Laurentian Bank of Canada

The stable outlook reflects our expectation that over the next two years, LBC will show progress in its efforts to strengthen the retail franchise through improved returns and productivity; loan losses will be manageable; and the RAC ratio will remain in our adequate range of 7%-10%. S&P Global Ratings expects funding metrics will gradually improve as the bank focuses on increasing core deposits. We could lower the ratings should execution fail and not lead to improvements in operating performance and productivity gains; if funding and liquidity metrics deteriorate from current levels; or if loan losses are outsize relative to those of peers. An upgrade is unlikely, as we expect results from efforts to strengthen the franchise will take some time

...Management's focus in 2022 is on execution. After the bank's repositioning for growth in 2021 through improvements in processes and systems, we believe that successful execution will likely translate into positive incremental improvements in returns, productivity, and market share over the medium term. S&P Global Ratings risk-adjusted capital (RAC) ratio is likely to come under modest pressure. We believe Laurentian Bank of Canada's (LBC's) RAC ratio (8.9% at year-end 2021 versus the peer average of 9.2%) will be under modest pressure from the resumption of share repurchases and dividend payouts. Loan losses are likely to rise from unsustainably low levels but remain manageable. We do not anticipate any major weaknesses in the bank's loan portfolios; however, LBC is exposed to riskier loan categories, including Alt-A mortgages and equipment and inventory financing, than some peers are. It also has a higher proportion of commercial real estate (CRE) and construction loans than peers have,...

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