Equitable Group Inc Q2 2019 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Nikolaus Priebe - BMO Capital Markets Equity Research - Analyst : Just wanted to start with a question on the net interest margin in the quarter. Of the factors that affected the sequential change in NIM between the first quarter of this year and the second quarter, one of the listed factors there was fair value changes on derivative instruments which was related to the deposit portfolio. Maybe this is one for Tim, but I was just wondering if you could expand a bit on what that related to?

Question: Nikolaus Priebe - BMO Capital Markets Equity Research - Analyst : Got it, okay. And then I also wanted to ask one on the impaired ratio. It did decline in the quarter. Looks to be mostly attributed to the leasing portfolio, and I think you made reference to that being connected to some refinements that were made in arrears and risk modeling assumptions. I was just wondering if you could give us some insight on what that entailed as well?

Question: Nikolaus Priebe - BMO Capital Markets Equity Research - Analyst : Okay, okay, got it. Maybe one last one for me before I pass the line. I also wanted to ask about the conventional commercial loan portfolio. It looks like principal on a year-to-date basis is about 2% lower than it was at the outset. And maybe that largely reflects your intent to rebuild capital organically this year, but just when I look at guidance for the -- for that conventional commercial loan portfolio, it continues to stand at about 8% to 10% for the full year. So I'm just wondering if we should expect to see a bit of an acceleration in the growth of that portfolio in the second half of this year relative to the first half? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 31, 2019 / 12:30PM, EQB.TO - Q2 2019 Equitable Group Inc Earnings Call

Question: Geoffrey Kwan - RBC Capital Markets, LLC, Research Division - Analyst : Just had one question. Curious how you're finding on the residential side the 905 area around Toronto. That was obviously an area that was pretty soft last year. Just wondering if you -- whether or not it's within the various regions within the 905? There's comments that you've got on the different housing types, areas that you're seeing better activity. And then maybe conversely, areas that may still be soft?

Question: Geoffrey Kwan - RBC Capital Markets, LLC, Research Division - Analyst : And are there specific municipalities that are doing better than others? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. JULY 31, 2019 / 12:30PM, EQB.TO - Q2 2019 Equitable Group Inc Earnings Call

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Just wanted to just get a little bit of clarification around the guidance for alternative single-family asset growth down a little bit from the prior quarter. Just trying to square that with what looks like better underlying fundamentals for the housing market and for that segment, especially, in the Toronto area?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay. And just, sort of, wanted to just follow-up on something you mentioned there about the sort of the geographic dynamics you are seeing softness in the western provinces. Is that -- maybe just speak a little bit more about what's going on in either Vancouver and Calgary, Alberta?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay. And then on the commercial mortgage side, looking at the breakdown between mortgages to corporates and to small businesses. It seems like it's the corporate side that's driving a little bit of the softness here to start the first half of the year. Just can you speak to, I guess, some of the dynamics between the 2 groups of commercial mortgages? And I guess, speaking to that pipeline, maybe a little bit more about what kind of corporates we're looking at versus small businesses?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay. And then still within the commercial segment, looking at construction loans. A little bit of growth here for -- versus the end of the year, but quite a bit of growth if we were looking back over 2017 end of year levels. Maybe just speak to what you're seeing in the dynamics in the construction loan market and where you expect that growth to come from going forward?

Question: Jaeme Gloyn - National Bank Financial, Inc., Research Division - Analyst : Okay. And last one for me. I just want to get a little bit more color around the Bennington credit performance coming in at about 70 basis points. That's below the range that you guided to around 1.5% to 2%. I'm just wondering if there's anything in particular in this quarter that you can speak to that drove a better-than-expected outcome, especially after the Q1 that resulted in a little bit higher-than-expected performance? Or is it all just related to this, I guess, change in strategy to more actively collect on 90 days past due loans?