Fourth Quarter 2016 March 2017
Forward-Looking Statements Certain forward-looking statements may be made in this presentation, including statements regarding possible future business, financing and growth objectives. Investors are cautioned that such forward-looking statements involve risks and uncertainties detailed from time to time in the Company’s periodic reports filed with Canadian regulatory authorities. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Equitable Group Inc. does not undertake to update any forward-looking statements, oral or written, made by itself or on its behalf except in accordance with applicable securities laws. www.eqbank.ca 2
Investment Thesis 1 Positioned as a bank of the future 2 Structural business model advantages 3 Disciplined and proven value creation processes 4 Track record of consistent performance 3
Company Overview Who We Are Our Vision • 9 th largest independent Schedule I bank in Canada by • Become Canada’s leading branchless bank… assets • …by delivering the best customer service experience of any • Proven lending and deposit-taking capabilities bank in Canada • 45+ year track record • Nurture a distinctive culture that engages our employees • 107 th most profitable company in Canada • Consistently deliver a Return on Equity above 15% and (Globe & Mail, 2015) maintain strong capital ratios Diversified Business Earnings Momentum Mortgages Under Management ($Bn) Earnings Per Share ($) Single Family 17% CAGR 17% CAGR Commercial 10.3 Securitization Financing 8.0 6.1 5.6 2.8 5.5 8.49 2.2 7.73 2.3 6.53 2.4 5.82 2.1 5.11 7.9 6.4 5.4 4.1 3.3 2012 2013 2014 2015 2016 2012 2013 2014 2015 2016 4
Have been successfully evolving the business INCREASING GEOGRAPHIC COVERAGE AND PRODUCT BREADTH Implemented new large bank Became a truly sponsored national Increased focus Converted funding facility alternative SFR on Alternative Equitable Trust lender, with IPO of Equitable Opened Issued first Single Family to Equitable entry into Group Montreal Office Deposit Note business Bank Quebec market 2013 2014 2016 1970 2004 2006 2010 2015 2008 Equitable Trust Opened Calgary Began to Issue Launched Implemented Launched EQ Launched Incorporated Office MBS and Alternative two new funding Bank, our first brokered HISA Single Family facilities direct-to- Participate in account business in consumer CMB Opened business Quebec Introduced a Vancouver HELOC Office Entered Prime Single Family business Long History as a Regulated Canadian Financial Institution 5
A sharply positioned challenger bank 6
Equitable’s Value Creation Equation Generate an ROE in the Mid Book Value Per Share ($) to High Teens (17.8%) 17% CAGR Grow Capital by Grow Assets at Rates Retaining the In-Line With Capital Majority of Growth, if Earnings and Opportunities Reinvesting it in the Meet or Exceed Our 54.96 Business ROE Targets 46.57 (16.9%) (17.0%) 40.90 35.14 29.83 Pay Out a Consistently Growing 2012 2013 2014 2015 2016 Dividend to Our Shareholders (1.7%) 7 Note: % figures above represent most recent 5-year average actual results
Disciplined capital management Capital Management Framework History of Consistent Dividend Growth Strong capital base has allowed us to pursue 13% CAGR our growth objectives while returning capital to shareholders Maintain target CET1 and leverage ratios Capital Deployment Find attractive assets within existing markets; 0.84 deploy to highest ROE opportunities first 0.76 0.68 0.60 Consistently grow dividends 0.52 Invest in growth and diversification initiatives that meet return thresholds 2012 2013 2014 2015 2016 8
Balance sheet strength Strong Regulatory Capital Position Diversified Funding Sources Deposit Notes • Higher CET1 and Total Capital ratios than any other 1% $20.9 Bn total MBS publicly traded Canadian Bank… 15% – …even though we use the standardized approach to risk weight our assets Brokered Term GICs 35% • 84% of regulatory capital in common equity High-Quality Liquid Asset Portfolio • $1.3 Bn or 6.7% of total assets at December 2016 • 91% is cash held at big-6 Canadian banks or in CMB Program 33% government guaranteed accounts/instruments EQ Bank Savings • LCR well in excess of regulatory minimum Account 5% • 99% of securities investments are preferred shares rated Brokered HISAs Bank Facilities 6% P-3(mid) or higher, with 44% rated P2(low) or higher 5% 9
Our Digital Strategy 10
Digital simplicity, absent of legacy infrastructure, enables innovation State-of-the-Art Banking Systems and Central Data Depository 11
Equitable is embracing FinTech Be Invested Be Open Be Collaborative 12
Vision premised on evolution of banking Banks circa 2000 B.C. Present-day Banks The Bank of the Future The first banks provided core functions of Today’s banks continue to perform Despite the emergence of tech companies, core banking functions storing value and acting as core functions, offer a full suite of continue to require the security, intermediaries between depositors and banking products, and manage borrowers distribution of these products scale, and infrastructure of banks Ancient civilizations needed safe Banks are focused on meeting each What will likely change is the warehouses (banks) to store farmers’ client’s full banking needs, distribution of these services grain “everything to everyone” e.g. Branches and ATMs might Clay “deposit receipts” used to make not be part of the Bank of the debt payments Future 13
Equitable is not burdened by the challenge of rethinking a legacy business model Prepared to turn away customers that demand in-person service? Turning away customers Reducing Prepared to let Simplifying the large portions of processes workforce the workforce go Shutting and retrain others? down Prepared to rethink and branches reinvent back end Hurting Prepared to risk large profit processes across the profit streams (e.g. credit cards, Prepared to shut country? streams foreign exchange fees)? down branches and call centers? 14
What our customers are saying about us “All things being equal I prefer the EQ experience. Using EQ I’ve grown to hate the ‘Tangerine two - step’ (transfer from savings to chequing and then pay bill) almost as much as I used to hate the 1-day delay transferring from PCF savings to chequing.” “IMO, EQ is better in this respect since they don’t play games with timing of deposits, starting balances, ‘new money’, etc. Every dollar of every customer earns the same 2%. That’s the fairest by far.” “EQ > Tangerine > PCF in my personal experience.” 15
Canadians have responded well to our innovative digital banking platform EQ Bank Deposit Principal Balances ($Bn) First Marketing campaign (January 2016) 1.1 1.0 1.0 0.8 Original 2016 Goal 0.1 2015 Q4 2016 Q1 2016 Q2 2016 Q3 2016 Q4 16
Our Performance 17
2016 Performance Highlights Objectives Results Grew book value per common share by 18% Consistently create Raised common share dividends by 11% shareholder value Grow by providing Increased Prime Single Family Mortgages Under Management by 90% effective service, Grew Alternative Single Family assets by 22% and originations by 35% competitive products and cost-efficient operations Further developed our presence and brand in the Prime market Build our capabilities and Awarded AON Hewitt Best Employer 2017 with a PLATINUM standing brand Recorded a provision for credit losses that was 2 bps of loan balances Maintain a low risk profile Reported a CET1 Ratio of 14.0%, ahead of most industry benchmarks 18
Continued industry outperformance 18.7 18.1 17.9 17.9 17.4 17.0 17.0 16.9 16.6 16.5 16.5 16.1 15.5 14.5 13.8 12.1 12.1 10.7 2008 2009 2010 2011 2012 2013 2014 2015 2016 Canadian Banks (1) EQB Includes all publically traded Canadian banks 19 Source: company filings, Bloomberg, Equitable analysis
A strong risk management framework and low loss levels Actual Credit Loss Rates, Selected Canadian Banks and Trust Companies 0.6% 0.5% 0.4% 0.3% Big Six 0.2% Peer Grp. 1 0.1% EQB 0.0% 04 05 06 07 08 09 10 11 12 13 14 15 16 Minimal Credit Losses and Strong Relative Performance Highlight Portfolio Quality Notes: 1 Peer group includes Canadian Western Bank, Laurentian Bank, and Home Capital Group Source: company filings, Bloomberg, Equitable analysis 20
No branches yields higher productivity and efficiency 2016 Revenue per Employee ($000s/Employee) 2016 Efficiency Ratios (%) 74.2 1,250 61.6 59.7 58.2 55.0 55.2 52.4 46.5 37.8 456 445 433 351 348 336 268 248 LB NB CWB CIBC BNS BMO TD RBC EQB EQB CWB RBC TD BNS NB CIBC BMO LB Source: company filings, Equitable analysis 21
Total shareholder return exceeds benchmarks Total Shareholder Return vs. Benchmarks Current EQB Valuation Ratios P/2017E: 7.3X P/2016BV: 1.3X S&P/TSX Total Return Composite Index S&P/TSX Capped Financials Index 157% Equitable Group Inc. 39% 86% 44% 25% 19% 5 Year 1 Year 22 Source: Bloomberg, Equitable analysis as at March 2017
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