Laurentian Bank Q2 Profit Increases 497%, Tops Estimates; Shares Up 2%


Shares of Laurentian Bank (LB) rose more than 2% in early trading Wednesday even after Canada’s seventh-largest bank posted better-than-expected Q2 profits, thanks to a strong performance in capital markets and lower provisions for credit losses.

Profit came in at C$53.1 million (C$1.15 per diluted share) for Q2 2021, up 497% from a profit of C$8.9 million (C$0.13 per diluted share) in Q2 2020.

On an adjusted basis, the Montreal-based bank earned C$56.7 million (C$1.23 per diluted share) in the quarter ended April 30, compared to an adjusted profit of C$11.9 million (C$0.20) per diluted share in the same quarter last year. Analysts on average expected adjusted EPS of C$0.89.

The improvement in profits was driven by lower provisions for credit losses. They fell to C$2.4 million in the second quarter from C$54.9 million in the same period a year earlier when the economy slumped due to the COVID-19 pandemic.

Meanwhile, total revenue was in line with estimates at C$249.8 million, up 4% from C$240.1 million in the prior-year quarter. (See Laurentian Bank stock analysis on TipRanks)

Laurentian Bank President and CEO Rania Llewellyn said, “The momentum we built in the first quarter of 2021 continued into the second quarter with strong performance in capital markets, lower provision for credit losses and our continued focus on cost discipline. We are excited to be celebrating Laurentian Bank’s 175th anniversary over the next year with our customers, employees, investors, and our communities. This historic milestone is an opportunity to reflect on our remarkable past and to leverage our strong roots to build sustainable growth and profitability.”

Last month, Scotiabank analyst Meny Grauman maintained a Hold rating on LB while raising its price target to C$46.00 from C$44.00 (3.3% upside potential).

Grauman said that Canadian banks may trade at much higher multiples than their historic averages since the post-pandemic economic outlook is “extremely favorable” for the banking sector.

Overall, LB scores a Hold rating among Wall Street analysts based on 1 Buy, 6 Holds, and 2 Sells. The average analyst price target of C$41.67 implies 6.5% downside potential from current levels.

TipRanks’ Smart Score

LB scores a 6 out of 10 on TipRanks’ Smart Score rating system, indicating that the stock returns are expected to be in line with the overall market.

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