Laurentian Bank earns $35.13-million in Q2
Mr. Michel Lauzon reports
LAURENTIAN BANK REPORTS SECOND QUARTER EARNINGS AND INCREASES DIVIDEND BY $0.01 PER SHARE
Laurentian Bank of Canada had net income of $35.1-million or $1.10 diluted per share for the second quarter ended April 30, 2013, compared with $33.9-million or $1.22 diluted per share for the second quarter of 2012. Return on common shareholders' equity was 10.3% for the second quarter of 2013, compared with 12.0% for the same period in 2012. Excluding adjusting items1, net income was up 12% to $40.5 million or $1.29 diluted per share for the second quarter of 2013, compared to $36.3 million or $1.31 diluted per share for the same period in 2012. Adjusted return on common shareholders' equity was 12.1% for the second quarter of 2013, compared with 13.0% for the same period in 2012.
For the six months ended April 30, 2013, net income totalled $69.2 million or $2.22 diluted per share, compared with $64.8 million or $2.38 diluted per share in 2012. Return on common shareholders' equity was 10.3% for the six months ended April 30, 2013, compared with 11.8% for the same period in 2012. Excluding adjusting items, net income was up 17% to $81.0 million or $2.63 diluted per share for the six months ended April 30, 2013, compared with $69.2 million or $2.56 diluted per share for the same period in 2012. Adjusted return on common shareholders' equity was 12.2% for the six months ended April 30, 2013, compared with 12.7% for the same period in 2012.
Commenting on the Bank's financial results for the second quarter of 2013, Rejean Robitaille, President and Chief Executive Officer, mentioned: "We delivered solid revenue and earnings growth and again generated positive operating leverage. Our acquisitions and other growth strategies have contributed to expanding the Bank's revenue base over the past year, while the excellent credit quality of the loan portfolio and disciplined control over expenses also yielded good results. In the midst of slowing loan demand and compressed margins, we continue to focus on growing the more profitable segments of our portfolios and are particularly directing our attention toward the integration of our recently acquired businesses."
Mr. Robitaille concluded: "In this environment, we remain committed to enhancing value for our shareholders and we are working diligently to unlock the value in each of our business segments. I am therefore pleased to announce that the Board of Directors has approved an increase in our quarterly common share dividend of $0.01 to $0.50 per share."
1 The MRS Companies include the renamed B2B Bank Financial Services Inc., B2B Bank Securities Services Inc. and B2B Bank Intermediary Services Inc. (B2B Bank Dealer Services), as well as MRS Trust, which was amalgamated with B2B Trust (now B2B Bank) as of April 16, 2012.
Review of Business Highlights
Laurentian Bank's financial services boutiques were recently recognized by the Chain Store Age magazine's international Retail Store of the Year competition. The concept of financial services boutiques was developed by the Bank almost 10 years ago with the aim of improving client experience and satisfaction. These boutiques offer customers a warm and user-friendly environment and are based on the Bank's core values of proximity, accessibility and simplicity. Today, 40 branches deploy this concept, contributing to the 95% client satisfaction level.
With the CRM (client relationship management) system well entrenched in Retail operations, the Bank is now leveraging this tool. The CRM system was adapted to the SME sector and was recently rolled out to SME account managers. With this capability, SME clients will be better served and the Bank's strong growth in this sector will be perpetuated. The next step will be to further adapt the CRM system to the Real Estate and Commercial segment. This tool provides the Bank with a competitive advantage, particularly in the Quebec market.
The mutual fund distribution agreement with Mackenzie Financial Corporation entered its second year and continues to be a win/win partnership. The RRSP season demonstrated good momentum in mutual fund sales as clients are pleased with the fund offering. Year-to-date sales were more than 50% ahead of the level attained a year earlier and mutual funds, as at April 30, 2013, totalled $2.4 billion, an 18% increase from a year ago.
B2B Bank's focus on MRS has resulted in the integration being almost complete and on time and on budget. With B2B Bank having completed a satisfying RRSP campaign, achieving its RRSP volume objectives, it will now turn its attention to the AGF integration. Activities such as reviewing mortgage processes, credit reviews, program analysis and more are underway so as to gradually realize the expected synergies.
A hallmark of the client centric approach utilized in the Commercial and Real Estate segment relates to turn around time for loan approvals being among the best in the industry. A continuous review and streamlining of processes is resulting in improved efficiency for the segment and even faster and better service for the Bank's clients. This is evidenced by real estate loans and acceptances growing sequentially by 4% (excluding the sale of the $94.7 million real estate portfolio in the second quarter of 2013).
Laurentian Bank Securities' client focus is contributing to its good performance with all business lines ahead of last year, despite a very challenging environment. Execution remains strong and business development is ongoing. In particular, with its good pipeline of investment banking transactions, LBS is well positioned to take advantage of a market recovery.
In March of this year, Isabelle Courville assumed her role as Chairwoman of the Bank's Board of Directors. Ms. Courville has been a director of the Bank since 2007. An engineer and a lawyer by profession, she was, until recently, President of Hydro-Quebec Distribution. Her extensive knowledge of the Bank, combined with her impressive career accomplishments, make her an ideal candidate for the Chair's position.
Economic Outlook
In North America, the U.S. economic recovery has continued to gain traction, but there are still some signs of weakness coming mostly from the labour market and the public sector, still deleveraging. Consequently, monetary policy should remain highly stimulative. The outlook for Canada remains unchanged: the economic recovery has lost momentum and is still expected to remain modest owing to a smaller contribution to growth from the public sector and a declining housing market. In that respect, the Bank expects the slowdown in the housing market to continue throughout 2013 since there are still imbalances between supply and demand. However, fundamentals should support demand over time and prevent a sharp correction in prices. In addition, the transition from economic growth driven by households and governments to growth driven by the external sector and private investment could take longer than anticipated. Private investment decisions in some key sectors may be delayed because of less favourable conditions and falling commodity prices. This situation has not put significant downward pressure on the Canadian dollar which remains elevated and contributes to preventing exports from edging higher. That said, the Bank has slightly revised downwards its forecasts and now expects real GDP to grow only by 1.5% in 2013 and 2.2% in 2014.
All in all, in the current environment, interest rates will remain lower for longer. With inflation expected to reach the 2% target only by mid-2015, the Bank anticipates the overnight target rate to remain on hold until at least the end of 2014. By that point, economic growth should have re-accelerated and "some modest withdrawal of monetary stimulus" would become more appropriate.
2013 Financial Objectives
The following table presents management's financial objectives for 2013 and the Bank's performance to date. These financial objectives are based on the assumptions noted on page 37 of the Bank's 2012 Annual Report under the title "Key assumptions supporting the Bank's objectives" and exclude adjusting items1.
2013 FINANCIAL OBJECTIVES (1)
2013 objectives For the six months
ended April 30, 2013
Revenue growth > 5% 9%
Adjusted efficiency ratio (1) 72.5% to 69.5% 71.7%
Adjusted net income (in millions of dollars) (1) $145.0 to $165.0 $81.0
Adjusted return on common shareholder equity (1) 10.5% to 12.5% 12.2%
Common equity Tier I capital ratio -- all-in basis > 7.0% 7.6%
(1) Refer to the non-generally accepted accounting principles financial measures section.
Based on the results for the six months ended April 30, 2013 and current forecasts, management believes that the Bank is in line to meet its objectives as set out at the beginning of the year. Strong revenue growth stemming mainly from the AGF Trust acquisition, combined with a disciplined control of expenses and continued excellent credit quality have contributed to the overall good performance.
Analysis of Consolidated Results
CONSOLIDATED RESULTS
In thousands of Canadian dollars, except per share amounts (Unaudited)
For the three months ended For the six months ended
April 30, Jan. 31, April 30, April 30, April 30,
2013 2013 2012 2013 2012
Net interest income $ 140,430 $ 142,344 $ 128,324 $ 282,774 $ 258,953
Other income 74,420 71,570 70,346 145,990 133,461
Total revenue 214,850 213,914 198,670 428,764 392,414
Gain on acquisition and
amortization of
net premium on purchased
financial instruments (1,224) (1,056) - (2,280) -
Provision for loan losses 9,000 8,000 7,500 17,000 17,500
Non-interest expenses 159,853 161,314 147,111 321,167 290,131
Income before income taxes 44,773 43,544 44,059 88,317 84,783
Income taxes 9,634 9,454 10,196 19,088 19,958
Net income $ 35,139 $ 34,090 $ 33,863 $ 69,229 $ 64,825
Preferred share dividends,
including applicable taxes 4,059 2,533 3,165 6,592 6,331
Net income available
to common shareholders $ 31,080 $ 31,557 $ 30,698 $ 62,637 $ 58,494
Earnings per share
Basic $ 1.10 $ 1.12 $ 1.22 $ 2.22 $ 2.38
Diluted $ 1.10 $ 1.12 $ 1.22 $ 2.22 $ 2.38
Access to Quarterly Results Materials Interested investors, the media and others may review this press release, unaudited condensed interim consolidated financial statements, supplementary financial information and our report to shareholders which are posted on our web site at
www.laurentianbank.ca.
Conference Call
Laurentian Bank invites media representatives and the public to listen to the conference call with financial analysts to be held at 2:00 p.m. Eastern Time on Wednesday, June 5, 2013. The live, listen-only, toll-free, call-in number is 416 695-7806 or 1 888 789-9572 Code 5680517#.
You can listen to the call on a delayed basis at any time from 6:00 p.m. on Wednesday, June 5, 2013 until 11:59 p.m. on July 6, 2013, by dialing the following playback number: 905 694-9451 or 1 800 408-3053 Code 3255829#. The conference call can also be heard through the Investor Relations section of the Bank's Web site at
www.laurentianbank.ca. The Bank's Web site also offers additional financial information.
We seek Safe Harbor.