DBRS Confirms Laurentian Bank, Long-Term Trend Remains Positive, Short-Term Trend Remains Stable

DBRS has today confirmed Laurentian Bank of Canada’s (Laurentian or the Bank), long-term ratings, including its Issuer Rating and Deposits & Senior Debt ratings, at BBB (high) and maintained the Positive trend. The Short-Term Instruments rating of R-1 (low) is also confirmed with a Stable trend. The ratings are supported by the Bank’s overall low-risk business profile, which is focused on retail lending funded by retail deposits, real estate and mid-market commercial financing, along with a mid-sized Montréal-based capital markets business. The Positive trend on the long-term ratings reflects DBRS’s view that Laurentian Bank has made gains in improving its earnings profile and increasing segment diversification, but its high cost structure and geographic diversification remain challenging. Resolution of the trend will depend on Laurentian Bank achieving efficiency improvements within the next year.

Laurentian’s improved earnings profile has contributed to its ability to sustain profitability from core businesses, despite a slowing Québec economy. Segment and geographic diversification continues to improve with the growth of B2B Bank (organically and through acquisitions). Notwithstanding, geographic concentration continues to be a challenge, with 62% of the loans based in Québec at the end of Q3 2013. The Bank has been able to generate consistently respectable levels of profitability in the face of maintaining conservative credit and financial risk profiles. There have been some gains made in Laurentian’s expense ratio from 2012 to the first nine months of 2013, but the cost structure remains high.

Notes:
The Cumulative Preferred Shares rating is notional as there are no outstanding shares.

All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodologies are Global Methodology for Rating Banks and Banking Organisations (June 2012), DBRS Criteria: Rating Bank Preferred Shares and Equivalent Hybrids (June 2009) and DBRS Criteria: Intrinsic and Support Assessments (February 2009), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.