Royal Bank of Canada (TSX: RY) has delivered market-beating returns to shareholders over the last two decades. Since the start of 2001, the TSX bank stock has returned 652% to shareholders. If we adjust for dividend reinvestments, cumulative returns are much higher at 1,760%.
Valued at a market cap of $254 billion, RBC is the largest company trading on the TSX. Despite its massive size, analysts forecast the banking giant will expand adjusted earnings from $12.09 per share in fiscal 2024 to $16 per share in fiscal 2027, indicating an annual growth rate of 9.7%. A widening earnings base should enable RBC to increase annual dividends from $5.60 per share in 2024 to $6.61 per share in 2027.
While the growth rates for RBC are steady, there is another TSX stock poised to deliver outsized gains. Let’s see why I’m bullish on EQB (TSX: EQB) in July 2025.
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The bull case for this TSX bank stock
EQB operates as a Canadian digital banking platform through its EQ Bank, serving over 560,000 customers with $9.4 billion in deposits. It focuses on single-family residential mortgages, Canada Mortgage and Housing Corp (CMHC-insured) multi-unit lending, and equipment financing while leveraging its challenger bank offerings to compete against traditional financial institutions.
Despite a challenging macro environment, EQB reported strong results in fiscal Q2 of 2025 (ended in April). While the bank demonstrated strong operational performance in key business lines, elevated credit losses and macroeconomic headwinds weighed on financial results.
In fiscal Q2, EQB reported a return on equity of 11.9%, well below its medium-term target of over 15%. Provisions for credit losses surged to $29 million compared to $13.7 million in the previous quarter, with nearly half the increase stemming from deteriorating forward-looking economic indicators related to cross-border tariff uncertainties.
Despite credit challenges, EQB’s core businesses showed resilience. Single-family residential originations increased 28% year-over-year, as the bank gained market share while maintaining disciplined underwriting standards. The uninsured single-family portfolio grew 2% quarter-over-quarter, supported by strong loan retention rates, which indicate customer service excellence and economic factors.
EQB’s leadership position in Canada’s apartment sector remained evident, with the insured construction portfolio increasing 10% quarter-over-quarter and term loans under management rising 6% sequentially and 29% annually. These gains occurred even as the bank tightened credit policies in specific geographies to manage elevated economic risks.
EQ Bank continued its impressive expansion trajectory, with customer growth of 23% year-over-year as it ended Q2 with 560,000 users. Moreover, demand deposits that contribute to net interest income rose by 10% compared to Q1.
Is EQB stock undervalued?
The credit environment proved more challenging than anticipated, with gross impaired loans rising 8% to $775 million. Management expressed confidence that Q2 represented a high watermark for credit losses, expecting improved performance in subsequent quarters. Strong application volumes in early May, up 17% year-over-year, provide optimism for continued business momentum despite macroeconomic uncertainties.
Analysts forecast EQB’s adjusted earnings to expand from $10.84 per share in fiscal 2025 to $14.56 in fiscal 2027. Further, its annual dividend is estimated to grow from $1.74 per share in 2024 to $2.72 per share in 2027.
If EQB stock is priced at 10 times forward earnings, which is reasonable, it will trade at $145 per share in early 2026, indicating an upside potential of 44% from current levels. If we adjust for dividend reinvestments, cumulative returns could be closer to 50% over the next 18 months.
