EQB Aktie

Welcome to EQB's earnings call for the second quarter of 2026. This call is being recorded on Thursday, May 28, 2026.

It is now my pleasure to turn the call over to Lemar Persaud, Vice President and Head of Investor Relations. Please go ahead.

Thank you, operator, and good morning, everyone. Your host for today's Q2 results call are Chadwick Westlake President and CEO; Anilisa Sainani, CFO; and Marlene Lenarduzzi, CRO. Also present for the Q&A session is Darren Lorimer, EVP, Commercial Banking; and Daniel Rethazy, EVP, Personal Banking. After prepared remarks, we will open the lines for questions from our prequalified analysts.

We encourage you to also log into our webcast and view our quarterly presentation, which will be referenced during the prepared remarks.

On Slide 2 of our presentation, you will find EQB's caution regarding forward-looking statements which involve assumptions that have 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.

Thanks, Lemar, and good morning. Before getting into my formal remarks, I want to start with spotlighting talent. I'm excited to welcome Daniel Rethazy to his first call with us as our Head of Personal Banking. He joined in April from CIBC to drive our integrated personal business, including PC Financial. It's early days, but he is already making his mark, a generational talent in banking for the generational change EQB is embarking on for our industry.

In a matter of weeks, when we close on PC Financial, we're very excited to welcome many new world-class leaders. We'll speak more about some of them later in Q3. Our team will be stronger than ever.

Now 3 topics I'll cover before Anilisa shares more on results.

First, we're entering an inflection point. This marks the final quarter of our stand-alone earnings model, with PC Financial set to close on Canada Day, July 1, an important and symbolic day for our country and for the start of our company's new differentiated growth curve. As I shared in my remarks at the Canadian Club earlier this month, Canada needs stronger competition to perform on a global stage and better serve everyday Canadians, especially in an uncertain macroeconomic environment.

I'll say again that I applaud our federal government and regulator for their quick action to ensure change is delivered with urgency. Being a Schedule 1 bank matters, and the regulations that guide responsible structure, capital and the privilege to be a deposit-taking institution directly matters. But this needs to be matched to the requisite speed, innovation and flexibility to compete, to ensure all Canadians have a fair chance to own a home and that small businesses are supported as the key growth engine for the Canadian economy that they are.

This applies to EQB where we have particular strength, helping self-employed borrowers remain underserved in Canada. The small business banking platform we launched last fall is also resonating with new customer growth of 53% quarter-over-quarter. We're going to add the scale and relevance to champion more of this by combining banking, payments, a leading credit card offering, insurance and the most relevant rewards. With PC Optimum's reach of 18 million members, we have a unique opportunity to deliver differentiated value propositions plus expanded distribution channels. We will move from a niche player serving hundreds of thousands, to millions of Canadians, with our transformed business model and capabilities.

Our integration plans are well advanced, and we're focused on flawless day 1 execution. At the same time, we remain anchored in the fundamentals of our bank: sustainable profitability, prudent risk management and strong capital discipline. Those areas of focus don't change on July 1 when we quadruple our customers nearly, double our revenue and diversify our entire business and earnings mix as EQ evolves to an omnipresent brand from coast to coast.

My second point this morning is that we continue to strengthen our core businesses that underpin everything we're building. This was our first quarter of neutral operating leverage in 2 years, maintaining our significant progress from Q1. This reflects deliberate actions to restore efficiency as a competitive advantage.

We did this while expanding our balance sheet thoughtfully and not chasing growth. For example, in Commercial Banking, we increased loans under management by 17% year-over-year and 4% quarter-over-quarter, reflecting continued strength in our insured multi-unit residential lending program and supporting the need for more affordable housing.

The market remains difficult in uninsured commercial real estate lending, and we continue to focus on quality opportunities at strong yields. Importantly, we saw improvement in uninsured commercial impaired loans, with a decline of 8% from Q1.

A key focus of Commercial Banking also continues to be supporting our credit union partners, including through our treasury and securitization consulting services and our registered product programs. In Q2, our securitization team reached a new milestone with nearly $9 billion of loans under administration. Our team was honored to receive 2 Canadian Public Relations Society ACE Awards for our outstanding work and raising awareness across Canada for registered disability savings plans.

In single family, a slower-than-expected housing market has intensified competition. Within that backdrop, we've been able to preserve market share and portfolio margins. Renewal rates reached record highs in Q2, in the high 70s, enabling us to keep loans on the book at lower cost than new originations.

Our strategic approach to insured originations delivered a strong pipeline of applications in Q2 and sets the foundation for the return to profitable growth within that portfolio over the long term, after deemphasizing growth for several quarters.

Our decumulation business continues to show strong margin performance, combined with assets that accretes 26% year-over-year and 5% quarter-over-quarter, driven by continued reverse mortgage market share gains in the provinces where we compete. Reverse mortgages are a top priority growth business for us.

EQ Bank deposit balances surpassed $10 billion. New digital customer acquisition continues to be strong with about 30,000 new customers joining us in the quarter, in part due to our focus on improving the application and onboarding process. This has been a deliberate effort ahead of our integration with PC Financial. We will continue to invest significantly in digital capabilities that will present cross-sell opportunities between EQ and PC customers as we integrate the platforms.

We're accomplishing all of this while investing in the innovation of our capabilities. We've often talked about the advantage of EQ Bank being cloud-based, with an open API stack and a partnership approach with fintechs. We have always been digital-first and cloud-native. AI is increasingly enabling our strategic agenda, including through the tools and agents we've developed to amplify employee capabilities and enhance customer experiences, ultimately flowing through to improved bottom line earnings. At the same time, we're embedding strong governance and security practices to ensure our teams can adopt and use AI with confidence and responsibility.

Employee adoption of AI assisted tools has increased fivefold this year, with over 80% now actively using AI systems daily. Our teams have sell built nearly 200 productivity agents, demonstrating strong grassroots adoption. 100% of our engineers have adopted AI-enabled coding tools, including a strong acceptance rate for agentic coating suggestions. All of these tools are designed to help empower our teams with AI, helping them work smarter, faster and unlock their full potential.

Some of this is already reflected in our efficiency ratio improvements. We're moving faster and able to scale without friction, and those benefits will only strengthen as we integrate with PC Financial. We'll share more detail on this and other capability investments when we host our Investor Day, which we are pleased to announce this morning will be on December 7 this year.

And on credit for the quarter behind us, Marlene will provide an update shortly. We now expect recovery to be weighted toward late 2026 and into 2027 for our mortgage portfolios, reflecting geopolitical tensions, trade uncertainty, higher energy prices, elevated unemployment and a softer housing market.

And my final point, shareholder value. During the second quarter, we continued to sharpen our focus, slowing or stopping in areas where we're not winning. This is a priority I outlined when I became CEO about 9 months ago. Following our exit of insurance lending, we also exited the merchant payment business. It was not core to where we're going. This is consistent with our approach that began last fall: focus, simplify and allocate capital where it drives the highest long-term value.

Our objective remains that we're intent on doing a few big things well as we evolve to a household name and a competitor at a new scale. We will continue to make portfolio decisions consistent with that discipline. We remain committed to returning to our 15% to 17% medium-term North Star ROE target. In support of that goal, we're taking a prioritized approach to capital allocation with flexibility as a strategic advantage. While our bias is toward internal reinvestment, we will remain opportunistic, including for share buybacks, dividend growth and selective inorganic opportunities.

Stepping back, all these actions I've discussed ladder to one outcome: stronger, more sustainable returns for our shareholders.

Now over to Anilisa.

Thank you, Chadwick, and good morning, everyone. As a reminder, my comments will be on an adjusted basis, and you can find a summary of these adjustments on Slide 22 of today's presentation.

Starting on Slide 6. During Q2, we operated with focus and discipline, maintained strong expense control and executed on strategic capital deployment, including share buybacks. However, EPS and ROE were down from last year, reflecting a stronger growth in credit environment at that time. Sequentially, diluted EPS for the second quarter was down 10% to $2.03 and ROE was down 90 basis points to 10.2%, largely reflecting higher provisions for credit losses and the semiannual LRCN distribution, partly offset by the impact of share repurchases. A modest decline in revenues was partially offset by lower expenses, with the efficiency ratio increasing 30 basis points and remaining strong at 49.4%.

Turning to the balance sheet on Slide 7. Loans under management, or LUM, are a key performance metric as they include our market-leading position in insured multi-unit residential mortgages. LUM increased 8% year-over-year and 2% sequentially to $77.1 billion, driven by continued strength in our multi-unit residential portfolio. We delivered this growth while continuing to optimize our portfolio mix and redeploy capital away from lower-return businesses. This included targeted actions in the insured single-family residential portfolio, repositioning our equipment financing portfolio to move away from long-haul trucking and subprime lending, and discontinuing originations in insurance lending.

Conventional loans, which exclude the insured single-family residential and insured multi-unit residential portfolios, are the primary contributor of net interest income. Conventional loans increased 4% year-over-year and 1% sequentially, reflecting continued growth across most portfolios.

We continue to track towards our 2026 LUM growth outlook, which we had talked about as a high single-digit to low double-digit growth target. We continue to expect to land in that range, albeit towards the lower end. Following the closing of PC Financial, we expect our lending mix and growth outlook to evolve, with the addition of a scaled credit card portfolio.

Turning to deposits. Balances increased 5% year-over-year and dropped 2% sequentially to $36 billion. EQ Bank deposits were up 7% year-over-year and 1% sequentially, driven by growth in customers. Across broker deposits, wholesale funding and other channels, we continue to access a diversified mix of funding sources. This provides important flexibility and enables us to actively manage and optimize our cost of funding across the stack while maintaining pricing discipline in a competitive environment. Overall we remain focused on increasing the proportion of lower-cost funding, particularly deposits, which we expect to accelerate post the closing of PC Financial.

Turning to NII on Slide 8. Net interest income was $261 million, down 6% year-over-year and consistent with last quarter. Net interest margins increased sequentially to 2.08%, in line with our 2% plus target. The sequential expansion of 6 basis points was partly driven by the impact of fewer days in the quarter, which show higher asset yields, as well as favorable mix shifts. Looking forward into 2026, our expectation is for margins to remain in the 2% plus range prior to the benefits of the PC Financial acquisition.

Slide 9, noninterest revenue of $41.6 million increased 10% year-over-year and declined 4% sequentially. The year-over-year increase was driven by growth in fee-based income and higher securitization gains in insured multi-unit residential lending where we continue to hold our market-leading position. These increases were partially offset by unfavorable fair value market-related adjustments. While securitization activity remained strong versus last year, we saw some moderation sequentially, reflecting market conditions. Following the close of PC Financial, we expect to expand our base of recurring fee-based income as we further diversified our revenue streams.

Turning to next on Slide 10. The strategic restructuring program completed last October reset our expense base and how we manage cost. We are tracking ahead of the $45 million pretax savings expense target outlined when we entered fiscal 2026 as we continue to operate with discipline and tightly control discretionary spending.

As a result, noninterest expenses declined 4% year-over-year and 1% sequentially. Year-over-year results benefited from our restructuring program, lower corporate expenses and the positive impact of other items, including a capital tax benefit, partially offset by higher premises costs. Sequentially, pacing our expense spending in line with revenue growth and the positive impact of the other items mentioned more than offset higher staff costs and our continued investments. Expenses remain a controllable lever that we are managing thoughtfully.

On Slide 11, our capital allocation strategy continues to prioritize reinvestment in organic growth, disciplined return of capital to shareholders through dividends and share repurchases, and maintaining flexibility to pursue strategic inorganic growth.

The bank's CET1 ratio was consistent with last quarter at 13.6%, reflecting the benefits of internal capital generation, offset by RWA growth. Our CET1 ratio is strong and remains well above our target and regulatory minimums. We expect to maintain a strong CET1 ratio post close of PC Financial.

And yesterday, we announced a 3% dividend increase to $0.61, up from $0.59 last quarter and $0.53 last year, as we continue our strong track record of dividend increases. We repurchased a record 1.2 million shares this quarter, supporting attractive return of capital for our shareholders.

I will now turn the call over to Marlene to take us through risk.

Thank you, Anilisa, and good morning, everyone. I'll start on Slide 13. Against a quarter characterized by elevated macroeconomic uncertainty, our lending portfolios have demonstrated resilience. As noted earlier by Chadwick, the macroeconomic headwinds in Canada have intensified.

Performing PCLs were $6.7 million as we proactively built allowances across both the Personal and Commercial portfolios in response to softer forward-looking macroeconomic indicators, reinforcing our disciplined and prudent approach to credit provisioning. The most notable changes were in the outlook for housing prices. This was reflected in our ACL coverage ratio, which increased -- was increasing to 46 basis points compared to 29 basis points a year ago. As we navigate a prolonged and evolving macroeconomic backdrop, our focus remains clear: disciplined credit management, prudent lending and appropriate provisioning.

We see improved credit trends in our leasing portfolio stemming from our deliberate actions to reduce exposure to higher credit risk segments such as long-haul transportation, and in addition to shifting the portfolio towards prime customers. We signaled our repositioning of this lending portfolio in 2024, and we're now seeing the positive impacts of those changes.

Turning to Slide 14. Impaired PCLs increased 3 basis points sequentially to 35 basis points, reflecting higher provisions in the Personal and Commercial portfolios, partially offset by improvements in equipment financing. In single-family residential, impaired PCLs totaled $13.3 million, reflecting continued pressure on property valuations, rising defaults and longer workout time lines. These pressures continue to predominantly affect the 2022 and shoulder vintages in select GTA surrounding suburbs. We have not observed this pressure spreading to other regions or other vintages, and this is further supported through scenario analysis.

In Commercial, impaired PCLs were driven by previously impaired loans that have had prolonged resolution time lines in the soft commercial real estate market.

Turning to Slide 15. While gross impaired loans increased in both our Personal and Commercial lending portfolio quarter-over-quarter, formations in all our portfolios, Personal, uninsured commercial and leasing were down sequentially. Gross impaired loans in Commercial increased to $524 million, up 9% quarter-over-quarter, largely driven by a single insured exposure. Encouragingly, excluding this item, GILs declined 8%, reflecting continued improvement in the underlying uninsured portfolio. As a reminder, approximately 85% of our commercial loans under management is insured by CMHC.

The bank lends through cycles and continuously refines its underwriting practices to maintain a resilient portfolio through various economic conditions. As a reminder, we remain focused on first-lien lending in urban markets where more diversified economic drivers support greater credit resilience.

In this environment, we remain focused on what we can control, maintaining disciplined underwriting, actively managing our portfolios and prudent reserving to ensure resilience through the cycle. Against the backdrop of elevated macro and geopolitical risks, we expect a normalization in credit to be skewed towards late 2026 and into 2027, absent a material shift in the outlook. We remain confident in the credit quality of our portfolios and our disciplined approach towards managing risk.

And with that, I will turn the call back to Lemar for the Q&A portion of the call.

Thanks, Marlene. I will ask that you limit yourself to 1 or 2 questions and then please requeue so that we can get to everyone. With that, operator, can we have the first question from the lines?

The first question is from John Aiken from Jefferies.

Chadwick, the July 1 date for the PC Financial acquisition is a little sooner than we expected, but I'm assuming that that's not a terrible surprise on your end. Something of this scale has obviously never been done at EQB. Can you give us some sense in terms of how you're preparing for the integration and talk to us about what those of us on the outside can expect to see in the early days?

Yes, sure, John. We're really pleased and excited about this. This is so significant for our industry. And we've been building towards this. This is why we've added talent like Daniel, who is here in the room with us, and the team coming with PC Financial is exceptionally talented too, which is we can't want to bring it all together.

From an integration perspective, we've been working on this since day minus 1, call it. We've been -- we have a team very well organized. The integration is proceeding really well. Probably one of the most positive aspects is actually just how the PC Financial and EQ teams are working together. We do have high conviction in the cultural alignment and how the product shelves are going to come together. Everyone is extremely collaborative.

And what's so different on this, I think, too, John, from an integration success perspective is this truly is about partnership. It's a very long partnership with Loblaw's. This makes us that exclusive financial partner for PC Optimum. We have a very shared vested interest and success for everyday Canadians here. So we have invested in the people, the process and the technology and the resources, and why I use the term deliberately for flawless day 1 execution. I use that very intently.

So I think if anything, it's going -- it's matching our ambition level, and we're very excited for day 1 closing. So yes, not a surprise, but certainly, that was our ambition. And I'm glad we could provide some upside positive surprise for you.

Well, I'll admit that flawless does raise my expectations.

Your next question is from Gabriel Dechaine from National Bank.

Just to start off, the buyback activity, which was notable this quarter. I'm just wondering what the outlook for more of that is. Let's start there.

Yes. Sure, Gabe. I mentioned it's going to continue to be in our capital allocation framework. But Anilisa, do you want to provide a little more context?

Yes, absolutely, Gabe. Like we dynamically manage our capital. As we've talked about, share buybacks are an important part of our overall shareholder value equation. And we think about investment in organic growth, returning capital through the buybacks, strategic inorganic growth.

As you know, we started to buy back shares in late 2025, well before the PC Financial acquisition. We believed that that was one of the best uses of capital at that time. And we've continued to buy back a double benefit, both from the PC Financial acquisition mechanics as well as our capital deployment strategy.

Looking ahead, I think about 2 things. First, interpreting our recent buybacks in any way to signal that we don't have alternative investment opportunities. There is a lot of strategic organic growth especially post close. And second, I would also caution, just because we've completed the buyback, to avoid any additional issuance to meet Loblaw requirement, that we're done with buybacks. We will continue to be active where the opportunities exist. So we have a lot of strategic optionality.

Note also that Loblaw will also be buying post July 1 up to their 25%. So we still believe our stock is undervalued by the market, and we have a lot of flexibility and strategic optionality.

Okay. Now on the credit side of things, the -- specifically the resi mortgage portfolio. I noticed the LTV -- the average LTV of the portfolio is at 69%. It's still a very low number, provides a lot of protection. But it's been creeping higher. I'm just wondering, is there -- what percentage of the portfolio, I don't know if you could have that number handy, is -- has [ reached ] above the 80% mark? And what percentage of the portfolio, because you said that the, my words, your problematic regions are the same ones as no -- not expanding, I guess. What percentage of the portfolio is in those particular areas?

Yes. And that's the kind of level of detail that we generally don't disclose publicly. But what I can tell you is that we have been monitoring those particular segments, including as we refresh HPIs and get a sense of where the current LTVs land. And we ensure that we're appropriately provisioned for any of the potential risk that that might provide.

Your next question is from Etienne Ricard from BMO Capital Markets.

So efficiency is a significant focus, getting more brand recognition is also another one. So as you get closer to the PC Financial deal, how do you think about better promoting the EQ Bank brand, given Loblaw has many different channels? And just a reminder on how this responsibility will be shared would be appreciated.

Yes, sure, Etienne. There's lots we can share, I get pretty excited on this topic where again you go from a brand that is not well enough known to Canadians as a brand that's so important to Canadians, and it will -- why I use the term household name, you're going to see 5 million, 6 million, 7 million, 8 million Canadians a week that will see our brand by default at, call it, 5,000, 6,000 points across Canada, be that in the Loblaw store. The Loblaw banners have over a dozen brands. You can imagine from a Loblaw to [ Canadian Real ], [ Lennox Supercenters ] to Shoppers and SO. We're going to be -- our brand is going to integrate in.

Where we'll come back with precise clarity is when will it show up where and what sequence. Because our first priority is a seamless customer experience here. And we're going to focus first on ensuring customers continue to experience PC Financial as they do today, so there's no confusion. And then we're to bring the products and the brands together really delicately, elegantly over the coming months and few quarters. And that PC Optimum will start to be a benefit right away and we're going to work that into many products.

So there is going to be a pretty big exciting conversion that's going to happen here. And we won't -- I think it's going to be both next quarter, I think we'll feel more comfortable sharing even more precision on that. And then as we get through to the Investor Day ahead. But a lot, a lot, a lot to come. But I just want to really want to reinforce this should feel like no significant change for those existing customers day 1. And we're going to focus on that seamlessness and then it's -- we're going to have a lot of pleasant surprise for customers on both sides from there.

Okay. Looking forward to it. A few of your peers have talked about the potential for improved efficiency in mortgage underwriting on the back of new technologies and AI. This could potentially free up resources and help banks look at more complex applications. So Chadwick, do you see a risk that we could see increased competition in the alternative market.

Yes. It's going to -- I think what -- the first thing, can we -- is there opportunity to improve the customer experience? Is there opportunity to improve underwriting through agents and AI? Yes. Do we maintain a competitive advantage to win in that market and segments where we compete today? Yes. A lot of that comes down to the lending experience either way, regardless of if you have an agent, and how you structure your residential mortgage underwriting policies and the experience in folks of your team. And I think for that, we will continue to have a competitive advantage.

It will make us more efficient. Can we improve the efficiency? Can improve the response times? Yes, with it. But I don't know if it's necessarily going to reshape the competitive landscape, but it's going to reshape our ability to do more faster, I think, and extend our filter. So this is a top line and bottom line win. But our focus is how do you get a response to Canadians faster and how do you manage that risk even more effectively.

Your next question is from Darko Mihelic from RBC Capital Markets.

And thank you, by the way, you get my vote for Best IR to have your results reported the night before on a very busy day. So thank you very much for that, appreciate it.

My question is for Marlene. Marlene, it's difficult from the outside looking in to understand how the process is going with respect to working out loans. For example, what I'm referring to is the concept that loans are taking longer to work out, and therefore, your loss given default is rising.

So my question is, first, with respect to the mortgages, and even Commercial for that matter. Are there any green shoots? Is there anything to suggest that the situation is getting better? Or is the situation actually getting potentially worse, because we just see no movement in housing sales or very limited movement in housing sales and we see delinquencies rising for everybody's mortgages? So is it, in fact, potential -- there's a good potential that the courts will have more workflow and even longer delays for a workout?

So thanks for the question, Darko. There's a lot to unpack in that question. I'll start with just talking about the Commercial portfolio and then we'll move to the retail portfolio or the Personal portfolio.

On Commercial, when you talk about green shoots, so we do have a green shoot this quarter. We certainly saw Commercial formations lower than they were last quarter and on par and, actually, it's lower than where they were last year at the same quarter. In addition, we see gross impaired loans on the uninsured portfolio declining sequentially. And so those are all positive signs. We did have a number -- some resolutions this quarter that are very encouraging as well. And we have a clear line of sight into our plans for the impaired book.

We're going to continue to work through the portfolio. And you're right, there have been some elongated time lines, but we're actively working that portfolio.

On the residential side, as you saw in Slide 20 in the appendix, you saw that the early-stage delinquencies, the 30 to 89 bucket, did come down sequentially, and it's been kind of down to where it was about a year ago. So there's a positive sign there. And our formations on the Personal side has also declined quarter-over-quarter.

Now I want to see a few more positive quarters like that to have the type of confidence that we're now -- the worst is behind us. But we're certainly looking at those segments and we're seeing the improvements that gives us some hope. But it does depend on external factors such as housing prices and sales. But that's where I would say we're looking at, Darko.

Just to -- correct me if I'm wrong. I believe many of your impaired losses this quarter were on files that were previously impaired and you had to take a higher loss. And is it your expectation that the existing book won't we -- I guess the concern is -- maybe I should rephrase that question. I understand what your expectation would be. But the concern is that the courts aren't getting any cleaner. And that your existing files will be right back at the same sort of situation next quarter and quarter after that simply because the system is overwhelmed.

Well, we do refresh our provisions every quarter. And so we've looked at our valuations and we've taken the appropriate provisions both on the performing and the nonperforming side. And so if I look at our overall allowance this quarter, it was 46 basis points. A year ago, it was 29. So we have built the appropriate reserves as we've been going through our portfolio and taking into account the elongated resolution times and the carrying costs that are associated with that, have already been baked into those provisions that you see there in Q3 -- in Q2, rather.

Okay. No, I understand that. I was just curious if there's any insight on the court process, if there's any anything that you could offer on that. But I can...

It hasn't -- it did get worse. It was typically a court process would be, say, a 6-month process, and it got -- it is now about 12 months, 18 months depending on the region. But it hasn't shifted materially over the last couple of quarters.

Yes, maybe I'll give a Daniel chance. So Daniel is running the business now as well, he's come with deep experience. Maybe, Daniel, is there a couple of comments you could share with Darko on this or anything?

Sure. Thanks, Chadwick, Yes, we spent a lot of time also, I think just given to Marlene's point, we are seeing the court processes, call it, 12 to 18 months longer, but sort of stable at that new normal. So what we've done is pivoted more towards our collections processes and made some changes to how we can drive greater actions, starting from files that we're concerned about that haven't even gone delinquent, right through to the demand in the enforcement stage. So I think that's really where more of the battleground is for us now, how do we get ahead, how do we drive more frequent, more regular and earlier action with our clients. And we're seeing some good traction there.

Your next question is from Mario Mendonca from TD Securities.

One of the bigger changes that happens as a result of the PC deal is you're picking up $4 billion plus in credit cards. And I would imagine that in your look through the business prior to this deal, you would have learned a lot about those customers. Some of the larger banks that have reported in the last few days were clearly seeing deterioration in their credit card books. And the level of that deterioration is highly dependent on the quality of the borrower, whether we're talking mass market or mass affluent. As you looked at this book, what did you learn? What is the nature of this client base, like FICO scores? Would you characterize it as mass market, mass affluent? What have you learned about that book so far?

Yes. The first thing I'd say, Mario, we're limited what we can say still. Obviously, PC Financial is still part of another public company, so we can only speak so much. But what we have shared before is about 90% are prime and super prime customers. We understand the FICO scores, yes. We do understand the geographic distribution.

We can't come on the performance yet. We certainly can in, call it 4 or 5 weeks, when we close. But this comes back to this being a high-quality portfolio with, call it, 2.5 million customers and pretty consistent in that $4.4 billion, $4.5 billion receivables range because these are also customers that are -- they're transacting, right? They're not necessarily revolving as much. They're using this for high payment volumes. And we have $3 billion plus in annual payments just on these cards with over 80% outside of stores. So these are high use, this can easily be a top wallet card as well. And then as that expands to our existing customer base and we really bring this together with our other products, and Daniel's going to be driving a lot of really integrated thinking underpinned in loyalty and rewards when you're buying up [indiscernible] cards, the day-to-day, mortgages and insurance.

But I'm not sure if any other remarks you wanted to offer, Daniel, this morning on the plan.

No, I think that's right. Just to say, reinforce something Chadwick said earlier, which is we're really encouraged by the strength of what we see in the PC Financial team that's coming over and very much looking forward to working with that group.

Sounds pretty good. The charge this quarter, the $17.5 million for exiting merchant payments, listening to you talk about it, my impression is that there's -- this is the beginning of a few more of these sorts of exits. Like for example, equipment finance, that doesn't seem like it's long for your business. To exit that business, would that be another material charge? What can you tell us about charges of this nature going forward?

Yes. No, I see where you're going. So look, where I started, and I mentioned in my remarks, we're going to focus, we're going to simplify. Is there more to come? I wouldn't say there's not, but we're pretty comfortable with our portfolio. We're always going to look at what's hurdling in that 15% range. Where can we win and compete, period, ongoing? It's all about regular capital allocation. This is not -- like we're not that complicated of a bank at the end of the day. We have a focused Personal bank. We have a focused Commercial bank. We only have so many key products. But we're comfortable with the decisions we made on that.

And Darren, on the business-to-business side, I'm not sure if there's anything else you want to say in the example of merchant acquiring.

Yes. No, I think we made the decision to exit merchant. It wasn't generating the level of risk-adjusted returns we would have liked to see. You've heard Chadwick talk even in his opening remarks about to bring more focus to the bank, particularly with the exciting opportunities that lie ahead with PC Financial. We've talked about focusing on the big things that we can really scale and bring value to Canadians. This just wasn't part of that. So we made a difficult decision to exit and the cost that you saw really were the costs needed to fully get out of that business.

And again, equipment financing, I know you're pretty deliberate in asking about that. But [indiscernible] runs that business, it's performing well. Is it a strategic challenge of a business? I'm not sure. But it's performing well right now.

And there's -- I'll be very direct too, is there like a bunch of these products and businesses around that people should be worried about? No. No, there's not, we're quite comfortable with our portfolio now it just becomes even more focused. And that's the part of the elegance of PC Financial. Not only is it the best deal that could happen in Canadian banking, but this is a very elegant complement to our existing portfolio. This is about growth. This isn't about cutting. This is natural growth synergies. So that's where you should be very encouraged about the book value per share growth we're going to add with this.

And specifically on the equipment business, I mean, you've seen the improvements that we've made over there in the last couple of years. It's performing well. It's generating positive contribution margin, positive earnings for the bank. We've done a lot to derisk that business. So there's definitely nothing that needs to be done imminently there. We're quite happy with how it's performing.

Your next question is from Stephen Boland from Raymond James.

I hope this is not an obvious question. But I'm just going back to the NCIB, which I believe was put in January. The maximum was 2.2 million, 2.3 million shares. And I think you've hit that number. So you've talked about how important share buybacks are. But are you maxed out at this point? And like is it possible that you renew it early and expand it again? Is that a possibility?

Well, we -- so there's 2 different NCIBs though, right? So we -- some of the buyback activity, the prior NCIB expired at the end of December. So we were buying under that as well. And then we initiated the new NCIB as well in January. So the math doesn't quite reconcile there. Do we still have room under NCIB? Yes. Might we use that? Yes.

Okay. And the second question, you mentioned that Loblaw's July 1 would probably be coming in to buy back shares as well or buy more shares. Can you remind us, is there a restriction on them buying shares in the market right now ahead of the deal close?

There's a public announcement that they made a little while ago of an ASPP up to a certain cap. So yes, they can buy. And then there's -- as soon as the deal closes July 1, they'll be in a position to buy up to the standstill, which is at 25%, I believe, over to 4 years, but they will continue with that.

Okay. Second question is on deposits. So when I look at the movement in term deposits, demand deposits, like term, there's certainly a little bit of EQ Bank has come down, credit unions has come down on the term side. And we're still -- we're seeing some movement. Even on the demand side, credit unions coming down. Maybe you could just talk about what you're seeing on the deposit side, what is -- what are people awaiting? And obviously, the credit union, I think both buckets are down. So what's happening there?

It's Daniel. Maybe I'll just start on the retail deposit side. We are very pleased with the growth that we're seeing in customers, both on the Personal side and the small business side. And we have confidence that over time, that will lead to more deposit growth. We also see high conversion of new customers into immediate deposit of funds.

The softness, I would say, on deposit is largely linked to the macroeconomic factors. We are seeing more strain on the Canadian consumer. We also know across all the banks that deposit growth has been challenged. So we're going to continue to focus on growing the high-quality customer base that over time we think will continue to strengthen that deposit growth as well.

You also mentioned the credit union deposits. That is an area that we've seen some drop in deposit side, reflects a little bit the nature of the consolidating industry, the credit -- the large amount of consolidation that's happening, but really more just less liquidity in the market. But during that time, we've actually increased the number of credit union clients. And so liquidity tends to ebb and flow, and we do see that increasing again over time as liquidity comes back to that market. Our credit union relationships remain stronger than ever in that space.

Your next question is from Mike Rizvanovic from Scotiabank.

A question for Marlene. Just wanted to touch on the mortgage book. Your losses came down last quarter sequentially and then came back up a little bit this quarter. And I would have thought that with the recovery in the GTA home prices, that maybe your recovery rates are getting a bit better. I'm just wondering what the moving parts are there. I guess I was a bit surprised that we didn't maybe see another sequential decline just given the market does seem to be stabilizing, at least from the pricing side in the GTA.

Yes, Mike. I think it really depends on the neighborhood. It's been very specific. When I look at where or Stage 3 provisions are coming from, we talk about very specific segments. And it's still the situation where fewer than say 20% of the loans that are impaired are driving 80% or more of those provisions. So it's quite specific to certain neighborhoods. And so you have to be careful when you look at those averages because you've got -- there's a lot underneath that. So this is not broad-based. That's why I said it's very specific to those higher risk areas that we've been talking about for several quarters. I don't get into very specific neighborhoods, but it's really specific to the neighborhood.

Okay. And then just a quick one on the gross yields in the lending portfolio. I think, Chadwick, in your prepared remarks, you mentioned some heightened competition in uninsured. So maybe a question for you or for Anilisa, but I actually -- so I see that in the yields in that part of your book. And it looks like the rest of the portfolio actually got better, which I think is what drove the NIM expansion over the last quarter. So in the uninsured book, which I know is a very profitable one for EQB, what's your outlook on how that competition being enhanced might impact the yield going forward? I'm wondering if it's a short-term thing in nature or maybe you get a recovery in the near term. Any thoughts on that?

Sure, Mike. Again, I'll turn it over to Daniel, who's head of the business, who's put a lot of thought into this and [ is out ] there on the pricing side, if you want to dig in?

Yes, I mean, as Chadwick mentioned in his opening remarks, whenever there is more competition and less demand, you are going to see some pressure on pricing and pressure on competition. We are very ROE-focused as an organization. And so we try to strike a balance very carefully between our market share and our balanced growth and our NIMs. And I think we executed on that really well in Q2, and we're going to continue to have that posture as we go forward in Q3.

We have thresholds that we manage to when it comes to profitability and margin in the business, and that's going to continue to be a driver. But we are going to continue to grow our share. There's lots of ways we can drive improvements in our efficiencies and our sales practices and our operations, et cetera. And so we think that -- and again, through the new customer base that we're going to have access to and the partnership with PC, there's going to be lots of opportunity for growth. while still maintaining strong margin performance. And we expect that to continue for the rest of the year.

Yes. And then I'll just come and build on the deposit side. We have been acting with significant more discipline, very similar. We're not trading off growth for profitability and managing our overall stock. And so we continue to make sure that we are pricing the deposit side to match -- run a match book against the asset side. So overall, we continue to target that 2% plus NIM guidance.

Thank you. There are no further questions at this time. I will now hand the call back over to Chadwick Westlake, President and CEO, for the closing remarks.

Sure. Thank you, everyone, for your continued support and investment in Canada's Challenger Bank. We look forward to speaking with you again at our Q3 earnings call in August, which will include initial reporting of results with PC Financial. And we will publish more of the details of our Investor Day on our website shortly. It's going to be an immersive experience for attendees. It's one you don't want to miss, here downtown Toronto. Have a great day.

Thank you. Ladies and gentlemen, that concludes our conference call for today. Thank you all for joining. You may now disconnect your lines.

Good morning. EQB's Annual Meeting of Shareholders is about to begin. Please note that this meeting is being recorded on April 8, 2026. During the meeting, you can submit questions or comments at any time by clicking on the message icon. We now turn the proceedings over to EQB.

Good morning. My name is Naveen Natarajan, and I'm Director, Credit Risk Management at Equitable Bank. Before we begin today, I make the following statement on behalf of all of us. We acknowledge that EQB occupies offices on Turtle Island, a name that multiple Indigenous nations gave to the place more widely known as North America. We gathered together today on land that is steeped in rich Indigenous history, recognizing the enduring presence of First Nations, Inuit, and Métis peoples. I further acknowledge that all settlers who came willingly to the stolen land are accountable for furthering truth and reconciliation. It's now my pleasure to turn the meeting over to Vincenza Sera, Chair of the Board of EQB.

Thank you, Naveen. Good morning, everyone, and welcome to our Annual Meeting of Shareholders, which I now call to order. Joining me speaking to you today is Chadwick Westlake, President and Chief Executive Officer. And in the audience, we have other members of our Board and dedicated executive leadership team. Shareholder engagement is of utmost important to us. And for that reason, we are hosting this meeting in-person and online to enable broad participation. We're very excited to begin a new era of service, growth, and performance at EQB under Chadwick's energetic, incisive, and insightful leadership.

Although new to the CEO role, Chadwick has already taken important steps to advance our corporate purpose of driving change in Canadian banking to enrich people's lives. The agreement to acquire PC Financial and partner with Loblaw Companies Limited, chief among them. When complete, the acquisition and partnership will greatly elevate our scale, reach, growth potential, and competitiveness as a leading financial services company and create even more diversified fee- and non-fee revenue streams to sustain our progress through economic cycles.

Chadwick will have more to say about the transformative nature of this combination during his remarks. To those comments, I will add that our Board is united in the belief that we have the right team with the right skill-sets and attitude to be a force for good in our market for years to come. Before moving on to the business of the meeting, a few thoughts on governance matters. Over the past year, the Board performed one of its most important duties in identifying Chadwick as a great successor to the late Andrew Moor.

Andrew was a remarkable leader of EQB for 18 years before his tragic passing last June. I speak on behalf of the entire team in saying how much we appreciated and valued Andrew's enormous contributions to our company and the broader Canadian banking industry and more in the loss of his friendship. CEO succession was led by an ad-hoc committee of the Board, which was established in 2023 and expertly led by Susan Erickson.

Although Andrew's passing was a shock to us all, the diligent work of that committee over the prior 2 years ensured that we employed a rigorous, disciplined and comprehensive approach in our candidate assessments, which is exactly what you would expect and demand from a Board in choosing the leader of a Schedule I bank. During 2025, our company operated in a historically challenging Canadian housing market amid broader macroeconomic environment affected by tariffs and ongoing trade uncertainty.

EQB emerged from that experience stronger and more focused, a reflection of effective management by Chadwick's team, good stewardship by our Board, and the inherent advantages we've built together over years to create a risk-aware culture infused with disciplined risk management and control process the fitting a bank of our stature. It was an eventful year, and I thank all Board members for your diligence and good governance.

Particular thanks to Michael Emory and Michael Stramaglia, who retire as directors at this meeting after 12 years of dedicated service. I recall when they stood for election to the Board for the first time back in 2014, in introducing them, Austin Beutel, our Chair at the time, said, and I quote, "Based on their clear and relevant knowledge and substantial experience, Mr. Emory and Mr. Stramaglia are both highly qualified to serve on our Board. Austin was right. Over the years, Michael and Michael have made many important contributions to the development of the business you see today.

My sincere thanks for their stewardship and enthusiastic participation in EQB's growth and advancement as a Challenger force in Canadian financial services. Planned retirements are a natural and healthy part of good governance, especially when accompanied by the recruitment of highly-skilled new directors. This year, you are asked to elect 3 new directors whose experience, qualifications, and reputations for integrity, leadership, and business excellence make them ideally suited to serve.

Joanne Ferstman has more than 35 years of experience and expertise in capital markets, financial reporting, risk management, M&A and governance having gained -- having served in executive leadership positions with the Dundee Group of Companies, a leading financial services organization. John Sullivan's career included 25 years with Cadillac Fairview, one of North America's leading owners, operators, and developers of real estate, where he served as President and CEO and before that, in senior leadership roles with Brookfield Corporation and Marathon Realty.

Mike Pedersen's distinguished career in banking and global financial services includes serving as Chair of the Board of Business Development Bank of Canada and President and CEO of TD Bank Group's U.S. Banking business. He brings more than 35 years of experience and a proven track-record of providing governance and strategy oversight during periods of high-growth and positive transformation. Following a successful vote today, Mike will succeed me as Chair, guiding our Board forward at a time of tremendous and positive change and growth for EQB. We welcome the arrival of Joanne, John, and Mike.

By their very nature, Annual Meetings provide an opportunity to reflect on the past. As I will retire from the Board today after 13 years as a Director, my thoughts naturally turn to the accomplishments and changes I have seen because of the diligence, effort, and imagination of our workforce. It has been my pleasure and privilege to play a part in this very productive value-creating period in our corporate history.

As a shareholder, it's also exciting to me to know that we can look forward to more growth and progress in the years to come. That brings me to the final and most important part of my informal remarks. On behalf of all of us at EQB, I offer my sincere thanks to our employees, customers, partners, and shareholders for your support and trust. We will now move to the formal business of the meeting. As stipulated in EQB's bylaws, as Chair of the Board, I will act as Chair of this meeting, and Michael Mignardi will act as Secretary.

I appoint Melanie Tong 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 have 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.

For the record, approximately 3/4 of our employees are now EQB shareholders, a great alignment of interest. Please keep in mind that only Registered Shareholders or Duly Appointed Proxyholders can vote to the resolutions to be put to this meeting. The Scrutineer's Report states that approximately 50.48% of EQ Bank's -- EQB's total issued and outstanding shares have been voted by proxy by both Registered and Beneficial Holders in respect of the matters of the business before the meeting. If you are a Shareholder or a Proxyholder 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. Please ensure that you print your name clearly on the ballot and sign it. If you are a Shareholder or Proxyholder 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 your vote, then you do not need to vote again.

A simple majority of 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 Proxyholders 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 Chadwick'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 financial fiscal 2025 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 EQB Investor Relations website. We will now take any questions on the Financial Statements, beginning with those from Shareholders or Proxyholders in the room. Michael, are there any questions or comments online?

Ben, there are no comments or questions online.

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. I will ask Jeanne Belfoy Khan to please read out the names of the director nominees.

Thank you, my name is Jeanne Belfoy-Khan, and I am a shareholder and employee of Ecobank. I have worked for the bank for 7 years, and I'm currently in the role of Director of Technology Delivery. The nominees for election as directors are Susan Erickson, Joanne Ferstman, Kishore Kapoor, Yona Kim, Markout Lopez, Mike Pedersen, Rowan Saunders, Carolyn Schuetz, John Sullivan, and Chadwick Westlake.

Thank you, Jeanne. You will find information on all nominated directors in the Management Information Circular. I now call upon Imaad Khatri to make the [ note ] motion for the nomination of directors.

Thank you, Madam Chair. My name is Imaad Khatri. I am a shareholder and my pronouns are he/him. I am Director, Portfolio Management, Commercial Finance Group with Equitable Bank, and I've been with the bank for over 6 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, Imaad. I call on Rashmi Ashok to second the motion.

Thank you, Madam Chair. My name is Rashmi Ashok. I am a shareholder and my pronouns are she/her. I am the Manager, Public Relations and Communications with Equitable Bank, and I have been with the bank for 1 year. I second the motion.

Thank you, Imaad, and thank you, Rashmi. 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 Proxyholders in the room are asked to please vote now by selecting 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 after it has concluded. If you are a Shareholder or a Proxyholder 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 change your vote if you voted in advance of the meeting. If you do not wish to change your vote, then no further action is required. Our next item of business is the Appointment of Auditors. Lydia Galaski, would you please make a motion?

Thank you, Madam Chair. My name is Lydia Galaski, I am a shareholder and my pronouns are she, her. I'm an Associate Manager, Total Rewards with Equitable Bank, and I've 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 Amanda Navidi to second the motion.

Thank you, Madam Chair. My name is Amanda Navidi. I'm a shareholder and my pronouns are she, her. I'm Vice President, Internal Audit with Equitable Bank and have been with the bank for 1 year. I second the motion.

Thank you, Lydia, and thank you, Amanda. 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?

Vin, there are no comments or questions online.

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 non-binding, 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 David Lee to make the motion.

Thank you, Madam Chair. My name is David Lee, and I'm a shareholder and my pronouns are he/him. I am Associate Director, Investor Relations with Equitable Bank, and I've been with the bank for 4 years. I move that the shareholders accept EQB's approach to executive compensation as disclosed in the Management Information Circular.

Deep Shah, would you please second the motion?

Thank you, Madam Chair. My name is Deep Shah. I'm a shareholder and my pronouns are he/him. I am Senior Product Manager at Equitable Bank, and I have been with the bank for 1 year. I second the motion.

Thank you, David, and thank you, Deep. The floor is now open for comments or questions on our Executive Compensation Approach. Michael, are there any questions or comments from the Webcast?

Vin, there are no comments or 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. Thank you. That brings us to the end of the formal business of the meeting, and voting is now closed. Now it's time to hear from our CEO, before turning the meeting over to Chadwick, 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 Chadwick delivers his remarks, we will open the meeting to general Q&A. Now over to Chadwick.

Good morning. Thank you for joining us. It's such a privilege to be before you today as the CEO of EQB at a defining moment for Canada's Challenger Bank. We've entered a new chapter, and we're deeply focused on taking this organization to its full potential. This is also a unique nation-building moment for Canada, and EQB has a meaningful role to play. As a challenger, we bring customers more choice and change the way they bank for the better.

By challenging the status quo with purpose and investment, we don't just help people; we push the whole industry to compete harder and innovate faster. I accepted this role with a clear mandate from the Board and from you, our shareholders, to accelerate growth, sharpen execution, and deliver enduring value. While I continue to appropriately manage risk, and we do as a Schedule I bank. I want to share more about this mandate today.

First, I want to recognize those who helped us position EQB for this next phase. Andrew Moor, he spent nearly 2 decades building a foundation that changed how Canadians think about where and how they experience banking. His impact on EQB and the entire industry is clear and everlasting. I'm grateful to have worked closely with Andrew. His legacy of shaping this company inspires us all. I want to thank our entire Board and our retiring Chair, Vin.

Vin is a rare and special leader, whose dedication to EQB over the past 13 years and steady hand as Chair these past 2 years made a tangible difference to us all. Vin, we can't thank you enough for your service and for helping create the conditions for growth going forward. I'm proud to have worked closely with Michael Emory and Michael Stramaglia. They helped shape our company of today, bringing their best to our deliberations. Thank you both. You'll be missed.

Speaking of standard-setters, we're delighted to welcome Mike, Joanne and John to our Board. I look forward to collaborating with them for many years and Mike with his deep expertise in governance, banking, leadership, and transformation, as our new Chair. For a financial services company of this size and growing importance, long-term success depends on having the best talent. I'm proud to say we have a team with the experience and the ambition needed to lead EQB through its next chapter of growth.

Anilisa Sainani joined to serve as our Chief Financial Officer and has had a remarkable start. Anilisa is uniquely qualified for this important role. And in our first couple of quarters, we've already recognized her impact, recently promoting Anilisa to Executive Vice President, and we added oversight of the Treasury function. The leadership of EQB, moving forward, is strong and growing stronger. We recently announced the addition of another star, an experienced and innovative senior leader joining from CIBC, Daniel Rethazy, to be our Executive Vice President and Head of Personal Banking, bringing together all the elements of these business lines and distribution channels under one proven and experienced banker.

Daniel is here today and just started with us officially on Monday this week. Recognizing our growing complexity and ambition, we also elevated other members of the senior team to shape a more refined structure. Marlene Lenarduzzi, Darren Lorimer, and Gavin Stanley, all of whom played a critical role in steering EQB for last year are now Executive Vice Presidents. Thank you to our full executive leadership team. That also includes Dan Broten, Tim Storus, Isabelle Farella, Janet Lin, Michael Mignardi, Dipti Patel, and David Wilkes, all EQB veterans for your many contributions last year and many more to come. To every one of our teammates, our Challengers across our extraordinary company, thank you. Your resilience and commitment over the past year have literally been simply remarkable. Thank you.

Before looking at our plans, I want to reinforce that our business is built for the long-term. While 2025 was historically more difficult for the reasons Vin outlined, we remain resilient with a significant growth agenda. Our 10-year Total Shareholder Return as of the end of Q1 was nearly 400%, the second highest among Canadian banks and one of the top in North America. And an early recognition for our announced agreement to acquire PC Financial, shareholders spoke with EQB delivering the highest share price return among Canadian Bank Peers over the past 15 years, measured 45 days following the announcement of a $500 million-plus acquisition.

And there are more bright spots in 2025, including the addition of over 94,000 EQ Bank customers, the launch of the EQ Bank small-business offering, and in October, news that our EQ franchise was selected as the top bank in Canada and North America by the Financial Times Banker magazine. In assuming my role as CEO, my first goal was to sharpen our focus and take immediate action to bring EQB back on the path to winning, while listening carefully to our employees, customers, partners, and shareholders regarding their expectations.

My first task was restoring efficiency as a competitive advantage, the foundation for our traditionally high Return on Equity. We moved quickly to reset our cost structure, announcing our first-ever restructuring program, which refocused the organization on doing a few big things well. You are already seeing the early results. In the first quarter of 2026 compared to the fourth quarter of 2025, improvements in Adjusted EPS were driven by a meaningful improvement in our Efficiency Ratio amidst a tough top-line growth environment, lower PCLs, and the positive impacts of our buyback activity.

Importantly, ROE increased 360 basis points, moving us closer to our traditional and medium-term objective of 15% to 17%. We also expanded Loans Under Management and continue to add more customers every day. This is not the destination, but an important sign of early progress on our journey that will not be linear. Now let's talk about our plans to challenge ourselves and the industry at a higher level and why this is a great time to do so. Canada's banking system is strong, trusted and stable. But it's not as competitive, innovative or responsive as it needs to be. That creates an opening for a Schedule I bank challenger.

More Canadians are rightfully asking harder questions about their banking relationships. They are becoming more price-sensitive, more digitally fluent. And while switching banks is at lower rates, we do believe our fellow Canadians will switch if there are visible, tangible alternatives that help them better manage and improve their financial health. At the same time, policymakers are more focused on presenting better options and outcomes for financial services consumers. We saw this with the Federal Government's first budget. We applaud and are encouraged by their strong messaging on more competition, innovation, and open banking.

That seriousness has been reflected in the conversations we've had with policymakers. They want strong, dynamic, growing Canadian institutions, which happens to be exactly what EQB is today. And this is only going to expand and grow dramatically when the Federal Government approves our announced agreement for PC Financial. The combination of this integrated customer expectations and heightened customer expectations and policy focus matters. It means the environment is shifting in ways that favor those who can move quickly, operate efficiently and deliver better value. In an industry long defined by a small number of large institutions, having an impact requires having scale.

And now we have a path to sufficient scale to positively impact market dynamics. More than a step, we're about to take a leap with our agreement to acquire PC Financial and partner with Loblaw companies. This changes everything for our growth profile. It will enable us to serve our purpose with tremendous customer reach, new products, including the PC MasterCard portfolio, one of Canada's largest and most recognized portfolios, and it will finally elevate EQ Bank to become a visible choice in our country and a household name.

On Day 1 of this combination, we will immediately quadruple our customer base to about 3.3 million, nearly double our revenue, add new distribution channels, and we will be the exclusive financial partner for the 17-million-member PC Optimum program. We will gain a very experienced set of leaders and talented group of employees, driven by the same shared mindset of improving Canadians' lives through their commitment to helping Canadians live life well. This creates something fundamentally different in the Canadian market, a challenger-built, loyalty-linked banking ecosystem that can compete directly and serve millions more Canadians, delivering better outcomes for both customers and shareholders.

By bringing together everyday banking, lending, payments, home and auto insurance, and importantly, loyalty into a single integrated ecosystem, we are creating the foundation for deeper, more durable full-service customer relationships. This is very much a long-term collaboration, and it's great to see our partner at Loblaw set to become our largest shareholder. It's a sign they are as committed as we are in delivering a higher purpose for our country.

I want to thank the leadership team at George Weston and Loblaw Companies for recognizing the enormous potential of this combination and working together to make it a reality. We are working hard to secure regulatory approval as quickly as possible to help build an even more resilient banking system with greater competition and choice every day for Canadians.

We've consistently viewed diversification as both a key driver of growth and natural hedge against economic cycles. As we look to the future, select and focused diversification remains at the forefront. PC Financial, for example, represents a step-change in diversification for our revenue base, adding significant fee-based transaction income and reducing reliance on spread-based fee Net Interest Income. The high-quality nature of our lending book must also be acknowledged for its relatively low-risk profile.

Our lending portfolio is conservatively structured, with 85% of our Commercial Loans Under Management being insured. Our status as a Schedule I bank reinforces that solid risk foundation. We operate with strong capital ratios, disciplined provisioning, and a liquidity profile designed to perform across a range of scenarios. We actively manage Interest Rate Risk, Credit Concentration and Funding Mix to ensure stability across changing market conditions. Alongside step-change in scale, we intend to strengthen the core of our bank.

Daniel, as our new Head of Personal Banking; and Darren, our long-standing Head of Commercial Banking, will be extremely focused on that, respectively. We're investing with intention in our reverse-mortgage business, where we continue to gain market share with a competitive offering. At the same time, in our single-family residential business, we're focused on deepening relationships with borrowers to drive retention while continuing to engage closely with our important broker partners.

We're making foundational investments in EQ Bank, one of our most recognizable core businesses now, serving more than 633,000 customers. This will help us deepen primary relationships and drive efficiencies across both Retail and Small-Business segments. We're advancing our Commercial Banking platform, including the recent launch of our proprietary Loan Management System with integrated AI capabilities.

We're aligning our Technology, Operations, and Product teams more closely to accelerate delivery and improve customer outcomes. In all of this, focus is paramount. We will not aim to replicate others, and we will not aim to be all things to all people. We will focus on the few big things where we can compete and innovate aligned to our purpose, where we have a competitive advantage, where we can and intend to win.

That includes our Concentra Trust operations, supporting credit unions, and ACM Advisors, which continues to be a clear winner in alternative-asset management. We will be deliberate about where we allocate our capital. We will be rigorous in how we measure performance, and we will hold ourselves accountable for delivering results. 2025 it's behind us. Our strategies to manage core and emerging risks are effective.

Our credit loss provisioning is appropriate, and we remain well-capitalized and liquid even against severe but plausible scenarios. We're committed to returning to our historical level of profitability, as dictated by our Return on Equity North Star, while unlocking new growth opportunities and our full potential. We'll discuss this more when we get to our Investor Day, a date we will confirm soon once we have more clarity of the timing for the regulatory approval for PC Financial, as it's important to do this only after the deal has closed. I look forward to standing at next year's meeting, located next time at our new EQ Bank corporate headquarters Tower at 25 Ontario Street, to report on the progress we have made for you and all Canadians. Thank you.

Thank you, Chadwick. Now it's time for Question Period. We will first open the floor to Shareholders and duly appointed Proxyholders 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 Proxyholder.

Do we have any questions? Now it's time for questions from our virtual audience.

My name is Daniel Engels, and I'm a shareholder. I have a question in Chadwick's presentation. You mentioned that when the deal closes with PC Financial, the Weston Group will be the largest shareholder, I think you said that of EQB. Can you just maybe elaborate a little bit on that and indicate the percentage of the piece that the Western Group will have of EQB. And also, my understanding is with Schedule I banks, there's a maximum that any single shareholder can own of 10%, I think. And does that affect EQB? So those are my questions.

Thank you very much for coming. I really appreciate your support and your ownership of the company that we all believe deeply in. For your question on share ownership, George Weston and Loblaw companies. What we shared publicly is that, at closing of the transaction, in exchange for the assets, they would get an exchange 17% ownership in us. And then they have the right and the ability to buy up to 25%, and that's under a 4-year ceiling.

They are permitted to do that under the Bank Act. We do have 3 shareholders now that own more than 10% of our company. But they will become the largest -- and that's the anticipation when they buy up in the open market up to 25%. But that is the cap we have at this point in time. Does that answer both questions? Yes. No, thank you very much. Really appreciate it.

For those who 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 a Proxyholder. Once you finish typing your questions, 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 you have any questions in the portal?

Vin, there are no questions in the portal.

As there are no further questions, that means there's just one item left remaining. We have now received preliminary voting results from the Scrutineer. Their report states that 50.48% or 36,949,606 of EQB's outstanding common shares were voted at this meeting. The shareholders who voted by proxy or ballot have voted as follows: On the election of directors, over 96.5% 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 as 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, 95.1% of the votes cast were in favor of the appointment of KPMG LLP as auditors of EQB. I therefore declare KPMG LLP has been appointed auditors of EQB for the 2026 fiscal year. The Advisory Resolution on our Approach to Executive Compensation received over 96.6% For. I therefore declare the advisory vote is 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.

Welcome to EQB's Earnings Call for the First Quarter of 2026. This call is being recorded on Thursday, February 26, 2026. [Operator Instructions]

It is now my pleasure to turn the call over to Lemar Persaud, Vice President and Head of Investor Relations. Please go ahead.

Thank you, Marissa, and good morning, everyone. Your host for today's Q1 results call are Chadwick Westlake, President and CEO; Anilisa Sainani, CFO; and Marlene Lenarduzzi, CRO. Also present for the Q&A session is Darren Lorimer, Group Head of Commercial Banking. After prepared remarks, we will open the lines for questions from our prequalified analysts.

For those on the phone lines only, we encourage you to also log into our webcast and view our quarterly presentation, which will be referenced during the prepared remarks. On Slide 2 of our presentation, you will find EQB's caution regarding forward-looking statements, which involves assumptions that have 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.

Thanks, Lemar, and good morning. We're building a purpose-led company, clear on why we exist and intentional in how we deliver it. A challenger bank is designed to bring customers more choice and to change the way things work, for the better. And when you challenge the status quo with clear intent, you don't just help people, you push the whole industry to compete harder and innovate faster. We build for people's real needs and aspirations, especially where the incumbent system is falling short. It means being bold, moving faster, building on technology and meeting people where they are, not simply where it's convenient or easy for us. It means putting the well-being of customers first.

We do this by owning a Schedule I bank that gives you the trust and comfort of how we are managed, the capital we hold and the standards we hold ourselves to as we emerge as one of the most distinct challenger banks in the world. We have the strength of a regulated bank that endures through every cycle and the urgency of a challenger. Our purpose is to drive change in Canadian banking, and we enter 2026 more focused than ever on the strategy to deliver it.

As a public company with a strong long-term track record, we remain focused on sustaining that performance, delivering on our strategy without compromising for short-term results. This is important to keep in mind as we prepare for the closing of PC Financial in the start of our incredible partnership with Loblaw Companies as we merge truly exceptional brands, teams, skill sets and offerings and create something materially different for our country.

In the interim, our performance has improved, and I believe that's evident in our first quarter. Compared to Q4, we significantly improved our efficiency ratio, as we said we would. We took decisive action to return to efficiency as a competitive advantage, a key source of our historical peer average ROE outperformance. While we cannot control the operating environment, we can control our costs. We are a growth bank, and we'll continue to invest in strategic, high-impact initiatives. However, expense growth must take its cue from revenue growth as a high-performing public company.

Similarly, we said we expected PCLs should start a path to improvement, albeit with a more substantial recovery skewed to the back half of the year. That too happened with total PCLs dropping 28% relative to Q4. Further, we moderately increased our net interest margin and maintained a good revenue profile in a slower growth environment while also expanding our loans under management. We indicated our outlook for a 12% ROE in 2026 as we balance near-term investments and elevated PCL in a continued uncertain environment. While this is not linear through the year, we're applying a refreshed discipline to our decision-making. And with nearly a 50% relative ROE improvement over Q4, we are progressing towards that outlook. We remain focused on a thoughtful return to our 15% to 17% plus ROE over the medium term.

As soon as we close PC Financial in coming months, our growth profile will shift meaningfully. We'll be able to scale what makes us distinct. We'll lay out the full potential at an Investor Day later this year after closing. That will be important context for what it will mean to add new top talent, literally quadruple our customers, nearly double our revenue, add new distribution channels, become part of the largest loyalty program in Canada with national household awareness and significantly diversify our business, and that's simply day 1. Until then, our core business progress early into 2026 aims to stabilize growth in our pre-provision pretax earnings regardless of the operating environment.

Before I pass it over to Anilisa to share more context for Q1, I'll offer a few more context -- comments on how I think about progress in the objectives we shared previously of reigniting our core, completing our product shelf and strengthening our capabilities. Reigniting our core means reinvigorating growth in our core business lines. As a challenger bank, we continue to focus on where we will win and where we can provide value-added options to underserved Canadians. We were pleased to see the outcomes of our focus translate into a 48% improvement in EPS over Q4 to land at $2.26 per share. Plus that meant we built on our very strong capital position with a 30 basis point expansion to 13.6% CET1.

Housing activity remains muted in Canada, which is no surprise. We're responding by staying disciplined and leaning into regions where we win, including notable success in Quebec this quarter, while maintaining our focus on credit quality and ROE-based pricing. In single-family, competition is intense, but we choose quality and returns over volume. A key bright spot is renewals. We're spending more time with existing customers, delivering near record of retention and seeing continued opportunity as we invest in and support our mortgage broker partners. Another bright spot is our reverse mortgage business. At 5% sequential growth, we gained market share, and we're early in the benefits of some enhancements we made at the end of last year. There will be more investment into this business.

On to another pillar of our core franchise, commercial banking. We had a great quarter for new originations, up 11% sequentially on the strength of our CMHC program and sustained demand for multi-unit residential housing in Canada. Pipelines remain robust, and we continue to believe that actions to raise the Canada mortgage bond issuance limit is a direct benefit to EQB.

And then our digital bank has become one of our most recognizable core businesses and now serves 633,000 Canadians. While deposit levels were relatively consistent, we remain focused on foundational investments and capabilities ahead of the closing of PC Financial. We have significant growth intention here and added another 26,000 customers, up 4% versus Q4. More customers than ever now rely on us for everyday banking, a clear sign of the deep primary relationships we're building.

We're putting our capital to work with purpose, accelerating share buybacks while continuing our strong track record of dividend growth. In this vein, we were also pleased to see Loblaw Companies recently announced its intention to enter into an ASPP to purchase shares of EQB in advance of closing, underscoring its confidence in our ability to deliver long-term shareholder value.

Now a few comments on progress completing our product shelf. Our current primary focus is execution readiness for PC Financial and our Loblaw partnership. We filed applications with OSFI and the Competition Bureau and have established an integration management office to ensure our integration progresses well. Achieving the strategic benefits of the transaction, including related synergies, remains our top priority. PC brings us distribution, payments, loyalty, insurance and more. There's so much potential for completing our integrated EQ product shelf with all of these combined. The demand for wealth management remains top of mind for EQ customers and for us to achieve our full potential.

Lastly, on strengthening our capabilities. To us, that means leveraging our digital native platform to drive efficiencies and innovation grounded in AI. Against this pillar in Q1, we partnered with Microsoft to launch a proprietary commercial loan management platform. This platform is a first-of-its-kind innovation in Canadian financial services that consolidates the commercial loan life cycle onto the Microsoft Dynamics platform with built-in AI capabilities.

We're seeing promising results that have meaningfully cut cycle times and will drive differentiated customer service and efficiency. We are well positioned to continue delivering where it matters most. What this means to us is balancing the need to deliver the best value for our customers and prospective customers while strengthening profitability for shareholders.

Now over to our CFO, Anilisa.

Thanks, Chadwick, and good morning, everyone. As a reminder, my comments will be on an adjusted basis, and you can find a summary of these adjustments on Slide 22 of today's presentation.

Starting on Slide 6 for a review of our Q1 results. Despite lower expenses and the positive impact of share buybacks, EPS and ROE were both down versus Q1 2025, reflecting a stronger growth in credit environment at this time last year. Given the significant change in the economy, changes in our leadership team last August and the restructuring program completed in October, we believe looking at earnings sequentially is a more meaningful way of measuring our performance in Q1.

We are pleased with the improvement in results. Client focus, disciplined expense management and capital allocation drove meaningful progress towards our ROE, EPS and efficiency targets. Diluted EPS for the first quarter was up $0.73 to $2.26 and ROE was up 360 basis points to 11.1%, reflecting a 9% increase in pre-provision pretax earnings, a decrease in performing PCLs and capital management actions. PPPT growth was driven by relatively flat revenues and a 9% drop in expenses, reflecting disciplined management against a soft growth backdrop. And as a result, the efficiency ratio improved by a significant 450 basis points to 49.1%.

Turning to the balance sheet on Slide 7. We look to loans under management, or LUM, as a key performance metric, reflecting our market-leading position in insured multi-unit residential mortgages. LUM increased 9% year-over-year and 2% sequentially to $75.7 billion, driven by continued strength in our multi-unit residential portfolio. This represents solid growth in a difficult economic environment and is in line with our 2026 outlook for high single-digit to low double-digit growth.

Importantly, this growth also reflects intentional portfolio choices, including a pullback from certain areas such as widespread engagement in insured single-family residential mortgages and select equipment financing portfolios, where lending activity doesn't meet our ROE hurdle rates.

Conventional loans, which are LUM excluding the insured single-family residential and insured multi-unit residential portfolios, are the primary contributor of net interest income. Conventional loans increased 6% year-over-year, reflecting continued growth in our uninsured mortgages and reverse mortgage business on the personal side and higher construction loans in commercial. Compared to last quarter, personal uninsured mortgages grew just under 2%, largely offset by lower construction lending.

Turning to deposits. Balances increased 9% year-over-year and 2% sequentially to $36.9 billion. Growth in EQ Bank deposits remained strong, increasing 10% year-over-year and were flat sequentially. Year-over-year growth was driven by an 18% increase in the customer base, reflecting momentum in the everyday high-interest personal account, notice savings accounts and the EQ business banking platform that launched in October. Broker deposit growth was solid, increasing 9% year-over-year and 4% sequentially. This remains an attractive source of funding, providing additional benefits of diversification and a relatively lower cost alternative to other sources of funding.

Wholesale funding increased 16% year-over-year and modestly sequentially and continues to play an important role in our diversified funding strategy. We are also focused on increasing the proportion of lower cost funding, particularly deposits, because we can control deposit pricing. This provides meaningful flexibility to manage margins proactively and ensures that growth remains aligned with profitability.

Turning to NII on Slide 8. Net interest income was $263 million, down 3% year-over-year and relatively flat versus last quarter. Net interest margins were down 8 basis points versus last year and increased 1 basis point sequentially. The sequential margin expansion reflects the shift towards higher-yielding assets, net of funding costs. Looking forward into the rest of 2026, our expectation is for margins to remain in the 2% range.

Turning to Slide 9. Noninterest revenue of $43.4 million declined 17% year-over-year and was flat sequentially. The year-over-year decline was primarily driven by lower gains on hedging and derivatives. Securitization activity remained very strong compared to last year, and that strength continued into the first quarter with a 7% increase in volumes compared to Q4. This activity was partly offset by lower market rates.

Turning to NIEs on Slide 10. The restructuring program completed last October marked a turning point in how we manage our expense base, sharpening our focus on our highest growth priorities, capital allocation and cost discipline while continuing to invest for the future within our risk management framework. As a result, noninterest expenses declined 1% year-over-year and 9% sequentially. These cost savings were partially offset by continued investment in the business, including technology and innovation, as well as higher costs associated with EQB's new Toronto headquarters.

We were pleased to deliver a 49.1% efficiency ratio. As we shared on our Q4 call, going forward, we would continue to expect an efficiency ratio in the low 50s with low single-digit expense growth and neutral to slightly positive operating leverage for 2026. As a reminder, the first quarter tends to be typically lower for expenses as merit increases take effect early in the calendar year and investment spend builds as the year progresses.

Finally, turning to capital on Slide 11. Our capital allocation approach continues to prioritize reinvestment in organic growth, returning capital to shareholders through dividend growth and share repurchases and the maintenance of capital flexibility to pursue strategic inorganic growth. The bank's CET1 ratio increased 30 basis points from last quarter, reflecting the benefits of strong internal capital generation. At 13.6%, our CET1 ratio is strong and remains well above our target and regulatory minimums.

Yesterday, we announced a 4% dividend increase to $0.59, up from $0.57 last quarter and $0.51 last year as we continue our strong track record of dividend increases. We also repurchased a record 1.1 million shares in the quarter as part of our plan to return capital to shareholders. In January, we renewed our NCIB and also established an automatic securities purchase plan to allow for ongoing return of capital.

I'll now turn the call over to Marlene to take us through risk.

Thank you, Anilisa, and good morning, everyone. I'll start on Slide 13 with a discussion of the allowances for credit loss. Against an environment characterized by elevated macroeconomic uncertainty, I'm encouraged by our credit performance in Q1 as performing PCLs declined materially, partially offset by a modest increase in impaired PCLs. Performing PCLs were $3.1 million, down 84% quarter-over-quarter, driven by a moderate build in allowances as the prior quarter reflected a more pronounced deterioration in the forward-looking macroeconomic indicators.

We also recorded a release in equipment financing, driven by improved credit quality arising from declines in higher credit risk segments such as long-haul trucking and a shift towards prime. By business, performing PCLs were $1.4 million in personal, $4.3 million in commercial and a performing PCL release of $2.6 million in equipment financing. Along with PCLs on impaired loans, realized losses and write-offs, ACLs increased by $3.5 million or 2 basis points quarter-over-quarter and 15 basis points year-over-year. Overall, our portfolio is appropriately provisioned, and we will continue to actively manage our allowances as we monitor macroeconomic conditions going forward.

Now please turn to Slide 14. Impaired PCLs increased 2 basis points sequentially to 32 basis points, with higher provisions in the commercial portfolio largely offset by lower provisions in the personal and equipment financing portfolios. In commercial, the sequential increase primarily related to one borrower group. Impaired PCLs in commercial can be lumpy by nature given the size of individual exposures. That said, our primary focus remains for commercial growth to be on CMHC insured lending, where we do not expect losses.

In single-family residential, trends were consistent with Q4 with continued softness from larger loans in Toronto and select surrounding suburbs, where prices have declined meaningfully from their peaks. We remain attentive to the risks and have not observed this pressure spreading to other regions. As a result, we do not believe this represents a systemic issue across the portfolio. We are encouraged by the 3 basis points decline in impaired PCLs relative to Q4, which was in line with our expectations. Finally, impaired provisions in equipment financing were at their lowest level since the start of 2023, reflecting the portfolio repositioning discussed earlier, a decision that was made several quarters ago.

Now turning to Slide 15. Against continued macroeconomic uncertainty, gross impaired loans increased 10% quarter-over-quarter to $956 million. Gross impaired loans in personal lending increased to $421 million in this quarter, up 15% quarter-over-quarter, primarily driven by credit migration. The bank continues to review its underwriting practices to ensure the portfolio remains resilient across different real estate cycles. Our focus remains on first lien lending in urban markets where economic drivers such as employment are more diversified, and this supports our ability to lend through the cycle.

Gross impaired loans in commercial lending increased modestly quarter-over-quarter, driven primarily by new formations related to one borrower exposure. Equipment financing demonstrated improvement in the quarter with impaired loans dropping 6% sequentially.

And now I'll share some perspective on how we're thinking about credit for the remainder of the year. Macroeconomic uncertainty remains elevated, continuing to weigh on both consumer and business confidence as trade tensions remain elevated. Delayed business investment, elevated unemployment rates and soft housing markets remain headwinds for our portfolio. And while we continue to expect the Bank of Canada rate cuts throughout 2024 and 2025 will support a recovery in housing activity, business investment and employment, this remains dependent on the resolution of broader macroeconomic issues. Barring any significant change in the macroeconomic environment, our outlook remains unchanged from Q4 2025.

Resolution time lines remain protracted across all lending portfolios. In personal lending, performance remains sensitive to employment conditions and housing price movements. In commercial lending, exposures tend to be larger, which can result in quarter-over-quarter variability as we experienced in Q1. As a reminder, approximately 85% of our commercial loans under management are comprised of CMHC insured lending. In equipment financing, we are seeing the benefits of our prudent lending actions and portfolio diversification away from long-haul trucking and towards higher-quality assets, which is translating into the expected improved credit performance we see this quarter.

In terms of PCL expectations and consistent with what we've previously communicated, we would expect some relief in the second half of the year, absent any additional macroeconomic headwinds. We remain confident in the credit quality of our portfolios and our disciplined approach towards managing risk through the cycle.

And with that, I'll turn it back over to Lemar for the Q&A portion of the call.

Thanks, Marlene. I would ask that you limit yourself to 1 or 2 questions and then please requeue so that we can get to everyone. With that, operator, can we have the first question from the lines?

[Operator Instructions] And your first question comes from Etienne Ricard with BMO Capital Markets.

So it's good to see the continued stability to the margin profile, although I would believe the mix shift towards conventional loans would support a better margin. So how would you describe the competition and spreads in single-family -- for single-family mortgages and especially for renewal, given this tends to be a better return opportunity? Would you say spreads have been stable or maybe declining a little bit?

Yes, sure, I'll hop in. Yes. The competition for sure is there. We're not chasing business, though. We're staying very disciplined to our ROE pricing, is number one. You are seeing conventional increase, but it's in our select areas of the market. There is growth in some parts of the market, but it's not growth that we're interested in. So we're very comfortable with our market share stability, importantly.

And for renewals, I'd say pricing is within our ROE calculator. And we are seeing renewal rates now actually at record levels as well. So we're really spending that time with our existing borrowers. And we'll have opportunities coming up, as you know, with our transaction as well to offer even more to those customers as well.

Okay. And on the topic of PC Financial, Loblaw mentioned in the past that it believes its underwriting policies have been very conservative. So as you think about integrating that business, would you expect some tweaks to the credit tolerance of the card portfolio?

Yes, sure. I'd say strategically we see -- we do see significant growth opportunity. But I know Marlene has spent a lot of time on this with the team as well. Maybe, Marlene, you want to...

Yes. We have looked at their approach. They have an established process, a strong team in place from a credit strategy perspective. And so we do see that there could be potential for adjustments there. But at this point, we think that the way they've been operating for now, it's going to be what we're going to go forward with, and we'll continue to review it as they come over.

Your next question comes from Doug Young with Desjardins Capital Markets.

Maybe Marlene, sticking with yourself, just on credit. You mentioned in the commercial side, ex equipment finances -- one borrower group where you saw some deterioration. Can you provide -- I'm not looking for a name, but provide maybe some context as to what that is. Can you size that out? And where I'm trying to go with this is like what's the LTV? Is there a risk that we could see further adjustments for that particular borrower group?

Yes. I would say on this particular one, it is one borrower group with 3 loans, and these are real estate secured against apartment units that are considered micro. And we have taken that into account in the provisions that we've taken on that property at this time. So we feel that at this point in time, we are adequately provisioned.

Are these completed properties? Are these properties under construction?

Yes, they're completed properties.

Okay. So they're completed. And do you have a size of it or anything that you're willing to give?

Not something that we disclose.

Okay. But you think that you're appropriately provisioned for this. So we shouldn't -- next quarter, the quarter after, like the expectation isn't there should be any leakage here at this point in time.

I'm happy to add a couple of comments. These loans have been with us through the workout process for some time. So we're fairly far along now in the resolution strategies. We feel good about where those are at. And so that I think gives -- alludes to Marlene's confidence in why we're comfortably provisioned at the current levels.

Okay. And then just another one on credit. There's a sizable write-off, a net write-off this quarter. I don't think you break that down between commercial, personal. But I was wondering if you can give some context as to what drove that.

We do have a bit -- I can give you a bit of a breakdown off-line if you'd like. But it's mostly -- about half of that is commercial and then -- commercial and a little bit on equipment financing as well -- sorry, half of it is commercial and then it's personal followed by a little bit on equipment financing.

Okay. It gives me a little bit -- maybe I'll follow up. And then just lastly -- and Lisa, just like on expenses, you're at 49%. You're targeting that low 50%. That's the guidance you give. You mentioned that you're going back -- you're still sticking with that low 50%. Like what takes you back from 49% this quarter to low 50s? Like I'm just trying to understand. And I understand that there's the merit increase that you mentioned. I'm just trying to get a gauge. Is this that you're just being conservative? Or are you trying to signal that there's some revenue pressure coming? If you could maybe flesh it out a little bit further.

Our outlook on efficiency is entirely expense driven. So we're not changing anything from a revenue side. We continue to expect the current revenue environment to persist into the second quarter, consistent with what we shared in Q4 with recovery and more growth skewed to the back half of the year. So when we think about our expenses, Q1 does tend to be typically lower. Exactly as you called out, merit increases, they come into effect in January. So you only see that for 1 month of the quarter as opposed to the rest of the year, where you'll see it consistently through.

There also tends to be seasonally lower spending just over the holiday period. The investments don't ramp up until afterwards. Third-party spend gets a little bit quiet over the holidays as well. And so investing in our business, continuing to enhance our technology capabilities and our connection with our clients and the products that we offer, that remains a priority and that will account for the ramp-up. So very similar to what we shared. 49.1%, we're very pleased with this quarter. We do expect that to tick up to low 50s for the remainder of the year as we continue to reinvest some of the expense savings into the business.

Your next question comes from John Aiken with Jefferies.

In context around the competitive pressures you're seeing in terms of the residential mortgages, what realistically can we expect for medium and longer term growth in that product line?

For -- we provided outlook for the year, right, for overall loans under management of high single-digits. And we didn't break out the specific aspect just for conventional residential. But I wouldn't expect a lot of momentum right now past these current levels where we just increased even on the conventional residential a couple of percent sequentially. I think the market is pretty muted. Like I said, I do believe there is growth out there, but we're staying very diligent in our ROE pricing and our risk lending parameters. So it's probably consistency for now. And that's part of our outlook, though.

Great. And then just one follow-on. The performance that we saw within the long-haul transports on the credit side, as Marlene pointed out, the best that we've seen in quite some time. Is the sense from your group now that we really have put this issue behind us? The portfolio should just be in runoff, and we're probably not going to see any more ripples on that?

Yes. We're really happy with what we've seen, not surprised, though. And I think this really goes back to 2024. We made a series of changes, including when we brought Ashley Yantzi in to take over as President and CEO. We did a lot to really derisk that portfolio, our move towards prime, our move away from a lot of long-haul, focusing on different brokers. In addition, we worked through a lot of those 2022 and prior vintages. So we are seeing a lot of improvement. We are seeing those defaults come down. We are also seeing generally improved trending in the early-stage delinquencies, lower NSFs. So we do think it's sustainable. It may not be perfectly linear on a quarter-to-quarter basis, but have a high conviction level that the worst is behind us for sure.

Your next question comes from Stephen Boland with Raymond James.

I'll leave maybe the credit questions to others. More curious about with Loblaws. And I guess is this business going to remain a separate subsidiary under the parent company? And the reason I ask that is just plans on funding. They use the trust. They issued some notes that may not be the most efficient from a rate perspective. So I'm just wondering in your discussions, has that progressed to the point where you do have funding plans or changes in funding plans for the business?

Well, we absolutely have plans. So the long-term intent, it wouldn't just be a subsidiary. We would intend to amalgamate that with EQ over time. We have, call it, a dozen different funding levers. Our intent, first and foremost, is to grow EQ Bank core deposits. That's going to be an increasing component of our funding stack, and that's going to be our lowest source cost of funding over time. Plus those assets that we bring in as part of the credit card portfolio will expand our capabilities for covered bond capacity and other options.

Now the Eagle Trust you're referring to as part of the asset-backed securitization, that will continue as well. It is an option for us. So I think it just expands our funding capacity. But we will, I think, have an opportunity to improve that overall and as part of the NIM equation over time.

Okay. I won't go too much in the weeds at that point. I guess the second thing is on...

Happy to oblige.

Sorry?

Happy to oblige.

Yes. Okay. The second question is on the NCIB. Obviously, aggressive in the quarter. You've just kind of stated here in your prepared remarks that, that is expected to continue. But I don't think I've ever seen another company and a major shareholder put an automatic purchase plan in place. So I'm just wondering, have you had discussions with Loblaws in terms of their limits? Because otherwise, you've got 2 plans that are competing for limited liquidity in the market. So I'm just wondering, has that discussion happened? Or does it need to happen if you're both trying to fulfill your buyback plans?

As you know, our buyback intent is not only a reflection of our capital allocation strategy and what we view as a material discount to the value of our stock. So it's part of a capital allocation planning. But for Loblaw -- you really would have to direct those questions to Loblaw and how they would want to address that. What I would say is our overall purchase agreement has a certain intent, where we would -- they would have 70% ownership at close. And then they have certain guardrails within the ASPP that they shared publicly with the market. But there's no -- I wouldn't assume any coordination past that. They see an undervalued stock. They have a plan and intent or an option to buy up to 25% after closing, and then the rest should really be directed to them.

Okay. So basically, you're going to do your thing and they're going to do their thing. Is that the way to -- at this point.

Pretty much.

Your next question comes from Darko Mihelic with RBC Capital Markets.

My question is for Marlene. You made a comment that within the residential mortgage segment that you're not seeing this sort of spread to other jurisdictions in terms of like just basically a few suburbs with some weakness. Can you maybe expand upon that? Do you mean to say that you're not seeing formations outside of those regions? Or do you mean to say you're not seeing prolonged workout or significant house price decline? I'm just -- if you could just flesh that out for me, I'll just be interested. And I have a follow-up on that.

Sure. So we've been talking for some time now, for several quarters, about these pockets of vulnerability, which is GTA and certain surrounding suburbs. Those are consistently -- when we dig into both the formations, the PCL and the impaireds, those continue to be the core of what is driving those numbers. That hasn't changed. But what we haven't seen is that spread into other regions and other geographies.

Okay. So essentially, when I look at your Slide 15 and I see $144 million in formations, which is higher, all of that's still in the same pockets. Is that a fair...

That's right.

Okay. But the loss rate is down, right? If I take your provision against that $144 million -- let's say, $10 million and compare that to the $12.5 million against the $108 million last quarter, it's down. So what has changed? Is it that the perceived value of the homes is a little bit better or faster workout? Or what's different?

Yes. We've got a few things going on. We are always investing in our collections and recoveries capabilities. And so -- we also have -- as you recall, we have a -- had a fairly large performing build of $7.4 million last quarter, another $1.4 million in this quarter, lower but still a build. And so we are ensuring that we're appropriately provisioned both on the performing side and on the impaired side to deal with the fact that we're in this uncertain market and there are still these pockets of vulnerability.

And when you look at our macroeconomic forecast, while for the next quarter, our forecast is effectively saying that we may still see some softness over the next quarter. When we look at our macroeconomic scenarios, they are projecting slight improvements, not significant, but I would say slight improvements in HPI towards the back half of the year and into 2027.

Okay. And then just finally then on this -- my last question on this topic, and I'll leave it there. So at $144 million in terms of formations, you're mentioning that there's still maybe a little bit of weakness. Can you size it for us? Is $144 million a good number? Could it creep higher? And why would it creep higher or lower from here? Given that you know this -- I mean, this is a specific vintage, right? So is there any kind of outlook you can provide on this in regards to just how big the formations can get against the vintage that clearly must be declining in size, right?

Yes. So I would say like when I look at this vintage in particular, it is declining in size. And so you'll see in our -- it's not something that we talk about. But in the past, we said most of our Stage 3 PCL is coming from that one vintage and, in particular, some geographies in that GTA and surrounding areas and the 2022 vintage. And that's gone from, say, almost 70% -- 75% -- 74% to 75% of the Stage 3 PCL and it's down to about half of the PCL in Stage 3. So we -- that is part of what you'll see in our mix, is that the losses -- that portfolio is shrinking as it would. And so we're seeing that reflected in the Stage 3 PCL.

Headwinds are the ones that I talked about in my remarks, right? If we see the continued uncertainty, if we see increases in unemployment, if we see challenges in GDP, those are all things -- and continued housing price declines, those are all headwinds to that forecast.

Your next question comes from Gabriel Dechaine at National Bank.

Just a couple of quick ones. Margin performance. And I apologize if I didn't catch this in the opening remarks, but margins at around 2%. Do you think you're going to be in and around that level until loan growth accelerates? And then the credit outlook. I get the descriptions and all that, but are you saying that this quarter is the high watermark for the year and we should kind of gradually trend lower over the rest of the year? It sounds like at least in the mortgage book.

So on margin, you're right, our outlook had been at 2% or greater for the year. I think the one thing to think about is how margin will further expand. And we'll give that outlook when we close BC Financial, which will, of course, be conducive to our margin profile and asset mix diversification. So that will be pretty meaningful.

Marlene, on the credit side if you want to add?

Sure. So yes, as I mentioned, the outlook for the rest of 2026 is consistent with what I said last quarter. So the first half will be a little -- will continue to be a little more challenging. We're elevated versus long-run historic norms, and we'll see that come down towards the back half. But as I mentioned, when you look at our macroeconomic forward-looking indicators, they're projecting improvement towards the back half.

And then as it relates to the mortgage book growth, SFR, Alt-A, whatever you want to call it, you're still confident in hitting double digits in the second half?

Yes. Well, we didn't -- yes. So there's a difference in asset growth as well, though, right? So the current momentum for single-family is what we expect. What we provided, Gabe, was that high single-digit to low double-digit was total loans under management. So that includes commercial. Like if you look at businesses like reverse mortgages that we have a high conviction in growing really well, that grew another 5% sequentially, what, 25%, 30% year-over-year. So that includes all of it, Gabe. So it's really important to watch.

Your next question comes from Mike Riz with Scotiabank.

A couple of quick ones. Just wanted to go back to Marlene on credit. And I'm trying to understand the GIL change sequentially, the 10% you referenced. I think you had about 8% in commercial, 15% in your mortgage book. Trying to understand what happened during the quarter on the macro side, because I see quite a bit of a divergence between what EQB is reporting on GILs and what the other banks are reporting. So there's something anomalous about your customer base, and I'm trying to put my finger on what that might actually be. So what is it that specifically you think drove this divergence between EQB and -- not speaking to the other banks, but it is standing out quite a bit here.

Yes, you're right. I can't speak to the other banks, but I will say what is interesting about our customer base and our book is our customer base is -- 69% of our customers are self-employed. Our terms are much shorter than the larger banks terms. We tend to have terms of 1 or 2 years. So our book does renew more frequently. And so the customers in the larger banks, they might have 5-year terms. They may have originated the bulk of their mortgage book 5 years ago when interest rates were incredibly low. Our customers have -- over 95% of our customers have renewed from those peak rates into lower rates. So we've seen our portfolio change. It's much more dynamic. And so we're not going to see the renewal cliff that others have. Our portfolio, as I said, has changed very dramatically. So it's not really an apples-to-apples comparison, Mike.

But is there nothing you can point to that happened intra-quarter that would have driven the big GIL jump? It just seems like quite a bit of a jump. It's increased at an accelerating pace in this quarter. I'm just trying to understand a little bit in terms of what drove that.

Yes. On the personal side, we did see -- I think there's a little bit of seasonality in those numbers, Mike. But also that's just the nature of our portfolio. We still see customers impacted by higher unemployment rates, et cetera. And as I said, almost 70% of our customers are self-employed. So they're seeing some of the slowness in business as well, and that would be impacting the growth in GILs.

Yes. Just on the commercial point, Mike. Speaking to the increase in the commercial, I think we noted in there that was really largely attributed, of course, to one large group. And your comment - back to the differences with the other banks, we don't speak to that. Except I will say that in that particular exposure, that was a big bank-led transaction that we participated in.

Okay. Appreciate that color. And then maybe one for Chadwick. Just wanted to talk a little bit about ROE. So when I look at the PCL ratio this quarter, the 32 basis points -- I'm just playing around with numbers here. But if I take that down to 0 PCL, the ROE still doesn't get to that 15% level, which maybe suggests a little bit of a structural hindrance on getting to 15%. I'm not sure if it's PC Financial that's going to drive you back to that 15% to 17% that you sound confident you'll get to at some point. But EQB as a stand-alone pre-deal, is it structurally impaired in terms of its ability to get to 15%? And if I'm wrong on that, why is that the case?

Yes, I don't know that I can validate your spreadsheet based on what you have, but I'd say it's a combination of factors, right? So we have revenue that would return to growth for a variety of factors. We have credit that goes down. And expenses are already on that solid momentum back. And then obviously, it's depending on how you're deploying your capital otherwise. 15% to 17%, obviously, that's the medium term, right? We said 12% was our outlook for this year as well.

So you're getting there through -- will PCF be part of it? Sure. But it's not actually -- not necessary to get back to 15%. That's as the market picks up and some of our outlook for the core businesses. And that's why we're focused so much on our core businesses as well on revenue growth. So it's -- you got to look at the numerator and denominator. But 15% we see in multiple ways back from a medium-term perspective.

Your next question comes from Fernando Torrealba Tesi with TD Securities.

Just 2 quick questions. The first, just to clarify. When earlier you mentioned that the formations from the 2022 vintages in and around the GTA, did I hear you right in saying that they used to represent 70% to 75% of Stage 3 and now they're closer to 50% of Stage 3. Do I have that right?

Yes, that's correct.

Okay. And then the second question is, could you maybe give us a little bit of color on the recently announced partnership with Dominion Lending Centers. I'm just trying to get a sense of how big a partnership that is. Is that going to focus on a return to on-balance sheet growth for insured residential mortgages? And if so, what kind of NIM profile could we expect from that? Just a little bit more color on the partnership would be appreciated.

Yes. I'll take that one. So we launched a program with a valued broker partner -- one of our valued broker partners in January. It is an improved economics versus some other programs that we've run in the past. It's not materially large from -- that changes in the outlook that we've provided in the past, but we do expect some healthy originations. It won't be enough to offset what has been a declining trend in our prime insured portfolio, but you will probably see the prime insured decline at a slower rate now as a result of launching this program.

There are no further questions at this time. I would like to turn the call back over to Mr. Chadwick Westlake.

Thank you, everyone, for joining us today. We could not be more enthusiastic about what the future holds for Canada's challenger bank and the significant growth ahead. We look forward to welcoming you at our upcoming AGM on April 8, where we will celebrate the accomplishments of our outgoing Board Chair, Vincenza Sera, and welcome our newest Director, Mike Peterson, who has been nominated to become our next Chair. All the best until then.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Okay. We'll start off with the next session, please. And before we begin, I've been asked to tell you that Chadwick Westlake's comments today may include forward-looking statements. Actual results could differ materially from forecasts, projections or conclusions in these statements. Listeners can find additional details in the public filings of EQB Inc. So with that, Chadwick, welcome to the conference. Thanks for...

Thanks for having me, Darko.

So all day long, we've been going and asking very direct questions about performance and ROE and all sorts of stuff. So I just want to dive right away into a few things with respect to your bank. And I want to, I think, start with sort of growth expectations and in particular, revenue growth. So as I sort of absorbed your guidance in the last conference call, essentially, you're expecting loans under management to grow about 10% -- sorry, in the high single digits.

Last year in '25, you had 10%, but revenue was actually slightly down. So maybe we can talk a little bit about the expectation for revenue growth in 2026. And to put a finer point on it, I think you're expecting flat to slightly positive operating leverage with low single-digit expense growth, which sort of says mid-single-digit revenue growth. So we've got high loans under management growth, mid-single revenue growth. Am I reading that right? And where do you see potential -- most importantly, where do you see the potential for revenue growth in '26?

Yes. I see how you do that, Darko. You ask a question, then you look to see if I'm going to give you a yes or no. Like first, thanks for having me. I really appreciate RBC hosting us today. Happy New Year to everyone. This is an exciting time for EQB. I do want to share that. This is -- I'm about 4 months into the job, and we're starting truly a new era for Canada's Challenger Bank.

And we're focusing the company on doing a few big things really well. We're reigniting our core franchise, which is going to come back to where we're going on the revenue growth. We're going to complete the full potential of the Challenger Bank. That includes with the recently announced PC Financial acquisition that I'll happily speak more about, too, is just incredibly exciting.

And we're going to optimize the capabilities of EQB. That includes returning to efficiency as a competitive advantage and returning to our 15% plus ROE North Star. So I say that as well as in terms of the strategic priorities and our excitement for where we're at and having closed the book on 2025 and the biggest year of change yet for EQB to what will be one of the most exciting years yet for EQB. And when you think of some of your questions, there's a couple of aspects. ROE is going to remain paramount, ROE and that earnings growth.

And one of the governors we're applying to the business that we're getting to through the restructuring charge and through the acquisition, some of the focus of the company is getting back to operating leverage as a paramount priority because we were very negative in our operating leverage last year, and it was not acceptable. And we've now rectified that, and you'll start to see that in Q1, so expenses more taking their cue from revenue growth. And we're going to get back to obviously growing the core franchise really well, but we're going to do it with a focus on back to 15% plus ROE, efficiency more in that competitive advantage range, which is south of 50%.

And some of that's what you're seeing in the guidance. So we gave that guidance or the outlook, I should say, of 12% to 15% EPS growth and then getting back to ROE, which we set around 12% plus for 2026 and then growing from there. So what you can expect for revenue growth, you're right, we thought high single digit, low double digit for loans under management. And you're going to see that in different ways where we're still growing well in the CMHC-insured multi, which is a big part of our business.

So that's part of the commercial business, which is about $42 billion of the $74 billion that we have in loans under management. Reverse mortgages, we expect to continue to grow really well, and that's a great yielding business. And we pulled back a little bit more on things like single-family insured, but the single-family uninsured, we do expect to pick up more momentum and more growth, especially for the second half of the year, but you're going to start to see some of those expense benefits start to play out early in the year.

So at the end of the day, we're going to use our high capital really well. We're going to focus it, and we're going to drive back to the ROE and the efficiency and that EPS growth that you should start to see translate this year really effectively.

Is that mostly then an NII story or a fee? Like how should I think of that, you're growing these different buckets?

Sure. Yes, that story will change when we close the deal. But for this year, we'd expect consistency in our net interest margin. So you saw that around 2.01% for Q4, and we'd expect some consistency there. I know there was a little bit of volatility last year, and we stabilized that. And that comes down to how we manage our funding costs, but also the asset classes where we're growing. Some of the loans under management, though, a big part of that is the insured multis and that shows up more in the noninterest revenue, which we expect would continue.

And that's always going to depend on the 5 or 10 years or where that's going in the spread. But overall, we'd expect -- even if revenue is flat, we're going to manage our expenses to the point where they're not going to exceed revenue. So you're going to get back to that flat to positive operating leverage is really important. So we can control our expenses and we will. And then when you layer on what we expect to be a better credit picture in 2026 as well, you get back to that higher earnings growth.

That's a great segue into the next question. So what about the expectations for it? I mean we didn't quite get a PCL guide for...

We tried, we tried.

You tried, but sort of -- so how should we think about improvement, yes, how significant a component of the 12% to 15% EPS growth can credit be?

Well, the first important point is going to be the expenses. So that's played out and you're going to start to see that benefit in Q1. You have not seen that benefit yet. And we've communicated that will be about a $45 million improvement in expenses. You'll see that in 2026 done. The credit side, what you can imagine in our first -- my first few months in the job and our new leadership team is we went through loan by loan.

And that was an important opportunity becoming CEO and to have an extraordinary new CFO to work with Anilisa and our CRO, Marlene, the whole leadership team that's here. I want to go through loan by loan to really understand the picture and ensure we had conviction that we were -- had the most conservative, thoughtful posture possible on the credit reserves and our ACL ratio. And you're always under accounting for -- IFRS 9 is IFRS 9, so you can only take the reserving that you can.

But we wanted to take the most conservative posture possible. We really understand each loan by loan. And we're confident that we left -- that we exited 2025 from a position of strength and that we're well reserved for -- not expecting the position to improve dramatically in 2026, but we're well positioned for even a more recessionary environment in 2026. So with that said, I'd expect the PCL ratio to be improved in 2026 over 2025 and improving sequentially through the year. And that includes both in single-family and commercial.

And equipment finance, we -- if we can just touch on that real quick...

Yes, equipment financing, we're -- I've been examining the business pretty carefully. I'd say we've improved the business in terms of the risk posture on it, where in the past, closer to 60% of the business was long-haul trucking and lower quality, I would say, that you price for. We've migrated the business significantly to more where maybe 25% or so is long haul and a much more significant component now is prime.

So that should reflect on the credit side, where in 2024, equipment financing was about 80% of our PCL. Last year it was around 1/3, and we'd expect that to continue to improve, but it is higher credit losses than our other books. But we'll continue to examine all the businesses. But the overall position in the business has improved from a stability perspective.

And is it still a business that you think can achieve the ROE objectives? Or is it still too early to tell?

Over time, I believe it can. But the question is, do I believe is that a Challenger Bank business? We're going to be one of the most distinct and one of the only omnichannel Challenger Banks in the world. And that's already set. That will be done by the end of this year. So does the Equipment Financing business match that or not? And what I -- I'm not as big of a fan of is the volatility in that credit profile where it's going to be a little bit more cyclical than we might like. And I'd like things to be a little bit more stable and predictable as a growth bank, but I like the credit patterns to be a little bit more consistent.

Okay. And then just to finish up on credit quality. I think the way we think about the Mortgage business is typically -- you said you went loan by loan almost and so I guess the cohort that you had talked about in the fourth quarter was like a GTA suburbs, 2022 sort of vintage, you've gone through it. I don't know if you can maybe talk to this, but what are the early signs for further delinquency or other formations in this book? And how should we think about possibly top-up because as you said, there's a little bit of accounting sort of holding you back from -- so could we expect something like that in the first quarter or 2?

So we -- in Q4, if you look at where we entered Q4 and we exited Q4, our coverage ratio expanded 10, 15 basis points. We did expand that. We built in performing. We -- 2/3 of that build would have been more macro driven and then some on the changes in significant credit risk. So we built for that. So my expectation would be an improvement in Q1 over Q4. And what we have not seen, and you always have to say, yes, because we -- none of us can predict this market, and we've already seen that starting the New Year.

Anything can change, but we have not identified anything systemic in our portfolio. I mean one thing that is true about EQB is that we have lowest PCL ratio. We trend with the lowest PCL ratio of all bank peers. And we've always been a strong lender in single-family and commercial. And what popped up last year was some losses in single-family, which is more unique for EQB. So I think that's what threw people off. And you have losses in 50, 60 loans that of, say, 63,000 just in that portfolio.

I think that just caused people to focus, but we haven't seen it out of that pattern of 50 to 60 that remain the same out of Q4 as we resolve some. And it has to be unique where in those properties, you had price declines of, say, 30%, 35% and you had some borrower stress, which can happen in these markets. So do we see that happening outside of where we're -- those markets and those 2022 vintages. I don't think we've seen that play out, but we have prepared for a more stressed environment in the reserve that we've taken.

Okay. Earlier, you were rather emphatic about the expense control and that we should see it right away. So what is the efficient -- like what is your efficiency aim to run the bank at a through-the-cycle kind of -- and maybe this is difficult to say now because you're about to embark on a fairly large change, and we'll get to the acquisition, I promise, everybody. But maybe first, like where do you think you can -- where do you want to really run the efficiency ratio of this bank?

Well, the first thing I'd say expenses increased 12% last year. Revenue was minus 1%, 0% completely unacceptable. And I'd say that right out of the gates, we acknowledge that and we fixed that. What I'd expect is consistent flat to positive operating leverage. That's -- I'll keep bringing it back to that because it's going to come to the operating leverage and the ROE.

What I would say is some people have looked at, including me say, okay, what was your efficiency ratio even 10 years ago? The hard part about that is EQB has changed dramatically in that time in a very good way. We acquired Concentra Bank in 2022 at a 70% efficiency ratio. We brought that to our level in the 40s. We acquired ACM, our asset management company that has a higher efficiency ratio, but it's great for ROE.

My belief in general, outside of PCF is our efficiency ratio should start with a 4. And we closed the quarter, what, 54% or so. So you'd expect to see that improve. And you'll start to see benefit of that in Q1. And that's why we set an expectation and outlook back to high 40s, around 50% by late next year, but you'll start to see momentum towards that already this year.

And then the rest just depends on the revenue environment, right? We're planning for a more conservative revenue growth environment in the interim. But it would have a 4 handle outside of, say, a business like PCF having an efficiency more in the 55% or so range, but you can improve that as well over time.

Yes. So let's talk about that. I mean so you've announced the deal. We grabbed what information was available from the regulatory side. We [ slammed it together with your ] model. And so it's not perfect. There's going to be mistakes in my model because I don't even know if there's any adjustments I should be making. So how should I think about the combined efficiency ratio? And what opportunities do you see there at PCF on the cost side?

Yes. Even when you take a step back, there is no deal like this to be done in Canada. We couldn't be more excited about the PC transaction and our new partners at Loblaw and George Weston. And this is the deal that will literally make us one of the most unique Challenger Banks in the world, and it will make us omnichannel for the first time as well. There's huge wins in that.

And this deal is about scale, capability and value. In scale, we're going to go from nearly 800,000 customers to about 3.5 million customers. We're going to have a real complete direct franchise for the first time with that. And there's a massive multiplier on distribution capabilities and branding, where in my shoes, I was asking the question of how do we become relevant to Canadians when 80% or 90% don't even know we're here.

That's been a challenge because how do you achieve that without having to spend 10, 20x the amount we're spending on marketing now to get to where people are because it's very important for me that we are where customers are. So this deal puts us where they are. Now we will be linked to the PC Optimum program, which is the most successful, largest loyalty program in Canada with 17.5 million members. We'll be omnichannel with an EQ Bank brand and there are 2,500 stores. We'll operate 180 advice pavilions.

We will be all over Canada, where 7 million to 8 million people visit per week. So it's all for the scale of how do you become relevant and economically build household awareness. We will be a household name when this completes. And then you think of the capabilities, we're adding the products. So you've heard us talk about for years, Darko, that we want to add a payment and credit solution. 9 out of 10 of our EQ customers said, if you have that, we'll do more business with you.

So this completes that capability perspective with one of the biggest credit card portfolios in Canada, that's 80% prime, super prime. It's a very large one. It's actually just -- we're right aligned with the big 5 with this credit card portfolio and a very high-quality credit card portfolio. And Loblaw would say a couple of million of their best customers become our customers. So you get that capability, plus you're getting the loyalty program and also talent.

We're adding hundreds of amazing employees with very shared culture and values and purpose and mission. And that capability is important. We're already on the same core banking platform. We're already both on Microsoft Azure. So there's real synergy. Even our Chief Technology Officer was theirs. She helped build their technology stack and the Optimum program. So there's real alignment in the capability. And you can't just go build this. You can't build it. And then lastly, it's about value.

So this creates tremendous shareholder value, customer value, competition for Canada. This is right on point. I think even right down to the rating agency aspect in terms of the shift in our business mix, revenue diversification, this completely transforms what we are in a very good way. So it's about those 3 aspects at the end of the day for the deal. And there was no deal like this. This was a marriage in the making. There was no process. They wanted to work with us, and we wanted to work with them.

And so just thinking about then we'll move this beyond just efficiency, which is -- let's think about all of these opportunities. So 17.5 million members.

In Optimum, yes.

In Optimum. And you have free opportunity there to convert them to your customers. Does that -- I can envision a number of things. Maybe you put PC Optimum points on the deposit product. You've got a license, I think, to issue PC Optimum points, right? So there's -- how should we think about the cross-sell opportunity? And how aggressively do you pursue it mindful of risks and so on?

Yes, there would be 2 things. So when we published our model and you said you're piecing together the data, and I know it's not easy because it's just the OSFI data. They needed to curb that stand-alone financials. And we gave a bit of a glimpse of that in our investor presentation. But I'd say we shared conservative synergy assumptions of about $30 million in cost savings, which is about 7%.

Even with that and some very rudimentary capital efficiency, we believe there's hurdles at 15% plus ROE. That's as much as we conveyed in an exceptional value-creating deal. Imagine on top of that, more capital efficiency, more funding capability. These customers have shown an interest and a propensity to open a day-to-day account. And you see that with PC Financial having launched a day-to-day offering in 2024. And in a short period of time, without even trying that hard, I think they would say, added $800 million in deposits and a few hundred thousand deposit customers.

So there is a propensity. There's an interest in doing more. And so that -- that we believe we can use to grow EQ Bank finally, that core deposit franchise really well, and that will be funding efficiency and savings. And then you have actual cross-sell from there. So could we offer an EQ mortgage to a PC customer? Absolutely. Could there be a reverse mortgage brochure and advice center? Could there be a wealth offering integrated in?

Now EQ customers get these credit cards. They can get the Home and Auto Insurance coverage that comes with the business as well where we don't take the P&C risk. There's synergy on both sides that is going to be upside potential on the acquisition. But what we wanted to show is with kind of rudimentary combination, this deal hurdles and makes a ton of sense in an extraordinary way for us. So there is upside in cross-sell and wins for both sides.

And the beauty for a PC customer, which many of you may be, is you're not going to lose anything. You're only going to gain. What's there will continue, and you'll get more product and offering from us as a Challenger Bank. And same with EQ, you're getting all the products and services that you were missing today. It all comes together as one United Challenger.

And you mentioned in the discussion there that you're picking up pavilions, ATMs, things you've never had before.

That's right.

So how should we think about that? And is that something that you would grow or expand? How should we think about that?

I'm excited about it. So I never believed as a Challenger, we should have branches per se. But I think physical interaction can be a value. But it's about branding, being present where customers are, but also an opportunity to have physical human interaction on site. And we're getting this -- we're able to operate pavilions at a very economical price in existing stores where people are.

So you don't have to go to branch on corner of X and X, go to where your family needs you to go to get groceries or you can -- in a variety of things across their stores, you might be in for various reasons. But there, you could have an advice center. We can come in and talk about a card, get some advice, maybe pick up a draft. Yes, you could use an EQ ATM. So it's the right amount of physical sort of advice light kind of branch light without taking on significant operating costs without expanding our efficiency ratio really.

So there -- you have to step back and reimagine what the operating model capability is combining these 2. And I think we're going to stay focused on Canada, but Canadians are also creatures of comfort and sometimes you want to know something is tangible. And I think some physical presence can actually make something more tangible if you see it there. And then I also reminded of, "Hey, maybe I should ask a question or maybe I should check out that product." So it's just -- it's there and it's visible, and I think that can matter to people. And today, for PC about, call it, half of sales might come from physical and then half might come through digital. So these are digitally inclined customers as well, but it's great to have the presence in the stores.

No early plans to expand anything?

There could be, but I'd say it's too early to share what the full potential is. And there's a lot of assessment to the local neighborhood demographics and where is the growth potential, where is the growth propensity. But I'd say there's definitely significant build possibility for customers through those sites.

And you mentioned that you're picking up an Auto Insurance Distribution business. I mean it was never something that I thought. How do you -- this is an ancillary feature? Or is this a business that you think you could also grow and expand?

I think we can grow. It's not -- we don't have to take the P&C risk. So again, very key. So we have another company we're partnering with -- but Home and Auto, when it's part of the package, it's there, and it was part of us becoming the exclusive financial partner. I think when you start to link the whole thing together, it's a very nice add-on that from a shareholder, it's great for ROE.

It's more of a referral-based business, and it matters to Canadians. We're not trying to create the new #1 insurance company, but it was more to be part of that complete offering that was there. And they've grown the business very well, already over 65,000 customers, over 90,000 policies, and it's still newer in the day. So that -- it's a great opportunity to expand ROE over time.

So you became the CEO and relatively quick out of the gate, you did the PC deal. And then you mentioned wealth just a bit ago, you might be able to -- so should we start to prepare ourselves for another potential move or how aggressively are you trying to charge down the Wealth business and entering and providing a wealth offering? Is it possible that you're even thinking about doing this organically or in-house?

A couple of things. So this -- the PC deal, is -- it's an important part of our strategy. As I said, for years, we thought we need payments and wealth. And this was the most distinct deal we could do in this country. Again, we're very excited about our new partners. And I remember they're going to join our Board as well, a couple of Board seats and take a significant interest in us. And one thing we all share is that wealth matters to Canadians, and there's significant intergenerational transfer of wealth coming up.

And what we have today in both of our platforms is a gap where we now will have -- even if you think of the EQ Bank app, we'll have all the everyday solutions you need, RSPs, TFSAs, U.S. dollar account payments, even you can even originate a mortgage through our Nesto partnership. Now you have the cards, PC Optimum will be integrated into our app. But what you don't have is a further yield offering that can even be a great EQ passive investment offering for Canadians integrated into the experience right now.

So that's more likely a buy and partner versus build. But there will be product and distribution opportunities that complete this focused direct franchise. And we wanted to move on this transaction, which expands and changes our universe and also the partners we might work with significantly. And it's important to Canadians. So you could expect to see it, but first priority is to close this deal and integrate it very well. But you can imagine in parallel, we've been thinking about this for a while. So there are options to add this in, and it's right on strategy for us.

Okay. Shifting gears a little bit to capital. So you had mentioned the potential of managing your CET1 down over time. I mean you ended at 13.3%. You just announced an AIRB. So maybe you can just give a little bit of a highlight on that recent press release...

NCIB?

Yes, the NCIB and what your thoughts were around that?

Yes, absolutely. We're very well capitalized. We're at a great position in our bank, but we need to put the capital to work. So our belief now is a couple of things. We're always going to invest organically. So making sure we're putting the money, the capital to work through loan growth and through the core franchise. And we generate a lot of capital every single quarter. So the first priority is to put the capital to work there. We have a pretty steady dividend.

And we're -- we'll probably migrate to more of a payout ratio target over time versus just dividend increase. But we believe in putting that money back into the business to grow. And buybacks is one aspect that you see new, and that's where you're going with that announcement, where it's also not a coincidence that we did a restructuring. We did the biggest transaction ever. We've also bought back more shares in the past [indiscernible] months than we have in our combined history because our stock is significantly undervalued.

And we're going to put our capital to work. So the NCIB, that takes us to our highest level of daily volume capability yet. And we also entered for the first time an ASPP, so an Automatic Share Purchase Program. And so we'll buy even through blackouts. That's how significantly we believe our shares are undervalued, and we will continue to buyback our stock and put that capital to work. As we have hundreds of millions in excess capital, we're putting it to work. You might see more inorganic in the future. But for now, organic dividends and buybacks. And then we'll see about more inorganic as well as we progress. But you can see that migrate down because it's very important, I think a bank should have a total capital ratio above 15%, 15.5% or so. We're there. We have some Tier 1 and Tier 2, so we can continue to put that CET1, Tier 1 -- CET1 to work.

Okay. I'm going to sort of quickly shift to see if there's anything from the audience here in terms of questions. Okay. So first question, was the Challenger Bank culture attractive for Loblaws? What was it about EQB that attracted Loblaws versus doing this with one of the large banks?

Yes, absolutely. The Challenger Bank culture is extremely, extremely compelling to Loblaw and to Galen Weston and Richard Dufresne, the whole team. They -- what the intent of build with PC Financial was to be a Challenger Bank. It is a Challenger Bank, and they view that very shared cultural sentiment with us. So they exclusively wanted to work with us with EQB. There was no process.

This was -- as they assessed what's the future for PC, they saw us building something very similar, and they wanted to really team up the companies that way. So, yes, shared culture, shared focus. And what I would say on the large bank is they want to have significant influence and be partners. And they had a while ago partnership with CIBC that ended back in 2017.

That was a very successful partnership. They generated tens of billions in mortgages and deposits, and it's for other reasons that it went in different directions. But in a large bank, they weren't necessarily going to get 2 Board seats and be able to buy up to 25% of the company. So with us, they could have an influence. We can focus on their millions of most valuable customers and vice versa, and we can build one distinct Challenger Bank.

So it's about what's possible for Canada for competition and Canadians. Where we're very, very similar is our focus on this country. We're exclusively focused on Canada. We're exclusively focused on building better lives for Canadians, completely sincerely. That's why I came back and took this job. I care deeply about this country and Canadians, and they feel the same way. So this is about the mission in Canada and their ability to influence and work with us.

And they don't think in a quarter or a year, they think in decades. So we're in this to really build something very different. So we're -- we haven't yet unpacked the full potential of what you'll see in this. And you'll see that more when we have an Investor Day later this year. I'll probably calibrate more to when the deal closes, so we can share even more robustness about it, but we couldn't be more excited about what's to come on us.

Okay. I think I was going to ask another one, but I think we're running out of time here. The time is running down. So I'm going to throw it back to you for the key takeaways that you want to leave with investors today.

Sure. Well, I'd say 2025 was a difficult year for us, a year of change. We haven't had a CEO change in over 18 years. But what is the same is our focus on being a Challenger Bank and being one of the most distinct Challenger Banks in the world, but exclusively focused on Canada. We're in a great position on our capital. We're in a great position, we believe, now on the credit side.

We've managed our expenses to a very appropriate level. And we're focused on a few big things, right? We're focusing the company on a few big things. And we're going to reignite our core, making sure we're winning where we should be winning. We're going to take the Challenger Bank to its full potential. And that has included completing the product shelf with payments and wealth.

And now you're going to see that dramatically transformed in such an exciting way with PC Financial and our new partners. And we're going to continue to optimize the capabilities of EQB to ensure our efficiency is a competitive advantage, and we're returning to that 15% plus ROE threshold, North Star. This is the start of a new era with a -- it's just -- it couldn't be more excited leadership team with a Board that's even been refreshed and very excited. And you saw us also announce a new nominated -- for nomination a new Board Chair, Mike Pedersen, that we're very, very excited about. It's a time of change and excitement.

So what you've known to love and believe about EQB will be consistent, but the future is looking brighter than ever. It just -- it feels like we're just getting started. So I couldn't be more excited and grateful and privileged to be in this position. We really appreciate all the support. And I hope you'll be signing up for an EQ account soon. You have PC Optimum, it's only going to get better. It's just the start for Canada's Challenger Bank. So we're very excited and grateful.

Okay. With that, we'll close the session and the conference. Chadwick, thank you very much.

Thanks very much, everyone.

Good morning, and welcome to EQB's Earnings Call for the Fourth Quarter of 2025. This call is being recorded on Thursday, December 4, 2025. [Operator Instructions]

It is now my pleasure to turn the call over to Lemar Persaud, Vice President and Head of Investor Relations. Please go ahead.

Thank you, Ludy, and good morning, everyone. Your host for today's Q4 results call are Chadwick Westlake, President and CEO; and Anilisa Sainani, CFO; and Marlene Lenarduzzi, CRO. Also present for the Q&A session is Darren Lorimer, Group Head of Commercial Banking. After prepared remarks, we will open the lines for questions from our prequalified analysts.

Please note that while we are excited about the acquisition of PC Financial, today's call, including Q&A session, is intended to be focused on the Q4 and full year EQB results. For those on the phone lines only, we encourage you to also log into our webcast and view our quarterly results presentation, which will be referenced during our prepared remarks.

On Slide 2 of our presentation, you will find EQB's caution regarding forward-looking statements, which involve assumptions that have 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.

Thanks, Lemar, and good morning. I appreciate everyone joining us during a busy earnings day and so soon after yesterday's call.

To stay on point for this call, I'm pleased to have fiscal 2025 behind us. It was a difficult year and one of significant change for EQB. That chapter is now closed, and our incredible leadership team is energized and focused on tomorrow. There were, however, several notable accomplishments.

First, while deemphasizing certain areas due to less attractive economics, we still achieved 10% year-over-year growth in total loans under management on the back of very strong 36% year-over-year growth in our off-balance sheet CMHC insured multi-unit residential mortgage business.

Second, EQ Bank, our crown jewel, continued to shine bright, achieving 18% year-over-year growth in customers and 10% growth in deposits, with deposit balances ending the year at nearly $10 billion.

Third, we launched our small business banking offering in October, bringing real competition and positive change to an underserved market that deserves better options. This offering has all the Challenger features you would expect, including fully digital account opening, a competitive interest rate, business GICs and no monthly fees. I'm pleased to report that at the end of October, we were already at $140 million in business deposits. That's before dialing up marketing efforts.

Finally, we were named the Top Bank Brand in Canada by the Financial Times' The Banker magazine, citing our status as best positioned to grow market share.

We have had plenty of moments of change in our history, and each time we emerged even stronger. I believe that is precisely how EQB is positioned now, ready for our next and most significant chapter of growth. I want to thank our deeply dedicated Challenger employees for their tireless work over the past year. Everyone is part of this team because they believe in our purpose and our ability to execute. I believe that applies to our longstanding and prospective shareholders as well.

This morning, I have a few key observations on my first 100 days as CEO. When I rejoined EQB in late August, I set out with a clear mandate from our Board to develop a future focused plan that concentrates capital and talent at the point of highest return, with the goal of achieving our long-term potential. With my leadership team, we've made a clear-eyed assessment of our competitive strengths and growth opportunities, strategies and supporting cost structure. There were no preconceived notions, no sacred cows, only a pledge to make the tough decisions and execute with velocity.

This resulted in a few early actions. First, I spent a lot of time traveling across Canada, to meet hundreds of employees, partners, brokers and shareholders. It is important to understand what people love about our company and where we can do better. What I found was a workforce that is energized as ever to win, customers that love our products and services and conviction in our ability to take our Challenger to its full potential while returning to our traditional ROE profile of 15% to 17%, which is important to our shareholders.

I also said coming into this job, we have return to efficiency as a competitive advantage. We would complete our product shelf and move back to our industry-leading ROE profile, even with the competitive disadvantage of standardized capital treatment.

I've also learned more about important areas for growth that matter for Canadians. Importantly, for example, our de-cumulation business. This portfolio increased 36% last year and remains poised to continue delivering double-digit growth, supported by market share gains and demographic trends, including the movement to age in place.

Second, my team dug deep into the fundamentals of our bank to reduce pressure points, specifically focused on margin, efficiency and credit. For margin, we took a closer look at our funding costs. The intention of our bank is still to provide Canadians with a highly attractive everyday interest rate. However, we recognize that with the Bank of Canada moving interest rates down another 50 basis points in the quarter, we have to more dynamically adjust our interest rate offering. It's all about striking the right balance to ensure we are continuing to grow profitably while expanding EQ Bank deposits to become the largest part of our funding stack.

With the build-out of our EQ Bank product shelf, we will attract more Canadians to our bank and grow share of wallet, a proven strategy to capture more value from our customer relationships and deliver greater value to our customers. A win-win situation. The outcome for Q4 was progress with NIM expanding 4 basis points sequentially to 2.01%.

On efficiency, we took decisive action. And while we cannot control the macroeconomic environment, we can control our costs. This resulted in the first-ever restructuring charge for EQB. Anilisa will speak to more detail shortly. The benefit is not in our Q4 results as it was executed at the end of October, but it will become evident in Q1 results. We needed to focus our efforts on the highest-return initiatives with clear benefit to earnings, to drive improvements in efficiency and positive operating leverage.

With respect to credit, PCLs in Q4 might be higher than some expected, but our intent as a refreshed team was to dig deep into our lending book. We carefully considered macroeconomic variables for Moody's to inform our forward-looking indicators, and we ensured we are appropriately provisioned for all current risks. The good news is, assuming no significant changes or deterioration from our forward-looking indicator macro drivers, we enter fiscal 2026 from a position of strength. Marlene will comment on credit further in her remarks. Our businesses are well positioned to deliver growth and resilience in credit despite the challenging macroeconomic backdrop.

And third, we spent time thinking through our strategic focus in the market. Contextually, we can all agree that Canada is one of the most profitable banking markets in the world, but there are millions of underserved Canadians and a real need for greater innovation and stronger competition to the incumbent biggest banks. We are here to bring that change, competition and innovation. We are here to disrupt and become a better everyday option, focused on Canadians. Our interest is in building a better banking system, offering unique products, including many low and no fee options with EQ Bank. And we championed the concept of Challenger with our trademark brand literally being Canada's Challenger Bank.

Our addressable market is significant, and our growth opportunities are tremendous. All at the same time, we remain significantly undervalued. I've always believed our goal should be to focus on doing a few big things well, rather than be everything to everyone. That is what it means to be a Challenger bank at its core.

Our PC Financial acquisition and Loblaw partnership are going to be game changers. This is anchored in purpose and a lead towards our full potential as the largest Challenger in Canada. That should be clear from last night's call.

2025 was a challenging year for housing as the market was characterized by elevated levels of economic uncertainty following the trade dispute with the U.S., tariffs, rising unemployment and lower consumer confidence levels, even as the Bank of Canada cut interest rates. There is strong structural demand in Canada for homeownership and supply issues remain.

Looking into 2026, we are cautiously optimistic we will see a rebound in housing. We think it's less of a question of if, more so when will the market recover. When it happens, you can expect it to result in revenue growth given that over 60% of our on-balance sheet loans are single-family residential. And with a 13.3% CET1 ratio, we have the capital to fund this growth.

To get the market really going, we will need to see the combination of lower rates, lower unemployment, which we saw recently, and better GDP growth. We have already seen the Bank of Canada respond by aggressively lowering interest rates. And finally, with the 2025 Federal budget focusing in on infrastructure investment, we are hopeful we can see positive impacts on GDP growth.

We think commercial loan growth will follow confidence in the broader economy, and our pipeline now is twice what it was this time last year, with a very busy start already to fiscal 2026 across all segments. This includes our multiunit residential portfolio. To support the supply of affordable housing to Canadians, the government announced an increase in the CMB issuance limit to $80 billion, up from $60 billion, in the latest Federal budget. This increase, which is tied exclusively to multiunit housing across Canada, will benefit EQB.

Combining all of this, with OSFI's engagement on reducing restrictions on capital to support business investment, a move which should directly impact our bank, I remain excited for the future of EQB.

As part of that future, I'll offer a few strategic comments. One, we're focused on winning in our core franchise. We are reviewing and driving more changes to ensure we hold the #1 position in single-family lending. In 2025, we achieved record broker satisfaction scores in our uninsured business, partly driven by recent technological investments and improved customer retention. We are also focused on expanding origination partnerships.

Being the leader in reverse mortgages is a priority, and we are not standing still. This past Monday, we launched even more enhancements to increase our competitiveness while maintaining strong risk management. We remain the market leader in CMHC insured multi-unit residential and operate attractive and well-run commercial businesses as a choice lender to other lenders, a commercial real estate alternative lender and top provider of services to credit unions.

Finally, the growth and sustainability of our diversified funding stack anchored in EQ Bank will be critically important as we intend to get the full attention it deserves as we bring focus to our priority lending areas.

Two, we're completing our product shelf and taking EQ Bank to its full potential. I've said before the gaps here are payments and [ wealth ]. We are addressing payments with PC Financial. All of this will be plugged into our world-class EQ Bank platform.

I want to be clear, we're focused on delivering a successful integration, which will allow us to achieve our full value from this historic transaction. But the remaining ingredient of wealth will remain a priority.

Three, we're expanding our capabilities and challenging the market. We will continue to leverage our digitally-native platform to drive best-in-class efficiency. This will be achieved through the rigorous expense discipline we introduced in Q4 to invest in a few big areas and ensure that, as the bank grows, we invest significantly, but also at pace with revenue growth.

We will grow our capabilities to reshape the market by investing in AI enablement, championing our technology and working with partners, government and regulators to enhance competition. Our acquisition of PC Financial advances our strategy here as well as they're bringing best-in-class personalization capabilities and tools and a 300-plus employee workforce with complementary skills to drive product innovation. With the addition of their pavilions, it offers us a unique edge to serve millions of Canadians and meet them where and when it's most convenient for them.

Finally, given the passing of the's Federal budget, we are one step closer to the creation of a made-in Canada consumer-driven banking system. EQB is uniquely positioned for this new era as a long-time supporter of open banking. We look forward to sharing more of our strategy at our 2026 Investor Day.

Moving to the next slide where we present our medium-term financial objectives. You will see that we are reaffirming our objectives, so this should be familiar to everyone. We have better aligned our categories to be more comparable to peers. For 2026, our outlook excludes the impact of PC Financial. And I would expect ROE to improve materially from the 7.5% we reported for Q4. What that looks like is highly dependent on the macroeconomic backdrop, but we feel, based on our estimates today, that could look something like approaching 12%, increasing even higher later in fiscal 2026.

Diluted EPS growth could land within our medium-term range of 12% to 15% growth. We expect to see improvements in our efficiency ratio and be within our medium-term range of flat to slightly positive operating leverage and exit next year with strong capital. We expect to continue delivering on our very strong dividend growth projection. Anilisa and Marlene will provide a more specific outlook on key income statement line items in their sections.

Now over to Anilisa to go through the 2025 full year and Q4 results, her first quarterly call as the CFO of Canada's Challenger Bank, and I could not be more thrilled and excited to have Anilisa in this chair.

Thanks, Chadwick, and good morning, everyone. As a reminder, my comments will be on an adjusted basis, and you can find a summary of these adjustments on Slide 27 of today's presentation. Starting on Slide 9 for a review of the fiscal 2025 results.

Operating environment headwinds, including a soft housing market and rising unemployment, weighed on our results. Diluted EPS for the year was $8.90 and return on equity was 11.3%, both reflecting higher provisions for credit losses. In addition, higher expenses and investments also impacted full year results. Against the backdrop of more modest revenue growth, operating leverage was negative 12.5% and the efficiency ratio increased by 570 basis points.

Moving to Slide 10. Diluted EPS for the fourth quarter was $1.53, and ROE was 7.5%. The decline in fourth quarter results as compared to last year reflected lower revenues, expense growth and higher provisions for credit losses. Compared to last quarter, pre-provisioned pretax earnings were down a modest 1%, with higher provisions for credit losses, partially offset by NIM expansion and contained expenses.

We announced an increase in the quarterly dividend to $0.57 per share, up from $0.55 last quarter and $0.49 last year, as we continue our strong track record of dividend increases. We also repurchased a record 731,000 shares in the quarter as part of our strategy to return capital to shareholders. And we expect to continue buybacks next year.

Before we get into key drivers, a note on the restructuring program on Slide 11, for which we recognized a final pretax charge of $92 million. The program sharpens our focus on top growth priorities, ensures efficient capital allocation and manages third-party spend and other costs with discipline. Going forward, we expect approximately $45 million in annual expense savings in fiscal 2026. These savings will be reinvested in continued strategic growth initiatives as we remain committed to investing in our future and maintaining our robust risk management framework.

As a result, we expect total expense growth to be in the low single digits next year, inclusive of the restructuring program savings. We also expect to deliver positive operating leverage with a low 50s efficiency ratio, with additional upside as the revenue environment picks up.

Now I'll break down the results of the quarter, starting with the balance sheet on Slide 12. As a reminder, we look to loans under management or LUM as a key performance metric as we are the market leader in ensuring multi-unit residential mortgages. Our LUM increased 10% year-over-year and 1% sequentially to $74.5 billion, with continued strength in our multiunit residential portfolio, solid growth in the context of a difficult economic environment.

And as a reminder, we intentionally pulled back from certain portfolios. For example, insured single-family residential and some equipment financing portfolios, as we managed overall risk-adjusted returns.

Conventional loans, which are LUM excluding off-balance sheet loans and insured single-family residential portfolios and are the primary contributor of net interest income, grew 7% year-over-year and 1% sequentially, reflecting continued growth in our de-cumulation business and uninsured mortgages. Looking forward to 2026, we expect growth in LUM in the high single digits to low double digits.

Turning to deposits. Balances increased 9% year-over-year and 1% sequentially to $36.1 billion, reflecting strong growth in EQ Bank. Growth in EQ Bank's demand deposits was strong, increasing 38% year-over-year and 3% sequentially. Within that portfolio, growth in the notice savings product was strong, while growth in payroll deposits moderated in the quarter as we adjusted interest rates in response to Bank of Canada cuts.

Wholesale funding was relatively flat in Q4 as repayments of covered bonds were offset by increases in our deposit note program. Wholesale funding remains an important source of our diversified funding stack and it expands our investor base. At the same time, we are focused on our funding mix sourcing a higher percentage from lower-cost sources, including deposits, which are sensitive to management actions and can be used to manage margins more actively. Overall, we are pleased with our mix progression.

Turning to NII on Slide 13. Net interest income was $265 million, down 2% year-over-year and up 1% versus last quarter. Net interest margins were down 8 basis points versus last year, but expanded 4 basis points sequentially. The sequential margin expansion primarily reflects lower funding costs and a shift towards higher-yielding uninsured mortgages, partly offset by higher liquid assets and lower prepayment income. Looking forward to 2026, we expect margins to remain around the 2% plus level.

Turning to Slide 14. Noninterest revenue of $43.5 million was down 15% from last year and 9% from last quarter, largely due to hedging activities and also lower gains on sale from securitization activities as volumes normalized.

Turning to Slide 15. Noninterest expenses increased by 11% compared to last year. Areas of increase were concentrated in our Challenger staff and growth-related investments. In addition, higher premises costs played through the second half of this year as we moved into our new Toronto headquarters this past spring. As a reminder, these occupancy costs will have a full year impact in 2026.

Compared to last quarter, both noninterest expenses and the efficiency ratio were largely flat as we thoughtfully managed controllable costs. We are pleased with this result considering the timing of the restructuring activities being late in the quarter and especially in the context of what is normally a seasonally higher expense quarter. As mentioned, overall, we expect low single-digit expense growth into 2026.

Finally, turning to capital on Slide 16. Internal capital generation was offset by the impact of the restructuring program, and the bank's CET1 ratio was flat at 13.3%, well above target and regulatory minimums.

Our capital allocation approach continues to prioritize reinvestment in organic growth, steadily increasing dividends and the maintenance of capital flexibility to pursue strategic inorganic growth.

I will now turn the call over to Marlene to take us through risk.

Thank you, Anilisa, and good morning, everyone. I'll start on Slide 18 with an overview of allowances for credit losses. Against the continued uncertain macroeconomic backdrop, credit losses were elevated in Q4 2025. Higher performing PCLs in personal and commercial lending were primarily driven by deterioration in the forward-looking indicators. This was partially offset by a release in equipment financing due to improved credit quality on the remaining [indiscernible] portfolio.

By business, PCLs were $7.8 million in personal, $11.8 million in commercial and $0.2 million in equipment financing. Along with PCLs on impaired loans, realized losses and write-offs, our ACL rate increased to 41 basis points, up 8 basis points sequentially and 9 basis points year-over-year. This was primarily driven by an increase in performing allowance, leaving the portfolio appropriately provisioned. We will continue to manage our allowances as the macroeconomic conditions evolve.

Turning to Slide 19. Impaired PCLs were 30 basis points, up 11 basis points sequentially and driven by increases across all businesses. On single-family residential, we continue to experience weakness stemming from larger loans in areas of Toronto and surrounding suburbs where residential real estate prices have declined significantly from their peaks. This does not appear to be a systemic issue across the portfolio.

In commercial, provisions were primarily driven by existing longer-standing impaired loans. The increase reflects deterioration in values and elongated resolution times. And finally, increased provisions in equipment financing are driven by continued downward pressure on asset values.

Turning to Slide 20 and a discussion of gross impaired loans. Macroeconomic conditions have contributed to an increase in gross impaired loans of 7% quarter-over-quarter to $871 million. Gross impaired loans and personal lending increased to $368 million this quarter, a 4% increase from Q3. This was largely driven by continued credit migration. On the positive side, however, early-stage delinquencies are trending positively over the year.

Gross impaired loans in commercial lending were up quarter-over-quarter, primarily driven by one commercial loan where a provision is not currently required. We are seeing stability in equipment financing as impaired loans increased only 3% or $1.4 million relative to last quarter.

Now I'll provide some thoughts on how I see credit evolving in 2026. The impacts of the 275 basis point reduction in the Bank of Canada's overnight rate since recent peaks are starting to work their way through the economy, and we see signs of credit improvement in the portfolios. We are also encouraged by the recent Federal budget announcements, which we expect will contribute to greater economic growth and improved market sentiment that will benefit performance in the latter half of 2026.

On single-family residential, we are seeing some improvements with lower early-stage delinquencies. However, we expect that we'll continue to operate in an environment of elevated global macroeconomic uncertainty in fiscal 2026.

On the commercial side, resolution time lines continue to be long. These loans tend to be larger in size and there could be noise within any given quarter. In our equipment financing business, we are seeing the credit benefits of repositioning towards prime and the deemphasis on long-haul trucking originations, resulting in improved credit performance. Having said this, we should be cautious that this outlook is highly dependent on macroeconomic conditions and based on the expectations that we will avoid a deep recessionary scenario.

In terms of PCL expectations, I would expect more relief in the second half of the year. Despite the headwinds of this past year, we remain confident in the credit quality of our lending portfolios and our prudent approach towards managing risk through the cycle. And with that, I'll turn it back to Lemar for the Q&A portion of the call.

Thanks, Marlene. [Operator Instructions] With that, operator, can we have the first question from the line?

Your first question comes from John Aiken with Jefferies.

Marlene, thanks for the color on the commercial portfolio ex-equipment financing, it's what I'd like to focus in on though. You had mentioned that the incremental provisions in the quarter related to loans that were previously classified as impaired. Do you have any sense in terms of how long the process will be for resolution until you can actually get the -- get these files off your desk?

Yes, it has been longer as we've said in the past, and it's approximately taking anywhere between 12 to 18 months. It can take a while to resolve.

And then just as a follow-on, Chadwick, in terms of the strategic review that you've done since you came back onboard, can we expect to see any changes in terms of the composition of the commercial portfolios?

Well, we have an excellent commercial business. When you think of the commercial bank, over 80% is insured and our priority has been the CMHC insured multi-unit as our top focus and being a #1 alternative CRE lender. All those principles will stay the same. And Darren Lorimer, our Group Head of Commercial Banking, is just exceptional. And he's here, and I don't know, Darren, if you want to add any other additional comments.

Yes. We continue to have a high level of conviction that we're going to see strong CMHC-insured lending growth into next year, both on the term and the construction side. We have great capabilities there. When you look ahead in our CMHC construction, most of that is based on commitments that we already have in place. So we have good visibility into that.

And we expect also to see an improvement in the uninsured commercial real estate lending as well. We're starting to see some early stages of growth there first -- the last 2 or 3 months, our pipeline has started to grow. I wouldn't want to extrapolate that over all of next year, but I think it's a good sign nonetheless.

The next question comes from Gabriel Dechaine with National Bank Financial.

I would like to ask about the credit stuff, of course. And get maybe a bit more specific on your outlook. And I guess, generally, you expect the phase of -- or the pace of PCLs to moderate over the course of the year. That's pretty consistent with what I'm hearing from other banks. But like where -- like if we look at the impaireds, is this a high watermark and it grades down? Or are we going to be stuck at this level in the residential mortgage portfolio specifically?

So I would say we are continuing to see elongated resolution times even in the residential mortgage portfolio where it can be 6 to 12 months to resolve. What we are encouraged by, and we show that in the graph in the appendix, is that the early-stage delinquency in that portfolio has been moderating, and you can see that decline over the year. Maybe a little bit of fluctuation quarter-to-quarter, but it's on a general downward trend. That will eventually result in lower gross impaired loans. And we even see the growth in gross impaired loans slowing quarter-over-quarter, if you look over the last 6 to 8 quarters.

So I don't have a crystal ball, of course, but I would say that all of those factors lead us to believe that, towards the end of the second half, we'll see those gross impaireds come down.

Okay. And the -- I think it was $12 million of impaired PCLs in the resi mortgage portfolio. How much of that was on new impairments? And I don't know if that is actually still the case. How much of it was on previously impaired loans where you're finding yourself with a longer resolution, you're going to pay someone on [ Mobile On], pay their property taxes, whatever, or maybe not [ Mobile On ] this time of the year, but you know what I mean.

I would say when I look at that portfolio, the impaired portfolio in SFR, a lot of it is still stemming from the segments I've been talking about for several quarters. It's the GTA suburbs, it's in that 2022 vintage. And those are -- and if you look at our formations in that portfolio, which we also provide to you, the formations are also coming down as well. So the formations represent the new that's coming in.

And yes, so -- but largely out of that $12 million, a large chunk of that, more than half, is related to that segment that we continue to monitor and provide against. And we feel that we're appropriately provisioned.

So new formations from the same area codes and vintage, not top-up provisions, that's my terminology, but it's not that?

Part of it is top-up. Yes, there is a -- it's a mix of top-up and new formations.

Okay. Now as far as the cost savings go and thank you for the clarity on the expense target, the growth target and all that. And I guess, should I interpret that the cost savings emanating from that restructuring that's all benefiting the bottom line with no reinvestment stuff? I know you got to reinvest in your business. But just from a -- if we ring-fence this particular number, that's pure cost savings to the shareholder, yes?

Yes. Thanks for the question, Gabe. You would have already seen the discipline come through this quarter, but you're quite right that the bottom line, that $45 million I was talking about in the subsequent reinvestment, that will play through 2026. You can expect to see the reversal in the expense growth trending right from the get-go. You're seeing it now, and you'll continue to see that into Q1.

Okay. Great. And then the last one I've got here, the PC Financial. Just a follow-up, I didn't get to ask yesterday, I think of asking. Do we have a -- if you have the ballpark, I'd really appreciate that, when you close, what your target core Tier 1 position will be?

Well, I'd say just plan for a strong consistency right now, Gabriel. It will be -- we expect second half of next year, but we have strong capital ratios, and that will continue, especially the focus on 15%-plus total capital and strong CET1.

And the next question comes from Mike Rizvanovic with Scotiabank.

I want to start with Marlene, just on your reserves. So the 41 basis points, how should we look at the 41? Like it's been built up pretty substantially here the last couple of quarters. And we tend to hear a similar narrative on your confidence in being well reserved. So is the 41 a new normal? It seems like there might have been a bit of a step change here in terms of where you want to sit. Or is it just a function of GILs being elevated for now? And as they come down -- what I'm trying to get at ultimately is as PCLs come in on the impaired side, do you offset that with some reserve releases and get that coverage ratio back down over time? Or is it a new level? I'm just trying to decipher if that's the case.

Yes. Thanks, Mike. I would say that when we look at this quarter, you saw that we have -- based on our forward-looking indicators, we have an increase in our performing provision. And that was driven because of the outlook on the macroeconomic factors, which show unemployment rising to 7.3%, shows GDP contracting even to small degree and staying relatively low and close to 0 for the rest of the year.

And so with that in mind, and not expecting the outlook in Q1 and those forward-looking indicators to deteriorate materially more than that, we shouldn't expect another large growth in that -- or a large performing provision in Q1. Does that help answer your question?

Yes. And then just as far as the actual coverage ratio, so that 41 basis points, is that somewhere where you're comfortable sitting at? Or can you see that coming back down in a more positive credit environment, I guess, is what I'm getting at.

Yes. If the credit environment improves, for sure, we would see that coverage -- that 41 basis points come down.

Okay. That's helpful. And then, Chadwick, just a quick one on the PC Financial. Just curious on -- and thanks for the P&L that was provided, the high-level P&L on that business that's being acquired. In terms of -- it looks like about a 4% loss ratio on that portfolio, and that's trailing 12 months. And I'm wondering if you have any -- anything you can offer in terms of like what's the parameter there?

Like is that 4% current in terms of the macro outlook being a little bit uncertain? Is it a little bit elevated? Like what is it normally at. I don't have color on if that 4% is a bit high right now or if it's right where it should be as a run rate. And then like where does that tend to go when things get really concerning on the consumer side in terms of risk?

Yes. Thanks, Mike. So I would say it's -- it does reflect the current environment. The normal level would be more in the -- even last year more in that 4.6% range. Trailing 12 months was about 4.2%. I would say -- you asked me this question last time, I'll say again, these -- is there a different type of borrower, right? Is that higher FICO Score, credit score than the Canadian average, high household income, high digital enablement, attractive customer base and over -- well over 80% are prime and super prime. So it is a different quality and well below their loss rate thresholds.

So does it reflect in our models, the current credit environment? Yes. And I think you could see this continued trend level. But in our models, do we model it for different scenarios? Absolutely. And it still makes a lot of accretive sense either way.

And then just out of curiosity, are you able to give us a sense of the capital that backs that business just in terms of dollar terms? I'm just trying to get a sense of the ROE of that acquired business. I'm not sure if you're able to provide that right now, but thought I'd ask.

I'd say it's a different way. There's a high CET1 capital position in that, but that's not really the way to think about the business. The way to think about the business is how we're going to close it. And that's where we pegged it at, at 13% at closing. And that's why you're going to see this hurdle really well from a base case and then with even the modest synergies, let alone all the upside from there.

So fair to say that it's a very, very good ROE business in relation to the lending business.

Yes, sir. It is.

And the next question comes from Darko Mihelic with RBC Capital Markets.

My questions are for Marlene. The first one is with respect to the residential mortgage impairments. I was just curious if you can talk a little bit about the nature of these formations. In other words, what I'm trying to better understand is, is the primary reason for the formation job loss, or is it simply the weight of the mortgage payment and the over indebtedness of the consumer that eventually has them fall behind and go impaired? And as a follow-on on to that, as we look forward into 2026, is the vast majority of the renewals that are occurring, will they be at a higher payment or a lower payment in 2026?

Okay. Those are great questions, Darko. Thank you. I would say a couple of things. One, when we look at the formations and the reason codes, if you will, for customers who are going to default, it's a bit of a mixed bag. Some of it is related to job loss, some of it is just customers we're holding on for a long time and having a harder time as the macroeconomic environment shifts. As you probably are aware, about 66% of our customers are self-employed. So as there's less activity in the macroeconomic environment, GDP slows, their businesses are impacting and -- are impacted, rather, and we see that happening.

In terms of like industry segments, these are industry segments that we see across the portfolios. Construction is impacted. Those working in transportation are other areas that are impacted.

And then in terms of other segments, we talked about the -- what was the second part of your question? Can you repeat that, Darko?

The potential payment shock on renewals in '26, or relief.

Yes. I've got that. So in terms of renewal, the segment that -- this more vulnerable segment that we've been talking about, the sort of GTA suburb, as you can imagine, the renewal rates have been higher. But that portfolio has actually come down about 26% year-over-year. And in terms of renewal rates, they are renewing into lower rates for the most part, because, you recall, our duration is quite short. And so our customers who were originated in 2022 at those very low rates did -- have already renewed into higher rates and actually have started to renew -- they've renewed into the lower rate and some of them have renewed again into lower rates. So duration is like 1 to 2 years generally.

And sorry, is it meaningfully lower or just modestly lower in terms of [indiscernible]?

It's meaningfully lower. Yes. The payments would be meaningfully lower.

Okay. And then a follow-on question in -- maybe, I mean sort of -- I just want to make sure that I'm interpreting your remarks. With respect to the forward outlook, I recall last year thinking about a range of 12 basis points or so for losses overall. Are you willing to talk about sort of what's the range for '26?

Not at this time, Darko.

Okay. And then my last question is in relation to the transaction, and again, it's aimed at you, Marlene. Does this in any way, assuming the transaction closes as per plan, does this in any way slow down your ARB approval work? Or would that just continue on and you would separately look to eventually get the P&C moved over to ARB more futuristically? I'm just curious if there's any impact at all on your work there.

No, it hasn't. We actually are fully committed to our ARB strategy, and we are moving ahead with our plans on the existing portfolio. And then we will assess the PC Financial portfolio and likely make plans for that moving into ARB remaining standardized. And I would expect it would, based on the outcome of that analysis, then we'll decide.

Darko, what I'd say as well on the question, so our capital allocation and our development plans here continue. We've been working on that for a long period of time. It is important. But also look at the regulatory environment and our regulators have been very open about ARB support or they could also still end up being an ARB late or further changes in risk floors. We don't know yet, but I think we certainly got the sentiment that there will be progress here that will be supportive to greater competition and ensuring we can get investment back into businesses and to consumers.

And the next question comes from Etienne Ricard with BMO Capital Markets.

So credit cards will become a new product at EQB. How would you contrast the long-term growth potential of the card portfolio relative to mortgages? The reason I'm asking is I tend to think of EQB's long-term loan growth track record to be in the low double digits for mortgages. And I think we're all aware of the industry tailwinds in that space with the shift to mortgage brokers and the growing size of the alternative market. Now credit card appears more GDP-driven. Would you agree with this statement?

I think a couple of things to think about. So we'll -- after we close, we'll share more -- a better outlook for the business. But what I would say is don't just think about this as a credit card. I think about this very much as payment solutions for Canadians and a truly valuable, in many cases, low fee, no fee card and payment solution for Canadians. And importantly, backed by the power of the PC Optimum program with those 17 million members that is the best in this country, and it brings so many options for Canadians.

So they are going to want to grow. We are going to grow cards and customers because of the payments with the loyalty, because it adds more value for people in this country. So there's a huge upside potential there for us, and that includes with existing EQ customers where there's going to be a benefit here, plus we can do more for PCF customers as well as they come into our ecosystem. It's a win-win on both sides.

But I see payment as growing as a fundamental need for Canadians. And these are -- this is going to give us the tools to grow that either way. And that will then drive revenue, of course too, when you think of the noninterest revenue. This is not just about [ NII ] or cards. This gives it all, backed by PC Optimum. And we have the exclusive position with that PC Optimum. So it's really important, I think, to keep that as front of mind.

And does the transaction impact your capital allocation policies, whether that's share buybacks heading into closing or maybe the dividend payout looking longer term?

No. And as you heard Anilisa say, we have a buyback plan and intent for 2026, and we have a great, strong capital position, and that will all continue.

And the next question comes from Graham Ryding with TD Securities.

Maybe I could just follow up on that theme, Chadwick. Can you just explain, if you're offering as an exclusive financial partner here with PC Optimum, you're going to be offering loyalty points to your EQB customers, I assume, outside of just the credit card. How should we think about the economics there? Will this be a cost to you that you offset with greater deposit growth and ultimately lower NIM? But is there also a benefit here from higher interchange payment fees that ultimately help pay for these loyalty costs?

Yes. I think it's a combination of the factors. So there'll be higher cash rewards. There will definitely be a higher growth in our funding capabilities. Obviously, we'll have higher interchange over time. But this will become part of the value proposition overall, where if we have PC Optimum and our existing customers can use it, that will encourage them to want to deepen their relationships and do more business with us. That's really the underlying factor.

I think we -- if you think of the full shelf, we have the notice savings accounts, excellent FX transfer, U.S. dollar accounts, registered accounts, excellent payroll accounts. Everything will come into that platform and then we can cross-sell more from there that will drive positive economics.

Okay. So ultimately, greater penetration on the deposit side, which helps your NIM? But also on the revenue side around the interchange fees.

That's correct.

That's how you offset the loyalty costs. Okay. And then my second question is just when you think about the sort of cross-sell opportunities here, selling that PC MasterCard into your existing 600,000 EQ Bank customers, is that potentially an easier synergy to execute on versus increasing that EQ Bank customer base through either leveraging PC loyalty program or just the distribution infrastructure that PC Financial has? How do you think those sort of different synergy opportunities?

Well, both. I think as a customer, you're going to love it when you have the PC Optimum loaded into the EQ account. You're going to see the integration, that you're going to have all that and the platform to drive the growth. So it is both of what you said.

And what I want to say again, it's -- when -- it's a little early for us to give all the details, there's going to be more to come as we get closer to close. This is an excellent deal for our shareholders, for customers, for employees. There's hurdles at the 15%-plus ROE with very, very modest savings. All of what you're talking about there is the full potential upside still for us and our franchise.

And really, this is about Canadians first and the product shelf and the value that everyday Canadians have. And this is going to complete that in a very significant way. So it's Canadians first. And by doing that, we're going to do really well for our shareholders here and a lot more upside to come as we get closer to close on this.

Okay. And just my last question, you gave us some guidance on loan under management, I think, mid to high single digits growth. Sorry, high single to low double digit. What is your growth expectation for on-balance sheet loan growth for next year?

Yes. Happy to take that one. Obviously, as we look ahead to 2026, we see the green shoots for economic recovery and growth. From a LUM perspective, as we said, high single digit to low double digits range for 2026, so very consistent with what we've delivered this year, though skewed to the latter half of the year.

On the personal SFR side, so that's all on balance sheet, we see an improved rate environment not relying on future cuts, but the cuts that came through certainly in the last quarter, combined with pent-up housing demand to be quite strong. De-cumulation, we see to be strong momentum as we see Canadians wanting to age in place and executing their estate planning. And so overall, we expect kind of medium single-digit growth in that portfolio.

As a reminder, I would just call out, we are continuing to intentionally and strategically pull back from the insured single-family residential. So there is declines in that portfolio that offset some of the growth that we're seeing in the uninsured piece. And that's, again, as we balance total risk-adjusted returns.

In commercial, we see market demand for multifamily residential that's expected to continue to grow. There continues to be a need for affordable housing, and the rate environment plays through there as well.

And I know you're focused on the on-balance sheet, but just one final point on the off-balance sheet. We have the -- in the Federal budget, we were really pleased to see the expansion of the CMB pool limits, and we stand to benefit from that as we do have a market-leading securitization provision. And so that allows us to kind of lean in into even more capacity on that side. We expect, roughly speaking, mid-single-digit million growth there.

And the next question comes from Doug Young with Desjardins.

Chadwick, I guess, both of these are probably for you. But on the wealth priority side, you talked about it in your prepared remarks. And that's not new. I think you talked about it before, wanting to build some form of wealth platform. I assume this is not organic, that you would do this in an inorganic manner. Can you do something else before you close PC and before you integrate PC? And can you maybe just remind us what it is that you're interested in as you talk [indiscernible]?

First, I'm going to repeat again though that, obviously, for sure, we've highlighted that wealth represents an important strategic gap we're looking to close over time. I don't think it's appropriate for me to speculate on M&A, but I would say it's -- there's different pros and cons to building versus buying in the wealth space. And our current focus though will remain on the successful integration of PCF first. And then it's the remaining ingredient is wealth.

The simplest way I can say is for a complete successful Challenger, you need the best day-to-day offering, the best payments offering and now we're getting loyalty, we have that, we'll have a direct reach to millions of customers. And then what could be most constructive within the EQ Bank offering is a higher-yielding offering integrated into the digital lineup, that really gives Canadians more choice for to put their money outside of, say, higher interest savings accounts and GICs and more. So a real long-term perspective on how to generate more yield integrated into the lineup is one of the ways to think about it.

And then outside of that, when you step back and think of EQB, remember, we have an excellent alternative asset management company called ACM Advisors. We have one of the top trust companies in Canada that's performing really well. So we have various ingredients. But we'll bring that concerted focus back to EQ Bank and that integrated wealth offering to give more choice to customers all within the platform.

I assume this is more distribution than manufacturing.

Yes, distribution -- so it is distribution. We represent distribution as well now. So there is -- we need the product and the solution on our distribution shelf, is one way to think about it as well. But it is more anchored in our expertise in distribution, but bringing the product into the shelf is really important.

Okay. And then you can correct me if I'm wrong, second question here, I think you talked at the potential ROE approaching 12% by the end of fiscal '26. And when I kind of look at the math, it's hard to get there unless you have a material improvement in the PCL versus what we saw. And I'm talking like a PCL half of what we saw in Q4. And so I'm just trying to get a sense, is that -- am I reading that right? Did you talk about 12% by the end of the year? Like what would be some of the drivers to get there? And is it mostly PCLs? Obviously, expense growth, kind of deposit operating leverage would be key. Just trying to kind of understand a little bit more about that.

Yes, I'd say a couple of things. So what I did say is 12%, but I said higher than that by later next year. And step one is the expense side that analysts have spoken about that we've delivered on. We can control the cost. You haven't even seen that benefit roll through yet. That will start rolling through in Q1. And that's the most significant component of it.

And we're planning and ready, if it is a slower market, if it is a lower revenue market, then we get along there just with the expense side. And then as the revenue environment picks up, that will improve, especially with the net interest margin discipline that we brought in and how we brought more expansion back to that.

And then your other ingredient is PCL, as you said, and we -- you heard Marlene's sentiment on that. Again, we do think we're at a position of strength and there's a lot of factors to consider, but we would expect that improvement later next year. So when you add all those up, plus then you think about your denominator, right, and what we're doing with capital and our intent to continue with buybacks to further accrete ROE and really put the capital to work, all those ingredients combined, I think you see -- we would expect, in our base case, you see that higher by later next year and then moving towards our medium-term objectives into the following year at pace.

And the last question comes from Stephen Boland with Raymond James.

Just one question. When you talk about pulling back on the insured single family, I always thought that was a tool you use to basically retain the customer and maintain broker relationships as well. Like you go into a broker and they have prime and you can insure it, but they also have alternate traditional single family and you underwrite all of them. So has that changed? Has the consumer behavior changed or a change in thought? I'm just curious about that.

Yes. Thanks. So pull back, sure, we're -- our focus is growing the uninsured. Our focus is supporting the mortgage brokers. The mortgage brokers, we always still say are the best ways to get a mortgage in Canada. They are vital partners and we're going to support them and serve them really well. And first priority is the uninsured. And in some cases, yes, you have some insured. But insured is a thinner margin. It's very competitive, and we want to focus our capitals as well where we can win. We're doing really well for Canadians. So it's a bit of a combination.

We pull back more. It's not a new thing. It actually goes back probably a year or 2. So you'll still see some, but it hasn't been a priority. And I think that's often why our asset growth is misperceived. People just look at OSFI data and say assets are down. Well, it's because we deprioritized lower profitability. We're not chasing volume. We're putting on thoughtful, profitable growth, underpinned by Canadians needs first. So that's what we're doing here as we go forward.

And how has the broker reaction been to that, that you would do those types of loans and then you're kind of saying, no, we don't really want to do it anymore?

It's not new news. This is longstanding. I think you're just seeing some of that play out, this was, call it, over a year ago. I'd say our partnerships with brokers, our strength -- the strength of our relationship with brokers has never been stronger. They fully understand our model and where we can best serve them. So I'd say it's very positive, Stephen.

Thank you. And that concludes our question-and-answer session. I would like to turn it back to Chadwick Westlake for closing remarks.

Thank you, everyone, for joining us today. We'd like to thank everyone for their continued support and wish everyone a safe and joyous holiday season. Anilisa, Lemar and I look forward to seeing some of you early in the new year at the RBC Capital Markets Bank CEO Conference on January 6.

Thanks very much. Have a great day.

And this concludes today's conference call. Thank you all for joining. You may now disconnect.

Welcome to EQB's Earnings Call for the Third Quarter of 2025. This call is being recorded on Thursday, August 28, 2025, [Operator Instructions]

It is now my pleasure to turn the call over to Lemar Persaud, Vice President and Head of Investor Relations. Please go ahead.

Thank you, Joanna, and good morning, everyone. I'm excited to be sitting on this side of the call after following Canada's Challenger Bank and the financial services sector for several years.

Your host for today's Q3 results call are Vincenza Sera, Chair of the Board of EQB; the newly appointed President and CEO, Chadwick Westlake; Marlene Lenarduzzi, Chief Risk Officer; who served as interim President and CEO during the quarter; and David Wilkes, SVP, Chief Strategy and Growth Officer. As announced yesterday, our new CFO, who joined us as of today and Anilisa Sainani is also here with us in the room.

For those on the phone lines only, we encourage you to also log into our webcast and view our quarterly presentation, which will be referenced during the prepared remarks.

On Slide 2 of our presentation, you will find EQB's caution regarding forward-looking statements as well as the use of non-IFRS measures. All figures referenced today are on an adjusted basis, where applicable, unless otherwise noted.

With that, I will turn it over to Vin.

Thank you, Lemar, and good morning, everyone. This is the beginning of a new era for EQB and it's my pleasure to take this opportunity to join the leaders of the team entrusted to create next-generation value for their first earnings call. In doing so, I want to again express our sadness as we all mourn the loss of our friend, colleague and fierce champion for all Canadians, Andrew Moor. What drove Andrew to be such an inspiring leader all of us was his steadfast belief that Canadians deserve so much better from their banks. Andrew's meaningful impact on all who knew him, and on the Canadian banking industry is permanent.

I also want to thank Marlene for her exceptional service as Interim President and CEO. This week, she returns to her previous role as Chief Risk Officer. The last few months have demonstrated clearly that we have a deep bench with leaders at all levels willing and able to step up. After completing our thorough and years long succession planning process, we celebrate Chadwick's return to EQB at the beginning of this week.

Speaking on behalf of the Board, I am here to express our full support for Chadwick, he is the capable, energetic and experienced leader we need take EQB to the next level of growth and performance. We look forward to collaborating with Chadwick as he develops the strategic plan to move our company forward in the months and years to come. Chadwick will offer his initial thoughts on the way forward to wrap up the call.

Now I'll turn it over to Marlene to start with some comments on results for Q3.

Thank you, Vin, and good morning. For today's call, I'm going to speak to the overall results of the quarter before addressing credit. At a high level, we faced challenges this quarter, and there are positives to share as well. Despite headwinds, our capital levels remain strong and much higher than regulatory minimums, which importantly underscores our resilience. Looking at our lending portfolios. Loans under management increased 3% sequentially and 10% year-over-year to approximately $74 billion. And combined with our administrative assets stood at new record of $137 billion at quarter end, up 9% year-over-year.

Of note, conventional lending, which is the most significant contributor to net interest income increased 2% quarter-over-quarter to $34.6 billion and is up 6% year-to-date. By business, the personal lending portfolio benefited from single-family origination growth, driving uninsured loans under management to $24.4 billion up 2% quarter-over-quarter and 8% year-over-year.

Single-family uninsured originations in the quarter increased 30% year-over-year. Our decumulation lending portfolio reached a record of $2.7 billion, up 8% sequentially and 41% year-over-year. In Commercial Banking, we capitalize on our leadership in lending to the insured multi-unit residential market. CMHC ensures multiunit residential loans under management grew 8% sequentially and 30% year-over-year to $31.4 billion.

Commercial Lending, excluding insured multis grew to $10.2 billion or 3% quarter-over-quarter driven by growth in insured construction lending.

For EQ Bank, we added 26,000 new customers, a gain of 21% year-over-year, while deposits increased at their fastest sequential rate in all 3 years to $9.7 billion.

Despite this progress, revenue and earnings performance for the quarter was below expectations, resulting in ROE of 12.4% year-to-date. Headwinds in credit have persisted. Cost of funds have increased and expense growth outpaced revenue growth. As a result of this lower performance year-to-date, we anticipate ROE for fiscal 2025 will be around 11.5%.

Now turning to credit. Credit was more challenging again in Q3 in the context of the macroeconomic environment. We leverage forecasted macroeconomic scenarios developed by Moody's analytics, which evolved more negatively this quarter, resulting in $10 million of additional provisions on performing loans bringing our total Stage 1 and 2 allowances for credit losses to 27 basis points, up from 25 basis points in Q2 2025, and up from 20 basis points in Q3 2024.

Performing provisions were driven by $4.4 million in commercial, $3.2 million in personal lending and $2.3 million in equipment financing. This brings our overall allowance to $174.4 million in the quarter or 33 basis points, up 4 points sequentially and 7 points year-over-year.

Stage 3 provisions were relatively flat quarter-over-quarter at $22.9 million, with increased provisions in single-family residential mortgages, offset by a reduction in provisions in our equipment financing portfolio. Impaired provisions on personal loans were $9.6 million, mainly driven by larger loans and a small pocket of loans in Toronto suburbs, where we have observed steeper price declines from their peak. Stage 3 provisions in Commercial were $6.4 million, down $0.4 million quarter-over-quarter. Like personal lending, most of these provisions are related to a small set of existing impaired loans. Equipment financing Stage 3 provisions were down to $6.9 million, $3.7 million lower than in Q2.

Now turning to gross impaired loans. The impacts of the macroeconomic conditions have contributed to an increase in gross impaired loans of 5% quarter-over-quarter to $815 million, driven largely by a personal lending. Gross impaired loans and personal lending increased to $352 million this quarter, a 9.5% increase from Q2. This was largely driven by credit migration and a softening in the housing market.

However, we have seen a decrease in formations in early-stage delinquencies. Gross impaired loans in commercial lending and equipment financing were relatively flat over the quarter. We remain confident in the quality of our lending portfolios and our prudent approach to managing the lending portfolios through the credit cycle.

In early 2024, we enhanced our underwriting criteria in vulnerable segments which manifested in a decrease in personal lending early-stage delinquencies that I talked to earlier. In our uninsured SFR portfolio, our average credit score is 711, our overall LTV is 64%, and our average origination LTV is 71%, reflecting our disciplined approach to underwriting.

All these factors lead to a portfolio that is much more resilient to potential stress. Interest rates have come down since their peak in 2022 and a further rate cut may occur in the fall. This should support -- this should provide support for medium and long-term growth. In the near term, economic headwinds may continue to delay resolutions beyond Q4 and into 2026.

In conclusion, the adjustments made across our businesses over the last 18 months is building resiliency into all our lending portfolios.

Now over to David.

Thank you, Marlene. I'll walk through the financials. Overall, EQB's net income for the quarter was $80.3 million, down 15% from Q2 and 32% year-over-year. Diluted EPS was $2.07 and ROE was 10.1%. Despite headwinds, these reflects -- these results also reflect our disciplined approach to growth in a complex environment, including a focus on credit quality and diversified funding, which strengthens our platform and positions us well for the future. Let me unpack the drivers of our earnings this quarter.

Our revenue in Q3 was $310 million, down 2% quarter-over-quarter and 5% from last year, driven primarily by net interest income and the influence of year-over-year declines in policy rates. Net interest income was $254 million, down 6% quarter-over-quarter and the same year-over-year. And of the $17 million decline quarter-over-quarter over half can be attributed to the one-time benefit mentioned last quarter on the call, nearly $8.5 million or 7 points of NIM.

As you will hear consistently from us, we manage EQB to a target 1 year duration of equity, which limits exposure of our economic value of equity to interest rate movements. However, there are areas of NII that can be affected as the lending book and interest rates change. And in the quarter, there were three main drivers.

First, mix shifts in the lending portfolio as some higher margin lending matured and repriced including some commercial loans with floor rates that had been contributing to NII. Second, a decline in contribution from EQ Bank as we purposely maintained some product rates as prime declined, and as customers increasingly choose deposit products such as our Notice Savings Account and payroll for every day. These products provide clients with higher rates and while deliver great value for EQ Bank through stronger engagement and more stable lasting deposits. And the third factor NII was also impacted in the quarter due to a higher liquidity portfolio associated with higher securitization activity as well as more activity in our wholesale funding program.

Our net interest margin was 1.95%, declining at 25 basis points from elevated levels in Q2 and year-to-date, NIM was 2.07%, and we continue to expect to meet our fiscal '25 NIM target of above 2% for the year. On noninterest revenue, as expected, we had a stronger quarter delivering $56 million and an increase of 25% from Q2 and in line with last year. This is primarily attributable to higher fee-based income, including contributions from ACM and Concentra Trust, higher revenue from our insured multi-unit securitization business with increased activity the spring as well as some gains on strategic investments. Provisions as noted by Marlene remained elevated in the quarter at $34 million, representing 28 basis points of loan assets.

Moving to expenses. Noninterest expenses grew to $166 million in the quarter, up 6% from Q2. This was largely driven by investments in our Challenger team, technology spend and an increase in premises expenses as we moved our new headquarters into our new headquarters in the EQ Bank Tower in late April. Efficiency ratio increased to 53% in the quarter and above our historical operating range. On funding, as Marlene said, more customers are depositing more money with EQ Bank as total deposits reached a record $9.7 billion, and we also saw a notable rise in demand deposits, reaching $5.9 billion, up 9% quarter-over-quarter and 47% from last year. EQ Bank's demand deposit growth has been driven by customers choosing EQs Notice Savings Account and new and current customers bringing their direct deposits to EQ Bank. These demand deposits are more flexible for EQB and are more cost effective relative to other deposits. With the pricing being continuously optimized to balance long-term customer and deposit growth and near-term margin contribution.

In the quarter, we were also very active in wholesale funding channels, an important part of our funding diversification strategy. And in Q3, we completed our latest benchmark covered bond issuance, raising EUR 500 million. In May, we completed a 3-year $350 million deposit note issuance, and subsequent to quarter end, we also issued a $300 million floating rate deposit note that closed on the first day of August. Our activity in this market has continued to lead to tighter pricing, helping make this funding even more attractive to EQB.

I'll finish on capital. The bank is supported by a strong capital position with total capital of 15.7% and CET1 of 13.3%, exceeding the bank's targets and well exceeding regulatory minimums. EQB's capital allocation approach continues to prioritize reinvestment in organic growth, maintaining capital flexibility in order to pursue potential strategic inorganic growth opportunities and steadily increasing dividends. EQB's Board of Directors declared a dividend of $0.55 per common share payable on September 30, representing a 17% increase year-over-year.

Finally, I'll remind you that as part of our capital allocation framework, we will opportunistically use normal course issuer bid, which was renewed and expanded in January. Share buybacks, while subject to market conditions or another lever we can pull to maximize long-term value for shareholders. In summary, we move forward with strong capital levels that support our customers, our challengers and the next phase of our growth agenda.

And I'll now pass to Chadwick to offer his closing comments.

Good Morning, everyone. Thanks, David. Thank you, Vin, for the warm welcome. And special thanks to my colleague, Marlene. I'm greatly looking forward to partnering with her as our Chief Risk Officer.

It's such a privilege to start this week as the CEO of EQB. This is Canada's Challenger Bank, and we are dedicated to helping build a better country, bringing real change to banking and giving Canadians the tool to maximize their financial potential. This has been true throughout our more than 50-year history and is crystallized over the past 2 decades under the leadership of Andrew Moor. I'm both honored and energized to lead this incredible company for our significant growth ahead.

I've been on the job for just a couple of days, but I do want to share a few comments. First, on people. As announced yesterday, I'm very excited to welcome our new CFO, who is here with us. Anilisa is a remarkable talent and finance. Moving into this vital role. She brings her impressive experience, including her time at RBC as Chief Operating Officer for the CFO Group and VP Finance and Chief Accountant. Anilisa is a true challenger and was also recognized in 2020 as one of Canada's top 40 under 40 for her innovation, leadership and community service. We look forward to how she will shape the evolution of our finance capabilities.

David Wilkes has been appointed Chief Strategy and Growth Officer as part of my executive leadership team. This is a critical new role that will enable David to devote his considerable talents and experience to drive our substantial growth agenda. Thank you, David, for managing EQB's finance function for the past 6 months.

Also, a warm welcome to our new Head of Investor Relations, Lemar Persaud. Lemar joins us from Cormark Securities, where he served as an institutional equity analyst covering EQB among many other leading financial services companies. With his deep knowledge of our business and industry, he will be instrumental in building closer relationships with the investment community and our shareholders.

With our deeply experienced team, I am confident in the resilience of Canada's Challenger Bank and how we will ignite and deliver the positive long-term change that hard-working Canadians deserve. I'll also offer a few brief comments on our strategic direction.

I am completely focused on returning to growth. With our entrepreneurial nature and capability of the top Schedule I Bank in Canada, the outcome of our capital allocation is expected and must be consistent profitable growth with ROE remaining a foundational North Star. I'll share more precision on our updated strategic objectives and growth outlook for fiscal 2026 as part of our Q4 call in December.

I am also pleased to share that we will be announcing an Investor Day for fiscal 2026. We intend to host this at the top of our EQ tower downtown Toronto and hope to be hosting this by late spring or early summer.

In the meantime, let me be clear about a few key priorities. At EQB, our focus is and will remain here in Canada, where there is still so much to do and some opportunities to grow. We will not become distracted by other markets. I am deeply proud of our Canadian identity and we will invest all our time and energy into this extraordinary country. What you can expect is more of what is consistently propelled EQB to material growth and leading long-term total shareholder returns but a refined focus, including three key areas.

One, our Challenger at scale. We will continue to do what we do best. This includes being exceptionable lenders to Canadian families and businesses owned by our deeply valued brokers and partners and our top position in the segments where we lend. We intend to pull further ahead in our winning position by investing to strengthen our competitive advantages.

Two, Challenger to its full growth potential. This will include executing on our diversification and expansion strategies and payments wealth and our digital platform, EQ Bank.

And three, Challenger to its greatest capabilities and purpose. We will invest in AI enablement to build with scale. We will continue to champion with our technology and fintech partners and our government and regulators on the importance of greater competition, open banking and innovation.

And importantly, I own this now, and I believe a best-in-class efficiency ratio has been a competitive advantage, and I intend to be deliberate in our capital allocation with a sharp focus on returning efficiency towards our traditional distinct high-performance levels.

We will not fall in the trap of trying to be all things to all people, but we will focus on segments where we can win. I look forward to sharing more with our customers, partners and shareholders soon. I'm intently focused on staying true to what makes EQB a force in Canadian banking, while unlocking new levels of growth relevance and impact for all of its stakeholders.

With that, Joanna, can you please begin the Q&A portion of the call.

[Operator Instructions] First question comes from John Aiken at Jefferies.

Marlene, in terms of the deterioration we saw in the personal lending portfolio, I was hoping you might dive into a little bit more in terms of -- you mentioned that it was concentrated in Toronto suburbs, high-value mortgages.

What is the outlook in terms of the evolution of this portfolio moving forward? Is this like a 1-quarter incidence? Or is this something we might actually see layering on for a couple more quarters?

I think there's a few things we have to think about in the mortgage portfolio. So first off, when we look at our portfolio, it -- we have a couple of things to think about. One is we look at the outlook for our housing prices. We look at the outlook for the macroeconomic environment.

But what we can tell you is that if I look at the increase in PCL for that residential portfolio. There's a really small number of mortgages are driving 80% of that PCL. And it is sort of very specific pockets and geographies where we saw price declines from their peak of about 30% to -- 25% to 30% as well as there are some idiosyncratic issues where you may -- when you repossess the house, you may find it needs a lot of work.

But I would say that we look at the outlook, it really depends on a lot of different factors. But what I can tell you is we do see some improvement in early stage delinquencies and that gives us some optimism that, that should result in lower PCLs down the road.

And Marlene, just as I'm looking at the gross impaired loans waterfall that you have on Slide 9. Correct me if I'm wrong, my understanding is that this was loans that were already impaired. Is that correct? And then if that is, is that the -- part of the $43 million delta in others?

For the commercial portfolio, the increase in impaired loans is related to loans that had already been impaired that we've been managing.

The next question comes from Doug Young at Desjardins Capital Markets.

I'm just trying to kind of get a sense of -- there seems to be a discrepancy in the impaired PCL trends for your single-family residential than what we're seeing with the big banks. And there's few things I want to get into. But I get where you operate is different in the big city centers, maybe it's more Ontario exposure exposed to more people that potentially could be impacted from unemployment in tariffs. Is there anything else that kind of really differentiates the book?

And I'll tell you where I'm going with this because when I look at your single-family residential, your Stage 3 loans, the coverage ratio was 4%. And so you impaired -- your holding allowances of 4% of the impairment. And it seems like you're having challenges with recoverables on the mortgages. But when I look at one of the big -- I'll pick CIBC, like the coverage ratio on RESL for Stage 3 RESL is 22%. I'm trying to get a sense of why there would be such a big difference? I'm hoping you can help me a little bit of thinking through that.

I can't obviously speak to CIBC's coverage approach. But I would say, for us, when we look at our portfolio, we have a great deal of conviction in our process to approach each loan individually and assess them on an individual basis and the provisions are set by our workout teams based on the characteristics of each individual loan that's impaired.

Okay. It just seems like it's a big discrepancy, but maybe I can follow up and talk a little bit more through that.

And I guess maybe towards what John has kind of indicated, like I guess the sense and the question I'm getting, are we done with this erosion in single-family residential? And I think it's obviously, no one's got a crystal ball as where we sit today.

It feels like early stage delinquencies is kind of settling back a little bit. Are you feeling more comfortable that you're kind of closer to the peak of this kind of erosion?

Obviously, depending upon many things, but it feels like you are, but I don't want to put words in your mouth. I was just hoping to get a little bit of color on that.

Well, as you know, we're in a period of unprecedented uncertainty, which makes forecasting and timing of recovery difficult. We have increased our Stage 1 and 2 provisions by $10 million, and this is really to account for further deterioration that may come in the macroeconomic outlook.

And it's also observed by Moody's in their forecast as well. On the cautiously optimistic side, as I point to those early-stage delinquencies coming down is a bright -- a bit of a bright light. However, we really want to see more stable macroeconomic conditions before we can really get confident that we will see around the timing of when the recovery will happen.

The next question comes from Paul Holden at CIBC.

Thanks for giving the ROE expectation for the full year around some quick math on that. And it implies that Q4 earnings will be roughly similar to Q3. Is that math in the right ballpark?

Yes. I think, David, do you want to take that?

Yes. Thanks, Paul. When you think about the major drivers across revenue and expenses, we expect similar performance in Q4, where there can be some uncertainty, obviously, is the last conversation we're having with Marlene, it's just on the provision expectations. So that will be the driver of any of the range and outcomes really in the next quarter.

Got it. Okay. And then second question, obviously, it was 11.5% ROE expectation for this year, well below prior objectives.

So I guess, really two questions, but getting at the same point. Should we expect any change in the ROE objective of 15% to 17% for EQB. It's been long standing. And I would assume it probably shouldn't need to change?

And more importantly, kind of maybe quickly, and I think it's a question for Chadwick is like what's the path to getting back there, again, without taking too much away from the Investor Day, but just high level, like what do you think are the key ingredients and getting back to the old ROE objective?

Yes. Thanks, Paul. I'll share more on 2026 specifically in December. And you're right, in Investor Day, we'll share more about our 3- to 5-year vision.

Early days and strategic focus. But I would say the ROE that has traditionally been an advantage in North Star will continue to be an advantage in North Star for us and how we're allocating our capital. And we're first going to continue to allocate our capital importantly into our growth businesses. We're going to focus on returning our efficiency to our traditional best-in-class levels or a couple of the big components.

But I do think we have, at this moment, as we shared conviction in the medium-term targets that we had, but we will get to that more in December. But it is like to my point, to be clear, traditional efficiency levels need to be delivered, and reigniting the growth in our core businesses where we'll win.

The next question comes from Gabriel Dechaine at National Bank.

First question, I'm going to go back to this uninsured mortgage where we're seeing the residential mortgage that is, the increase in provisions for a couple of quarters now.

From the sounds of it, we could be -- there could be more quarters like this ahead, but hopefully getting better as delinquency -- the early-stage delinquencies improve, as rate cut, but, nonetheless, we could see a bit more. I was just wondering about if you can identify a certain geographic exposures and certain loan vintages or something like that? Why could you justify booking perhaps a large performing provision because the -- maybe, I don't know if it's solely contingent on borrower risk but asset risk is also different.

Yes. Thanks for your question. I would say a few things there. One is -- we do have -- there is a great deal of uncertainty, as I've said, right. Unemployment rate and interest rates are elevated on a relative basis. Housing sales are starting to show signs of weakness, which has contributed in the past through increased mortgage delinquency rate, particularly in the GTA region.

And we may see that continue. I would say that from a geography perspective, there were pockets of geography and then to Toronto suburbs, for example, there are some pockets where we did see prices drop that 25% to 30%. We are well aware of those pockets and are monitoring them, and we do have appropriate levels of provision to account for that.

So no then, like an outsized heavier weighting to really downside scenario that's not in the cards?

The downside there are built into what we get from Moody's analytics. You can see that there's scenario outlook versus last quarter is much more severe. Plus, we do have specific overlays within our provisioning process on performing loans for those higher-risk segments.

And then on the -- moving on the revenue side, I guess the -- some of the deposit cost trends we're working against you, but you have adjusted your pricing, I believe, on the high interest savings account, that should help. Looking forward though, if we get some rate cuts whenever that happens later this year, would you be thinking about moving more in lockstep with whatever the Bank of Canada does as opposed to lagging it for competitive reasons?

Thanks, Gabe. I think it's more likely we would do that. We will -- we actively manage this on an ongoing basis. As you'll have seen yesterday, I think we lowered rates on some of our products by 20 basis points. I think when you think about rates declining, the other factor that you want to consider is the benefit we're going to receive from the commercial floors that are already in the money.

So those are sort of tagged effects. We have $3 billion in commercial loans that will contribute more to NII if Bank of Canada moves. So think of that as the bigger move. But on the deposit side, yes, there's a good chance we would move more in lockstep.

Okay. Great. And then I'll just throw another one. You've changed your full year guidance, I get that. and we can work out the math of what that means for Q4 earnings per share. Is the range is the toggle or the swing factor really the provision number because the revenues may be modestly better if the margin picks up and then expenses to do what they do, but really the maintenance swing factor is going to be PCL?

Yes, yes. That's what I mentioned earlier, I think PCL would the bigger uncertainty tied to Q4.

The next question comes from Etienne Ricard at BMO Capital Markets.

I want to follow up on one of the earlier questions on credit quality, and the divergence we're seeing for the impaired loans relative to some of the other banks, especially for single-family mortgages.

So I understand your target markets tend to be a bit different with exposure to the self-employed as well as the new Canadians. Do you think these demographics is experiencing a tougher macro backdrop? And if so, why is that the case?

When I think about this segment of our population, so it's true, 70% of our customers are self-employed and new Canadians are an important part of our customer base. That segment seems to be when we look at how these segments perform historically, these are very resilient -- this is a very resilient segment. These are people who are resourceful and particularly small business owners are able to really hustle to find ways to keep up with their payments.

We have a well-diversified portfolio when we think about the range of products that we offer. And as well, when I think about this portfolio and the strength of our loan to values, that gives us comfort as we move forward. We also stress tested our portfolio, and I would suggest that through that stress testing, it gives us confidence in our ability to manage this through a cycle.

So I guess what you're seeing is the relative divergence in the impaired loans, it's more of a geographic allocation?

Yes, it could be. We have probably a higher concentration in Ontario than some of the peers.

And the Chadwick, I've heard the word efficiency multiple times in your comments. What is the path looking like get back closer to the historical levels? Is a potential efficiency improvement going to be driven by growing revenues or maybe also relooking at the expense base?

Well, yes, I believe a competitive advantage always has been and will be a best-in-class efficiency ratio for Canada's Challenger Bank and our digital platform and the markets where we win.

So as I said, I'll own this now, and we intend to return to that level of performance through both, as you indicated, revenue work and reigniting that revenue work through the three strategic categories that I called out in terms of Challenger at scale, Challenger to its full growth potential, and then there's several options on the table, I think, for revenue and the cost side. So there will be a combination, I think, as we get there over coming quarters, and I'll share more about that in December and at the Investor Day, but that is an important North Star under -- and really secondary and foundational to ROE.

The next question comes from Graham Ryding at TD Securities.

Maybe I could just jump into that sort of 2022 cohort where on the single-family residential side where it seems like prices are elevating its driving some losses.

Can you quantify what the particular size of the book either in around the GTA or that 2022 cohort, what that represents as a percentage of your single-family residential book? That would be my first question.

And the follow-on would just be, is it fair to say that the price declines that we've seen from 2023 and 2024 cohorts less pronounced and you feel less exposed from a potential credit loss perspective from those vintages?

Yes. Thanks. The -- we don't disclose specifically the size of that -- of any kind of subsegment or vintage in our portfolio. But what I can tell you is that we look at our approach to lending, I do feel more that there's less movement in those more recent vintages as well.

When I look at the 2022 vintage on average, it's still supported by a relatively strong loan to values on HPI adjusted loan-to-value basis. So that gives us confidence in what could come out of that moving forward.

Okay. And then just on the capital and the buyback side, just given the macro backdrop and the lower loan growth that you're seeing currently, and then your consideration to share price, is it fair to say that your appetite for buybacks is reasonable currently?

Thanks, Graham. I'll reinforce our capital allocation strategy. So first, we're -- we obviously have a great capital position, intended to maintain one. We'll continue to invest first in the business. We have a consistent dividend strategy. We'll always be looking at inorganic opportunities.

But in general, belief is we trade well below our intrinsic value, and we'll continue to allocate capital according to that filter. So there's an NCIB for a reason. But the capital allocation filter really goes in that sequence.

The next question comes from Mike Rizvanovic at Scotia Bank.

A couple of questions, hopefully quick ones. But I wanted to start with the gain on sale and income from retained interest line. Obviously, this has been a very, very important driver of your revenue diversification. It's been growing very, very strongly. Can you talk a little bit about the components here? So there's the volume side where I do believe that you would look to use your full allocation with this TV program.

And in fact, like when you book gains, I'm guessing the duration matters too. And with a flat yield curve, I would imagine your borrowers would prefer the 10-year over the 5-year. Now you've got some steepness in the yield curve. Is there a dynamic where this line has downside risk? And I'm not trying to pin you on any sort of guidance, but $26.5 million is a record number. I'm just trying to better understand if this is a line that could legitimately go beyond $26.5 million as a run rate? Or is it something that could actually gravitate down to the $20 million range. So if you had to sort of look at a high level, where do you see this trending over the course of the say, 6 to 8 quarters?

Thanks, Mike. Good to hear from you. David, do you want to take that question?

Yes. Thanks, Mike. Yes, you pointed out there are two drivers in the gain on sale and retained interest line. The retained interest portion is tied to the portfolio that's already here. And so that will continue. It accounts for probably more than half of that line.

And then as you said, the gains on the actual securitization activity depends on the origination volume and our ability to find funding for both directly, as you said, into the CMB programs or other alternatives. So we see this quarter similar to this quarter last year as a strong performance in that line. We see the retained interest continue to grow as the loan under management grow on that piece.

And then as you said, the gains on securitization a little bit depends on customer appetite across the 5-year and 10-year, but continued activity in that market last quarter, and we're seeing that trend continue in the next quarter.

So do you think this is sustainable? And in terms of the upside, is there upside or notwithstanding a change in the CMB support level, the $60 billion that the government currently allocates, would that have to move for this line item to have upside beyond this type of really strong level that you're reporting currently?

The $60 billion program is definitely a major contributor. It's not our only source of funding for these types of assets. But just expect -- we expect continued strong performance, likely at this level with small growth.

Okay. Got it. And then I also wanted to follow up on the expense side. Obviously, the revenue environment seems to be a bit challenged right now, not just for EQB, but for a lot of lenders, in particular, the residential mortgage side really hasn't come back. We really haven't had much of a rebound in the spring lending market. If you look at dollar volume on the origination side.

So what I'm wondering is -- and maybe this is for Chadwick, as you think about getting back to a growth profile and getting your efficiency ratio back to something that looks better versus the 53% you reported this quarter. How do you sort of think about an environment where maybe the revenue is just not as robust as what might have been expected a few quarters ago. Is that a hindrance to getting the efficiency ratio down to where you ideally want it to be? And then I guess as a follow-up, would EQB ever consider somewhat of a bigger sort of sizable restructuring charge?

Thanks, Mike. Few things, I'll share more about our outlook for next year in December, and this will become part of our Investor Day in terms of how we intend to operate our traditional best-in-class levels for efficiency. I agree the revenue headwinds play into the mix. But I will have a heightened focus as well on how we allocate every dollar. All of our capital to ensure we're allocating it into our higher sources of growth, as I've outlined.

So that will include for sure, our view of how we spend and spend wisely. I've just been back for a couple of days. I need to take some time to go through that with the team, but there will be a heightened focus on that. Always knowing first priority is revenue growth. But by the way, we're going to land back at that efficiency range.

Okay. So this is more of a longer-term view, but you're not contemplating anything in terms of a more sizable restructuring type scenario? Like we do see that with some of the larger banks. I'm guessing that's probably not in your DNA. Is that fair?

I'd say, I just started as the CEO. It is a new era. We will -- we have our traditional strengths that I expect to continue. But all options are on the table as we look to deliver our strategic agenda, Mike. So we'll be looking at how do we accelerate revenue and how we ensure we have economy of scale and our spending wisely, that might include reallocation of resources and dollars and that might include also slowing that level of expense increase. I do think there's work to do on both sides, and I'm very focused on that together with the leadership team.

The next question comes from Stephen Boland at Raymond James.

A lot has been covered, but I want to go to that slide on your NIM. You've kind of said Q4 would probably be in terms of profit similar to Q3. So you only need like a 1.95% NIM in Q4 to get to that 2% average. So kind of base that. But I'm curious about the reasons for the NIM decline. I mean I understand the increase in the liquidity portfolio. But when you mentioned that the attrition of higher-margin loans where you had the floors have rolled off and deposits, certain deposits that are coming in are obviously more expensive. But it's 1 quarter. So I'm really struggling why even if Q2 was kind of a onetime -- there were some onetime items in there that you're not above 2% in the quarter.

How does it like 1 quarter of movement in the portfolio and maturities and repricing of loans impact you that much? I guess, is the question.

David, do you want to present for the NIM?

Yes. Thanks for the question. Like as we think of Q4 and the underlying trends that I mentioned, both on the commercial mortgages and on EQ Bank deposits like we do have the lever on the each bank deposit side.

You mentioned more expensive deposits, but these deposits are a better cost of funds. We do have that lever there. We wouldn't expect the liquidity portfolio to be higher quarter-over-quarter, as our funding programs will show slightly less activity potentially between the 2 quarters.

And then the one place that you mentioned is the commercial loan maturities. And we will have some more maturities on the uninsured portfolio. Some of them will have floors and one of the countervailing effects there will be the benefit of the floor potentially expanding with Bank of Canada moves.

Okay. And Marlene, I don't want to hammer this to debt, but we've seen some stabilization in single-family and granted, I understand you're talking about vintages that were 3-year mortgages or 5-year mortgages, like underwritten in 2020 or 2022.

But like you traditionally always -- your LTVs have always been around the 70% mark. So I don't think I've seen anything that shows a 30% decline in housing. So even in Toronto. So I'm just curious, like, I mean, are these houses really beat up like that -- like that you've gone -- you've eaten into that LTV. I don't think I've ever seen that with [indiscernible] before, that was a concern.

Yes, there have been pockets, very specific pockets. As I said, it's about 50 loans. It's a small portion of loans about 50 loans that are generating 80% of the decline. So it's very targeted pockets where these are larger loans and there are larger loans that did see price declines in some areas of 25% to 30% since their peak in 2022.

And for that 2022 vintage, just as a reminder, our mortgage terms tend to be very short. So that vintage would have renewed most of it's renewed two times already. So the first time they would have renewed it would have been at the higher interest rate and then they since re-renewed at lower interest rates. So again, that's also helping to provide some relief in terms of their carrying costs and gives us more confidence moving forward as a part of that green shoot. But however, we are still seeing some uncertainty in the market.

Okay. So these mortgages have already been renewed? I thought it was a 3-year or a 5-year duration, but you...

No, largely like 2 years -- 1 to 2 years, typically.

Next question comes from Darko Mihelic at RBC Markets.

Covered a lot of ground. I'll be very quick. I also wanted to ask about the margin. I get the Q4 view. So I'm happy with that. I guess where I'm going -- what I'm thinking about is longer term into '26. And one of the things that I'm seeing with the larger banks, is a bit of a shift, right, in the deposit mix.

We're getting actually getting term declining, demand savings balances rising and that's been very beneficial for larger banks. I don't get the sense that can happen here. I see actually that your term deposits, which are brokered are growing and probably necessary given the growth rate that you have with loans.

So I wonder if you could provide some insight into how that term book on the deposit side is maturing and rolling off and on. And is there any possible tailwind coming from that or not? That would be helpful just so I can frame and think about some of the drivers for your NIM into '26 and '27.

Sure. Thanks, Darko. I'd split that into two pieces. You mentioned the brokered -- the brokered term deposits, we see that as our marginal cost of funds. So you'll see growth there or marginal funding source. So you'll see growth there as the portfolio grows, where you'll really see that more -- that behavior more apparent as an EQ Bank.

And so you can see it in the growth in the demand deposit in EQ Bank and the term in EQ Bank coming down. So we're seeing that behavior, too, where customers that had purchased the GIC with us last year at this time at 5% are now rolling into our Notice Savings Account product or our HISAs.

And both of those, we manage to -- while still giving great value to customers a broader margin. And so I think you'll see that, and that's where we can actively manage go forward in the EQ bank side.

So would I be correct in presuming that as we roll forward unless we get rate cuts that you would still get some improvement in margin taken all in on your term book or am I wrong in that?

Yes. The way I think about it is the sort of split between EQ Bank and again, the rest of the brokered market, EQ Bank, as it shifts a little bit more to demand each quarter. And so it's more -- our demand deposits are up 47% year-over-year. that's where we get more margin in the deposit book. The rest of the lending portfolio is priced relative to the broker deposit. So we don't see expansion there. That's really just almost our FTT type number.

And so the cut in rates at EQ Bank is not expected to have an impact on your growth rate of those deposits?

No. We think the value prop right now is very compelling in the market.

Mr. Westlake, there are no further questions. Back to you for closing comments.

All right. Thank you. Thanks again for joining us, everyone, today. And for some of our listeners, Anilisa Sainani, Lemar, David and I will be at the Scotia Financials Conference on September 3 and the CIBC Financial Conference in Montreal on September 25. To everyone, I look forward to sharing more in December. Have a great day.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.