Hey there. I'm not sure what you mean by the April 2021 report? If you're speaking on the report of Equitable Bank itself, you may be reading an outdated one if it's April 2021. We have made numerous updates to its report on the Bull List since. I'll drop a link below. Keep in mind, it will be updated yet again when it reports earnings:
https://www.stocktrades.ca/premium/premiumfiles/Stocktrades-Premium-Equitable-Bank-EQB.pdf
I am very bullish on Equitable Bank. In fact, despite it being a small cap stock it is one of my largest financial holdings. This goes against my typical strategy in which I usually make small caps no more than a 1-2% position in my portfolio. As it sits right now, Equitable is around 3.5-4%.
If rates come down and Equitable Bank comes out of this situation unscathed, I would be absolutely shocked if it didn't outperform the Big 6.
Obviously, nothing is guaranteed. But the company is so cheap and growing so fast that I would find it hard to imagine if rates normalize, the fears of this company's loan book collapsing subside, and there begins to be a bit more confidence in the consumer that this would not outperform.
The risks are very much the same though yes. This company is much more exposed to the mortgage industry and doesn't have as diverse of a portfolio as the Big Banks and as such the market is not willing to reward it with as high of a valuation multiple. If it can continue to grow and diversify its offerings however, that is where the upside is. Because eventually, the market will reward it with a higher valuation multiple.
We e-mailed investor relations a few months ago and got word back that 46% of the company's loan book is insured. Meaning that the mortgages have insurance on them and they would be compensated in the event of default by something like CMHC which is a crown corporation. So, this protects the company a bit.
There is risk here, make no mistake about it. But we also do feel it's being over exaugurated a bit.
Hope this helps!