Ms. Rania Llewellyn reports

LAURENTIAN BANK OF CANADA REPORTS THIRD QUARTER 2023 RESULTS

Laurentian Bank of Canada had net income of $49.3-million and diluted earnings per share of $1.03 for the third quarter of 2023, compared with $55.9-million and $1.18 for the third quarter of 2022. Return on common shareholders' equity was 6.9 per cent for the third quarter of 2023, compared with 8.4 per cent for the third quarter of 2022. Adjusted net income was $57.6-million and adjusted diluted earnings per share were $1.22 for the third quarter of 2023, compared with $58.2-million and $1.24 for the third quarter of 2022. Adjusted return on common shareholders' equity was 8.2 per cent for the third quarter of 2023, compared with 8.7 per cent for the same period a year ago.

For the nine months ended July 31, 2023, reported net income was $150.5-million and diluted earnings per share were $3.22, compared with $170.9-million and $3.69 for the nine months ended July 31, 2022. Return on common shareholders' equity was 7.4 per cent for the nine months ended July 31, 2023, compared with 8.9 per cent for the nine months ended July 31, 2022. Adjusted net income was $163.6-million and adjusted diluted earnings per share were $3.53 for the nine months ended July 31, 2023, compared with $179.2-million and $3.88 for the nine months ended July 31, 2022. Adjusted return on common shareholders' equity was 8.0 per cent for the nine months ended July 31, 2023, compared with 9.4 per cent for the same period a year ago.

"We announced solid results this quarter, and I am extremely pleased with the progress we continue to make on our fiscal year 2023 priorities, in particular, our continued focus on enhancing the customer experience," said Rania Llewellyn, president and chief executive officer.

Consolidated results

Three months ended July 31, 2023, financial performance

Net income was $49.3-million and diluted earnings per share were $1.03 for the third quarter of 2023, compared with $55.9-million and $1.18 for the third quarter of 2022. Of note, reported results for the third quarter of 2023 included restructuring and strategic review-related charges of $8.2-million ($6-million after income taxes), or 14 cents per share. Adjusted net income was $57.6-million and adjusted diluted earnings per share were $1.22 for the third quarter of 2023, compared with $58.2-million and $1.24 for the third quarter of 2022.

Total revenue

Total revenue was $260.8-million for the third quarter of 2023 mainly unchanged compared with the third quarter of 2022.

Net interest income increased by $3.6-million or 2 per cent to $192.1-million for the third quarter of 2023, compared with $188.5-million for the third quarter of 2022. The increase was due to higher interest income from commercial loans, partly offset by higher financing costs and lower mortgage prepayment penalties. The net interest margin was 1.84 per cent for the third quarter of 2023, an increase of one basis point compared with the third quarter of 2022, mainly due to favourable changes in the bank's business mix, partly offset by higher financing costs as a result of the rising interest rate environment.

Other income decreased by $2.7-million or 4 per cent to $68.7-million for the third quarter of 2023, compared with $71.4-million for the third quarter of 2022. Unfavourable market conditions impacted financial markets-related revenue in the third quarter of 2023, including income from financial instruments, fees and securities brokerage commissions, and income from mutual funds.

Provision for credit losses

The provision for credit losses was $13.3-million for the third quarter of 2023, compared with $16.6-million for the third quarter of 2022, an improvement of $3.3-million reflecting lower provisions on performing loans due to volume reduction and credit migration, partly offset by higher provisions on impaired loans. The provision for credit losses as a percentage of average loans and acceptances was 14 basis points for the quarter, compared with 18 basis points for the same quarter a year ago.

Non-interest expenses

Non-interest expenses amounted to $190.1-million for the third quarter of 2023, an increase of $12.6-million compared with the third quarter of 2022. In the third quarter of 2023, non-interest expenses included restructuring and strategic review-related charges of $8.2-million. Adjusted non-interest expenses increased by $4.3-million or 2 per cent to $178.7-million for the third quarter of 2023, compared with $174.4-million for the third quarter of 2022.

Salaries and employee benefits amounted to $98.6-million for the third quarter of 2023, a decrease of $1.4-million compared with the third quarter of 2022, mostly due to lower performance-based compensation. This was partly offset by salary increases and talent acquisition to invest in strategic priorities, improve the customer experience and support growth.

Premises and technology costs were $49.2-million for the third quarter of 2023, an increase of $5-million compared with the third quarter of 2022. The increase year-over-year is mainly due to higher technology costs as the bank is investing in its infrastructure and strategic priorities, as well as increased amortization charges resulting from new projects.

Other non-interest expenses were $34-million for the third quarter of 2023, an increase of $800,000 compared with the third quarter of 2022 mainly resulting from higher advertising, business development and travel expenses.

Impairment and restructuring charges were $8.2-million for the third quarter of 2023, compared with nil for the third quarter of 2022. In the third quarter of 2023, this line item included restructuring charges of $5.5-million resulting from the rightsizing of the bank's capital markets franchise, as well as charges of $2.7-million resulting from the bank's review of strategic options to maximize shareholder and stakeholder value.

Efficiency ratio

The efficiency ratio on a reported basis was 72.9 per cent for the third quarter of 2023, compared with 68.3 per cent for the third quarter of 2022. The increase year-over-year is mainly due to the restructuring and strategic review-related charges incurred in the third quarter of 2023. The adjusted efficiency ratio was 68.5 per cent for the third quarter of 2023, compared with 67.1 per cent for the third quarter of 2022 mainly as a result of investments in strategic priorities.

Income taxes

For the third quarter of 2023, income taxes were $8.2-million, and the effective tax rate was 14.2 per cent. The lower effective tax rate, compared with the statutory rate, is attributed to a lower taxation level of income from foreign operations, as well as from the favourable effect of the interest paid semi-annually on the limited recourse capital notes. For the third quarter of 2022, the income tax expense was $10-million, and the effective tax rate was 15.2 per cent. The lower effective tax rate, compared with the statutory rate, is attributed to a lower taxation level of income from foreign operations, as well as from the favourable effect of holding investments in Canadian securities that generate non-taxable dividend income and of the interest paid semi-annually on the limited recourse capital notes.

Financial condition

As at July 31, 2023, total assets amounted to $50.6-billion, relatively in line with $50.7-billion as at Oct. 31, 2022.

Liquid assets

As at July 31, 2023, liquid assets amounted to $12.2-billion, an increase of $400-million compared with $11.8-billion as at Oct. 31, 2022.

The bank continues to prudently manage its level of liquid assets. The bank's financing sources remain well diversified and sufficient to meet all liquidity requirements. Liquid assets represented 24 per cent of total assets as at July 31, 2023, compared with 23 per cent as at Oct. 31, 2022.

Loans

Loans and bankers' acceptances, net of allowances, stood at $36.7-billion as at July 31, 2023, a decrease of $600-million since Oct. 31, 2022. During the first nine months of 2023, the decrease in personal and commercial loans was partly offset by an increase in residential mortgage loans. Commercial loans and acceptances amounted to $17.8-billion as at July 31, 2023, a decrease of $400-million or 2 per cent since Oct. 31, 2022. The decrease resulted mainly from a seasonal reduction in inventory financing volumes. Personal loans of $2.7-billion as at July 31, 2023, decreased by $500-million from Oct. 31, 2022, mainly as a result of a decline in the investment loan portfolio driven by volatile market conditions. Residential mortgage loans of $16.4-billion as at July 31, 2023, increased by $300-million or 2 per cent from Oct. 31, 2022.

Deposits

Deposits decreased by $800-million to $26.3-billion as at July 31, 2023, compared with $27.1-billion as at Oct. 31, 2022, relatively in line with the reduction in loans.

Personal deposits stood at $22.4-billion as at July 31, 2023, an increase of $200-million compared with $22.2-billion as at Oct. 31, 2022. Of note, personal deposits sourced through the retail channel increased by $300-million or 4 per cent compared with Oct. 31, 2022. Personal notice and demand deposits from partnerships also increased by $300-million or 9 per cent since Oct. 31, 2022, and deposits from advisers and brokers decreased by $300-million. Personal deposits represented 85 per cent of total deposits as at July 31, 2023, compared with 82 per cent as at Oct. 31, 2022, and contributed to the bank's sound liquidity position. Business and other deposits decreased by $1-billion over the same period to $3.9-billion, partly offset by an increase in cost-effective long-term debt related to securitization activities, as detailed below.

Debt related to securitization activities

Debt related to securitization activities increased by $400-million or 3 per cent compared with Oct. 31, 2022, and stood at $12.6-billion as at July 31, 2023. Since the beginning of the year, new issuances of cost-effective long-term debt related to securitization activities more than offset maturities of liabilities, as well as normal repayments.

Shareholders' equity and regulatory capital

Shareholders' equity stood at $2.8-billion as at July 31, 2023, and increased by $40.3-million compared with Oct. 31, 2022. Retained earnings increased by $75.7-million compared with Oct. 31, 2022, mainly as a result of the net income contribution of $150.5-million, partly offset by dividends. For additional information, please refer to the capital management section of the bank's management discussion and analysis and to the consolidated statement of changes in shareholders' equity for the period ended July 31, 2023.

The bank's book value per common share was $59.30 as at July 31, 2023, compared with $58.02 as at Oct. 31, 2022.

The CET1 (common equity Tier 1) capital ratio was 9.8 per cent as at July 31, 2023, in excess of the minimum regulatory requirement and the bank's target management levels. The CET1 capital ratio increased by 70 basis points compared with Oct. 31, 2022, due to internal capital generation and the seasonal inventory financing loan reduction. The bank met OSFI's (Office of the Superintendent of Financial Institutions) capital and leverage requirements throughout the quarter.

On Aug. 30, 2023, the board of directors declared a quarterly dividend of 47 cents per common share, payable on Nov. 1, 2023, to shareholders of record on Oct. 2, 2023. This quarterly dividend is equal to the dividend declared in the previous quarter and is 4 per cent higher compared with the dividend declared in the previous year. The board also determined that shares attributed under the bank's shareholder dividend reinvestment and share purchase plan will be made in common shares issued from corporate treasury with a 2-per-cent discount.

Access to quarterly results materials

This press release can be found on the bank's website, under the press room tab, and the bank's report to shareholders, investor presentation and supplementary financial information under the investor centre tab, financial results.

Conference call

Laurentian Bank invites media representatives and the public to listen to the conference call to be held at 9 a.m. (ET) on Aug. 31, 2023. The live, listen-only, toll-free, call-in number is 1-888-664-6392, code 72396970. A live webcast will also be available on the group's website under the investor centre tab, financial results.

The conference call playback will be available on a delayed basis from 12 p.m. (ET) on Aug. 31, 2023, until 12 p.m. (ET) on Oct. 1, 2023, on the bank's website under the investor centre tab, financial results.

The presentation material referenced during the call will be available on the bank's website under the investor centre tab, financial results.

About Laurentian Bank of Canada

Laurentian Bank believes it can change banking for the better. By seeing beyond numbers.

Founded in Montreal in 1846, Laurentian Bank helps families, businesses and communities thrive. Today, it has approximately 3,000 employees working together as one team, to provide a broad range of financial services and advice-based solutions for customers across Canada and the United States. The bank protects, manages and grows $50.6-billion in balance sheet assets and $27.4-billion in assets under administration.

We seek Safe Harbor.