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Q u a r t e r 2 0 1 6 May 13, 2016 1 Forward-Looking Statements - PowerPoint PPT Presentation

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T S X E Q B / E Q B . P R . C F i r s t Q u a r t e r 2 0 1 6 May 13, 2016 1 Forward-Looking Statements Certain forward-looking statements may be made in this presentation, including statements regarding possible future business, financing

  1. T S X E Q B / E Q B . P R . C F i r s t Q u a r t e r 2 0 1 6 May 13, 2016 1

  2. 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. 2

  3. A Transformational Quarter EQ Bank Launch Is a Game Changer for Canadian Savers and Equitable 3

  4. Profitable First Quarter Affected by Some Unusual Items Net Income  Bank continued to perform well ($ millions) across most operating metrics  EPS performance reflected: 29.5 28.0 o Strategic investments - including EQ Bank launch costs – that will EPS EPS 1.81 1.71 benefit future periods o $1.2M accounting hedge loss (no economic loss) o Decision not to sell I/O strips and to keep assets on balance sheet Q1 2015 Q1 2016 EPS $1.89 Adjusted for Hedge Loss and Marketing Spend 4

  5. Creating More Value for Our Shareholders ROE Book Value (%) ($ Per Share) 17.9 Canadian 16% bank 47.81 average 46.57 14.7 13.2% in Q1 1 40.90 35.14 29.83 25.18 2011 2012 2013 2014 2015 Q1 2016 Q1 2015 Q1 2016 1 Average of all publicly traded Canadian banks, excluding Equitable 5

  6. Serving More Borrowers Than Ever Mortgages Under Management ($ billions) 17.7 16.7 16% 13.8 12.1 10.9 9.5 2011 2012 2013 2014 2015 Q1 2016 MUM Increased 22% Over Q1 of Last Year 6

  7. Alternative Single Family Lending Mortgage Principal Mortgage Originations ($ billions) ($ millions) 19% 6% 6.8 674 6.4 6.2 5.9 5.7 568 5.4 4.9 4.6 4.3 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 2015 Q1 2016 2014 2015 2016 Mortgage Principal Growing On High Quality Originations 7

  8. Commercial Lending Mortgage Principal Mortgage Originations ($ billions) ($ millions) 2.4 2.3 2.3 2.3 2.3 2.3 2.3 2.2 2.2 208 202 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q1 2015 Q1 2016 2014 2015 2016 Maintaining ROE and Risk Discipline in a Competitive Market 8

  9. Securitization Financing Mortgages Under Management Originations ($ billions) ($ millions) 48% 5% 693 8.6 8.0 7.5 Prime 6.8 $444M 469 6.4 6.1 5.7 5.5 5.5 Q1 2015 Q1 2016 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 2014 2015 2016 Prime MUM Almost Three Times Higher Year Over Year at $2.5B 9

  10. Best in Class Credit Performance Net Realized Credit Losses as a % of Total Loans  PCL was 1 bp of total 0.5% mortgage principal in Q1  Analysis showed no addition 0.4% necessary to collective allowance 0.3% Peer Group  Expect Single Family arrears rates and losses to remain 0.2% low in most regions in 2016  Arrears are trending up in 0.1% Alberta but expect any EQB losses to be manageable 0.0% 04 05 06 07 08 09 10 11 12 13 14 15 Q1 2016 Strong Relative Performance Highlights Portfolio Quality 10

  11. Serving More Savers Than Ever Deposit Principal ($ billions)  Brokered HISA balances have grown to $1.1B 8.7  EQ Bank Savings Plus account balances 17% already at $794M at quarter end 8.1 7.4  Additional investments brought service 6.4 levels up to Equitable’s high standards by 5.6 end of March 4.5  Managing account growth with waiting list, reduced ad budget, 2.25% savings rate 794M 2011 2012 2013 2014 2015 Q1 2016 EQ Bank Successfully Diversifying Our Funding Sources 11

  12. Margin Trends Net Interest Margin – TEB  13% growth in Q1 net interest 2.57 2.66 2.62 2.60 2.65 2.59 2.68 2.55 2.53 income on higher average asset balances  Core NIM reflects high levels of liquid assets, lower 0.37 0.31 0.27 0.29 0.28 0.28 prepayment income, EQ Bank 0.25 0.23 0.18 deposit growth Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1  Securitization Financing NIM 2014 2015 2016 up on tighter MBS spreads Core Lending Securitization Financing Total 1.66 1.70 1.76 1.76 1.73 1.79 1.73 1.70 1.63 NIM Expect Net Interest Income to Grow at Low to Mid Teen Rates in 2016 12

  13. Investing For Our Future Efficiency Ratio  Q1 normal course non-interest expenses (%) up $5.0M (27%) year over year on 25% FTE growth 43.2  Investments in strategic initiatives of $5.7M, five times higher than last year 35.7 33.4 32.8 32.4 (almost half of total expense growth)  Without strategic investments, adjusted Efficiency Ratio was 35%  Expect Efficiency Ratio to decline but stay in mid to high 30% range in 2016 as we continue to invest for future Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Remain One of Canada’s Most Efficient Banks 13

  14. Solid Capital Ratios March 31, 2016 (%) Leverage Ratio CET1 Total Capital 16.7 Basel III minimum 13.5 Total Capital level of 10.5% Basel III minimum CET1 target of 7.0% Full compliance 5.0 with new standard 14

  15. Strong Consumer Receptivity to New Offerings Digital Banking Services High Interest Savings Account Single Family Home Equity Line of Credit Mortgage Lending Expect Strong Results From All Initiatives 15

  16. Summary 1 Strong fundamentals, solid asset growth continues 2 EQ Bank platform is a game-changer for savers 3 Investments now will yield great future results 16

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