Loblaw Companies Limited (L.TO) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the EQB Inc. Conference Call and Webcast. [Operator Instructions] This call is being recorded on Wednesday, December 3, 2025. I would now like to turn the conference over to Lemar Persaud. Thank you. Please go ahead.

Thank you, Ina, and good evening, everyone. Thank you for joining us on short notice during a busy earnings season. Your hosts for today's call are Chadwick Westlake, President and CEO; and Richard Dufresne, President and CEO of George Weston Limited and CFO of Loblaw Companies Limited. Also in the room are EQB's CFO, Anilisa Sainani; CRO, Marlene Lenarduzzi; and Chief Strategy and Growth Officer, David Wilkes. After prepared remarks, we will open the lines for questions from our prequalified analysts. Please note that this evening's call is to discuss the announced agreement to acquire PC Financial and establish a long-term partnership with Loblaw Companies Limited. We will be happy to answer your questions related to EQB's Q4 and full year results and outlook at the regular scheduled earnings call tomorrow morning at 10:30 a.m. For those on the phone lines only, we encourage you to also log into our webcast and view the presentation covering this transaction, which will be referenced during the prepared remarks. On Slide 3 of our presentation, you will find EQB's caution regarding forward-looking statements, which involves assumptions and has inherent risks and uncertainties. Actual results may differ materially. I would remind listeners that all figures referenced today are on an adjusted basis where applicable, unless otherwise noted. With that, I will now turn the call over to Chadwick.

Good evening, and thank you for joining us at this incredibly exciting moment of change for Canadian Banking. As you've likely seen, after market close, we announced that EQB and Loblaw Companies Limited have agreed to a transaction, where EQB will acquire PC Bank, PC Financial Insurance Agency, Inc., PC Financial Insurance Brokers, Inc. and certain other affiliated entities of PC Bank. During this presentation, we'll refer to all those aforementioned entities collectively as PC Financial. We also announced that we'll enter a new long-term strategic partnership to become the exclusive financial partner for Loblaw and the provider of one of the country's largest and most beloved loyalty programs, PC Optimum. This is precisely on strategy for EQB and our Challenger Bank purpose for Canadians. We partner with the best organizations to innovate faster and what we'll be able to achieve together is so much greater than what we could do alone. We are acquiring 100% of PC Financial for 1.15x book value. This translates to a total consideration of $800 million at today's estimate. In exchange, Loblaw will receive approximately 7.2 million shares of EQB issued from treasury, which is expected to represent about 17% of EQB's outstanding shares on closing. The balance of the consideration will be paid in cash. This will be subject to customary adjustments at closing, which we anticipate will occur within calendar 2026, pending the required regulatory approvals. This transaction unites 2 of Canada's most innovative banks, with aligned visions for better banking for all Canadians. It redefines the sector by scaling the delivery of extraordinary products and services and brings the value of challenger banking to new audiences, with EQB expanding to serve nearly 3.5 million customers combined at closing. It also presents a highly compelling opportunity for long-term value creation for our shareholders. Our mission at EQB is to drive change in Canadian banking to enrich people's lives. The acquisition of PC Financial will fuel our mission by cementing EQB as the challenger in Canadian banking, by growing our position to become one of the largest digital banks by customers and introducing Loblaw as a long-term strategic partner and shareholder. I'm proud to say that this is now a joint mission of our EQB and PC teams. Today, PC Financial is part of Loblaw. They provide everyday banking services to millions of Canadians, including their deposit account and their beloved MasterCard credit card program, one of Canada's largest credit card portfolios and most recognized card brands, with PC Financial serving 2.5 million customers. Some key metrics to highlight are its $4.4 billion in average credit card receivables, $5.8 billion in total assets, $32 billion in transaction volume and $1.1 billion in revenue reported as of September 2025 on a trailing 12-month basis. Alongside the transaction, we have agreed to a long-term commercial partnership in which we will become the exclusive financial partner for Loblaw. We'll also become the only financial services partner where customers can earn rewards through the PC Optimum loyalty program, Loblaw's marquee rewards program. This program is held in high regard by over 17 million Canadians, many of whom redeem rewards and receive exceptional value on a daily basis. I'm thrilled about this last point, and we'll expand more on the unique power of PC Optimum in the loyalty space in a moment. This partnership creates the competitive banking option that Canadians deserve. EQ Bank customers will be able to earn PC Optimum points, open a credit card and gain benefits from new in-person access to a banking on their teams -- on their terms as part of Loblaw's extensive retail footprint, a footprint that spans 2,500 stores, over 180 in-store pavilions and a nationwide 600 ATM network. PC Financial customers will be able to seamlessly access EQ Bank's broadest suite of banking products, such as our Notice savings account, gain access to our leading digital platform and enjoy the PC Optimum rewards they know and love. This partnership not only benefits our shared customers, it will benefit all Canadians by giving them greater access to better banking products and compelling innovations in the future from 2 banks with agile technology stacks, capable of bringing better products to market faster than our incumbent peers. Together, Canadians will benefit from increased opportunities to save, borrow and manage their money. Now let's take a deeper dive into what this acquisition unlocks and how it fits into our strategy. When we look at the strategic rationale of the acquisition, it fits into 5 broad categories as a transformative and financially compelling transaction. First, EQB's strategic priorities are each directly accelerated with the addition of PC Financial. Our first strategic priority is reigniting our core franchises. We're channeling significant time and energy into what makes us a true challenger. We're renewing focus on businesses where we have a competitive advantage, becoming more efficient and rigorous in our capital allocation. This transaction is a tremendous growth catalyst for our combined direct personal banking Challenger platform. Second, we're growing our product offering and ability to serve our customers. One of the biggest and most exciting pieces here is the PC Optimum linked MasterCard portfolio. The ability to offer our customers a leading credit card product is nothing short of transformational and precisely on strategy. Our complementary strengths allow us to even better -- are even better for our shared customers. PC Financial excels in spend, products and loyalty, while EQ Bank excels in everyday banking and deposit products. Together, our product shelf is diverse, digital first at the core and fiercely competitive. In addition, this partnership brings exclusive access, as I've said, to the award-winning PC Optimum program, the extended retail footprint of Loblaw stores and the totality of the ubiquitous brands and digital infrastructure, all of which prepare the Launchpad for future innovation. And then finally, the third strategic priority is expanding our capabilities in challenging the market. PC Financial brings experienced leadership with deep expertise in lending and payments as well as exceptional capabilities and hyperpersonalization. This will drive a more bespoke experience to our customers once we come together post close. Importantly, this expands our capabilities when we welcome the over 300 talented members of the PC Financial workforce to the EQB Challenger team. Their skill sets and culture complement ours perfectly, and we're excited for how our teams can learn from each other and innovate faster together. The second driver of our strategic rationale is the expansion of our customer base and how we believe this partnership can accelerate our growth. Growing to nearly 3.5 million combined customers and gaining exposure to the more than 17 million PC Optimum customer base is a reason to celebrate, but the fit of PC Financial's customer profile with EQB's existing ecosystem is what makes this growth so valuable. PC Financial customers are digitally engaged and aligned both geographically and from a risk perspective, with most accounts concentrated in prime and super prime borrowers. Their high pace of digital deposit uptake should bode well for growth in our direct deposit and savings account offerings. Banking is a scale business, and this deal delivers both scale and diversification. Our fiscal 2025 revenue was $1.26 billion. But when combined with PC Financial, it nearly doubles to more than $2.3 billion on a pro forma basis. The additional noninterest revenue is a significantly positive change for EQB and a long-standing strategic priority. Of PC Financial's $1.1 billion trailing 12 months revenue, 53% is noninterest. The noninterest revenue primarily consists of interchange transaction fees and card-related fee income, which will continue with EQB. The rapidly growing deposit base at PC Financial is currently over $800 million, and the addition to our EQ Bank model materially diversifies both our funding and revenue. Combined, we'll accelerate our focus on growing EQ Bank core deposits, progressing its position to become the largest component of our funding stack. This will be an eventual net interest margin tailwind. EQB has historically been referred to as a mortgage lender. This has matured to that of a Challenger Bank, and this transaction represents a significant strategic evolution and what it means to be a Challenger Bank. We'll continue proudly running our strong mortgage lending franchise in commercial bank, but we will become a far more competitive and multifaceted bank. We'll have a lending profile closer to those of our peers, but the capability to introduce new innovations and products faster. While the customer revenue growth will have a meaningful impact in the short term, it's just the beginning. This is the start of a long-term partnership with some of Canada's most recognizable brands, an intangible asset with massive potential. Many of the stores, ATMs and pavilions across Canada will introduce the EQ Bank brand. The tangible assets of this new partnership will be used to expand and diversify our marketing capabilities, opening avenues to reach customers and dramatically scaling our household awareness in Canada. With the acquisition of PC Insurance, which will be operated under EQB Inc. outside of the bank, EQB will continue to run the existing brokerage arrangement under the PC Financial banner in partnership with its underwriter. This offering provides everyday home and auto insurance solutions for Canadians. Importantly, it does not introduce property and casualty insurance risk to EQB as all policy risk remains with the underwriting partner. The business generates revenue primarily through gross written premium referral commissions paid to PC Insurance, translating to approximately 800 -- to $8 million and growing in annual earnings. It represents a simple, higher earnings stream for EQB. We're excited by the opportunity to add another financial services product to our shelf, expand our stable fee-based revenue and bring in a uniquely skilled and highly capable team. This is all compounded by EQB becoming the exclusive financial partner of PC Optimum. I want to expand on this for a moment because the impact of PC Optimum can't be understated. It's one of the largest loyalty programs in Canada, but the depth, power and sophistication of the technology is what really sets it apart. So not only will we have the opportunity to administer PC Optimum points, we'll have the privilege of working alongside the team that made it. The final category of how this transaction fits into our strategic rationale is about our joint financial profile and growth curve. This is a financially compelling transaction. Revenue synergies are expected from the significant cross-sell opportunities to our expanded customer base, but they are not required to make the transaction attractive. We also expect to realize funding and capital synergies through EQB's banking expertise and improvements in CET1 and RWA metrics, respectively. The cost synergy target is modest, representing just 7% of the cost base relative to the significant strategic benefits and acceleration of customer growth. Transactions like this are only successful with the right team in place. This will be our primary focus as this is about growth, not cutting, and we intend to create as much value as possible. Year 1 is expected to be mid-single-digit accretive to adjusted EPS and accretive to ROE in the first full year post closing on a run rate fully synergized basis. To be clear, we're talking about being accretive to the lower end of EQB's 15% to 17% ROE objective on a fully synergized basis, with PC Financial simply running at a more appropriate capital ratio. Additional upside is expected from cross-sell, capital and securitization and funding opportunities. We will continue our prudent capital management strategy and maintain strong capital ratios. As part of our capital management plan, we intend to submit our application to renew our normal course issuer bid in January 2026, an ongoing component of our capital allocation framework. We expect those annual pretax run rate cost synergies to be greater than $30 million and onetime pretax integration costs of $105 million. Most of the cost synergies and integration costs are anticipated to occur within the first 2 years of closing. On purchase accounting impacts, we estimate a gross credit markdown on credit card receivables of $300 million pretax, which will be amortized over 3 years and largely offset by future expected credit losses. Fair value increases on deposits and long-term notes are estimated at $50 million pretax, which accretes substantially to earnings over 3 years. And the identifiable incremental intangibles are estimated at $230 million, $200 million of which will be amortized over 8 to 10 years. This acquisition and our long-term partnership will deliver meaningful scale and diversification to EQB. This is illustrated by the pro forma metrics below, derived by EQB's adjusted fiscal 2025 results and PC Financial's reported September 2025 results trailing 12 months. Using these numbers, our assets increased 11% to $59 billion, and our combined customer base quadrupled to nearly 3.5 million. Revenue nearly doubles and in line with our stated objective of diversifying revenue, noninterest revenue increases by more than 4x to $759 million. It's clear that this transaction establishes a strong foundation for the accelerated growth we expect in the years ahead. In fueling this accelerated growth, we expect to close the deal in the second half of calendar 2026 subject to regulatory approvals and customary conditions. This transaction will not require EQB or Loblaw shareholder approvals, and the transaction has unanimously been approved by the Boards of EQB, Loblaw and George Weston Limited. On behalf of our Board, the leadership team and everyone at EQB, I can't wait to welcome the amazing, talented and innovative people at PC Financial to our Challenger team. Now I'd like to turn the call over to Richard Dufresne.

Thank you for giving me the opportunity to join your analyst call today. As Chadwick emphasized, this transaction is strategic for EQ Bank, but is also strategic for Loblaw. For Loblaw, it offers a new home for some of our best customers, but it will allow us to attract more customers going forward. It will, over time, offer an enhanced suite of products to further improve our customers' ability to live life well. EQ Bank has an impressive track record, which, combined with our great suite of products, should drive more shareholder value going forward. PC Optimum as one of Canada's leading loyalty programs will help drive EQ Bank's business. We have reviewed EQ Bank's strategy and are excited by the potential it offers to grow the business long term. The transaction consists in the sale of our PC Bank business in exchange for cash and equity. We will get 2 Board seats and the ability over time to increase our ownership to 25%. EQ Bank does not offer credit cards currently, and we will benefit from their scale and depth. Together, we offer a unique opportunity to accelerate the growth of Canada's leading digital bank, while allowing us to increase our focus on our core retail food and drug businesses. This will simplify our operational structure and balance sheet and will be accretive to earnings in our first full year post transaction. From a financial perspective, we will simplify our reporting structure, eliminating the bank segment. We will realize total value of about $1.3 billion. This includes our equity position, the cash portion of the transaction, the unlocking of excess capital associated with the conservative capitalization of our credit card portfolio, plus some other benefits. We intend to use a portion of the cash proceeds to increase our ownership in EQB up to the agreed level of 25% over time. The balance will be deployed toward our share buyback program. We have built a very loyal base of 17 million active PC Optimum cardholders. We also touch over 6 million Canadians every week in our stores and online offerings, and Canadians earn and burn more than $1 billion in PC Optimum points every year. We know that the more engaged a customer is, the more valuable they are, they spend more across our network and are more loyal. PC MasterCard holders are amongst the most loyal customers to Loblaw. As EQB accelerates the growth of PCO-linked financial products, more PC Optimum points will be issued, driving engagement and top line growth for Loblaw. From Loblaw's perspective, I believe this transaction represents a clear path to greater operational efficiency, financial strength and ultimately, superior shareholder returns. This is a strategic relationship designed to deliver transformational benefits to customers, creating one of Canada's largest loyalty linked banking ecosystem and offering more ways for Canadians to earn rewards. I will now turn the call back to Chadwick.

Thank you, Richard. With that, operator, can we please take questions from the line? We ask that you limit yourself to one or two questions, then requeue.

And your first question comes from the line of John Aiken from Jefferies.

Chad, you mentioned the cost synergies. I think it was around 7% of the cost base. But in terms of your EPS accretion, is there any assumptions in terms of revenue synergies? Or is that surplus that we may see down the road?

That would be surplus that you would see down the road.

Perfect. And if I may add one on since that was an easy question. The overlap in terms of the customer base, the 3.5 million that's going to be coming in from PC Financial and 17 million in terms of the loyalty members on PC Optimum. What is the overlap? And what -- how does a PC Financial customer look versus an EQB legacy customer?

Yes, sure. Thanks, John. I'd say it's very, very minimal overlap. This is net new opportunity. And I'd say that the makeup is actually very similar when you think of how digitally engaged the PC Financial customers are, where over 57% are digitally engaged. And when you look at the -- what the customers are looking for and value and product offerings and also the propensity of PC MasterCard customers to want a deposit account is very high, especially for the PC Bank digital offering now. So that bodes very well for cross-selling to the EQ Bank digital everyday account. So we see very significant upside. And then as I mentioned, we think the quality of the PC Financial customer, obviously, is extraordinarily high, right? This is a business that's been operating for over 25 years. The majority of accounts in the portfolio are concentrated in prime and super prime, as I mentioned, very high income earning in many cases. There's just -- there's a very good complementary growth opportunity here when you add all the 3.5 million together.

And your next question comes from the line of Gabriel Dechaine from National Bank Financial.

Congrats on the deal. Just a question on the financing here. So 7.2 million shares issued to a Loblaw Company, that's around $625 million or so at current price. I'm assuming it's the current price we should reference or something else.

Yes.

Where does the extra $200 or so million come from? Is that coming out of your excess capital, you'll dip down into the 12s for your core Tier 1? I guess, well, on close, you would have the new shares issued that would put you back in the other direction. Is that kind of how it would work though mechanically?

That's right, Gabriel. So it would be -- we have a VWAP that you would have seen for the current share price peg and then the residual in excess cash that we have on hand, yes.

Okay. And then that cash gets replaced essentially by the shares issued -- well, the capital, I guess, rather. Now about this cross-sell opportunity, what's -- when you're game planning this, what's more likely to work from this pairing? EQB with its new and improved over the past year, deposit business, selling that into the Loblaw customer base, maybe mortgages, I don't know about that one, or PC Financial MasterCards to the EQB customer base? Because I can draw that on a PowerPoint slide, but I mean, the PC Financial customer base is loyal, but it looks like they're single product customers primarily.

So a couple of questions there. So we do see material growth potential, right? We're going to be very focused with a complete EQ Bank product shelf, more complete now, and that's part of what's been missing. It's a little bit too early to give detailed specifics on all the cross-sell potential, but you got to think of a few ways where, yes, PC customers will gain access to the broader EQ Bank product suite. So we do have the savings, registered accounts, the digital platform. Yes, could you see mortgages at some point? Absolutely. We obviously have a significant mortgage business, including an offering through EQ Bank. And as I mentioned earlier, we see a high propensity for the PC MasterCard customers to be engaged in getting a deposit account, over 10% do now. And we see -- and that's really been ramping up as the team has been working on that more and more. So we do see a lot more growth for EQ Bank deposits and both sides to really have a complete offering. When you don't have complete product shelves on both sides, it's more difficult. And now really important as well, I think, is the distribution gate with this being, again, making us more omnichannel. So we have the digital, and we can actually be there in, say, for example, 180 pavilions and -- where EQ Bank can be. That will also help with advice and also help with more cross-sell of EQ products over time. So there's actually a pretty full shelf that we can sell on both sides.

And the brands are going to be distinct as well. So if I'm in a PC kiosk, I'm not seeing an EQB deposit, it will be labeled PC Financial or branded or whatever. And if I'm an EQB customer, you just try to sell me a PC Financial labeled credit card? I don't know if that's been -- maybe down the line.

It will all become EQ Bank. That's the brand that we're investing in. So that will be very simple and clear. You'll see PC Financial for insurance, which is -- but it's all going to be -- those pavilions, the ATMs, everything will become EQ Bank, but PC Optimum will be that lead brand with us, but there will be brand simplicity.

Yes. All our pavilions -- Gabriel, sorry, all our Pavilions will turn yellow and -- but you'll continue to see the PC logo on our card and the EQ Bank logo on it, too. So I think it's going to be great.

All right. Well, my wife might -- she collected at the Shoppers Drug Mart, so she might get on this stuff.

And your next question comes from the line of Stephen Boland from Raymond James.

I think a couple -- there was a few good questions. Chad, look, I mean you've got some several big shareholders already. I know you don't need shareholder approval. But I'm just curious, have you reached out and seeing how supportive they are because you are issuing stock at probably -- I haven't looked at the chart, but maybe a lower valuation than you wanted 3 or 4 months ago. I'm just curious if you've had any reactions from your 3 big shareholders.

Thanks, Steve. I appreciate you calling in. We -- I can't offer a perspective on our shareholders, but I could say I have spoken with a couple of our shareholders. And I would say that -- I'd say, with great support, and this deal is a great deal for Canadian Banking, for EQB, for Loblaw, and that's what we focus on most. This is there's great value exchange here and huge value creation. So we're not as focused on the share price today. We're focused on creating the best value possible for shareholders, and that's what we're doing here.

Okay. And second question is when I look at the Slide 17, PCLs, I mean, you're grabbing a large unsecured book, a fraction of your size, but the PCLs at PC Financial are a lot higher than what you've delivered. I'm just wondering, is your accretion include similar levels of PCLs in post-closing?

Yes. Yes, we have looked at the churning on PCLs. And I'd say, again, we believe this portfolio is a really strong quality, Steve. Higher FICO credit scores than the Canadian average, high household income, high digital engagement provides an attractive customer base. And on the customer behavior, customers are revolving and charge-off at rates we would expect and are in line with peers. So absolutely, we've thought that through, and we've modeled that accordingly.

And your next question comes from the line of Graham Ryding from TD Securities.

You flagged $800 million of direct retail deposits within PC Financial. How is the rest of the PC Financial business funded?

Want to try, Richard?

With equity. Like...

Yes, securitization.

Securitization and equity, that's how we've been funding our business. Like we're a grocer. So we -- we're not expert bankers. So we've, over time, been very, very conservative because it's not our expertise. So we've always been very conservative on all aspects of running this business, whether it was on credit, capital and any other thing that revolves around banking. So it was all securitization facilities.

And I think important too, Graham, the push on PC Financial Digital, it's really just ignited, I'd say, probably over the last year plus, right? The team is really building and gaining velocity there. So I think that $800 million would have a much higher run rate over time as well. But otherwise, it's been the securitization vehicles.

Okay. I assume those will continue going forward?

Yes, yes.

Okay. Great. And my second question, if I could. Just like, how can you describe the sort of the loan book or the credit card loan book, in particular, the growth profile and the earnings profile either over the last year or over the last few years?

Sorry, just the overall assets have been fairly consistent over the past year. So I'd say the PCL ratio, the PCL experience actually over the last 12 months has been a little bit lower. So I think on average, it's around 4.6%. We've seen about 4.2%, I think, on a trailing 12-month basis, which reflects the strong quality of the book. But overall, it's a stable to increasing credit card portfolio.

And your next question comes from the line of Mike Rizvanovic from Scotiabank.

Chad, I want to go back to that credit card, the growth profile. And I'm sure you're going to look to amp it up as time goes on as you sort of get that value proposition to the new clients that you're going to pick up. But when I look at the OSFI data, I do see that the credit card balances have been in and around $4 billion for a couple of years. It's underperformed versus when I look at the larger banks. And I'm wondering -- I don't know if Richard wants to opine on this, but what's been driving that? But it looks like it's been pretty stagnant for a couple of years here in terms of the actual outstanding balances.

No, I think the growth has been pretty stable, we'd say, and it's been tied to what's been happening on the food side, like -- and that's one of the reasons why we're so excited about this opportunity. Like we think with EQ Bank, we're going to be able to boost that growth. Because as I said in my remarks, for us, like the more credit cards we have, the more PC Optimum points we issue and that translates to our business. So that was ultimately the big driver of us seeking this transaction.

And I'd say, Mike, too -- thanks for calling, Mike. The -- important to remember is there's -- it's how you think of the book, right? Again, a lot of prime, super prime, it's actually very comparable to the DCB credit card portfolio books. And there's certainly a high transactor component. This is not all about a revolving business. These are high-quality transactors, and that's why the fee-based revenue and the noninterest revenue is a very significant component here, and that's really important and that's stable and sticky and that will continue as well.

Okay. Got it. And then just a quick one on -- just in terms of the distribution capabilities that you're picking up. Obviously, you're expanding it pretty significantly here. And I guess I was always under the impression that your customer base on the uninsured residential was very well catered to by the broker channel. Was there like a missing component where this sort of enhances that where you're picking up customers that you normally would not get through the brokers? Just curious in terms of how this actually expands into helping your other lending categories.

Yes, absolutely. I'd say our mortgage customers are absolutely very well served by the brokers. The brokers are still the best way to get a mortgage in Canada. This will absolutely -- we don't really cross-sell between EQ Bank and the Equitable Bank brands today. That will -- that is a planned evolution really to offer more mortgages to customers. And this brings in millions of more customers that we can target directly. And more of that might come through broker partnership beyond, but this does expand the universe overall of customers that we're engaging with and bring significant analytical capabilities. And PC Optimum is going to underpin our offerings, and that's going to be very, very unique and foundational. That is the #1 loyalty program in Canada. It greatly expands the value proposition, and that's really important to focus on here.

And your next question comes from the line of Darko Mihelic from RBC Capital Markets.

Just a couple of questions that I'm a little bit unclear on. And the most important of which I think might be the loyalty reward program. So I guess going forward, how does it work? Who calls the shots on the loyalty reward program? And how are the economics around that shared?

Well, nothing changed in our loyalty program, like EQ Bank will have a license to issue points. And so they'll have the whole points and the breakage that comes with it, and that's it. Like we've been tweaking around the edges on our loyalty program over the years, but it's all about making it better, more accessible. And so -- and it's a big driver for our business. So you should not anticipate to see any changes -- any significant change to our loyalty program other than making it more palatable for our customers. And the feature that's key for PC Optimum and has been the big driver of its success in Canada is the fact that we offer instant redemption. If you own PC Optimum or you have your PC Optimum app, like you know as well as I do that you have cash on your phone that you can use to pay for groceries or stuff at Shoppers Drug Mart day in, day out. And so that's what's really appealing. And so there are no plans to change anything.

And just to reinforce that, we have -- this is about a long-term commercial agreements, right? So there is -- we're very well organized around this in the partnership. That's why it's so important to know this is a long-term partnership.

Yes. And I want to add one more thing, like this loyalty program is not about making money with loyalty. It's about driving sales. If you were to compare our redemption rates versus all other loyalty program, it's extremely high. It's in the high 90%. And we like it that way. We want people to use the program. And so that's how it's been designed, and that's how it's been run for years, and that will not change going forward.

And does EQB have the right and the ability to add PC Optimum rewards to other financial products?

Yes. The more points get issued, the more -- like we're very much aligned, Chad, with an eye on this. So the more points EQ Bank issues, the happier Loblaw is.

Okay. I think I might have some follow-ups on that, Chadwick, afterwards.

And your next question comes from the line of Etienne Ricard from BMO Capital Markets.

Congrats on the deal. My question is for Richard. So why is PC Financial in better hands under EQB's ownership? In other words, why monetize now?

But to us, we're not monetizing. Like we are transferring ownership into the hands of an organization that we think is going to help us grow it even faster. As I've said earlier, these are our best customers and -- but we want more of those. And we feel EQ Bank strategy is best positioned to increase the number of credit cards that get issued year in, year out. That's ultimately what we seek. And so for us, monetizing PC Bank is not significant financially, but it's very important strategically. And so that's why this process was not a competitive process. It was a friendly process that lasted quite long because we wanted to get to know EQ Bank, the culture of the organization, their strategy and the people we will have to deal with. And we're very pleased with the outcome that is being announced today because we think this is a great fit for us, and EQ Bank will benefit as we benefit ourselves. So I think this is great from our perspective, and that's why we're so excited about the potential of this deal.

Okay. I appreciate the details. And Chadwick, this is a meaningful transaction for EQB in terms of scale. So how do you think about the integration complexity and the time line on potential revenue synergies?

Yes. It's right on strategy for us. So that's very important. The integration will be key. You've heard us speak about payments and completing our product shelf for a long period of time. So this will be a top priority. It's right -- I think the timing is excellent for us. I think for closing, when you think ahead to how this will accelerate our vision for accelerate the potential of the Challenger Bank after closing, you can start to see revenue synergies, I think, in short order. We'll be able to realize -- we believe we'll realize those cost synergies within the first 2 years. That's what we weighted to. And then the revenue synergies, the capital synergies, the funding synergies will start to scale, I think, reasonably quickly after closing.

And we have a follow-up question from Stephen Boland from Raymond James.

And this is more for the Loblaw side. I mean I presume the size of your portfolio is desirable from -- for every Canadian bank. So why Equitable? Like you said, it was not an option, I presume, but like why Equitable? Why not National, why not one of the other big 6 banks? Why did you choose Equitable?

Well, we felt from the get-go when we started to think about this a while back that we wanted an institution that would be best to house our customers. And when we look at EQ Bank strategy, we looked at their track record. And when we started to talk with them, like we felt that this was something that felt where we could work well together. Obviously, we're going to have 2 Board seats. So we'll have a little bit of influence on what's happening versus if we would have sold to one of the big banks, it would be very difficult to have any influence, I would say. So therefore, we think it's a great fit. But I think the more important point, as I said earlier, is like the strategy and the culture is one that fits really well with us. And so that was the key driver ultimately.

And I'll just reinforce. We feel the exact same way. This is such a close cultural alignment and mission alignment and focus on Canadians and the Canadian banking system improving. We couldn't be more aligned and thrilled our entire Board and management team, all of us, we couldn't be more excited than to work with Loblaw companies.

And your next question comes from the line of Gabriel Dechaine from National Bank Financial.

Just a couple of follow-ups here. When you talk about funding synergies and Mr. Dufresne's comment earlier about the funding strategy using securitization, I see about $3 billion of securitization assets and then you got a $4.4 billion receivables book. So is part of the plan just securitizing all of that as opposed to using equity for funding?

We'd securitize more, yes. But -- and then part of the funding synergy is also growing the core digital deposits as well, which we think we can do very well. And then you have -- it's kind of RWA release as well. Gab, I think is an important part of that.

Yes. That actually segues into my other question. The RWAs, I believe, is PC Financial on the advanced approach?

No.

No. Okay. All right. I see operating risk RWAs on the OSFI filings. That's all. Then...

That was standard I should say.

Okay. Cool. Last one I swear. Who asked for this -- I think it's called the change of control provision, the scenario where if there's somebody comes to acquire EQB, and it's successful, you have to pay $40 million to Loblaws. Who asked for that? I guess, Loblaws?

We just want to make sure like that our loyalty program is well treated if something like that were ever to happen. So we decided to partner with EQ Bank because we like their strategy. So we just want to have a say if someone else is interested in EQ Bank. Just between the announcement.

Of course, but it also signals that your intent is to close the deal, and you want to build a long-term partnership, and that's why you're putting that security in there for your protection.

Yes. We want to get married with EQ Bank, not with anyone else.

Sounds great. All right. And then what -- under what conditions would you -- I don't know if you can comment on that, but you're below that 25% cap when the deal closes. Is that -- what conditions would -- have you considered what conditions would need to be existing before you decide to increase that to that level?

No, there's no specific condition. That's our objective. So we'll do that over time. And -- but there are no conditions. So that's a level we think would be adequate for us. And so we're going to do that over time, yes.

Thank you. And I will now hand the call back to Chadwick Westlake for any closing remarks.

All right. Well, thank you so much, everyone, for joining us this evening and for following EQB story. We could not be more enthusiastic about our future with PC Financial and the close collaboration with Loblaw to fuel our next phase of growth. We look forward to keeping you updated and welcome you to join us tomorrow morning to discuss our Q4 remarks at 10:30 a.m. Eastern Time. Thank you, and good night.

And this concludes today's call. Thank you for participating. You may all disconnect.