Laurentian Bank of Canada Q3 2020 Earnings Call Transcript

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

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Just want to talk about the loan growth issue there, and thanks for all the detail on what's going on in the inventory finance business, makes sense. And I'm just wondering about the rest of the portfolio because where you see commercial growth evolving here because -- in the big 6, anyway, we saw flat growth quarter-over-quarter after years of double-digit growth. And it did seem to be obvious that businesses have confidence issues right now, and then that's suppressing demand. Is that something that could weigh on your growth into 2021? StTphane Therrien - Laurentian Bank of Canada - EVP of Personal & Commercial Banking, Interim President, CEO and Director Yes. We're not immune, right? It's -- I think the particularity of our portfolio is definitely Northpoint, as you pointed out. The growth, we're seeing pipeline being built up right now in real estate, commercial real estate. So we feel good about, again, this portfolio. Our portfolio in our leasing arm will build as the economy stabilize. So we feel good with this portfolio as well. For the rest of the bank, with respect of our residential mortgages, our portfolio has been stable for the last -- past 2 quarters. The environment has been highly competitive, and our appetite is for profitable growth, but still it has been stable for the last 4 -- 2 quarters. So we feel good about this. But as we navigate through the pandemic, all line of business are focusing on where they can win in order to resume growth. And for your question in terms of business services, we still feel very positive about our current portfolio. We're not active in industry that had been mostly impacted by COVID-19, obviously, with Northpoint, but it's kind of a negative, positive type of news. So we feel good about our future ability to grow in business services but also stabilizing the rest of our portfolio. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2020 / 1:00PM, LB.TO - Q3 2020 Laurentian Bank of Canada Earnings Call

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. So how many accounts are we talking about?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. So those belong to a specific sector out there?

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Okay. And then the other -- my last question here is on the classification of loans. So I'm hearing the -- when you talk about the provision, the performing provision expense and how you're increasing the probability of the worst-case and base-case scenarios, and that's building conservatism. But when I look at how you're classifying your loan book, I see total, but it's commercial and personal, total stage 2 balances, which are the higher-risk performing loans. They're down sequentially, and that makes sense. It's a reflection of government's support programs, but they're down materially from last year. And last year, COVID wasn't even on the radar. It doesn't seem to make sense. And it does diverge with what I'm seeing elsewhere. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2020 / 1:00PM, LB.TO - Q3 2020 Laurentian Bank of Canada Earnings Call StTphane Therrien - Laurentian Bank of Canada - EVP of Personal & Commercial Banking, Interim President, CEO and Director I'll pass it to Liam.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Right. I get that. But we hear about management overlay, and this area seems where you could proactively put some accounts into stage 2, take --compelled you to take a higher provision, but I'm seeing the opposite here. We're in a very, very different situation.

Question: Gabriel Dechaine - National Bank Financial, Inc., Research Division - Analyst : Maybe we'd talk about that off-line because it's interesting to see how -- I mean, you can't really see that overlay in these numbers, but I get what you're saying.

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : Just a couple of quickies, hopefully. Maybe for Liam, I don't know. Can you give a little bit more color around geographic breakdown of the mortgage relief? And specifically, more details around I think the 250, 260 that you say were new release in the quarter.

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : So just to be clear, Liam, you're saying you're not seeing any disproportionality, if you will, geographically around the relief?

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : And Liam, that would -- those comments would also apply to the new relief provided during the quarter?

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : Okay. And then I just wanted to go back to the balance sheet trends, generally speaking. I think aside from the Northpoint dynamics that you were talking about, if I would just look at your residential mortgage balances. I guess I think you said something along the lines of stable is comfortable for you. But the market is growing. I think the markets you participate in are growing. So I was just curious to get a sense of how much more, I guess, market share you're willing to give up? Or what will it take for you to want to start growing with the market? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 04, 2020 / 1:00PM, LB.TO - Q3 2020 Laurentian Bank of Canada Earnings Call StTphane Therrien - Laurentian Bank of Canada - EVP of Personal & Commercial Banking, Interim President, CEO and Director This is StTphane. I'll take this one. We -- yes, this is a very competitive market as well. And we have appetite for profitable growth in certain areas of this market. So for us, short term, having being able to stabilize the portfolio is the first step. I'm not saying that we will not want to grow, but we want this growth to be profitable.

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : Okay. And one last -- just one last one on the net interest margin. I apologize if you mentioned this, and I missed it. But did you comment as to what the outlook for that line item is over the, call it, foreseeable quarters? StTphane Therrien - Laurentian Bank of Canada - EVP of Personal & Commercial Banking, Interim President, CEO and Director Frantois Laurin?

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : Okay. And then I guess, Frantois, just to put a final point on it. Hopefully, eventually, when heading next year, you start growing mortgage book again.

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : That will be a net headwind to NIM, correct?

Question: Sohrab Movahedi - BMO Capital Markets Equity Research - Analyst : And if the mix of the growth, if the secured stuff starts growing, which obviously is lower risk, but lower margin, I guess, that would be an offset as far as margin expansion or NIM expansion is concerned?