Laurentian Bank of Canada

Bonjour and welcome to the Second Quarter Results 2021 for Laurential Bank Financial Group Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Susan Cohen, Director, Investor Relations. Please go ahead, ma'am.

Bonjour à tous. Good morning and thank you for joining us. Today's opening remarks will be delivered by Rania Llewellyn, President and CEO of and the review of our second quarter of 2021 financial results will be presented by Yvon Deschamps, Executive Vice President and Chief Financial Officer, after which we will invite questions from the phone. Also joining us for the question period are several members of the bank's executive leadership team, Liam Mason, Chief Risk Officer, Kelsey Gunderson, Head of Capital Markets, Eric Prevost, Head of Commercial Banking, and for the first time, Karine Abgraal Teslik, Head of Personal Banking. All documents pertaining to the quarter can be found on our website in the Investor Center. I would like to remind you that during this conference call, forward-looking statements may be made, and it's possible that actual results may differ materially from those projected in such statements. For the complete cautionary note regarding forward-looking statements, please refer to our press release, or to slide two of the presentation. It is now my pleasure to turn the call over to Rania Llewellyn.

Thanks Susan. Bonjour a tous. Good morning and thank you to everyone for joining us today. I would like to begin by expressing my deep sadness about the recent discovery of the remains of 215 children buried on the grounds of a former residential school in Kamloops, B.C. As we pause and honor the lives of these 215 innocent children and the countless others, we must also make a commitment to them and their families that our individual and collective actions as a nation must focus on righting these wrongs. Moving now to our second quarter, on behalf of the entire leadership team, I want to thank everyone at Laurentian Bank for their efforts over the last quarter and for their ongoing commitment to our organization and the new leadership team. You have continued to grapple with the competing priorities of home life and your ongoing commitment to the work of the bank. Your efforts are very much appreciated and directly contribute to our positive results. As the country continues to work its way through the third wave of the pandemic, our priority remains the health and safety of our employees and in supporting our customers and communities during these challenging times. For our part, we are offering all our employees paid time off to get vaccinated and encourage everyone to do so as soon as possible. With the number of new COVID-19 cases declining and with increasing vaccination rates across the country, there is reason to feel optimistic. Turning to our results, the momentum we built in the first quarter of 2021 continued into the second quarter, delivering adjusted net income of $56.7 million. This represents an increase of 19% quarter over quarter and is almost four times higher than a year ago, with adjusted earnings per share of $1.23. Our results were driven by strong performance in capital markets, lower provision for credit losses, and our continued focus on cost discipline. The PCL includes a reserve release on performing loans of $9.9 million, reflecting improvements in economic forecasts. The bank has also maintained its healthy liquidity levels and a strong capital position with a CET1 ratio of 10.1%. This quarter also saw some key developments that I would like to highlight. Following the employee vote, the Canada Industrial Relations Board revoked the union certification covering the unionized employees. Both DBRS and SMP upgraded their ratings outlook on the bank from negative to stable, recognizing the solid progress that the bank is making. The bank launched its inaugural covered bond program, issuing $250 million at the beginning of the third quarter to further diversify and optimize sources of funding. And we announced the issuance of $125 million of limited recourse capital notes. The proceeds are earmarked to redeem the Preferred Shared Series 15 with a positive impact on the cost of capital. While I am pleased with our overall performance for the quarter and the first half of the year, there continues to be much work to be done to position the bank for sustained growth and profitability. As a result, we do not expect this year of transition and strategic refocus to be a straight line to success. You will recall from previous quarters that we have established three strategic pillars that are guiding all of our efforts and actions. They are cultivating a customer-first culture, driving an agile and innovative mindset, and engaging and empowering our employees to work as one team from those pillars we identified three key priorities in 2021 number one renew the senior leadership team and organizational structure number two increase our efforts on cost discipline while pivoting to structural cost opportunities and number three conduct a thorough review of the bank's operations and develop a new strategic plan. I would like to provide a brief update on our progress against each of those priorities. First, as part of renewing our senior leadership team, we appointed Keren Abgraal Teslik as Executive Vice President and Head of Personal Banking. With 25 years of financial services experience, Keren has a strong track record of transforming businesses and driving a customer-first strategy. She is leading our one-team approach to personal banking, which includes the Quebec Branch Network, digital banking, and B2B Bank. With the acceleration of digitization, changing consumer needs, and speed of change, technology has become a key enabler for all organizations, especially financial institutions. In order to support our need to become more agile as an organization and more digitally enabled, we will be conducting a formal search for a new chief technology officer. Second, I would like to highlight the continued efforts in the bank to carefully manage our discretionary expenses. Our focus on cost discipline enabled us to improve our adjusted efficiency ratio in the second quarter by 490 basis points from last year, maintaining this ratio below 70%. We are now pivoting towards cost optimization. In alignment with our overall theme of simplification, we are reviewing several of our key partnership agreements to ensure that we are getting the best value for the bank's dollars. As we continue to review our end-to-end processes, we will look to leverage partnerships as a way to drive further efficiencies. Last quarter, we mentioned that addressing the underperformance of our mortgage business was a high priority and committed to sharing our progress as we embarked on an end-to-end review. This quarter, we conducted a review of our mortgage broker channel origination process and found that the customer experience is complex, the process is lengthy, and there is an inconsistent level of service for our brokers. As a result, we are instituting a number of improvements, including piloting a program that segments and differentiates brokers to improve the customer experience, reducing overlap and duplication to streamline and simplify the end-to-end process, and establishing a dedicated end-to-end file ownership structure to improve our response time and service levels, all while maintaining our disciplined underwriting standards. We are now extending this review to our mortgage broker channel retention process and to our branch channel. On our last call, I talked about the ESG journey that we have begun at Laurentian Bank and how committed I am to it. That's why I announced at our AGM that I am personally taking the lead as Laurentian Bank's ESG champion, making myself directly accountable for our ESG strategy, and will be working closely with the Board. We have also included ESG and eDNI targets in all Leaders of Scorecards, linking these initiatives directly to performance as part of our efforts. To further support our ESG initiatives this past quarter, we established an executive ESG steering committee and cross-functional working group, and we have appointed our CFO, Yvonne Deschamps, as the lead of our TCFD task force. And we launched our first Courageous Conversation series led by the newly formed Black Employee Resource Group. I look forward to continuing to update you on our progress in the quarters to come. On May 26th, Laurentian Bank celebrated its 175th anniversary. Not too many Canadian companies can say they have been part of the fabric of our country for 175 years. This is an incredible milestone, and it is an opportunity to reflect on our remarkable past and to celebrate the strength of our roots. Our evolution as an institution is one built on prudence, innovation, and dedication to serving a market that was previously underserved. What hasn't changed in nearly two centuries is our unwavering commitment to serving the financial needs of our customers, our shareholders, and our communities. To promote our customer-first approach, we have launched several deposit and credit card 175 branded cashback offers to reward our existing customers and acquire new ones. As we continue to celebrate throughout the year and to support our renewal and growth strategy, additional product offerings will be launched. Across the board, our people are telling us they want to play a vital role in our future success, and I am pleased to say that I am seeing a renewed sense of pride and a winning attitude across all business lines. As we look towards our exciting future, our continued success will be the result of how we move forward together as one team and as one bank. I am now pleased to turn the call over to Yvon for his first earnings call as our CFO.