Laurentian Bank of Canada

Welcome to the Laurentian Bank Quarterly Financial Results Call. Please note that this call is being recorded. I would now like to turn the meeting over to Andrew Chernenky, Vice President, Investor Relations. Please go ahead, Andrew.

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 the fourth quarter financial results will be presented by Yvon Deschamps, Executive Vice President, and Chief Financial Officer, after which we'll 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 Graveau, Head of Commercial Banking, Karin Abgerall-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. As a complete cautionary note regarding forward-looking statements, please refer to our press release or to slide 2 of the presentation. I would also like to remind listeners that the Bank assesses its performance on a reported and adjusted basis and considers both to be useful in assessing underlying business performance. Rangya and Ava will be referring to adjusted results in the remarks unless otherwise noted as reported. I would now like to turn the call over to Rangya.

Thank you, Andrew. Bonjour a tous. Earlier this morning, we released our fourth quarter and annual results for 2022, bringing an end to the first year of our three-year strategy. I'm extremely pleased to announce that we have exceeded all four of our financial targets for the year. We executed on our plan with a laser-like focus across the entire organization, which is evidenced by the strong results we issued today. We did this in a period of economic uncertainty, and we are confident in our ability to deliver against any backdrop. We have a lot to be proud of as an organization, and on behalf of the management team, I would like to thank everyone at the bank for their ongoing dedication. I would now like to turn to our financial results. We had strong net income growth this year, up 12% to $237 million. Top line revenue of $1.03 billion was driven by continued loan growth in commercial banking and complemented by cost discipline and our pivot to finding operational efficiencies across the enterprise. PTPP income was up 9% to $347 million compared to $319 million a year ago. On a full year basis, we exceeded our financial targets. Earnings per share were $5.19, up 14% year over year, and above our target of greater than 5%. ROE was 9.3%. up 100 basis points from last year, exceeding our target of 8.5%. The bank's efficiency ratio was 66.5%, down 170 basis points compared to 2021, and better than our target of 68%. And we delivered positive operating leverage of 2.6% while making foundational investments in our strategic priorities. This year also saw record deposit growth of 18%, which outpaced loan growth at 12%, exceeding a key objective to grow deposits in line with loans on a relative basis. We maintained our CET1 ratio at 9.1% while supporting strong organic growth. Before I recap the year, there are a few highlights from the fourth quarter that I would like to share. First, As part of our strategy to leverage partnerships to deliver products to customers quicker, I'm excited to announce that within just one year, we have launched our newly reimagined credit card experience. This meets a key objective of reducing the time to approval from 25 days to minutes and provides immediate access to a virtual card that can be added to your mobile wallet. We are launching this initiative to our employees first. followed by a phased customer rollout in the first half of the year. This is similar to the approach we use for digital account opening and allows us to gather feedback and ensure a seamless customer experience. Second, as part of our commitment to make a positive impact for our customers, investors, employees, and communities, we published our inaugural Sustainable Bond Framework. The framework was validated by Sustainalytics, a global leader in ESG ratings, which founded credible, impactful, and aligned with international standards. Third, as part of our strategic plan, we have now subleased 50% of our corporate office space. This is a particularly significant achievement and highlights the ability of our team to execute in challenging market conditions. Turning now to our achievements over the past year, our year of execution. We kicked off our Investor Day last December identifying culture as our driving force. Guided by our new purpose and core values, we are a very different bank today than we were two years ago. We have adopted a work-from-home first approach, introduced an employee recognition program, expanded mental health and wellness resources, and provided employees with new tools to work even more efficiently. Our employees are also feeling the positive momentum as reflected in our reduced turnover rate and in the employee engagement score from our annual survey, which is up three points to 77%, surpassing our target of 75%. At our investor day, we said that commercial banking would be our growth engine. This year, we have seen tremendous commercial loan growth of $4.1 billion across our specializations, up 29% year-over-year. The strong growth in inventory financing led us to exceeding our medium-term geographic diversification target, moving from 14% of commercial assets in the US last year to 24% today. As part of our diversification strategy, we have also expanded into new industries such as agriculture and technology, where we've grown our dealer base by 27% and 210%, respectively, over the last year. This has all been underpinned by our continued commitment to deliver an excellent customer experience, as evidenced by improving our already excellent net promoter score in commercial banking. In December of last year, we said that our capital markets business offers a focused and aligned offering. Since then, we have been aligning our capital markets activities with core commercial lending capabilities. As a result, capital markets reached its target of 75% coverage of top-tier commercial clients, which also led to year-over-year growth in our FX business, ending with a record quarter in Q4. In support of our strategic pillar, Make the Better Choice, we also participated in 100% of green and social bond issuances by our core clients. Personal banking continues to reposition for growth by closing key foundational gaps. This year, we met our objective of reducing time to ask for a mortgage from more than eight days in 2021 to less than three days. We did this by eliminating redundant processes and introducing new digital capabilities like e-signatures. In addition, we launched our renewed brand with a modernized look and feel and closed the top five digital pain points as identified by our customers. This includes our new mobile app, which was delivered in just seven months, tap-on debit, digital account onboarding, self-service password resets, and a refreshed public website. We now continue to build on that momentum with our new credit card experience. To support our path to improved efficiency, we continued with our focus on cost discipline while also turning to net new cost optimization opportunities. In addition to the reduction of our corporate office space, a few other examples include reducing excess data storage and associated costs, decommissioning redundant technology applications, and leveraging contract renewals to streamline the number of vendors and professional services providers. We also said that our strategy would be underpinned by a commitment to integrating ESG across the organization. In 2022, we launched the bank's first ESG and TCFD reports, achieved our objective of moving to a low-risk ESG rating from Sustainalytics, and as I mentioned earlier, published our inaugural sustainable bond framework. Each of these on its own is a tremendous accomplishment. To have completed all of this within one year is a testament to the skills and engagement of our teams and successfully closes our year of execution. Now, as we enter 2023 with momentum on our side, our focus shifts to initiatives that will stimulate future growth. We intend on concentrating our efforts in three priority areas. First, delivering excellent customer service. We will leverage data from our NPS program to improve the customer experience and reduce pain points. Second, growing deposits. Coming off a record year in deposit growth and having closed our top five digital gaps, We are well positioned to grow deposits by deepening our relationships with existing customers and targeting new ones. Third, driving efficiencies through simplification. While not always a straight line as we invest in growth initiatives, we will continue to drive down our adjusted efficiency ratio below 65% over the medium term by further streamlining our internal processes and operations. Notwithstanding an uncertain economic environment, I am confident that we have the right plan and the right team in place to continue to drive results and shareholder values. I will now turn the call over to Yvon.