December 9, 2009 / 3:16 PM / 9 years ago

UPDATE 4-Laurentian Bank profit rises, ups dividend

* Q4 EPS C$1.47 vs C$1.02 year earlier

* Q4 continuing EPS C$0.99 vs forecast C$1.14

* Increases dividend to C$0.36 from C$0.34

* Misses estimates, but shares jump on dividend (Adds Tier 1 capital ratio)

TORONTO, Dec 9 (Reuters) - Laurentian Bank of Canada (LB.TO) reported a higher quarterly profit on Wednesday and increased its dividend, making it the first Canadian bank to raise its payout since the financial crisis hit.

The Montreal-based regional bank said income from continuing operations rose 17 percent to 99 Canadian cents a share in the fourth quarter.

That was short of analysts’ expectations for a C$1.14 per share profit, as compiled by Thomson Reuters I/B/E/S. But Laurentian’s shares still rose as investors celebrated the higher dividend and the bank’s positive outlook.

Revenue was up 11 percent and in line with analysts’ forecasts, taking some of the sting out of the lower headline number. In addition, analysts pointed to several provisions they said they suspect won’t recur.

“We believe the provisions for operational issues could have been one-time-ish in nature,” RBC Capital Markets analyst Dave Mun said in a research note.

Macquarie analyst Sumit Malhotra pointed to securities-loss and expense provisions, which hurt results in the fourth quarter but are not expected to continue.

“Bigger picture, we continue to believe Laurentian has one of the better credit and organic balance-sheet growth profiles in the sector at the current time,” Malhotra said in a note to clients.

The bank raised its 2010 profit target to between C$4 and C$4.70 a share from a 2009 earnings target of C$3.70 to C$4.40 a share.

“While the challenge presented by the economy lingers, as does the unprecedented low interest rate environment, we are very satisfied with the performance of all our business segments in 2009,” Chief Executive Rejean Robitaille told analysts on a conference call.

“Going forward, we will continue to be committed to the pursuit of profitable growth.”

He said the bank would raise its quarterly dividend by 2 Canadian cents a share, or 6 percent, to 36 Canadian cents a share, due to confidence in the bank’s performance.

While the move was a positive sign that banks have the confidence to draw down capital levels as the economy recovers, analysts said investors should not expect similar dividend hikes from Canada’s bigger banks.

“I think the big banks will probably be a little more delayed in their efforts to raise their dividend, largely because their capital requirements are a bit more stringent and there is uncertainty around what regulations will be,” said Edward Jones analyst Craig Fehr.

“They’ll sit on their hands a little bit longer. If we do see some increases in 2010, it will be in the latter half of the year, likely the last quarter,” Fehr said.

None of Canada’s banks cut their dividends during the financial crisis, unlike other banks around the world.

Over the last two weeks, the big six Canadian banks — Royal Bank of Canada (RY.TO), Toronto-Dominion Bank (TD.TO), Bank of Nova Scotia (BNS.TO), Bank of Montreal (BMO.TO), Canadian Imperial Bank of Commerce (CM.TO) and National Bank of Canada (NA.TO) reported mostly stronger than expected quarterly profits as well as huge capital reserves.

But global regulators are discussing several options to prevent another financial meltdown, including minimum capital requirements and maximum leverage ratios, and Canadian bankers have said they will guard prudent levels of capital until there is more regulatory certainty.

Laurentian’s Tier 1 capital ratio was 11.0 percent at the end of fiscal 2009, in line with domestic peers but well above the 7 percent minimum target set by the Office of the Superintendent of Financial Institutions (OSFI).

By the numbers, Laurentian Bank said it had net income of C$38.2 million ($36.0 million), or C$1.47 a share, for its fourth quarter, ended Oct. 31. That’s up from C$27.3 million, or C$1.02, in the year-earlier quarter.

The results for both periods included income from discontinued operations. When that is excluded, fourth-quarter 2009 profit was 99 Canadian cents a share, up from 84 Canadian cents a share a year earlier.

Net interest income rose 14 percent in the quarter as loan and deposit volumes grew, offsetting a jump in the amount of money the bank set aside to cover bad loans.

Provisions for credit losses rose to C$16.0 million from C$10.5 million a year earlier, but were flat from the third quarter, and the bank said it expected the pressure on consumer loans would ease in 2010.

Laurentian Bank shares were up 0.9 percent at C$42.10 on the Toronto Stock Exchange on Wednesday afternoon.

$1=$1.06 Canadian Reporting by Andrea Hopkins; editing by Peter Galloway

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