The deal would make EQB the exclusive banking partner for the PC Optimum loyalty program, which counts around 17 million active members. (REUTERS\/Chris Helgren) \u00b7 REUTERS \/ Reuters <\/p>\n
EQB Inc.\u2019s (EQB.TO<\/a>) 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\u2019s biggest banks.<\/p>\n 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.<\/p>\n For Westlake, who became CEO in August following the sudden death of longtime leader Andrew Moor<\/a>, the deal fills one of the bank\u2019s major strategic gaps: a payments and credit-card offering.<\/p>\n \u201cNow we have the complete product shelf,\u201d he told Yahoo Finance Canada in an interview. \u201cNow we’ll have that ability to have millions of Canadians every week see our brand and then become more familiar with our complementary products.\u201d<\/p>\n 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.<\/p>\n Under the agreement, Loblaw Companies (L.TO<\/a>) 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.<\/p>\n He said the deal is \u201cliterally adding these companies together, because what they have, we don’t have, in many ways,\u201d and noted that \u201clayoffs are not part of this.\u201d In October, EQB announced it would lay off 8 per cent of its workforce<\/a> of approximately 2000.<\/p>\n Westlake also said that Loblaw \u201cspecifically did not want to partner with one of the big six\u201d banks and approached EQB \u201clate last year\u201d to explore a transaction. In 2017, Loblaw and CIBC ended a 20-year partnership<\/a> involving the PC Financial business.<\/p>\n The deal coincided with the release of EQB\u2019s 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.<\/p>\n In a note to clients, Jefferies analyst John Aiken criticized the credit picture, calling it \u201can albatross\u201d and warning that despite the acquisition presumably pleasing the market, \u201cthe negatives of the quarter\u2019s earnings will take centre stage\u201d in the near term. Aiken nonetheless described the PC Financial transaction as strategically positive for EQB.<\/p>\n Westlake said the Q4 results reflect the bank\u2019s first-ever restructuring charge and a deliberate reset of credit quality as it heads into 2026. EQB, he said, \u201creally pulled apart an entire credit book, loan by loan\u201d to adopt what he called \u201cthe most prudent posture possible to close up the year.\u201d<\/p>\n Regarding timing, Westlake says the acquisition was \u201c100 per cent on strategy\u201d and aligned with what he sees as a pivotal moment for the industry.<\/p>\n \u201cI\u2019ve never felt a time like now for change and disruption,\u201d he said. \u201cWe can all acknowledge that there\u2019s not enough choice, and yet this is still the most profitable banking market in the world.\u201d<\/p>\n With Laurentian Bank being broken up this week<\/a> 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.<\/p>\n \u201cYou actually do need some scale, I believe, to really be a fierce competitor,\u201d he said. \u201cSo 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.\u201d<\/p>\n Although he framed the acquisition as completing EQB\u2019s product range, Westlake also acknowledged that there are still pieces missing. In the longer term, he said, the bank expects to \u201cspeak more \u2026 about wealth management, completing our product lineup so Canadians can choose us.\u201d For now, though, he insisted the focus will remain on integrating PC Financial. \u201cFurther acquisition of other competitors isn\u2019t the top of my list \u2026 it\u2019s making sure we\u2019re doing what we\u2019re doing now to the best of our ability.\u201d<\/p>\n John MacFarlane is a senior reporter at Yahoo Finance Canada. Follow him on X @jmacf<\/a>.<\/p>\n Download the Yahoo Finance app, available for Apple<\/a> and Android<\/a>.<\/p>\n