When it comes to investing in Canadian bank stocks, the Big Five often steal the spotlight. But sometimes, the most compelling opportunities lie just outside the mainstream. One such opportunity is EQB (TSX:EQB), the parent company of Equitable Bank and its digital arm, EQ Bank. Despite a recent 9% dip in its stock price, EQB’s strong fundamentals and growth trajectory make it a stock worth considering for long-term investment.
About EQB
EQB carved out a niche in the Canadian banking sector by focusing on digital banking solutions and underserved markets. Its innovative approach has led to significant growth in recent years. As of Oct. 31, 2024, EQB reported record annual earnings, with revenue surpassing $1 billion for the first time. The bank stock’s net income for the fiscal year stood at $438 million, reflecting its robust operational performance.
In its second-quarter (Q2) 2025 earnings report, EQB reported earnings per share of $2.31, slightly below analysts’ expectations of $2.68. Despite this, the company’s revenue for the quarter was $315.95 million, exceeding forecasts. The slight earnings miss was attributed to higher provisions for credit losses, particularly in its equipment financing portfolio. However, EQB has taken steps to mitigate these risks by diversifying and lowering risk for this segment.
More to come
One of EQB’s standout achievements is the growth of its digital platform, EQ Bank. Launched in 2016, EQ Bank has attracted a substantial customer base by offering high-interest savings accounts with no monthly fees. By the end of 2024, EQ Bank had over 513,000 customers, marking a 28% year-over-year increase. This growth underscores the bank’s ability to meet the evolving needs of Canadian consumers seeking convenient and cost-effective banking solutions.
From a valuation perspective, EQB presents an attractive opportunity. With a price-to-earnings ratio of approximately 9.4 and a price-to-book ratio of 1.10, the bank stock appears undervalued compared to its peers. As of writing, EQB’s stock price stood at $91.79, with a market capitalization of around $3.55 billion.
Delicious dividend
EQB’s commitment to returning value to shareholders is evident in its dividend policy. The bank stock increased its common share dividend by 23% year over year, reflecting confidence in its financial health and future prospects. The current dividend yield stands at approximately 2.3%, offering investors a steady income stream alongside potential capital appreciation. So, here is what $10,000 would earn in dividends alone for investors.
| COMPANY | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | INVESTMENT TOTAL |
|---|---|---|---|---|---|---|
| EQB.TO | $91.79 | 108 | $2.12 | $229.00 | Quarterly | $9,913.32 |
Looking ahead, EQB is well-positioned to capitalize on emerging trends in the banking industry. The bank stock’s focus on digital banking aligns with the growing demand for online financial services. Additionally, EQB’s strategic initiatives, such as the launch of its Notice Savings Account and the beta rollout of the EQ Bank Business Account, aim to attract a broader customer base and drive deposit growth.
Bottom line
While EQB may not have the name recognition of Canada’s largest banks, its impressive growth, strategic focus on digital banking, and shareholder-friendly policies make it a compelling investment opportunity. The recent dip in its stock price offers a potential entry point for investors seeking exposure to a forward-thinking financial institution poised for long-term success.
