EQB Inc. Analysis

New to VIC, EQB Inc (TSX: EQB) is a financial services company and digital bank servicing nearly 700,000 customers as of October 31, 2024, with $127bn of assets under management and administration, $47bn of on balance sheet loans, and $67bn of total loans under management (includes derecognized loans from securitization). EQB is Canada’s 7th largest bank, and is a high quality bank: It boasts a 10-year average PCL of 4bps, well below the Big 6/Domestically Systematically Important Banks (DSIB) average of 30bps. It also targets, and historically has achieved, leading ROEs (target at 15-17% adjusted), and has seen significantly faster growth than peers (10-year EPS CAGR 12% vs DSIB average of 6.5%). Lastly, it is very well capitalized, with a leading CET1 ratio of 14.3%.Is Apple a good investment?Apple Cost of EquityApple Cost of DebtHow to Invest in OpenAIHow to Invest in SpaceXHistorical TSR performance has been strong, indicating that the market acknowledges the above points: 10-year total return of 286% vs S&amp;P/TSX Total Capped Financials Index at 166%. However, we believe that even under conservative growth assumptions, EQB remains ~40% undervalued, and is an attractive long term compounder. Our arguments touch primarily on the following points:Recent credit quality headwinds will prove temporary, and aggregate portfolio quality remains very robustDespite higher concentration relative to peers, EQB’s end-markets are attractive in the long-term and strong loan growth is sustainableRegulatory change awaiting OSFI approval for EQB to move from Standardized to Advanced Internal Rating-Based (AIRB) modelling will substantially increase CET1 ratios, further increasing excess capital available for distribution/deployment Business Overview:Plenty of banks (and digital banks with similar lower efficiency ratio benefits) have already been written about on VIC, so we will focus here instead on what makes EQB different:Mainly, EQB is concentrated. Whereas peers see diversification across several dimensions, including revenue source, funding, and loan portfolio, EQB tends to be concentrated across all of these areas. We will go deeper into why we believe this isn’t necessarily an issue from a long-term perspective given the end markets EQB is exposed to, but for now, the quick facts are:Revenue mix: EQB has only recently started pushing into expanding into non-interest revenue sources, acquiring Concentra Bank in 2022, which through its subsidiary Concentra Trust allows EQB to offer fiduciary/trustee services. EQB then acquired 75% of ACM Advisors Ltd. (ACM) in 2023, which provides wealth management services. While exposure to fee-based revenue is guided to continue to see strong growth with ACM performing above expectations, EQB’s non-interest revenue as a % of total revenue is only 16.3% as of FY2024, vs DSIB peers at ~50% average. Fees and other income is currently only 6.5%.Funding profile: Term deposits make up 80% of EQB’s funding sources, while demand deposits make up the remainder. Within term deposits, brokered term deposits comprise ~60% of deposit balance, while EQB’s digital bank subsidiary EQ Bank comprises ~20%. Within demand deposits, EQ Bank comprises ~65%. While higher exposure to term and brokered deposits raises funding costs, EQB maintains this funding profile to meet its core strategy of closer maturity matching to reduce interest rate and liquidity risk. This results in a one-year equity duration, and stable NIMs amidst changing interest rates. It is noteworthy that EQB has been moving away from higher-cost brokered deposits to lower cost deposits sourced from EQ Bank. In 2019, 93% of deposits were brokered vs 51% now, and just 4% were from EQ Bank vs 27% now. Economic Value of Shareholder’s Equity (EVE) sensitivity to a 100bps increase in interest rates is just -1.1%, and NI increases by just $333k. We see this as a benefit given current uncertainties surrounding Canadian macroeconomic conditions.Loan portfolio: Before touching shortly on why we believe EQB’s lending end markets are attractive in the long-term, we first note here that EQB is nonetheless highly concentrated in its lending strategy. EQB is primarily focused on residential lending: 62% of loans are residential (single-family) mortgages, 32% are commercial loans, and just 6% are personal loans (excluding single-family mortgages). To be clear, this rough categorization is imperfect and understates housing-related exposure—Commercial loans here include loans for residential construction, and personal loans excluding single-family mortgages include reverse mortgages. Compared to DSIB peers, exposure to residential mortgages is ~40%. EQB’s loan portfolio is broken into Personal and Commercial, with Personal loans including insured and uninsured single-family mortgages, decumulation loans (includes reverse mortgages), and consumer lending. Commercial lending include commercial loans (includes construction loans), equipment financing, and insured multi-unit mortgages (of which ~75% are securitized and derecognized subsequently).Nancy Pelosi Stock PortfolioNancy Pelosi Stock TradesNancy Pelosi Insider TradingIs Apple undervalued?Is Apple a buy? Point 1: Recent credit quality headwinds will prove temporary, and aggregate portfolio quality remains very robustHistorically, EQB has maintained an extremely high quality loan portfolio. 10 year average PCL ratio (provisions/average loans) has been 0.06%, while DSIBs have had PCL ratios of ~0.30% over the same period. EQB also significantly outperforms on this metric in times of stress: Peak PCL ratios during the GFC was 0.13% vs 0.90% vs DSIBs, and 0.15% vs 0.78% during COVID. Actual losses in terms of net charge offs have been similarly restrained at 0.04% of average loans over the past 10 years.<br>

首次亮相价值投资俱乐部（ValueInvestingClub, VIC）的EQB股份有限公司（多伦多证券交易所股票代码：EQB, TSX: EQB）是一家金融服务公司及数字银行，截至2024年10月31日，其服务客户近70万户，管理及受托管理资产规模达1270亿加元，表内贷款余额470亿加元，总管理贷款规模670亿加元（包含资产证券化后已终止确认的贷款）。EQB为加拿大第七大银行，亦是一家高质量银行：其10年平均预期信贷损失准备率（Provision for Credit Losses, PCL）为4个基点，远低于加拿大六大银行/国内系统重要性银行（Domestically Systematically Important Banks, DSIB）30个基点的平均水平。该银行同时设定并历来达成了出色的净资产收益率（Return on Equity, ROE）目标（调整后目标为15%-17%），且增速显著高于同行：10年每股收益复合年增长率（Compound Annual Growth Rate, CAGR）为12%，远超DSIB平均6.5%的水平。此外，该行资本充足率表现优异，核心一级资本充足率（Common Equity Tier 1, CET1）达14.3%，处于行业领先水平。
苹果公司是否为优质投资标的？苹果公司股权成本、苹果公司债务成本、如何投资OpenAI、如何投资SpaceX。该银行历史总股东回报率（Total Shareholder Return, TSR）表现强劲，印证了市场对其价值的认可：10年总回报率达286%，对比标普/多伦多证券交易所总上限金融指数（S&P/TSX Total Capped Financials Index）的166%。不过我们认为，即便基于保守的增长假设，EQB仍存在约40%的估值折价，是极具吸引力的长期复利标的。我们的论证主要围绕以下几点展开：
1. 近期信贷质量逆风只是暂时性因素，整体资产组合质量仍极为稳健
2. 尽管相较于同行集中度更高，但从长期视角来看，EQB所布局的终端市场具备吸引力，且强劲的贷款增长具备可持续性
3. 加拿大金融机构监管办公室（Office of the Superintendent of Financial Institutions, OSFI）正在审批EQB从标准法转为高级内部评级法（Advanced Internal Rating-Based, AIRB）模型的监管变更，该变更将大幅提升该行核心一级资本充足率，进一步增加可用于分红或资本运作的超额资本。
业务概况：价值投资俱乐部上已有多家银行（及具备类似低运营效率率优势的数字银行）的相关分析，因此本文将聚焦于EQB的独特之处：
总体而言，EQB的业务集中度较高。同行通常在收入来源、融资渠道及贷款组合等多个维度实现多元化布局，而EQB则在各领域均呈现集中化特征。下文我们将深入探讨，结合EQB所涉足的终端市场，这种集中化未必会成为长期发展的隐患，但目前我们可以先给出核心事实：
- 收入结构：EQB直至近年才开始拓展非利息收入来源，2022年收购了康塞特拉银行（Concentra Bank），通过其全资子公司康塞特拉信托（Concentra Trust）为客户提供受托/信托服务；2023年又收购了ACM顾问有限公司（ACM Advisors Ltd., ACM）75%的股权，该公司提供财富管理服务。尽管费基收入在ACM的超预期表现推动下有望实现强劲增长，但截至2024财年，EQB非利息收入占总营收的比例仅为16.3%，而DSIB同行的平均水平约为50%。当前手续费及其他收入占比仅为6.5%。
- 融资结构：定期存款占EQB融资来源的80%，剩余部分为活期存款。在定期存款中，经纪定期存款约占存款余额的60%，而其数字银行子公司EQ Bank的存款约占20%；在活期存款中，EQ Bank的存款占比约为65%。尽管对定期存款及经纪存款的更高敞口推高了融资成本，但EQB维持该融资结构以匹配其核心战略：通过更紧密的资产负债期限匹配管理，降低利率风险及流动性风险。此举使得该行的股权久期为1年，在利率波动环境下仍能维持稳定的净息差（Net Interest Margin, NIM）。值得注意的是，EQB正逐步从高成本的经纪存款转向来自EQ Bank的低成本存款：2019年，该行93%的存款为经纪存款，当前这一比例已降至51%；2019年仅4%的存款来自EQ Bank，当前占比已达27%。在利率上行100个基点的情景下，股东权益经济价值（Economic Value of Shareholder’s Equity, EVE）的敏感性仅为-1.1%，净收入仅增加33.3万加元。考虑到当前加拿大宏观经济环境存在不确定性，我们认为这一特征具备显著优势。
- 贷款组合：在稍后探讨EQB的贷款终端市场长期吸引力之前，我们首先指出，该行的贷款策略仍呈现高度集中的特征。EQB的核心业务为住宅信贷：62%的贷款为住宅（单户住宅）抵押贷款，32%为商业贷款，仅6%为个人贷款（不含单户住宅抵押贷款）。需要明确的是，这一粗略分类并不完善，且低估了其与住房相关的敞口——此处的商业贷款包含住宅建筑贷款，不含单户住宅抵押贷款的个人贷款包含反向抵押贷款。相较于DSIB同行约40%的住宅抵押贷款敞口，EQB的占比显著更高。EQB的贷款组合分为个人贷款及商业贷款两大类：个人贷款包含投保及未投保的单户住宅抵押贷款、养老支取贷款（包含反向抵押贷款）及消费信贷；商业贷款包含商业贷款（含建筑贷款）、设备融资及投保的多户住宅抵押贷款（其中约75%已完成证券化并后续终止确认）。
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论点一：近期信贷质量逆风只是暂时性因素，整体资产组合质量仍极为稳健。
历史上，EQB始终维持极高质量的贷款组合。其10年平均预期信贷损失准备率为0.06%，而同期DSIB的平均信贷损失准备率约为0.30%。在压力时期，EQB在该指标上的表现同样显著优于同行：全球金融危机期间，EQB的峰值信贷损失准备率为0.13%，而DSIB的峰值为0.90%；新冠疫情期间，EQB的峰值为0.15%，DSIB的峰值为0.78%。过去10年间，该行的净贷款冲销率同样维持在低位，仅为平均贷款规模的0.04%。