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Laurentian Bank reports profit down from system outage, cuts 2% of staff

Laurentian Bank of Canada said Thursday it was cutting staff and revamping its strategic plan as it works to move past a major system outage in September and the subsequent ousting of its chief executive.

Éric Provost, who replaced Rania Llewellyn in the top job in October, said the bank is focused on improving customer relations, simplifying the organization and improving its technology.

"I know that the past few months have been a challenging period for the bank with the conclusion of the strategic review and an outage of our mainframe," said Provost on an earnings call.

"One thing is certain, that the status quo at Laurentian Bank is no longer an option."

Provost's remarks come only months after a strategic review during which the bank explored various options, including a sale, only to decide that the best option was to continue with its existing strategy.

Provost said the bank has already moved ahead with plans to cut about two per cent of staff this week, while it will be exploring a range of options as it charts a path forward.

"Part of the rebuilding, we need to get back to the drawing board, make sure that we address a path of simplification."

The revamp efforts come as the bank reported earnings of $30.6 million or 67 cents per diluted share for the quarter ended Oct. 31, down from a profit of $55.7 million or $1.26 per diluted share a year earlier.

The bank says the results included a $5.3-million charge related to the mainframe outage and $15.9 million in restructuring and strategic-review related charges.

Revenue for the quarter totalled $247.4 million, down from $257.1 million a year ago, while provisions for credit losses totalled $16.7 million for the quarter compared with $17.8 million in the fourth quarter of 2022.

On an adjusted basis, Laurentian says it earned $1 per diluted share in its latest quarter, down from an adjusted profit of $1.31 per diluted share in the same quarter last year.

Results were well below the $1.16 consensus and the $1.15 National Bank expected, said analyst Gabriel Dechaine in a note, with the miss in part because of the IT outage that led the bank to hold higher liquidity levels and refund service charges.

He said that while the bank is guiding more stable results ahead, it will still face another severance charge next quarter, along with wider bank challenges.

"Overall, we view LB as an increasingly challenged bank in an increasingly challenging macroeconomic and competitive environment," Dechaine said.

Provost said on the call that he's aware of the difficulties ahead.

"We have a lot of work ahead of us as we revamp our strategic plan and continue to implement our priorities of customer focus, simplifying the bank and making investments in our foundational technology."

This report by The Canadian Press was first published Dec. 7, 2023.

Companies in this story: (TSX:LB)

Ian Bickis, The Canadian Press

Note to readers: This is a corrected story. A previous version incorrectly referred to a second strategic review at the bank.