Equitable Bank Servicing a Niche Market

Equitable Group Inc. is Canada’s financial services business that operates through its wholly-owned 

subsidiary, Equitable Bank. Equitable Bank is the ninth largest Schedule I bank, and a Challenger Bank in Canada. 

The bank offers a wide range of residential and commercial lending and savings solutions to over 250,000 Canadians, including business-for-self borrowers and commercial real estate investors. The saving solutions offer security and attractive interest rates, including Guaranteed Investment Certificates, High Interest Savings Accounts, and deposit notes.

The bank’s operations can be organized into single-family lending services, commercial lending services, securitization financing, EQ Bank, and brokered deposits. Equitable operates through a network of independent mortgage brokers and other business partners across Canada. The bank serves its clients from coast to coast through its branchless banking model and customer-first approach. 

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Revenue Growth & Market Exposure

With five decades of experience, Equitable Bank is known for its superior customer service. The bank is attracting more customers through its innovative digital platform. EQ Bank is the digital banking arm of Equitable Bank, which provides digital banking services to more than 185,000 Canadians and has garnered $4.6 billion in savings deposits so far. The bank started to diversify into adjacent businesses such as reverse mortgages and cash surrender value LoC through its commercial lending platform beginning in 2018.

Equitable Bank has a strong reputation for providing competitive rates as both a Prime and Alternative lender, which positions it well to address the changing environment. The bank is known for its quality assets, excellent loan to value, and loss ratios. Its assets under management totaled $36 billion at the year-end, doubling from five years ago.

It principally lends in the major urban areas having huge housing demand and liquid real estate markets. Equitable Bank focused on providing liquidity to the insured mortgage lending market both in residential and multi-unit space and witnessed high-quality asset growth. 

Over the years, the bank has developed extensive partnerships with Canada’s mortgage brokers and bankers, deposit agents, investment dealers, and financial planners. The group is focusing on growth through extending its reach, introducing new products as well as retaining its position as Canada’s Challenger Bank.

Equitable launched its newest challenger bank services like the EQ Bank Tax Free Savings Account, EQ Bank RSP Savings Account, and EQ Bank Joint Savings Plus Account all offering higher interest, no fees, and poised to create more growth opportunities for 2021.

The bank’s loans under management at the year-end quarter increased by 7% to $33.3 billion and its loan originations also increased by 18% YoY. The CET1 ratio stood at 14.6%. The bank’s new digital account openings increased by 82% and deposits also grew by 71%. About 24,500 new accounts were opened in Q4.


Equitable Group has increased its dividend by more than 20 times over the decade, growing it by an average of 12%+ per year. This Canadian Dividend Aristocrat sports a modest dividend yield of ~1.1% currently and has a very low payout ratio of ~11% signifying enough room for future growth.

The recent dividend increased by ~6%. Equitable has also grown its earnings at more than 13% CAGR over the last decade. The bank has strong capital and liquidity positions. Equitable is expecting dividend growth of 20%-25% and EPS growth of 12%-15% over the medium term.

Equitable Bank has been successful in growing its AUM, net income, and dividends over the past five years. It has grown its book value per share by 15% over the past ten years. It has been shifting its focus more towards single-family residential mortgages since 2009, as they typically generate a higher ROE than commercial mortgages.

The bank has a low level of fixed expenses and a flexible cost structure owing to its branchless operating model without any retail presence. This has led to the bank maintaining an industry-leading efficiency ratio. Its CET1 ratio stood at 14.6 which was above management’s target range. 

Equitable is in a good position to tap the growth opportunities to achieve positive returns in all markets. It operates an integrated balance sheet and lends across a wide range of retail and commercial asset categories. The bank is focusing on markets that are not well served by Canada’s larger financial institutions. Equitable’s diversified businesses across a wide spectrum of secured real estate assets further reduce its risk profile.

Its Personal and Commercial banking continue to add quality assets in diversified markets. The bank expects its personal banking arm to grow by 20%-30% and commercial banking to grow by 5%-8% in 2021. The management is expecting earnings to grow on the back of the growing Canadian economy and stable housing and demographic trends.

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The banking environment is highly competitive. Equitable Bank competes with other banks, trust companies, insurance companies, and financial services companies.A few of its competition include Home Capital Group, First National Financial Corp, MCAN Mortgage Corp, Atrium Mortgage Investment Corp., etc. The cost-efficiency of Equitable’s branchless banking model is a compelling competitive advantage.

Bottom Line

As a leading medium-size bank in Canada, Equitable has enough scale to make strategic investments, innovations, and a better banking experience. Equitable Bank is strengthening its digital offerings and is leveraging its capabilities to grow in adjacent markets.

The bank has been benefitting from good business and strong market fundamentals. Equitable Bank should continue growing its customer base driven by an expanding digital bank platform, new challenger bank services, and diverse personal and commercial banking offerings.

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DISCLAIMER: Please note that this blog post represents my opinion and not an advice/recommendation. I am not a financial adviser, I am not qualified to give financial advice. Before you buy any stocks/funds consult with a qualified financial planner. Make your investment decisions at your own risk – see my full disclaimer for more details.