. By this time next year, we think Quebec customers could represent 5% or more of EQ Bank deposits. So healthy ambitions for a great new platform. We express our confidence with 2023 guidance for EQ Bank deposit growth of 20-30%. We can clearly achieve that growth, but the actual result will be driven by some tricky trade-offs of rate and spend on customer acquisition to achieve good outcomes for both our customers and our owners. Before I conclude, I'd like to welcome Carolyn Schuetz, Marcus Lopez, and Michael Hanley to the bank's board of directors. These three accomplished business leaders bring outstanding new perspectives to our deliberations across subject matters that are important to us, including entrepreneurship, fintech, business integrations, risk management, and environmental stewardship. Their appointments also prepare us for future director retirements. So positive development all around and one that was very carefully orchestrated in keeping with your focus on excellence in governance. For my part, I will summarize by saying we will accomplish a great deal next year. With a scale of a larger bank, new partners across the credit union system, consistent, proven value creation method guiding our every move, and increasingly strong franchise built on our position as candidates to challenge a bank and strengthen our team, we approach 2023 with great confidence. And now over to Chadwick.