Act Fast: 75 Only!
EQB (TSX:EQB) is a Toronto-based personal and commercial bank that provides residential and commercial real estate lending services as well as personal banking services. Today, I want to discuss what is next for this unique Canadian bank after the collapse of Silicon Valley Bank (SVB) in the United States.
The collapse of SVB, which possessed US$212 billion in customer assets at the time of its demise, has sparked major volatility in the financial sector. Moreover, it has led to political finger-pointing and questions over how to tackle these issues going forward.
The Biden administration has criticized the regulatory rollbacks of the Trump administration — more specifically a 2018 law that removed credit requirements imposed under the post-2008 Dodd-Frank legislation. At the time, the Congressional Budget Office (CBO) warned that banks in the $100 billion to $250 billion range were more likely to fail due to these rollbacks.
How should Canadians process the ongoing banking crisis?
Fortunately, Canadian banks are subject to much stricter regulatory requirements compared to their U.S. counterparts. These stringent rules have made the Canadian financial system very resilient in the face of macroeconomic challenges. That said, EQB and its peers are still processing the aggressive policy change from the Bank of Canada (BoC). Interest rate hikes have put significant pressure on Canada’s housing market in 2022 and early 2023.
Canadian home sales and prices have experienced a sharp correction in recent months. However, on March 7, Royal Bank analyst Robert Hogue suggested that the Canada market housing downturn had nearly reached its bottom. That is good news for EQB and good news for Canadian investors.
EQB has performed well in the face of macroeconomic challenges
Shares of EQB have plunged 16% month over month as of close on March 21. That has dragged the stock into the red for the year-to-date period. Moreover, its shares have declined 27% year over year. Investors can toggle the interactive price chart below to get a more detailed look at its recent performance.
This bank released its final batch of fiscal 2022 earnings on February 16, 2023. Organic growth in 2022 reached 15% in the year-over-year period for Personal Banking conventional loans, which was on the higher end of its forecasts. Meanwhile, EQ Bank’s customer base climbed 23% year over year to 308,000, and customer everyday engagement rose to an all-time high of 48% in the fourth quarter.
EQB reported adjusted diluted earnings per share (EPS) of $9.17 in 2022 — up 9% from the prior year. Meanwhile, conventional loans increased 43% to $30.3 billion. Total deposits rose 14% to $7.9 billion.
Here’s why I’m looking to buy EQB on the dip in this chaotic period
Investors should be wary in this uncertain period, but Canadian financial institutions have proven worthy of your trust in previous decades. EQB delivered a strong fiscal 2022 in the face of many macroeconomic challenges. Shares of this TSX stock possess an attractive price-to-earnings ratio of 7.4. Meanwhile, it offers a quarterly dividend of $0.35 per share. That represents a 2.4% yield.
