Laurentian Adds Advisers as Branches Turn to `Financial Clinics'

(Bloomberg) -- Laurentian Bank of Canada intends to double the number of financial advisers and commercial account managers by 2020 as part of a plan to transform the Quebec lender from its traditional banking roots.

Laurentian, which for most of its 170-year history offered local banking to Montrealers, plans to have 700 in-branch advisers within three years as part of a shift away from routine teller services, Chief Executive Officer Francois Desjardins said in a March 24 interview at Bloomberg's Toronto office. It also seeks to have 240 account managers for its business unit, twice the current number, mainly by hiring outside Quebec.

Laurentian is 15 months into a seven-year plan to build a simpler and more profitable bank with a return on equity that's on par with Canada's larger lenders. The bank sees business growth as fueling performance to reach its goal of doubling profit by 2022, and prospects for more acquisitions.

“The whole idea of having a seven-year transformation plan was to be able to tell the market that this is not going to be an overnight, slap-lipstick-on-a-pig kind of situation," said Desjardins, 46. “The whole industry is going through transformation and Laurentian has to fundamentally change the way it's going to market.”

‘Wait, See'

Among the goals Desjardins set after becoming CEO in November 2015 was doubling annual net income from 2015 levels to as much as C$370 million ($276 million), improving return on equity and increasing assets by about 85 percent to C$70 billion. Laurentian's quarterly results for the period ended Jan. 31 showed the bank ahead on its efficiency targets, while adjusted ROE was 11.8 percent, little changed from a year earlier. The bank's shares have climbed 2.2 percent this year, about half the gain of Canada's eight-company S&P/TSX Commercial Banks Index.

“What the analysts and the Street have been telling me so far is it's ‘wait and see', and I think that's a fair comment," Desjardins said of the bank's stock performance. “Laurentian has been saying it will do many things in the past and not necessarily coming to the Street with the results they promised. It's one of the reasons we decided to do a larger scale transformation."

So far, Laurentian is showing “that they are able to execute on the plan,” said Meny Grauman, a Cormark Securities analyst who has a buy rating on the stock.

“For a long time the Laurentian Bank story was a sleepy story,” Grauman said in an interview. “More people are noticing the name, more people have more confidence about the execution, but they still need to deliver, particularly on the ROE side.”

Closing Branches

Laurentian's strategy involves pruning its Quebec branch network by about a third to 100 outlets by year-end, with 23 of those locations being “advice-only branches" with automated teller machines but no counter transactions. The bank is merging 33 outlets in April and another seven in June, with the rest completed by December to combat what Desjardins calls an “obsolete” banking model. Safety deposit boxes, travelers checks and passbooks will no longer be offered.

“The branches of tomorrow are going to be a reception area and offices where you're going to meet and do financial planning," said Desjardins, who started at Laurentian 26 years ago as a part-time teller. “Think of them as financial clinics.”

Laurentian has 2,000 employees in its Quebec retail operations, including 350 in-branch advisers whose role includes helping customers with budgets, investment decisions and mortgages, Desjardins said. Fixing Laurentian's retail operations is important, but Desjardins's focus is on expanding commercial banking and its B2B Bank, which provides retail banking products via advisers across Canada.

“That's where the needle is moving," Desjardins said. “The industry is moving very quickly there, and that's where I spend most of my time."

‘Speed Dial'

About 85 percent of Laurentian's profit comes from what 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 percent to profit.

Takeovers such as last October's purchase of CIT Group Inc.'s Canadian equipment-leasing business can also help expansion. Desjardins says he's looking “every single week" for acquisitions that could accelerate growth and add to earnings.

"We put ourselves on the radar by saying we're in the business of acquiring, and we are on the speed dial of all the bankers that are out there," Desjardins said.

Desjardins said he'd consider expanding the retail bank beyond its home province in the distant future, though not until he's comfortable with the model in Quebec.

"I'm not closing the door on it, I just want to manage expectations," Desjardins said. “I'm still young, I've got some time."

To contact the reporter on this story: Doug Alexander in Toronto at dalexander3@bloomberg.net.

To contact the editors responsible for this story: Peter Eichenbaum at peichenbaum@bloomberg.net, David Scanlan at dscanlan@bloomberg.net, Steven Crabill, Jacqueline Thorpe