Second Quarter Report For the three and six months ended June 30, 2018
Forward-Looking Statements Certain forward-looking statements may be made in this presentation, including statements regarding possible future business, financing and growth objectives. Forward-looking statements include, but are not limited to, statements relating to our financial performance objectives, vision and strategic goals, the economic and market review and outlook, the regulatory environment in which we operate, the outlook and priorities for each of our business lines, the risk environment including our liquidity and funding risk, and statements by our Chief Executive Officer and Chief Financial Officer. The forward-looking information contained herein is presented for the purpose of assisting the holders of our securities and financial analysts in understanding our financial position and results of operations as at and for the periods ended on the dates presented, as well as our financial performance objectives, vision and strategic goals, and may not be appropriate for other purposes. Forward-looking statements are typically identified by words such as believe, expect, foresee, forecast, anticipate, intend, estimate, goal, plan and project and similar expressions of future or conditional verbs such as will, may, should, could or would. Investors are cautioned that such forward-looking statements involve risks and uncertainties detailed from time to time in the Company s periodic reports filed with Canadian regulatory authorities. Many factors could cause actual results, performance or achievements to be materially different from any future results, performance or achievements that may be expressed or implied by such forward-looking statements. Equitable Group Inc. does not undertake to update any forward-looking statements, oral or written, made by itself or on its behalf except in accordance with applicable securities laws. 2
Growth Across All Businesses Mortgages Under Management 1 ($ billions) Deposit Principal Balances ($ billions) 21.7 22.0 22.8 23.2 23.8 24.6 9.9 10.0 10.5 11.0 11.9 12.4 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 Expanding our role as Canada s Challenger Bank 2017 2018 1. Mortgages Under Management, which includes certain mortgages derecognized from the balance sheet on securitization. 3
Solid Profitability Despite Backstop Costs Earnings Per Share Diluted ($) ROE (%) 2.54 2.28 2.21 2.36 2.34 2.45 2.19 18.4 15.6 14.4 14.9 14.5 14.5 13.0 Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 2017 2018 Q2 EPS reduced by $0.26, ROE reduced by 1.5% due to backstop-related write down 4
Profitability Driving Book Value Consistently Higher Book Value Per Share ($) 47.81 49.55 51.72 54.96 57.73 59.98 62.25 64.57 67.14 69.03 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 5
Grow Existing Business Through Superior Service Alternative Single Family Mortgage Principal ($ billions) 8.2 8.5 9.1 9.3 9.5 9.8 Mortgage Principal 15% higher than last year Originations 51% higher than Q1 (versus 40%-45% growth originally expected) Renewals up ~10% year-over-year asset growth expected in Q3 and Q4 (versus lowsingle digit growth originally expected) Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 Growth in Q2 originations and growth in assets faster than expected at beginning of the year 6
Grow Existing Business Through Superior Service Commercial Lending Mortgage Principal ($ billions) 3.0 2.8 2.9 2.9 3.1 3.3 Mortgage Principal 15% higher than last year Originations 134% higher than last year (up 11% compared to Q1) Growth reflects capital allocation strategy, broader partner network Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 Q2 Commercial originations an all-time record 7
Grow Existing Business Through Superior Service Securitization Financing Mortgages Under Management ($ billions) 10.5 10.6 10.8 10.9 11.2 11.5 MUM 8% higher than last year Originations 30% above last year (47% above Q1) Driven by an increase in CMB capacity, strength in Multi market, stability in Prime Q1 Q2 Q3 Q4 Q1 Q2 2017 2018 8
Build EQ Bank Into Canada s Leading Digital Platform 9
Leverage Our Capabilities and Balance Sheet to Grow In Adjacent Markets Mortgage broker awareness of our reverse mortgage product is growing 10
Maintain Capital Management Discipline, Low-Risk Profile Dividend Per Common Share - Declared ($) 0.27 0.27 0.26 0.25 0.24 0.23 0.23 Feb May Aug Nov Feb May Aug 2017 2018 (%) June 30, 2018 Leverage CET1 Total Capital Ratio 5.4 Full compliance with standard 14.3 Basel III minimum CET1 target of 7.0% 15.6 Basel III minimum Total Capital level of 10.5% Low Risk Profile Net impaired mortgage assets of $27.2M or only 0.13% of total mortgage book (vs. 0.16% a year ago) Allowance for credit losses to total mortgage assets of 0.12% (higher than Bank s average loss rate of 0.04% over past decade) 0.4% 0.3% 0.2% PCL of $0.2M reflects quality of book and improved 0.1% macroeconomic forecasts IFRS 9 adopted January 1, 2018 0.0% Net Realized Credit Losses as a % of Total Loans 0.5% Comparator Group 1 EQB 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Q1 Q2 2018 1. Represents eight largest publicly traded banks 11
Strengthen Key Capabilities New Switch Program Easily move Prime mortgages to Equitable from other lenders Creditor Life Insurance Added value for Alternative or Prime borrowers 12
Financial Metrics Reduced by Write Down; Write Down Costs Recovered by Year End Net Interest Income Impact NIM Impact Core Lending NIM Impact Net Income Impact $5.9M 11 bps 17 bps $4.3M EPS/BVPS Impact $0.26 Backstop-related vs recent run-rate expenses will decline $2.8M per quarter Q3 2018 - Q2 2019 13
Margin Trends NII relatively consistent YoY as 10% growth in average asset balances offset by 12 bps decline in NIM Core Lending NIM lower due to backstop costs, asset and funding mix, partially offset by lower insurance premiums Securitization NIM lower due to funding mix, mortgage prepayment income partially offset by asset mix Total NIM Net Interest Income / Margin TEB (%) 63.6 67.0 70.8 77.9 78.3 78.3 2.50 2.55 2.60 2.64 2.55 2.41 72.0 2.17 Net Interest Income ($M) 79.7 81.3 79.5 2.33 2.31 2.21 0.31 0.22 0.19 0.24 0.22 0.30 0.25 0.24 0.22 0.17 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 1.62 1.61 1.64 1.70 1.66 1.63 1.47 1.59 1.58 1.51 Core Lending Securitization Financing Expected NIM range of 1.55% to 1.60% in Q3 and Q4 2018 14
Investing While Maintaining Tight Cost Controls Efficiency Ratio (%) Q2 Efficiency Ratio elevated by EQ Bank marketing investment and writedowns 43.2 38.2 37.0 33.9 33.2 39.2 37.4 37.3 37.7 42.9 Q2 non-interest expenses 12% higher Y-o-Y on 8% FTE growth, higher marketing expenses in connection with EQ Bank and regulatory/legal fees Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2016 2017 2018 Canada s Most Efficient Schedule I Bank 15
Summary Differentiation strategy contributing to brand and shareholder value Product and technology roadmaps will be executed with discipline and creativity Improved outlook for Alternative Single Family asset growth Expect diversified asset growth to continue 16