EQB Inc.

‘s (EQB:TSX) deal to purchase

Loblaw Cos. Ltd.

‘s

PC Financial

assets is “strategically enhancing,” according to an analyst at

BMO Capital Markets

, who hiked his price target Tuesday and upgraded shares of the company, which offers banking services through its

Equitable Bank

.

Etienne Ricard, a diversified financial analyst at BMO, raised his price target to $130 from $103 and upgraded the shares to outperform from market perform based on EQB’s previously announced deal in early December that it was buying PC Financial and related insurance companies from Loblaw Cos. Ltd. for $800-million, with the grocery store chain taking a minority stake in the financial services firm.

Shares of EQB traded Tuesday early afternoon around the $108 level, jumping more than six per cent on the price hike and upgrade. The 12-month price target of nine analysts who follow the stock was $105.11, according to Bloomberg.

“The acquisition of PC Financial is strategically enhancing insofar as it provides EQB with an expanded customer outreach and a more diversified bank from asset, funding and revenue perspectives,” Ricard said in a note. He added he thinks there is more “upside potential” for shares from cross-selling between the two companies.

Ricard laid out four reasons for upgrading the stock, including the addition of 2.5 million PC Financial clients along with access to about 17 million PC Optimum members, making EQB “the only bank enabling customers to earn loyalty points.” Further, PC Financial’s credit card unit will allow EQB to diversify its lending offerings, he said. The deal also opens up more avenues for non-interest revenue from interchange, transaction and card fees, and finally, Ricard said, the deal will create additional funding sources from PC Money.

EQB and Loblaw said at the time the deal was announced that it would give PC Financial customers access to Equitable Bank’s digital platform and offerings in savings and registered accounts, while Equitable customers would benefit from PC credit cards as well as access to retail banking at about 2,500 Loblaw stores, more than 180 in-store banking stations and an ATM network across Canada.

The companies also agreed that EQB would become the exclusive financial partner of Loblaw’s PC Optimum loyalty program.

Richard described the risk-reward of the deal as appearing “favourable” and that confidence is rising that EQB can retake 15 per cent return on equity.

Toronto-based EQB had a turbulent 2025, including the sudden death of chief executive Andrew Moor, missed estimates in August and cutting eight per cent of its workforce.

Ricard said upside from the deal could push shares as high as $150, while downside risks in terms of book value could knock them down to $85.

EQB next reports earnings on Feb. 26.

  • Equitable Bank parent EQB to buy PC Financial from Loblaw
  • EQB to cut its workforce by 8% in latest layoffs to hit Canada’s banking sector

—With files from Barbara Shecter, Financial Post

• Email: gmvsuhanic@postmedia.com