Profits and revenues down at Laurentian

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In the midst of a turnaround that began in 2016, Laurentian Bank considers itself on the path of growth, despite results below expectations in the third quarter, where profits and sales declined.

Julien Arsenault
The Canadian Press

The seventh largest bank in the country on Thursday unveiled a net profit of $ 47.8 million, or $ 1.05 per share, while its net profits were $ 54.9 million, or $ 1.23 per share, at the same period a year ago.

For the quarter ended July 31, Laurentian recorded adjustments totaling $ 5.6 million, including a restructuring charge of $ 1.8 million related to the reduction in its workforce, while the provision for credit losses more than doubled , at 12.1 million.

Revenues were also down 6% to $ 244.7 million, primarily due to lower loan volumes and lower capital markets activity.

However, Laurentian President and Chief Executive Officer François Desjardins was rather optimistic during a conference call with analysts about the branch's offer of consulting services.

"Even though the bank has not been present outside Quebec in the retail business since 2003, our brand awareness throughout the country is high and we expect to attract new customers, young and old." , he said.

Mr. Desjardins also explained that Laurentian will also roll out new products online, without going into details.

While Gabriel Dechaine of National Bank Financial noted the financial institution's enthusiasm, the analyst indicated in a note that he was not yet convinced by the turnaround.

"While Laurentian had problems with irregularities in its mortgage portfolio at the end of 2017 and was in a difficult period of negotiation with its unionized employees, its core business has suffered," he said. highlighted.

Mr. Dechaine recalled that since the end of fiscal 2017, the size of the bank's loan portfolio has declined by 8% and banking revenues have declined for six consecutive quarters on an annualized basis.

Last March, some 1,200 union members in Laurentian whose collective agreement had expired more than a year ago accepted about 81% of the final employer offer to renew their employment contracts.

Now about one in four Laurentian employees is unionized, up from 51% a little less than four years ago.

Excluding non-recurring items, the bank generated adjusted earnings of $ 51.9 million, or $ 1.15 per share, in the third quarter, compared to $ 59.4 million, or $ 1.34 per share. a year ago.

This was under analysts' expectations, which had a profit per share of $ 1.16 and revenues of $ 251 million, according to the data firm on financial markets Refinitiv.

"There are signs of stabilization which, over time, should lead to some stabilization of the earnings trajectory," said Robert Sedran of CIBC World Markets in a report.

For example, the net interest margin was 1.85% in the third quarter, up eight percentage points from a year ago. Non-interest expense was also down 5% to 177.9 million.

However, the efficiency ratio – an indicator that measures bank performance – was 70.6%, up 0.9 percentage points.

On the Toronto Stock Exchange, Laurentian shares retreated 28 cents, or 0.63%, to close at $ 44.13.



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