Laurentian Bank is a leading Canadian bank that offers its clients a wide range of advice-based solutions and services. It is a leading diversified financial services company.

The bank offers a wide variety of services to its clients, ranging from commercial and personal banking to equipment, inventory and real estate financing to advisory services. The bank is also reorganizing its commercial and personal banking into two operating units.

Laurentian Bank is aimed at business, private and institutional clients. The bank has the largest presence in Quebec (43% of the loans) and Ontario (33%). It has Pan-Canadian activities and a growing presence in the US (5%). Quebec is their home market and the bank also has a decent presence in the Atlantic provinces (2%).

Laurentian Bank operates across Canada through its Quebec-based branch network and specialized teams. The bank operates through Laurentian Bank (business and retail services), B2B Bank and Laurentian Bank Securities. The company provides equipment and inventory financing through its subsidiaries LBC Capital and Northpoint Commercial Finance.

In aggregate, the group had total assets of more than $ 44 billion and assets under management of ~ $ 31 billion.

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Plant data

Sales growth & market presence

Laurentian Bank is a leading player in various market segments including retail, corporate, financial services, securities and capital markets. It is the seventh largest Canadian bank. In addition, Laurentian Bank Securities offers integrated brokerage services to both institutional and retail clients.

As a diversified financial services provider, the bank is well positioned to take advantage of opportunities in a developing market. Laurentian has completed the migration of all B2B banking products and loans to the core banking system. In addition, the conversion of the traditional branch network to a 100% advisory model was completed.

With 175 years of banking experience, Laurentian Bank is trusted for their quality services, prudent management and good corporate governance. Laurentian Bank is evolving its loan portfolio mix to include a larger proportion of higher margin commercial loans into the group (currently rising to 40% from 27% in 2015) while home loans account for ~ 48%.

The bank is also expanding its geographic presence in the US, with the country now making up 5% of the mix (from zero in 2015). Laurentian Bank is making progress in rolling out its digital platform and increasing revenue from its commercial loan portfolio.

The pandemic had a negative impact on Laurentian Bank’s performance. However, in the last quarter the bank recorded a strong performance on the capital markets, low risk provisioning and a healthy liquidity position.

Dividends

Laurentian Bank has increased its dividend growth by 4% over the past decade. The bank has a solid history of paying rising dividends. It has an attractive return of over 3.6% and a payout ratio of 43%. The company cut its quarterly dividend by 40% last year.

With a long history in the banking industry, Laurentian Bank is better able to respond to changes in customer behavior influenced by technological changes and the globalization of banking. Transformation processes such as the implementation of the core banking system, the development of digital solutions and the adoption of the AIRB approach are intended to further strengthen the financial foundation of the bank.

The bank’s focus on increasing efficiency through measures such as converting traditional branches to a 100% advisory model, optimizing certain back-office functions and merging branches has resulted in significant savings.

Laurentian Bank has a good track record with strong credit quality and access to well diversified and stable funding sources. Common Equity Tier 1 capital improved 10.1% in the most recent quarter, driven by internal capital generation and a reduction in risk-weighted assets. Laurentian Bank also has a large Pan-Canadian and targeted US presence.

The increased customer focus, the expansion of its geographic presence and the trend towards higher-margin commercial loans have positioned Laurentian Bank for profitable growth in the future. In-depth knowledge of the Canadian banking sector and deep and long-term customer relationships combined with the Group’s leadership position are important advantages in the years of transformation.

The bank expects improved technology and processes to drive future growth in customer loans and deposits.

Laurentian Bank (LB) historic return
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competition

The financial services market is highly competitive and Laurentian Bank’s performance is influenced by the level of competition in all different market segments.

Canadian Western Bank, National Bank, and VersaBank are major competitors of Laurentian Banks. The National Bank is the leading bank based in Quebec and is one of the six largest commercial banks in Canada.

VersaBank is a leading chartered bank in Canada, while Canadian Western Bank is known for providing specialized corporate advisory and financial services, as well as personal banking and wealth management services.

In addition, Laurentian Bank also suffers from competition from non-financial institutions that offer banking products and services through electronic and internet-based financial solutions.

Bottom line

Laurentian Bank should benefit from its large presence in the Quebec market, which is expected to see momentum in the housing and labor markets. Laurentian Bank continues to improve its cost discipline to improve its overall efficiency.

The bank is well positioned to benefit from a strong and diversified commercial loan portfolio and a high quality residential mortgage portfolio. Strong credit quality, a solid balance sheet, and a rigorous underwriting process all help to position them well for the future.

LB vs. TSX vs. SP500 2021
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Laurentian Bank (LB) Historic Pe
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