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Laurentian Bank has started strategic review and possible sale
July 11, 2023
2:46 pm
Briguy
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July 11, 2023
2:48 pm
Briguy
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Would this influence people on this forum from buying GICs from LBC Digital ?

July 11, 2023
3:54 pm
AltaRed
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I am not sure why it should influence anything. Whoever buys the company will honor the contract through the usual successors and assigns clause. CDIC also typically continues to cover as if a separate entity.

July 11, 2023
4:07 pm
Briguy
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It might be more paper work possibly, if you have to start a new profile at a new bank ? And may not be worth it if you have already have a bank account at another bank with similar interest rates, eg. 5 year rate at LBC Digital is 5.05 percent, compared to 5 percent at EQ Bank.

And if you have to start a new profile at a new bank, you may not get the welcome bonus you would get if you joined during a promotion.

July 11, 2023
6:14 pm
Doug
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Most likely any potential buyer will structure it as an asset purchase agreement, rather than a share purchase agreement. In CDIC terms, that shouldn't make any difference, other than immediately imposing CDIC rules on merged institutions upon closing.

My "top picks" to the likely buyers include:
- 1. Scotiabank (expands their Quebec presence; incremental LBC Digital clients can easily be offered migration deals to Tangerine, which eliminates the LBC Digital problem; and its sorry excuse for LBC Direct brokerage easily combined with Scotia iTRADE. B2B Bank would give them expanded reach in the third-party custodial brokerage service business)
- 2. Canadian Western Bank (expands their geographic reach to become a pan-Canadian bank)
- 3. EQB Inc. (they likely don't want Laurentian's branches, so expect a full-scale closure of remaining branches and for a somewhat messy systems migration to EQB's Azure cloud-based systems)

An outlier would be ATB Financial, though they have the heft to pull it off. 🙂

Cheers,
Doug

July 11, 2023
6:15 pm
Doug
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Remember, Motus Bank is also in a strategic review and could be sold off by Meridian, or taken out back and put out to pasture. Either way, Motus Bank and LBC Digital's days are numbered in the next 12 months. 🙂

Cheers,
Doug

July 11, 2023
6:27 pm
AltaRed
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I disagree with Doug. LB will be bought out via a share purchase (corporate) arrangement if for no other reason than LB is not insolvent. Just as Smith Financial bought Home Capital Group.

I do agree Scotiabank is likely the leading contender, with EQB and even Smith Financial as outside possibilities. I can't imagine why CWB would even care about LB as it is not their modus operandi. As for ATB, it is way outside ATB's wheelhouse and I am not sure their charter would allow it (it is an AB crown corporation)

July 11, 2023
6:33 pm
Briguy
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Doug said
Most likely any potential buyer will structure it as an asset purchase agreement, rather than a share purchase agreement. In CDIC terms, that shouldn't make any difference, other than immediately imposing CDIC rules on merged institutions upon closing.

My "top picks" to the likely buyers include:
- 1. Scotiabank (expands their Quebec presence; incremental LBC Digital clients can easily be offered migration deals to Tangerine, which eliminates the LBC Digital problem; and its sorry excuse for LBC Direct brokerage easily combined with Scotia iTRADE. B2B Bank would give them expanded reach in the third-party custodial brokerage service business)
- 2. Canadian Western Bank (expands their geographic reach to become a pan-Canadian bank)
- 3. EQB Inc. (they likely don't want Laurentian's branches, so expect a full-scale closure of remaining branches and for a somewhat messy systems migration to EQB's Azure cloud-based systems)

An outlier would be ATB Financial, though they have the heft to pull it off. 🙂

Cheers,
Doug  

Good analysis overall, Doug. However, the original Globe and Mail article predicts that this will start a trend of smaller banks like Canadian Western Bank putting themselves up for sale. They seem to agree with you that Scotiabank will be the number 1 contender.

https://archive.is/djLxR

July 11, 2023
8:35 pm
Loonie
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I don't deal with LB in any form and will wait to see what happens. Usually mergers lead to worse deals for savers. I can really only imagine it being bought by a major bank.
The best choice for savers might be Scotia if it merges it with Tangerine. I don't like Tangerine because of the games they play but occasionally they are useful and their CC isn't bad.
LB's CEO is impressive. I wonder if she would be part of the package - especially handy if the winner is Scotia as she worked there before.

I appreciated the archived link.

July 12, 2023
11:02 am
savemoresaveoften
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Briguy said
Good analysis overall, Doug. However, the original Globe and Mail article predicts that this will start a trend of smaller banks like Canadian Western Bank putting themselves up for sale. They seem to agree with you that Scotiabank will be the number 1 contender.

https://archive.is/djLxR  

why not TD ? LB is only 2B market cap and TD is flooded with extra capital as their latest US purchase did not make it to the finish line.

July 12, 2023
1:08 pm
AltaRed
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What can LB really do for TD's bottom line? LB brings nothing to the table like HSBC can do for RBC..... other than maybe discounted cents on the dollar relative to book value.

The Quebec gov't probably will/would have a major hissy fit if suddenly the HQ was gone with its tax revenue, all the branches were to close and all those Quebecers were on the unemployment line. Don't be surprised if the Quebec gov't interferes with the process.

July 12, 2023
1:33 pm
savemoresaveoften
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AltaRed said
The Quebec gov't probably will/would have a major hissy fit if suddenly the HQ was gone with its tax revenue, all the branches were to close and all those Quebecers were on the unemployment line. Don't be surprised if the Quebec gov't interferes with the process.  

if that is the political driver, then national bank is the only "approved' buyer.

But given how small LB is, I think any of the big 6 will be interested to pick them up and no govt will interfere re 'lack of competition'.

it will be seriously interesting if one of the bigger CU is interested to buy a sch A bank !

July 12, 2023
6:50 pm
Doug
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AltaRed said
I disagree with Doug. LB will be bought out via a share purchase (corporate) arrangement if for no other reason than LB is not insolvent. Just as Smith Financial bought Home Capital Group.

I do agree Scotiabank is likely the leading contender, with EQB and even Smith Financial as outside possibilities. I can't imagine why CWB would even care about LB as it is not their modus operandi. As for ATB, it is way outside ATB's wheelhouse and I am not sure their charter would allow it (it is an AB crown corporation)  

Why and how do you disagree? And why a share purchase? Their assets are not great. They may not be insolvent (I never said they were), but their profits and revenues are in decline, as is their traditional banking and investment brokerage businesses. Their best assets are probably LBC Capital and Northpoint Commercial Finance, for which I would wager CWB, Meridian Credit Union, ECN Capital, potential private equity bids, and/or management-led buyouts by the subsidiary's management team(s) to be strong contenders for those businesses. Scotiabank may be interested in the banking business, but at well below their book value. National Bank and Desjardins would likely be blocked from buying the banking businesses, by the AMF and/or the Minister of Finance for Canada, but may well be interested in B2B Bank and Laurentian Bank Securities.

We should not rule out sales of the businesses in pieces. 🙂

As for Smith Financial, you assume this is part of Stephen Smith's grand plan to significantly grow the banking business. I do not see that. There is actually a possibility he may seek sell Home Capital Group to EQB Inc. in exchange for a larger equity stake in EQB. That I can definitely see happening. But as to making Smith Financial some banking empire/brand, no; it's just a private investment holding company. sf-cool

Cheers,
Doug

July 12, 2023
6:53 pm
Doug
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AltaRed said
What can LB really do for TD's bottom line? LB brings nothing to the table like HSBC can do for RBC..... other than maybe discounted cents on the dollar relative to book value.

The Quebec gov't probably will/would have a major hissy fit if suddenly the HQ was gone with its tax revenue, all the branches were to close and all those Quebecers were on the unemployment line. Don't be surprised if the Quebec gov't interferes with the process.  

We can't rule out the Quebec government potentially looking to make a bid for the banking business, and allowing other parties to buy the other parts of LBC Financial Group, including B2B Bank, for this reason.

July 12, 2023
7:29 pm
AltaRed
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If LB was to be sold in parts, it would be a complicated process of the corporate LB parent spinning off each business for, most likely, cash and then corporate LB spinning off special dividends (or maybe ROC) to its shareholders Brookfield style for each of the parts. Taken to the very limits, LB shares could end up having zero value.

What I see more likely is a corporate buy and then the acquirer selling off, or shutting down, the pieces it does not want. It's all pure speculation until it happens.

July 13, 2023
7:32 am
COIN
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The market likes it. LB shares up $8 yesterday, an increase north of 20%.

July 13, 2023
7:33 am
RetirEd
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Laurentian Bank's roots are in the old City & District Savings Bank (Yeah, I'm old enough to remember them. The database at their branch near my home was trays of bank-book cards on a table just in front of the vault, no doubt squirreled behind that door at night)... Aren't they part of the Desjardins (Caisses Populaires) empire now? That's a crown jewel in Quebec finance the government would seriously want to protect, no?

Of course, I am not nose-deep in the Quebec financial institution waters these days.
RetirEd

EDIT: I just looked at Wikipedia's entry about Laurentian. Looks like quite a complicated series of situations. Anyone else understand any of it?
RetirEd (again)

RetirEd

July 13, 2023
8:26 am
AltaRed
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It has been noted elsewhere that LB is 'listed' as a Schedule 1 bank >$5B which means it needs to be widely held, albeit the Minister has a tangled web of discretions. If so, that complicates matters a bit, albeit no doubt not a showstopper.

RetirEd: Here is a high level summary of LB's history from the horse's mouth https://www.laurentianbank.ca/en/about-us/our-company/our-history

July 13, 2023
10:20 am
Loonie
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Why not BMO or Desjardins? Keeps it in QC but mergers almost always mean job losses sooner or later
I can't see Meridian acquiring it as they are already in so much do-do from motusbank.

July 13, 2023
12:50 pm
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I think LB is also unionized which could complicate things.
https://financialpost.com/news/fp-street/laurentian-bank-labour-union

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