EQB Continue to Grow in 2024 Q3

I'm betting that EQB will become the next big bank in Canada, seeing how consistent it has been growing in recent years. Here are some highlights from this quarter:

• Strong revenue growth of 15% YoY to CA$327.2 million.
• Strong customer growth of 32% YoY, to 485k, reflecting the effectiveness of EQB's ad campaign and successful product development.The notice savings account is a great product coming out this quarter.
• Decumulation loan grow 56% YoY- Share outstanding only increased 1.3%, much lower than the average 3% dilution rate in the past 5 years.
• Diluted EPS declined 1% YoY to CA$2.96. This is a point of concern, I think this is likely due to the elevated PCL (provision for credit losses) compared to the quarter a year ago, mainly from losses in equipment financing loans. The good news is that the PCL has decreased from 22.2 million to 19.6 million q/q. This matches the management's expectation and it looks like they got it under control.
• Non-interest revenue grow from CA$32.8 million from a year ago to CA$55.8 million. It is now 17% of the total revenue, further diversifying the revenue source.

The estimated fair value of EQB is CA$107 using DCF model. Here are the assumptions:

• Latest TTM Net income CA$452.4 million
• Net income growth rate of 10% (5YR avg of 22%)
• 3% Share dilution (5YR AVG 3%)
• Future PE of 10 (5YR avg 7.9)
• Discount rate of 10%

I'm using a higher PE ratio than the 5-year average because of EQB's strong track record, and it deserves to trade at a similar price compared to its peers. I will continue to hold the stock long term and I believe EQB will deliver outsized returns.

If you are interested in how I value stocks using the DCF model, be sure to check out this Youtube video where I walk you through the process step-by-step.

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DISCLAIMER: This post is the author's personal opinion only and none of it should be considered financial advice.