Laurentian Bank headquarters on April 5, 2022 in Montreal.Ryan Remiorz/The Canadian Press
Laurentian Bank of Canada’s LB-T newly minted chief executive officer Éric Provost is focusing the lender on expanding its commercial segment and streamlining its businesses as part of a new turnaround plan prompted by a tumultuous year.
Mr. Provost is embarking on the bank’s third overhaul in less than a decade – a plan that was initiated after a multiday system outage prevented customers from accessing their accounts, and the abrupt ousting of its chief executive officer. Over the past year, Laurentian has grappled with waning profits as its revenue flatlined and costs jumped.
Laurentian has already started cutting jobs and trimming less profitable businesses to get its finances under control. Its new strategic plan is aimed at further simplifying its businesses by focusing on the areas where the bank believes it can compete against the larger lenders, particularly in commercial banking, reforming its personal banking business to boost its deposit base and improving its digital and technology platforms.
“Our key focus areas will be aimed towards where we can compete with an edge,” Mr. Provost said during a presentation to investors Friday afternoon. “We need to simplify this organization to make it more efficient, because for too long we’ve been all things to all people.”
Laurentian put itself on the auction block last year but called off its sale process in September after it failed to attract a buyer. Weeks later, its computer systems crashed during a planned technology upgrade, leading to the termination of chief executive officer Rania Llewellyn, the first woman to run a major Canadian-based bank.
At the time, Laurentian was halfway through a three-year strategic review implemented by Ms. Llewellyn, and analysts have raised questions about how bold or innovative the bank’s new plan would be compared with the one she began only a few years prior. Laurentian has been in a state of flux for several years. In 2020, former CEO François Desjardins was suddenly ousted after the bank abandoned an overhaul of its digital systems and branch network.
Ms. Llewellyn’s plan – launched in 2021 – aimed to present Laurentian as a more nimble alternative to Canada’s big banks. The strategy focused on improving performance by focusing on specialized sectors and simplifying the bank by revamping its technology and digital banking platforms through partnerships with external providers.
“One word that is important from this presentation is focus,” chief financial officer Yvan Deschamps said Friday in response to an analyst’s question. “That’s one thing that we see as different from an evolution of that last plan – it’s not trying to do everything for everyone.”
Laurentian had already made progress on the previous plan, increasing its commercial loan book to $17-billion from $14-billion and addressing gaps in its digital services for customers, such as launching the ability to pay by tapping a debit or credit card.
Mr. Provost said the new plan aims to streamline the bank in a faster, more targeted way.
Shares of Laurentian slumped Friday after the bank posted a second-quarter loss of $117.5-million, or $2.71 per share, compared with profit of $49.3-million or $1.11 in the same quarter last year.
The lender also booked major impairment and restructuring charges of $197-million, in part from cutting back on its corporate office premises in Toronto.
Laurentian’s stock tumbled 6.5 per cent in Toronto, underperforming the 0.5-per-cent rise of the S&P/TSX Composite Bank Index.
The bank has already started cutting back its operations. During its second-quarter conference call Friday morning, Mr. Provost said it had reduced its work force by nearly 4 per cent to 2,800 employees since the fall.
In mid-May, Laurentian cut jobs and eliminated its equity research unit following a “reallocation of company resources.” The bank also exited its retail investment brokerage business in April with the sale of $2-billion of assets under administration to Montreal-based financial services giant iA Financial Group.
By trimming its operations and bolstering its stronger-performing businesses, Laurentian plans to reduce its adjusted efficiency ratio – a key metric of productivity that measures expenses as a percentage of revenues – to about 60 per cent, a significant drop from its relatively high level of 74 per cent in the second quarter.
A key part of that hinges on expanding its commercial banking segment — the division where Mr. Provost has spent most of his time at Laurentian. The bank specializes in equipment and inventory financing – which includes U.S.-based Northpoint Commercial Finance, its fastest-growing division – and lending for commercial real estate lending and small and medium-sized business.
Laurentian intends to hire people with expertise in these specialized niches, diversify into related sectors, and strike partnerships, such as its financing deal with major PC maker Lenovo Group Ltd.
To fund these loan growth ambitions, Laurentian seeks to increase its deposit base by appealing to middle-class and younger customers through its personal banking unit. In the coming year, Mr. Provost said the bank plans to launch low- or no-fee products and enhance digital platforms to compete with rival banks such as EQ Bank, and no-fee chequing account providers Tangerine and Simplii Financial – which are owned by two of Canada’s largest lenders.
Meanwhile, the bank will need to invest heavily in modernizing and enhancing its technology platforms by eliminating the complexity of its systems and rolling out more of the digital offerings already available at its competitors.
“We made progress, but at the end of the day, I think we did too little,” Mr. Provost said. “We’ve remained too complex in terms of our product shelf, and for most of those products, we don’t have significant scale.”
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2024-05-31 23:21:41Z
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