Laurentian Bank of Canada reported an increase in first-quarter profits as it got a boost from seasonal commercial loans while it continues with efforts to revamp its retail business.

The Montreal-based bank said Wednesday that profits of $55.5 million for the quarter ending Jan. 31, up from $44.8 million a year ago, were boosted in part by a $2.2-billion, or 17 per cent, jump in commercial loans.

“Commercial banking remains our growth engine, capital markets provides a focused and aligned offering, and personal banking is repositioning for growth,” said chief executive Rania Llewellyn on an earnings call.
Commercial loans were especially boosted by inventory financing, which grew by 39 per cent from the fourth quarter.

About half of the inventory financing business is geared to recreation vehicle and marine sales, which were helped, especially on the RV side, by better supplies in the quarter.

On the retail side, Laurentian is in the midst of a major turnaround plan. In December, it announced a new partnership with Brim Financial on Visa cards and before that it launched its first digital app, while it is also streamlining how it handles its mortgage business.

  Llewellyn said the bank has reduced credit card issuing time from 25 days to instantaneous, while in the three months since the bank launched its app over 25 per cent of online banking customers have downloaded it. She said the bank is proactively calling customers who have mortgages up for renewal as it looks to increase its share of market in the space and that initial results are "encouraging."

The bank says its net income amounted to $1.17 per diluted share for the quarter ended Jan. 31, up from 96 cents per diluted share in the same quarter a year earlier.

Revenue totalled $257.5 million for the quarter, up from $247.4 million for the first quarter last year.
Laurentian says its provisions for credit losses amounted to $9.4 million for the quarter, compared with $16.8 million a year earlier as lower provisions on impaired loans were partly offset by higher provisions on performing loans.

On an adjusted basis, Laurentian says it earned $1.26 per diluted share in its most recent quarter, up from an adjusted profit of $1.03 per diluted share a year earlier.

Analysts on average had expected an adjusted profit of $1.20 per share, according to financial markets data firm Refinitiv.

Scotiabank analyst Meny Grauman said that the bump from the seasonal inventory finance business helped the bank beat expectations, but that the opposite trend could weigh on the next couple of quarters when the recreational financing is expected to dip.

He said in a note that the bank's start to the year is encouraging but that it is still early days in Laurentian's ambitious transformation.

"Overall, we continue to expect to see ongoing progress for Laurentian on the commercial loan front, but we believe that challenges in the retail business are more formidable."