EQB Inc.

Welcome to EQB's earnings call for the second quarter of 2023 on Wednesday, August 2nd, 2023. At this time, you are in a listen-only mode. Later, we'll conduct a Q&A session for analysts. Instructions will be provided at that time. It's now my pleasure to turn the call over to David Lee, Senior Manager of Investor Relations for EQB. Please go ahead.

Your hosts today are Andrew Moore, President and Chief Executive Officer, and Chadwick Westlake, Chief Financial Officer. For those on the phone lines only, we encourage you to log on to our webcast as well to review our accompanying quarterly investor presentation. Presentation includes on slide two, EQB's caution regarding forward-looking statements, as well as the use of non-IFRS measures on this call. All figures referenced today are adjusted or applicable or otherwise noted. Now, my pleasure to turn the call over to Andrew.

Thanks, David, and good morning, everyone. As this year and decade prove, Ecuador is consistently putting great numbers on the board. Through effective execution of long-term strategies, those numbers include Q2 earnings of $115.5 million, an all-time quarterly record, and ROE of 18.3%. which adds to EQB's status as the Canadian banking industry's leader in shareholder value creation. We regularly assess the 10-year total shareholder return of all Canadian S&P 500 banks. This week, EQB is on top, and it certainly is nice to see us outperforming all of the leaders on Wall Street and Canada's largest banks on this important outcome for shareholders. We do not take this performance for granted. This also comes while we firmly believe a wide discount remains in the value of our bank for investors. It reminds us that we must stay true to our capital allocation, branchless business model, and challenger bank approach, and roll fronts where it can be positioned to continue this return trend for the next 10 years and beyond, outperforming our industry in a very meaningful way. Another figure that delights me is $543,000. a number of Canadians now relying on Canada's Challenger Bank to deliver our mission of changing banking to enrich people's lives. We're making a concerted effort to grow and engage our customer base through innovative value-enhancing services. Those efforts are working. We're also an institution that responds to challenges. During this time of higher interest rates, our processes and monitoring activities are keeping our credit book in good shape. Chadwick will speak to results and the progress of our Consent for a Bank integration plan. For my part, I'll discuss conditions in our priority markets, updated increased 2023 earnings guidance, innovations to watch for, and a comment on our regulatory development. First, market conditions. As expected, the 10 Bank of Canada policy interest rate increases, totaling 4.75% since March of 2022, And the resulting slowdown in the housing market reduced single family mortgage application volumes compared to prior periods. At the same time, loans are staying on our books for longer and renewals are stronger as more customers opt to remain in their homes. The housing market has gone through a correction and prices are now showing signs of improvement. At the very least, there seems to be a floor under house prices. that gives us more confidence in our credit outlook for that part of the book. With growth of 3% through June, we now expect the bank's conventional personal lending portfolio to grow 5% to 8% for the 10 months ended October 31st. We will provide our 2024 outlook when we report our Q4 results in December. And now I can share that we expect higher growth next year, a reasonable assumption given the housing market's fundamentals fueled by population growth, some pent-up demand caused by current housing market conditions, and presumably by then, more stability in interest rates. In commercial, our priority market is multifamily, including affordable housing, where demand for CMHC-insured products is strong. From a risk perspective, we like our positioning as over two-thirds of our commercial loans under management are CMHC-insured. I encourage you to review past disclosures, which will help you get very comfortable with our commercial lending activities. With growth of 5% through the first half of 2023, we now expect the conventional commercial portfolio to expand 8% to 12% for the 10-month fiscal reporting period, without degradation in our risk profiles. Growth will be faster in insured lending, where we are protected from credit loss by the Government of Canada. Turning to liquidity and funding market, it appears the fallout from U.S. bank failures earlier in the year continues to be contained. Structurally, it's evident that Canada enjoys an advantage over the U.S. While U.S. money market funds have mechanisms to deposit funds directly with the Federal Reserve, taking liquidity out of the banking system, in Canada, money really only moves between banks. An important difference. For our bank, total deposit growth was 37% year over year. with ample liquidity on the balance sheet, a well-positioned liability structure, and access to liquidity to fund the operations of the bank. Our foundation is strong. Moving to earnings guidance, we are realigning our financial results calendar to improve our reporting comparisons to Canadian bank peers. 2023 fiscal year will end on October 31st, covering only 10 months on a one-time basis. To make it easier to track progress, in the Q2 MD&A, we provide guidance for the 10-month reporting period ending with a four-month Q4, as well as 12-month guidance as a relative checkpoint if we had not been changing fiscal years. Not to be lost in the recut, we raised guidance for EPS, ROE, and book value per share growth. As the slide on our deck and the table on our MD&A show, through June we are performing well ahead of original guidance. including adjusted EPS growth of 27% year-to-date versus original calendar guidance of 10% to 15%. This momentum gives us confidence to increase expectations. Our next quarterly report is set for December 7th, and we'll publish our regular detailed annual guidance for next year at that time. I believe we are the Canadian bank with the most upside in the industry, and we're investing in ways that are adding value for our customers, and momentum for equitable. The recent introduction of the EQ Bank card, now in the hands of 75,000 Canadians who have used it in 140 countries, last month's addition of the mobile wallet to hold that card, and benefits from the launch of EQ Bank services in Quebec are all having their desired effect on customer expansion and engagement. At the end of the quarter, customer growth had increased 31% year over year. As of today, over 375,000 Canadians now have EQ Bank accounts. As a result of adding the value and functionality to make the EQ Bank platform capable of serving Canadians' everyday banking needs, we experienced a good increase in the potential customers who deposit payroll into EQ Bank, a sign of trust and belief that's evident in our customer satisfaction measures. Daily transactions also illustrate that customers increasingly see EQ Bank as a sound alternative to traditional bank checking accounts. In late July, we had another reason to make bank with Equitable by introducing the market's first all-digital first home savings account product to the EQ Bank platform. The EQ FHSA savings account is a tax-deductible way for customers to accumulate a down payment for a home purchase much faster than rival banks. because of our high everyday deposit rates and zero fees. The EQ FHSA is completely free, and there's no need to visit a branch to start an account. In just two weeks since launch, customers have opened more than 2,400 EQ Bank FHSAs. Full marks to the EQ team for working through CRA reporting requirements to get this product to market, and to the Concentra team for introducing it to credit unions through our Concentra Bank Partner Portal. 80 credit unions have already signed up to participate, a great start. More generally, we're working hard to increase EQB's presence in the credit union system through outreach activities, including our attendance at the World Credit Union Conference in Vancouver. At the conference last week, I came away with a reinforced view that there is tremendous opportunity to work closely with credit unions to build value for all, and we're actively pursuing a number of initiatives to make that happen. Progress in our reverse mortgage business also has been positive. This fall, you will see a more prominent advertising message to drive enhanced consumer awareness of our differentiated reverse mortgage solutions. Around the world, we see the difficulties large banks have in serving small business effectively, with Canada being no exception to that general reality. We're on the cusp of changing that too as we put the final touches on our first EQ Bank small business account. To start, this will be a minimum viable product on desktop and then a mobile app. It promises to be a game changer for business owners due to the digital experience, elimination of bank fees, and good interest on deposits in the accounts. I'm really excited about this one. A final thought on a regulatory development. Osprey recently proposed changes to capital adequacy to address risks related to variable rate mortgages. EQB has no exposure to these increased capital requirements because we stopped offering berms 12 years ago and moved to adjustable rate mortgages, or arms, which adjust payment to keep amortization of the original terms. But financial institutions are always risks to address, and we are diligently ensuring that our bank is prudently managed to navigate the challenging economic environment. We are feeling confident, and I think justifiably so, in EQ's positioning as Canada's challenger bank. 23% year-over-year dividend increase, we announced, is delivering on the commitment we have made to shareholders and a reflection of the confidence and strength of the bank's place in the market. Now to you, Chadwick.