Mortgage lender sees continued loan growth but increases credit loss provision amid evolving market conditions
Challenger bank EQB Inc. has kicked off 2025 with solid earnings, reporting increased loan growth and higher net interest income, though it also raised provisions for credit losses.
EQB Inc. posted net income of $116 million in the first quarter of 2025, marking a 7% year-over-year increase and an 11% rise from the previous quarter. Adjusted revenue reached $323 million, up 8% from a year ago, driven by continued expansion in residential and commercial lending. The bank’s total assets under management and administration grew to $132 billion, an 11% increase from Q1 2024.
EQB saw strong momentum in residential lending, with single-family uninsured mortgage originations jumping 23% in Q1. The bank expects further acceleration as the Spring homebuying season gains traction and borrowing costs ease.
Meanwhile, decumulation lending, which includes reverse mortgages and insurance lending, rose by 47% year-over-year.
"Successful advertising, exceptional broker service, and the value proposition of reverse mortgages have helped raise awareness among Canadians looking to tap into home equity," the bank noted.
Commercial lending also posted significant gains, with loans under management climbing 18% to $37 billion. Notably, multi-unit residential financing grew by 30%, totalling $27.5 billion in insured lending. EQB remains focused on insuring multi-unit residential properties, with 82% of its commercial loan book covered through Canada Mortgage and Housing Corporation (CMHC) programs.
While EQB’s lending portfolio expanded, the bank slightly increased provisions for credit losses (PCL) in response to evolving economic conditions. Adjusted PCL for Q1 stood at $13.7 million, while reported PCL was $18.7 million.
Net impaired loans climbed by $59.3 million to reach $683 million, representing 147 basis points of total loan assets—up from 132 bps in Q4 2024 and 94 bps a year ago. EQB noted that nearly one-third of new impaired loans stem from a single multi-unit residential loan insured by CMHC.
The bank said that its reserves remain sufficient, with net allowances at 28 bps of total loan assets, down slightly from 32 bps in Q4 2024.
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"The tailwind of recent interest rate cuts provides a constructive backdrop for enhanced loan growth and improving credit metrics," said Andrew Moor, president and CEO of EQB. “While we will need to manage second-order effects of cross-border tariff threats carefully, our purely domestic market presence, focus on lending in large Canadian urban centres with diversified economies and the highly competitive nature of our challenger bank services support a positive outlook."
EQB’s Board of Directors announced a dividend increase to $0.51 per common share, a 4% jump from the last quarter and 21% higher than the same period last year. The dividend is payable on March 31, 2025, to shareholders of record as of March 14.
EQB chief financial officer Chadwick Westlake expressed confidence in EQB's long-term outlook.
"We are pleased with EQB's strong start to 2025 and are invigorated by external recognition of our growth potential, reinforcing the calibre of our challenger business model and ability to consistently generate 15%+ ROE," Westlake said in a Press release. "EQB has excellent momentum from purposeful asset class expansion with strategic funding diversification progress importantly in EQ Bank."
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