EQB's Q3 2025 Earnings: A Tectonic Shift in a Digital Bank's Resilience

The Q3 2025 earnings report for EQB Inc. (TSX: EQB) reads like a case study in the paradox of modern digital banking: a company hemorrhaging margins while attracting customers at a feverish pace. Revenue fell 5% year-over-year to $310 million, net interest income contracted by 6%, and adjusted net income plummeted 32%. Yet EQ Bank's customer base swelled by 21% to 586,000, and its capital ratios remain fortress-like. This duality—declining profitability versus surging growth—forces investors to ask: Is EQB's current pullback a buying opportunity, or a warning sign of deeper structural challenges?

The Margin Squeeze: A Symptom of a Broader Malaise

EQB's 14-basis-point contraction in net interest margin (NIM) and a 34% spike in credit provisions to $21.3 million underscore the brutal realities of a high-rate environment. The housing market's slowdown, weaker collateral values, and a shift in consumer behavior have eroded the profitability of its mortgage-centric model. reveals a steady decline, mirroring the broader Canadian banking sector's struggle to balance deposit costs and loan yields.

Yet EQB's management isn't blind to these headwinds. The appointment of Chadwick Westlake as CEO in August 2025 signals a pivot toward innovation. His mandate: to diversify revenue streams beyond interest income. The EQ Bank Card program, now a $1 billion milestone, and a push into fee-based services and AI-driven analytics are early steps. But these initiatives are still in their infancy. For now, EQB remains tethered to a model that's under siege.

Customer Growth: A Double-Edged Sword

The 21% year-over-year surge in EQ Bank customers is impressive, but it raises critical questions. How much is the company spending to acquire these users? With no transparency on cost-per-acquisition (CPA) or customer lifetime value (LTV), investors are left guessing whether this growth is sustainable. (hypothetical data) would clarify this, but the absence of such metrics is a red flag.

Moreover, customer growth alone isn't a substitute for profitability. EQB's digital-first model thrives on scale, but if margins continue to compress, the company risks becoming a “growth at all costs” story—a recipe for disaster in a sector where capital discipline is paramount.

Loan Diversification: A Strategic Lifeline

EQB's loan portfolio diversification in 2025 offers a glimmer of hope. Total loans under management hit $71.5 billion, with strategic expansions into single-family residential (SFR), commercial real estate, and equipment financing. The bank's focus on conservative underwriting—70% LTV for SFR loans and 82% CMHC-insured commercial lending—mitigates some of the risks associated with a softening real estate market.

However, the 164-basis-point net impaired loan ratio in Q3 2025 (up from 109 bps in Q3 2024) suggests that even these safeguards may not be enough. would highlight vulnerabilities, particularly in equipment financing, where impaired loans rose to $10.3 million.

Capital Allocation: A Fortress with Cracks

EQB's capital position remains robust, with a CET1 ratio of 13.3% and a total capital ratio of 15.7%. These metrics provide a buffer against further credit deterioration and support its 17% dividend increase. Yet the 32% drop in adjusted net income raises concerns about the sustainability of this payout. would contextualize its appeal to income-focused investors.

The real test lies in management's ability to deploy capital effectively. While EQB's leadership team has emphasized innovation and risk management, the lack of a clear AI roadmap and underdeveloped fee-based services remain strategic blind spots.

Is This a Buy? A Calculated Bet

EQB's Q3 earnings present a mixed bag. On one hand, the company is grappling with margin compression, rising credit provisions, and a lack of transparency on customer economics. On the other, its strong capital position, diversified loan portfolio, and leadership transition offer a path to long-term resilience.

For long-term investors, the key question is whether EQB can execute its strategic pivot before macroeconomic conditions worsen. The recent pullback in its stock price (down 18% year-to-date) may present an entry point, but only for those willing to tolerate near-term volatility.

Investment Thesis:
- Bull Case: EQB's capital strength, customer growth, and diversification efforts position it to weather the current downturn. A successful pivot to fee-based services and AI-driven analytics could unlock value.
- Bear Case: Persistent margin compression, rising credit losses, and a lack of clear cost discipline could erode shareholder value.

In the end, EQB's story is one of transformation. Whether it succeeds depends on its ability to balance growth with profitability—a challenge that will define its next chapter. For now, the stock offers a high-risk, high-reward proposition, best suited for investors with a multi-year time horizon and a tolerance for uncertainty.