VANCOUVER, British Columbia (Reuters) - Laurentian Bank of Canada (LB.TO) raised its dividend for the first time in nearly six years on Tuesday, yet its stock fell, as fourth quarter earnings fell short of the market’s expectations.
Laurentian, Canada’s eighth largest bank by market value, also revealed that it is holding C$20 million ($19.8 million) worth of nonbank asset-backed commercial paper (ABCP) — a small amount of the troubled investment instrument relative to the holdings of some Canadian banks, but more than the market had anticipated.
“Relative to their size it is still meaningful. I am not terribly surprised, but at the same time I was not expecting it,” said National Bank Financial analyst Robert Sedran.
The bank, the bulk of whose clients are in the province of Quebec, posted a 34 percent rise in net income to C$30.2 million, or C$1.14 Canadian a diluted share, for the three months ended October 31.
That’s up from C$22.6 million, or 84 Canadian cents, in the same period a year earlier.
Earnings from continuing operations were C$25.7 million, or 95 Canadian cents a share, in the quarter, compared with C$18.1 million, or 65 Canadian cents a share, a year earlier.
Sedran said that if a number of one-off items, including a C$4 million gain from the restructuring of credit card firm Visa Inc and various tax benefits worth C$2.2 million, earnings were closer to 80 Canadian cents a share.
Analysts had expected Laurentian to report earnings before exceptional items of 82 Canadian cents a share, according to Reuters Estimates.
But there was some good news for shareholders. The bank raised its quarterly dividend by 10 percent to 32 Canadian cents a share — the first dividend increase since the first quarter of its 2002 financial year.
Even so, the bank’s stock fell on the Toronto Stock Exchange. At 11.30 a.m. Laurentian’s shares were 94 Canadian cents, or 2.3 percent, weaker at C$39.66. Laurentian’s stock is the strongest performer among Canada’s eight biggest banks this year, up 31 percent.
The bank, which has said in the past that it has “very limited” exposure to the Canadian nonbank ABCP market, said that it had written down its holdings by 15 percent, or C$2.9 million.
The bank’s return on equity, a measure of how efficiently a bank uses its capital, increased to 13.8 percent in the fourth quarter from 10.8 percent a year earlier.
Reporting by Nicole Mordant; Editing by Bernadette Baum