This won't help
Big increase in loan-loss provisions. Story from today's Globe and Mail:
Laurentian Bank of Canada is boosting its loan-loss provision to $80-million from $10-million and is launching a "strategic repositioning" of its loan book in the wake of BCE Inc. cutting off long-term funding for Teleglobe Inc.
Laurentian announced last night that its increased provision will apply to the second quarter ended today. The revised figure is equivalent to a charge of $1.83 a share, spokeswoman Nathalie Roberge said yesterday.
The charge could push Laurentian into the red in the second quarter. In the first quarter ended Jan. 31, the bank made a profit of $24.9-million or 91 cents a share.
The bank said it will use the additional provision to cover possible losses from its $39-million loan to Teleglobe -- representing its entire exposure to the money-losing long distance carrier -- the recent deterioration of some of its commercial loans and the strategic repositioning of its commercial and corporate lending activities.
Ms. Roberge said the bank is conducting the review of its commercial and corporate lending in an effort to determine whether it is facing losses on any other loans similar to Teleglobe.
"We don't want to have the same situation again," Ms. Roberge said.
The bank's commercial and corporate book accounts for 12 per cent of its total loan portfolio, which stood at $14.1-billion at the end of the first quarter. Laurentian is the seventh-largest Canadian chartered bank with assets just over $18-billion.
Laurentian made the announcement after the markets closed. Its shares closed at $33.81 on the Toronto Stock Exchange yesterday, up 21 cents.
It is the third domestic bank to boost its loan-loss provision for Teleglobe following BCE's announcement last week that it will no longer provide long-term funding for its money-losing subsidiary.
National Bank of Canada and Bank of Montreal made similar moves last week.
In reaction to Laurentian's "unexpected" announcement, Dominion Bond Rating Service Ltd. said it was placing the bank's debt ratings under review "with negative implications."
Toronto-based DBRS said in a release that Laurentian's announcement "adds uncertainty to the future business profile of the bank."