Although net income in the latest quarter for this mortgage finance company was slightly down from last year, it handily beat analysts’ estimates by $2.12.
Equitable Group Inc. (EQB.TO, EQGPF)
From Internet Wealth Builder
Equitable Group provides mortgage lending services to individuals and businesses in Canadian urban markets, with a focus on entrepreneurs and new Canadians. It carries on operations through wholly owned subsidiary Equitable Bank, Canada’s eighth-largest Schedule 1 bank by market capitalization. Equitable Bank serves 240,000 Canadians and employs about 900 people. It also has a digital banking operation, EQ Bank, with its flagship product being the EQ Bank Savings Plus Account.
The shares have been in an upward trend all year. On Oct. 25, the stock split 2 for 1, which means you now own 200 shares for every 100 you had before.
The company released strong third-quarter results in early November. Revenue for the three months to Sept. 30 was $165.6 million, after added back $3.5 million for reversed credit loss allocations. That compared with $151.6 million in the same period of 2020. For the first nine months of the fiscal year, revenue was $477.3 million, up from $362.7 million last year. Reverse mortgage assets showed a huge jump, up 259% year-over-year.
Despite the revenue gains, net income for the third quarter was down slightly at $71.4 million ($4.14 per diluted share, pre-split). That compared to $72.8 million ($4.30 per share) in the year-before period. However, for the first nine months, profits are running well ahead of 2020 at $209.1 million ($12.15 a share). That compares to $149 million ($8.81 per share) in 2020.
Deposits were up 6% quarter-over-quarter and up 60% year-over- year. Loan originations were up 60% year-over-year. The adjusted quarterly dividend is $0.185 a share ($0.74 per share) for a yield of 0.9%.
The company expects next year’s performance will be positively influenced by the carry-forward effect of growth in loans this year, an asset mix favoring its high-value conventional loan book, ongoing success in growing EQ Bank customer relationships, and the reduction in funding costs to be achieved through expansion of its covered bond program. Formal guidance for 2022 will be announced before year-end.
Action now: Buy.
Gordon Pape, Internet Wealth Builder, buildingwealth.ca, 1-888-287-8229, November 15, 2021