Equitable Bank reported its best ever quarterly earnings per share in the second quarter as high interest rates push Canadians to look for alternatives to traditional banking.

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The challenger bank’s adjusted net income in the second quarter jumped 88 per cent to $115.5 million and adjusted diluted earnings for the quarter were up 70 per cent to $2.98 per share.

During Wednesday’s earnings call, chief executive Andrew Moor told investors Equitable had outpaced larger lenders when it came to total shareholder returns over the past decade.

“It certainly is nice to see us outperforming all the leaders on Wall Street and Canada’s largest banks on this important outcome for shareholders,” Moor said.

Moor said EQB’s strong year-to-date performance allowed it to increase its 12-month earnings growth guidance, including diluted EPS guidance, to a range of 18 to 22 per cent from the previous guidance of 10 to 15 per cent.

Adjusted revenue for the three months ended June 30 was up 72 per cent year-over-year to $284.6 million, led by lending growth, net interest margin expansion and higher non-interest revenue.

EQ Bank, the online-only offshoot of Equitable, also reported a 50 per cent year-over-year increase in adjusted net interest income to $251.7 million, exceeding analyst expectations. Its non-interest income of $33 million also significantly beat the street’s $26-million target, National Bank analyst Jaeme Gloyn wrote in a note to clients.

“The only real miss came from PCLs [provision for credit losses] of $13 million, or a PCL rate of 0.11 per cent, above the street (expectation) of 0.08 per cent and NBF PCL rate of 0.09 per cent,” Gloyn said.

EQ Bank said its customer base had grown to 367,790 at June 30 with a 133 per cent increase in sign-ups compared to the same quarter last year, while customer everyday engagement remained at a quarterly high of 51 per cent.

It said this strong gain in accounts is due to its Make Bank marketing campaign, the launch of the EQ Bank Card and the introduction of services in Quebec.

“Another thing that delights me is 543,000, the number of Canadians now relying on Canada’s challenger bank,” Moor said.

The CEO said the Bank of Canada’s recent interest rate increases, as well as the resulting slowdown in the housing market, reduced EQB’s single-family mortgage application volumes compared to prior periods.

At the same time, Moor said, loans are staying on the books for longer and renewals are stronger as more customers opt to remain in their homes.

“We expect high growth next year — a reasonable assumption given the housing market’s fundamentals fuelled by population growth, some pent-up demand caused by current housing market conditions and presumably by then, more stability in interest rates,” he said.

First National Financial Corp., which owns one of Canada’s largest non-bank mortgage originators and underwriters, also reported its second quarter results on Aug. 1.

First National reported a record $137.8 billion in mortgages under administration, an eight per cent increase compared to the previous year. Its revenue also increased 26 per cent to $525.9 million from $416.8 million a year ago.

CIBC analyst Nik Priebe said this strong headline earnings beat appears to be driven in large part by a significant step-up in mortgage servicing income.

“Second-quarter results exceeded our expectations which continue to be tempered by the ongoing impact of higher interest rates on real estate activity across Canada,” said First National chief executive Jason Ellis.

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