* Canadian Western Bank Q3 EPS C$0.38 vs C$0.41 yr-earlier
* Laurentian Bank Q3 EPS C$1.08 vs C$1.17 yr-earlier
* Both exceed estimates, shares rise (Adds company comments on loans, dividends, acquisitions)
By Andrea Hopkins
TORONTO, Sept 3 (Reuters) - Two Canadian regional banks, Canadian Western Bank (CWB.TO) and Laurentian Bank (LB.TO), reported better-than-expected quarterly profits on Thursday, sending their shares higher.
Continuing a string of upside surprises by Canada’s major banks in the third quarter, Edmonton, Alberta-based CWB and Montreal-based Laurentian Bank reported stronger profits, after one-time items are excluded, as loan growth and relatively low exposure to credit risk boosted revenues.
Shares of CWB ended the day 4.3 percent higher, while Laurentian Bank shares closed up 4.7 percent.
The strong performance closed the Canadian banks’ earnings season. Five of Canada’s big six banks exceeded market expectations as trading revenues soared.
CWB, the nation’s seventh-largest bank, and Laurentian, No. 8, had less exposure to volatile capital markets, and Dundee Securities analyst John Aiken said that makes their profits even more impressive.
“The regional banks outperformed based on their lower relative risk profile and leverage to improving credit spreads,” Aiken said.
“While they do not benefit to the same degree from exposure to the capital markets, this makes their earnings quality higher and much more sustainable than the big six going forward.”
On conference calls following the release of their earnings, executives at both regional banks said they were starting to see signs that the worst of the credit woes that have hit banks may be nearly over, though provisions for losses could creep a bit higher.
Banks have set aside more money to cover bad loans as the recession and unemployment make it harder for consumers and businesses to repay their debts.
“The level of gross impaired loans will fluctuate up or down as we progress through the current cycle (but) based on our current assessment, we expect actual losses will remain within our acceptable range,” CWB Chief Executive Larry Pollack told analysts on a conference call.
Both banks also boasted very high capital levels, and said they will consider raising their dividends in the coming quarters — the first hint by Canadian banks that dividends, which were not cut during the financial crisis, may soon be on the upswing again.
“If we start to see progressively increasing earnings and stability in margins, I think you will look for continued dividend increases going forward,” Pollack told analysts.
The solid balance sheets at the regional banks also bodes well for potential acquisitions, Pollack said, noting that CWB was looking at several possible acquisitions from other lenders but would insist on good price and good quality.
Laurentian Bank Chief Executive Rejean Robitaille suggested acquisitions could be just months away.
“Our strong capital base and higher liquidity levels should allow us to selectively take advantage of opportunities that may arise in the coming months,” he told analysts.
CWB, which offers personal and commercial banking in Canada’s western provinces of Manitoba, Saskatchewan, Alberta and British Columbia, said net income rose 9 percent to C$28.7 million ($26.1 million), or 38 Canadian cents a share. Analysts were expecting earnings of 32 Canadian cents a share, according to Reuters Estimates.
CWB shares rose 4.3 percent to C$18.36. That’s more than double the 52-week low of C$7.52 reached in March, but still well below the year high of C$24.13.
Shares of Laurentian Bank, whose branches are mainly in Quebec, did even better, climbing 4.7 percent to C$37.93 after reporting net income of C$28.7 million or C$1.08 a share.
Profit is down from a year earlier, but it surpassed analysts’ estimates for per share earnings of 88 Canadian cents. ($1=$1.10 Canadian) (Reporting by Andrea Hopkins; editing by Peter Galloway)