Mr. Eric Provost reports

LAURENTIAN BANK OF CANADA REPORTS 2023 RESULTS

Laurentian Bank of Canada had net income of $181.1-million and diluted earnings per share of $3.89 for the year ended Oct. 31, 2023, compared with $226.6-million and $4.95 for the year ended Oct. 31, 2022. Return on common shareholders' equity was 6.6 per cent for the year ended Oct. 31, 2023, compared with 8.9 per cent for the year ended Oct. 31, 2022. Adjusted net income was $208.3-million and adjusted diluted earnings per share were $4.52 for the year ended Oct. 31, 2023, compared with $237.1-million and $5.19 for the year ended Oct. 31, 2022. Of note, reported results for the year ended Oct. 31, 2023, included restructuring and strategic review-related charges of $24.1-million ($17.7-million after income taxes), or 41 cents per share. Adjusted return on common shareholders' equity was 7.7 per cent for the year ended Oct. 31, 2023, compared with 9.3 per cent for the same period a year ago.

For the fourth quarter of 2023, reported net income was $30.6-million and diluted earnings per share were 67 cents, compared with $55.7-million and $1.26 for the fourth quarter of 2022. Return on common shareholders' equity was 4.5 per cent for the fourth quarter of 2023, compared with 8.7 per cent for the fourth quarter of 2022. Of note, reported and adjusted results for the fourth quarter of 2023 included a negative pretax impact of $5.3-million ($3.9-million after income taxes), or nine cents per share, from the mainframe outage that occurred in September, 2023. Reported results for the fourth quarter of 2023 also included restructuring and strategic review-related charges of $15.9-million ($11.7-million after income taxes), or 27 cents per share. Adjusted net income was $44.7-million and adjusted diluted earnings per share were $1 for the fourth quarter of 2023, compared with $57.8-million and $1.31 for the fourth quarter of 2022. Adjusted return on common shareholders' equity was 6.6 per cent for the fourth quarter of 2023, compared with 9 per cent for the same period a year ago.

"Laurentian Bank is an integral part of our society and our place in this ecosystem is unwavering as we continue to support Canadian families, businesses and communities achieve their dreams," said Eric Provost, president and chief executive officer. "That's why we are taking steps today to streamline the bank and revamp our strategic plan to focus on serving our customers and ensuring that we remain a strong Quebec-based institution."

Driving efficiencies through simplification

In line with its priorities of becoming a simpler and more customer-centric organization, the bank began in December, 2023, to simplify its organizational structure. As a result, restructuring charges of an estimated $6.5-million (before income taxes) are expected to be incurred in the first quarter of 2024. The bank expects these actions will generate recurring cost savings of an approximate $8-million (before income taxes) on an annual basis.

Medium-term financial targets

In December, 2021, the bank announced its three-year strategic plan to drive sustainable, long-term profitable growth. These medium-term financial targets will be re-evaluated in 2024, as further detailed below.

2023 financial performance summary

In 2023, uncertain and challenging macroeconomic conditions affected the bank's ability to progress toward its medium-term financial targets. Net interest margin compression, volatile market conditions unfavourably impacting financial markets revenues and higher provisions for credit losses contributed to the lower financial results compared with fiscal 2022. Non-interest expenses also increased in 2023 due to inflationary pressures and investments in technology infrastructure and strategic priorities. Furthermore, the mainframe outage that occurred in September, 2023, had a negative pretax impact of $5.3-million, or nine cents per share, due to waived service fees and additional expenses to support remediation.

Ensuring the sustained success of the bank

On Oct. 2, 2023, the bank announced that Mr. Provost was appointed as president and chief executive officer. In the coming months, the leadership team will revamp its strategic plan to ensure the sustained success of Laurentian Bank. It will focus its efforts on renewing the trust of loyal customers while driving greater operational efficiency and refocusing the bank's core activities to create maximum value for its customers. As part of this review, the bank's medium-term financial objectives will be re-evaluated.

Consolidated results

Three months ended Oct. 31, 2023, financial performance

Net income was $30.6-million and diluted earnings per share were 67 cents for the fourth quarter of 2023, compared with $55.7-million and $1.26 for the fourth quarter of 2022. Of note, reported and adjusted results for the fourth quarter of 2023 included a negative pretax impact of $5.3-million ($3.9-million after income taxes), or nine cents per share, from the mainframe outage that occurred in September, 2023. Reported results for the fourth quarter of 2023 also included restructuring and strategic-review related charges of $15.9-million ($11.7-million after income taxes), or 27 cents per share. Adjusted net income was $44.7-million and adjusted diluted earnings per share were $1 for the fourth quarter of 2023, compared with $57.8-million and $1.31 for the fourth quarter of 2022.

Total revenue

Total revenue decreased by $9.7-million to $247.4-million for the fourth quarter of 2023, compared with $257.1-million for the fourth quarter of 2022.

Net interest income decreased by $0.9-million to $182.9-million for the fourth quarter of 2023, compared with $183.8-million for the fourth quarter of 2022. The decrease was mainly due to higher liquidity levels and financing costs, partly offset by higher interest income from commercial loans. The net interest margin was 1.76 per cent for the fourth quarter of 2023, a decrease of one basis point compared with the fourth quarter of 2022 for the same reasons.

Other income decreased by $8.8-million or 12 per cent to $64.5-million for the fourth quarter of 2023, compared with $73.3-million for the fourth quarter of 2022. Unfavourable market conditions impacted financial markets-related revenue in the fourth quarter of 2023, especially fees and securities brokerage commissions and income from mutual funds. Of note, monthly service fees for the months of September and October, 2023, totalling $2.3-million were waived following the mainframe outage that occurred in September, 2023.

Provision for credit losses

The provision for credit losses was $16.7-million for the fourth quarter of 2023 compared with $17.8-million for the fourth quarter of 2022, an improvement of $1.2-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 18 basis points for the quarter, compared with 19 basis points for the same quarter a year ago.

Non-interest expenses

Non-interest expenses amounted to $197.3-million for the fourth quarter of 2023, an increase of $23.1-million compared with the fourth quarter of 2022. In the fourth quarter of 2023, non-interest expenses included restructuring and strategic review-related charges of $15.9-million. Adjusted non-interest expenses increased by $6.9-million or 4 per cent to $178.1-million for the fourth quarter of 2023, compared with $171.2-million for the fourth quarter of 2022.

Salaries and employee benefits amounted to $88.3-million for the fourth quarter of 2023, a decrease of $1.3-million compared with the fourth 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 and to continue the bank's focus on improving the customer experience. Salaries and employee benefits for the fourth quarter of 2023 also included $500,000 of additional expenses to support remediation efforts following the mainframe outage that occurred in September, 2023.

Premises and technology costs were $51.8-million for the fourth quarter of 2023, an increase of $4.8-million compared with the fourth 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 recently completed projects.

Other non-interest expenses were $41.3-million for the fourth quarter of 2023, an increase of $3.5-million compared with the fourth quarter of 2022 mainly resulting from higher advertising, business development and travel expenses. Other non-interest expenses for the fourth quarter of 2023 also included $2.5-million of professional fees and other expenses related to the mainframe outage that occurred in September, 2023.

Impairment and restructuring charges were $15.9-million for the fourth quarter of 2023, compared with negative $200,000 for the fourth quarter of 2022. In the fourth quarter of 2023, this line-item included restructuring charges of $12.5-million resulting from changes in the bank's management structure, as well as strategic review-related charges of $3.4-million resulting from the bank's review of strategic options aimed at maximizing shareholder and stakeholder value. In the fourth quarter of 2022, this line-item included net charges mainly related to lease contracts following the completion of the reduction of leased corporate office premises, as well as to other updates to estimates initially recorded in the prior year.

Efficiency ratio

The efficiency ratio on a reported basis was 79.7 per cent for the fourth quarter of 2023, compared with 67.7 per cent for the fourth quarter of 2022. The increase year-over-year is mainly due to the restructuring and strategic review-related charges incurred in the fourth quarter of 2023. The adjusted efficiency ratio was 72 per cent for the fourth quarter of 2023, compared with 66.6 per cent for the fourth quarter of 2022 mainly as a result of investments in strategic priorities and due to the combined $5.3-million negative impact of the mainframe outage on other revenues and non-interest expenses, as further detailed above.

Income taxes

For the fourth quarter of 2023, the income tax expense was $2.9-million, and the effective income tax rate was 8.6 per cent, compared with an income tax expense of $9.5-million, and an effective income tax rate of 14.6 per cent for the fourth quarter of 2022. For both quarters, the lower effective income tax rate compared with the statutory income tax rate was mainly attributed to the lower taxation level of income from foreign operations. The lower effective income tax rate for the fourth quarter of 2023 compared with the fourth quarter of 2022 mainly resulted from the higher proportion of income from foreign operations.

Three months ended Oct. 31, 2023, compared with three months ended July 31, 2023

Net income was $30.6-million and diluted earnings per share were 67 cents for the fourth quarter of 2023, compared with $49.3-million and $1.03 for the third quarter of 2023. Of note, reported and adjusted results for the fourth quarter of 2023 included a negative pre-tax impact of $5.3-million ($3.9-million after income taxes), or nine per share, from the mainframe outage that occurred in September, 2023. Reported results for the fourth quarter of 2023 also included restructuring and strategic-review related charges of $15.9-million ($11.7-million after income taxes), or 27 cents per share. Adjusted net income was $44.7-million and adjusted diluted earnings per share were $1 for the fourth quarter of 2023, compared with $57.6-million and $1.22 for the third quarter of 2023.

Total revenue decreased by $13.4-million to $247.4-million for the fourth quarter of 2023 compared with $260.8-million for the previous quarter.

Net interest income decreased by $9.2-million sequentially to $182.9-million. The decrease was mainly due to lower interest income from commercial loans and higher liquidity levels. Net interest margin was 1.76 per cent for the fourth quarter of 2023, a decrease of eight basis points compared with 1.84 per cent for the third quarter of 2023 mainly for the same reasons.

Other income amounted to $64.5-million for the fourth quarter of 2023, a decrease of $4.2-million compared with $68.7-million for the previous quarter. Of note, monthly service fees for the months of September and October, 2023, totalling approximately $2.3-million were waived following the mainframe outage that occurred in September, 2023. Unfavourable market conditions also impacted financial markets related revenue in the fourth quarter of 2023, especially income from financial instruments and income from mutual funds.

The provision for credit losses was $16.7-million for the fourth quarter of 2023, an increase of $3.3-million compared with $13.3-million for the third quarter of 2023, mainly reflecting higher provisions on impaired loans.

Non-interest expenses increased by $7.2-million to $197.3-million for the fourth quarter of 2023 from $190.1-million in the third quarter of 2023. In the fourth quarter of 2023, non-interest expenses included restructuring and strategic-review related charges of $15.9-million compared with $8.2-million for the previous quarter. Non-interest expenses for the fourth quarter of 2023 also included $3-million of additional expenses to support remediation following the mainframe outage that occurred in September, 2023. Adjusted non-interest expenses decreased by $500,000 to $178.1-million in the fourth quarter of 2023 mainly due to sequentially lower performance-based compensation, partly offset by higher professional fees, advertising and other expenses.

Financial condition

As at Oct. 31, 2023, total assets amounted to $49.9-billion, a 2-per-cent decrease compared with $50.7-billion as at Oct. 31, 2022.

Liquid assets

As at Oct. 31, 2023, liquid assets as presented on the balance sheet amounted to $11.4-billion, a decrease 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 23 per cent of total assets as at Oct. 31, 2023, in line with Oct. 31, 2022.

Loans

Loans and bankers' acceptances, net of allowances, stood at $36.9-billion as at Oct. 31, 2023, a decrease of $500-million since Oct. 31, 2022. In 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 Oct. 31, 2023, a decrease of $400-million or 2 per cent since Oct. 31, 2022. The decrease resulted mainly from lower inventory financing volumes and other commercial loans. Personal loans of $2.6-billion as at Oct. 31, 2023, decreased by $700-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 $16.7-billion as at Oct. 31, 2023, increased by $600-million or 3 per cent from Oct. 31, 2022.

Deposits

Deposits decreased by $1.1-billion to $26-billion as at Oct. 31, 2023, compared with $27.1-billion as at Oct. 31, 2022. Personal deposits stood at $22.3-billion as at Oct. 31, 2023, an increase of $100-million compared with $22.2-billion as at Oct. 31, 2022. Of note, personal deposits sourced through the retail channel increased by $200-million or 3 per cent compared with Oct. 31, 2022. Personal notice and demand deposits from partnerships were mainly unchanged since Oct. 31, 2022, and deposits from advisers and brokers decreased by $300-million. Personal deposits represented 86 per cent of total deposits as at Oct. 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 $1.2-billion over the same period to $3.7-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 $700-million or 5 per cent compared with Oct. 31, 2022, and stood at $12.9-billion as at Oct. 31, 2023. During 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 $2.9-billion as at Oct. 31, 2023, and increased by $77.7-million compared with Oct. 31, 2022. Retained earnings increased by $84.1-million compared with Oct. 31, 2022, mainly as a result of the net income contribution of $181.1-million, partly offset by dividends.

The bank's book value per common share was $59.96 as at Oct. 31, 2023, compared with $58.02 as at Oct. 31, 2022.

The common equity Tier 1 (CET1) capital ratio was 9.9 per cent as at Oct. 31, 2023, in excess of the minimum regulatory requirement and the bank's target management levels. The CET1 capital ratio increased by eight basis points compared with Oct. 31, 2022, due to the risk-weighted assets reduction and internal capital generation. The bank met OSFI's (Office of the Superintendent of Financial Institutions) capital and leverage requirements throughout the year.

On Dec. 6, 2023, the board of directors declared a quarterly dividend of 47 cents per common share, payable on Feb. 1, 2024, to shareholders of record on Jan. 3, 2024. 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 of Canada invites media representatives and the public to listen to the conference call to be held at 9 a.m. (ET) on Dec. 7, 2023. The live, listen-only, toll-free, call-in number is 1-888-664-6392, code 71576346. A live webcast will also be available on the bank'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 Dec. 7, 2023, until 12 p.m. (ET) on Feb. 7, 2024, 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 can it 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 $49.9-billion in balance sheet assets and $25.8-billion in assets under administration.

We seek Safe Harbor.