Canadian challenger bank EQB Inc. posted third-quarter 2026 results that missed analyst expectations, sending shares down nearly 10% in after-hours trading as credit concerns overshadowed revenue growth.
The Toronto-based lender reported adjusted diluted earnings per share of $2.12, below the $2.24 consensus estimate. Total revenue reached $393 million on an adjusted basis, a 30% increase from the prior quarter and 27% higher year-over-year. Including broader metrics, total revenue stood at $425 million. Net interest income climbed 22% sequentially and annually to $319 million, while non-interest revenue surged 77% quarter-over-quarter to $73.9 million, expanding its share of total revenue to 25% from 14% in Q2 2026.
The acquisition of PC Financial, completed on July 1, 2026, added over 4 million customers and $4.5 billion in credit card loans under management. The integration contributed $68 million to revenues in the first month, with $38 million in expenses and $10 million in adjusted net income. CEO Chadwick Westlake described the acquisition as a "historic inflection point" for EQB, citing structural advantages from the combined technology platform.
Credit metrics showed deterioration, with the bank setting aside $219 million in pre-tax provisions for credit losses on day one. The allowance for credit losses rose to $485.4 million from $227.9 million, driven by $35.2 million in provisions on performing loans and a $48.8 million increase in impaired provisions. The consolidated provision on impaired loans reached $48.8 million, or 42 basis points, a 24% increase quarter-over-quarter. Net interest margin expanded to 2.41%, up 33 basis points sequentially, with PC Financial credit cards contributing 38 basis points to the increase.
EQB's efficiency ratio improved to 50.1%, down 70 basis points sequentially and 330 basis points year-over-year, while CET1 ratio declined to 13.4% from 13.6% in the prior quarter. Total capital stood at 16.6%, though risk-weighted assets rose 25% quarter-over-quarter to $25.4 billion, primarily due to the addition of PC Financial assets. Loans under management grew 7% sequentially and 12% annually to $82.5 billion, with residential mortgages increasing 4% to $24.5 billion.
The bank increased its quarterly dividend by 3% to $0.63 per share and plans to provide a more detailed fiscal 2027 outlook at an Investor Day scheduled for December 7, 2026.
