Equitable Group Reports Record Results, Increases Dividend and Announces Intention to Increase Rate of Dividend Growth

TORONTO, July 30, 2019 /CNW/ - Equitable Group Inc. (TSX: EQB and EQB.PR.C) ("Equitable" or the "Company") today reported record financial results for the three and six months ended June 30, 2019 on the strength of diversified growth in its wholly owned subsidiary, Equitable Bank (the "Bank" or "Canada's Challenger Bank™") and the contribution of Bennington Financial Corp. ("Bennington").  It also announced its intention to grow its dividend at a rate of 20% to 25% per annum in each of the next five years, up from its previously stated target of more than 10% per year.

SECOND QUARTER HIGHLIGHTS

• Adjusted Diluted earnings per share were a record $3.18, up 31% from $2.43 in Q2 2018.
• Adjusted Return on Shareholders' Equity was 16.9% compared to 14.4% in Q2 2018.
• Retail loan principal outstanding at June 30, 2019 was $16.9 billion, up 23% from $13.8 billion a year ago on strong originations and low attrition.
• Commercial loan principal outstanding at June 30, 2019 was $7.9 billion, up 19% from $6.6 billion a year ago as a result of organic growth and the acquisition of Bennington.
• Deposits at June 30, 2019 were $14.5 billion, up 18% from $12.4 billion a year ago and included increases in both EQ Bank and brokered deposits.
• The Bank's Common Equity Tier 1 Capital Ratio at June 30, 2019 was 13.1% compared to 12.9% at March 31, 2019 as the Bank strengthened its capital position following the Bennington acquisition.
• DBRS Limited confirms Equitable Bank's rating at BBB and improves trending to Positive from Stable.

Q2 2019 reported Diluted earnings per share ("EPS") were $3.15 and reported Return on Shareholders' Equity ("ROE") was 16.8%.  Adjusted results exclude $0.7 million of net mark-to-market losses on certain security investments and derivative transactions related to securitization.

INCREASES DIVIDEND AND ANNOUNCES DIVIDEND INCREASE POLICY

The Board of Directors (the "Board") today declared a dividend of $0.33 per common share, payable on September 30, 2019 to common shareholders of record at the close of business September 13, 2019.  This 22% increase over the dividend declared in August 2018 is in keeping with the commitment the Board of Directors is now making to growing Equitable's dividend at a rate of between 20% to 25% in each of the next five years.

Equitable's franchise has grown and strengthened materially over the past number of years.  The Bank has entered new business lines and established its position as Canada's Challenger Bank^TM, while maintaining a strong capital position and generating high ROEs.  Given this improved position, management and the Board  considered changes to Equitable's dividend philosophy and evaluated the impact of various approaches to dividend levels on Equitable's stakeholders.  The conclusion was that increasing the rate of capital allocation to dividends is now the right decision for the Company.  Even with this faster pace of dividend growth, the Bank should maintain a strong capital position and retain sufficient capital to support strong business growth.

The Board also declared a quarterly dividend in the amount of $0.396875 per preferred share, payable on September 30, 2019, to preferred shareholders of record at the close of business September 13, 2019.

COMMENTARY ON PERFORMANCE AND OUTLOOK

"Q2 was another great quarter that reflected Equitable's broader customer reach and growing consumer affinity for our Challenger Bank services," said Andrew Moor, President and Chief Executive Officer.  "Some 81,000 Canadians now count on EQ Bank for best-in-class digital banking, a 33% year-over-year increase driven by well-received upgrades to our customer onboarding process, as well as to our mobile and web functionality.  Both our retail and commercial businesses set new all-time highs for assets by executing well on their growth plans and maintaining strong credit quality.  We've started to deploy more of the Bank's funding sources to Bennington and have been able to grow the leasing portfolio by 7% in the first half of the year.  In combination, these advancements generated record profitability for Equitable and added to its foundation as a future-ready bank providing exceptional service and compelling value."

Equitable's primary financial and operating metrics point to strength in its business fundamentals and ability to deliver on key strategic objectives.  Based on current assessments, management expects that loans will grow at a rate between 12% and 14% over 2018, earnings will increase between 15% and 17% year-over-year, and ROE will be between 15% and 16%.  The Bank also continues to add to its capital position organically such that its CET1 ratio is expected to return to the mid-point of management's target range of 13%-14% by the end of 2019.

During the second quarter, Equitable renewed its $400 million secured backstop for a two-year period at a lower cost.  As a result of this development, quarterly interest expenses will decline further in Q3, by $0.8 million compared to Q2 and $1.6 million compared to Q1.

Management's complete business outlook can be found in Management's Discussion and Analysis ("MD&A") for the three and six months ended June 30, 2019, which is available on SEDAR and on Equitable's website.

CONFERENCE CALL AND WEBCAST

Equitable will hold its second quarter conference call and webcast at 8:30 a.m. ET Wednesday July 31, 2019.  To access the call live, please dial [phone] five minutes prior to the start time.  The listen-only webcast with accompanying slides will be available at www.equitablebank.ca under Investor Relations.  The call will be hosted by Andrew Moor, President and Chief Executive Officer.

A replay of the call will be available until August 7, 2019 at midnight and it can be accessed by dialing [phone] and entering passcode 2869878 followed by the number sign.  Alternatively, the call will be archived on the Company's website for three months.

INTERIM CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS (unaudited)
AS AT JUNE 30, 2019
With comparative figures as at December 31, 2018 and June 30, 2018
($ THOUSANDS)
			June 30, 2019			December 31, 2018			June 30, 2018
Assets:
Cash and cash equivalents		$	424,422		$	477,243		$	793,688
Restricted cash			462,438			327,097			347,285
Securities purchased under reverse repurchase agreements			125,069			250,000			-
Investments			196,699			193,399			155,048
Loans – Retail^(1)			17,014,738			16,203,137			13,874,941
Loans – Commercial^(1)			7,853,171			7,323,267			6,580,436
Securitization retained interests			124,561			115,331			109,191
Other assets			160,103			147,671			84,132
		$	26,361,201		$	25,037,145		$	21,944,721
Liabilities and Shareholders' Equity
Liabilities:
Deposits		$	14,720,700		$	13,668,521		$	12,476,974
Securitization liabilities			10,024,334			9,236,045			7,584,327
Obligations under repurchase agreements			-			342,010			202,928
Deferred tax liabilities			58,100			42,610			38,735
Other liabilities			198,421			177,961			177,994
Bank facilities			-			289,971			250,811
			25,001,555			23,757,118			20,731,769
Shareholders' equity:
Preferred shares			72,557			72,557			72,557
Common shares			206,039			200,792			199,305
Contributed surplus			7,132			7,035			6,612
Retained earnings			1,096,231			1,014,559			938,122
Accumulated other comprehensive loss			(22,313)			(14,916)			(3,644)
			1,359,646			1,280,027			1,212,952
		$	26,361,201		$	25,037,145		$	21,944,721

^(1)	Effective January 1, 2019, the Company has changed the presentation of its loan products.  Prior period presentation has been updated accordingly.

CONSOLIDATED STATEMENTS OF INCOME (unaudited)
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2019
With comparative figures for the three and six month periods ended June 30, 2018
($THOUSANDS, EXCEPT PER SHARE AMOUNTS)
			Three months ended				Six months ended
			June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Interest income:
Loans – Retail^(1)			$	168,136	$	129,327	$	327,358	$	251,795
Loans – Commercial^(1)				98,208		70,259		195,837		135,782
Investments				2,084		1,500		3,905		2,546
Other				6,724		4,163		12,658		7,968
				275,152		205,249		539,758		398,091
Interest expense:
Deposits				96,280		69,392		189,976		131,676
Securitization liabilities				62,653		44,825		125,556		88,387
Bank facilities				1,897		11,536		4,552		17,262
				160,830		125,753		320,084		237,325
Net interest income				114,322		79,496		219,674		160,766
Provision for credit losses				1,386		168		11,014		938
Net interest income after provision for credit losses				112,936		79,328		208,660		159,828
Other income:
Fees and other income				5,900		6,547		11,544		11,924
Net gain/(loss) on investments				76		138		(745)		(232)
Gains on securitization activities and income from         securitization retained interests				2,497		3,024		4,562		5,961
				8,473		9,709		15,361		17,653
Net interest and other income				121,409		89,037		224,021		177,481
Non-interest expenses:
Compensation and benefits				25,751		19,032		50,035		37,635
Other				22,745		19,491		44,572		34,698
				48,496		38,523		94,607		72,333
Income before income taxes				72,913		50,514		129,414		105,148
Income taxes:
Current				17,861		12,404		31,437		26,724
Deferred				1,030		573		2,294		720
				18,891		12,977		33,731		27,444
Net income			$	54,022	$	37,537	$	95,683	$	77,704
Dividends on preferred shares				1,191		1,191		2,382		2,382
Net income available to common shareholders			$	52,831	$	36,346	$	93,301	$	75,322
Earnings per share:
Basic			$	3.17	$	2.20	$	5.62	$	4.56
Diluted			$	3.15	$	2.19	$	5.57	$	4.53

^(1)	Effective January 1, 2019, the Company has changed the presentation of its loan products. Prior period presentation has been updated accordingly.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2019
With comparative figures for the three and six month periods ended June 30, 2018
($ THOUSANDS)
			Three months ended				Six months ended
			June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
Net income			$	54,022	$	37,537	$	95,683	$	77,704
Other comprehensive income – items that will be    reclassified subsequently to income:
Debt instruments at Fair Value through Other     Comprehensive Income:
Net unrealized gains/(losses) from change in fair value				143		(23)		545		(26)
Reclassification of net gains to income				(162)		-		(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 losses from change in fair value				(1,668)		(1,117)		(3,499)		(228)
Reclassification of net losses to retained earnings				(646)		-		(638)		(6)
				(2,333)		(1,140)		(3,754)		(260)
Income tax recovery				620		302		999		69
				(1,713)		(838)		(2,755)		(191)
Cash flow hedges:
Net unrealized losses from change in fair value				(1,856)		(364)		(6,445)		(969)
Reclassification of net (gains)/losses to income				(56)		291		123		1,445
				(1,912)		(73)		(6,322)		476
Income tax recovery/(expense)				508		19		1,680		(126)
				(1,404)		(54)		(4,642)		350
Total other comprehensive (loss)/income				(3,117)		(892)		(7,397)		159
Total comprehensive income			$	50,905	$	36,645	$	88,286	$	77,863

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2019
With comparative figures for the three month period ended June 30, 2018
($ THOUSANDS)
																		June 30, 2019
																		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			$	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
																		June 30, 2018
																		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			$	199,123			$	6,309			$	906,235			$	3,557			$	(6,309)			$	(2,752)			$	1,181,472
Net income			-				-				-				37,537				-				-				-				37,537
Other comprehensive loss, net of tax			-				-				-				-				(54)				(838)				(892)				(892)
Exercise of stock options			-				151				-				-				-				-				-				151
Dividends:
Preferred shares			-				-				-				(1,191)				-				-				-				(1,191)
Common shares			-				-				-				(4,459)				-				-				-				(4,459)
Stock-based compensation			-				-				334				-				-				-				-				334
Transfer relating to the exercise of      stock options			-				31				(31)				-				-				-				-				-
Balance, end of period		$	72,557			$	199,305			$	6,612			$	938,122			$	3,503			$	(7,147)			$	(3,644)			$	1,212,952

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2019
With comparative figures for the six month period ended June 30, 2018
($ THOUSANDS)
											June 30, 2019
											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 January 1, 2019			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 loss, 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
											June 30, 2018
											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	$	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 January 1, 2018			72,557		198,660		6,012			871,559		3,153		(6,956)		(3,803)		1,144,985
Net income			-		-		-			77,704		-		-		-		77,704
Transfer of losses on sale of equity      instruments			-		-		-			(6)		-		-		-		(6)
Other comprehensive income, net of tax			-		-		-			-		350		(191)		159		159
Exercise of stock options			-		525		-			-		-		-		-		525
Dividends:
Preferred shares			-		-		-			(2,382)		-		-		-		(2,382)
Common shares			-		-		-			(8,753)		-		-		-		(8,753)
Stock-based compensation			-		-		720			-		-		-		-		720
Transfer relating to the exercise of      stock options			-		120		(120)			-		-		-		-		-
Balance, end of period		$	72,557	$	199,305	$	6,612		$	938,122	$	3,503	$	(7,147)	$	(3,644)	$	1,212,952

^(1)	The Company adopted IFRS 16 effective January 1, 2019 using the modified retrospective approach, with the cumulative effect of initially applying the standard recognized in opening retained earnings at the date of initial application.  The adjustment of $840 is net of tax.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2019
With comparative figures for the three and six month periods ended June 30, 2018
($ THOUSANDS)
		Three months ended				Six months ended
		June 30, 2019		June 30, 2018		June 30, 2019		June 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income for the period		$	54,022	$	37,537	$	95,683	$	77,704
Adjustments for non-cash items in net income:
Financial instruments at fair value through income			3,148		(6,985)		5,223		(3,720)
Amortization of premiums/discount on investments			263		2,247		1,592		4,537
Amortization of capital assets and intangible costs			4,186		2,424		8,084		4,759
Provision for credit losses			1,386		168		11,014		938
Securitization gains			(2,581)		(3,024)		(4,360)		(5,961)
Stock-based compensation			373		334		812		720
Income taxes			18,891		12,977		33,731		27,444
Securitization retained interests			7,705		6,966		15,039		13,700
Changes in operating assets and liabilities:
Restricted cash			(81,294)		(14,188)		(92,763)		18,753
Securities purchased under reverse repurchase agreements			422,552		-		124,932		-
Loans, net of securitizations			(439,781)		(777,267)		(939,460)		(1,152,404)
Other assets			(6,137)		9,954		44,329		15,256
Deposits			(104,893)		478,126		1,033,472		1,364,963
Securitization liabilities			97,473		29,380		398,169		19,093
Obligations under repurchase agreements			-		98,276		(342,010)		(249,073)
Bank facilities			-		250,811		(320,421)		121,940
Other liabilities			(13,104)		4,595		(20,311)		(20,146)
Income taxes paid			(12,534)		(15,355)		(25,691)		(33,698)
Cash flows (used in)/from operating activities			(50,325)		116,976		27,064		204,805
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of common shares			1,399		151		4,532		525
Dividends paid on preferred shares			(1,191)		(1,191)		(2,382)		(2,382)
Dividends paid on common shares			(5,163)		(4,294)		(14,786)		(8,418)
Cash flows used in financing activities			(4,955)		(5,334)		(12,636)		(10,275)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of investments			(20,876)		(9,952)		(33,383)		(52,622)
Acquisition of subsidiary			293		-		(46,772)		-
Proceeds on sale or redemption of investments			18,409		-		22,548		45
Net change in Canada Housing Trust re-investment Accounts			19		19		155		38
Purchase of capital assets and system development costs			(4,565)		(6,380)		(9,164)		(9,233)
Cash flows used in investing activities			(6,720)		(16,313)		(66,616)		(61,772)
Net (decrease)/increase in cash and cash equivalents			(62,000)		95,329		(52,188)		132,758
Cash and cash equivalents, beginning of period			486,422		698,359		476,610		660,930
Cash and cash equivalents, end of period		$	424,422	$	793,688	$	424,422	$	793,688
Cash flows from operating activities include:
Interest received		$	258,560	$	199,575	$	515,030	$	390,844
Interest paid			(104,969)		(80,334)		(205,129)		(144,237)
Dividends received			2,061		1,472		3,614		2,574

ABOUT EQUITABLE GROUP INC.  

Equitable Group Inc. is a growing Canadian financial services business that operates through its wholly-owned subsidiary, Equitable Bank.  Equitable Bank, Canada's Challenger Bank^TM, is the country's ninth largest independent Schedule I bank and offers a diverse suite of residential lending, commercial lending and savings solutions to Canadians.  Through its proven branchless approach and customer service focus, Equitable Bank has grown to approximately $31 billion of Assets Under Management.  EQ Bank, the digital banking arm of Equitable Bank, provides state-of-the-art digital banking services to over 81,000 Canadians and was the 2018 recipient of the Best Mobile App in Canada at the World Finance Digital Banking Awards.  The EQ Bank Savings Plus Account reimagines banking for Canadians by offering the functionality of a chequing account to perform daily banking with ease, as well as a great everyday interest rate – currently 2.30% – to help transactional balances grow into bigger savings.  From unlimited Interac® e-Transfers and bill payments to payroll deposits and no monthly fees, everyday banking is now a richer prospect for Canadians.  Equitable Bank employs over 800 dedicated professionals across the country and is a 2019 recipient of Canada's Best Employer Platinum Award, the highest bestowed by AON Hewitt.  For more information about Equitable Bank and its products, please visit equitablebank.ca.

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, Common Equity Tier 1 Capital Ratio, and Assets Under Management 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 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 Equitable Group Inc.

Andrew Moor, President and Chief Executive Officer, 416-515-7000; Tim Wilson, Senior Vice President and Chief Financial Officer, 416-515-7000

Related Links

http://www.equitabletrust.com