Stephen Takacsy - BNN - TOP PICK LAURENTIAN BANK (LB TSX)
Laurentian Bank is Canada’s ninth biggest bank with $50 billion in assets and has announced that it is looking to maximize shareholder value which means it has put itself up for sale. Since banks don’t come around for sale very often this is a unique opportunity for competitors to gain market share, particularly in Quebec. Also, LB had unionized employees, but the union was de-certified in 2021, making it a more attractive acquisition today. It should be easy for any of the traditional banks to improve LB’s return on equity by cutting corporate overhead and lowering funding costs, and we doubt the regulators would object. We see TD, Scotia, CIBC, National Bank, and Desjardins as the likeliest suitors, as well as outliers like Power Corp/Wealth Simple and possibly a U.S. bank, as Royal is busy acquiring HSBC Canada and BMO is still digesting Bank of the West. Note that LB’s CEO Rania Llewellyn was at Scotia for 26 years. LB’s Book Value is around $60 versus $43 where it is trading today. We think that a realistic price is in the $54 to $60 range, so we see 25 per cent to 40 per cent upside. Dividend yield is 5.5 per cent (payout ratio of 40 per cent) so you get well paid while you wait for the sales process to play out.
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$43.650
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