Laurentian Bank is for sale and the Quebec financial institution is already knocking on various doors in the hope of finding a new owner. In the event that it is bought by a rival already well established in the country, this does not bode well for the head office, which is located in Montreal.
The seventh largest bank in the country in terms of assets, Laurentian limited itself to saying on Tuesday that it was examining its “strategic options”. However, according to sources familiar with the matter, but who are not authorized to speak publicly, the process is already well underway.
According to our information, the Quebec lender has retained the services of JPMorgan Chase to support it in its efforts. Approaches have even already been tried, particularly with Quebec financial institutions.
“The bank does not intend to communicate any further information on this subject before the review is completed”, limited itself to indicating Laurentian, without offering more details about the next steps.
By email, the Desjardins Group did not want to say if it was interested in the assets of Laurentian. As of this writing, National Bank has not responded to questions from La Presse. Scotiabank could be a candidate. Last April, its president and CEO, Scott Thomson, expressed a desire to increase the Nova Scotia bank’s footprint in markets like Quebec, where it is “underrepresented”.
Royal Bank of Canada and TD Bank – the two largest in the country – are expected to remain on the sidelines. The first must complete the takeover of the Canadian activities of HSBC for 13.5 billion while the second has its eyes more riveted on the American market.
“I’m not surprised [by the announcement],” said HEC Montreal strategy professor Louis Hébert, who specializes in mergers and acquisitions, among other things. “The economic climate is not favorable for a smaller bank. In the Canadian sector, which is concentrated, it is difficult to find a voice. »
Founded in 1846, Laurentian operated 58 branches at the end of its last fiscal year (October 31). Its assets are approximately 51 billion and it offers loans in Quebec, Canada and the United States.
Unless the bank serves as a springboard for a foreign player wishing to establish itself in Canada, the prospects for Laurentian’s head office are not bright, Mr. Hébert believes.
“If it is a consolidation acquisition of a Canadian player, it is certain that the head office will disappear, says the expert. We want to achieve economies of scale and reduce management costs. All Head Office Pledges have an expiry date. »
In Quebec, the bank has 1,500 employees. She did not specify how many people worked at her head office, where there are functions that revolve around finance, legal affairs, human resources and information technology.
The past few years have been eventful at Laurentian. At the end of 2021, President and CEO Rania Llewellyn unveiled a new transformation plan to focus on niche niches. The strategy put in place in 2015 by his predecessor François Desjardins, which consisted in modernizing the bank’s systems and halving the number of branches, had not borne fruit and weighed on the results.
Ms. Llewellyn had succeeded in restoring the luster to Laurentian’s performance. In 2022, earnings per share grew by 22%, well above the initial target of 5%. The picture has changed, however, amid an economic downturn, rising interest rates – which weighs on loan portfolio growth – as well as new rules requiring banks to keep more capital in their reserves.
Added to this are de-unionization campaigns. Two attempts had failed in 2018. However, the scenario had been different a few years later. After a presence of more than five decades within the financial institution, the union, affiliated with the Federation of Workers of Quebec, had been officially dissolved in April 2021 following a vote of the employees.
According to data from the firm Refinitiv, there is only one Quebec shareholder among the ten main owners of Laurentian, namely the Caisse de dépôt et placement du Québec (CDPQ). The woolen stocking of Quebecers is the most important with its participation of 8.1%.
“We will not make any specific comment as it is a public company, underlined the institution’s spokesperson, Kate Monfette. But we will follow the process closely. »
The story was similar on the side of the Legault government. Claudia Loupret, press secretary to the Minister of Finance, Eric Girard, only indicated that Quebec would monitor the various stages of the process.
On the Toronto Stock Exchange on Tuesday, Laurentian stock closed at $33.53, up 15 cents, or 0.45%. This gives a market value of 1.46 billion to the lender.
Although Laurentian Bank’s head office is in Montreal, the majority of decisions seem to be made in Ontario, where the president lives. Last year, 70% of the organization’s ten “senior executives” lived outside Quebec, according to the lender’s annual information form. The portrait is hardly more rosy on the side of the board of directors. Only two directors out of 11 are from Quebec. When she was named head of Laurentian in 2020, Ms. Llewellyn was not fluent in French.