Laurentian Bank restructures operations, reporting a $117.5m net loss and adjusting strategies for future growth
Laurentian Bank of Canada has reported a net loss of $117.5m for the second quarter of 2024, a stark contrast to the net income of $49.3m recorded in the same quarter of 2023.
This loss amounts to $2.71 per diluted share, down from a profit of $1.11 per diluted share a year earlier. Revenue for the quarter totalled $252.6m, a slight decrease from $257.2m in 2023.
The bank's second-quarter results include impairment and restructuring charges of $196.8m, or $3.56 per share, related to the restructuring of its operations and impairment of the Personal and Commercial (P&C) Banking segment.
Adjusted net income was $40.5m, with adjusted diluted earnings per share at $0.90, compared to $51.7m and $1.16, respectively, in the previous year. Analysts had expected a profit of $0.88 per share.
Laurentian Bank's provision for credit losses increased to $17.9m, up from $16.2m in the same quarter last year. The bank's return on common shareholders' equity was a negative 18.6 percent for the second quarter of 2024, compared to 7.7 percent for the second quarter of 2023.
Adjusted return on common shareholders' equity was 6.1 percent, down from 8.1 percent a year ago.
For the six months ended April 30, the bank reported a net loss of $80.3m, with a diluted loss per share of $1.97. This compares to a net income of $101.2m and diluted earnings per share of $2.20 for the same period in 2023.
The six-month period also saw impairment and restructuring charges of $202.8m, or $3.66 per share. Adjusted net income for this period was $84.7m, with adjusted diluted earnings per share at $1.80, down from $106.0m and $2.31, respectively, in the previous year.
The adjusted return on common shareholders' equity was 6.1 percent, compared to 8.0 percent a year ago.
Éric Provost, president, and CEO, stated, “The Bank maintained a strong and prudent liquidity position and remains well capitalized in light of continuing macroeconomic headwinds.”
“This quarter, we further simplified our operations that demonstrates our conviction and ability to execute on our strategic plan, as we concentrate on our core strengths. We will also unveil our revamped strategic plan on May 31, which will position us for future growth as an even stronger Bank.”
In its revamped strategic plan, the bank recorded impairment and restructuring charges of $196.8m in the second quarter of 2024, affecting the bank's Common Equity Tier 1 (CET1) capital ratio, which decreased by 8 basis points.
The bank also identified potential impairment in its P&C Banking segment, resulting in an impairment charge of $155.9m.
Laurentian Bank has decided to suspend its advanced-internal ratings-based (AIRB) approach to credit risk project, leading to an impairment charge of $23.3m.
Additionally, the bank plans to reduce its leased corporate office premises in Toronto by two-thirds, recording charges of $13.2m in the second quarter of 2024.
Organizational changes continued as the bank simplified its structure, resulting in severance charges of $2.9m in the second quarter of 2024, with additional charges of approximately $7m expected in the third quarter.
Laurentian Bank also announced the sale of assets under administration of its retail full-service investment broker division to iA Private Wealth Inc., expected to close this summer.
The bank experienced key executive changes, including the departure of Kelsey Gunderson, executive vice president and head of Capital Markets, and the retirement of William Mason, executive vice president and chief risk officer.
As of April 30, Laurentian Bank's total assets were $48.4bn, a decrease from $49.9bn as of October 31, 2023. The bank's liquid assets amounted to $11.0bn, and loans and bankers' acceptances stood at $36.1bn. Deposits decreased to $24.6bn, while debt related to securitization activities increased to $13.2bn.
The bank's book value per common share was $56.82 as of April 30, and the CET1 capital ratio stood at 10.4 percent. The Board of Directors declared a quarterly dividend of $0.47 per common share, payable on August 1, to shareholders of record on July 2.
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