Laurentian Bank of Canada Q1 Earnings Call Highlights

Key Points

• Transaction-related charges of CAD 54.7 million after tax drove a reported net loss of CAD 20.5 million, while adjusted net income was CAD 24.2 million (adjusted EPS CAD 0.65); management expects an additional ~CAD 40 million post‑tax of transaction costs in Q2, including a loss on the syndicated loan sale.
• Commercial momentum powered results: total loans grew ~4% (commercial loans up about CAD 1.4 billion) and now comprise 51% of the book, helping net interest income rise and lift NIM to 1.89%, while residential mortgages declined ~3% year‑over‑year.
• Capital and efficiency pressures — the CET1 ratio fell to 10.9% (down 40 bps) partly from transaction impacts and loan growth, the adjusted efficiency ratio widened ~240 bps year‑over‑year, and adjusted return on equity was 4.5%.

Laurentian Bank of Canada TSE: LB reported first-quarter 2026 results that management said showed continued momentum in its core commercial businesses, alongside significant adjusting items tied to transactions announced in December. Executives also provided an update on shareholder approval and progress toward closing agreements involving Fairstone and National Bank, while noting additional transaction-related charges are expected in the second quarter.

First-quarter results included sizable transaction-related adjusting items

President and CEO Éric Provost said the bank recorded after-tax adjusting items of CAD 54.7 million in the quarter, reflecting charges related to the transactions announced in December. CFO Yvan Deschamps detailed that these adjusting items totaled CAD 54.7 million after tax, or CAD 1.23 per share.

Deschamps said the transaction-related charges (totaling CAD 53.1 million after tax) included:

• CAD 15.8 million impairment of premises and equipment
• CAD 10.8 million charges related to interest contracts, leases, and other
• CAD 8.4 million severance and employee benefits
• CAD 5.2 million accelerated amortization of software and other intangible assets
• CAD 4.8 million impairment of software and other intangible assets
• CAD 8.1 million transaction and conversion costs

In addition, Deschamps noted the bank purchased group annuity contracts from a Canadian insurer to transfer approximately CAD 60 million of obligations from two registered defined benefit pension plans, resulting in a CAD 1.6 million after-tax net settlement loss.

On a reported basis, the bank posted a net loss of CAD 20.5 million and a diluted loss per share of CAD 0.58. On an adjusted basis, Deschamps reported net income of CAD 24.2 million and diluted EPS of CAD 0.65. Adjusted diluted EPS was down 17% year-over-year and down 11% sequentially, while adjusted net income was down 13% year-over-year and was stable compared with the prior quarter.

Revenue edged higher; net interest income and margin improved

Total revenue for the quarter was CAD 251.6 million, up 1% from the prior year and up 3% quarter-over-quarter.

Deschamps said net interest income increased CAD 8.7 million, or 5%, year-over-year, driven by growth in average earning assets, higher commercial loan concentration, and favorable loan repayments. Sequentially, net interest income rose CAD 12.2 million, or 7%, citing similar factors and the impact of “favorable loan repricing lags” following a reduction in the U.S. Federal Reserve rate last December.

The bank’s net interest margin was 1.89%, up 4 basis points year-over-year and up 10 basis points sequentially, including “about half” from non-recurring elements, according to the CFO.

Other income was CAD 56.7 million, down 9% from both the prior year and the prior quarter, mainly due to lower income from financial instruments.

Expenses rose and efficiency ratio increased; CET1 declined to 10.9%

Non-interest expenses were CAD 192.9 million, up 4% year-over-year and sequentially, which Deschamps attributed mainly to seasonally higher employee benefits and vacation accruals. The adjusted efficiency ratio increased 240 basis points year-over-year due to strategic investments, and increased 110 basis points sequentially due mainly to annual salary increases and seasonally higher employee benefits.

Adjusted return on equity was 4.5%, down 80 basis points year-over-year and down 50 basis points quarter-over-quarter.

The bank’s CET1 ratio decreased by 40 basis points to 10.9%, which Deschamps said reflected charges stemming from the December-announced transactions and commercial loan portfolio growth.

On funding and liquidity, Deschamps said total funding was stable sequentially and that the bank maintained a healthy liquidity coverage ratio “at the high end of the industry.” He added liquidity will remain very high for the remainder of the year, considering proceeds from the sale of the syndicated loan portfolio that closed on Feb. 17.

Commercial loan growth led results; mortgage portfolio declined

Provost said the bank’s “core commercial businesses showed solid underlying momentum,” with total loan growth of 4% in the quarter, in line with the bank’s transformation plan. The mix of commercial loans increased by 1% to reach 51% of the total loan portfolio, according to the CEO.

Deschamps said the total commercial loan portfolio grew by about CAD 1.4 billion year-over-year and by about CAD 700 million sequentially. Inventory financing grew 7% quarter-over-quarter, supported by seasonal dealer inventory restocking, and utilization increased to 45%, up 5 percentage points from the prior quarter.

Commercial real estate loan and pipeline growth were both 5%. Deschamps also highlighted that about two-thirds of the commercial real estate portfolio is residential, “with most of it in multi-residential housing,” and said the loan-to-value on the uninsured multi-residential portfolio was 61%.

By contrast, total residential mortgage loans declined 3% year-over-year and 2% sequentially. Deschamps said the bank maintained cautious underwriting standards, noting 65% of mortgages are insured and the loan-to-value ratio on the uninsured portion was 51%.

Credit quality improved; Q2 outlook includes more transaction costs

Provost said the provision for credit losses ratio decreased to 18 basis points, and that gross impaired loans declined by 19% to 96 basis points. Deschamps reported total allowances for credit losses of CAD 192.6 million, up CAD 3.8 million from the prior quarter, “mostly from higher allowances on commercial loans.”

Provision for credit losses was CAD 16.5 million, up CAD 1.3 million from a year earlier. Sequentially, PCL declined CAD 1.5 million, reflecting lower provisions on impaired commercial loans, partially offset by lower releases on performing loans. As a percentage of average loans, PCL increased 1 basis point year-over-year and decreased 2 basis points sequentially to 18 basis points.

Gross impaired loans decreased by CAD 49 million year-over-year and CAD 75.1 million sequentially, driven by changes in commercial loans. Deschamps said about 95% of the loan portfolio is collateralized, helping the bank manage credit migration with minimal impact on allowance and PCL outcomes.

Looking to the second quarter, Deschamps said the bank expects additional transaction-related charges “in the CAD 40 million range post-tax,” including a loss due to the discount on the syndicated loan portfolio sale to National Bank, which closed Feb. 17. He said the expected Q2 impact from the syndicated loan portfolio sale is a loss of about CAD 0.04 on adjusted EPS.

Management expects loans to decline by roughly 2% to 3% in Q2 mainly due to the syndicated portfolio sale; excluding that, loans should remain relatively stable. Deschamps said net interest margin is expected to be “slightly lower” due to non-recurring items in Q1, while the adjusted efficiency ratio should be relatively in line with Q1. The bank expects PCL to remain in the “high teens” and the tax rate also in the “high teens,” while capital and liquidity are expected to remain strong.

On the transaction timeline, Provost told analysts the bank is primarily awaiting approvals from OSFI and the Competition Bureau, after which ministerial approval would follow. When asked about timing, he said the bank remains “still aiming” for the “late 2026” guidance.

During Q&A, Provost also discussed drivers of inventory finance growth, citing a mix of continued onboarding success and dealer restocking. He pointed to a newly won exclusive program with Arctic Cat and said dealers have been restocking “prudently” with positive momentum. He added that customer reaction to the change in ownership has been “quite good,” and that the bank has seen additional volume and a good pipeline.

In closing remarks, Provost said the bank is making steady progress toward closing the agreements with Fairstone and National Bank while keeping customers and employees “at the forefront,” adding that there is still work ahead but he is confident the bank will achieve its objectives.

About Laurentian Bank of Canada TSE: LB

Founded in Montreal in 1846, Laurentian Bank is committed to serving its customers and fostering deep relationships with specialized groups. Laurentian Bank runs operations across Canada - primarily in Québec and Ontario - as well as in the United States and competes where it sees market opportunity and has an edge, while harnessing the power of partnerships and collaboration.

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