With EQB the Big Six becomes the Big Seven

Most Canadians when they hear the expression "The Big Six"think about registered banks.Of course the big six include Royal Bank.TD Bank,CIBC,Bank of Montreal,Scotiabank and National Bank.These banks make up the core of Canadian banking.EQB is,of course, much smaller in total assets than the next biggest bank.National Bank (6) has total assets of about $620 billion in comparison to EQB which is about $180 billion in total assets including it's digital operation assets.EQB is smaller than the other "big six" banks but it has always had operational quality.In 2021,2022 and 2023 it was ranked number1 of the top schedule1 Canadian banks by Forbes Banking.

History

EQ Bank(EQB) was formerly known as Equitable Trust with it's headquarters in Hamilton..It became a bank and got it's federal charter in 2013.It showed it's customers good growth until 2016 when it released it's digital branches platform.And it was all operated in the cloud.The digital branches operate completely online;there are no "bricks and mortar" branches.Strangely enough their digital operation is called Equitable Bank which is somewhat confusing.And EQB  was publicly listed in 2021

Oligopolistic Competition

The Canadian banking market is not a huge one and it is an oligopoly.An oligopoly is a market structure in which a small number of firms dominate the market.The Canadian market has adequately accomodated sizeable profits for the "big six"but can it also accomodate a seventh bank.The large banks do put pressure on the smaller banks so that they can scoop up their small market share.For example,Laurentian Bank only had assets of $40-$50 billion.And this provided only  small annual profit increases.As a result their stock price remained dormant.And now they have sold their business.Canadian Western Bank which was chiefly in the Alberta market also only had assets of about $50 billion.They were  expanding into Ontario but at a slow pace.CWB did not invest enough to gain any sizeable  earnings in Ontario.  Finally they sold out to National Bank and gave National more of a national platform.

EQ Bank is slightly larger than either of these two acquired banks and it has a  quality platform that has grown more quickly than the other two.  However it is still a lot smaller than the smallest of the "big six"which is National Bank.It does have a niche market which on the one hand gives it a secure and growing market.On the other hand, this makes it more attractive to the other six.

EQ Bank has not only grown organically by increasing it's deposits.It has also made three substantial acquisitions.In 2019 it acquired Bennington Financial Service which is in the equipment leasing market.In 2022 it closed the acquisition of Concentra Bank for$500 million which made it Canada's 7th largest bank.In 2025 it made an astute acquisition by acquiring President's Choice Financial from Loblaws.These acquisitions have to be converted to the EQB Bank style of banking.

Guidance

EQB Bank has had a target rate of adjusted return(ROE)  of 15%.But in 2025 the adjusted rate of return was 11.5%.And so EQB Bank which has always been an astute manager will have to ensure that it's recent acquisitions earn as high an adjusted ROE equal to it's core operation.It seems that they are doing just that as EQB traded at $83 per share a year ago and $111 per share a month ago.Now it trades at $121 per share.This is steady growth but this blog believes that if  the Canadian economy slows down from it's present rate the "big six" banks may look for a way to ensure their growth continues.EQB must look for a way to ensure that it is not easily assimilated.The gains seen in the last month (10%) will surely help.But this blog recommends that EQB look closely at one of the 14 Canadian trust companies with a federal charter  or even a small trust company that may appreciate a helping hand.The possibility of acquiring a federally regulated trust company could send the EQB share price towards $150.

Dale Mcintyre M.A. (Econ) is a freelance writer that often writes articles for Zacks.Zacks Investment Research: Stock Research, Analysis, & Recommendations