Laurentian Bank of Canada Q2 2020 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : I mean you've obviously talked to the economic uncertainty. It's a big degree of complexity on the strategic transformation program. I just -- I wonder if you could just talk us through how you decided on the order of magnitude reduction of the dividend. I mean I guess, just trying to understand how the thinking went through it. Why -- I mean this is by 40%, not 80% or 20%. I'm just -- is that something to talk to you a little bit? Frantois Desjardins;President and CEO Absolutely. Obviously, when we went into the year after 1.5 years of labor lows, et cetera, I started the year by thinking that we would earn our way out of it. And that earnings would come back faster as we plan to -- I announced the year as being a year in which the heavy lifting would be coming to an end, and we would focus on growth. Obviously, COVID changes that slightly by introducing higher provisions for loan losses and delays just in terms of priority in terms of serving clients, which is the ultimate priority in these times. So we just made the prudent choice to say, well, what -- how do we have better aligned the dividend payout with the policy in a pre-COVID world. And instead of trying to earn our way out to -- like we without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 29, 2020 / 1:00PM, LB.TO - Q2 2020 Laurentian Bank of Canada Earnings Call plan to do, is make the cut right now, stay prudent. And as earnings go back to what they should be in a post strategic-planned world, then the dividend would grow along with it.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : The dividend cut is one strategy to preserve capital. I'm wondering if you're evaluating others. You've done the DRIP discount. Are you looking at any portfolio sales potentially to reduce the RWAs if not in the past, but maybe the harder look at that strategy today? Frantois Desjardins;President and CEO Thank you for the question, Gabriel. No, we are not looking at portfolio sales at all. We are looking at growth in our portfolios. And no large-scale acquisitions, like we've said in the past, but small portfolios, we'd be open to looking at that. We want to put more assets on the balance sheet. And we've said so for the last year or so, and we've been working very hard and successfully on the business customer side. As we've said in our remarks, this has continued to be a growth engine for us. And turning around the personal customer side has been our focus. I'm encouraged by the organic business development activities that we've been seeing. We've been slowly coming up the ranks in terms of market share on the mortgage broker business. And we've seen recently, our efforts start to pay off on personal loan side as well. So we're seeing some signs of stabilization. So really, as we're going through this crisis. Now that everybody's home or 80% of our team members are home, we're open for business and we're looking for growth. From a DRIP perspective, obviously, we discussed that every quarter, and we'll discuss that again next quarter. But for the time being, given that these are unprecedented times, we just left the DRIP as is for now, and we'll see what we do with that at the next quarter. For the moment, it gives us extra flexibility on capital. And of course, more capital means more growth.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Right. But that -- is my description an accurate one of the base case?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. And Liam, while I have you, the performing provision, we bought it by category. I was wondering what it was earmarked to or at least the allowance. Can you tell me geographically, U.S. versus Canada? And how that looks to play?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Would it be in line with the...

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : I'm not really worried about your operating exposure. I'm wondering how much of the performing provision was assigned to Northpoint? Be blunt. without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 29, 2020 / 1:00PM, LB.TO - Q2 2020 Laurentian Bank of Canada Earnings Call

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : Liam, I just wanted to get a bit of clarification. The commercial stage 3 loans you were talking about. You said -- was it a couple of accounts or more than a couple of accounts?

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : So I mean, $50-ish million increase. I mean are those -- is it fair to say those accounts were on average $25 each? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. MAY 29, 2020 / 1:00PM, LB.TO - Q2 2020 Laurentian Bank of Canada Earnings Call

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : Okay. And so can you comment how much you've provided against whatever notionals you have up on those 2 accounts?