LAURENTIAN BANK INCREASES ITS DIVIDEND ON THE STRENGTH OF RECORD 2010
EARNINGS
MONTREAL, Dec. 8 /CNW Telbec/ -
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Laurentian Bank of Canada's audited Consolidated Financial Statements for
the year ended October 31, 2010, and accompanying Management's Discussion
and Analysis (MD&A) are available at www.laurentianbank.ca.
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2010 highlights Highlights of the fourth quarter 2010
- Record net income, up 9% to - Common share dividend increase of
$122.9 million $0.03 to $0.39
- Income from continuing - Net income of $32.5 million
operations up 21% - Return on common shareholders'
- Total revenue up 11% to equity of 11.8%
$737.4 million - Total revenue of $190.1 million
- Return on common shareholders' - Continued solid growth in all
equity of 11.5% business segments
- Strong loan growth at 12% - Sequentially stronger capital ratios
For the year ended October 31, 2010, Laurentian Bank reported net income of $122.9 million or diluted earnings of $4.63 per share, compared with net income of $113.1 million or diluted earnings of $4.23 per share in 2009. Return on common shareholders' equity was 11.5% in 2010, compared to 11.4% in 2009. Income from continuing operations for the year ended October 31, 2009 was $101.7 million or $3.75 diluted per share, with a return on common shareholders' equity of 10.1%. The 21% increase in continuing operations earnings over last year reflects the strong growth in mortgage loans and commercial loans, as well as a solid contribution from each business segment.
Net income was $32.5 million, or $1.24 diluted per share, for the fourth quarter ended October 31, 2010, compared with $38.2 million, or $1.47 diluted per share, for the fourth quarter of 2009. Return on common shareholders' equity was 11.8% for the fourth quarter of 2010, compared to 15.3% for the fourth quarter of 2009. Net income for the fourth quarter of 2009 included income from discontinued operations of $11.5 million ($0.48 diluted per share) related to the sale of asset management activities in fiscal 2005. Income from continuing operations was $26.8 million and corresponding return on common shareholders' equity was 10.3% for the fourth quarter of 2009.
Commenting on the Bank's financial results for 2010, Réjean Robitaille, President and Chief Executive Officer, mentioned: "Last December, when we set our 2010 performance objectives, we once again raised the bar; and again we delivered. We reached all our objectives for 2010 and, for the fourth year in a row, completed another record year. We succeeded in surpassing last year's results by more than 20% despite international uncertainties, fierce competition in most retail segments and no revenue from discontinued operations. We owe this achievement to the solid operating foundation we have built, the growth momentum we have created in all our businesses, and above all to all our employees who, day after day, contribute to the Bank's success."
"Focusing on our key growth engines and good execution, we remain committed to improve the Bank's performance and continue to look forward with optimism. Given our confidence in the Bank's future and our solid balance sheet and capital ratios, the Board approved a $0.03 per share increase in the quarterly dividend to $0.39 per common share."
Non-GAAP Financial Measures
The Bank uses both generally accepted accounting principles ("GAAP") and certain non-GAAP measures to assess performance, such as return on common shareholders' equity, tangible common equity ratio, net interest margin and efficiency ratios. With regard to the calculation of the return on common shareholders' equity, the Bank considers that net income is the best measure of profitability and that common shareholders' equity, excluding accumulated other comprehensive income, should be used as a measure of capital. The calculation of the Bank's book value per share is also based on common shareholders' equity, excluding accumulated other comprehensive income. Tangible common equity is defined as common shareholders' equity, excluding accumulated other comprehensive income, less goodwill and contractual and customer relationship intangible assets. The tangible common equity ratio is defined as the tangible common equity divided by the risk-weighted assets.
Non-GAAP measures do not have any standardized meaning prescribed by GAAP and are unlikely to be comparable to any similar measures presented by other companies. The Bank believes that these non-GAAP financial measures provide investors and analysts with useful information so that they can better understand financial results and analyze the Bank's growth and profit potential more effectively.
Caution Regarding Forward-looking Statements
In this document and in other documents filed with Canadian regulatory authorities or in other communications, Laurentian Bank of Canada may from time to time make written or oral forward-looking statements within the meaning of applicable securities legislation. Forward-looking statements include, but are not limited to, statements regarding the Bank's business plan and financial objectives. The forward-looking statements contained in this document are used to assist the Bank's security holders and financial analysts in obtaining a better understanding of the Bank's financial position and the results of operations as at and for the periods ended on the dates presented and may not be appropriate for other purposes. Forward-looking statements typically use the conditional, as well as words such as prospects, believe, estimate, forecast, project, expect, anticipate, plan, may, should, could and would, or the negative of these terms, variations thereof or similar terminology.
By their very nature, forward-looking statements are based on assumptions and involve inherent risks and uncertainties, both general and specific in nature. It is therefore possible that the forecasts, projections and other forward-looking statements will not be achieved or will prove to be inaccurate. Although the Bank believes that the expectations reflected in these forward-looking statements are reasonable, it can give no assurance that these expectations will prove to have been correct.
The Bank cautions readers against placing undue reliance on forward-looking statements when making decisions, as the actual results could differ considerably from the opinions, plans, objectives, expectations, forecasts, estimates and intentions expressed in such forward-looking statements due to various material factors. Among other things, these factors include capital market activity, changes in government monetary, fiscal and economic policies, changes in interest rates, inflation levels and general economic conditions, legislative and regulatory developments, competition, credit ratings, scarcity of human resources and technological environment. The Bank further cautions that the foregoing list of factors is not exhaustive. For more information on the risks, uncertainties and assumptions that would cause the Bank's actual results to differ from current expectations, please also refer to the Bank's public filings available at www.sedar.com.
The Bank does not undertake to update any forward-looking statements, whether oral or written, made by itself or on its behalf, except to the extent required by securities regulations.
FINANCIAL
HIGHLIGHTS
FOR THE THREE MONTHS ENDED
IN MILLIONS OF DOLLARS, ----------------------------
UNLESS OTHERWISE INDICATED OCTOBER 31 OCTOBER 31
(UNAUDITED) 2010 2009 VARIANCE
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Earnings
Net income $ 32.5 $ 38.2 (15)%
Income from continuing
operations $ 32.5 $ 26.8 21%
Net income available to
common shareholders $ 29.6 $ 35.2 (16)%
Return on common shareholders'
equity(1) 11.8% 15.3%
Return on common shareholders'
equity for continuing
operations(1) 11.8% 10.3%
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Per common share
Diluted earnings per share $ 1.24 $ 1.47 (16)%
Diluted earnings per share
from continuing operations $ 1.24 $ 0.99 25%
Dividends declared $ 0.36 $ 0.34 6%
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FINANCIAL RATIOS
Dividend yield 3.25% 3.44%
Dividend payout ratio 29.1% 23.1%
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As a percentage of average
assets
Net interest income 2.15% 2.19%
Provision for loan losses 0.27% 0.30%
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Profitability
Efficiency ratio (non-interest
expenses as a % of total
revenue) 69.7% 71.8%
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FOR THE YEAR ENDED
IN MILLIONS OF DOLLARS, ----------------------------
UNLESS OTHERWISE INDICATED OCTOBER 31 OCTOBER 31
(UNAUDITED) 2010 2009 VARIANCE
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Earnings
Net income $ 122.9 $ 113.1 9%
Income from continuing
operations $ 122.9 $ 101.7 21%
Net income available to
common shareholders $ 110.8 $ 101.0 10%
Return on common shareholders'
equity(1) 11.5% 11.4%
Return on common shareholders'
equity for continuing
operations(1) 11.5% 10.1%
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Per common share
Diluted earnings per share $ 4.63 $ 4.23 9%
Diluted earnings per share
from continuing operations $ 4.63 $ 3.75 23%
Dividends declared $ 1.44 $ 1.36 6%
Book value(1) $ 41.87 $ 38.68 8%
Share price - close $ 44.25 $ 39.53 12%
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Financial position
Balance sheet assets $ 23,800 $ 22,165 7%
Loans, bankers' acceptances
and securities purchased
under reverse repurchase
agreements, net $ 18,375 $ 16,354 12%
Personal deposits $ 15,425 $ 15,139 2%
Shareholders' equity and
debentures $ 1,389 $ 1,321 5%
Number of common shares - end
of period (in thousands) 23,921 23,914 -%
Net Impaired loans as a % of
average loans and acceptances 0.30% 0.15%
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Capital ratios
Tier I BIS capital ratio 10.9% 11.0%
Total BIS capital ratio 12.9% 13.0%
Assets to capital multiple 17.9 x 18.0 x
Tangible common equity as a
percentage of risk-weighted
assets(2) 9.0% 9.1%
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FINANCIAL RATIOS
Per common share
Price / earnings ratio 9.6 x 9.3 x
Market to book value 106% 102%
Dividend yield 3.25% 3.44%
Dividend payout ratio 31.1% 32.1%
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As a percentage of average
assets
Net interest income 2.15% 2.07%
Provision for loan losses 0.29% 0.27%
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Profitability
Efficiency ratio (non-interest
expenses as a % of total
revenue) 68.4% 70.8%
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OTHER INFORMATION
Number of full-time equivalent
employees 3,643 3,528
Number of branches 157 156
Number of automated banking
machines 413 408
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(1) With regard to the calculation of the Return on common shareholders'
equity ratio, the Bank considers that net income is the best measure
of profitability and that common shareholders' equity, excluding
accumulated other comprehensive income, would be used as a capital
measure. The calculation of the Bank's book value is also based on
common shareholders' equity, excluding accumulated other
comprehensive income.
(2) Tangible common equity is defined as common shareholders' equity,
excluding accumulated other comprehensive income, less goodwill and
contractual and customer relationship intangible assets.
Financial review
The following sections present a summary analysis of the Bank's operating results for the year ended October 31, 2010, as well as for the fourth quarter ended October 31, 2010. The analysis should be read in conjunction with the unaudited financial information for the fourth quarter of 2010. Audited Annual Consolidated Financial Statements and accompanying Management's Discussion and Analysis for 2010 are also available on the Bank's Web site at www.laurentianbank.ca.
Additional information about the Laurentian Bank of Canada, including the Annual Information Form, is available on the Bank's website at www.laurentianbank.ca and on SEDAR at www.sedar.com.
Performance and Financial Objectives
The following table presents management's financial objectives for 2010 and the Bank's performance. These financial objectives are based on the same assumptions noted on page 21 of the Bank's 2009 Annual Report under the title "Key assumptions supporting the Bank's objectives".
2010 FINANCIAL OBJECTIVES
FOR THE YEAR
ENDED
OCTOBER 31,
2010 OBJECTIVES 2010
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Revenue growth 5 % to 10 % 11 %
Efficiency ratio 70 % to 67 % 68.4 %
Return on common shareholders' equity 10.0 % to 12.0 % 11.5 %
Diluted earnings per share $ 4.00 to $ 4.70 $ 4.63
Tier I BIS capital ratio Minimum of 9.5 % 10.9 %
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Consolidated Results
Year ended October 31, 2010 compared to year ended October 31, 2009
For the year ended October 31, 2010, net income totalled $122.9 million or $4.63 diluted per share, compared with net income of $113.1 million or $4.23 diluted per share in 2009. Net income in 2009 included income from discontinued operations of $11.5 million, or $0.48 diluted per share, related to the sale of asset management activities in fiscal 2005. Income from continuing operations was $101.7 million in 2009, or $3.75 diluted per share.
Total revenue
Total revenue improved 11% to $737.4 million for the year ended October 31, 2010, compared to $666.5 million for the year ended October 31, 2009. Net interest income increased from $423.8 million for the year ended October 31, 2009 to $496.4 million for the same period in 2010, as a combined result of improved net interest margins and higher loan and deposit volumes. Net interest margins had temporarily been under pressure in the first part of 2009 as a result of the introductory promotional pricing on B2B Trust's High Interest Investment Accounts and a generally declining interest rate environment. Although the overall lower interest rate environment has continued to put pressure on the Bank's margins, this was more than offset by improved loan and deposit pricing. Other income was only marginally lower compared to October 31, 2009, as higher fees and commissions resulting from solid core business growth, as well as higher income from treasury and financial market operations offset a $28.4 million decrease in securitization income.
Provision for loan losses
The provision for loan losses amounted to $68.0 million for the year ended October 31, 2010, compared to $56.0 million for the year ended October 31, 2009. The increase mainly reflects losses related to certain commercial and real estate accounts, which were impacted by the soft North American economic environment, as well as higher loan volumes. Nonetheless, overall credit quality improved in the fourth quarter, as evidenced by the decline in net impaired loans. Retail portfolios performed well during the year, as borrowers benefited from the improved employment conditions in Canada and a low interest rate environment. Please refer to the annual MD&A on the Bank's website for further analysis of credit risk.
Non-interest expenses
Non-interest expenses totalled $504.2 million for the year ended October 31, 2010, compared to $472.0 million for the year ended October 31, 2009. The increase is principally attributable to higher salaries and costs related to growth initiatives, as well as higher pension costs and compensation tax. Premises and technology costs also increased as a result of higher amortization expense related to IT development projects and overall increases in technology costs to support higher business activity levels. Other non-interest expenses decreased compared to a year ago. Expenses for 2009 included the effect of a $5.5 million charge related to two specific operational issues. Excluding this item, other expenses were relatively unchanged. For the year ended October 31, 2010, the efficiency ratio (non-interest expenses divided by total revenue) improved significantly to 68.4%, compared to 70.8% for the year ended October 31, 2009; reflecting a 3.8% positive operating leverage (percentage growth in revenues, less percentage growth in non-interest expenses).
Income taxes
For fiscal 2010, the income tax expense was $42.3 million and the effective tax rate was 25.6%, compared to $36.8 million and 26.6% for 2009. The lower tax rate, compared to the statutory rate, mainly resulted from the favourable effect of holding investments in Canadian securities that generate non-taxable dividend income, as well as the lower taxation level on revenues from credit insurance operations. Results for 2010 also included favourable adjustments of $2.2 million to future income taxes.
Balance sheet review
Loans and bankers' acceptances stood at $17.7 billion at October 31, 2010, up $1.8 billion from October 31, 2009. Since the beginning of the year, residential mortgage loans, including securitized loans, increased by 13.9% or $1.4 billion. The Bank's ability to meet customer's needs, combined with the low interest rate environment, better economic conditions and overall favourable housing markets in Canada contributed to maintain the momentum in this portfolio's growth. Commercial mortgage loans and commercial loans, including bankers' acceptances, increased by a combined $438 million, as the Bank continues to capitalize on growth opportunities in the Canadian market. Personal loans decreased slightly by $24 million, as growth in investment loans and home equity lines of credit did not fully compensate for ongoing run-offs in point-of-sale financing. Since the beginning of the year, total personal deposits increased by $286 million and business and other deposits increased by $1.1 billion.
Fourth quarter ended October 31, 2010 compared to fourth quarter ended October 31, 2009
Net income was $32.5 million, or $1.24 diluted per share, for the fourth quarter ended October 31, 2010, compared with $38.2 million, or $1.47 diluted per share, for the fourth quarter ended 2009. Net income for the fourth quarter of 2009 included income from discontinued operations of $11.5 million related to the sale of asset management activities in fiscal 2005. Income from continuing operations was $26.8 million for the fourth quarter of 2009.
Total revenue
Total revenue increased by 6% to $190.1 million in the fourth quarter of 2010, compared with $178.5 million in the fourth quarter of 2009. Net interest income increased to $128.2 million for the fourth quarter of 2010, from $118.2 million in the fourth quarter of 2009. The increase is mainly attributable to the strong loan and deposit growth year-over-year. Interest margins decreased slightly in the fourth quarter of 2010, when compared to the fourth quarter of 2009 as interest margins remained under pressure, because of sustained competition for retail customers, a flatter yield curve and the continued low interest rate environment.
Other income improved to $61.9 million in the fourth quarter of 2010, compared to $60.3 million in the fourth quarter of 2009. Overall retail business growth contributed to higher fees and commissions on loans and deposits, as well as to the increase in credit insurance income. In addition, income from treasury and financial market operations improved by more than $5.0 million in the fourth quarter of 2010, when compared to the fourth quarter of 2009, as results for 2009 were hampered by net losses on securities of $3.5 million. Securitization income decreased by $5.0 million compared to the same quarter a year ago, as a result of lower gains on reduced level of mortgage loan securitization and tighter spreads on mortgage loans sold. Income from brokerage operations decreased by $2.0 million in the fourth quarter of 2010, when compared to the fourth quarter of 2009. Results from these operations, for the fourth quarter of 2009, benefitted from the recovering equity markets, as well as from the particularly good quarter for the Institutional Fixed Income division of Laurentian Bank Securities. At $14.9 million for the fourth quarter of 2010, brokerage revenues were nonetheless satisfactory.
Provision for loan losses
The provision for loan losses amounted to $16.0 million in the fourth quarter of 2010, unchanged from the fourth quarter of 2009, as lower losses on retail portfolios were offset by increases in commercial portfolios. This level of losses is in line with the overall good credit quality of the Bank's loan portfolio given the current soft North American economic conditions.
Non-interest expenses
Non-interest expenses totalled $132.5 million for the fourth quarter of 2010, compared to $128.1 million for the fourth quarter of 2009. Salaries and employee benefits rose by $6.1 million, mainly as a result of higher salary charges, compensation tax and pension costs. Over the last twelve months, headcount has increased by more than one hundred mainly to support growth and service quality initiatives. Premises and technology costs rose from $31.9 million for the fourth quarter of 2009 to $35.2 million for the fourth quarter of 2010, mainly as a result of higher amortization expenses related to recently completed IT development projects, technology costs to support business growth and rental costs. Other non-interest expenses decreased from $30.2 million for the fourth quarter of 2009 to $25.2 million for the fourth quarter of 2010. Other expenses for 2009 included the effect of a $5.5 million charge related to two specific operational issues. Excluding this item, other expenses were relatively stable as a result of sustained cost control.
The efficiency ratio improved to 69.7% in the fourth quarter of 2010, compared with 71.8% in the fourth quarter of 2009; reflecting a 3.1% positive operating leverage.
Income taxes
For the quarter ended October 31, 2010, the income tax expense was $9.1 million and the effective tax rate was 21.8%. The lower tax rate, compared to the statutory rate, mainly resulted from the favourable effect of holding investments in Canadian securities that generate non-taxable dividend income and the lower taxation level on revenues from credit insurance operations. Results for the fourth quarter also include year-end favourable adjustments of $2.2 million to future income taxes. For the quarter ended October 31, 2009, the income tax expense related to continuing operations was $7.6 million and the effective tax rate was 22.1%.
Fourth quarter 2010 compared to third quarter 2010
Net income was $32.5 million for the fourth quarter of 2010, compared to $30.1 million for the third quarter ended July 31, 2010. Total revenue increased to $190.1 million in the fourth quarter of 2010, compared with $188.8 million in the third quarter of 2010. Net interest income decreased slightly, despite continued growth in loans and deposits, as a result of tighter interest margins. These remained under pressure during the fourth quarter of 2010, due to the sustained competition for retail customers and the continued low interest rate environment.
Other income improved to $61.9 million in the fourth quarter of 2010, compared to $58.9 million in the third quarter of 2010, mainly as a result of better results from treasury and financial market operations and brokerage operations, which both benefitted from favourable financial markets during the quarter.
The provision for loan losses amounted to $16.0 million in the fourth quarter of 2010, compared to $20.0 million for the third quarter of 2010. The decrease is mainly related to a $5.0 million loss on a single commercial exposure, during the third quarter. Otherwise, the overall credit condition of the portfolios has remained relatively stable over the last three months.
Non-interest expenses increased by $4.7 million compared with the third quarter of 2010, mainly as a result of year-end variable compensation cost adjustments and higher technology costs.
Measuring performance in 2011
The following table presents Management's objectives for 2011.
2011 Objectives(1)
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Revenue growth (greater than) 5%
Efficiency ratio 70% to 67%
Return on common shareholders' equity 11.0% to 13.0%
Diluted earnings per share $4.80 to $5.40
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(1) These objectives for 2011 should be read concurrently with the
following paragraphs.
Key assumptions supporting the Bank's objectives
The following assumptions are the most significant items considered in setting the Bank's strategic priorities and financial objectives. Other factors such as those detailed in the Caution Regarding Forward-Looking Statements and Integrated Risk Management Framework sections of this MD&A could also cause future results to differ materially from these objectives.
The objectives for 2011 assume that the Canadian economy is entering a period of slow transition from recession to recovery, with continued challenges stemming from low interest rates and increased competition, leading to ongoing pressure on pricing and margins. Nonetheless, the Bank expects loan growth to continue at a healthy rate in 2011. The targets for 2011 also incorporate increased spending necessary to meet heightened regulatory requirements and higher salaries and employee benefits resulting from ongoing hiring to support growth and service levels, as well as higher pension costs. However, the Bank expects to maintain a solid return on common shareholders' equity by maintaining appropriate cost controls while ensuring it continues to further build its key growth engines.
Capital Management
On November 2, 2010, the Bank completed the issuance of $250.0 million Medium Term Notes (subordinated indebtedness) due November 2, 2020. On December 6, 2010, the Bank also announced its intention to redeem the $150.0 million subordinated debentures Series 10. When combined, these transactions will provide the Bank with added flexibility to pursue its growth initiatives and contribute to meet new pending regulatory capital requirements.
As at October 31, 2010, the BIS Tier 1 and total capital ratios stood at 10.9% and 12.9%, respectively, compared to 11.0% and 13.0%, respectively, as at October 31, 2009, and well above current regulatory requirements.
Basel Committee on Banking Supervision new proposed capital and liquidity regulation
In December 2009, the Basel Committee on Banking Supervision (BCBS) published proposals on new capital and liquidity requirements. Updates were also published in July and September 2010, providing additional information. The proposals introduce new global liquidity standards and provide more stringent capital adequacy standards. More information regarding these new regulatory requirements is expected over the coming months. At this stage, it is still too early to determine the definitive impact on capital ratios and liquidity requirements, considering the proposals are yet to be finalized at both the international (BCBS) and national (OSFI) levels and may further change between now and when the final rules take effect. Nonetheless, considering the Bank's strong capital position and the nature of its operations, and based on available information, management believes that the Bank is well positioned to meet upcoming capital requirements.
Dividends
At its meeting on November 3, 2010, the Board of Directors declared regular dividends on the various series of preferred shares to shareholders of record on December 9, 2010. At its meeting on December 8, 2010, given its confidence in the Bank's future and the solid balance sheet and capital ratios, the Board of Directors approved a $0.03 per share increase to the quarterly dividend on common shares and thus declared a dividend of $0.39 per common share, payable on February 1, 2011, to shareholders of record on January 3, 2011.
Segmented Information
This section outlines the Bank's operations according to its organizational structure. Services to individuals, businesses, financial intermediaries and institutional clients are offered through the following business segments:
- Retail & SME Quebec - Laurentian Bank Securities and
- Real Estate & Commercial Capital Markets
- B2B Trust - Other
As of November 1, 2009, certain capital market activities which were previously reported in the Other segment are now reported with Laurentian Bank Securities activities under the newly formed Laurentian Bank Securities and Capital Markets business segment. In addition, foreign exchange and international services, which were also formerly reported in the Other segment, are now reported in the Real Estate & Commercial segment. The Retail & SME Quebec and B2B Trust business segments were not affected by this reorganization. Comparative figures were reclassified to conform to the current year presentation.
Retail & SME Quebec
FOR THE THREE MONTHS ENDED
In thousands of dollars, -----------------------------------------
except percentage amounts OCTOBER 31 JULY 31 OCTOBER 31
(Unaudited) 2010 2010 2009
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Total revenue $ 112,666 $ 116,963 $ 108,274
Provision for loan losses $ 10,004 $ 9,583 $ 11,815
Income from continuing
operations $ 9,746 $ 14,633 $ 10,013
Net income $ 9,746 $ 14,633 $ 21,482
Efficiency ratio 80.4% 75.4% 77.0%
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FOR THE YEAR ENDED
In thousands of dollars, ---------------------------
except percentage amounts OCTOBER 31 OCTOBER 31
(Unaudited) 2010 2009
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Total revenue $ 453,514 $ 425,924
Provision for loan losses $ 40,919 $ 41,887
Income from continuing
operations $ 47,013 $ 39,623
Net income $ 47,013 $ 51,092
Efficiency ratio 77.8% 78.3%
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2010 Financial Performance
The Retail & SME Quebec business segment had a great year, with income from continuing operations improving 19% to $47.0 million, compared to $39.6 million for 2009. Net income for 2009 was $51.1 million and included income from discontinued operations of $11.5 million related to the sale of asset management activities in fiscal 2005.
Revenues improved by 6% or $27.6 million, from $425.9 million in 2009 to $453.5 million in 2010, as a result of the significant growth in loan and deposit volumes stemming from various growth initiatives and favourable market conditions, as well as higher prepayment penalties on mortgage loans. Credit insurance revenues, income from mutual funds and credit card service revenues all improved year-over-year. Non-interest expenses also increased by 6%, or $19.1 million, from $333.5 million in 2009 to $352.6 million in 2010, essentially in salaries. Loan losses decreased slightly to $40.9 million in 2010 from $41.9 million in 2009, as a result of lower losses on the point-of-sale financing portfolio, partially offset by higher losses in the small commercial business portfolio. Retail credit conditions have steadily improved over the last 18 months and remain sound at the onset of 2011.
Fourth quarter ended October 31, 2010
Income from continuing operations remained relatively stable at $9.7 million for the fourth quarter of 2010, compared to $10.0 million for the fourth quarter of 2009. Net income for 2009 was $21.5 million and included income from discontinued operations of $11.5 million related to the sale of asset management activities in fiscal 2005, as noted above.
Total revenue increased by $4.4 million, from $108.3 million in the fourth quarter of 2009 to $112.7 million in the fourth quarter of 2010, as a result of higher net interest income and continued increases in other income sources, mainly from mutual funds and credit card services. Loan losses decreased from $11.8 million in the fourth quarter of 2009 to $10.0 million in the fourth quarter of 2010, essentially as a result of lower losses in the point-of-sale financing portfolio. Non-interest expenses rose by $7.2 million, from $83.4 million in the fourth quarter of 2009 to $90.6 million in the fourth quarter of 2010, mainly as a result of increases in salaries, in the number of employees, as well as in pension costs and compensation tax. Higher advertising expenses and costs related to the opening of two new branches also contributed to the increase year-over-year.
Compared to the third quarter of 2010, results were particularly affected by lower net interest income. Prepayment penalties for the third quarter were above average, as a result of the higher level of prepayments. Also, non-interest expenses for the fourth quarter increased as a result of year-end adjustments to variable compensation costs and higher advertising costs.
Balance sheet highlights
- Loans up 6% or $625 million over the last 12 months
- Increase in deposits of $546 million over the last 12 months, to
$8.9 billion as at October 31, 2010
Real Estate & Commercial
FOR THE THREE MONTHS ENDED
In thousands of dollars, -----------------------------------------
except percentage amounts OCTOBER 31 JULY 31 OCTOBER 31
(Unaudited) 2010 2010 2009
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Total revenue $ 31,004 $ 31,608 $ 26,597
Provision for loan losses $ 5,557 $ 9,433 $ 2,897
Net income $ 12,319 $ 10,427 $ 7,611
Efficiency ratio 25.1% 22.8% 47.5%
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FOR THE YEAR ENDED
In thousands of dollars, ---------------------------
except percentage amounts OCTOBER 31 OCTOBER 31
(Unaudited) 2010 2009
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Total revenue $ 119,327 $ 93,513
Provision for loan losses $ 24,124 $ 9,817
Net income $ 49,089 $ 34,421
Efficiency ratio 20.8% 35.9%
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2010 Financial Performance
The Real Estate & Commercial business segment's contribution to net income improved by $14.7 million, or 43%, to $49.1 million in 2010, compared with $34.4 million in 2009.
Total revenue increased by 28% or $25.8 million, from $93.5 million in 2009 to $119.3 million in 2010, as a result of strong loan growth and recent initiatives to grow deposit volumes, as well as sound pricing strategies. Loan losses were higher at $24.1 million in 2010, compared with $9.8 million in 2009. The increase mainly reflects losses related to a limited number of commercial and real estate accounts which were adversely impacted by the economic slowdown, as well as higher loan volumes. Nonetheless, overall credit quality has improved toward the end of the year, as evidenced by a decline in net impaired loans. Non-interest expenses decreased by 26% or $8.8 million, from $33.6 million in 2009 to $24.8 million in 2010, mainly as results for 2009 included charges related to specific operational issues, mostly recovered early in 2010.
Fourth quarter ended October 31, 2010
The Real Estate & Commercial business segment's contribution to net income increased 62%, to $12.3 million for the fourth quarter of 2010, compared with $7.6 million for the fourth quarter of 2009.
Total revenue increased by $4.4 million, from $26.6 million in the fourth quarter of 2009 to $31.0 million in the fourth quarter of 2010, essentially as a result of continued strong business growth. Loan losses stood at $5.6 million in the fourth quarter of 2010, compared to $2.9 million in the fourth quarter of 2009. As mentioned above, certain commercial and real estate accounts continued to experience difficulties in the current economic environment. Non-interest expenses decreased by $4.8 million to $7.8 million in the fourth quarter of 2010, compared to $12.6 million in the fourth quarter of 2009, essentially as a result of charges related to specific operational issues recorded in 2009.
Balance sheet highlight
- Loans and BAs up 12% or $331 million over the last 12 months
B2B Trust
FOR THE THREE MONTHS ENDED
In thousands of dollars, -----------------------------------------
except percentage amounts OCTOBER 31 JULY 31 OCTOBER 31
(Unaudited) 2010 2010 2009
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Total revenue $ 32,430 $ 32,711 $ 26,412
Provision for loan losses $ 439 $ 984 $ 1,288
Net income $ 12,156 $ 11,818 $ 7,468
Efficiency ratio 44.5% 44.8% 53.7%
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FOR THE YEAR ENDED
In thousands of dollars, ---------------------------
except percentage amounts OCTOBER 31 OCTOBER 31
(Unaudited) 2010 2009
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Total revenue $ 124,613 $ 100,256
Provision for loan losses $ 2,957 $ 4,296
Net income $ 46,394 $ 32,092
Efficiency ratio 43.7% 48.9%
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2010 Financial Performance
The B2B Trust business segment's contribution to net income improved by $14.3 million, or 45%, to $46.4 million in 2010, compared with $32.1 million in 2009.
Total revenue increased by $24.3 million, from $100.3 million in 2009 to $124.6 million in 2010. Net interest income increased by $23.5 million year-over-year, as a combined result of higher loan and deposit volumes and B2B Trust's agility to weather the challenges from the evolving market environment and competition. In the first half of 2009, margins had been under pressure as a result of the introductory promotional pricing on the High Interest Investment Accounts.
Provision for loan losses related to B2B Trust's various loan portfolios decreased to $3.0 million in 2010, compared with $4.3 million in 2009, reflecting the quality of B2B Trust's loan portfolio and underwriting practices. In line with increased business activity and enhanced service levels, non-interest expenses rose by $5.4 million, from $49.0 million in 2009 to $54.4 million in 2010, mainly from the effect of additional employees required to deliver on B2B Trust's commitments.
Fourth quarter ended October 31, 2010
The B2B Trust business segment's contribution to net income improved 63%, reaching $12.2 million in the fourth quarter of 2010, compared with $7.5 million in the fourth quarter of 2009.
Total revenue increased by $6.0 million, from $26.4 million in the fourth quarter of 2009, to $32.4 million in the fourth quarter of 2010, essentially as a result of continued growth in loan and deposit volumes over the last twelve months. In addition, net interest margins also improved due to lower funding costs. Loan losses, including losses on investment lending activities, remained low at $0.4 million in the fourth quarter of 2010, compared with $1.3 million in the fourth quarter of 2009. Non-interest expenses increased slightly to $14.4 million in the fourth quarter of 2010, compared with $14.2 million in the fourth quarter of 2009; mainly as a result of higher staffing levels in support of B2B Trust's growth initiatives.
Balance sheet highlights
- Loans up 16% or $735 million over the last 12 months
- At $9.2 billion in retail deposits as at October 31, 2010, B2B Trust
remains a key source of funding for the Bank
Laurentian Bank Securities and Capital Markets
FOR THE THREE MONTHS ENDED
In thousands of dollars, -----------------------------------------
except percentage amounts OCTOBER 31 JULY 31 OCTOBER 31
(Unaudited) 2010 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total revenue $ 17,367 $ 13,981 $ 18,483
Net income $ 3,468 $ 2,100 $ 2,730
Efficiency ratio 72.3% 79.0% 73.5%
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FOR THE YEAR ENDED
In thousands of dollars, ---------------------------
except percentage amounts OCTOBER 31 OCTOBER 31
(Unaudited) 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total revenue $ 61,115 $ 61,573
Net income $ 9,988 $ 11,976
Efficiency ratio 76.8% 70.6%
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2010 Financial Performance
The Laurentian Bank Securities and Capital Markets business segment's contribution to net income totalled $10.0 million in 2010, compared with $12.0 million in 2009, as the better performance from the Retail brokerage and Institutional Equity divisions were offset by lower income from the Institutional Fixed Income division and the Bank's capital market operations. Non-interest expenses increased, mainly in the brokerage business, essentially as a result of higher variable compensation and higher salaries related to new employees hired to support growth.
Fourth quarter ended October 31, 2010
The Laurentian Bank Securities and Capital Markets business segment's contribution to net income amounted to $3.5 million in the fourth quarter of 2010, compared with $2.7 million in the fourth quarter of 2009. Revenues decreased by $1.1 million to $17.4 million in the fourth quarter of 2010, essentially as a result of the very good performance of the Institutional Fixed Income division in 2009, and despite a better performance by the Institutional Equity division in 2010. Non-interest expenses decreased to $12.6 million in the fourth quarter of 2010, from $13.6 million in the fourth quarter of 2009, due primarily to lower variable compensation in 2010.
Balance sheet highlight
- Assets under management up 16% or $305 million over the last 12 months
Other
FOR THE THREE MONTHS ENDED
-----------------------------------------
In thousands of dollars OCTOBER 31 JULY 31 OCTOBER 31
(Unaudited) 2010 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total revenue $ (3,393) $ (6,453) $ (1,226)
Net loss $ (5,175) $ (8,914) $ (1,043)
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FOR THE YEAR ENDED
---------------------------
In thousands of dollars OCTOBER 31 OCTOBER 31
(Unaudited) 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Total revenue $ (21,123) $ (14,764)
Net loss $ (29,543) $ (16,448)
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2010 Financial Performance
The Other segment posted a negative contribution to net income of $29.5 million in 2010, compared with a negative contribution of $16.4 million in 2009.
Net interest income improved as asset-liability management activities contributed more positively to results. However, securitization income declined sharply as lower volumes of mortgage loans were securitized. In addition, interest spreads on securitized loans narrowed in 2010, compared to 2009 and the mark-to-market revaluation on seller swaps affected results during 2010.
Fourth quarter ended October 31, 2010
The Other sector posted a negative contribution to net income of $5.2 million in the fourth quarter of 2010, compared with a negative contribution of $1.0 million in the fourth quarter of 2009. Net interest income decreased slightly to negative $4.2 million in the fourth quarter of 2010, compared to negative $3.4 million in the fourth quarter of 2009. Other income for the fourth quarter of 2010 amounted to $0.8 million, compared to $2.2 million for the fourth quarter of 2009. This decrease mainly resulted from lower income from securitization, partly offset by the absence of write-downs on securities which were recorded in the fourth quarter of 2009.
About Laurentian Bank
Laurentian Bank of Canada is a banking institution operating across Canada and offering its clients diversified financial services. Distinguishing itself through excellence in service, as well as through its simplicity and proximity, the Bank serves individual consumers and small and medium-sized businesses. The Bank also offers its products to a wide network of independent financial intermediaries through B2B Trust, as well as full-service brokerage solutions through Laurentian Bank Securities.
Laurentian Bank is well established in the Province of Quebec, operating the third-largest retail branch network. Elsewhere throughout Canada, it operates in specific market segments where it holds an enviable position. Laurentian Bank of Canada has more than $23 billion in balance sheet assets and more than $15 billion in assets under administration. Founded in 1846, the Bank employs more than 3,600 people.
Conference Call
Laurentian Bank invites media representatives and the public to listen to the conference call with financial analysts to be held at 2:00 p.m. Eastern Time on Wednesday, December 8, 2010. The live, listen-only, toll-free, call-in number is 1-866-696-5910 Code 2421638.
You can listen to the call on a delayed basis at any time from 6:00 p.m. on Wednesday, December 8, until 11:59 p.m. on Thursday, December 30, 2010, by dialling the following playback number: 416-695-5800 Code 2256173. The conference call can also be heard through the Investor Relations section of the Bank's Web site at www.laurentianbank.ca. The Bank's Web site also offers additional financial information.
CONSOLIDATED
BALANCE SHEET
AS AT AS AT
OCTOBER 31 OCTOBER 31
IN THOUSANDS OF DOLLARS (UNAUDITED) 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
ASSETS
Cash and non-interest-bearing deposits with
other banks $ 70,537 $ 61,010
---------------------------
Interest-bearing deposits with other banks 95,561 239,606
---------------------------
Securities accounts
Available-for-sale 1,103,744 1,424,043
Held-for-trading 1,496,583 1,391,313
Designated as held-for-trading 1,658,478 1,616,827
---------------------------
4,258,805 4,432,183
---------------------------
Securities purchased under reverse
repurchase agreements 803,874 536,064
---------------------------
Loans
Personal 5,630,788 5,655,055
Residential mortgage 8,582,548 7,219,830
Commercial mortgage 1,638,861 1,285,012
Commercial and other 1,691,190 1,555,956
---------------------------
17,543,387 15,715,853
Allowance for loan losses (138,143) (114,546)
---------------------------
17,405,244 15,601,307
---------------------------
Other
Customers' liabilities under acceptances 165,450 216,817
Premises and equipment 58,536 58,163
Derivatives 162,610 253,661
Goodwill 53,790 53,790
Software and other intangible assets 112,369 103,386
Other assets 613,227 608,793
---------------------------
1,165,982 1,294,610
---------------------------
$23,800,003 $22,164,780
---------------------------
---------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Personal $15,424,776 $15,138,637
Business, banks and other 4,250,819 3,161,329
---------------------------
19,675,595 18,299,966
---------------------------
Other
Obligations related to securities sold
short 1,362,336 1,054,470
Obligations related to securities sold
under repurchase agreements 60,050 284,988
Acceptances 165,450 216,817
Derivatives 199,278 174,859
Other liabilities 947,879 812,454
---------------------------
2,734,993 2,543,588
---------------------------
Subordinated debentures 150,000 150,000
---------------------------
Shareholders' equity
Preferred shares 210,000 210,000
Common shares 259,363 259,208
Contributed surplus 243 209
Retained earnings 741,911 665,538
Accumulated other comprehensive income 27,898 36,271
---------------------------
1,239,415 1,171,226
---------------------------
$23,800,003 $22,164,780
---------------------------
---------------------------
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CONSOLIDATED STATEMENT
OF INCOME
FOR THE THREE MONTHS ENDED
IN THOUSANDS OF DOLLARS, -----------------------------------------
EXCEPT PER SHARE AMOUNTS OCTOBER 31 JULY 31 OCTOBER 31
(UNAUDITED) 2010 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Interest income
Loans $ 201,066 $ 193,722 $ 179,730
Securities 19,020 19,075 18,154
Deposits with other banks 112 73 102
Other, including derivative
financial instruments 23,273 29,490 39,764
-----------------------------------------
243,471 242,360 237,750
-----------------------------------------
Interest expense
Deposits 112,473 109,304 117,048
Other, including derivative
financial instruments 846 1,235 516
Subordinated debentures 1,950 1,951 1,951
-----------------------------------------
115,269 112,490 119,515
-----------------------------------------
Net interest income 128,202 129,870 118,235
-----------------------------------------
Other income
Fees and commissions on loans
and deposits 28,861 29,372 26,403
Income from brokerage
operations 14,920 11,607 16,926
Securitization income 553 935 5,551
Credit insurance income 4,759 4,287 3,399
Income from sales of mutual
funds 3,961 3,739 3,383
Income from treasury and
financial market operations 5,114 4,186 (99)
Income from registered
self-directed plans 1,997 2,282 1,887
Other 1,707 2,532 2,855
-----------------------------------------
61,872 58,940 60,305
-----------------------------------------
Total revenue 190,074 188,810 178,540
-----------------------------------------
Provision for loan losses 16,000 20,000 16,000
-----------------------------------------
Non-interest expenses
Salaries and employee benefits 72,101 71,021 66,027
Premises and technology 35,180 33,201 31,948
Other 25,203 23,598 30,168
-----------------------------------------
132,484 127,820 128,143
-----------------------------------------
Income from continuing
operations before income taxes 41,590 40,990 34,397
Income taxes 9,076 10,926 7,618
-----------------------------------------
Income from continuing
operations 32,514 30,064 26,779
Income from discontinued
operations, net of income taxes - - 11,469
-----------------------------------------
Net income $ 32,514 $ 30,064 $ 38,248
-----------------------------------------
-----------------------------------------
Preferred share dividends,
including applicable taxes 2,899 3,075 3,066
-----------------------------------------
Net income available to common
shareholders $ 29,615 $ 26,989 $ 35,182
-----------------------------------------
-----------------------------------------
Average number of common shares
outstanding (in thousands)
Basic 23,921 23,921 23,878
Diluted 23,939 23,938 23,903
-----------------------------------------
Earnings per share from
continuing operations
Basic $ 1.24 $ 1.13 $ 0.99
Diluted $ 1.24 $ 1.13 $ 0.99
-----------------------------------------
Earnings per share
Basic $ 1.24 $ 1.13 $ 1.47
Diluted $ 1.24 $ 1.13 $ 1.47
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CONSOLIDATED STATEMENT
OF INCOME
FOR THE YEAR ENDED
IN THOUSANDS OF DOLLARS, ---------------------------
EXCEPT PER SHARE AMOUNTS OCTOBER 31 OCTOBER 31
(UNAUDITED) 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Interest income
Loans $ 757,677 $ 719,538
Securities 72,975 71,373
Deposits with other banks 298 3,903
Other, including derivative
financial instruments 116,273 137,275
---------------------------
947,223 932,089
---------------------------
Interest expense
Deposits 440,053 493,812
Other, including derivative
financial instruments 3,011 6,765
Subordinated debentures 7,738 7,735
---------------------------
450,802 508,312
---------------------------
Net interest income 496,421 423,777
---------------------------
Other income
Fees and commissions on loans
and deposits 113,700 101,445
Income from brokerage operations 52,934 51,788
Securitization income 5,996 34,441
Credit insurance income 17,785 15,994
Income from sales of mutual
funds 15,012 12,429
Income from treasury and
financial market operations 18,035 10,472
Income from registered
self-directed plans 8,680 7,960
Other 8,883 8,196
---------------------------
241,025 242,725
---------------------------
Total revenue 737,446 666,502
---------------------------
Provision for loan losses 68,000 56,000
---------------------------
Non-interest expenses
Salaries and employee benefits 275,964 249,658
Premises and technology 132,540 120,054
Other 95,732 102,278
---------------------------
504,236 471,990
---------------------------
Income from continuing
operations before income taxes 165,210 138,512
Income taxes 42,269 36,848
---------------------------
Income from continuing operations 122,941 101,664
Income from discontinued
operations, net of income taxes - 11,469
---------------------------
Net income $ 122,941 $ 113,133
---------------------------
---------------------------
Preferred share dividends,
including applicable taxes 12,122 12,116
---------------------------
Net income available to common
shareholders $ 110,819 $ 101,017
---------------------------
---------------------------
Average number of common shares
outstanding (in thousands)
Basic 23,921 23,858
Diluted 23,937 23,876
---------------------------
Earnings per share from
continuing operations
Basic $ 4.63 $ 3.75
Diluted $ 4.63 $ 3.75
---------------------------
Earnings per share
Basic $ 4.63 $ 4.23
Diluted $ 4.63 $ 4.23
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CONSOLIDATED STATEMENT
OF COMPREHENSIVE INCOME
FOR THE
THREE MONTHS ENDED FOR THE YEAR ENDED
-------------------------- ---------------------------
IN THOUSANDS OF OCTOBER 31 OCTOBER 31 OCTOBER 31 OCTOBER 31
DOLLARS (UNAUDITED) 2010 2009 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net income $ 32,514 $ 38,248 $ 122,941 $ 113,133
-------------------------------------------------------
Other comprehensive
income, net of
income taxes
Unrealized gains
on available-for-
sale securities 4,093 4,552 7,366 14,081
Reclassification
of (gains) losses
on available-for-
sale securities
to net income (545) 2,390 (2,373) 6,185
Net change in
value of
derivative
instruments
designated as
cash flow hedges (1,778) (7,839) (13,366) (2,821)
-------------------------------------------------------
1,770 (897) (8,373) 17,445
-------------------------------------------------------
Comprehensive
income $ 34,284 $ 37,351 $ 114,568 $ 130,578
-------------------------------------------------------
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-------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED
---------------------------
OCTOBER 31 OCTOBER 31
IN THOUSANDS OF DOLLARS (UNAUDITED) 2010 2009
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Preferred shares
Balance at beginning and end of year $ 210,000 $ 210,000
---------------------------
Common shares
Balance at beginning of year 259,208 257,462
Issued during the year under share purchase
option plan 155 1,746
---------------------------
Balance at end of year 259,363 259,208
---------------------------
Contributed surplus
Balance at beginning of year 209 173
Stock-based compensation 34 36
---------------------------
Balance at end of year 243 209
---------------------------
Retained earnings
Balance at beginning of year 665,538 596,974
Net income 122,941 113,133
Dividends
Preferred shares, including applicable
taxes (12,122) (12,116)
Common shares (34,446) (32,453)
---------------------------
Balance at end of year 741,911 665,538
---------------------------
Accumulated other comprehensive income
Balance at beginning of year 36,271 18,826
Other comprehensive income, net of income
taxes (8,373) 17,445
---------------------------
Balance at end of year 27,898 36,271
---------------------------
Shareholders' equity $ 1,239,415 $ 1,171,226
---------------------------
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For further information: Chief Financial Officer: Michel C. Lauzon, 514-284-4500 #7997; Media and Investor Relations contact: Gladys Caron, 514-284-4500 #7511, cell 514-893-3963
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