FOURTH QUARTER HIGHLIGHTS
- Adjusted Diluted earnings per share were a quarterly record
$3.22 , up 21% from$2.66 in Q4 2018. - Adjusted Return on Shareholders' Equity was 15.9% compared to 14.7% in Q4 2018.
Reported Diluted earnings per share ("EPS") were
2019 ANNUAL HIGHLIGHTS
- Adjusted Diluted EPS was an annual record
$12.29 , up 22% from$10.10 in 2018. - Adjusted ROE was 15.9% compared to 14.7% in 2018.
- Retail loan principal outstanding at
December 31, 2019 was$18.3 billion , up 13% from$16.1 billion a year ago on growth in all retail asset categories. - Commercial loan principal outstanding at
December 31, 2019 was$8.3 billion , up 13% from$7.3 billion a year ago as a result of organic growth and the acquisition of Bennington. - The Provision for Credit Losses ("PCL") was
$18.4 million or 0.07% of average loan principal outstanding. - Deposits at
December 31, 2019 were$15.2 billion , up 13% from$13.5 billion a year ago and included 22% or$478 million year-over-year growth inEQ Bank deposits. - The Bank's Common Equity Tier 1 Capital Ratio at
December 31, 2019 was 13.6% compared to 13.5% atDecember 31, 2018 as the Bank rebuilt capital to above the middle of its target range after the Bennington acquisition inJanuary 2019 .
2019 reported Diluted EPS and ROE were
DIVIDEND DECLARATIONS
The Board of Directors ("Board") today declared a dividend of
The Board declared a quarterly dividend in the amount of
COMMENTARY ON PERFORMANCE AND OUTLOOK
"2019 capped a decade of superior value creation as Equitable delivered a total shareholder return of 500%, the highest of any Bank in the TSX Composite," said
In 2020, Equitable's 50th year of serving Canadians, management anticipates that earnings growth will outpace that of the broader Canadian banking industry, based on consensus forecasts for other banks. Management expects earnings to increase in the range of 4% to 8% in 2020 as a result of loan growth, stable margins and low provisions for credit losses. The expected earnings growth rate will be below Equitable's longer-term average due to significant planned investments in the Bank's digital platform, emerging lending businesses and IT capabilities. Adjusted ROE should be between 14% and 16%, slightly lower than 2019 due to higher levels of capital and slightly lower earnings growth expectations.
Management's complete business outlook can be found in Management's Discussion and Analysis ("MD&A") for the three and twelve months ended
CONFERENCE CALL AND WEBCAST
Equitable will hold its fourth quarter conference call and webcast at
A replay of the call will be available until
CONSOLIDATED FINANCIAL STATEMENTS | |||||
CONSOLIDATED BALANCE SHEETS | |||||
($ THOUSANDS) | |||||
As at | 2019 | 2018 | |||
Assets | |||||
Cash and cash equivalents | $ | 508,853 | $ | 477,243 | |
Restricted cash | 462,992 | 327,097 | |||
Securities purchased under reverse repurchase agreements | 150,069 | 250,000 | |||
Investments | 362,611 | 193,399 | |||
Loans – Retail(1) | 18,359,805 | 16,203,137 | |||
Loans – Commercial(1) | 8,248,025 | 7,323,267 | |||
Securitization retained interests | 139,009 | 115,331 | |||
Other assets | 161,088 | 147,671 | |||
$ | 28,392,452 | $ | 25,037,145 | ||
Liabilities and Shareholders' Equity | |||||
Liabilities: | |||||
Deposits | $ | 15,442,207 | $ | 13,668,521 | |
Securitization liabilities | 10,706,956 | 9,236,045 | |||
Obligations under repurchase agreements | 507,044 | 342,010 | |||
Deferred tax liabilities | 54,689 | 42,610 | |||
Other liabilities | 213,842 | 177,961 | |||
Bank facilities | - | 289,971 | |||
26,924,738 | 23,757,118 | ||||
Shareholders' Equity: | |||||
Preferred shares | 72,557 | 72,557 | |||
Common shares | 213,277 | 200,792 | |||
Contributed surplus | 6,973 | 7,035 | |||
Retained earnings | 1,193,493 | 1,014,559 | |||
Accumulated other comprehensive loss | (18,586) | (14,916) | |||
1,467,714 | 1,280,027 | ||||
$ | 28,392,452 | $ | 25,037,145 |
(1) | Effective |
CONSOLIDATED STATEMENTS OF INCOME | ||||||
($ THOUSANDS, EXCEPT PER SHARE AMOUNTS) | ||||||
Years ended | 2019 | 2018 | ||||
Interest income: | ||||||
Loans – Retail(1) | $ | 685,964 | $ | 541,586 | ||
Loans – Commercial(1) | 395,860 | 294,764 | ||||
Investments | 8,671 | 5,867 | ||||
Other | 26,315 | 17,846 | ||||
1,116,810 | 860,063 | |||||
Interest expense: | ||||||
Deposits | 385,197 | 290,991 | ||||
Securitization liabilities | 256,364 | 191,866 | ||||
Bank facilities | 7,319 | 24,242 | ||||
Other | 5,282 | 4,583 | ||||
654,162 | 511,682 | |||||
Net interest income | 462,648 | 348,381 | ||||
Provision for credit losses | 18,394 | 2,083 | ||||
Net interest income after provision for credit losses | 444,254 | 346,298 | ||||
Other income: | ||||||
Fees and other income | 23,855 | 21,229 | ||||
Net loss on investments | (973) | (3,855) | ||||
Gains on securitization activities and income from securitization retained interests | 11,534 | 10,285 | ||||
34,416 | 27,659 | |||||
Net interest and other income | 478,670 | 373,957 | ||||
Non-interest expenses: | ||||||
Compensation and benefits | 101,651 | 77,062 | ||||
Other | 97,922 | 72,301 | ||||
199,573 | 149,363 | |||||
Income before income taxes | 279,097 | 224,594 | ||||
Income taxes: | ||||||
Current | 73,877 | 54,374 | ||||
Deferred | (1,259) | 4,594 | ||||
72,618 | 58,968 | |||||
Net income | $ | 206,479 | $ | 165,626 | ||
Dividends on preferred shares | 4,691 | 4,763 | ||||
Net income available to common shareholders | $ | 201,788 | $ | 160,863 | ||
Earnings per share | ||||||
Basic | $ | 12.10 | $ | 9.73 | ||
Diluted | $ | 11.97 | $ | 9.67 |
(1) | Effective |
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | |||||
($ THOUSANDS) | |||||
Years ended | 2019 | 2018 | |||
Net income | $ | 206,479 | $ | 165,626 | |
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 | 554 | 37 | |||
Reclassification of net (gains) losses to income | (315) | 17 | |||
Other comprehensive income – items that will not be reclassified subsequently to income | |||||
Equity instruments designated at Fair Value through Other Comprehensive Income: | |||||
Net unrealized losses from change in fair value | (1,320) | (14,505) | |||
Reclassification of net (gains) losses to retained earnings | (638) | 11 | |||
(1,719) | (14,440) | ||||
Income tax recovery | 457 | 3,831 | |||
(1,262) | (10,609) | ||||
Cash flow hedges: | |||||
Net unrealized losses from change in fair value | (894) | (2,971) | |||
Reclassification of net (gains) losses to income | (2,388) | 2,285 | |||
(3,282) | (686) | ||||
Income tax recovery | 874 | 182 | |||
(2,408) | (504) | ||||
Total other comprehensive loss | (3,670) | (11,113) | |||
Total comprehensive income | $ | 202,809 | $ | 154,513 |
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY | |||||||||||||||||||
($ THOUSANDS) | |||||||||||||||||||
2019 | |||||||||||||||||||
Accumulated other | |||||||||||||||||||
comprehensive | |||||||||||||||||||
income (loss) | |||||||||||||||||||
Preferred | Common | Contributed | Retained | Cash flow | Financial instruments | ||||||||||||||
shares | shares | surplus | earnings | hedges | at FVOCI | Total | Total | ||||||||||||
Balance, beginning of year | $ | 72,557 | $ | 200,792 | $ | 7,035 | $ | 1,014,559 | $ | 2,649 | $ | (17,565) | $ | (14,916) | $ | 1,280,027 | |||
Cumulative effect of adopting IFRS 16 | - | - | - | (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 | - | - | - | 206,479 | - | - | - | 206,479 | |||||||||||
Transfer of losses on sale of equity instruments | - | - | - | (469) | - | - | - | (469) | |||||||||||
Other comprehensive loss, net of tax | - | - | - | - | (2,408) | (1,262) | (3,670) | (3,670) | |||||||||||
Exercise of stock options | - | 10,825 | - | - | - | - | - | 10,825 | |||||||||||
Dividends: | |||||||||||||||||||
Preferred shares | - | - | - | (4,691) | - | - | - | (4,691) | |||||||||||
Common shares | - | - | - | (21,545) | - | - | - | (21,545) | |||||||||||
Stock-based compensation | - | - | 1,598 | - | - | - | - | 1,598 | |||||||||||
Transfer relating to the exercise of stock options | - | 1,660 | (1,660) | - | - | - | - | - | |||||||||||
Balance, end of year | $ | 72,557 | $ | 213,277 | $ | 6,973 | $ | 1,193,493 | $ | 241 | $ | (18,827) | $ | (18,586) | $ | 1,467,714 | |||
2018 | |||||||||||||||||||
Accumulated other | |||||||||||||||||||
comprehensive | |||||||||||||||||||
income (loss) | |||||||||||||||||||
Financial | |||||||||||||||||||
Preferred | Common | Contributed | Retained | Cash flow | instruments | ||||||||||||||
shares | shares | surplus | earnings | hedges | at FVOCI | Total | Total | ||||||||||||
Balance, beginning of year | $ | 72,557 | $ | 198,660 | $ | 6,012 | $ | 866,109 | $ | 3,153 | $ | (8,374) | $ | (5,221) | $ | 1,138,117 | |||
Cumulative effect of adopting IFRS 9 | - | - | - | 5,450 | - | 1,418 | 1,418 | 6,868 | |||||||||||
Restated balance as at | 72,557 | 198,660 | 6,012 | 871,559 | 3,153 | (6,956) | (3,803) | 1,144,985 | |||||||||||
Net income | - | - | - | 165,626 | - | - | - | 165,626 | |||||||||||
Transfer of losses on sale of equity instruments | - | - | - | (9) | - | - | - | (9) | |||||||||||
Other comprehensive loss, net of tax | - | - | - | - | (504) | (10,609) | (11,113) | (11,113) | |||||||||||
Exercise of stock options | - | 1,780 | - | - | - | - | - | 1,780 | |||||||||||
Dividends: | |||||||||||||||||||
Preferred shares | - | - | - | (4,763) | - | - | - | (4,763) | |||||||||||
Common shares | - | - | - | (17,854) | - | - | - | (17,854) | |||||||||||
Stock-based compensation | - | - | 1,375 | - | - | - | - | 1,375 | |||||||||||
Transfer relating to the exercise of stock options | - | 352 | (352) | - | - | - | - | - | |||||||||||
Balance, end of year | $ | 72,557 | $ | 200,792 | $ | 7,035 | $ | 1,014,559 | $ | 2,649 | $ | (17,565) | $ | (14,916) | $ | 1,280,027 |
CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||
($ THOUSANDS) | ||||||
Years ended | 2019 | 2018 | ||||
CASH FLOWS FROM OPERATING ACTIVITIES | ||||||
Net income | $ | 206,479 | $ | 165,626 | ||
Adjustments for non-cash items in net income: | ||||||
Financial instruments at fair value through income | 15,175 | 7,532 | ||||
Amortization of premiums/discount on investments | 2,415 | 7,829 | ||||
Amortization of capital assets and intangible costs | 16,999 | 9,454 | ||||
Provision for credit losses | 18,394 | 2,083 | ||||
Securitization gains | (9,888) | (9,025) | ||||
Stock-based compensation | 1,598 | 1,375 | ||||
Income taxes | 72,618 | 58,968 | ||||
Securitization retained interests | 31,736 | 28,481 | ||||
Changes in operating assets and liabilities: | ||||||
Restricted cash | (93,317) | 38,941 | ||||
Securities purchased under reverse repurchase agreements | 99,931 | (250,000) | ||||
Loans receivable, net of securitizations | (2,713,778) | (4,248,509) | ||||
Other assets | 41,192 | (36,838) | ||||
Deposits | 1,763,225 | 2,544,335 | ||||
Securitization liabilities | 1,081,924 | 1,670,057 | ||||
Obligations under repurchase agreements | 165,034 | (109,991) | ||||
Bank facilities | (320,421) | 161,100 | ||||
Other liabilities | (23,108) | (11,111) | ||||
Income taxes paid | (48,510) | (60,663) | ||||
Cash flows from (used in) operating activities | 307,698 | (30,356) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES | ||||||
Proceeds from issuance of common shares | 10,825 | 1,780 | ||||
Dividends paid on preferred shares | (4,691) | (4,763) | ||||
Dividends paid on common shares | (26,180) | (17,343) | ||||
Cash flows used in financing activities | (20,046) | (20,326) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES | ||||||
Purchase of investments | (259,181) | (112,760) | ||||
Acquisition of subsidiary | (46,772) | - | ||||
Proceeds on sale or redemption of investments | 110,519 | 238 | ||||
Net change in | (39,848) | (57) | ||||
Purchase of capital assets and system development costs | (20,127) | (20,426) | ||||
Cash flows used in investing activities | (255,409) | (133,005) | ||||
Net increase (decrease) in cash and cash equivalents | 32,243 | (183,687) | ||||
Cash and cash equivalents, beginning of year | 476,610 | 660,930 | ||||
Cash and cash equivalents, end of year | $ | 508,853 | $ | 477,243 | ||
Cash flows from operating activities include: | ||||||
Interest received | $ | 1,073,829 | $ | 842,060 | ||
Interest paid | (536,734) | (383,522) | ||||
Dividends received | 6,688 | 5,827 |
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, Provision for credit losses – rate, and Common Equity Tier 1 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 fourth quarter 2019 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
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