December 5, 2008 / 3:04 PM / 10 years ago

UPDATE 2-Laurentian Bank profit falls, stock slumps 7 pct

* Q4 net profit slips to C$1.02/shr from C$1.14

* Profit excluding items beats mkt expectation

* 2009 outlook includes possible EPS decline

* Laurentian stock falls 7.4 pct to C$32.90 (Adds executive, analyst comments, details; closing stock price)

By Lynne Olver

TORONTO, Dec 5 (Reuters) - Laurentian Bank of Canada (LB.TO) said its quarterly profit fell 9.6 percent because of charges for fixed-income securities and a canceled technology project, but said its loan portfolios were not showing signs of stress from the worsening economy.

Excluding writedowns, the regional bank beat market expectations for the fourth quarter, ended Oct. 31.

“Despite the current turmoil in the financial markets, our balance sheet is strong, our capital ratios are among the best in the industry, and our credit profile remains excellent,” President and Chief Executive Rejean Robitaille said on a conference call.

The bank also said that it aims to report full-year 2009 net income of C$3.70 to C$4.40 a share, versus C$3.80 a share for 2008. This implies that earnings per share could fall by 2.6 percent or jump 16 percent next year.

Laurentian based its 2009 objectives on “a soft economic outlook” and said total revenue growth could slow to between 2 percent and 5 percent next year, from 8 percent in 2008.

Shares of Laurentian fell 7.4 pct to close at C$32.90 on the Toronto Stock Exchange in a mixed session for bank stocks. Laurentian shares are down 1.1 percent year-to-date, which is by far the best performance in the bank group.

“In a year that is clearly shaping up to be another tough one for the Canadian banks, we expect that the earnings power of Laurentian Bank will be ‘stickier’ than is the case for most of its peers,” Merrill Lynch analyst Sumit Malhotra said in a note to clients. It is his favorite stock among small-cap Canadian financials.

In the fourth quarter, the bank earned C$27.3 million ($21.2 million), or C$1.02 a share. That was down from C$30.2 million, or C$1.14, in the same 2007 period.

A securities impairment charge cut earnings by 23 Canadian cents a share, and the technology-related writeoff chopped a further 6 Canadian cents a share from the bottom line.

Excluding items, quarterly profit surged past the 99 Canadian cents a share that analysts had expected, according to Reuters Estimates.

Montreal-based Laurentian, which has the third-largest branch network in Quebec, said its provision for credit losses ticked up slightly to C$10.5 million.

“Although the bank is not immune from the effect of a slowdown in the economy, so far we have seen no significant deterioration in our loan portfolios,” Chief Financial Officer Robert Cardinal said on the conference call.

Cardinal will retire in January after 18 years with the bank.

Dundee Securities analyst John Aiken said that although Laurentian’s risk profile is “quite benign,” economic growth in Eastern Canada should be worse than the national average, so credit deterioration is “quite likely” through 2009.

Laurentian’s Tier 1 capital ratio, at 10 percent, is high among domestic banks, and it said it aims to keep the ratio at 9.5 percent or more in 2009. ($1=$1.29 Canadian) (Reporting by Lynne Olver; editing by Rob Wilson)

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