"Against a tough backdrop, Equitable's earnings snapped back from the first quarter of the year as our team adjusted quickly to new realities," said
The Bank's second quarter earnings on both a reported and adjusted basis rebounded from the first quarter of 2020 as a result of a reduction in the forward-looking Provision for Credit Losses ("PCL") on performing loans. PCLs were still elevated compared with historical levels due to a deterioration in the macroeconomic forecasts used in the Company's loss modelling. Actual realized losses and write-offs in Q2 2020 amounted to
SECOND QUARTER HIGHLIGHTS
- The Bank's CET1 Capital Ratio at
June 30, 2020 of 14.0% was at the top end of management's target range and compares with 13.5% atMarch 31, 2020 and 13.1% atJune 30, 2019 . - Liquid assets were
$1.9 billion or 6.4% of total assets atJune 30, 2020 compared to$1.6 billion or 6.0% of assets atJune 30, 2019 . - PCLs of
$8.8 million were down from$35.7 million in Q1 2020 and up from$1.4 million in Q2 2019, as economic forecasts remained weak but most future expected losses were recorded in Q1. - Adjusted Diluted earnings per share ("EPS") were
$2.86 , up 68% from Q1 2020 and down 10% from$3.18 in Q2 2019. - Adjusted Return on Shareholders' Equity ("ROE") was 13.8%, up from 8.4% in Q1 but lower than 16.9% in Q2 2019.
- Book value per common share of
$84.89 atJune 30, 2020 was up 10% or$7.67 per share from a year ago and 4% or$2.89 higher than March 31, 2020 - Deposits at
June 30, 2020 were$15.6 billion , up 8% from$14.5 billion a year ago. EQ Bank , Equitable's digital platform, experienced 46% year-over-year growth in deposits on a 52% increase in its customer base which stood at approximately 124,000 at quarter end.- Retail loan principal outstanding at
June 30, 2020 was$19.0 billion , up 12% from$16.9 billion a year ago on growth in all retail asset categories. - Commercial loan principal outstanding at
June 30, 2020 was$8.6 billion , up 10% from$7.9 billion a year ago on growth in all commercial asset categories.
Reported Diluted EPS was
DIVIDEND DECLARATIONS
The Board of Directors ("Board") today declared a dividend of
The Board declared a quarterly dividend in the amount of
COMMENTARY ON PERFORMANCE AND OUTLOOK
"2020 so far has been a year of unprecedented challenges and significant achievements for most businesses," said
"At
As the duration of COVID-19 is not known, the timetable for an economic recovery is also uncertain. Management is therefore not providing a specific quantitative outlook for the Bank's 2020 financial performance. Qualitatively, earnings in Q3 to Q4 2020 are expected to trend positively from the earnings reported in Q2 while the Bank's CET1 ratio is expected to increase. Assuming economic forecasts do not worsen, PCLs should decrease in subsequent quarters. The duration and depth of the economic contraction, as well as the impact of government support initiatives, will be the key determinants of the defaults and loan losses that are ultimately realized. A positive signal for defaults is that total active mortgage payment deferrals as at
"Equitable marks its 50th anniversary this year with a simple pledge: we will continue to challenge the status quo and challenge ourselves to provide an exceptional banking experience for our customers," said
Management's updated business outlook can be found in Management's Discussion and Analysis ("MD&A") for the three and six months ended
CONFERENCE CALL AND WEBCAST
Equitable will hold its second quarter conference call and webcast at
A replay of the call will be available until
INTERIM CONSOLIDATED FINANCIAL STATEMENTS | |||||||
CONSOLIDATED BALANCE SHEETS (unaudited) | |||||||
AS AT | |||||||
With comparative figures as at | |||||||
($ THOUSANDS) | |||||||
Assets: | |||||||
Cash and cash equivalents | $ | 569,688 | $ | 508,853 | $ | 424,422 | |
Restricted cash | 589,046 | 462,992 | 462,438 | ||||
Securities purchased under reverse repurchase agreements | 200,370 | 150,069 | 125,069 | ||||
Investments | 566,859 | 362,611 | 196,699 | ||||
Loans – Retail | 19,135,799 | 18,359,805 | 17,014,738 | ||||
Loans – Commercial | 8,573,118 | 8,248,025 | 7,853,171 | ||||
Securitization retained interests | 149,307 | 139,009 | 124,561 | ||||
Other assets | 173,059 | 161,088 | 160,103 | ||||
$ | 29,957,246 | $ | 28,392,452 | $ | 26,361,201 | ||
Liabilities and Shareholders' Equity | |||||||
Liabilities: | |||||||
Deposits | $ | 15,861,725 | $ | 15,442,207 | $ | 14,720,700 | |
Securitization liabilities | 11,190,224 | 10,706,956 | 10,024,334 | ||||
Obligations under repurchase agreements | 598,956 | 507,044 | - | ||||
Deferred tax liabilities | 50,546 | 54,689 | 58,100 | ||||
Other liabilities | 256,038 | 213,842 | 198,421 | ||||
Bank facilities | 500,374 | - | - | ||||
28,457,863 | 26,924,738 | 25,001,555 | |||||
Shareholders' equity: | |||||||
Preferred shares | 72,557 | 72,557 | 72,557 | ||||
Common shares | 213,701 | 213,277 | 206,039 | ||||
Contributed surplus | 7,818 | 6,973 | 7,132 | ||||
Retained earnings | 1,257,268 | 1,193,493 | 1,096,231 | ||||
Accumulated other comprehensive loss | (51,961) | (18,586) | (22,313) | ||||
1,499,383 | 1,467,714 | 1,359,646 | |||||
$ | 29,957,246 | $ | 28,392,452 | $ | 26,361,201 |
CONSOLIDATED STATEMENTS OF INCOME (unaudited) | |||||||||
FOR THE THREE AND SIX MONTH PERIODS ENDED | |||||||||
With comparative figures for the three and six month periods ended | |||||||||
($THOUSANDS, EXCEPT PER SHARE AMOUNTS) | |||||||||
Three months ended | Six months ended | ||||||||
Interest income: | |||||||||
Loans – Retail | $ | 172,019 | $ | 168,136 | $ | 353,576 | $ | 327,358 | |
Loans – Commercial | 98,974 | 98,208 | 199,180 | 195,837 | |||||
Investments | 3,315 | 2,084 | 5,803 | 3,905 | |||||
Other | 3,220 | 6,724 | 9,167 | 12,658 | |||||
277,528 | 275,152 | 567,726 | 539,758 | ||||||
Interest expense: | |||||||||
Deposits | 94,022 | 96,280 | 195,842 | 189,976 | |||||
Securitization liabilities | 63,302 | 62,653 | 130,323 | 125,556 | |||||
Bank facilities | 1,497 | 1,897 | 2,703 | 4,552 | |||||
158,821 | 160,830 | 328,868 | 320,084 | ||||||
Net interest income | 118,707 | 114,322 | 238,858 | 219,674 | |||||
Provision for credit losses | 8,847 | 1,386 | 44,534 | 11,014 | |||||
Net interest income after provision for credit losses | 109,860 | 112,936 | 194,324 | 208,660 | |||||
Other income: | |||||||||
Fees and other income | 5,130 | 5,900 | 11,853 | 11,544 | |||||
Net gain (loss) on loans and investments | 8,653 | 76 | 122 | (745) | |||||
(Losses) gains on securitization activities and income | |||||||||
from securitization retained interests | (1,160) | 2,497 | 5,342 | 4,562 | |||||
12,623 | 8,473 | 17,317 | 15,361 | ||||||
Net interest and other income | 122,483 | 121,409 | 211,641 | 224,021 | |||||
Non-interest expenses: | |||||||||
Compensation and benefits | 26,253 | 25,751 | 53,148 | 50,035 | |||||
Other | 25,214 | 22,745 | 52,499 | 44,572 | |||||
51,467 | 48,496 | 105,647 | 94,607 | ||||||
Income before income taxes | 71,016 | 72,913 | 105,994 | 129,414 | |||||
Income taxes: | |||||||||
Current | 16,106 | 17,861 | 31,686 | 31,437 | |||||
Deferred | 2,428 | 1,030 | (4,144) | 2,294 | |||||
18,534 | 18,891 | 27,542 | 33,731 | ||||||
Net income | $ | 52,482 | $ | 54,022 | $ | 78,452 | $ | 95,683 | |
Dividends on preferred shares | 1,119 | 1,191 | 2,238 | 2,382 | |||||
Net income available to common shareholders | $ | 51,363 | $ | 52,831 | $ | 76,214 | $ | 93,301 | |
Earnings per share: | |||||||||
Basic | $ | 3.06 | $ | 3.17 | $ | 4.54 | $ | 5.62 | |
Diluted | $ | 3.05 | $ | 3.15 | $ | 4.50 | $ | 5.57 |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited) | |||||||||
FOR THE THREE AND SIX MONTH PERIODS ENDED | |||||||||
With comparative figures for the three and six month periods ended | |||||||||
($ THOUSANDS) | |||||||||
Three months ended | Six months ended | ||||||||
Net income | $ | 52,482 | $ | 54,022 | $ | 78,452 | $ | 95,683 | |
Other comprehensive income – items that will be | |||||||||
reclassified subsequently to income: | |||||||||
Debt instruments at Fair Value through Other | |||||||||
Comprehensive Income: | |||||||||
Net unrealized gains from change in fair value | 3,899 | 143 | 3,074 | 545 | |||||
Reclassification of net gains to income | (351) | (162) | (1,019) | (162) | |||||
Other comprehensive income – items that will not be | |||||||||
reclassified subsequently to income: | |||||||||
Equity instruments designated at Fair Value through | |||||||||
Other Comprehensive Income: | |||||||||
Net unrealized gains (losses) from change in fair value | 6,239 | (1,668) | (16,669) | (3,499) | |||||
Reclassification of net losses (gains) to retained earnings | - | (646) | - | (638) | |||||
9,787 | (2,333) | (14,614) | (3,754) | ||||||
Income tax (expense) recovery | (2,586) | 620 | 3,861 | 999 | |||||
7,201 | (1,713) | (10,753) | (2,755) | ||||||
Cash flow hedges: | |||||||||
Net unrealized losses from change in fair value | (5,293) | (1,856) | (33,354) | (6,445) | |||||
Reclassification of net (gains) losses to income | (245) | (56) | 2,610 | 123 | |||||
(5,538) | (1,912) | (30,744) | (6,322) | ||||||
Income tax recovery | 1,462 | 508 | 8,121 | 1,680 | |||||
(4,075) | (1,404) | (22,622) | (4,642) | ||||||
Total other comprehensive income (loss) | 3,126 | (3,117) | (33,375) | (7,397) | |||||
Total comprehensive income | $ | 55,608 | $ | 50,905 | $ | 45,077 | $ | 88,286 |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) | ||||||||||||||||||||||
FOR THE THREE MONTH PERIOD ENDED | ||||||||||||||||||||||
With comparative figures for the three month period ended | ||||||||||||||||||||||
($ THOUSANDS) | ||||||||||||||||||||||
Accumulated other | ||||||||||||||||||||||
Preferred | Common | Contributed | Retained | Cash flow | Financial | Total | Total | |||||||||||||||
Balance, beginning of period | $ | 72,557 | $ | 213,701 | $ | 7,405 | $ | 1,212,125 | $ | (18,306) | $ | (36,781) | $ | (55,087) | $ | 1,450,701 | ||||||
Net income | - | - | - | 52,482 | - | - | - | 52,482 | ||||||||||||||
Other comprehensive loss, net of tax | - | - | - | - | (4,075) | 7,201 | 3,126 | 3,126 | ||||||||||||||
Dividends: | ||||||||||||||||||||||
Preferred shares | - | - | - | (1,119) | - | - | - | (1,119) | ||||||||||||||
Common shares | - | - | - | (6,220) | - | - | - | (6,220) | ||||||||||||||
Stock-based compensation | - | - | 413 | - | - | - | - | 413 | ||||||||||||||
Transfer relating to the exercise of stock options | - | - | - | - | - | - | - | - | ||||||||||||||
Balance, end of period | $ | 72,557 | $ | 213,701 | $ | 7,818 | $ | 1,257,268 | $ | (22,381) | $ | (29,580) | $ | (51,961) | $ | 1,499,383 | ||||||
Accumulated other | ||||||||||||||||||||||
Preferred | Common | Contributed | Retained | Cash flow hedges | Financial instruments | Total | Total | |||||||||||||||
Balance, beginning of period | $ | 72,557 | $ | 204,492 | $ | 6,907 | $ | 1,049,208 | $ | (589) | $ | (18,607) | $ | (19,196) | $ | 1,313,968 | ||||||
Net income | - | - | - | 54,022 | - | - | - | 54,022 | ||||||||||||||
Transfer of losses on sale of equity instruments | - | - | - | (646) | - | 646 | 646 | - | ||||||||||||||
Other comprehensive loss, net of tax | - | - | - | - | (1,404) | (2,359) | (3,763) | (3,763) | ||||||||||||||
Exercise of stock options | - | 1,399 | - | - | - | - | - | 1,399 | ||||||||||||||
Dividends: | ||||||||||||||||||||||
Preferred shares | - | - | - | (1,191) | - | - | - | (1,191) | ||||||||||||||
Common shares | - | - | - | (5,162) | - | - | - | (5,162) | ||||||||||||||
Stock-based compensation | - | - | 373 | - | - | - | - | 373 | ||||||||||||||
Transfer relating to the exercise of stock options | - | 148 | (148) | - | - | - | - | - | ||||||||||||||
Balance, end of period | $ | 72,557 | $ | 206,039 | $ | 7,132 | $ | 1,096,231 | $ | (1,993) | $ | (20,320) | $ | (22,313) | $ | 1,359,646 |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited) | |||||||||||||||||
FOR THE SIX MONTH PERIOD ENDED | |||||||||||||||||
With comparative figures for the six month period ended | |||||||||||||||||
($ THOUSANDS) | |||||||||||||||||
Accumulated other comprehensive income (loss) | |||||||||||||||||
Preferred | Common | Contributed | Retained | Cash flow | Financial | Total | Total | ||||||||||
Balance, beginning of period | $ | 72,557 | $ | 213,277 | $ | 6,973 | $ | 1,193,493 | $ | 241 | $ | (18,827) | $ | (18,586) | $ | 1,467,714 | |
Net income | - | - | - | 78,452 | - | - | - | 78,542 | |||||||||
Transfer of losses on sale of equity instruments | - | - | - | - | - | - | - | - | |||||||||
Other comprehensive loss, net of tax | - | - | - | - | (22,622) | (10,753) | (33,375) | (33,375) | |||||||||
Exercise of stock options | - | 357 | - | - | - | - | - | 357 | |||||||||
Dividends: | |||||||||||||||||
Preferred shares | - | - | - | (2,238) | - | - | - | (2,238) | |||||||||
Common shares | - | - | - | (12,439) | - | - | - | (12,439) | |||||||||
Stock-based compensation | - | - | 912 | - | - | - | - | 912 | |||||||||
Transfer relating to the exercise of stock options | - | 67 | (67) | - | - | - | - | - | |||||||||
Balance, end of period | $ | 72,557 | $ | 213,701 | $ | 7,818 | $ | 1,257,268 | $ | (22,381) | $ | (29,580) | $ | (51,961) | $ | 1,499,383 | |
Accumulated other comprehensive income (loss) | |||||||||||||||||
Preferred shares | Common shares | Contributed surplus | Retained earnings | Cash flow hedges | Financial instruments at FVOCI | Total | Total | ||||||||||
Balance, beginning of period | $ | 72,557 | $ | 200,792 | $ | 7,035 | $ | 1,014,559 | $ | 2,649 | $ | (17,565) | $ | (14,916) | $ | 1,280,027 | |
Cumulative effect of adopting IFRS 16(1) | - | - | - | (840) | - | - | - | (840) | |||||||||
Restated balance as at | 72,557 | 200,792 | 7,035 | 1,013,719 | 2,649 | (17,565) | (14,916) | 1,279,187 | |||||||||
Net income | - | - | - | 95,683 | - | - | - | 95,683 | |||||||||
Transfer of losses on sale of equity instruments | - | - | - | (638) | - | 638 | 638 | - | |||||||||
Other comprehensive income, net of tax | - | - | - | - | (4,642) | (3,393) | (8,035) | (8,035) | |||||||||
Exercise of stock options | - | 4,532 | - | - | - | - | - | 4,532 | |||||||||
Dividends: | |||||||||||||||||
Preferred shares | - | - | - | (2,382) | - | - | - | (2,382) | |||||||||
Common shares | - | - | - | (10,151) | - | - | - | (10,151) | |||||||||
Stock-based compensation | - | - | 812 | - | - | - | - | 812 | |||||||||
Transfer relating to the exercise of stock options | - | 715 | (715) | - | - | - | - | - | |||||||||
Balance, end of period | $ | 72,557 | $ | 206,039 | $ | 7,132 | $ | 1,096,231 | $ | (1,993) | $ | (20,320) | $ | (22,313) | $ | 1,359,646 |
(1) | The Company adopted IFRS 16 effective |
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) | |||||||||
FOR THE THREE AND SIX MONTH PERIODS ENDED | |||||||||
With comparative figures for the three and six month periods ended | |||||||||
($ THOUSANDS) | |||||||||
Three months ended | Six months ended | ||||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||||
Net income for the period | $ | 52,482 | $ | 37,537 | $ | 78,452 | $ | 77,704 | |
Adjustments for non-cash items in net income: | |||||||||
Financial instruments at fair value through income | 982 | (6,985) | 14,344 | (3,720) | |||||
Amortization of premiums/discount on investments | 1,148 | 2,247 | 1,457 | 4,537 | |||||
Amortization of capital assets and intangible costs | 5,504 | 2,424 | 10,735 | 4,759 | |||||
Provision for credit losses | 8,847 | 168 | 44,534 | 938 | |||||
Securitization gains | (2,516) | (3,024) | (5,283) | (5,961) | |||||
Stock-based compensation | 413 | 334 | 912 | 720 | |||||
Income taxes | 18,534 | 12,977 | 27,542 | 27,444 | |||||
Securitization retained interests | 518 | 6,966 | 8,998 | 13,700 | |||||
Changes in operating assets and liabilities: | |||||||||
Restricted cash | (198,648) | (14,188) | (126,054) | 18,753 | |||||
Securities purchased under reverse repurchase agreements | 299,594 | - | (50,303) | - | |||||
Loans, net of securitizations | (939,714) | (777,267) | (1,145,281) | (1,152,404) | |||||
Other assets | (1,520) | 9,954 | (3,990) | 15,256 | |||||
Deposits | 168,440 | 478,126 | 404,314 | 1,364,963 | |||||
Securitization liabilities | 412,120 | 29,380 | 478,239 | 19,093 | |||||
Obligations under repurchase agreements | 169,609 | 98,276 | 91,912 | (249,073) | |||||
Bank facilities | 386 | 250,811 | 500,374 | 121,940 | |||||
Other liabilities | (8,057) | 4,595 | 13,803 | (20,146) | |||||
Income taxes paid | (420) | (15,355) | (37,919) | (33,698) | |||||
Cash flows (used in) from operating activities | (12,298) | 116,976 | 306,786 | 204,805 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||||
Proceeds from issuance of common shares | - | 151 | 357 | 525 | |||||
Dividends paid on preferred shares | (1,119) | (1,191) | (2,238) | (2,382) | |||||
Dividends paid on common shares | (6,220) | (4,294) | (12,439) | (8,418) | |||||
Cash flows used in financing activities | (7,339) | (5,334) | (14,320) | (10,275) | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||||
Purchase of investments | (153,815) | (9,952) | (269,777) | (52,622) | |||||
Proceeds on sale or redemption of investments | 50,045 | - | 112,226 | 45 | |||||
Net change in | (36,997) | 19 | (60,667) | 38 | |||||
Purchase of capital assets and system development costs | (7,243) | (6,380) | (13,413) | (9,233) | |||||
Cash flows used in investing activities | (148,010) | (16,313) | (231,631) | (61,772) | |||||
Net (decrease) increase in cash and cash equivalents | (167,647) | 95,329 | 60,835 | 132,758 | |||||
Cash and cash equivalents, beginning of period | 737,335 | 698,359 | 508,853 | 660,930 | |||||
Cash and cash equivalents, end of period | $ | 569,688 | $ | 793,688 | $ | 569,688 | $ | 793,688 | |
Cash flows from operating activities include: | |||||||||
Interest received | $ | 275,050 | $ | 199,575 | $ | 555,359 | $ | 390,844 | |
Interest paid | (150,628) | (80,334) | (293,723) | (144,237) | |||||
Dividends received | 1,522 | 1,472 | 3,076 | 2,574 |
ABOUT
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
Statements made by the Company in the sections of this news release, in other filings with Canadian securities regulators and in other communications include forward-looking statements within the meaning of applicable securities laws ("forward-looking statements"). These statements include, but are not limited to, statements about the Company's objectives, strategies and initiatives, financial performance expectations and other statements made herein, whether with respect to the Company's businesses or the Canadian economy. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "planned", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases which state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved", or other similar expressions of future or conditional verbs. Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, closing of transactions, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements, including but not limited to risks related to capital markets and additional funding requirements, fluctuating interest rates and general economic conditions, legislative and regulatory developments, changes in accounting standards, the nature of our customers and rates of default, and competition as well as those factors discussed under the heading "Risk Management" in the MD&A and in the Company's documents filed on SEDAR at www.sedar.com. All material assumptions used in making forward-looking statements are based on management's knowledge of current business conditions and expectations of future business conditions and trends, including their knowledge of the current credit, interest rate and liquidity conditions affecting the Company and the Canadian economy. Although the Company believes the assumptions used to make such statements are reasonable at this time and has attempted to identify in its continuous disclosure documents important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Certain material assumptions are applied by the Company in making forward-looking statements, including without limitation, assumptions regarding its continued ability to fund its mortgage business, a continuation of the current level of economic uncertainty that affects real estate market conditions, continued acceptance of its products in the marketplace, as well as no material changes in its operating cost structure and the current tax regime. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws.
NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") FINANCIAL MEASURES
This news release references certain non-GAAP measures such as Adjusted Diluted earnings per share, Adjusted Return on Shareholders' Equity, Reported Return on Shareholders' Equity, Liquid Assets, Book value per common share and CET1 Capital Ratio that management believes provide useful information to investors regarding the Company's financial condition and results of operations. The "NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") FINANCIAL MEASURES" section of the Company's second quarter 2020 MD&A provides a detailed description of each non-GAAP measure and should be read in conjunction with this release. The MD&A also provides a reconciliation between all non-GAAP measures and the most directly comparable GAAP measure, where applicable. Readers are cautioned that non-GAAP measures often do not have any standardized meaning, and therefore, may not be comparable to similar measures presented by other companies.
SOURCE
© Canada Newswire, source