Laurentian Bank of Canada

Good day, bonjour, and welcome to the fourth quarter and fiscal 2021 results Laurentian Bank Financial Group conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mrs. Susan Cohen, Head of Investor Relations, Laurentian Bank. Please go ahead, ma'am.

Merci. Bonjour à tous. Good morning, and thank you for joining us. Today's opening remarks will be delivered by Rania Llewellyn, President and CEO, and the review of fiscal 2021 and fourth quarter financial results will be presented by Yvonne 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, Eric Prevost, Head of Commercial Banking, Karine Abgraal Teslik, Head of Personal Banking, and Kelsey Gunderson, Head of Capital Markets. 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 is 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.

Bonjour à tous. Good morning and thank you for joining us today. We have a lot to cover with both our fourth quarter results presentation and shortly thereafter, our virtual investor day, where we will unveil our new strategic plan. As a result, I will keep my remarks on this call focused on our annual and fourth quarter results and reserve more forward-looking comments and guidance for today's Investor Day. As 2021 comes to a close, I want to express my deep thanks to the Laurentian Bank team for their tireless work in serving our valuable customers and maintaining the bank's operations while we continue to collectively navigate through the pandemic. Together, everyone demonstrated that we are stronger when we work as one team. We continue to monitor the latest COVID variant, global supply chain constraints and high inflation and their impact on the economy. On November 23rd, 2021, we also announced certain charges the bank was taking as a result of our strategic review and changes that needed to be made in order to reach our full potential. We believe they will position us for long-term, sustainable profitability. Turning now to our financials. On an adjusted basis, the bank delivered great results. Adjusted net income for fiscal 2021 was $211.2 million, or 53% higher than in 2020. and for the fourth quarter was $47.8 million or 13% higher than a year ago, despite being impacted by provisions for credit losses of $19 million related to the strategic review of our investment loan portfolio. These results generated adjusted earnings per share of $4.57, up 56% from the previous year. For the fiscal year of 2021, Adjusted pre-tax pre-provision income for the bank was $318.9 million and $86.3 million for the fourth quarter, both up 18% compared with a year earlier. These were primarily the result of a strong performance in commercial banking, which saw a net increase of $1.4 billion or 11% in loan growth compared to the prior year, driven by real estate financing and inventory financing. Capital markets had a record year and solid quarter, closing its largest ever M&A advisory mandate as it continues to execute on our renewed one-bank approach. On a reported basis, the bank recorded net income of $57.1 million and a net loss of $102.9 million for the fourth quarter. Results were impacted by the previously announced restructuring and impairment charges of $209 million on a pre-tax basis, which related to our strategic review and the impairment of the personal banking segment. The bank also continues to maintain healthy liquidity levels and a strong capital position to support our strategic plan with a CET1 ratio of 10.2% up 60 basis points year-over-year. With OSFI lifting capital restrictions and our confidence in our future, we announced earlier today that we have increased our quarterly dividend by 4 cents this quarter, or 10%, and we are launching a new 2% normal course issuer bid program that we will activate on December 15. This is part of our shareholder value creation strategy, while retaining significant flexibility to continue investing in organic and inorganic opportunities going forward we will review our dividend on a semi-annual basis i also wanted to provide an update on our inventory financing business this business is a key driver of growth and has been highly impacted by the pandemic although there are still pressures in supply chains globally growth resumed in inventory financing, increasing dealer credit utilization rates from 28% last quarter to 35% this quarter. This was as a result of normal seasonal demands and our sales activities that resulted in expanding our dealer network by 20% year over year. While we are encouraged by these results, Utilization rates continue to be lower than pre-pandemic levels and we continue to expect that supply chain disruptions and high consumer demand will remain a challenge for most of 2022. As you know, this past year we established three strategic pillars that guided all our efforts and actions. From those pillars, we identified and successfully achieved our three key priorities for 2021. One, we renewed our senior leadership team and simplified our organizational structure. Two, we identified a number of opportunities for cost savings and executed against those initiatives, reducing our overall adjusted efficiency ratio by 410 basis points to 68.2% for the year and a 290 basis point improvement for the quarter. And three, we completed a thorough review of our operations and developed a strategic plan which will position the bank for sustainable long-term profitable growth by focusing on areas where we can continue to differentiate ourselves with a customer first approach to drive shareholder value which we will share later on today. Over the past two quarters we also identified shortfalls in our mortgage business and digital offering. I will first touch on our digital offering. Last quarter, we said that we had three areas of focus to improve our digital capabilities. They were to close foundational gaps, enhance digital onboarding, and improve the end-to-end digital experience. To that end, today I am pleased to announce the launch of the Laurentian Bank mobile app on both iOS and Android devices. A mobile app has been the number one requested feature from our customers and employees. The first version of this app provides customers with the most commonly used banking features, including account balances, transaction history, Interac e-transfer, and bill payments, and has a simple user interface for ease of customer experience. This app was launched in less than seven months from conception to delivery. and truly demonstrated how we can make size our advantage by being agile and nimble in our development. This closes a key foundational gap for the bank and will allow us to continue to grow our national presence and serve our customers where and when they want. We will continue to add more features to the app in 2022, as well as introduce new capabilities to enhance and accelerate digital onboarding and improve the end-to-end digital experience which I will cover in more detail at our investor day over the past three quarters we have also identified shortfalls in our mortgage business including a complex customer experience lengthy processes and inconsistent service level last quarter we identified some short-term actions to begin improving the customer experience and this quarter we are building on those initiatives for instance We integrated the mortgage underwriting team into the newly created residential real estate secured lending business unit, and we strengthened our focus on retention, including the deployment of predictive analytics allowing for proactive customer engagement. We note there are no changes to our risk underwriting parameters as a result of these changes. To reposition and drive growth in this business, we are going to continue to improve our time to yes. further simplify processes, and enhance the customer experience. We will share more details at our investor day later on this morning. Given our ongoing commitment to ESG, I would like to provide an overview of some key developments over this past quarter. We launched an ESG materiality assessment and comprehensive risk assessment, the results of which we will disclose in our first-ever 2021 ESG report, and will directly inform our ESG strategy moving forward. We launched our third employee resource group, StrongHer. This is part of our Courageous Conversations initiative to create a safe space for employees to share, listen, and learn about various aspects of diversity and inclusion. As part of our commitment to the Black North initiative, we announced a $25,000 donation to Groupe 3737, a Montreal-based innovation hub that is making a real difference by empowering and supporting talented entrepreneurs from diverse backgrounds. To further empower employees in our retail branches and commercial banking business centers to give back to the communities where we live and work, we launched a new grassroots initiative called Laurentian Bank in the Community. This program resulted in almost 70 organizations receiving an additional financial boost to help them deliver on their important missions. I am now pleased to turn the call over to Yvon.