Earnings call transcript: Laurentian Bank Q3 2025 beats EPS expectations

Laurentian Bank reported its third-quarter earnings for 2025, showcasing a stronger-than-expected performance with an earnings per share (EPS) of $0.78, surpassing the forecasted $0.7287. Despite a slight revenue miss, the bank’s strategic initiatives and operational efficiencies have been highlighted. The stock saw a decline of 2.53% in pre-market trading, reflecting mixed investor sentiment. According to InvestingPro analysis, the bank maintains strong financial health with an overall score of 3.12 out of 5, labeled as "GREAT," suggesting robust operational fundamentals.

Key Takeaways

• Laurentian Bank’s EPS exceeded expectations by 7.04%.
• Revenue fell short of forecasts by 0.6%, totaling $246.8 million.
• Stock price decreased by 2.53% pre-market despite the EPS beat.
• Strategic focus on technology and platform consolidation is ongoing.
• Commercial real estate portfolio shows growth, especially in residential multi-housing.

Company Performance

Laurentian Bank’s overall performance in Q3 2025 showed resilience amid challenging market conditions. The bank’s strategic focus on technology investments and operational efficiency has contributed to a 2% sequential increase in revenue, although it declined by 4% year-over-year. The net income rose by 17% from the previous quarter, despite an 8% year-over-year decrease.

Financial Highlights

• Revenue: $246.8 million, down 4% YoY, up 2% QoQ
• Earnings per share: $0.78, down 11% YoY, up 7% QoQ
• Net income: $39.6 million, down 8% YoY, up 17% QoQ
• Return on Equity (ROE): 5.4%, down 80 basis points YoY

Earnings vs. Forecast

Laurentian Bank’s EPS exceeded the forecast of $0.7287 by 7.04%, indicating stronger operational performance than anticipated. However, revenue came in slightly below the expected $248.31 million, missing by 0.6%. The EPS surprise marks a positive deviation from previous quarters, where earnings were more aligned with forecasts.

Market Reaction

Despite the EPS beat, Laurentian Bank’s stock fell by 2.53% in pre-market trading, with the price dropping from a previous close of $31.68. The stock’s decline might reflect concerns over the revenue miss and broader market trends affecting the banking sector. The stock remains within its 52-week range of $24.37 to $31.74.

Outlook & Guidance

Looking forward, Laurentian Bank expects muted growth in average earning assets for Q4, with net interest margins anticipated to remain stable. The bank projects a full-year efficiency ratio of around 75% and a tax rate between 19-20%. Additionally, potential recovery in inventory financing is contingent on U.S. interest rate movements.

Executive Commentary

CEO Eric Provo emphasized the bank’s strategic direction, stating, "We are taking deliberate steps to reduce complexity across the organization." CFO Yves Deschenes noted, "We’re not in the mode of necessarily growing. We’re in the mode of having enough for an impact in the market." These comments underscore the bank’s focus on strategic specialization and operational efficiency.

Risks and Challenges

• Potential economic downturns affecting commercial real estate and loan portfolios.
• Fluctuations in U.S. interest rates impacting inventory financing recovery.
• Competitive pressures in the commercial banking sector.
• Continued focus on technology investments and platform consolidation.

Q&A

During the earnings call, analysts questioned the bank’s strategies for managing impaired loans and potential recovery in inventory financing. Executives confirmed a strong liquidity position and explored opportunities for U.S. funding partnerships. These discussions highlight the bank’s proactive approach to navigating current market challenges.

Full transcript - Laurentian Bank Of Canada (LB) Q3 2025:

Conference Operator: 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 Rafael Amabeau, Vice President, Finance and Investor Relations. Please go ahead, Rafael.

Rafael Amabeau, Vice President, Finance and Investor Relations, Laurentian Bank: Good morning and thank you for joining us. Today’s opening remarks will be delivered by Eric Provo, President and CEO and the review of the third quarter financial results will be presented by Yves Deschenes, Executive Vice President and CFO, after which we’ll invite questions from the phone. Also joining us for the question period is Christian Debroux, Executive Vice President and CRO. All documents pertaining to the quarter can be found on our website in the Investor Relations section. I’d 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. 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. Eric and Ivan will be referring to adjusted results in their remarks unless otherwise noted as reported. I will now turn the call over to Eric.

Eric Provo, President and CEO, Laurentian Bank: Good morning. Thanks for being with us today. Today, we’re pleased to report a strong quarter, reflecting our continued focus and disciplined execution. These efforts have enabled us to effectively manage the challenges of a volatile economic landscape. Our performance this quarter reaffirms the strength of our market positioning and the value of our commercial specialization, all supported by a solid foundation of liquidity and capital.

Our strategic priority remains clear, to simplify, strengthen and future proof our operations. We are taking deliberate steps to reduce complexity across the organization, enhance system redundancy and improve overall resilience. A key part of this involves streamlining our distribution channels and simplifying our technology efforts that will continue into 2026. I’m proud to share that our teams remain highly engaged and committed to executing our strategy. This was clearly reflected in the results of our most recent engagement survey, transpiring to our culture and the support that the team is dedicating to transform our organization.

Such a high level of engagement is especially important in today’s economic environment. We are actively monitoring a range of factors, including market trends, policy developments and broader macroeconomic conditions that may impact our customers. As always, we remain ready to adapt as needed. Looking at loan performance, commercial loans remained stable this quarter, supported by growth in our commercial real estate portfolio, which offset the usual seasonal decline in our inventory financing segment, Mainly as a result of the shift in business mix, our net interest margin was slightly down to 1.82%. In inventory financing, utilization declined to 41% at the July, fully aligned with our expectations and continues to reflect steady LT demand for the products offered by our dealers.

Our dealer base is also continued to expand at a steady pace this quarter, bringing the year to date growth to 4%. This momentum was primarily driven by the agriculture and powersports segments, both of which are part of our diversification strategy in inventory financing. Looking ahead, we remain encouraged by the sustained demand our dealer network is experiencing this season. Should interest rates begin to ease in The U. S.

In the upcoming quarters, we believe this could act as a lever for renewed restocking activity, particularly as dealers prepare for the summer twenty twenty six season. In our commercial real estate portfolio, loan volumes increased by 5% during the quarter, reflecting the strength of our market positioning and deep expertise of our teams. Their ability to identify and seize opportunities has been instrumental in driving this growth. At the same time, we maintain a stable unfunded pipeline with potential to convert in the coming quarters. That said, we remain cautious in our outlook for Q4 given the current market environment.

On the personal banking side, our sustained engagement with our customers enabled us to maintain a stable deposit base within our retail segment, while also continuing to build positive momentum in broker sourced deposits. As emphasized during our Investor Day, we remain actively focused on pursuing strategic partnerships to accelerate our specialization strategy. We believe that forging the right partnerships will be a key driver in unlocking future growth and further elevating our market position. During the quarter, we also maintained focus on investing in our key strategic priorities, resulting in an adjusted efficiency ratio of 75.7%. While we expect these elevated expense levels to persist over the coming months, these investments, particularly in technology, are critical to executing our strategic plan.

I’d also like to highlight that our provision for credit losses stood at 12 basis points this quarter, reflecting the strength of our specialized underwriting, consistent education and robust portfolio management. We remain confident that our current level of provisions is prudent and aligned with the quality of our portfolio. While the economy has shown resilience so far, we remain vigilant and prepared to adjust. Finally, we continue to maintain a solid position in both liquidity and capital, providing us with the financial stability to manage the current macroeconomic environment, while remaining focused on executing our strategic priorities. With that, I’ll turn it over to Eva.

Yves Deschenes, Executive Vice President and CFO, Laurentian Bank: I would like to begin by turning to Slide six, which highlights the bank’s financial performance for the 2025. Total revenue for the quarter was $246,800,000 down 4% compared to last year and up 2% quarter over quarter. On a reported basis, net income and diluted EPS were $37,500,000 and $0.73 respectively. We’ve recorded adjusting items for the quarter, which totaled $2,100,000 after tax or $05 per share from restructuring and other impairment charges of $2,900,000 Additional details are available on Slide 21 and in the third quarter report to shareholders. The remainder of my comments will be on an adjusted basis.

The diluted EPS of $0.78 decreased by 11% year over year and increased by 7% quarter over quarter. Net income of $39,600,000 was down by eight percent compared to last year and up 17% compared to last quarter. The bank’s efficiency ratio increased by two forty basis points compared to last year and by 50 basis points sequentially. The increase is mainly driven by the elevated level of expenses related to investments in our strategic priorities. Our ROE for the quarter stood at 5.4%, down 80 basis points year over year and up 20 basis points quarter over quarter.

Slide seven shows net interest income up by $5,100,000 or 3% year over year from the growth of average earning assets and higher commercial loan concentration. On a sequential basis, net interest income was up by $3,700,000 or 2% mainly due to the longer quarter. Our net interest margin at 1.82% was up three basis points year over year and down three basis points sequentially due to changes in the loan mix. Slide eight highlights the bank’s funding position. On a sequential basis, total funding was up by $500,000,000 which mainly came from an increase in deposits from advisers and brokers.

The bank maintained a healthy liquidity coverage ratio through the quarter, which remained at the high end of the industry. Slide nine presents other income of $60,900,000 which was lower by 20% compared to last year and higher by 1% sequentially. The year over year decrease mostly came from lower fees and securities brokerage commissions following the divestiture of the retail brokerage divisions as well as lower income from financial instruments and lower lending fees. Slide 10 shows non interest expenses of $186,900,000 down 1% year over year and up 2% sequentially from the number of days and the higher performance based compensation. On Slide 11, you’ll see that our CET1 ratio increased by 30 basis points to 11.3% sequentially due to changes in the asset mix and in the internal capital generation.

We are in a solid position and well prepared to redeploy capital. Slide 12 highlights our commercial loan portfolio, which grew by about $1,100,000,000 year over year and by about $100,000,000 sequentially. The expected seasonal decline in inventory financing was offset by growth in our commercial real estate portfolio, which also maintained a stable pipeline through the quarter. Slide 13 provides details of our inventory financing portfolio. This quarter, utilization rates were 41%, remaining below historical averages normally in the high 40s.

Slide 14 illustrates that two thirds of our commercial real estate portfolio is residential, with most of it in multi residential housing. We have limited exposure to the office segment, which accounts for just 3% of our commercial loan portfolio. The LTV on the uninsured multi residential portfolio stood prudently at 59%. Slide 15 presents the bank’s residential mortgage portfolio. Residential mortgage loans were down 1% year over year and up 1% on a sequential basis.

We adhere to cautious underwriting standards and are confident in the quality of our portfolio. This is reflected in our 62% proportion of insured mortgages and a low loan to value ratio of 50% on the uninsured portion. Allowances for credit losses on Slide 16 totaled $189,900,000 down $14,400,000 compared to last quarter, mostly from lower allowances on impaired commercial loans. Turning to Slide 17, our level of allowances for credit losses has remained elevated since the pandemic period. In the bottom left corner, you’ll find the evolution of our coverage ratio expressed as the previous year’s allowances for credit losses over the net write offs incurred over the following twelve months.

On a relative basis, we remain well positioned in terms of coverage to face ongoing uncertainties. Turning to Slide 18, the provision for credit losses was $11,100,000 a decrease of $5,200,000 from a year ago from lower provisions on impaired loans. Sequentially, PCLs were down 5,600,000 from provision reversals in performing loans. As a percentage of average loans, PCLs decreased by six basis points year over year and by seven basis points quarter over quarter to 12 basis points. Slide 19 provides an overview of impaired loans.

On a year over year basis, gross impaired loans increased by $41,900,000 due to credit migration in commercial loans and by $11,300,000 sequentially. Thanks to our prudent underwriting standards and the strong credit quality of our loan portfolio, about 95% of which is collateralized, we’re able to manage credit migration effectively with minimal impact on ACL and PCL outcomes. As we look ahead to the 2025, I would like to provide some remarks. We expect muted growth for average earning assets for Q4. NIM is expected to be consistent with Q3.

Regarding the efficiency ratio, Q4 should be relatively aligned with Q3 leading to a full year around 75% as previously guided. Considering the uncertain environment, it is difficult to predict the potential outcome of on PCLs, but we currently expect to be in the high teens. Our tax rate is expected to be in the 19%, 20% range. Capital and liquidity levels are solid and are expected to remain strong for Q4. I will now turn the call back to the operator.

Conference Operator: Thank you, sir. First, we will hear from Paul Holden at CIBC. Please go ahead, Paul.

Paul Holden, Analyst, CIBC: Thank you. Good morning. First question, I guess, is on credit trends. So performing provision release, but then the increase in gross impaired loans and increase in impaired PCLs. And I guess, I recognize the two are always correlated.

But maybe you can walk us through that, like what’s driving the increase in GILs and impaired? And then why do you feel comfortable releasing against those trends?

Yves Deschenes, Executive Vice President and CFO, Laurentian Bank: Hi, Paul. Christian, thank you for the question.

Christian Debroux, Executive Vice President and CRO, Laurentian Bank: So the increasing gills is really

Yves Deschenes, Executive Vice President and CFO, Laurentian Bank: a function of our commercial book. And then these tend to be lumpy. So when they come in, they come

Christian Debroux, Executive Vice President and CRO, Laurentian Bank: in, in big chunks, and that’s what we’re seeing. It also takes a little bit more time today to work out of these accounts. But what you’re seeing, there’s a lot of activity in Argyle’s. Argyle’s, the new formations was 140,000,000 this quarter, and yet we’ve only increased by $11,000,000 quarter over quarter in our gills. That’s because we have very high levels of return to performing, net repayments with while managing our net write offs.

So overall, it’s just a reflection of the economic cycle and we’re performing well. And why do I feel that despite this increase that we are well provisioned, there is a better impaired mix in our portfolio right now. So as we have built our portfolio or and has evolved over time, the same is said about our gills. So we have a lot more of inventory financing, equipment financing and commercial real estate in our impaired mix, and that is more collateralized than what we’ve had in prior years. And remember as well, every time an impaired commercial account comes in, it goes through a process of a third party appraisal to peg the value.

So we’re very comfortable with the level of allowances.

Paul Holden, Analyst, CIBC: Okay. I want to ask a couple of questions on potential recovery and inventory finance. I think you gave us some numbers roughly a low 40 utilization rate and I think $10,000,000,000 of lines outstanding. Maybe you can give us a sense, remind us on how much CET1 that might consume if inventory finance recovers and also maybe the NII potential associated with that?

Eric Provo, President and CEO, Laurentian Bank: Yes. I’ll take a portion of that and Yves will complement. Paul, it’s Eric. Good morning. We feel very well positioned for an uptick in our inventory finance business, just growing our dealer base, as I mentioned in the opening remark, in terms of diversification as well.

But a lot relies on the overall macro. And if we are to see some ease in the interest rate levels in The U. S, we believe that both the consumer confidence as well as the dealer base confidence could actually get us closer or back to historical levels. And as you mentioned, like this could represent an uptick of 8% to 10% in utilization rates. So clearly, could be a consumption of 40 bps to 50 bps of capital.

But again, everything needs to be aligned and we are comfortable the position we have right now in terms of capital because we’ll be ready to deploy against those highly profitable markets. In terms of NII, I don’t know, Yves, if you want to add?

Yves Deschenes, Executive Vice President and CFO, Laurentian Bank: The only thing I would add on NII, we don’t disclose that specifically. But what I can tell you is interest rate reductions in The U. S. Would have positive impact on inventory financing previously explained the impact. So just to quantify it, about the ’25 basis points decrease in Fed rates would equate to about a nonrecurring $1,500,000 for the quarter.

Paul Holden, Analyst, CIBC: Okay. And then last question for me, like how should we think about your liquidity level? So you’re going to disclose your LCR ratio, but you said it’s the top end of the range. How should we think about that versus the liquidity you might need to draw for recovery in inventory finance? Like would you need to increase broker deposits to fund it?

Or do you have excess liquidity that you could pull on to fund it?

Yves Deschenes, Executive Vice President and CFO, Laurentian Bank: Yes. There’s many ways of attacking it. But I would say, overall, we are in excess liquidity. We’ve been managing very prudently the liquidities. We’re above the industry in terms of LCR.

So we have good liquidity aside that would help us support and increase inventory financing. And the way it’s that the way we manage and that also regulatory wise banks are managed for uncommitted amounts for some types of portfolios, we always have to keep some liquidities aside. So we can definitely use some of that for recovery of volume in inventory financing or otherwise.

Paul Holden, Analyst, CIBC: Okay. Okay. I’ll leave it there. Thanks for the time.

Yves Deschenes, Executive Vice President and CFO, Laurentian Bank: Thank you, Paul. Thank you, Paul.

Conference Operator: Next, we will hear from Stephen Bolan at Raymond James. Please go ahead, Stephen.

Stephen Bolan, Analyst, Raymond James: Paul got through a lot of it. Just one question, there was talk of putting in a forward flow agreement or alternative funding in The U. S. I’m just wondering if there’s been any progress on that on diversifying your funding base in The U. S?

Eric Provo, President and CEO, Laurentian Bank: Yes. Thank you, Stephen, for

Paul Holden, Analyst, CIBC: that

Eric Provo, President and CEO, Laurentian Bank: question. We’re actively working on it in terms of that’s why I open up talking about partnerships. Definitely, this is one of the angle of partnerships we are considering. But we’ll make sure that we line up the right agreement. And right now, as you see in our capital position and as Eva mentioned in terms of our liquidity position, like we feel very good where we are.

So we’re in no rush. So we’re going to lend the best agreement possible for the organization going forward, but it’s still in our plans. So more to come on that, Stephen.

Stephen Bolan, Analyst, Raymond James: Okay. And then just on your CET1, does grow. I mean, what’s can you remind me what the goal is for your CET1 ratio? Is it to get to high 11s, 12s, something like that?

Yves Deschenes, Executive Vice President and CFO, Laurentian Bank: In fact, thank you for the question. This is Yves. So what we mentioned in the past is we wanted to manage in the 10% plus in our margin, so to stay above 10% in that margin. We’re currently at 11.3%, but that goes to a few points then, partly Eric discussed that, right? Environment is still uncertain.

We are heavily investing right now in the platform to build efficiencies going forward. But the key point that I want to pass on capital, Eric just mentioned that there’s a low utilization in inventory financing. A change in the rates in The U. S. Could trigger some demand up to potentially $1,000,000,000 which is 40 basis 50 basis points.

Commercial real estate, we also have an increase of more than 20% in our unfunded pipeline since last year. So that’s also additional capital that we want to keep aside to answer that. So we’re not in the mode of necessarily growing, Stephen. We’re in the mode of having enough for an impact in the market. If there’s less uncertainty, U.

S. Rate reduction and even Canada, Canadian rate reduction that could have on the real estate side.

Stephen Bolan, Analyst, Raymond James: Okay. And I’ll sneak one more in. Just in your opening remarks, you mentioned expanding distribution or simplifying your distribution and technology costs. Can you give us like a concrete example of maybe some milestone you’ve hit during the quarter or a product that you discontinued? I’m just wondering like maybe a little bit like something specific.

Eric Provo, President and CEO, Laurentian Bank: Yes. Thank you, Stephen. Actually, it’s Eric. On many fronts, we made progress towards the foundation. Like I won’t go into system details, but definitely efforts we’re putting forward in terms of some of the upgrades we’re considering are moving from on premise type technology to cloud technology.

And this, as we indicated in the strategic plan, puts more pressure from an OpEx point of view, so heavily on our expense side and again for about the first two years of the plan. Also remember that we started simplification last year by divesting some of our platforms, but also joining our equipment finance group into our inventory finance platform, Northpoint. So that combination also will fuel and create some future opportunities. So we’re working on all aspects to really reduce complexity and create those efficiency going forward.

Stephen Bolan, Analyst, Raymond James: Okay. I appreciate that. Thanks. Have a great weekend.

Yves Deschenes, Executive Vice President and CFO, Laurentian Bank: Yes. You too. Thank you.

Conference Operator: Next question will be from Saurabh Mavedi at BMO Capital Markets. Please go ahead.

Saurabh Mavedi, Analyst, BMO Capital Markets: Okay. Yes, thank you. Eric, I just wanted to maybe follow-up on that. I mean, you obviously had a strategic plan. You shared some of that with us at your Investor Day.

We’re about a year or so into it. Like how are we tracking to that plan halfway through?

Eric Provo, President and CEO, Laurentian Bank: Thank you. I would come back on the halfway through, Sohrab, because we’re just over a year in the plan actually of what has been released. And then the financial targets we set were for midterm. So I feel very good just like we said last quarter, we’re tracking towards plan. And again, working on the foundation of future state required that investment blitz from the beginning to make sure we’re ready to transition either to cloud, allowing us afterwards to decommission key expensive systems in our platform and in our technology stack.

So again, we are working on multi fronts. It is heavy lifting, but the teams are strongly engaged and we’re making the progress as planned, but it’s a big undertaking as we laid out last year.

Saurabh Mavedi, Analyst, BMO Capital Markets: Okay. So just to kind of belabor the point, I mean, things are going according to plan, guess, or as planned you’re saying. But I assume on the investing and the spending and the heavy lifting of the technology side, but the revenue backdrop has softened. So is there any plan to adjust to the prevailing kind of macro environment? Or is it more of a, I’ll call it, pedal to the metal and we’re doing the spending, we’re going on regardless of what the revenue environment looks like?

Eric Provo, President and CEO, Laurentian Bank: We’ll stay committed to our investment level, Sahar, because it’s required. It’s needed. If we want to transform and change this bank, we absolutely need to make the right steps to move to better, stronger, more resilient type technology. And this is a commitment we’ve made. So we will continue towards the program.

And as you mentioned, unfortunately, we do have that macroeconomic volatility and uncertainty. But on that front, like I feel very good of where we are in terms of positioning into our specialized markets. And our goal is to accelerate that specialization, Farab. And I think this is where it’s going to bear its proof in the overall plan over the quarters. Like if you look at a couple of examples, like we grew year over year 19% in our equipment group.

Our multi res CRE business increased by 22. Like overall, we are changing the mix of the bank’s portfolio towards a more commercial focus. And this was going to improve our NII and our margins towards the time and should make us a more profitable organization and achieve our midterm targets.

Saurabh Mavedi, Analyst, BMO Capital Markets: Okay. And just one last one for me here. I mean, create the capacity to invest, you have done some restructurings. But do you think you’ll have to do unless the revenue environment improves, do you have to do more restructurings to fund the continued investments?

Eric Provo, President and CEO, Laurentian Bank: Well, Farhab, I think that we’re well positioned, as Ivan said, from a capital perspective to sustain our investment in terms of technology. But like to go from a 75.7% efficiency towards our goal of 60% and below, we’ll need to sustain a mix between revenue growth, improve profitability towards the mix of our portfolio, but also continue and make progress towards being a more efficient organization. So we’ll have to work both on the revenue upside, but also keep the expenses aligned with our future efficiency state.

Saurabh Mavedi, Analyst, BMO Capital Markets: Thank you for taking my questions. Have a nice long weekend.

Eric Provo, President and CEO, Laurentian Bank: Thank you.

Conference Operator: And at this time gentlemen, it appears we have no other questions. Please proceed.

Eric Provo, President and CEO, Laurentian Bank: Okay. Thank you for this morning’s call. Overall, we remain focused on executing our strategy, commercial banking business that leverages our core strengths, expanding into targeted areas of opportunity and doing so with a continued focus on delivering on a value added high quality client experience. I’d like to take a moment to sincerely thank our dedicated employees, loyal customers, shareholders and all stakeholders for your ongoing support as we transform and grow Laurentian Bank. We look forward to continuing this journey together and reaching new milestones.

Thank you again, and I wish you all a great rest of your day. Thank you.

Conference Operator: Thank you, sir. Ladies and gentlemen, this does indeed conclude your conference call for today. Once again, thank you for attending. At this time, we ask that you please disconnect your lines. Have a good weekend.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.