EQB Inc.

Good morning and welcome to EQB's earnings call for the fourth quarter of 2025. This call is being recorded on Thursday, December 4, 2025. At this time, you 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 Lamar Prasad, Vice President and Head of Investor Relations. Please go ahead.

Thank you, Ludi, and good morning, everyone. Their hosts for today's Q4 results call are Chadwick Westlake, President and CEO, Annalisa Sunani, CFO, and Marlene Lenarduzzi, CRO. Also present for the Q&A session is Darren Lorimer, Group Head of Commercial Banking. After prepared remarks, we will open the lines for questions from our pre-qualified analysts. Please note that while we are excited about the acquisition of PC Financial, Today's call, including Q&A session, is intended to be focused on the Q4 and full-year EQB results. For those on the phone lines only, we encourage you to also log into our webcast and view our quarterly results presentation, which will be referenced during our prepared remarks. On slide two of our presentation, you will find EQB's caution regarding forward-looking statements, which involves assumptions that have inherent risks and uncertainties. Actual results may differ materially. I would remind listeners that all figures referenced today are on an adjusted basis where applicable unless otherwise noted. With that, I will now turn the call over to Chadwick.

Thanks, Lamar, and good morning. I appreciate everyone joining us during a busy earnings day and so soon after yesterday's call. To stay on point for this call, I'm pleased to have fiscal 2025 behind us. It was a difficult year, and one of significant change for EQB. That chapter is now closed, and our incredible leadership team is energized and focused on tomorrow. There were, however, several notable accomplishments. First, while de-emphasizing certain areas due to less attractive economics, we still achieved 10% year-over-year growth in total loans under management on the back of very strong 36% year-over-year growth in our off-balance sheet CMHC insured multi-unit residential mortgage business. Second, EQ Bank, our crown jewel, continued to shine bright, achieving 18% year-over-year growth in customers and 10% growth in deposits, with deposit balances ending the year at nearly $10 billion. Third, we launched our small business banking offering in October, bringing real competition and positive change to an underserved market that deserves better options. This offering has all the challenger features you would expect, including fully digital account opening, a competitive interest rate, business GICs, and no monthly fees. I'm pleased to report that at the end of October, we were already at $140 million in business deposits. That's before dialing up marketing efforts. Finally, we were named the top bank brand in Canada by the Financial Times' The Banker magazine, citing our status as best positioned to grow market share. We have had plenty of moments of change in our history, and each time we emerge even stronger. I believe that is precisely how EQB is positioned now, ready for our next and most significant chapter of growth. I want to thank our deeply dedicated Challenger employees for their tireless work over the past year. Everyone is part of this team because they believe in our purpose and our ability to execute. I believe that applies to our long-standing and prospective shareholders as well. This morning, I have a few key observations on my first 100 days as CEO. When I rejoined EQB in late August, I set out with a clear mandate from our board to develop a future-focused plan that concentrates capital and talent at the point of highest return with the goal of achieving our long-term potential. With my leadership team, We've made a clear-eyed assessment of our competitive strengths and growth opportunities, strategies, and supporting cost structure. There were no preconceived notions, no sacred cows, only a pledge to make the tough decisions and execute with velocity. This resulted in a few early actions. First, I spent a lot of time traveling across Canada to meet hundreds of employees, partners, brokers, and shareholders. It is important to understand what people love about our company and where we can do better. What I found was a workforce that is energized as ever to win. Customers that love our products and services and conviction and our ability to take our challenger to its full potential while returning to our traditional ROE profile of 15 to 17%, which is important to our shareholders. I also said coming into this job, we would return to efficiency as a competitive advantage. we would complete our product shelf and move back to our industry-leading ROE profile, even with the competitive disadvantage of standardized capital treatment. I've also learned more about important areas for growth that matter for Canadians. Importantly, for example, our decumulation business. This portfolio increased 36% last year and remains poised to continue delivering double-digit growth, supported by market share gains and demographic trends, including the movement to age in place. Second, my team dug deep into the fundamentals of our bank to reduce pressure points, specifically focused on margin, efficiency, and credit. For margin, we took a closer look at our funding costs. The intention of our bank is still to provide Canadians with a highly attractive everyday interest rate. However, we recognize that with the Bank of Canada moving interest rates down another 50 basis points in the quarter, we have to more dynamically adjust our interest rate offerings. It's all about striking the right balance to ensure we are continuing to grow profitably while expanding EQ Bank deposits to become the largest part of our funding stack. With the build-out of our EQ Bank product shelf, we will attract more Canadians to our bank and grow share of wallet, a proven strategy to capture more value from our customer relationships and deliver greater value to our customers, a win-win situation. The outcome for Q4 was progress. With NIM expanding four basis points sequentially, to 2.01%. On efficiency, we took decisive action. While we cannot control the macroeconomic environment, we can control our costs. This resulted in the first ever restructuring charge for EQB. Annalisa will speak to more details shortly. The benefit is not in our Q4 results, as it was executed at the end of October, but it will become evident in Q1 results. We needed to focus our efforts on the highest return initiatives with clear benefit to earnings to drive improvements in efficiency and positive operating leverage. With respect to credit, PCLs in Q4 might be higher than some expected, but our intent as a refreshed team was to dig deep into our lending book. We carefully considered macroeconomic variables for Moody's to inform our forward-looking indicators, and we ensured we were appropriately provisioned for all current risks. The good news is assuming no significant changes or deterioration from our forward-looking indicator macro drivers, we enter fiscal 2026 from a position of strength. Marlene will comment on credit further in her remarks. Our businesses are well positioned to deliver growth and resiliency in credit, despite the challenging macroeconomic backdrop. And third, we spend time thinking through our strategic focus in the market. Contextually, we can all agree that Canada is one of the most profitable banking markets in the world. but there are millions of underserved Canadians and a real need for greater innovation and stronger competition to the incumbent biggest banks. We are here to bring that change, competition and innovation. We are here to disrupt and become a better everyday option focused on Canadians. Our interest is in building a better banking system, offering unique products, including many low and no fee options with EQ Bank. And we championed the concept of Challenger, with our trademark brand literally being Canada's challenger bank. Our addressable market is significant and our growth opportunities are tremendous. All at the same time, we remain significantly undervalued. I've always believed our goal should be to focus on doing a few big things well, rather than be everything to everyone. That is what it means to be a challenger bank at its core. Our PC financial acquisition and Loblaw partnership are going to be game changers. This is anchored in purpose and a leap towards our full potential as the largest challenger in Canada. That should be clear from last night's call. 2025 was a challenging year for housing. But the market was characterized by elevated levels of economic uncertainty following the trade dispute with the U.S., tariffs, rising unemployment, and lower consumer confidence levels, even as the Bank of Canada cut interest rates. There is strong structural demand in Canada for home ownership, and supply issues remain. Looking into 2026, we are cautiously optimistic we will see a rebound in housing. We think it's less of a question of if, more so when, will the market recover. When it happens, you can expect it to result in revenue growth, given that over 60% of our on-balance sheet loans are single-family residential. And with a 13.3% set-one ratio, we have the capital to fund this growth. To get the market really going, we would need to see the combination of lower rates, lower unemployment, which we saw recently, and better GDP growth. We have already seen the Bank of Canada respond by aggressively lowering interest rates. And finally, with the 2025 federal budget focusing in on infrastructure investment, we are hopeful we can see positive impacts on GDP growth. We think commercial loan growth will follow confidence in the broader economy, and our pipeline now is twice what it was this time last year, with a very busy start already to fiscal 2026 across all segments. This includes our multi-unit residential portfolio. To support the supply of affordable housing to Canadians, the government announced an increase in the CMB issuance limit to $80 billion, up from $60 billion in the latest federal budget. This increase, which is tied exclusively to multi-unit housing across Canada, will benefit EQB. Combining all of this with OSFI's engagement on reducing restrictions on capital to support business investment, a move which should directly impact our bank, I remain excited for the future of EQB. As part of that future, I'll offer a few strategic comments. One, we're focused on winning in our core franchise. We are reviewing and driving more changes to ensure we hold a number one position in single-family lending. In 2025, we achieved record broker satisfaction scores in our uninsured business, partly driven by recent technological investments and improved customer retention. We are also focused on expanding origination partnerships. Being the leader in reverse mortgages is a priority, and we are not standing still. This past Monday, we launched even more enhancements to increase our competitiveness while maintaining strong risk management. We remain the market leader in CMHC insured multi-unit residential and operate attractive and well-run commercial businesses as a choice lender to other lenders, a commercial real estate alternative lender, and top provider of services to credit unions. Finally, the growth and sustainability of our diversified funding stack anchored in EQ Bank will be a critically important as we intend to get the full attention it deserves as we bring focus to our priority lending areas. Two, we're completing our product shelf and taking EQBank to its full potential. I've said before the gaps here are payments and wealth. We are addressing payments with PC Financial. All of this will be plugged into our world-class EQBank platform. I want to be clear. We're focused on delivering a successful integration, which will allow us to achieve our full value from this historic transaction. but the remaining ingredient of wealth will remain a priority. Three, we're expanding our capabilities and challenging the market. We will continue to leverage our digitally native platform to drive best-in-class efficiency. This will be achieved through the rigorous expense discipline we introduced in Q4 to invest in a few big areas and ensure that as the bank grows, we invest significantly, but also at pace with revenue growth. We will grow our capabilities to reshape the market by investing in AI enablement championing our technology and working with partners, government, and regulators to enhance competition. Our acquisition of PC Financial advances our strategy here, as well as they're bringing best-in-class personalization capabilities and tools in a 300-plus employee workforce with complementary skills to drive product innovation. With the addition of their pavilions, it offers us a unique edge to serve millions of Canadians and meet them where and when it's most convenient for them. Finally, given the passing of the federal budget, we are one step closer to the creation of a made-in-Canada, consumer-driven banking system. EQB is uniquely positioned for this new era as a longtime supporter of open banking. We look forward to sharing more of our strategy at our 2026 Investor Day. Moving to the next slide, where we present our medium-term financial objectives. You will see that we are reaffirming our objectives, so this should be familiar to everyone. we have better aligned our categories to be more comparable to peers. For 2026, our outlook excludes the impact of PC Financial, and I would expect ROE to improve materially from the 7.5% we reported for Q4. What that looks like is highly dependent on the macroeconomic backdrop, but we feel, based on our estimates today, that could look something like approaching 12%, increasing even higher later in fiscal 2026. Diluted EPS growth could land within our medium-term range of 12 to 15% growth. We expect to see improvements in our efficiency ratio and be within our medium-term range of flat to slightly positive operating leverage and exit next year with strong capital. We expect to continue delivering on our very strong dividend growth projection. Annalisa and Marlene will provide a more specific outlook on key income statement line items in their sections. Now, Over to Annalisa to go through the 2025 full year and Q4 results, her first quarterly call as the CFO of Canada's Challenger Bank. And I could not be more thrilled and excited to have Annalisa in this chair.