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One of the reasons for the increased-yet-still-decreased earnings was that Laurentian set aside $22.3 million for sour loans during the third quarter. This was down from the $54.9 million in provision for credit losses the bank set aside in the second quarter, but it was up from $12.1 million a year ago because of the pandemic, the economic effects of which have forced lenders to increase reserves.
Like its fellow Canadian banks, Laurentian has been offering up to six months of deferred loan payments to its customers to help them get through the pandemic. And, again like its peers, Laurentian is seeing the amount of deferred loans decline as the economy reopens. Payments on approximately $1.83 billion of Laurentian’s loans, or 5.5 per cent of its portfolio, were being deferred as of the end of July, down from $4.4 billion and 13.3 per cent as of the end of April.
National Bank Financial analyst Gabriel Dechaine noted Laurentian’s total revenue rose two per cent year-over-year, to $248.6 million, but that loan balances dipped by three per cent and deposits by eight per cent.
“On the bright side,” Dechaine added in a note to clients, “branch-raised deposits increased on a sequential basis for the second consecutive quarter.”
Laurentian’s common equity tier 1 ratio, a measure of its capital strength, rose to 9.4 per cent in its third quarter from 8.8 per cent for the second quarter.
Therrien said the pandemic particularly curbed Laurentian’s business loan growth during the quarter, which was mostly because of weaker inventory financing. Demand from customers for boats and recreational vehicles shot up, the interim CEO said, but manufacturing interruptions meant dealers were unable to restock their inventory and wound up borrowing less from the bank.
Laurentian also said salaries and employee benefits for the third quarter rose $2.4 million from a year earlier, to $92.5 million. Part of the reason for this, the bank said, was a $2.7-million compensation charge tied to Desjardins’ retirement.
When asked about the board of directors’ search for a permanent CEO, Therrien said there was “no timeframe” for the effort.
“It could be an internal candidate as well as an external candidate,” the interim CEO said. “So more to come, I would say.”