Laurentian Bank shares soar after it announced a review of strategic options

Former OSFI regulator on potential Laurentian Bank sale Carl De Souza, senior vice president, head of Canadian banking and North American FIG at DBRS Morningstar, discusses whether the regulatory environment would favour an acquisition of Laurentian Bank.

Shares of Laurentian Bank of Canada soared more than 30 per cent in early trading Wednesday after the bank said it was conducting a review of its strategic options to maximize shareholder value.

A strategic review is often seen by investors as a prelude to a sale by a company.

In a news release Tuesday, the bank said it does not intend to disclose further developments until the review is concluded.

Laurentian says it has a strong capital and liquidity position as well as a strong, stable and diversified funding and deposit base.

All of the Big Six banks will probably evaluate buying Laurentian, National Bank analyst Gabriel Dechaine said in a research note, where he put a potential acquisition price of $2.6 billion for the bank.

He said some of the most likely buyers would include Scotiabank, since it's looking to reduce how much its international segment contributes to its bottom line, and TD, which has lots of extra capital around after its deal to buy First Horizon Corp in the U.S. fell apart.

Barclays analyst John Aiken said the door to a potential sale of Laurentian could have been opened by RBC's pending acquisition of HSBC Canada.

RBC's $13.5-billion deal to acquire the Canadian subsidiary of HSBC Holdings PLC has raised concerns about increased consolidation in a sector that's already dominated by a few players.

Montreal-based Laurentian has been working through a three-year strategic plan it launched in late 2021 to modernize operations, including with the rollout of its first mobile banking app, as it looks to catch up to the offerings of other Canadian banks.

Laurentian shares closed up $8.93, or 26.6 per cent, at $42.46 Wednesday on the Toronto Stock Exchange after trading as high as $48.23 in early trading.

The bank was trading at around $42 a share last August.

This report by The Canadian Press was first published July 12, 2023.