Laurentian Bank of Canada

The stable outlook reflects our expectation that in the next two years, LBC will continue 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 continue to improve, particularly through higher originations of deposits from the branch network. We could lower the ratings should execution fail and not lead to consistent 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. We could consider an upgrade should the bank demonstrate higher and consistent returns, particularly in the retail bank,

...Management's focus on execution of plan is showing early signs of progress. This has led to higher loan growth, though mostly in business lending. Personal loan growth has yet to resume. Efforts are also leading to improvements in productivity and positive operating leverage. We believe the repositioning of the retail banking franchise might take time to produce higher returns and show consistent loan growth. S&P Global Ratings risk-adjusted capital (RAC) ratio is under pressure. Laurentian Bank of Canada's (LBC's) RAC ratio was 8.2% at second-quarter 2022, down from 8.8% at year-end 2021, and compares with the peer average of 9.2%. We believe that the RAC ratio will likely remain under pressure from strong business loan growth but should moderate somewhat in 2023. We expect the RAC ratio will be closer to 7.6%-7.9% in our adequate range of 7%-10%...

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