Thu Aug 9, 2018 4:16pm EST

TORONTO, Aug. 9, 2018 /CNW/ - Equitable Group Inc. (TSX: EQB and EQB.PR.C) ("Equitable" or the "Company") today reported financial results for the three and six months ended June 30, 2018 that reflected the solid performance of Equitable Bank (the "Bank"), its wholly owned subsidiary.

Equitable Group Inc. (CNW Group/Equitable Group Inc.)

SECOND QUARTER HIGHLIGHTS

  • Adjusted Diluted earnings per share were $2.45, up 8% from $2.28 in the same period of 2017
  • Adjusted Return on Shareholders' Equity was 14.5% compared to 15.6% in Q2 2017
  • Single Family Lending mortgage principal at June 30, 2018 was a record $9.8 billion, up 15% from $8.5 billion a year ago on strong originations and higher renewal rates
  • Commercial Lending mortgage principal at June 30, 2018 was a record $3.3 billion, up 15% from $2.8 billion a year ago reflecting origination activity that was at an all-time high
  • Deposits amounted to $12.4 billion, up 24% from $10.0 billion a year ago as the Bank grew its EQ Bank deposits to $2.0 billion, a 51% year-over-year increase

Q2 2018 reported Diluted Earnings per share ("EPS") were $2.19 and reported Return on Shareholders' Equity ("ROE") was 13.0%.  Reported results include a $5.9 million pre-tax write-down of unamortized up-front costs (a $0.26 reduction in EPS and a 1.5 percentage point reduction in ROE) associated with reducing the size and costs of the Bank's secured backstop funding facility.

As announced in June 2018, the Company chose to reduce the secured backstop funding facility to $850 million from $2.0 billion due to successful measures taken to enhance liquidity and favourable funding market conditions. As a result of this decision, the Bank expects its quarterly interest expenses to decline by $2.8 million beginning in Q3 2018 and continuing through Q2 2019, from a combination of reduced standby fees and lower up-front cost amortization expenses.

DIVIDEND DECLARATIONS

The Board of Directors today declared a dividend of $0.27 per common share, payable October 4, 2018 to common shareholders of record at the close of business September 14, 2018.  This represents a 13% increase over the dividend declared in August 2017.  In addition, the Board declared a quarterly dividend of $0.396875 per preferred share, payable September 28, 2018 to preferred shareholders of record at the close of business September 14, 2018.

CEO's COMMENTARY   

"I am very encouraged with how the Bank is performing" said Andrew Moor, President and Chief Executive Officer. "In November 2017, we expected asset growth in our Alternative Single Family business to be 2% to 4 % for 2018, but, our expectations have now moved higher to the range of 8% to 10%.  This change translates into approximately $500 to $600 million of additional assets at year end 2018 that will drive earnings growth in 2019 and beyond. Our Prime Single Family business has remained quite stable for the past two years and we hope to grow our share in this market through the balance of 2018.  Our Commercial team delivered a quarter of record originations and we expect strong activity levels to continue in this business. Our EQ Bank digital banking platform is attracting many new customers to the Bank and we have been successful in providing quality customer service, expanding brand awareness and are working on taking the digital experience and functionality up to the next level. With credit losses and arrears remaining low and the costs of the backstop facility decreasing, our outlook is for strong financial performance in future quarters from Canada's Challenger BankTM."

CREDIT QUALITY

Equitable's credit metrics reflect the high quality of the mortgage portfolio. At June 30, 2018, net impaired mortgage assets were just 0.13% of total mortgage assets compared to 0.16% a year ago. The allowance for credit losses was 0.12% of total mortgage assets at June 30, 2018, down in percentage terms from a 0.19% year ago primarily due to low impairment rates and an $8.5 million transitional adjustment as a result of the adoption of IFRS 9 on January 1, 2018.  The Bank's credit performance reflected Equitable's risk-aware culture, the strength of its internal control framework, its prudent underwriting approach, and its three lines of defence operating model.

The Provision for Credit Losses ("PCL") was $0.2 million or 0.003% of mortgage principal in Q2 2018, which reflects the stable credit quality of the Bank's assets and improvements in the macroeconomic outlook.

CAPITAL

Equitable Bank's Capital Ratios continue to exceed minimum regulatory standards and were above the levels of the other eight publicly listed Schedule I Canadian banks.  At June 30, 2018:

  • Common Equity Tier 1 Capital Ratio was 14.3% compared to 14.8% at June 30, 2017 and surpassed the Basel III minimum of 7.0% in both periods.
  • Total Capital Ratio was 15.6%, well above the regulatory requirement of 10.5% on an all-in basis although down from last year's elevated level of 17.4%.
  • Leverage Ratio was 5.4% and as such the Bank was fully compliant with the target that OSFI sets on a confidential, institution-by-institution basis.

STRATEGIC UPDATE

Equitable continues to deliver on its key strategic priorities. Among recent strategic highlights, Equitable:

  • Increased its share of the direct-to-consumer GIC market with a full consumer launch of EQ Bank GICs and enhancements to the EQ Bank digital platform, further broadening the Bank's access to a diversified range of funding sources.
  • Continued to build mortgage broker awareness of the PATH Home Planâ„¢ reserve mortgage product and refined its offering in response to market feedback.
  • Broadened the Bank's suite of commercial mortgage products to address market opportunities in underserved segments.
  • Launched the Equitable Bank Evolution Suiteâ„¢ Switch program, an approach that enables brokers and borrowers to easily switch Prime mortgages from other lenders to Equitable.
  • Added a creditor life insurance option – in partnership with a major insurance company – to all of the Bank's residential products that provides further value to single-family borrowers.
  • Continued to advance efforts to migrate to the Advanced Internal Ratings Based (AIRB) approach to capital and risk management.

"This is a formative period for Canada's Challenger BankTM as we create and introduce innovative new platforms, products and programs for Canadians that change the way they bank," said Mr. Moor. "In each case, we are striving to differentiate Equitable with services designed to better meet the needs of specific customer groups. As we execute our strategic roadmap, we have been careful to establish milestones for asset and deposit expansion and diversification that will enable us to thoroughly test and refine each new offering to ensure it delivers intended results. This approach will protect our brand and create lasting value for our customers and our shareholders."

BUSINESS OUTLOOK

Equitable expects that its strategy, including its disciplined approach to capital allocation, will continue to deliver value to shareholders and protect the money that depositors have trusted to the Bank. Asset quality remains high and the Bank's diversified business model continues to present profitable growth opportunities.  Management expects earnings to continue increasing in the second half of 2018 due to loan portfolio growth and the recent reduction in the size of the secured backstop liquidity facility.  ROE will likely be below the Bank's 5-year average of 17.2% due to the residual costs associated with successfully navigating through funding market disruptions that occurred in 2017 (see the Company's Q1 and Q2 2017 MD&As) as well as the high level of the Bank's common equity capital.

Although there remains market uncertainty, management expects that year-over-year growth of MUM and balance sheet mortgage assets will be in the range of 9% to 11% in the last half of 2018.

 "We are confident in the strength of the Bank's franchise and the ability of our diversified business model to continue performing well," said Mr. Moor. "In lending, our outlook for growth in Alternative Single Family has improved over the past quarter as our team successfully adjusted its B-20 implementation and refined pricing, which improved our competitiveness. That said, Q2 residential originations were still slightly below last year's levels, a function of lower activity in real estate markets and constraints on lending caused by revisions to B-20 mortgage qualifying rules. With more modest market growth prospects, we will continue to deploy more capital into Commercial Lending, our newly launched reverse mortgage business and other secured lending programs that we will introduce to profitably expand our assets within our well-defined risk-return parameters.  We will also determine whether returning some capital to our shareholders is appropriate as other opportunities and the impacts of B-20 become clearer over the course of the next several quarters."

Management believes that Net Interest Income in the final two quarters of 2018 will increase at year-over-year rates in the 8% to 10% range along with average asset balances.  NIM should remain stable from Q2 levels (after adjusting for the backstop related write-down) but may fluctuate and differ from these expectations due to mortgage prepayment income volatility and other factors such as seasonal variations in our liquidity holdings.

Equitable should also operate with an Efficiency Ratio in the high 30 percent range, even with significant and ongoing investments in strategic initiatives such as EQ Bank.

"As we continue to make investments that reinforce our high level of customer service, build the value inherent in Equitable's Challenger Bankâ„¢ franchise, and expand our digital banking platform, we anticipate that non-interest expenses will increase at year-over-year rates slightly higher than the growth rate of the Bank's assets in the last two quarters of 2018," said Tim Wilson, Senior Vice President and Chief Financial Officer. "Of course, if growth in any of our lending markets slows beyond current expectations, we will manage our expenses accordingly with an eye to maintaining Equitable Bank's status as an efficiency leader in Canada."

Management's complete business outlook can be found in Management's Discussion and Analysis for the three and six months ended June 30, 2018 which is available on SEDAR and on Equitable's website.

CONFERENCE CALL AND WEBCAST

Equitable will hold its second quarter conference call and webcast at 10:00 a.m. eastern Friday, August 10, 2018. To access the call live, please dial (416) 764-8609 five minutes prior. The listen-only webcast with accompanying slides will be available at www.equitablebank.ca under Investor Relations. The call will be hosted by Andrew Moor, President and Chief Executive Officer.

A replay of the call will be available until August 17, 2018 and it can be accessed by dialing (416) 764-8677 and entering passcode 673530 followed by the number sign. Alternatively, the call will be archived on the Company's website for three months.


INTERIM CONSOLIDATED FINANCIAL STATEMENTS













CONSOLIDATED BALANCE SHEETS (unaudited)








AS AT JUNE 30, 2018








With comparative figures as at December 31, 2017 and June 30, 2017

($ THOUSANDS)



















June 30, 2018(1)


December 31, 2017


June 30, 2017









Assets:








Cash and cash equivalents


$

793,688

$

660,930

$

811,465

Restricted cash



347,285


366,038


412,036

Investments



155,048


107,442


112,658

Mortgages receivable – Core Lending



13,100,591


12,304,741


11,393,045

Mortgages receivable – Securitization Financing



7,354,786


6,993,807


6,870,578

Securitization retained interests



109,191


104,429


98,513

Other assets



84,132


96,863


97,691



$

21,944,721

$

20,634,250

$

19,795,986









Liabilities and Shareholders' Equity








Liabilities:









Deposits


$

12,476,974

$

11,114,313

$

10,099,459


Securitization liabilities



7,584,327


7,565,545


7,750,405


Obligations under repurchase agreements



202,928


452,001


428,985


Deferred tax liabilities



38,735


35,802


43,988


Other liabilities



177,994


199,601


205,482


Bank facilities



250,811


128,871


141,815


Debentures



-


-


65,000




20,731,769


19,496,133


18,735,134









Shareholders' equity:









Preferred shares



72,557


72,557


72,557


Common shares



199,305


198,660


197,439


Contributed surplus



6,612


6,012


5,594


Retained earnings



938,122


866,109


798,253


Accumulated other comprehensive loss



(3,644)


(5,221)


(12,991)




1,212,952


1,138,117


1,060,852



$

21,944,721

$

20,634,250

$

19,795,986


(1) 

The amounts for the period ended June 30, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated.

 


CONSOLIDATED STATEMENTS OF INCOME (unaudited)




FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2018




With comparative figures for the three and six month periods ended June 30, 2017




($THOUSANDS, EXCEPT PER SHARE AMOUNTS)






















Three months ended

Six months ended



June 30, 2018(1)

June 30, 2017

June 30, 2018(1)

June 30, 2017











Interest income:











Mortgages – Core Lending


$

153,523

$

125,670

$

296,638

$

247,562


Mortgages – Securitization Financing



46,063


44,957


90,939


90,112


Investments



1,500


1,370


2,546


3,498


Other



4,163


1,715


7,968


3,043




205,249


173,712


398,091


344,215

Interest expense:











Deposits



69,392


49,817


131,676


96,811


Securitization liabilities



44,825


42,379


88,387


86,312


Bank facilities



11,536


2,217


17,262


2,491


Debentures



-


950


-


1,900




125,753


95,363


237,325


187,514

Net interest income



79,496


78,349


160,766


156,701

Provision for credit losses



168


378


938


1,116

Net interest income after provision for credit losses



79,328


77,971


159,828


155,585

Other income:











Fees and other income



6,547


6,853


11,924


14,657


Net gain/(loss) on investments



138


(788)


(232)


(788)


Gains on securitization activities and income from securitization retained interests



3,024


3,248


5,961


6,466




9,709


9,313


17,653


20,335

Net interest and other income



89,037


87,284


177,481


175,920

Non-interest expenses:











Compensation and benefits



19,032


16,467


37,635


32,890


Other



19,491


18,028


34,698


31,425




38,523


34,495


72,333


64,315

Income before income taxes



50,514


52,789


105,148


111,605

Income taxes:











Current



12,404


7,896


26,724


24,087


Deferred



573


5,984


720


5,216




12,977


13,880


27,444


29,303

Net income


$

37,537

$

38,909

$

77,704

$

82,302

Dividends on preferred shares



1,191


1,191


2,382


2,382

Net income available to common shareholders


$

36,346

$

37,718

$

75,322

$

79,920











Earnings per share:











Basic


$

2.20

$

2.29

$

4.56

$

4.85


Diluted


$

2.19

$

2.28

$

4.53

$

4.82


(1) 

The amounts for the period ended June 30, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated.

 


CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)




FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2018

With comparative figures for the three and six month periods ended June 30, 2017




($ THOUSANDS)






















Three months ended

Six months ended



June 30, 2018(1)

June 30, 2017

June 30, 2018(1)

June 30, 2017











Net income


$

37,537

$

38,909

$

77,704

$

82,302











Other comprehensive income – items that will be reclassified subsequently to income:











Debt instruments at Fair Value through Other












Comprehensive Income/Available for sale:











Net unrealized (losses)/gains from change in fair value



(23)


475


(26)


10,080


Reclassification of net gains to income



-


596


-


401











Other comprehensive income – items that will not be reclassified subsequently to income:











Equity instruments designated at Fair Value through












Other Comprehensive Income:











Net unrealized losses from change in fair value



(1,117)


N/A


(228)


N/A


Reclassification of net losses to retained earnings



-


N/A


(6)


N/A




(1,140)


1,071


(260)


10,481

Income tax recovery/(expense)



302


(284)


69


(2,752)




(838)


787


(191)


7,729











Cash flow hedges:










Net unrealized (losses)/gains from change in fair value



(364)


1,932


(969)


1,832

Reclassification of net losses to income



291


877


1,445


1,328




(73)


2,809


476


3,160

Income tax recovery/(expense)



19


(746)


(126)


(897)




(54)


2,063


350


2,263

Total other comprehensive (loss)/income



(892)


2,850


159


9,992

Total comprehensive income


$

36,645

$

41,759

$

77,863

$

92,294



(1) 

 The amounts for the period ended June 30, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated.

 


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)

FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2018


With comparative figures for the three month period ended June 30, 2017


($ THOUSANDS)




























Accumulated other

comprehensive

income (loss)



June 30, 2018


Preferred
shares

Common
shares

Contributed
surplus

Retained earnings

Cash flow
hedges

Financial instruments at FVOCI(1)

Total

Total



















Balance, beginning of period


$

72,557

$

199,123

$

6,309

$

906,235

$

3,557

$

(6,309)

$

(2,752)

$

1,181,472

Net income



-


-


-


37,537


-


-


-


37,537

Other comprehensive loss, net of tax



-


-


-


-


(54)


(838)


(892)


(892)

Exercise of stock options



-


151


-


-


-


-


-


151

Dividends:



















Preferred shares



-


-


-


(1,191)


-


-


-


(1,191)


Common shares



-


-


-


(4,459)


-


-


-


(4,459)

Stock-based compensation



-


-


334


-


-


-


-


334

Transfer relating to the exercise of stock options



-


31


(31)


-


-


-


-


-

Balance, end of period


$

72,557

$

199,305

$

6,612

$

938,122

$

3,503

$

(7,147)

$

(3,644)

$

1,212,952















































Accumulated other

comprehensive

income (loss)



June 30, 2017


Preferred shares

Common shares

Contributed surplus

Retained earnings

Cash flow

hedges

Available

for sale investments

Total

Total



















Balance, beginning of period


$

72,557

$

197,339

$

5,322

$

764,325

$

(2,573)

$

(13,268)

$

(15,841)

$

1,023,702

Net income



-


-


-


38,909


-


-


-


38,909

Other comprehensive gain, net of tax



-


-


-


-


2,063


787


2,850


2,850

Exercise of stock options



-


84


-


-


-


-


-


84

Dividends:



















Preferred shares



-


-


-


(1,191)


-


-


-


(1,191)


Common shares



-


-


-


(3,790)


-


-


-


(3,790)

Stock-based compensation



-


-


288


-


-


-


-


288

Transfer relating to the exercise of stock options



-


16


(16)


-


-


-


-


-

Balance, end of period


$

72,557

$

197,439

$

5,594

$

798,253

$

(510)

$

(12,481)

$

(12,991)

$

1,060,852



(1) 

Current year balance is classified as at FVOCI for debt and equity instruments, however, balance at the beginning of the period is classified as Available for Sale under IAS 39.

 


CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)

FOR THE SIX MONTH PERIOD ENDED JUNE 30, 2018











With comparative figures for the six month period ended June 30, 2017











($ THOUSANDS)














































Accumulated other

comprehensive

income (loss)



June 30, 2018


Preferred shares

Common shares

Contributed surplus

Retained earnings

Cash flow hedges

Financial instruments at FVOCI(1)


Total


Total



















Balance, beginning of period


$

72,557

$

198,660

$

6,012

$

866,109

$

3,153

$

(8,374)

$

(5,221)

$

1,138,117

Cumulative effect of adopting IFRS 9(2)



-


-


-


5,450


-


1,418


1,418


6,868

Restated balance as at January 1, 2018



72,557


198,660


6,012


871,559


3,153


(6,956)


(3,803)


1,144,985

Net income



-


-


-


77,704


-


-


-


77,704

Other comprehensive income/(loss), net of tax



-


-


-


-


350


(191)


159


159

Net realized losses on sale of equity investments



-


-


-


(6)


-


-


-


(6)

Exercise of stock options



-


525


-


-


-


-


-


525

Dividends:



















Preferred shares



-


-


-


(2,382)


-


-


-


(2,382)


Common shares



-


-


-


(8,753)


-


-


-


(8,753)

Stock-based compensation



-


-


720


-


-


-


-


720

Transfer relating to the exercise of stock options



-


120


(120)


-


-


-


-


-

Balance, end of period


$

72,557

$

199,305

$

6,612

$

938,122

$

3,503

$

(7,147)

$

(3,644)

$

1,212,952















































Accumulated other

comprehensive

income (loss)



June 30, 2017


Preferred shares

Common shares

Contributed surplus

Retained earnings

Cash flow

hedges

Available

for sale investments


Total


Total



















Balance, beginning of period


$

72,557

$

196,608

$

5,056

$

725,912

$

(2,773)

$

(20,210)

$

(22,983)

$

977,150

Net income



-


-


-


82,302


-


-


-


82,302

Other comprehensive gain, net of tax



-


-


-


-


2,263


7,729


9,992


9,992

Exercise of stock options



-


697


-


-


-


-


-


697

Dividends:



















Preferred shares



-


-


-


(2,382)


-


-


-


(2,382)


Common shares



-


-


-


(7,579)


-


-


-


(7,579)

Stock-based compensation



-


-


672


-


-


-


-


672

Transfer relating to the exercise of stock options



-


134


(134)


-


-


-


-


-

Balance, end of period


$

72,557

$

197,439

$

5,594

$

798,253

$

(510)

$

(12,481)

$

(12,991)

$

1,060,852


(1) 

Current year balance is classified as at FVOCI for debt and equity instruments, however, balance at the beginning of the period is classified as Available for Sale under IAS 39.

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

FOR THE THREE AND SIX MONTH PERIODS ENDED JUNE 30, 2018

With comparative figures for the three and six month periods ended June 30, 2017

($ THOUSANDS)






















Three months ended

Six months ended



June 30, 2018(1)

June 30, 2017

June 30, 2018(1)

June 30, 2017

CASH FLOWS FROM OPERATING ACTIVITIES










Net income for the period


$

37,537

$

38,909

$

77,704

$

82,302

Adjustments for non-cash items in net income:











Financial instruments at fair value through income



(6,985)


1,364


(3,720)


1,349


Amortization of premiums/discount on investments



2,247


1,349


4,537


4,784


Amortization of capital assets and intangible costs



2,424


2,083


4,759


4,173


Provision for credit losses



168


378


938


1,116


Securitization gains



(3,024)


(2,717)


(5,961)


(6,287)


Net loss on sale or redemption of investments



-


788


-


788


Stock-based compensation



334


288


720


672


Income taxes



12,977


13,880


27,444


29,303


Securitization retained interests



6,966


6,093


13,700


11,609

Changes in operating assets and liabilities:











Restricted cash



(14,188)


(153,437)


18,753


(164,158)


Securities purchased under reverse repurchase agreements



-


4,984


-


199,401


Mortgages receivable, net of securitizations



(777,267)


(107,701)


(1,152,404)


(496,612)


Other assets



9,954


(24,311)


15,256


(20,914)


Deposits



478,126


54,013


1,364,963


338,480


Securitization liabilities



29,380


(43,324)


19,093


(11,674)


Obligations under repurchase agreements



98,276


283,489


(249,073)


316,497


Bank facilities



250,811


141,815


121,940


91,815


Other liabilities



4,595


19,407


(20,146)


8,718

Income taxes paid



(15,355)


(11,147)


(33,698)


(37,621)

Cash flows from operating activities



116,976


226,203


204,805


353,741

CASH FLOWS FROM FINANCING ACTIVITIES










Dividends paid on preferred shares



(1,191)


(1,191)


(2,382)


(2,382)

Dividends paid on common shares



(4,294)


(7,579)


(8,418)


(11,022)

Proceeds from issuance of common shares



151


84


525


697

Cash flows used in financing activities



(5,334)


(8,686)


(10,275)


(12,707)

CASH FLOWS FROM INVESTING ACTIVITIES










Purchase of investments



(9,952)


(2,553)


(52,622)


(40,538)

Proceeds on sale or redemption of investments



-


60,301


45


70,219

Net change in Canada Housing Trust re-investment Accounts



19


17


38


227

Purchase of capital assets and system development costs



(6,380)


(1,462)


(9,233)


(3,656)

Cash flows (used in)/from investing activities



(16,313)


56,303


(61,772)


26,252

Net increase in cash and cash equivalents



95,329


273,820


132,758


367,286

Cash and cash equivalents, beginning of period



698,359


537,645


660,930


444,179

Cash and cash equivalents, end of period


$

793,688

$

811,465

$

793,688

$

811,465











Cash flows from operating activities include:










Interest received


$

199,575

$

173,850

$

390,844

$

344,788

Interest paid



(80,334)


(83,078)


(144,237)


(149,462)

Dividends received



1,472


1,104


2,574


2,460


(1) 

The amounts for the period ended June 30, 2018 have been prepared in accordance with IFRS 9; prior period amounts have not been restated.

 

ABOUT EQUITABLE GROUP INC.

Equitable Group Inc. is a growing Canadian financial services business that operates through its wholly-owned subsidiary, Equitable Bank. Equitable Bank, Canada's Challenger Bankâ„¢, is the country's ninth largest independent Schedule I bank and offers a diverse suite of residential lending, commercial lending and savings solutions to Canadians. Through its proven branchless approach and customer service focus, Equitable Bank has grown to over $25 billion of Assets Under Management. EQ Bank, the digital banking arm of Equitable Bank, provides state-of-the-art digital banking services to more than 60,000 Canadians. Equitable Bank employs more than 600 dedicated professionals across the country, and is a 2018 recipient of Canada's Best Employer Platinum Award, the highest bestowed by AON. For more information about Equitable Bank and its products, please visit equitablebank.ca.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements made by the Company in the sections of this news release including those entitled "CEO's Commentary", "Strategic Update", "Business Outlook", in other filings with Canadian securities regulators and in other communications include forward-looking statements within the meaning of applicable securities laws ("forward-looking statements"). These statements include, but are not limited to, statements about the Company's objectives, strategies and initiatives, financial result expectations and other statements made herein, whether with respect to the Company's businesses or the Canadian economy. Generally, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "expects" or "does not expect", "is expected", "budget", "scheduled", "planned", "estimates", "forecasts", "intends", "anticipates" or "does not anticipate", or "believes", or variations of such words and phrases which state that certain actions, events or results "may", "could", "would", "might" or "will be taken", "occur" or "be achieved". Forward-looking statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, closing of transactions, performance or achievements of the Company to be materially different from those expressed or implied by such forward-looking statements, including but not limited to risks related to capital markets and additional funding requirements, fluctuating interest rates and general economic conditions, legislative and regulatory developments, the nature of our customers and rates of default, and competition as well as those factors discussed under the heading "Risk Management" in the Management's Discussion and Analysis and in the Company's documents filed on SEDAR at www.sedar.com. All material assumptions used in making forward-looking statements are based on management's knowledge of current business conditions and expectations of future business conditions and trends, including their knowledge of the current credit, interest rate and liquidity conditions affecting the Company and the Canadian economy. Although the Company believes the assumptions used to make such statements are reasonable at this time and has attempted to identify in its continuous disclosure documents important factors that could cause actual results to differ materially from those contained in forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended. Certain material assumptions are applied by the Company in making forward-looking statements, including without limitation, assumptions regarding its continued ability to fund its mortgage business at current levels, a continuation of the current level of economic uncertainty that affects real estate market conditions, continued acceptance of its products in the marketplace, as well as no material changes in its operating cost structure and the current tax regime. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on forward-looking statements. The Company does not undertake to update any forward-looking statements that are contained herein, except in accordance with applicable securities laws.

NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") FINANCIAL MEASURES

This news release references certain non-GAAP measures such as Adjusted Diluted earnings per share, Return on Shareholders' Equity, Adjusted Return on Shareholders' Equity, Mortgages Under Management ("MUM"), book value per common share, provision for credit loss rate, Capital Ratios, Efficiency Ratio, and Assets Under Management that management believes provide useful information to investors regarding the Company's financial condition and results of operations. The "NON-GENERALLY ACCEPTED ACCOUNTING PRINCIPLES ("GAAP") FINANCIAL MEASURES" section of the Company's second quarter 2018 Management's Discussion and Analysis provides a detailed description of each non-GAAP measure and should be read in conjunction with this report. The Management's Discussion and Analysis also provides a reconciliation between all non-GAAP measures and the most directly comparable GAAP measure, where applicable. Readers are cautioned that non-GAAP measures do not have any standardized meaning, and therefore, may not be comparable to similar measures presented by other companies.

SOURCE Equitable Group Inc.



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