Equitable Bank's $350M Deposit Note Issuance: A Strategic Move to Fuel Growth Amid Strong Investor Demand
2min read Equitable Bank, Canada’s seventh-largest bank by assets, has secured a pivotal $350 million fixed-rate deposit note issuance, marking its second-largest such transaction on record. This move underscores the bank’s ability to attract capital amid competitive market conditions and signals its confidence in scaling its digital-first strategy. The issuance, priced at a 3.738% fixed rate with a three-year maturity, brings total outstanding deposit notes to $2.15 billion—a testament to the bank’s growing financial resilience and investor trust.
Key Details of the Issuance
The transaction was oversubscribed 2.5 times, with an order book exceeding $875 million, allowing the bank to upsized the offering to its upper limit. Pricing at the tight end of its target spread guidance—118 basis points (bps) above the Government of Canada bond yield curve—reflects strong demand and the bank’s improved credit standing. The deposit notes are unsecured and rank equally with other unsubordinated liabilities but are not insured by the Canada Deposit Insurance Corporation (CDIC), a minor trade-off for accessing cheaper funding.
This issuance follows a $500 million deposit note in late 2024, highlighting Equitable’s strategy of diversifying funding sources beyond traditional deposits. The funds will support its growth initiatives, including expanding its technology-driven EQ Bank subsidiary and scaling commercial lending in urban markets.
Strategic Implications: Fueling Growth and Innovation
Equitable Bank’s CEO, Andrew Moor, emphasized that the issuance “demonstrates investor confidence in our strategy to transform Canadian banking through technology.” The bank’s $132 billion in combined assets under management (as of January 2025) and its digital EQ Bank platform—now serving over 536,000 customers—position it as a formidable challenger to traditional banks.
The funds will likely be directed toward two key areas:
1. Commercial Real Estate Lending: The bank has prioritized multi-unit residential mortgages (e.g., rental apartments) and commercial construction loans, which grew 30% and 48% year-over-year (YoY) in Q1 2025, respectively. These segments benefit from CMHC insurance, reducing risk while capitalizing on urban housing demand.
2. Digital Banking Expansion: EQ Bank’s recent launch of a Notice Savings Account in Quebec and its USD-denominated accounts (with fee-free global transfers) aim to attract millennials and international users, driving deposit growth.
Financial Health and Market Position
Equitable’s capital ratios remain robust, with a Total Capital Ratio of 15.5% and a Common Equity Tier 1 (CET1) ratio of 14.1%—well above regulatory requirements. The bank’s Liquidity Coverage Ratio (LCR) exceeds 100%, ensuring it can withstand short-term market volatility.
Q1 2025 results further validate its strategy:
- Adjusted EPS rose 8% YoY to $2.98, driven by higher net interest margins (2.07%) and securitization gains.
- Total loans under management (LUM) grew 18% YoY to $57.2 billion, with multi-unit residential and construction lending leading the charge.
Risks and Considerations
While the issuance reflects strong investor sentiment, risks persist:
- Uninsured Deposit Notes: The lack of CDIC insurance may deter risk-averse investors, though the oversubscription suggests institutional buyers prioritized yield over guarantees.
- Interest Rate Sensitivity: Lower rates could boost loan demand but may compress margins over time.
- Regulatory Challenges: The bank must navigate evolving rules around digital banking and cross-border operations, though its domestic focus mitigates geopolitical risks.
Conclusion
Equitable Bank’s $350 million deposit note issuance is a strategic win, leveraging investor confidence to fuel growth in high-demand sectors like urban real estate and digital banking. With a 2.5x oversubscription, 14.1% CET1 ratio, and a 15.5% Total Capital Ratio, the bank is financially positioned to capitalize on its vision. Its Q1 performance—18% YoY LUM growth, $59.25 million in non-interest revenue, and a 15.2% ROE—supports its ambition to become Canada’s leading Challenger Bank.
Investors should monitor Equitable’s ability to maintain disciplined growth while navigating macroeconomic headwinds. The issuance’s success, paired with its TSX:EQB stock’s 20% YTD gain, suggests the market is betting on its tech-driven model. For those seeking exposure to Canada’s evolving financial landscape, Equitable’s blend of innovation and financial strength makes it a compelling play.
