Analyst chops price target on this Canadian banking stock

National Bank Financial Capital Markets analyst Gabriel Dechaine cut his target for EQB (EQB Stock Quote, Chart, News, Analysts, Financials TSX:EQB) to $89 from $104 while maintaining a “Sector Perform” rating in an Aug. 28 note, citing a weak third-quarter performance and downbeat guidance for the rest of the year.

EQB, a Canadian digital financial services company with $137-billion in combined assets under management and administration, operates Equitable Bank, the country’s seventh-largest bank by assets, and ACM Advisors, which specializes in alternative assets.

After the bell on Wednesday, EQB reported adjusted earnings of $2.07 per share for the quarter ended July 31, down 11% year over year and below both Dechaine’s $2.55 forecast and the consensus estimate of $2.53. As reported by the Globe and Mail, the analyst attributed the miss to lower revenues, higher expenses and higher provisions for credit losses, calling it “another tough credit quarter” marked by further mortgage provisions.

Revenue came in 4% below expectations, with net interest income missing by 6% as net interest margins compressed 25 basis points from the prior quarter. Dechaine said the margin pressure reflected lower yields on new commercial loans compared with maturities, excess liquidity, and higher-yielding demand deposits. He noted EQB has since reduced high-interest savings account rates, which should help recover some margin performance.

Provisions for credit losses were 15% above forecast, driven by performing loans, which were about 130% higher than expected. Impaired provisions were 7% below forecast, though 40% were tied to uninsured mortgages. He said this was the second consecutive quarter of “catch-up” provisions on impaired mortgages where asset values declined more than 30% or resolution times extended.

Updated guidance from the company called for full-year return on equity of 11.5% versus 12.4% year-to-date, pre-tax pre-provision profit down 10%–12% versus a 9% decline year-to-date, and adjusted EPS down 12%–15%.

Dechaine said that implies Q4 2025 EPS of $2.02 to $2.36, or 12%–25% below consensus. “An important question is whether this challenging guidance will be reflected in the 2026 outlook,” he said.

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