Laurentian Bank Financial Group reported net income of
$41.3 million and diluted earnings per share of $0.90 for the
fourth quarter of 2019, compared with $50.8 million and $1.13 for
the fourth quarter of 2018. Return on common shareholders' equity
was 6.6% for the fourth quarter of 2019, compared with 8.4% for the
fourth quarter of 2018. On an adjusted basis, net income was $48.0
million and diluted earnings per share were $1.05 for the fourth
quarter of 2019, down 12% and 14% respectively, compared with $54.3
million and $1.22 for the fourth quarter of 2018. Adjusted return
on common shareholders' equity was 7.8% for the fourth quarter of
2019, compared with 9.0% a year ago. Reported results include
adjusting items, as detailed in the Non-GAAP and Key Performance
Measures section.
For the year ended October 31, 2019, net income
was $172.7 million and diluted earnings per share were $3.77,
compared with $224.6 million and $5.10 for the year ended October
31, 2018. Return on common shareholders' equity was 7.0% for the
year ended October 31, 2019, compared with 9.7% for the year ended
October 31, 2018. On an adjusted basis, net income was
$193.2 million and diluted earnings per share were $4.26 for
the year ended October 31, 2019, down 20% and 23% respectively,
compared with $241.6 million and $5.51 for the year ended
October 31, 2018. Adjusted return on common shareholders' equity
was 7.9% for the year ended October 31, 2019, compared with 10.5%
for the same period a year ago. Reported results include adjusting
items, as detailed in the Non-GAAP and Key Performance Measures
section.
Highlights
|
For the three months ended |
|
For the year ended |
As at
or for the periods presented (Thousands of Canadian dollars, except
when noted) |
October 31 2019 |
|
|
July 31 2019 |
|
|
Variance |
|
|
October 31 2018 |
|
|
Variance |
|
|
October 31 2019 |
|
|
October 31 2018 |
|
|
Variance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
results |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue |
$ |
241,638 |
|
|
$ |
244,653 |
|
|
(1 |
)% |
|
$ |
255,857 |
|
|
(6 |
)% |
|
$ |
968,510 |
|
|
$ |
1,043,410 |
|
|
(7 |
)% |
Net income |
$ |
41,343 |
|
|
$ |
47,798 |
|
|
(14 |
)% |
|
$ |
50,801 |
|
|
(19 |
)% |
|
$ |
172,710 |
|
|
$ |
224,646 |
|
|
(23 |
)% |
Adjusted net income(1) |
$ |
47,966 |
|
|
$ |
51,882 |
|
|
(8 |
)% |
|
$ |
54,344 |
|
|
(12 |
)% |
|
$ |
193,227 |
|
|
$ |
241,560 |
|
|
(20 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
performance |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share |
$ |
0.90 |
|
|
$ |
1.05 |
|
|
(14 |
)% |
|
$ |
1.13 |
|
|
(20 |
)% |
|
$ |
3.77 |
|
|
$ |
5.10 |
|
|
(26 |
)% |
Adjusted diluted earnings per share(1) |
$ |
1.05 |
|
|
$ |
1.15 |
|
|
(9 |
)% |
|
$ |
1.22 |
|
|
(14 |
)% |
|
$ |
4.26 |
|
|
$ |
5.51 |
|
|
(23 |
)% |
Return on common shareholders' equity |
6.6 |
% |
|
7.8 |
% |
|
|
|
8.4 |
% |
|
|
|
7.0 |
% |
|
9.7 |
% |
|
|
Adjusted return on common shareholders' equity(1) |
7.8 |
% |
|
8.5 |
% |
|
|
|
9.0 |
% |
|
|
|
7.9 |
% |
|
10.5 |
% |
|
|
Net interest margin |
1.84 |
% |
|
1.85 |
% |
|
|
|
1.77 |
% |
|
|
|
1.81 |
% |
|
1.78 |
% |
|
|
Efficiency ratio |
74.8 |
% |
|
72.7 |
% |
|
|
|
69.0 |
% |
|
|
|
75.0 |
% |
|
68.7 |
% |
|
|
Adjusted efficiency ratio(1) |
71.2 |
% |
|
70.6 |
% |
|
|
|
67.2 |
% |
|
|
|
72.3 |
% |
|
66.7 |
% |
|
|
Operating leverage |
(2.9 |
)% |
|
4.9 |
% |
|
|
|
3.9 |
% |
|
|
|
(8.5 |
)% |
|
0.7 |
% |
|
|
Adjusted operating leverage(1) |
(0.9 |
)% |
|
4.0 |
% |
|
|
|
3.4 |
% |
|
|
|
(7.8 |
)% |
|
(0.9 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
position ($ millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans and acceptances |
$ |
33,667 |
|
|
$ |
33,887 |
|
|
(1 |
)% |
|
$ |
34,395 |
|
|
(2 |
)% |
|
|
|
|
|
|
Total assets |
$ |
44,353 |
|
|
$ |
44,337 |
|
|
— |
% |
|
$ |
45,895 |
|
|
(3 |
)% |
|
|
|
|
|
|
Deposits |
$ |
25,653 |
|
|
$ |
26,616 |
|
|
(4 |
)% |
|
$ |
28,007 |
|
|
(8 |
)% |
|
|
|
|
|
|
Common shareholders' equity |
$ |
2,303 |
|
|
$ |
2,293 |
|
|
— |
% |
|
$ |
2,260 |
|
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key growth
drivers ($ millions) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans to business customers |
$ |
12,966 |
|
|
$ |
12,868 |
|
|
1 |
% |
|
$ |
12,036 |
|
|
8 |
% |
|
|
|
|
|
|
Loans to personal customers(2) |
$ |
20,700 |
|
|
$ |
21,019 |
|
|
(2 |
)% |
|
$ |
22,359 |
|
|
(7 |
)% |
|
|
|
|
|
|
Deposits from clients(3) |
$ |
22,518 |
|
|
$ |
22,881 |
|
|
(2 |
)% |
|
$ |
24,410 |
|
|
(8 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basel III
regulatory capital ratios |
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Equity Tier 1 (CET1) capital ratio(4) |
9.0 |
% |
|
9.0 |
% |
|
|
|
9.0 |
% |
|
|
|
|
|
|
|
|
CET1 risk-weighted assets ($ millions) |
$ |
20,407 |
|
|
$ |
20,445 |
|
|
|
|
$ |
20,239 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Credit
quality |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross impaired loans as a % of loans and acceptances |
0.52 |
% |
|
0.59 |
% |
|
|
|
0.53 |
% |
|
|
|
|
|
|
|
|
Net impaired loans as a % of loans and acceptances |
0.40 |
% |
|
0.45 |
% |
|
|
|
0.42 |
% |
|
|
|
|
|
|
|
|
Provision for credit losses as a % of average loans and
acceptances |
0.15 |
% |
|
0.14 |
% |
|
|
|
0.20 |
% |
|
|
|
0.13 |
% |
|
0.12 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common share
information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Closing share price(5) |
$ |
45.30 |
|
|
$ |
45.41 |
|
|
— |
% |
|
$ |
41.56 |
|
|
9 |
% |
|
$ |
45.30 |
|
|
$ |
41.56 |
|
|
9 |
% |
Price / earnings ratio (trailing four quarters) |
12.0 |
x |
|
11.3 |
x |
|
|
|
8.1 |
x |
|
|
|
12.0 |
x |
|
8.1 |
x |
|
|
Book value per share |
$ |
54.02 |
|
|
$ |
54.00 |
|
|
— |
% |
|
$ |
53.72 |
|
|
1 |
% |
|
$ |
54.02 |
|
|
$ |
53.72 |
|
|
1 |
% |
Dividends declared per share |
$ |
0.66 |
|
|
$ |
0.66 |
|
|
— |
% |
|
$ |
0.64 |
|
|
3 |
% |
|
$ |
2.62 |
|
|
$ |
2.54 |
|
|
3 |
% |
Dividend yield |
5.8 |
% |
|
5.8 |
% |
|
|
|
6.2 |
% |
|
|
|
5.8 |
% |
|
6.1 |
% |
|
|
Dividend payout ratio |
73.5 |
% |
|
62.7 |
% |
|
|
|
56.5 |
% |
|
|
|
69.3 |
% |
|
49.6 |
% |
|
|
Adjusted dividend payout ratio(1) |
62.6 |
% |
|
57.4 |
% |
|
|
|
52.6 |
% |
|
|
|
61.4 |
% |
|
45.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
information |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of full-time equivalent employees |
3,256 |
|
|
3,318 |
|
|
|
|
3,642 |
|
|
|
|
|
|
|
|
|
Number of Financial Clinics |
88 |
|
|
88 |
|
|
|
|
96 |
|
|
|
|
|
|
|
|
|
Number of automated banking machines(6) |
197 |
|
|
206 |
|
|
|
|
222 |
|
|
|
|
|
|
|
|
|
(1) |
Refer to the Non-GAAP Measures section. |
(2) |
Including loans to personal customers and residential mortgage
loans. |
(3) |
Including personal deposits from Financial Clinics, Advisors
and Brokers, Digital direct to customers offering and Business
customers. |
(4) |
Using the Standardized Approach in determining credit risk and
operational risk. |
(5) |
Toronto Stock Exchange (TSX) closing market price. |
(6) |
Through the Bank's partnership with THE EXCHANGE® Network,
customers have access to more than 3,600 automated banking machines
in Canada. |
Medium-Term Performance
Targets
The following table shows the medium-term
performance targets for the Bank and the Bank’s performance for
2019. Considering the key achievements of 2019 with regard to
the core banking system, the transition of all our traditional
branches into 100% Advice Financial Clinics, the launch of our
digital offering and the ratification of the new collective
agreement, we remain confident that we can achieve our targets.
However, given 2019's labor relations environment and the impact on
the current year performance as described below, we are delaying
them by one year to 2022. In addition, growth drivers were adjusted
to reflect our new business segmentation. These medium-term
performance targets depend on a number of assumptions, as detailed
in our 2019 Annual Report under the heading "Outlook".
2021
MEDIUM-TERM PERFORMANCE TARGETS AND 2019 PERFORMANCE |
|
|
|
|
|
|
|
(Billions of Canadian dollars, except per share and percentage
amounts) |
|
2021 Mid-term Targets(1) |
|
|
2019 |
|
|
2018 |
|
|
Variance 2019/2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted financial
performance(2) |
|
|
|
|
|
|
|
|
|
|
Adjusted return on common shareholders’ equity |
|
Narrow gap to 250 bps(3) |
|
|
7.9 |
% |
|
10.5 |
% |
|
Current gap at 790 bps |
|
|
Adjusted efficiency ratio |
|
<63 |
% |
|
72.3 |
% |
|
66.7 |
% |
|
5.6 |
% |
|
Adjusted diluted earnings per share |
|
Grow by 5% to 10% annually |
|
|
$ |
4.26 |
|
|
$ |
5.51 |
|
|
(23 |
)% |
|
Adjusted operating leverage |
|
Positive |
|
|
(7.8 |
)% |
|
(0.9 |
)% |
|
n.m. |
|
|
|
|
|
|
|
|
|
|
|
|
|
Key growth
drivers |
|
|
|
|
|
|
|
|
|
|
Loans to Business customers |
|
Grow to $16.0B |
|
|
$ |
13.0 |
|
|
$ |
12.0 |
|
|
8 |
% |
|
Residential mortgage loans |
|
Grow to $19.0B |
|
|
$ |
16.0 |
|
|
$ |
17.0 |
|
|
(6 |
)% |
|
Deposits from clients(4) |
|
Grow to $28.0B |
|
|
$ |
22.5 |
|
|
$ |
24.4 |
|
|
(8 |
)% |
|
(1) |
Mid-term targets, as set out in the 2018 Annual Report. |
(2) |
The 2021 financial objectives are based on non-GAAP measures that
exclude adjusting items related to restructuring plans and to
business combinations. Refer to the Non-GAAP and Key
Performance Measures section. |
(3) |
Compared to the major Canadian banks, based on the Bank using the
AIRB approach in determining credit risk and the Standardized
approach in determining operational risk. The current gap is based
on the average of major Canadian banks for the nine months ended
July 31, 2019. |
(4) |
Including deposits from Financial Clinics, Advisors and Brokers and
Business customers. |
2019 Performance
Throughout the year, as we advanced on our
strategic initiatives, we maintained an elevated capital position.
In addition, during the first half of the year, we incurred
significant costs to mitigate risks associated with a possible
labour conflict, including from holding a higher level of liquidity
as well as from additional legal and labor related expenses. The
uncertainty related to our labour relations environment hampered
business development activities and postponed process efficiency
measures. The signature of the new collective agreement now
provides us with the right conditions to resume growth in the
Personal segment. Our Business Services segment, on the other hand,
posted another strong performance. Our solid expertise and
relationships in Real Estate Financing, Commercial Banking and
Equipment and Inventory Financing are yielding results. Loans to
Business customers increased by 8%, or 9% adjusting for the sale of
a $105 million loan portfolio in the first quarter of 2019,
generally in line with the objective we had set last year. This
strong growth contributed positively to earnings. At the same time,
revenues from our Institutional segment were impacted by the
unstable market environment.
As a result, profitability metrics for 2019 were
impacted. Adjusted return on common shareholders’ equity was 7.9%
in 2019 compared with 10.5% in fiscal 2018, and the ROE gap
relative to the major Canadian banks widened.The adjusted
efficiency ratio of 72.3% for 2019 increased compared to the 2018
level given lower revenues and, to a lesser extent, additional
operating costs. Adjusted diluted earnings per share of $4.26 for
2019 was down 23% year-over-year, essentially for the same reasons
as noted above.
2022 MEDIUM-TERM
PERFORMANCE TARGETS |
|
|
|
|
|
|
(Billions of Canadian dollars, except per share and percentage
amounts) |
|
2022 Mid-term Targets |
|
|
2019 |
|
|
|
|
|
|
|
|
|
Adjusted financial
performance(1) |
|
|
|
|
|
|
Adjusted return on common shareholders’ equity |
|
Narrow gap to 250 bps |
(2) |
|
7.9 |
% |
|
Adjusted efficiency ratio |
|
<63 |
% |
|
72.3 |
% |
|
Adjusted diluted earnings per share |
|
Grow by 5% to 10% annually |
|
|
$ |
4.26 |
|
|
Adjusted operating leverage |
|
Positive |
|
|
(7.8 |
)% |
|
|
|
|
|
|
|
|
Key growth drivers |
|
|
|
|
|
|
Loans to Business customers |
|
Grow to $17.5 B |
|
|
$ |
13.0 |
|
|
Loans to Personal customers(3) |
|
Grow to $22.5 B |
|
|
$ |
20.7 |
|
|
Deposits from clients(4) |
|
Grow to $26.0 B |
|
|
$ |
22.5 |
|
|
(1) |
The 2022 financial objectives are based on non-GAAP measures that
exclude adjusting items related to restructuring plans and to
business combinations. Refer to the Non-GAAP and Key
Performance Measures section. |
(2) |
Compared to the major Canadian banks, based on the Bank using the
AIRB approach in determining credit risk and the Standardized
approach in determining operational risk. |
(3) |
Including personal loans and residential mortgage loans. |
(4) |
Including personal deposits from Financial Clinics, Advisors and
Brokers, Digital direct to customers offering and Business
customers. |
New Medium-Term Targets
Performance Targets
As shown in the Table above, the ROE objective
remains to narrow the gap with the major banks to 250 bps in 2022.
As we plan to adopt the AIRB approach to credit risk in 2022, this
gap reflects the initial benefit of gradually redeploying capital.
We are also targeting an efficiency ratio of below 63% in 2022
versus last year's plan in 2021, and we are continuing to aim for
positive operating leverage. Lastly, we are working toward an
adjusted diluted earnings per share growth objective, over the
medium-term, of 5% to 10% annually. We remain as committed as ever
to execute our strategic plan and work toward our ultimate goal -
to improve the Bank’s performance and achieve a profitability level
similar to that of the major Canadian banks.
Growth Targets
Business Services is expected to continue its
profitable growth. As shown in the Table above, loans to Business
customers are now projected to reach $17.5 billion in 2022. This
reflects our decision to evolve the portfolio toward
higher-yielding loans to Business customers and the opportunities
that we have as we leverage our investments. This represents a
future annual growth of 10% over the next 3 years. Furthermore, in
regards to our new Personal segment and in line with our objective
to resume growth in personal loans and mortgages, we are
introducing a target for growth in loans to Personal customers at
$22.5 billion in 2022. Lastly, we are reviewing our objective for
growth in deposits from clients to $26.0 billion in 2022.
Strategic Plan
In November 2015, we launched a 7-year plan
focused on becoming a better and different bank to address
advancements in technology, globalization of banking and better
meet our customers' needs. To achieve this, we outlined three
strategic objectives: Build a stronger foundation; Invest in
profitable growth; and Improve financial performance. We strive to
execute on these strategic objectives with our ultimate goal – to
improve the Bank’s performance and achieve a profitability level
similar to that of the major Canadian banks once the AIRB approach
is fully implemented. In that regard, 2019 remained a year of
investments in our people, processes and technology. Throughout the
year, we made important progress on our key initiatives, as
detailed below. We also executed on our business plan by delivering
strong profitable growth in equipment and inventory financing
activities, as well as in real estate financing. We will continue
to grow these segments to improve the Bank's profitability and
diversification.
New Collective Agreement
At the beginning of the year, to move the
strategic plan forward and improve the labour relations environment
for the long term, we prioritize resources to resolve the
collective agreement situation. From our perspective, this became
an prerequisite to improve our ability to serve customers and
implement process efficiencies. The signature of a new collective
agreement in March 2019, along with the change in composition of
the collective bargaining unit, which is now covering
Quebec-based-customer-facing positions almost exclusively,
strengthens our foundation and is expected to improve the Bank's
financial performance. In late April, we also began to
optimize certain back-office, credit and collection functions which
mainly support Financial Clinics. Concurrently, we entered into
certain outsourcing arrangements to generate efficiencies. In the
third quarter of 2019, we reduced our liquidity levels,
reduced legal expenses and other labour related costs and re-tasked
team members to revenue generating priorities. We previously
indicated that on an annual basis, carrying the right level of
liquidity would improve net interest income by $7.0 million and
reducing legal and labor related expenses would reduce non-interest
expenses by $3 million. These items were realized during the
second half of 2019.
Update on key initiatives
Core-banking system
The Bank is well advanced in its multi-year plan
to replace its core-banking system. The new account management
platform provides the necessary tools to improve our product
offering and advance our transformation to digital banking. During
the transition period, we are running concurrent platforms for our
core-banking systems. The program began in 2016 with the first
product and account migrations occurring in November 2017 and
September 2018 for our investment loan portfolio and for deposit
products sourced through the Advisors and Brokers channel,
respectively. The remaining products from the adviser and broker
channel and most Business Services loans were migrated onto the new
platform at the outset of 2019, marking the conclusion of Phase 1
of the program. Phase 2 of the program will encompass all accounts
and products from our Financial Clinics, as well as the few
remaining Business Services products. The target for completion of
Phase 2 is December 2020, at which time, 100% of all products will
have been migrated from the old banking platform to our new core
banking platform. From this point on, we will be able to start
decommissioning the legacy system.
The total program cost is expected to reach
approximately $200 million, relatively in line with initial
estimates. As we have completed Phase 1, which encompasses the
foundation for most of the Bank’s operations, approximately $180
million has been invested.
Transition of Financial Clinic operations and efficiency
measures
At the beginning of fiscal year 2016, we announced our strategic
plan, which included optimizing and simplifying our branch network
in Quebec. This strategy led us to complete, in September 2019, the
transition of all our traditional branches into 100% Advice
Financial Clinics, where clients obtain financial advice. For basic
transactions, such as bill payments, deposits, withdrawals and fund
transfers, customers have 24/7 access to electronic and web-base
platforms. The shift to this new approach has been carefully
planned with all our customers to ensure a smooth transition to our
new model. With this milestone behind us, our Financial Clinics in
Quebec are starting a new and promising phase that will be driven
by growth. Staff are engaged to succeed in the pursuit of our
mission to help our customers improve their financial health.
At the end of February 2019, we announced measures to further
lower costs, including headcount reductions through attrition,
early retirement and targeted job reductions. As we converted our
traditional branches to Financial Clinics and from the optimization
of certain back-office functions, we achieved the majority of the
expected cost reductions. The remaining synergies and cost
reductions are expected to be gradually delivered through the end
of the first half of 2020. Once fully implemented, these measures
are expected to generate total savings between $15 to $20 million
on an annual basis.
Digital offering
Once we completed Phase 1 of the implementation of our
core-banking system in January 2019, we focused on the development
of our new Digital direct to customers offering. This new offering
was gradually launched to advisors and brokers in the fourth
quarter of 2019. Furthermore, at the beginning of fiscal 2020, we
launched a Digital direct to customers offering under the LBC
Digital brand. In the coming year, we plan to further enhance our
customer experience by adding functionalities, transactions and
products to the offering.
Advanced Internal Rating-Based approach to credit
risk
As part of our plan to improve the Bank’s foundation, we are
pursuing our initiative to adopt the AIRB approach to credit risk.
Once fully implemented, it will enable the Bank to optimize
regulatory capital, improve profitability and provide a level
playing field for credit underwriting activities, as the Bank will
be able to calculate its capital requirements on the same basis as
its industry peers.
In late 2013, the Bank made the decision to
suspend its AIRB development and implementation due to the
uncertainty regarding the AIRB approach at the international level.
However, several AIRB adoption building blocks were integrated into
the Bank’s operations and systems and are contributing to enhance
the Bank’s processes. Given positive indications, the Bank renewed
its commitment to pursuing the AIRB project in early 2016 and
defined a comprehensive program to realize the remaining steps
toward the adoption of the AIRB approach. The Bank’s objective is,
subject to regulatory approval, to obtain the AIRB accreditation in
2022.
Total AIRB program cost is expected to reach
$105 million, of which approximately $76 million has been invested
to date.
Consolidated Results
Non-GAAP measures
Management uses both generally accepted
accounting principles (GAAP) and non-GAAP measures to assess the
Bank’s performance. Results prepared in accordance with GAAP are
referred to as “reported” results. Non-GAAP measures presented
throughout this document are referred to as “adjusted” measures and
exclude amounts designated as adjusting items. Adjusting items
relate to restructuring plans and to business combinations and have
been designated as such as management does not believe they are
indicative of underlying business performance. Non-GAAP measures
are considered useful to readers in obtaining a better
understanding of how management analyzes the Bank’s results and in
assessing underlying business performance and related trends.
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 issuers.
The following table shows adjusting items and
their impact on reported results.
IMPACT OF ADJUSTING
ITEMS ON REPORTED RESULTS |
|
|
|
|
|
|
|
|
|
|
For the three months ended |
|
For the year ended |
In
thousands of Canadian dollars, except per share amounts
(Unaudited) |
October 31 2019 |
|
|
July 31 2019 |
|
|
October 31 2018 |
|
|
October 31 2019 |
|
|
October 31 2018 |
|
Impact on income
before income taxes |
|
|
|
|
|
|
|
|
|
Reported income before income taxes |
$ |
47,926 |
|
|
$ |
54,359 |
|
|
$ |
61,325 |
|
|
$ |
196,165 |
|
|
$ |
280,333 |
|
Adjusting items,
before income taxes |
|
|
|
|
|
|
|
|
|
Impairment and restructuring
charges(1) |
|
|
|
|
|
|
|
|
|
Severance charges |
1,735 |
|
|
972 |
|
|
925 |
|
|
6,474 |
|
|
925 |
|
Other restructuring charges |
3,696 |
|
|
830 |
|
|
107 |
|
|
6,205 |
|
|
5,019 |
|
|
5,431 |
|
|
1,802 |
|
|
1,032 |
|
|
12,679 |
|
|
5,944 |
|
Items related to business
combinations |
|
|
|
|
|
|
|
|
|
Amortization of net premium on purchased financial
instruments(2) |
284 |
|
|
336 |
|
|
495 |
|
|
1,452 |
|
|
2,296 |
|
Amortization of acquisition-related intangible assets(3) |
3,416 |
|
|
3,426 |
|
|
3,366 |
|
|
13,711 |
|
|
12,705 |
|
Other costs related to business combinations(4) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,357 |
|
|
3,700 |
|
|
3,762 |
|
|
3,861 |
|
|
15,163 |
|
|
17,358 |
|
|
9,131 |
|
|
5,564 |
|
|
4,893 |
|
|
27,842 |
|
|
23,302 |
|
Adjusted income before income taxes |
$ |
57,057 |
|
|
$ |
59,923 |
|
|
$ |
66,218 |
|
|
$ |
224,007 |
|
|
$ |
303,635 |
|
Impact on net
income |
|
|
|
|
|
|
|
|
|
Reported net income |
$ |
41,343 |
|
|
$ |
47,798 |
|
|
$ |
50,801 |
|
|
$ |
172,710 |
|
|
$ |
224,646 |
|
Adjusting items, net
of income taxes |
|
|
|
|
|
|
|
|
|
Impairment and restructuring
charges(1) |
|
|
|
|
|
|
|
|
|
Severance charges |
1,274 |
|
|
713 |
|
|
678 |
|
|
4,752 |
|
|
678 |
|
Other restructuring charges |
2,712 |
|
|
610 |
|
|
78 |
|
|
4,554 |
|
|
3,679 |
|
|
3,986 |
|
|
1,323 |
|
|
756 |
|
|
9,306 |
|
|
4,357 |
|
Items related to business
combinations |
|
|
|
|
|
|
|
|
|
Amortization of net premium on purchased financial
instruments(2) |
209 |
|
|
247 |
|
|
364 |
|
|
1,067 |
|
|
1,688 |
|
Amortization of acquisition-related intangible assets(3) |
2,428 |
|
|
2,514 |
|
|
2,423 |
|
|
10,144 |
|
|
9,143 |
|
Other costs related to business combinations(4) |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
1,726 |
|
|
2,637 |
|
|
2,761 |
|
|
2,787 |
|
|
11,211 |
|
|
12,557 |
|
|
6,623 |
|
|
4,084 |
|
|
3,543 |
|
|
20,517 |
|
|
16,914 |
|
Adjusted net income |
$ |
47,966 |
|
|
$ |
51,882 |
|
|
$ |
54,344 |
|
|
$ |
193,227 |
|
|
$ |
241,560 |
|
Impact on diluted
earnings per share |
|
|
|
|
|
|
|
|
|
Reported diluted earnings per share |
$ |
0.90 |
|
|
$ |
1.05 |
|
|
$ |
1.13 |
|
|
$ |
3.77 |
|
|
$ |
5.10 |
|
Adjusting items |
|
|
|
|
|
|
|
|
|
Impairment and restructuring charges |
0.09 |
|
|
0.03 |
|
|
0.02 |
|
|
0.22 |
|
|
0.11 |
|
Items related to business combinations |
0.06 |
|
|
0.07 |
|
|
0.07 |
|
|
0.27 |
|
|
0.30 |
|
|
0.15 |
|
|
0.10 |
|
|
0.08 |
|
|
0.49 |
|
|
0.41 |
|
Adjusted diluted earnings per share(5) |
$ |
1.05 |
|
|
$ |
1.15 |
|
|
$ |
1.22 |
|
|
$ |
4.26 |
|
|
$ |
5.51 |
|
(1) |
Restructuring charges mainly result from the optimization of our
Financial Clinic operations and the related streamlining of certain
back-office and corporate functions. Restructuring charges also
result from the reorganization of retail brokerage activities and
other measures aimed at improving efficiency as detailed in the
Efficiency measure topic in the "Outlook" section. Restructuring
charges include severance charges, salaries, provisions related to
the termination of lease contracts, communication expenses and
professional fees. Restructuring charges are included on the
Non-interest expenses line item. For the year ended October 31,
2019, severance charges are presented net of a $4.8 million
curtailment gain on pension plans and other post-employment
benefits obligations, as well as of reversals of provisions
amounting to $3.5 million. |
(2) |
Amortization of net premium on purchased financial instruments
results from a one-time gain on a business acquisition in 2012 and
is included on the Amortization of net premium on purchased
financial instruments line item. |
(3) |
Amortization of acquisition-related intangible assets results from
business acquisitions in 2016 and 2017 and is included on the
Non-interest expenses line-item. |
(4) |
Other costs related to business combinations result from the
transaction and integration of business acquisitions in 2016 and
are included on the Non-interest expenses line item. |
(5) |
The impact of adjusting items on a per share basis may not add due
to rounding. |
Three months ended October 31, 2019
compared with three months ended October 31, 2018
Net income was $41.3 million or $0.90 diluted
per share for the fourth quarter of 2019, compared with $50.8
million or $1.13 diluted per share for the fourth quarter of
2018. Adjusted net income was $48.0 million for the fourth quarter
of 2019, down 12% from $54.3 million for the fourth
quarter of 2018, while adjusted diluted earnings per share was
$1.05, down 14% compared with $1.22 for the fourth quarter of 2018.
The decrease in earnings per share for the fourth quarter of 2019
is further detailed below.
Total revenue
Total revenue decreased by $14.2 million or
6% to $241.6 million for the fourth quarter of 2019 from $255.9
million for the fourth quarter of 2018. This decrease was driven by
lower other income.
Net interest income was $173.2
million for the fourth quarter of 2019, which is in line with the
fourth quarter of 2018. Net interest margin as a percentage of
average earning assets stood at 1.84% for the fourth quarter of
2019, an increase of 7 basis points compared with the fourth
quarter of 2018, due to the combined effect of an improving loan
portfolio mix, a reduction in liquidity and an improvement in the
Prime/BA spread.
Other income decreased by
$14.3 million to $68.4 million for the fourth quarter of 2019,
compared with $82.7 million for the fourth quarter of 2018.
Other income for the fourth quarter of 2019 was impacted by lower
capital market related revenues, including a $3.8 million loss
resulting from a revaluation of trading securities, whereas other
income for the fourth quarter of 2018 included gains of $4.9
million on available-for-sale securities, no longer available as a
result of the adoption of IFRS 9 which eliminates gains on
available-for-sale equity securities in other income and drove
changes to our portfolios' compositions. Fees and commissions on
loans and deposits which include lending fees, service charges and
card service revenues, also decreased by $3.0 million, mainly
as a result of lower lending fees given the evolving mix towards
commercial loans favoring higher margins.
Amortization of net premium on purchased financial
instruments
For the fourth quarter of 2019, amortization of net premium on
purchased financial instruments amounted to $0.3 million
compared with $0.5 million for the fourth quarter of 2018.
Refer to the Consolidated Financial Statements for additional
information.
Provision for credit losses
The provision for credit losses amounted to $12.6 million for
the fourth quarter of 2019 compared with $17.6 million for the
fourth quarter of 2018. Credit losses for the fourth quarter of
2018 were impacted by a $10.0 million loss on a single syndicated
commercial exposure. Credit losses for the fourth quarter of 2019
were impacted, in part, by higher losses on personal loans. The
overall level of losses remains low and is commensurate with the
gradual increase in higher margin loans.
Non-interest expenses
Non-interest expenses amounted to $180.8 million
for the fourth quarter of 2019, an increase of $4.4 million
compared with the fourth quarter of 2018. Adjusted non-interest
expenses of $172.0 million for the fourth quarter of 2019 were
relatively unchanged compared to the fourth quarter of 2018.
Salaries and employee benefits
decreased by $3.0 million or 3% to $84.8 million for the fourth
quarter of 2019, compared with the fourth quarter of 2018, mainly
due to lower performance-based compensation, a favourable
adjustment to pension costs and lower headcount.
Premises and technology costs
increased by $0.7 million or 1% to $49.0 million for the fourth
quarter of 2019 compared with the fourth quarter of 2018, mainly as
a result of higher technology costs and higher amortization expense
for the completed Phase 1 of the core-banking system program,
partly offset by lower rent expenses.
Other non-interest expenses
amounted to $41.6 million for the fourth quarter of 2019, an
increase of $2.4 million or 6% compared with the fourth quarter of
2018. This increase was mainly due to higher advertising and
business development expenses as we developed our strategy to
support the launch of our new digital offering.
Restructuring charges amounted
to $5.4 million for the fourth quarter of 2019 and mainly
included expenses for the optimization of the Financial Clinic
operations and the related streamlining of certain back-office and
corporate functions. Restructuring charges for the fourth quarter
of 2019 also resulted from other measures aimed at improving
efficiency as detailed in the Strategic Plan section above.
Efficiency ratio
The adjusted efficiency ratio was 71.2% for the
fourth quarter of 2019, compared with 67.2% for the fourth quarter
of 2018, mainly as a result of lower revenue. The adjusted
operating leverage was also negative year-over-year The efficiency
ratio, on a reported basis, was 74.8% for the fourth quarter of
2019, compared with 69.0% for the fourth quarter of 2018,
essentially for the same reasons.
Income taxes
For the quarter ended October 31, 2019, income
tax expense was $6.6 million and the effective tax rate was 13.7%.
The lower tax rate, compared to the statutory rate, mainly resulted
from the lower taxation level on revenues from foreign operations,
as well as from the favourable effect of holding investments in
Canadian securities that generate non-taxable dividend income. For
the quarter ended October 31, 2018, income tax expense was $10.5
million and the effective tax rate was 17.2%. The lower tax
rate, compared to the statutory rate, resulted from the same
factors as noted above.
Three months ended October 31, 2019
compared with three months ended July 31, 2019
Net income was $41.3 million or $0.90 diluted
per share for the fourth quarter of 2019, compared with $47.8
million or $1.05 diluted per share for the third quarter of
2019. Adjusted net income was $48.0 million or
$1.05 diluted per share for the fourth quarter of 2019,
compared with $51.9 million or $1.15 diluted per share for the
third quarter of 2019.
Total revenue decreased by $3.0 million to
$241.6 million for the fourth quarter of 2019, compared with $244.7
million for the previous quarter. Net interest income
decreased by $2.8 million sequentially to $173.2 million. The
third quarter benefitted from seasonal mortgage prepayments while
the fourth quarter was impacted by a lower average loan volume. Net
interest margin stood at 1.84% for the fourth quarter of 2019, a
decrease of 1 basis point compared with the third quarter of 2019
due to lower mortgage prepayments.
Other income was $68.4 million for the fourth
quarter of 2019, which is comparable to the previous quarter's
$68.6 million. The fourth quarter 2019 included a $3.8 million loss
resulting from a revaluation of trading securities, which was
offset by overall improvements in other brokerage operations.
The line item “Amortization of net premium on
purchased financial instruments” amounted to $0.3 million for the
fourth quarter of 2019, essentially unchanged from the third
quarter of 2019.
Provision for credit losses totalled $12.6
million for the fourth quarter of 2019, a $0.5 million
increase compared with $12.1 million for the third quarter of
2019. Refer to Note 7 to the annual consolidated financial
statements for additional information.
Non-interest expenses increased by $3.0 million
to $180.8 million for the fourth quarter of 2019 from $177.9
million in the third quarter of 2019. Adjusted non-interest
expenses decreased by $0.6 million and amounted to $172.0 million
in the current quarter, compared with $172.6 million in the third
quarter of 2019. Salaries and employee benefits decreased by $5.3
million due to a favorable adjustment to pension cost and
seasonally lower payroll charges, as well as a lower headcount. The
decrease in Salaries and employee benefits was partly offset by a
$4.4 million increase in Other expenses mainly due to higher
advertising and business development expenses to support the launch
of our new digital offering.
Financial Condition
As at October 31, 2019, total assets amounted to
$44.4 billion, a 3% decrease compared with $45.9 billion as at
October 31, 2018. This mainly reflects a decrease in
liquid assets of $1.0 billion, as the new labor relations
environment allowed us to reduce liquidity as of the end of the
second quarter. Commercial loans increased as a result of our
efforts to optimize capital allocation and focus on higher-yielding
loans. Lower personal and residential mortgage loans also
contributed to the decrease as explained below.
Liquid assets
Liquid assets consist of cash, deposits with
banks, securities and securities purchased under reverse repurchase
agreements. As at October 31, 2019, these assets totalled $9.3
billion, a decrease of $1.0 billion compared with $10.2 billion as
at October 31, 2018.
Over the past year, we continued to prudently
manage the level of liquid assets as we are progressing on our
various initiatives. The Bank benefits from well-diversified
funding sources and the current level of cash resources is
sufficient to meet obligations, under both normal and stressed
conditions.
Loans
Loans and bankers’ acceptances, net of
allowances, stood at $33.6 billion as at October 31, 2019,
down $0.7 billion or 2% from October 31, 2018. This
is consistent with the continued optimization of our portfolio mix
aimed at improving capital allocation and returns on risk-weighted
assets. Variances are further explained by the items outlined
below.
Personal loans amounted to $4.7 billion and
decreased by $0.7 billion or 13% since
October 31, 2018, mainly as a result of the continued
reduction in the investment loan portfolio, reflecting an ongoing
consumer behavior to reduce leverage.
Residential mortgage loans stood at $16.0
billion as at October 31, 2019, a decrease of $0.9
billion or 6% year-over-year. This mostly reflects a gradual
decrease in origination and a focus on higher-yielding commercial
loans to optimize product mix. The decrease was partly offset by
the acquisition of mortgage loans originated by third-parties as
part of our program to optimize the usage of National Housing Act
mortgage-backed securities (NHA MBS) allocations.
Commercial loans and acceptances amounted to
$13.0 billion as at October 31, 2019, up 8% since
October 31, 2018. This increase is mainly due to inventory
financing volumes through NCF, as well as to equipment financing
and real estate financing loans. At the beginning of the year, we
sold lower-yielding commercial loans amounting to
$105 million, which concluded the realignment of our
commercial loan portfolio. As a result, the commercial loan
portfolio increased by 9% net of loan sales since October 31,
2018.
Other assets
Other assets were essentially unchanged compared
with October 31, 2018 and stood at $1.5 billion as at
October 31, 2019. They mainly included cheques and other
items in transit, software and other intangible assets,
derivatives, as well as goodwill.
Liabilities
Deposits decreased by $2.4 billion or 8% to
$25.7 billion as at October 31, 2019 compared with $28.0
billion as at October 31, 2018 mainly given the reduction
in liquidity following the ratification of the new collective
agreement mid-year, and as we increased our funding through
securitization. Personal deposits stood at $19.7 billion as at
October 31, 2019, down $1.2 billion compared with
October 31, 2018 driven by lower term deposits sourced through
the Advisors and Brokers channel. Business and other deposits
decreased by $1.1 billion to $5.9 billion over the same
period, mostly in institutional funding. Personal deposits
represented 77% of total deposits as at October 31, 2019,
compared with 75% as at October 31, 2018, and contributed to
our good liquidity position.
Debt related to securitization activities
increased by $1.1 billion or 14% compared with
October 31, 2018 and stood at $8.9 billion as at
October 31, 2019. Since the beginning of the year, mortgage
loan securitization through both the CMHC programs and a
third-party program, as well as securitization of finance lease
receivables and investment loans more than offset maturities of
liabilities related to the Canada Mortgage Bond program, as well as
normal repayments. For additional information, please refer to the
Securitization and Off-Balance Sheet Arrangements section of our
2019 Annual Report.
Subordinated debt was essentially unchanged and
stood at $349.1 million as at October 31, 2019, compared
with $348.8 million as at October 31, 2018.
Shareholders’ equity and regulatory
capital
Shareholders’ equity stood at $2,567.7 million
as at October 31, 2019, compared with $2,496.2 million as at
October 31, 2018. As at November 1, 2018, the adoption of IFRS
9 resulted in a net decrease of $7.7 million of shareholders'
equity. In 2019, shareholders' equity increased mainly as a result
of the net income contribution, net of declared dividends, and an
increase in AOCI related to cash flow hedges, as well as the
issuance of common shares under the Shareholder Dividend
Reinvestment and Share Purchase Plan. For additional information,
please refer to the Consolidated Statement of Changes in
Shareholders' Equity.
The Bank’s book value per common share
appreciated to $54.02 as at October 31, 2019 from $53.72 as at
October 31, 2018.
The Common Equity Tier 1 capital ratio stood at
9.0% October 31, 2019, unchanged compare to the previous year.
This level of capital provides the Bank’s with the flexibility to
pursue organic growth, as well as to continue to invest in the
implementation of our core banking system, the development of our
digital solutions and the project to adopt the AIRB approach to
credit risk. During the year, we continued to manage capital, as
well as to optimize the product mix with a view to improving
profitability as we redeploy capital.
Future Changes to Accounting
Policies
The International Accounting Standards Board
(IASB) has issued new standards and amendments to existing
standards on leases, insurance contracts and employee benefits
which were not yet effective for the year ended October 31,
2019. These future accounting changes are applicable for the Bank
in various annual periods beginning on November 1, 2019.
Additional information on the new standards and
amendments to existing standards can be found in Note 4 of the
Consolidated Financial Statements and in the "Future Changes to
Accounting Policies" section in our 2019 Annual Report.
Transition Impact for IFRS 16,
Leases
Based on current estimates, the adoption of IFRS
16 is expected to result in the recognition of right-of-use assets
of approximately $138.6 million, net of deferred credits
related to previously recorded lease inducements, and lease
liabilities of approximately $170.7 million as at November 1, 2019.
The decrease in shareholders’ equity at IFRS 16 transition is not
expected to exceed $8.5 million. The adoption of IFRS 16 is
expected to decrease the Bank's Common Equity Tier 1 (CET1) capital
ratio by up to 10 basis points. Management is finalizing its
analyses of the impact of the adoption of this standard on its
Consolidated Financial Statements.
Condensed Interim Consolidated Financial
Statements (unaudited)
Consolidated Balance Sheet
In
thousands of Canadian dollars (Unaudited) |
As at October 31 2019 |
|
|
As at October 31 2018 |
|
Assets |
|
|
|
Cash and non-interest bearing deposits with
banks |
$ |
90,658 |
|
|
$ |
116,490 |
|
Interest bearing deposits with banks |
322,897 |
|
|
374,237 |
|
Securities |
|
|
|
Available-for-sale |
|
n/a |
|
|
2,710,249 |
|
Held-to-maturity |
|
n/a |
|
|
655,757 |
|
Held-for-trading |
|
n/a |
|
|
2,695,138 |
|
|
6,299,936 |
|
|
6,061,144 |
|
Securities purchased under reverse repurchase
agreements |
2,538,285 |
|
|
3,652,498 |
|
Loans |
|
|
|
Personal |
4,660,524 |
|
|
5,372,468 |
|
Residential mortgage |
16,039,680 |
|
|
16,986,338 |
|
Commercial |
12,646,332 |
|
|
11,839,106 |
|
Customers' liabilities under acceptances |
319,992 |
|
|
196,776 |
|
|
33,666,528 |
|
|
34,394,688 |
|
Allowances for loan losses |
(100,457 |
) |
|
(93,026 |
) |
|
33,566,071 |
|
|
34,301,662 |
|
Other |
|
|
|
Derivatives |
143,816 |
|
|
94,285 |
|
Premises and equipment |
77,802 |
|
|
80,961 |
|
Software and other intangible assets |
391,162 |
|
|
367,345 |
|
Goodwill |
116,649 |
|
|
116,617 |
|
Deferred tax assets |
37,045 |
|
|
25,437 |
|
Other assets |
768,806 |
|
|
704,007 |
|
|
1,535,280 |
|
|
1,388,652 |
|
|
$ |
44,353,127 |
|
|
$ |
45,894,683 |
|
Liabilities and
shareholders' equity |
|
|
|
Deposits |
|
|
|
Personal |
$ |
19,747,260 |
|
|
$ |
20,995,453 |
|
Business, banks and other |
5,905,344 |
|
|
7,011,119 |
|
|
25,652,604 |
|
|
28,006,572 |
|
Other |
|
|
|
Obligations related to securities sold short |
2,618,147 |
|
|
3,008,666 |
|
Obligations related to securities sold under repurchase
agreements |
2,558,883 |
|
|
2,515,823 |
|
Acceptances |
319,992 |
|
|
196,776 |
|
Derivatives |
112,737 |
|
|
285,492 |
|
Deferred tax liabilities |
53,102 |
|
|
19,081 |
|
Other liabilities |
1,207,567 |
|
|
1,229,556 |
|
|
6,870,428 |
|
|
7,255,394 |
|
Debt related to securitization activities |
8,913,333 |
|
|
7,787,753 |
|
Subordinated debt |
349,101 |
|
|
348,762 |
|
Shareholders'
equity |
|
|
|
Preferred shares |
244,038 |
|
|
244,038 |
|
Common shares |
1,139,193 |
|
|
1,115,416 |
|
Retained earnings |
1,161,668 |
|
|
1,152,470 |
|
Accumulated other comprehensive income |
20,947 |
|
|
(15,990 |
) |
Share-based compensation reserve |
1,815 |
|
|
268 |
|
|
2,567,661 |
|
|
2,496,202 |
|
|
$ |
44,353,127 |
|
|
$ |
45,894,683 |
|
Consolidated Statement of Income
|
For the three months ended |
|
For the year ended |
In
thousands of Canadian dollars, except per share amounts
(Unaudited) |
October 31 2019 |
|
|
July 31 2019 |
|
|
October 31 2018 |
|
|
October 31 2019 |
|
|
October 31 2018 |
|
Interest
income |
|
|
|
|
|
|
|
|
|
Loans |
$ |
360,367 |
|
|
$ |
365,422 |
|
|
$ |
356,135 |
|
|
$ |
1,440,102 |
|
|
$ |
1,396,936 |
|
Securities |
18,318 |
|
|
18,887 |
|
|
18,681 |
|
|
76,562 |
|
|
62,035 |
|
Deposits with other banks |
2,120 |
|
|
1,899 |
|
|
1,488 |
|
|
8,356 |
|
|
3,428 |
|
Other, including derivatives |
6,551 |
|
|
7,465 |
|
|
8,276 |
|
|
31,362 |
|
|
28,384 |
|
|
387,356 |
|
|
393,673 |
|
|
384,580 |
|
|
1,556,382 |
|
|
1,490,783 |
|
Interest
expense |
|
|
|
|
|
|
|
|
|
Deposits |
157,984 |
|
|
161,570 |
|
|
158,290 |
|
|
638,389 |
|
|
583,203 |
|
Debt related to securitization activities |
44,961 |
|
|
43,535 |
|
|
42,449 |
|
|
172,419 |
|
|
166,077 |
|
Subordinated debt |
3,835 |
|
|
3,835 |
|
|
3,835 |
|
|
15,214 |
|
|
15,214 |
|
Other, including derivatives |
7,371 |
|
|
8,691 |
|
|
6,854 |
|
|
43,949 |
|
|
20,377 |
|
|
214,151 |
|
|
217,631 |
|
|
211,428 |
|
|
869,971 |
|
|
784,871 |
|
Net interest income |
173,205 |
|
|
176,042 |
|
|
173,152 |
|
|
686,411 |
|
|
705,912 |
|
Other
income |
|
|
|
|
|
|
|
|
|
Lending fees |
16,630 |
|
|
15,499 |
|
|
18,654 |
|
|
61,459 |
|
|
66,540 |
|
Service charges |
10,109 |
|
|
10,973 |
|
|
11,154 |
|
|
42,033 |
|
|
48,972 |
|
Card service revenues |
7,855 |
|
|
8,351 |
|
|
7,821 |
|
|
33,238 |
|
|
33,785 |
|
Fees and securities brokerage commissions(1) |
11,919 |
|
|
10,330 |
|
|
13,438 |
|
|
43,892 |
|
|
51,388 |
|
Commissions from sales of mutual funds |
10,706 |
|
|
10,749 |
|
|
11,630 |
|
|
42,892 |
|
|
47,609 |
|
Fees on investment accounts |
4,593 |
|
|
4,378 |
|
|
4,508 |
|
|
18,231 |
|
|
20,146 |
|
Insurance income, net |
3,334 |
|
|
3,270 |
|
|
3,701 |
|
|
13,941 |
|
|
15,273 |
|
Income from financial instruments(1) |
(584 |
) |
|
1,910 |
|
|
8,992 |
|
|
12,460 |
|
|
32,687 |
|
Other |
3,871 |
|
|
3,151 |
|
|
2,807 |
|
|
13,953 |
|
|
21,098 |
|
|
68,433 |
|
|
68,611 |
|
|
82,705 |
|
|
282,099 |
|
|
337,498 |
|
Total revenue |
241,638 |
|
|
244,653 |
|
|
255,857 |
|
|
968,510 |
|
|
1,043,410 |
|
Amortization of net premium on purchased financial
instruments |
284 |
|
|
336 |
|
|
495 |
|
|
1,452 |
|
|
2,296 |
|
Provision for credit losses |
12,600 |
|
|
12,100 |
|
|
17,600 |
|
|
44,400 |
|
|
44,000 |
|
Non-interest
expenses |
|
|
|
|
|
|
|
|
|
Salaries and employee benefits |
84,755 |
|
|
90,078 |
|
|
87,800 |
|
|
357,396 |
|
|
366,022 |
|
Premises and technology |
49,017 |
|
|
48,705 |
|
|
48,358 |
|
|
197,351 |
|
|
192,377 |
|
Other |
41,625 |
|
|
37,273 |
|
|
39,247 |
|
|
159,067 |
|
|
150,081 |
|
Restructuring charges |
5,431 |
|
|
1,802 |
|
|
1,032 |
|
|
12,679 |
|
|
5,944 |
|
Costs related to business combinations and other |
— |
|
|
— |
|
|
— |
|
|
— |
|
|
2,357 |
|
|
180,828 |
|
|
177,858 |
|
|
176,437 |
|
|
726,493 |
|
|
716,781 |
|
Income before income
taxes |
47,926 |
|
|
54,359 |
|
|
61,325 |
|
|
196,165 |
|
|
280,333 |
|
Income
taxes |
6,583 |
|
|
6,561 |
|
|
10,524 |
|
|
23,455 |
|
|
55,687 |
|
Net income |
$ |
41,343 |
|
|
$ |
47,798 |
|
|
$ |
50,801 |
|
|
$ |
172,710 |
|
|
$ |
224,646 |
|
Preferred share dividends, including applicable taxes |
3,196 |
|
|
3,257 |
|
|
3,253 |
|
|
12,966 |
|
|
14,038 |
|
Net income available to common shareholders |
$ |
38,147 |
|
|
$ |
44,541 |
|
|
$ |
47,548 |
|
|
$ |
159,744 |
|
|
$ |
210,608 |
|
Average number of
common shares outstanding (in thousands) |
|
|
|
|
|
|
|
|
|
Basic |
42,518 |
|
|
42,370 |
|
|
42,023 |
|
|
42,310 |
|
|
41,280 |
|
Diluted |
42,583 |
|
|
42,429 |
|
|
42,023 |
|
|
42,356 |
|
|
41,280 |
|
Earnings per
share |
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.90 |
|
|
$ |
1.05 |
|
|
$ |
1.13 |
|
|
$ |
3.78 |
|
|
$ |
5.10 |
|
Diluted |
$ |
0.90 |
|
|
$ |
1.05 |
|
|
$ |
1.13 |
|
|
$ |
3.77 |
|
|
$ |
5.10 |
|
Dividends declared per
share |
|
|
|
|
|
|
|
|
|
Common share |
$ |
0.66 |
|
|
$ |
0.66 |
|
|
$ |
0.64 |
|
|
$ |
2.62 |
|
|
$ |
2.54 |
|
Preferred share - Series 11 |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
0.25 |
|
Preferred share - Series 13 |
$ |
0.26 |
|
|
$ |
0.27 |
|
|
$ |
0.27 |
|
|
$ |
1.06 |
|
|
$ |
1.08 |
|
Preferred share - Series 15 |
$ |
0.37 |
|
|
$ |
0.37 |
|
|
$ |
0.37 |
|
|
$ |
1.46 |
|
|
$ |
1.46 |
|
(1) |
Comparative figures have been reclassified to conform the current
year presentation. |
Consolidated Statement of Comprehensive
Income
|
For the three months ended |
|
For the year ended |
In
thousands of Canadian dollars (Unaudited) |
October 31 2019 |
|
|
July 31 2019 |
|
|
October 31 2018 |
|
|
October 31 2019 |
|
|
October 31 2018 |
|
Net income |
$ |
41,343 |
|
|
$ |
47,798 |
|
|
$ |
50,801 |
|
|
$ |
172,710 |
|
|
$ |
224,646 |
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive
income (loss), net of income taxes |
|
|
|
|
|
|
|
|
|
Items that may subsequently be
reclassified to the statement of income |
|
|
|
|
|
|
|
|
|
Net change in debt securities at FVOCI |
|
|
|
|
|
|
|
|
|
Unrealized net gains (losses) on debt securities at FVOCI |
(114 |
) |
|
276 |
|
|
n/a |
|
|
2,327 |
|
|
n/a |
|
Reclassification of net (gains) losses on debt securities at FVOCI
to net income |
115 |
|
|
(392 |
) |
|
n/a |
|
|
(378 |
) |
|
n/a |
|
|
1 |
|
|
(116 |
) |
|
n/a |
|
|
1,949 |
|
|
n/a |
|
Net change in available-for-sale securities |
|
|
|
|
|
|
|
|
|
Unrealized net losses on available-for-sale securities |
|
n/a |
|
|
|
n/a |
|
|
(4,797 |
) |
|
|
n/a |
|
|
(7,672 |
) |
Reclassification of net gains on available-for-sale securities to
net income |
|
n/a |
|
|
|
n/a |
|
|
(3,144 |
) |
|
|
n/a |
|
|
(5,206 |
) |
|
|
n/a |
|
|
|
n/a |
|
|
(7,941 |
) |
|
|
n/a |
|
|
(12,878 |
) |
Net change in value of derivatives designated as cash flow
hedges |
(1,764 |
) |
|
(274 |
) |
|
(5,191 |
) |
|
33,293 |
|
|
(4,951 |
) |
Net foreign currency translation adjustments |
|
|
|
|
|
|
|
|
|
Net unrealized foreign currency translation gains (losses) on
investments in foreign operations |
(432 |
) |
|
(6,007 |
) |
|
4,404 |
|
|
445 |
|
|
9,012 |
|
Unrealized net losses on hedges of investments in foreign
operations |
(242 |
) |
|
1,438 |
|
|
(3,341 |
) |
|
(5,158 |
) |
|
(6,677 |
) |
|
(674 |
) |
|
(4,569 |
) |
|
1,063 |
|
|
(4,713 |
) |
|
2,335 |
|
|
(2,437 |
) |
|
(4,959 |
) |
|
(12,069 |
) |
|
30,529 |
|
|
(15,494 |
) |
|
|
|
|
|
|
|
|
|
|
Items that may not
subsequently be reclassified to the statement of income |
|
|
|
|
|
|
|
|
|
Remeasurement gains (losses) on employee benefit plans |
(3,938 |
) |
|
(6,498 |
) |
|
58 |
|
|
(7,311 |
) |
|
13,023 |
|
Net losses on equity securities designated at FVOCI |
(3,338 |
) |
|
(3,342 |
) |
|
|
n/a |
|
|
(18,411 |
) |
|
|
n/a |
|
|
(7,276 |
) |
|
(9,840 |
) |
|
58 |
|
|
(25,722 |
) |
|
13,023 |
|
Total
other comprehensive income (loss), net of income taxes |
(9,713 |
) |
|
(14,799 |
) |
|
(12,011 |
) |
|
4,807 |
|
|
(2,471 |
) |
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
$ |
31,630 |
|
|
$ |
32,999 |
|
|
$ |
38,790 |
|
|
$ |
177,517 |
|
|
$ |
222,175 |
|
Income Taxes — Other Comprehensive
Income
The following table shows income tax expense
(recovery) for each component of other comprehensive income.
|
For the three months ended |
|
For the year ended |
In
thousands of Canadian dollars (Unaudited) |
October 31 2019 |
|
|
July 31 2019 |
|
|
October 31 2018 |
|
|
October 31 2019 |
|
|
October 31 2018 |
|
|
|
|
|
|
|
|
|
|
|
Net change in debt securities
at FVOCI |
|
|
|
|
|
|
|
|
|
Unrealized net gains (losses) on debt securities at FVOCI |
$ |
140 |
|
|
$ |
(42 |
) |
|
n/a |
|
|
$ |
846 |
|
|
n/a |
|
Reclassification of net gains on debt securities at FVOCI to net
income |
(137 |
) |
|
— |
|
|
n/a |
|
|
(137 |
) |
|
n/a |
|
|
3 |
|
|
(42 |
) |
|
n/a |
|
|
709 |
|
|
n/a |
|
Net change in
available-for-sale securities |
|
|
|
|
|
|
|
|
|
Unrealized net losses on available-for-sale securities |
n/a |
|
|
n/a |
|
|
$ |
(1,670 |
) |
|
n/a |
|
|
$ |
(2,584 |
) |
Reclassification of net gains on available-for-sale securities to
net income |
n/a |
|
|
n/a |
|
|
(1,732 |
) |
|
n/a |
|
|
(2,436 |
) |
|
n/a |
|
|
n/a |
|
|
(3,402 |
) |
|
n/a |
|
|
(5,020 |
) |
Net change in value of
derivatives designated as cash flow hedges |
(639 |
) |
|
(103 |
) |
|
(1,877 |
) |
|
12,034 |
|
|
(1,793 |
) |
Net foreign currency
translation adjustments |
|
|
|
|
|
|
|
|
|
Unrealized net losses on hedges of investments in foreign
operations |
142 |
|
|
(298 |
) |
|
— |
|
|
— |
|
|
— |
|
Remeasurement gains (losses)
on employee benefit plans |
(1,443 |
) |
|
(2,355 |
) |
|
22 |
|
|
(2,666 |
) |
|
4,740 |
|
Net
losses on equity securities designated at FVOCI |
(1,181 |
) |
|
(1,212 |
) |
|
— |
|
|
(6,648 |
) |
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
$ |
(3,118 |
) |
|
$ |
(4,010 |
) |
|
$ |
(5,257 |
) |
|
$ |
3,429 |
|
|
$ |
(2,073 |
) |
Consolidated Statement of Changes in
Shareholders’ Equity
|
For the year ended October 31, 2019 |
|
|
|
|
Accumulated Other Comprehensive Income |
Share-based compensation reserve |
Total shareholders’ equity |
(in
thousands of Canadian dollars) |
Preferred shares |
Common shares |
Retained earnings |
Debt securities at FVOCI |
Available- for-sale securities |
Cash flow hedges |
Translation of foreign operations |
Total |
|
|
|
|
|
|
|
|
|
|
|
Balance as at
October 31, 2018 |
$ |
244,038 |
|
$ |
1,115,416 |
|
$ |
1,152,470 |
|
$ |
— |
|
$ |
(8,029 |
) |
$ |
(12,244 |
) |
$ |
4,283 |
|
$ |
(15,990 |
) |
$ |
268 |
|
$ |
2,496,202 |
|
Impact of adoption of new
accounting standards |
|
|
(14,087 |
) |
(1,621 |
) |
8,029 |
|
|
|
6,408 |
|
|
(7,679 |
) |
Balance as at November 1, 2018 |
244,038 |
|
1,115,416 |
|
1,138,383 |
|
(1,621 |
) |
— |
|
(12,244 |
) |
4,283 |
|
(9,582 |
) |
268 |
|
2,488,523 |
|
Net income |
|
|
172,710 |
|
|
|
|
|
|
|
172,710 |
|
Other comprehensive income (net
of income taxes) |
|
|
|
|
|
|
|
|
|
|
Unrealized net gains on debt securities at FVOCI |
|
|
|
2,327 |
|
|
|
|
2,327 |
|
|
2,327 |
|
Reclassification of net gains on debt securities at FVOCI to net
income |
|
|
|
(378 |
) |
|
|
|
(378 |
) |
|
(378 |
) |
Net change in value of derivatives designated as cash flow
hedges |
|
|
|
|
|
33,293 |
|
|
33,293 |
|
|
33,293 |
|
Net unrealized foreign currency translation gains on investments in
foreign operations |
|
|
|
|
|
|
445 |
|
445 |
|
|
445 |
|
Net losses on hedges of investments in foreign operations |
|
|
|
|
|
|
(5,158 |
) |
(5,158 |
) |
|
(5,158 |
) |
Remeasurement of losses on employee benefit plans |
|
|
(7,311 |
) |
|
|
|
|
|
|
(7,311 |
) |
Net losses on equity securities designated at FVOCI |
|
|
(18,411 |
) |
|
|
|
|
|
|
(18,411 |
) |
Comprehensive
income |
|
|
146,988 |
|
1,949 |
|
n/a |
33,293 |
|
(4,713 |
) |
30,529 |
|
|
177,517 |
|
Issuance of share capital |
|
23,777 |
|
|
|
|
|
|
|
|
23,777 |
|
Share-based compensation |
|
|
|
|
|
|
|
|
1,547 |
|
1,547 |
|
Dividends |
|
|
|
|
|
|
|
|
|
|
Preferred shares, including applicable taxes |
|
|
(12,966 |
) |
|
|
|
|
|
|
(12,966 |
) |
Common shares |
|
|
(110,737 |
) |
|
|
|
|
|
|
(110,737 |
) |
Balance as at October 31, 2019 |
$ |
244,038 |
|
$ |
1,139,193 |
|
$ |
1,161,668 |
|
$ |
328 |
|
n/a |
$ |
21,049 |
|
$ |
(430 |
) |
$ |
20,947 |
|
$ |
1,815 |
|
$ |
2,567,661 |
|
|
For the year ended October 31, 2018 |
|
|
|
|
Accumulated Other Comprehensive Income |
Share-based compensation reserve |
|
Total shareholders’ equity |
|
(in
thousands of Canadian dollars) |
Preferred shares |
|
Common shares |
|
Retained earnings |
|
Available- for-sale securities |
|
Cash flow hedges |
|
Translation of foreign operations |
|
Total |
|
|
|
|
|
|
|
|
|
|
|
Balance as at October 31, 2017 |
$ |
341,600 |
|
$ |
953,536 |
|
$ |
1,035,770 |
|
$ |
4,849 |
|
$ |
(7,293 |
) |
$ |
1,948 |
|
$ |
(496 |
) |
$ |
— |
|
$ |
2,330,410 |
|
Net income |
|
|
224,646 |
|
|
|
|
|
|
224,646 |
|
Other comprehensive income
(loss), (net of income taxes) |
|
|
|
|
|
|
|
|
|
Unrealized net losses on available-for-sale securities |
|
|
|
(7,672 |
) |
|
|
(7,672 |
) |
|
(7,672 |
) |
Reclassification of net gains on available-for-sale securities to
net income |
|
|
|
(5,206 |
) |
|
|
(5,206 |
) |
|
(5,206 |
) |
Net change in value of derivatives designated as cash flow
hedges |
|
|
|
|
(4,951 |
) |
|
(4,951 |
) |
|
(4,951 |
) |
Net unrealized foreign currency translation gains on investments in
foreign operations |
|
|
|
|
|
9,012 |
|
9,012 |
|
|
9,012 |
|
Unrealized net losses on hedges of investments in foreign
operations |
|
|
|
|
|
(6,677 |
) |
(6,677 |
) |
|
(6,677 |
) |
Remeasurement of gains on employee benefit plans |
|
|
13,023 |
|
|
|
|
|
|
13,023 |
|
Comprehensive income |
|
|
237,669 |
|
(12,878 |
) |
(4,951 |
) |
2,335 |
|
(15,494 |
) |
|
222,175 |
|
Issuance of share capital |
|
161,880 |
|
|
|
|
|
|
|
161,880 |
|
Repurchase of share capital |
(97,562 |
) |
|
(2,438 |
) |
|
|
|
|
|
(100,000 |
) |
Share-based compensation |
|
|
|
|
|
|
|
268 |
|
268 |
|
Dividends |
|
|
|
|
|
|
|
|
|
Preferred shares, including applicable taxes |
|
|
(14,038 |
) |
|
|
|
|
|
(14,038 |
) |
Common shares |
|
|
(104,493 |
) |
|
|
|
|
|
(104,493 |
) |
Balance as at October 31, 2018 |
$ |
244,038 |
|
$ |
1,115,416 |
|
$ |
1,152,470 |
|
$ |
(8,029 |
) |
$ |
(12,244 |
) |
$ |
4,283 |
|
$ |
(15,990 |
) |
$ |
268 |
|
$ |
2,496,202 |
|
Caution Regarding Forward-Looking
Statements
In this document and in other documents filed
with Canadian regulatory authorities or in other communications, we
may, from time to time, make written or oral forward-looking
statements within the meaning of applicable securities legislation.
Forward-looking statements may include, but are not limited to,
statements regarding our business plan and financial objectives
including statements contained in our 2019 Annual Report under the
heading “Outlook”. The forward-looking statements contained in this
document are used to assist readers in obtaining a better
understanding of our 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 are identified with words or phrases such as
believe, estimate, forecast, project, expect, anticipate, plan,
goal, target, may, should, could, would, will, intend or the
negative of these terms, variations thereof or similar
terminology.
By their very nature, forward-looking statements
require us to make assumptions and are subject to inherent risks
and uncertainties, both general and specific in nature. There is
significant risk that the predictions, forecasts, projections or
conclusions will prove to be inaccurate, that our assumptions may
not be correct, and that actual results may differ materially from
such predictions, forecasts, projections or conclusions.
We caution readers against placing undue
reliance on forward-looking statements, as a number of factors,
many of which are beyond our control and the effects of which can
be difficult to predict, could cause our actual results to differ
materially from the targets, plans, objectives, expectations,
forecasts, estimates and intentions expressed in such
forward-looking statements.
The future outcomes that relate to
forward-looking statements may be influenced by many factors,
including but not limited to: general economic and market
conditions; changes in government monetary, fiscal or economic
policies; changes in currency and interest rates; legislative and
regulatory developments, including tax legislation and
interpretation; critical accounting estimates and the effect of
changes to accounting standards, rules and interpretations on these
estimates; changes in competition; modifications to credit ratings;
scarcity of human resources; developments with respect to labour
relations; information technology and cyber security; developments
in the technological environment; environmental risk including
changes to global environmental policy and the effects of climate
change; the possible effects of global conflicts and terrorism,
natural disasters, public health emergencies, disruptions to public
infrastructure and other catastrophic events; our ability to
execute our strategic plans including the reorganization of our
retail branches, the modernization of our core banking system
and implementation of the Advanced Internal Ratings-Based
(AIRB) Approach to credit risk, as well as our ability to
anticipate and effectively manage risks arising from the
foregoing.
We further caution that the foregoing list of
factors is not exhaustive. Other factors and risks could adversely
affect our results. For more information on the risks,
uncertainties and assumptions that would cause our actual results
to differ from current expectations, please also refer to the “Risk
Appetite and Risk Management Framework” section of our 2019 Annual
Report, as well as to other public filings available at
www.sedar.com.
We do not undertake to update any
forward-looking statements, whether oral or written, made by us or
on our behalf, except to the extent required by securities
regulations.
Access to Quarterly Results
Materials
Interested investors, the media and others may
review this press release on our website at www.lbcfg.ca, under the
Press Room tab, and our report to shareholders, presentation to
investors and supplementary financial information under the
Investor Centre tab, Financial Results.
Conference Call
Laurentian Bank Financial Group invites media
representatives and the public to listen to the conference call to
be held at 10:00 a.m. Eastern Time on December 4, 2019.
The live, listen-only, toll-free, call-in number is 1-800-239-9838,
code 7408149. A live webcast will also be available on the
Group’s website under the Investor Centre tab, Financial
Results.
The conference call playback will be available
on a delayed basis at any time from 1:00 p.m. on December 4,
2019 until 1:00 p.m. on January 3, 2020, on our website under
the Investor Centre tab, Financial Results.
The presentation material referenced during the
call will be available on our website under the Investor Centre
tab, Financial Results.
Contact InformationInvestor
Relations |
Media |
Susan CohenDirector, Investor RelationsOffice: 514 284-4500,
ext. 40452Mobile: 514 970-0564susan.cohen@lbcfg.ca |
Hélène SoulardAssistant Vice-President, CommunicationsOffice:
514 284-4500, ext. 40015Mobile: 514
926-3295helene.soulard@lbcfg.ca |
About Laurentian Bank Financial Group
Founded in 1846, Laurentian Bank Financial Group
is a diversified financial services provider whose mission is to
help its customers improve their financial health. The Laurentian
Bank of Canada and its entities are collectively referred to as
Laurentian Bank Financial Group (the “Group” or the “Bank”).
With more than 3,200 employees guided by the
values of proximity, simplicity and honesty, the Group provides a
broad range of advice-based solutions and services to its personal,
business and institutional customers. With pan-Canadian activities
and a presence in the U.S., the Group is an important player in
numerous market segments.
The Group has $44 billion in balance sheet
assets and $29 billion in assets under administration.
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