EQB Inc Q4 2025 Earnings Call Transcript

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

Question: Gabriel Dechaine - National Bank Financial Research - Analyst : I would like to ask about the credit stuff, of course. And get maybe a bit more specific on your outlook. And I guess, generally, you expect the phase of -- or the pace of PCLs to moderate over the course of the year. That's pretty consistent with what I'm hearing from other banks. But like where -- like if we look at the impaireds, is this a high watermark and it grades down? Or are we going to be stuck at this level in the residential mortgage portfolio specifically?

Question: Gabriel Dechaine - National Bank Financial Research - Analyst : Okay. And the -- I think it was $12 million of impaired PCLs in the resi mortgage portfolio. How much of that was on new impairments? And I don't know if that is actually still the case. How much of it was on previously impaired loans where you're finding yourself with a longer resolution, you're going to pay someone on [Mobile On], pay their property taxes, whatever, or maybe not Mobile On this time of the year, but you know what I mean.

Question: Gabriel Dechaine - National Bank Financial Research - Analyst : So new formations from the same area codes and vintage, not top-up provisions, that's my terminology, but it's not that?

Question: Gabriel Dechaine - National Bank Financial Research - Analyst : Okay. Now as far as the cost savings go and thank you for the clarity on the expense target, the growth target and all that. And I guess, should I interpret that the cost savings emanating from that restructuring that's all benefiting the bottom line with no reinvestment stuff? I know you got to reinvest in your business. But just from a -- if we ring-fence this particular number, that's pure cost savings to the shareholder, yes?

Question: Gabriel Dechaine - National Bank Financial Research - Analyst : Okay. Great. And then the last one I've got here, the PC Financial. Just a follow-up, I didn't get to ask yesterday, I think of asking. Do we have a -- if you have the ballpark, I'd really appreciate that, when you close, what your target core Tier 1 position will be?

Question: Mike Rizvanovic - Scotiabank GBM - Analyst : I want to start with Marlene, just on your reserves. So the 41 basis points, how should we look at the 41? Like it's been built up pretty substantially here the last couple of quarters. And we tend to hear a similar narrative on your confidence in being well reserved. So is the 41 a new normal? It seems like there might have been a bit of a step change here in terms of where you want to sit. Or is it just a function of GILs being elevated for now? And as they come down -- what I'm trying to get at ultimately is as PCLs come in on the impaired side, do you offset that with some reserve releases and get that coverage ratio back down over time? Or is it a new level? I'm just trying to decipher if that's the case.

Question: Mike Rizvanovic - Scotiabank GBM - Analyst : Yes. And then just as far as the actual coverage ratio, so that 41 basis points, is that somewhere where you're comfortable sitting at? Or can you see that coming back down in a more positive credit environment, I guess, is what I'm getting at.

Question: Mike Rizvanovic - Scotiabank GBM - Analyst : Okay. That's helpful. And then, Chadwick, just a quick one on the PC Financial. Just curious on -- and thanks for the P&L that was provided, the high-level P&L on that business that's being acquired. In terms of -- it looks like about a 4% loss ratio on that portfolio, and that's trailing 12 months. And I'm wondering if you have any -- anything you can offer in terms of like what's the parameter there? Like is that 4% current in terms of the macro outlook being a little bit uncertain? Is it a little bit elevated? Like what is it normally at. I don't have color on if that 4% is a bit high right now or if it's right where it should be as a run rate. And then like where does that tend to go when things get really concerning on the consumer side in terms of risk? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 04, 2025 / 3:30PM, EQB.TO - Q4 2025 EQB Inc Earnings Call

Question: Mike Rizvanovic - Scotiabank GBM - Analyst : And then just out of curiosity, are you able to give us a sense of the capital that backs that business just in terms of dollar terms? I'm just trying to get a sense of the ROE of that acquired business. I'm not sure if you're able to provide that right now, but thought I'd ask.

Question: Mike Rizvanovic - Scotiabank GBM - Analyst : So fair to say that it's a very, very good ROE business in relation to the lending business?

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : My questions are for Marlene. The first one is with respect to the residential mortgage impairments. I was just curious if you can talk a little bit about the nature of these formations. In other words, what I'm trying to better understand is, is the primary reason for the formation job loss, or is it simply the weight of the mortgage payment and the over indebtedness of the consumer that eventually has them fall behind and go impaired? And as a follow-on on to that, as we look forward into 2026, is the vast majority of the renewals that are occurring, will they be at a higher payment or a lower payment in 2026? LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 04, 2025 / 3:30PM, EQB.TO - Q4 2025 EQB Inc Earnings Call

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : The potential payment shock on renewals in '26, or relief.

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : And sorry, is it meaningfully lower or just modestly lower in terms of (inaudible)?

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : Okay. And then a follow-on question in -- maybe, I mean sort of -- I just want to make sure that I'm interpreting your remarks. With respect to the forward outlook, I recall last year thinking about a range of 12 basis points or so for losses overall. Are you willing to talk about sort of what's the range for '26?

Question: Darko Mihelic - RBC Capital Markets Inc - Analyst : Okay. And then my last question is in relation to the transaction, and again, it's aimed at you, Marlene. Does this in any way, assuming the transaction closes as per plan, does this in any way slow down your ARB approval work? Or would that just continue on and you would separately look to eventually get the P&C moved over to ARB more futuristically? I'm just curious if there's any impact at all on your work there.

Question: Etienne Ricard - BMO Capital Markets - Analyst : So credit cards will become a new product at EQB. How would you contrast the long-term growth potential of the card portfolio relative to mortgages? The reason I'm asking is I tend to think of EQB's long-term loan growth track record to be in the low double digits for mortgages. And I think we're all aware of the industry tailwinds in that space with the shift to mortgage brokers and the growing size of the alternative market. Now credit card appears more GDP-driven. Would you agree with this statement?

Question: Etienne Ricard - BMO Capital Markets - Analyst : And does the transaction impact your capital allocation policies, whether that's share buybacks heading into closing or maybe the dividend payout looking longer term?

Question: Doug Young - Desjardins Securities Inc - Analyst : Chadwick, I guess, both of these are probably for you. But on the wealth priority side, you talked about it in your prepared remarks. And that's not new. I think you talked about it before, wanting to build some form of wealth platform. I assume this is not organic, that you would do this in an inorganic manner. Can you do something else before you close PC and before you integrate PC? And can you maybe just remind us what it is that you're interested in as you talk (inaudible)?

Question: Doug Young - Desjardins Securities Inc - Analyst : I assume this is more distribution than manufacturing.

Question: Doug Young - Desjardins Securities Inc - Analyst : Okay. And then you can correct me if I'm wrong, second question here, I think you talked at the potential ROE approaching 12% by the end of fiscal '26. And when I kind of look at the math, it's hard to get there unless you have a material improvement in the PCL versus what we saw. And I'm talking like a PCL half of what we saw in Q4. LSEG STREETEVENTS | www.lseg.com | Contact Us consent of LSEG. 'LSEG' and the LSEG logo are registered trademarks of LSEG and its affiliated companies. DECEMBER 04, 2025 / 3:30PM, EQB.TO - Q4 2025 EQB Inc Earnings Call And so I'm just trying to get a sense, is that -- am I reading that right? Did you talk about 12% by the end of the year? Like what would be some of the drivers to get there? And is it mostly PCLs? Obviously, expense growth, kind of deposit operating leverage would be key. Just trying to kind of understand a little bit more about that.

Question: Stephen Boland - Raymond James Holdings (Canada) Inc - Analyst : Just one question. When you talk about pulling back on the insured single family, I always thought that was a tool you use to basically retain the customer and maintain broker relationships as well. Like you go into a broker and they have prime and you can insure it, but they also have alternate traditional single family and you underwrite all of them. So has that changed? Has the consumer behavior changed or a change in thought? I'm just curious about that.

Question: Stephen Boland - Raymond James Holdings (Canada) Inc - Analyst : And how has the broker reaction been to that, that you would do those types of loans and then you're kind of saying, no, we don't really want to do it anymore?