EQB (TSE:EQB) executives emphasized sequential improvement in profitability, expense discipline, and early signs of stabilization in credit trends during the company’s first-quarter 2026 earnings call, while reiterating that performance will not be linear through the year as the bank prepares for the closing of PC Financial and a partnership with Loblaw Companies.
Management frames 2026 as a transition year ahead of PC Financial closing
President and CEO Chadwick Westlake positioned EQB as a “challenger bank” focused on building customer choice and using technology to improve banking outcomes. He said the company entered 2026 “more focused than ever” on executing its strategy and balancing investments with profitability.
Sequential earnings and efficiency improved in Q1
CFO Anilisa Sainani said management believes sequential comparisons are the most meaningful measure of progress given changes in the economy, leadership transitions last year, and a restructuring program completed in October.
- Diluted EPS: CAD 2.26, up CAD 0.73 sequentially.
- ROE: 11.1%, up 360 basis points quarter-over-quarter.
- Pre-provision, pre-tax (PPPT) earnings: up 9% sequentially, driven by relatively flat revenue and a 9% decline in expenses.
- Efficiency ratio: improved 450 basis points sequentially to 49.1%.
Westlake said EQB “took decisive action” to restore efficiency as a competitive advantage, noting that while the operating environment is outside management’s control, costs are not. Sainani added that the lower expense level in Q1 is typically seasonal, with merit increases taking effect early in the year and investment spending ramping as the year progresses. EQB reiterated its expectation for an efficiency ratio in the low 50s for 2026, with low single-digit expense growth and neutral to slightly positive operating leverage.
Loans under management grew; margins expected to stay around 2%
Sainani said loans under management (LUM), a key metric for EQB given its insured multi-unit residential position, rose 2% sequentially and 9% year-over-year to CAD 75.7 billion, driven by strength in multi-unit residential. She said the growth reflects deliberate portfolio choices, including pulling back from activities that do not meet ROE hurdle rates, such as “widespread engagement” in insured single-family mortgages and select equipment financing portfolios.
On funding, deposits increased 2% sequentially and 9% year-over-year to CAD 36.9 billion. EQ Bank deposits were flat sequentially and up 10% year-over-year, with growth supported by an 18% increase in the customer base. Broker deposits grew 4% sequentially and 9% year-over-year, which management described as a diversified, relatively lower-cost funding source.
Net interest income was CAD 263 million, relatively flat sequentially but down 3% year-over-year. Net interest margin increased 1 basis point from Q4, which Sainani attributed to a shift toward higher-yielding assets rather than funding costs. Management said it expects margins to remain in the 2% range through the rest of 2026, with Westlake adding that the PC Financial transaction is expected to be “conducive” to margin and mix diversification once closed.
Non-interest revenue was CAD 43.4 million, flat sequentially and down 17% year-over-year, primarily due to lower gains on hedging and derivatives. Sainani said securitization activity remained strong, with volumes up 7% from Q4, though partly offset by lower market rates.
Capital actions: dividend increase and record buybacks
EQB reported a CET1 ratio of 13.6%, up 30 basis points sequentially, which Sainani said reflected strong internal capital generation and remained well above targets and regulatory minimums.
The company announced a 4% dividend increase to CAD 0.59 per share and repurchased a record 1.1 million shares during the quarter. Westlake also noted that Loblaw has announced its intention to enter into an automatic securities purchase plan (ASPP) to buy EQB shares ahead of closing, which he said underscores Loblaw’s confidence in EQB’s long-term value proposition. In response to an analyst question, Westlake said EQB’s buyback approach and Loblaw’s planned purchases are not coordinated beyond publicly disclosed parameters.
Credit: performing provisions fell sharply; impaired metrics remained mixed
Chief Risk Officer Marlene Lenarduzzi said EQB’s credit performance improved quarter-over-quarter, with performing provisions for credit losses (PCLs) down materially, partially offset by a modest increase in impaired PCLs.
- Performing PCLs: CAD 3.1 million, down 84% from Q4, reflecting a less severe shift in forward-looking macro indicators and a release in equipment financing tied to improved credit quality and a shift toward prime assets.
- Impaired PCLs: increased 2 basis points sequentially to 32 basis points, driven by higher provisions in commercial lending largely tied to one borrower group.
- Gross impaired loans: increased 10% sequentially to CAD 956 million; personal impaired loans rose 15% to CAD 421 million, while equipment financing impaired loans declined 6%.
On commercial credit, Lenarduzzi said the quarter’s increase in impaired PCLs was mainly related to a single borrower group with three loans secured by completed apartment properties described as “micro” units. She said EQB believes it is adequately provisioned and noted that commercial impairments can be lumpy due to exposure size. Westlake added that the loans have been in the workout process for some time and that the bank is “fairly far along” in its resolution strategies.
Within single-family residential, Lenarduzzi said the pressure remains concentrated in the Greater Toronto Area and select surrounding suburbs where prices have declined meaningfully from peak levels. She said the bank has not seen that pressure spread to other regions, and she does not view it as a systemic issue across the portfolio. She also noted that the 2022 vintage that had previously comprised roughly 70% to 75% of Stage 3 PCL has declined to about half as that portfolio shrinks.
Looking ahead, Lenarduzzi said macroeconomic uncertainty remains elevated, with trade tensions, delayed business investment, elevated unemployment, and soft housing markets weighing on confidence. EQB maintained its outlook from Q4 2025, with expectations for credit relief skewed to the second half of 2026 absent additional headwinds.
In Q&A, management reiterated that competition in single-family mortgages remains intense, but EQB is prioritizing credit quality and ROE-based pricing over volume. Westlake also said the bank expects to amalgamate the PC Financial business with EQB over time and sees multiple funding “levers,” with an emphasis on growing core EQ Bank deposits as a lower-cost source of funding.
About EQB (TSE:EQB)
EQB Inc formerly Equitable Group Inc trades on the Toronto Stock Exchange TSX: EQB and EQB.PR.C and serves over 360000 Canadians through its wholly owned subsidiary Equitable Bank Canadas Challenger Bank. Equitable Bank has grown to become the countrys eighth largest independent Schedule I bank with a clear mandate to drive real change in Canadian banking to enrich peoples lives. At Equitable Bank we are as invested in our employees as we are in our business. Thats why we are consistently recognized as one of Canadas Top Employers a rating that comes from our 1300+ employees.
