Q: Please give us your analysis and best guess as to the success and effect of the PC bank takeover by EQB on EQB’s share price in the future.
Thanks
Sheldon
Thanks
Sheldon
5i Research Answer:
It is an interesting, and somewhat aggressive, deal. At $800M, the PC acquisition is about 25% of EQB's market cap. But it should be a good partnership. EQB will get its first branch locations, and PC members are very loyal customers. Loblaw was very careful in choosing a partner, and is committed now with 17% ownership of EQB. With other small banks in Canada disappearing, it sets up EQB well both from a customer and an investor viewpoint. EQB also gets firmly into the profitable credit card business, and the deal will double revenue. We have not seen expected earnings metrics yet, but all in we think this is a very good move for EQB's future growth potential.