Post by
perplexed01 on Dec 07, 2023 9:58am
cibc analyst:Target 12-18 mo $35.00 (was $37 9/14)
FQ4 First Look: Messy Quarter; Adjusted EPS Miss
Our take: Negative.Laurentian Bank’s FQ4 results missed estimates by 6%, driven by lower-than-expected NII and non-interest revenues. Expenses came in better than expected but operating leverage was still negative in the quarter. The bank incurred $15.9MM in charges related to restructuring, a technology outage and the strategic review.
Overview of results: Adjusted EPS came in at $1.00; we adjust for $5.3MM associated with the mainframe outage that occurred in the quarter and arrive at $1.09. The results are below consensus of $1.16 and our estimate of $1.20. PTPP was $74.6MM, below our estimate of $81.6MM. Adjusted ROE came in at 6.6%. BVPS of $59.96 was up 1.1% from last quarter.
Sources of variance: Relative to our estimate, negative sources of variance include lower NII (-$0.18/sh) and lower fee-based income (-$0.14/sh), which was slightly offset by lower non-interest expenses (+$0.17/sh).
NIM compression drives miss: Core NII came in at $182.9MM, down 4.8% from last quarter and below our estimate of $192.1MM. Consolidated NIM came in at 1.76%, down 7bps from last quarter and worse than our estimate of 1.84%.
No help from non-interest income: Capital markets related revenue came in at $14.5MM, down 10% Q/Q and below our estimate of $18.2MM. Feebased income of $40.7MM was also well below our estimate of $47.9MM.
Better expenses; still negative operating leverage: Total expenses were up 1.0% Y/Y. We estimate operating leverage of negative 4.7%. The bank incurred one-time charges for restructuring and strategic review charges of $15.9MM pre-tax in FQ4 and $5.3MM related to the mainframe outage. LB announced that it had reduced its workforce by 2%.
Loan growth flat, personal loans down: Total gross loans and acceptances ended the quarter at $37.1B, up 0.3% Q/Q. Personal loans were down 6.0% in the quarter while residential mortgages offset this with 1.6% growth. Commercial loan growth was flat.
Demand deposit attrition continues: Total deposits were down 1.1% Q/Q, worsening from -0.8% in FQ3. Total demand deposit growth was -5.1% versus -6.0% in Q3. Term deposit growth was +1.0% Q/Q, versus +2.2% in FQ3.
PCLs lower than expected: Total PCLs came in at $16.7MM, lower than our estimate of $17.6MM but higher than FQ3 of $13.3MM. Performing provisions decreased $0.8MM and impaired provisions increased $4.1MM
Solid capital position: Reported CET1 came in at 9.9%, up from 9.8% last quarter.
Price Target Calculation
We derive our $35 price target by applying a 7.2x PE multiple to our F2024 EPS estimate of $4.80. The multiple implies a 20% discount to the bank’s historical multiple, given the higher sensitivity to recessionary risks.