EQB shares leap on PC Financial deal; CEO says move gives bank ‘complete’ product lineup

EQB Inc.’s (EQB.TO) stock jumped more than 13 per cent Thursday after the bank unveiled an $800-million deal to acquire PC Financial, a move CEO Chadwick Westlake says finally provides the product range and overall scale to compete more directly with Canada’s biggest banks.

The acquisition, announced after market close Wednesday, brings EQB the PC Mastercard portfolio and will expand its customer base from well under a million to roughly 3.5 million. It also adds a physical footprint that includes over 180 banking locations within Loblaw-owned stores, as well as more than 600 ATMs, and makes EQB the exclusive banking partner for the PC Optimum loyalty program, which counts around 17 million active members. The news release states that over time, the PC Financial branding will be replaced by EQ Bank.

For Westlake, who became CEO in August following the sudden death of longtime leader Andrew Moor, the deal fills one of the bank’s major strategic gaps: a payments and credit-card offering.

“Now we have the complete product shelf,” he told Yahoo Finance Canada in an interview. “Now we’ll have that ability to have millions of Canadians every week see our brand and then become more familiar with our complementary products.”

EQB shares closed at $98.01 on the Toronto Stock Exchange on Thursday, up nearly 13 per cent on the day. Even so, the stock remains down more than 10 per cent from a year ago.

Under the agreement, Loblaw Companies (L.TO) will receive a roughly 16 per cent stake in EQB and two board seats. Westlake emphasized that the partners are particularly well aligned, citing complementary technology stacks and a shared cultural focus on competition and consumer value.

He said the deal is “literally adding these companies together, because what they have, we don’t have, in many ways,” and noted that “layoffs are not part of this.” In October, EQB announced it would lay off 8 per cent of its workforce of approximately 2000.

Westlake also said that Loblaw “specifically did not want to partner with one of the big six” banks and approached EQB “late last year” to explore a transaction. In 2017, Loblaw and CIBC ended a 20-year partnership involving the PC Financial business.

The deal coincided with the release of EQB’s fourth-quarter results, which showed adjusted earnings per share of $1.53, well below the consensus estimate of $1.99. Higher provisions for credit losses and weaker fee income weighed on the quarter. Even with the earnings miss, the bank raised its quarterly dividend by four per cent to $0.57 per share.

In a note to clients, Jefferies analyst John Aiken criticized the credit picture, calling it “an albatross” and warning that despite the acquisition presumably pleasing the market, “the negatives of the quarter’s earnings will take centre stage” in the near term. Aiken nonetheless described the PC Financial transaction as strategically positive for EQB.

Westlake said the Q4 results reflect the bank’s first-ever restructuring charge and a deliberate reset of credit quality as it heads into 2026. EQB, he said, “really pulled apart an entire credit book, loan by loan” to adopt what he called “the most prudent posture possible to close up the year.”

Regarding timing, Westlake says the acquisition was “100 per cent on strategy” and aligned with what he sees as a pivotal moment for the industry.

“I’ve never felt a time like now for change and disruption,” he said. “We can all acknowledge that there’s not enough choice, and yet this is still the most profitable banking market in the world.”

With Laurentian Bank being broken up this week and other regional players having already been absorbed, EQB is now effectively the last smaller publicly traded bank in the country. Westlake said that makes scale essential if EQB is to remain a genuine challenger to the incumbents.

“You actually do need some scale, I believe, to really be a fierce competitor,” he said. “So now that this is so complementary, we start serving millions of customers, and I believe our addressable market is several multiples above even what our new customer base will be.”

Although he framed the acquisition as completing EQB’s product range, Westlake also acknowledged that there are still pieces missing. In the longer term, he said, the bank expects to “speak more … about wealth management, completing our product lineup so Canadians can choose us.” For now, though, he insisted the focus will remain on integrating PC Financial. “Further acquisition of other competitors isn’t the top of my list … it’s making sure we’re doing what we’re doing now to the best of our ability.”

John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf.

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