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Laurentian Bank Cuts Dividend 40%
May 29, 2020
1:41 pm
MG
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Today Laurentian Bank announced a 40% dividend cut. Is anyone worried there might be a run on deposits ala Home Capital Group, which happened 3 years ago?

Hmmmm....

https://web.tmxmoney.com/article.php?newsid=7591058241208610&qm_symbol=LB

May 29, 2020
2:09 pm
Briguy
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I'm not worried because I have less than 100K in LBC Digital.

May 30, 2020
5:27 am
Indmuny
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Real Canadian banks do not reduce their dividends. Laurentian will now always be considered a aintgonnabe after this cut. National cut their dividend in '92 and will always be held in disdain for that. A good indication that these clowns have no clue and that their strategic plan is flawed

May 30, 2020
5:48 am
qweasdzxc63
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Possible the bank go into bankruptcy given they cut the dividend and the rate in the worse quarter results? What about money over 100,000 in that case?

May 30, 2020
6:34 am
Bud
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Laurentian is being conservative nothing wrong with them.

May 30, 2020
7:36 am
qweasdzxc63
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Their cet1 ration is only 8.8, lowest among all Canadian banks.

May 30, 2020
8:05 am
Oscar
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Indmuny said
Real Canadian banks do not reduce their dividends. Laurentian will now always be considered a aintgonnabe after this cut. National cut their dividend in '92 and will always be held in disdain for that. A good indication that these clowns have no clue and that their strategic plan is flawed  

Unless the other banks follow suit and then we are all in this together. Maybe this is part of the "new normal" they keep repeating endlessly

May 30, 2020
5:20 pm
Doug
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Indmuny said
Real Canadian banks do not reduce their dividends. Laurentian will now always be considered a aintgonnabe after this cut. National cut their dividend in '92 and will always be held in disdain for that. A good indication that these clowns have no clue and that their strategic plan is flawed  

They still have investments left to make in their core banking system migration. They've only fully migrated B2B Bank to the new Temenos core banking system, as well as LBC Digital offering which launched last year. COVID-19 has delayed their migration of Laurentian Bank commercial and business banking customers and products until November next year, with Laurentian Bank personal banking customers to follow immediately after that. They now expect to fully decommission the legacy core banking system and online banking platform in 2022, with the expected $250 million in annual cost savings to follow that. Laurentian also, somewhat unexpectedly, announced on the conference call that they expect to close a further 22 branches this year, reducing from 85 Advice Clinics to 63 Advice Clinics by year end 2020. This is below even my target of expecting them to end up with 75-90 branches, so I now think they're probably aiming for 50-60 Advice Clinics, all in Quebec, by 2022, and that's where they'll end up.

They have, however, added 25 full-time financial advisors to their Advice Clinics not slated for closure and to their contact centre(s) in the first quarter of this year.

National Bank did cut their dividend in 1992 and, I think, even in 2008 as well, but honestly, they have been the best performing bank stock for the past few years—so much so that they're now even more pricey than Royal Bank of Canada on a P/E and P/B basis. It's far too early, as I still think Laurentian goes to ~$20 per share before it moves higher on a sustained basis, but I think, ultimately, when they run through their operational initiatives, they've got more room now to increase their dividend, which should ultimately propel the stock higher beginning in 2022.

Cheers,
Doug

May 30, 2020
7:21 pm
Canadianbull
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Their stock dropped 10% after the news. More pain to come.

May 30, 2020
9:50 pm
Bud
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Doug said
expected $250 million in annual cost savings

Doug  

thats a big amount for them u sure its correct. itll double their annual profit. But wont they lose a lot of older customers as they kick them out of the branches to online

May 31, 2020
7:09 am
savemoresaveoften
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Doug said

They still have investments left to make in their core banking system migration. They've only fully migrated B2B Bank to the new Temenos core banking system, as well as LBC Digital offering which launched last year. COVID-19 has delayed their migration of Laurentian Bank commercial and business banking customers and products until November next year, with Laurentian Bank personal banking customers to follow immediately after that. They now expect to fully decommission the legacy core banking system and online banking platform in 2022, with the expected $250 million in annual cost savings to follow that. Laurentian also, somewhat unexpectedly, announced on the conference call that they expect to close a further 22 branches this year, reducing from 85 Advice Clinics to 63 Advice Clinics by year end 2020. This is below even my target of expecting them to end up with 75-90 branches, so I now think they're probably aiming for 50-60 Advice Clinics, all in Quebec, by 2022, and that's where they'll end up.

They have, however, added 25 full-time financial advisors to their Advice Clinics not slated for closure and to their contact centre(s) in the first quarter of this year.

National Bank did cut their dividend in 1992 and, I think, even in 2008 as well, but honestly, they have been the best performing bank stock for the past few years—so much so that they're now even more pricey than Royal Bank of Canada on a P/E and P/B basis. It's far too early, as I still think Laurentian goes to ~$20 per share before it moves higher on a sustained basis, but I think, ultimately, when they run through their operational initiatives, they've got more room now to increase their dividend, which should ultimately propel the stock higher beginning in 2022.

Cheers,
Doug  

From $28 to $20 is another 30% hit, it wont happen solo but if market tanks again with other banks going down with it, then yes its very possible. IMHO

Unfortunately they just had 2 consecutive years of "bad news" and saw it tanking from the $50s. It was flying high in 2018

May 31, 2020
8:33 am
Doug
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Bud said

thats a big amount for them u sure its correct. itll double their annual profit. But wont they lose a lot of older customers as they kick them out of the branches to online  

It could've been the combined annual cost savings from the elimination of having to run two core banking systems and two online banking platforms and from their branch closures and staffing reductions, but yes, that's the figure I heard on the Q2 2020 conference call. Don't forget, they've had a lot of one-time charges for the I.T. and marketing investments they've been making. sf-cool

Who knows whether they have mostly senior citizen customers or not. Most of the branch closures have already been done. Besides, they're targeting a new demographic, the digitally-minded emerging and mass affluent—both young, single professionals and young married couples, with or without children. Senior citizens aren't a profitable demographic—they're actually a cost to all banks. They're a source of funding for the banks' and credit unions' loan books with their deposits, but in terms of wealth management, anecdotally, they tend not to gravitate to self-directed discount brokerage platforms or mutual funds. Some, like @AltaRed, @Norman1, and @Bill, do use discount brokerages and may even hold mutual funds through those platforms, but they're neither frequent traders nor holders of banks' high cost proprietary mutual funds. In short, the banks earn some revenue from seniors like them, but it is modest.

And, mark my words, Laurentian Bank will be by no means alone in terms of coming branch closures. I expect many of the large banks and even the larger credit unions to make permanent these branch hour reductions, including staff reductions. I also expect the Big Six banks + HSBC Bank Canada to accelerate their rate of branch closures (net of new branch openings or branch moves/consolidations) to accelerate from an average of 3-7 per year, per bank (ex. HSBC) to a rate of 15-20 per year (per bank, ex. HSBC). HSBC has a smaller footprint and has already closed ~20 branches and 75 consumer finance division offices in the past 10 years, so their acceleration will be modest, but they could increase their closure rate of 1-2 to 2-3 or 3-4 per year.

Cheers,
Doug

May 31, 2020
10:04 am
AltaRed
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Doug said
And, mark my words, Laurentian Bank will be by no means alone in terms of coming branch closures. I expect many of the large banks and even the larger credit unions to make permanent these branch hour reductions, including staff reductions. I also expect the Big Six banks + HSBC Bank Canada to accelerate their rate of branch closures (net of new branch openings or branch moves/consolidations) to accelerate from an average of 3-7 per year, per bank (ex. HSBC) to a rate of 15-20 per year (per bank, ex. HSBC). HSBC has a smaller footprint and has already closed ~20 branches and 75 consumer finance division offices in the past 10 years, so their acceleration will be modest, but they could increase their closure rate of 1-2 to 2-3 or 3-4 per year.

Cheers,
Doug  

Covid-19 isolation has probably forced a lot of people who had not yet converted to online banking pre-covid to do so to stay on top of their financial accounts. I suspect most of them will now 'stay' with digital banking for the most part and not revert to teller transactions (lonely seniors excepted who see their bank teller as their social outing).

My sentiment is thus to agree with Doug that reduced branch hours and accelerated branch closings are most likely here to stay. Beyond a need for a bank draft or similar (and perhaps business banking), there simply is no justifiable reason I can think of to ever step into a bank branch to "do banking". As investors and savers, it is in our interest for FIs to reduce their retail banking operating costs dramatically. No reason to manage/store paper documents any more with electronic PDFs, nor many reasons to use cash either.

May 31, 2020
10:57 am
Norman1
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Those senior retail customers are not a significant contributor to Laurentian Bank's profits. Their retail banking operations are not that a significant source of profit to them.

In the March 2017 Financial Post article Laurentian Bank is going to turn its branches into ‘financial clinics’…, the CEO shared that the entire retail bank contributes only about 14% to the bank's profits back then:

About 85 per cent of Laurentian’s profit comes from what [Laurentian Bank CEO Francois] Desjardins calls its “Pan-Canadian” operations: business services, which comprises commercial business banking, real-estate lending and financial services for small companies, as well as its B2B Bank and its Laurentian Bank Securities capital markets unit. The retail bank, by comparison, contributes 14 per cent to profit.

In modern business management theory, it is okay to lose customers who are not profitable. Perhaps, those customers are better suited to a competitor who is better equipped to both serve them and make a profit from serving them.

May 31, 2020
2:50 pm
Briguy
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AltaRed said

Covid-19 isolation has probably forced a lot of people who had not yet converted to online banking pre-covid to do so to stay on top of their financial accounts. I suspect most of them will now 'stay' with digital banking for the most part and not revert to teller transactions (lonely seniors excepted who see their bank teller as their social outing).

My sentiment is thus to agree with Doug that reduced branch hours and accelerated branch closings are most likely here to stay. Beyond a need for a bank draft or similar (and perhaps business banking), there simply is no justifiable reason I can think of to ever step into a bank branch to "do banking". As investors and savers, it is in our interest for FIs to reduce their retail banking operating costs dramatically. No reason to manage/store paper documents any more with electronic PDFs, nor many reasons to use cash either.  

For some reason Scotiabank requires a lot more paperwork to be done at the bank level than other FIs. Maybe they figure they can upsell you on more investments?

Another problem is that since COVID started, the wait time to contact the big 5 banks has grown horrendous, so going in to branch may work out faster.

May 31, 2020
4:52 pm
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The big banks have been closing branches and reducing and outsourcing services for years, so it's just more of the same. All they are really interested in is "wealth management" and loans, at least for individuals, and the branches function like showrooms, with coffee machines, hot chocolate, TV, overstuffed chairs, and the various salespeople in offices surrounding the common space. The line of teller cages which we used to face on entry have been recessed and minimized, although probably soon to be enhanced with plexiglass. Design says it all.
They have numerous employees in every branch whose lives are dedicated to selling you mutual funds and/or upgrading you to wealth managers and riskier portfolios, regardless of whether you ever showed the slightest interest in them..

The lonely seniors are, unfortunately for the seniors, proving to be a lucrative target market as they grew up in an era when people believed they could count on their bankers' trustworthiness. And they end to have largish amounts in cash or shorter GICs - for good reason. But there is always someone readily available to talk them out of their well-considered priorities. Having done so, the banks then routinely refuse access to these "investments" by POAs, leaving seniors who are institutionalized without access to necessary funds. Beware. The POA documents you signed at the lawyer's office will not matter much to at least some of the big banks, and your POA will be taering their hair out. Seems to be a new trend.

May 31, 2020
5:22 pm
Briguy
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@Loonie , hopefully the POA document the bank has you sign at the branch level will work for the designated POA ? I mentioned recently that I wasn't allowed to be the second POA at CIBC. I initially was the second, but then their ATM ate my card and they phoned me up that I couldn't be second as they only allow one. So recently during this Covid crisis I've had to go to my bank to withdraw money to give my family member, and then get paid back by cheque from her, and then go back to my bank to deposit it, since I don't have POA.

May 31, 2020
6:29 pm
cruzinalong
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Briguy said
@Loonie , hopefully the POA document the bank has you sign at the branch level will work for the designated POA ? I mentioned recently that I wasn't allowed to be the second POA at CIBC. I initially was the second, but then their ATM ate my card and they phoned me up that I couldn't be second as they only allow one. So recently during this Covid crisis I've had to go to my bank to withdraw money to give my family member, and then get paid back by cheque from her, and then go back to my bank to deposit it, since I don't have POA.  

Get a joint account with the person concerned. I had a POA with my brother for my mother when Dad passed. It worked.

May 31, 2020
6:54 pm
Loonie
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Getting a joint account is not always advisable or possible, but it can be an option for some.
It's up to the person who has the money if they want to do this. Plus, they need to be mentally competent and capable of attending at the bank in order to set it up. Most people assume the forms they sign at the lawyer's office will suffice; they won't.

I fully understand what you are up against, BriGuy. The question is, what happens when/if the person is no longer capable of signing the cheques? Or if they end up in nursing home or retirement home and you are not permitted to visit and they lose their vision, which is more common than one might think. Even under "normal" conditions, these homes are sometimes closed due to infection such as Norwalk etc.

May 31, 2020
7:53 pm
Briguy
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@Loonie it might look bad to other family members if I had her set me up in a joint account with her. What will probably end up happening is that after Covid I will go with her to bank and have myself set up as the POA instead of my other family member. I'm also POA outside the bank, but as you mentioned, banks want you to be POA in their paperwork.

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