MONTREAL – Laurentian Bank is targeting a five to eight per cent increase in adjusted diluted earnings next year after having completed the integration of two recent acquisitions, MRS Companies and AGF Trust, the Montreal-based bank said Wednesday.
“We are proud of our 2014 results and we know that we can still do better and accelerate our growth now that integrations are behind us,” president and CEO Rejean Robitaille said Wednesday during a conference call.
The bank, which marked its eighth consecutive year of record profitability with $5.31 per share in adjusted earnings in 2014, will continue to focus in 2015 on higher-margin commercial activities and increasing its footprint outside of Quebec, Robitaille said.
Revenue at Laurentian’s Toronto-based B2B Bank, which offers banking products and services to Canadian financial advisers and brokers, are expected to be flat to slightly positive next year, after decreasing seven per cent in 2014, the company said.
And, with no exposure to the energy sector, Laurentian Bank hopes to get a boost from lower fuel prices and the weaker Canadian dollar that will support exports and economic growth in Ontario and Quebec where it mainly operates.
While the earnings guidance is in line with other Canadian banks, Laurentian may be challenged to achieve its forecast unless it can overcome slowing mortgages and personal loans, said Scott Chan of Canaccord Genuity.
“The target is there but my gut feeling is that it’s going to be hard to reach the mid- to high-end of that target next year,” he said in an interview.
He said the bank needs to continue to control costs and see an uptick in commercial loans, whose portfolio grew 15 per cent in 2014.
Over the longer term, Laurentian plans to double the volume of business portfolios to $10 billion in 2018. With the integration of MRS Companies and AGF Trust completed, it aims to double B2B Bank’s mortgage loans to $8 billion in five years.
Laurentian (TSX:LB) became the fourth Canadian bank to increase its quarterly dividend this earnings season after capping a strong year with higher profits in the fourth quarter, although they were shy of analyst estimates.
The bank is boosting its payout for the third time in the past year, raising its dividend by four per cent to 54 cents with the next payment in February. Since 2010, the dividend has grown by 50 per cent.
It joins Quebec banking rival National Bank (TSX:NA), Scotiabank (TSX:BNS), CIBC (TSX:CM) and Bank of Montreal (TSX:BMO), all of which announced recently they were raising their dividends.
Canada’s seventh-largest bank earned $33.8 million or $1.09 per diluted share for the three months ended Oct. 31. That was up from $25.9 million or 82 cents per share in the fourth quarter of its 2013 financial year.
The profits were reduced by $5.6 million or 19 cents per share for restructuring costs, including $4.4 million for severance and $1.2 million related to IT projects.
Excluding one-time items, adjusted net income reached a record of $42.6 million or $1.39 per diluted share in the fourth quarter. That was up from $38.5 million or $1.26 per a share last year.
Revenues increased to $221.4 million, from $215.5 million.
Laurentian was expected to earn $1.41 per share on $221.6 million of revenues, according the analysts polled by Thomson Reuters.
Most of Canada’s banks missed expectations this quarter, causing their stock prices to fall. On the Toronto Stock Exchange, Laurentian’s shares closed at $47.60, down $2.67 or 5.31 per cent in Wednesday trading.
For the full year, the bank’s net income surged 17.5 per cent to $140.4 million on $874.1 million of revenues. Adjusted profits were $163.6 million or $5.31 per diluted share, up from $155.4 million or $5.07 per share in 2012.
Provisions for loan losses increased by $6 million to reach $42 million for the year, and were up five per cent to $10.5 million in the fourth quarter year over year, but unchanged from the third quarter.
The bank’s core personal and commercial segment’s adjusted profit grew nearly 18 per cent to $33.4 million in the quarter on revenue of $153.8 million.
B2B Bank earned $8.46 million, up from $4.4 million a year ago, on $43.6 million in revenue. Laurentian Bank Securities earnings slipped to $2.4 million from $2.9 million a year ago on $16.16 million of revenues.
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Note to readers: This story corrects an earlier version that counted severance separately from restructuring charges.