EQB Inc. (EQB) Earnings Call Transcript & Summary

Good morning, everyone. Before we begin, I would like to acknowledge that Equitable occupies offices on Turtle Island, a name that multiple indigenous nations gave to the place more widely known as North America. We gather here today on land that is steeped in rich indigenous history, recognizing the enduring presence of First Nations, Inuit and Métis people. I acknowledge that all settlers who came willingly to this stolen land are accountable for furthering truth and reconciliation. As part of my own commitment to reconciliation, I'm currently reading Five Little Indians, a novel by Michelle Good, which details the journey of residential school survivors. Thank you. I'd now like to introduce Chair of the Board, Vincenza Sera.

Thank you, [ Kerri ]. Good morning, everyone, and welcome. As you heard, my name is Vincenza Sera and in my capacity as Chair of the Board of EQB Inc. I will chair this 2025 Annual Meeting of Shareholders, which I now call to order. This year, we host our meeting on a hybrid basis to enable shareholders to participate here in person at EQB's corporate headquarters in Toronto or via live webcast using a secure voting system. We believe this hybrid approach allows for greater shareholder engagement and is entirely appropriate given EQB's growing profile as a company that serves, employs and is owned by Canadians coast-to-coast. Wherever you find yourself today, we thank you for participating. Joining me are Andrew Moor, President and CEO, who will provide a progress report later in the meeting; and Michael Mignardi, Vice President and General Counsel; and Linda Dwyer, our Corporate Secretary. Before we move to business matters, a few personal observations. I was appointed Chair of the Board last September following the unexpected departure of Michael Hanley for personal reasons. While it is true that I am a veteran member of the Board, having served for the past 12 years, I'm humbled and honored that my fellow directors selected me for this role. I thank them for showing confidence in my leadership and providing advice, support and encouragement. It is very much appreciated. I'm pleased to note that all directors whose names and photos appear on the screen are standing for reelection this year. As constituted, our Board is well resourced with dedicated and experienced people who possess the relevant skills, deep expertise and diverse perspectives needed to provide sound, consistent and effective governance for EQB. As we navigate the turbulence created by unwelcomed geopolitical tensions, it gives me confidence as a shareholder that our Board is populated by business leaders who have direct experience managing risks through the many economic and business cycles of the past 2 and in some cases, 3 decades. With the support of well-established and effective governance systems, our Board will continue to actively cultivate and promote the risk-aware corporate culture that has kept our institutions safe, sound and trustworthy for many years. Together, our Board is committed to EQB's ongoing success. Credit for that success belongs to our CEO and the entire EQB team. With the steady hand and challenger mindset, Andrew has done a remarkable job transforming what was a regional trust company when I joined the Board into a financial services power house with a great future. He is the architect of our corporate purpose of driving change in Canadian banking to enrich people's lives. He is an inspiring leader who works tirelessly to challenge himself and others to go the extra mile for our growing customer base. And he is an astute financial manager who's proven and effective value creation model is entrenched and employed by every challenger workforce on every loan we make. On behalf of the Board, I congratulate and thank Andrew and all 1,900 EQB challengers for delivering record financial performance in the fiscal 2024 and positioning our business to do even more in the coming years. I will conclude my personal observations by saying thank you to all shareholders for your ongoing support of EQB. We now move to the formal business of the meeting. As stipulated by EQB's bylaws, as Chair of the Board, I will act as Chair of this meeting, and Linda Dwyer will act as Secretary. I appoint Paul Keyes of Odyssey Trust Company to act as scrutineer. I have received an affidavit from Odyssey Trust confirming that the meeting materials were duly mailed to shareholders of record in compliance with applicable securities rules. I've also received proof that notice of this meeting was duly given and that a quorum is present. I therefore declare that this meeting is properly constituted and declare the polls open for voting. We have a few guidelines on how this meeting will proceed. To facilitate the introduction of motions, EQB has asked several employee shareholders to move and second all motions for shareholder consideration. Please keep in mind that only registered shareholders or duly appointed proxy holders can vote on the resolutions to be put to this meeting. The scrutineer's report states that a majority of EQB's total issued and outstanding shares have been voted by proxy by both registered and beneficial holders in respect of the matters of business before the meeting. If you are a shareholder or proxy holder attending in person and voted in advance, no further action is required. If you have not yet voted or you already voted but would like to change your vote, please raise your hand and our scrutineer will provide you with the ballot for each item of business to be voted on today. Completed ballots will be collected by the scrutineer following the last motion, which will be for the shareholder proposal. Please ensure that you print your name clearly on the ballot and sign it. If you are a shareholder or a proxy holder participating in the online webcast and have not yet voted or wish to change your vote, you can vote by clicking on the Vote tab at the top of your screen. If you voted in advance and do not wish to change, then you do not need to vote again. A simple majority of the votes cast in person or by proxy is required to pass each item of business. We will provide preliminary voting results today -- during today's meeting and final voting results will be available after the meeting. For shareholders and proxy holders who wish to ask a question on the items being considered today, please raise your hand if you are here in the room or if you are on the webcast, select the messaging tab at the top of your screen, type your question and click send. Michael Mignardi will read out any questions submitted through the online platform once we have finished with questions from the floor here in Toronto. Questions of a more general nature and not specific to the business of the meeting will be addressed during the Q&A session that follows. I will have more to say about that following Andrew's presentation later in the meeting. We will now proceed with the first item of business as set out in the Notice of Meeting. Copies of EQB's for fiscal 2024 consolidated financial statements and the auditor's report on them were made available to shareholders before the meeting. The financial statements can also be found on our website at equitablebank.ca. We will now take any questions on the financial statements, beginning with those from shareholders or proxy holders in the room. Michael, are there any questions or comments online?

Madam Chair, there are no questions online at this time.

Thank you. We will now proceed with the election of directors. The Board of Directors has fixed the number of directors to be elected today at 10, and I can confirm that all nominees are eligible for election. Other than Andrew and myself, all of our directors are present online. I will ask Linda to please read out the names of the director nominees.

Thank you, Vin. The nominees for election as directors are Michael Emory, Susan Ericksen, Kishore Kapoor, Yongah Kim, Marcos Lopez, Andrew Moor, Rowan Saunders, Carolyn Schuetz, Vincenza Sera and Michael Stramaglia.

Thank you, Linda. You will find information on all nominated directors in the management information circular. I now call upon Rose to make the motion for the nomination of directors.

Thank you, Madam Chair. My name is Rose Gallo. I am a shareholder and my pronouns are she/her. I am a Mortgage Default Officer with Equitable Bank, and I have been with the bank for over 13 years. It is my pleasure to nominate each of the director nominees as set out in the management information circular for this meeting to be a director of EQB until the close of the next Annual Meeting of Shareholders or until their successor is duly elected or appointed.

Thank you, Rose. I call on Ankit to second the motion.

Thank you, Madam Chair. My name is Ankit Suri. I'm a shareholder and my pronouns are he/him. I'm a Senior Residential Mortgage Officer with Equitable Bank, and I've been with the bank for just over 3 years. I second the motion.

Thank you, Ankit. The floor is open for any comments or questions on the election of directors. Michael, are there any comments or questions from the webcast?

Vin, there are no comments or questions from the webcast.

Thank you. I declare the nominations closed. The election of directors is the first item to be voted on. If you have not yet voted, all shareholders or proxy holders in this room are asked to please vote now by selecting the option for or withhold for each individual director. Ballots will be collected after the voting on all matters to be voted upon today has concluded. If you are a shareholder or proxy holder and have used your control number to log into the webcast, you may record your vote now if you have not already done so or if you wish to vote -- to change your vote if you voted in advance of the meeting. If you don't wish to change your vote, then no further action is required. Our next item of business is the appointment of auditors. Jay, would you please make a motion?

Thank you, Madam Chair. My name is Jay Srinivasan. I'm a shareholder and my pronouns are he/him. I'm an Associate Director in anti-money laundering Operations and Analytics with Equitable Bank and I have been with the bank for 2 years. I move to appoint KPMG LLP as auditors of EQB until the close of the next Annual Meeting of Shareholders at a remuneration to be fixed by the directors.

I now call upon Mariah to second the motion.

Thank you, Madam Chair. My name is Mariah Steinfeld, and I am a shareholder. My pronouns are she/her. I'm a servicing initiatives manager with Equitable Bank, and I have been with the bank for 10 years. I second the motion.

Thank you, Jay and Mariah. The floor is now open for comments or questions on the appointment of auditors. Michael, are there any comments or questions in the webcast portal?

Madam Chair, there are no questions online.

If you have not yet -- thank you, Michael. If you have not yet voted, please vote now by selecting the option for or withhold for the appointment of KPMG LLP. The next item of business is the advisory resolution on our approach to executive compensation. Although the vote is nonbinding, the Board considers it to be an important part of shareholder engagement and will take the results into consideration when making future executive compensation decisions. I call on Andrew to make the motion.

Thank you, Madam Chair. My name is Andrew Watson. I'm a shareholder and my pronouns are he/him. I'm a Senior Residential Mortgage Officer with Equitable Bank, and I have been with the bank for 3 years. I move that the shareholders accept EQB's approach to executive compensation as disclosed in the Management Information Circular.

Harmohit, would you please second the motion?

Thank you, Madam Chair. My name is Harmohit Arora, and I am a shareholder and my pronouns are he/him. I am a Senior Customer Service Representative at EQ Bank, and I have been with the bank for over 3 years, and I second the motion.

Thank you, Andrew and Harmohit. The floor is now open for questions or comments on our executive compensation approach. Michael, are there any comments or questions on the webcast?

Madam Chair, there are no questions online.

Thank you. Please vote now by selecting the option for or against. Again, if you have already voted, no further action is required. The final item of business today relates to the shareholder proposal submitted by the Shareholder Association for Research and Education or SHARE on behalf of Hamilton Community Foundation. I'd like to ask Juana Lee of SHARE to say a few words.

Thank you, Ms. Sera. My name is Juana Lee, Associate Director of Corporate Engagement at SHARE. I'm representing the Hamilton Community Foundation, a shareholder of EQB Inc., which has filed Schedule A shareholder proposal as stated in EQB's 2025 Management Information Circular. The shareholder proposal requested the Board of Directors of EQB Inc. to report on the extent to which EQB's policies and practices regarding indigenous community relations, recruitment and advancement of indigenous employees, internal education on indigenous reconciliation and procurement from indigenous-owned businesses compared to or are certified by external indigenous-led standards of practice. SHARE and members of EQB have engaged in meaningful and productive dialogue since late 2024, which continued following the filing of this shareholder proposal. Based on discussions and agreements made with EQB management after the circular was issued, we agreed earlier to withdraw the proposal and therefore, not to seek votes in its favor. In keeping with this agreement, I now withdraw the proposal from consideration at this Annual Meeting of Shareholders. Beyond EQB's commitment to enhance disclosure on its policies and practices related to indigenous relations as publicly announced in its circular, EQB's Board has also committed to reviewing the merit of, one, becoming certified by indigenous-led standards of practice such as the Canadian Council for Indigenous Business Partnership Accreditation in Indigenous Relations Program, also known as the PAIR program; and two, publishing a reconciliation action plan to effectively communicate to shareholders on EQB's current and forward-looking plans to advance indigenous reconciliation. EQB's consideration of the PAIR program and a reconciliation action plan is aligned with peer practices. As 35% of the TSX 60 Index and 25% of the financial sector companies on the TSX Composite Index have already become PAIR certified or have committed to publishing a reconciliation action plan. As shareholders and through our productive dialogue with the company, we commend EQB's commitment to answer the Truth and Reconciliation Commission's Call to Action #92 regarding business and reconciliation established by the Government of Canada. We believe these commitments are a step in the right direction, and we look forward to continuing our engagement with management on these matters and seeing further progress in the coming year. Thank you.

Thank you, Juana, and thank you to SHARE and the Hamilton Community Foundation for their engagement in our company and the fine work they are doing to bring these very important issues to the forefront of Corporate Canada. While the proposal has been withdrawn for consideration by shareholders on the basis described by Juana, we will still proceed with voting. First, the floor is now open for comments or questions on the shareholder proposal. Michael, are there any comments or questions from the portal?

There are no questions online, Vin.

I now ask all shareholders and proxy holders, both in the room and on the webcast to please vote now by selecting for or against. Remember, if you voted in advance of the meeting and do not wish to change your vote, no further action is required. Thank you. That brings us to the end of the formal business of the meeting, and voting is now closed. Now it is time to hear from our CEO. Before turning the meeting over to Andrew, you are advised that statements made today may contain forward-looking information about EQB's outlook, objectives and strategies to achieve them. Details regarding forward-looking statements and non-GAAP financial measures are on the webcast and can also be found in EQB's financial report. Once Andrew delivers his remarks, we will open the meeting to general Q&A. Now over to Andrew.

Good morning, everyone. It's an honor to be here to report on the state of our company, something I've had the great privilege of doing for the past 18 years, and the passion still burns bright. I'd like to thank each of you and for your interest, participation and trust you placed in EQB, hopefully, as a shareholder and as one of our 718,000 valued customers. To Vin, I offer special thanks for your kind words and support of our team and me and for stepping in and doing an outstanding job as Chair of the Board. Vin brings a wealth of experience in governance to this role and is intimately familiar with all things EQB and has been a constant source of wisdom and insight to me for the past decade. Vin and our other dedicated directors act always in the best interest of our company with a full understanding and serious appreciation for their fiduciary duties. As owner of Canada's seventh largest bank, EQB has the governance systems and talent for fitting our growing status as a contributor to the Canadian economy. My thanks to all members of the Board for providing a solid governance foundation upon which our shareholders can take comfort and upon which we can execute our business purpose. One of the reasons we chose to host our meeting here at our Toronto office is to give shareholders the opportunity to meet with members of our team whose hard work fuels the performance of that we all enjoy. It's not possible for me to introduce all 1,900 members of the team from coast to coast who deserve and received my thanks for their hard work. But you did hear from 6 Equitable employee shareholders, who introduced and moved and seconded motions this morning. 70% of our people have an ownership stake in EQB through the employee share purchase plan. And we're delighted that Rose, Ankit, Jay, Mariah, Andrew, Harmohit are amongst that large and dedicated group. The mixture of roles, skills, backgrounds and experiences resident in our workforce is one thing that makes this a special place. We are a diverse group that increasingly reflects the face of modern Canada. There is great value in workforce diversity because amongst other things, it makes us more sensitive to the cultural needs of our customers and business partners. Access to career opportunities at all levels is the starting point for ensuring diverse voices are heard and heed in our decision-making. I'm proud of all of the work we are doing here, which is ongoing and the results of our efforts so far, which are outlined with supporting data in our responsibility report. Page 39 shows diversity by gender and racialized group, segmented by all levels of the company, including middle management, junior executives and senior executives as well as by region for each of 2023 and 2024. Through a thoughtful approach to inclusion, we have made meaningful progress in increased representation, particularly with women in junior executive roles and are continuing to focus efforts on representation of indigenous persons and people with disabilities. In particular, I encourage you to read about our indigenous employee resource group, which is introduced educational initiatives across the company to help us all learn about the actionable steps we can take to advance reconciliation. As an outward expression of our commitment to indigenous peoples, EQ Bank is the first in Canada to employ photo recognition of status cards to open accounts in the digital platform. More typically, customers had to visit bank branches to verify their identity, which creates barriers to access. Within our commercial conventional lending solutions, we provide financing that directly supports indigenous bands across Canada. This includes financing land entitlement claims, empowering indigenous nations to pursue legal restitution for historical rights land violations. Our financing structures help ensure that indigenous communities have the necessary resources to advocate for their rights and secure their long-term economic benefits. Through Concentra Trust, we also provide services as trustee for First Nations pre and post settlement land claims. That said, we can and we will do more, including as part of our commitment to the Hamilton Community Foundation, SHARE and the forever work of truth and reconciliation. Our responsibility report also offers a wealth of information on our other social engagements as well as data on our environmental performance. I encourage you to read it, to learn how we are meeting our obligation to all stakeholders through a made at EQB solution and approach. And I would like to thank the representative of SHARE for being here today and working with us so constructively. We devote considerable time to commenting on financial results in our quarterly earnings calls. So rather than duplicating that effort, I will simply say that both on a short-term and long-run basis, EQB has consistently delivered a strong performance for shareholders. This includes record earnings in fiscal 2024 and in the first quarter of this year, with ROE at or above 15% and higher dividend payouts in each reporting period. We're proud of this track record of financial success, stretching all the way back to our IPO 21 years ago. It is a legacy of performance that surpasses the Canadian banking industry as a whole and it demonstrates the effectiveness and resilience of our business model, challenger growth strategies and disciplined method for allocating capital for superior returns. Of note, EQB has made this performance happen by investing exclusively in Canada for Canadians and by being managed and run by Canadians, something we intend to continue doing. Unlike other big Canadian banks, we do not have designs on penetrating the U.S. or other international markets. We believe our pure domestic presence and our specialized focus, combined with our technology leadership, allow us to better see it serve the needs of this country. Which brings me to the heart of my remarks and the way forward. Our work as Canada's Challenger Bank and our purpose of driving change in Canadian banking to enrich people's lives causes us to explore the art of the possible and find new and better ways to win and wow our customers. On both the lending and deposit taking sides of the business, we are applying our challenger thinking and displaying our unique culture of care for our customers. This is true in single-family lending, which is an important engine of growth, in our rapidly growing wealth accumulation business, that is specifically designed to serve Canada's growing population of seniors and in our commercial banking business, where we are the leading securitizer of CMHC insured multifamily apartment buildings. Nowhere is our challenger thinking more apparent or our care for our customers more pronounced than in EQ Bank, a perennial member of the world's best bank list published by Forbes and compiled directly based on feedback from our customers. This year, we are refreshing our EQ Bank mobile app, continuing to roll out our Banque EQ services in Quebec and moving our new EQ Bank small business account from beta to full market launch. That's not all. We introduced brilliantly competitive offering that significantly enhances our EQ Bank Canadian to U.S. dollar exchange rate pricing, going where others have not to offer customers far better spreads, plus as always, no fees while also maintaining a high interest rate for EQ Bank U.S. dollar account holders. Now that we've reached a critical mass of innovative everyday accounts used by well over 0.5 million Canadians, including a growing number who put their payroll deposit directly in EQ Bank, we will strive to deepen customer relationships and add more value to them by clustering related digital services together. Unlike other banks with siloed deposit products, our digital technology and our customer-first mindset enable us to break down barriers to provide holistic solutions that reflect how banking should work. Solutions that recognize our customers are not one-dimensional, but often have multiple interests, both business and personal and many goals, individual and related families and the broader community. Across our organization, we have great opportunities to grow in Canada and a hometown advantage that we will continue to nurture. That advantage is even more pronounced and unique today as a result of the Canadian banking industry consolidation over the past year that has removed Canadian Western Bank and HSBC Bank of Canada from the landscape. This leaves us standing alone as the next largest bank beyond the traditional CIBs that dominate the landscape. We're asking the Canadian government to make regulatory changes by improving competitive intensity -- that by improving competitive intensity will ensure Canadians are better served by their banks and stimulate innovation that will contribute to higher levels of economic prosperity and productivity. This includes increasing for the first time in 20 years, CDIC insurance deposit limit coverage to give assurance to deposit in banks such as ours and make up for the implicit advantage that the government grants through the systemically important bank legislation that backstops the deposits of large banks. Creating a more efficient and faster pathway for midsized banks such as ours to apply for the same advanced internal ratings-based system for measuring credit risk as the large Canadian banks, which will allow us to be more competitive across the lending landscape, especially for lower risk transactions. And bring in open banking, something we that has been studied ad nauseam since 2017 and not legislated despite the proven good it's doing for banking customers in other advanced economies, including the U.K. We need to stop pretending Canada's implementing open banking and actually do it. As we all know, value can be unlocked for all Canadians by removing into provincial trade barriers. The same can be said about removing barriers to better banking, and I do hope our new government will recognize this immediately, particularly since all these pragmatic reforms will serve the best interest of consumers while ensuring Canada, to its credit, retains a stable banking industry. With an election in full swing, it's certainly a good time to talk to candidates looking to represent us in parliament about the need for regulatory evolution in banking. Clearly, what's on everybody's mind in recent days is the trade war, that's meshing the global economy. There is enormous uncertainty on how this will all play out. And your management team is making appropriate changes to our risk approach to ensure the bank can successfully navigate this time of challenge. While we don't take the challenge lightly, I'm optimistic that Bank of Canada monetary policy adjustments, combined with fiscal policy support will protect Canadians and allow us all, including our bank, to successfully transition to the new economic reality. To sum up, we plan to make fiscal 2025 another year of meaningful shareholder value creation aligned to our broader purpose of driving change in Canadian banking to enrich people's lives. In closing, I thank our entire team for their very meaningful contributions, including members of our management team. Dan Broten, Head of EQ Bank; Marlene Lenarduzzi; Darren Lorimer, Group Head of Commercial Banking; Gavin Stanley, Chief Human Resources Officer; David Wilkes, Vice President, Head of Finance; Tim Charron, Vice President and Treasurer; and Janet Lin, Senior Vice President and Chief Information Officer of Equitable Bank. Together, I'm confident we can build on EQB's best industry track record in the months and years to come. Now back to our Chair. Vin?

Thank you, Andrew. Now it is the time for question period. We will first open the floor to shareholders and duly appointed proxy holders in attendance here in Toronto before moving to questions submitted in the online portal. If you have a question, please raise your hand so a microphone can be provided. State your name and whether you are a shareholder or a proxy holder. Do we have any questions? Now is the time for questions from our virtual audience. If you wish to ask a question in the portal, please select the messaging icon at the top of your screen, type your message in the text box and state whether you are a shareholder or proxy holder. Once you finish typing your question, click submit. At our end, Michael will summarize your question, read aloud your name and if applicable, the entity you represent. If your question has already been asked by another shareholder and answered, we will move to the next question. Michael, do we have any questions in the portal?

Vin, there are no questions in the portal.

Okay. As there are no questions, that means there's just one item remaining. We've now received preliminary voting results from the scrutineer. Their report states that 67.97% or 26,130,665 of EQB's outstanding common shares were voted at this meeting. The shareholders who voted by proxy or ballot have voted as follow: on the election of directors, over 98% of the votes cast at this meeting were voted in favor of each of the 10 nominees named in the Management Information Circular, and I therefore declare each nominee is elected a director of EQB until the close of the next Annual Meeting of Shareholders or until their successor is elected or appointed. On the appointment of auditors, over 93% of the votes cast were in favor of the appointment of KPMG LLP as auditors of EQB. I therefore declare KPMG LLP has been reappointed auditors of EQB for the 2025 fiscal year. The advisory resolution on our approach to executive compensation received over 98% for. I therefore declare the advisory vote is approved. Lastly, while the shareholder proposal was withdrawn, it received 23.75% votes for and 72.62% against and therefore, not approved. Final voting results will be available after the meeting via press release and on our website. We appreciate your interest in EQB. And on behalf of the Board, I thank you for participating and remind you that our door is always open for shareholder engagement during the year. I now declare the meeting terminated. Thank you.