Q3 2020 Laurentian Bank of Canada Earnings Call
Good day awful.
<unk> third quarter results.
Laurentian Bank financial from.
Today's conference is being recorded.
At this time I would like to turn the conference.
<unk> director of Investor Relations. Please go ahead.
Good morning, Thanks for joining.
Today's with you the third quarter 2020 results will be presented by bank W interim President and CEO.
One other executive Vice President Seattle, all documents put change at the quarter, including relation banks financial support to shareholder Investor presentation, I financial supplement PD found on our website investors danger.
Following our formal Clemens senior management team will be available to answer questions.
Before we begin that was in line to the journey is calling since all forward looking statements may be a.
Possible actual results may differ materially from those projected in such statements.
Complete cautionary note regarding forward looking statements. Please refer to our press release, which is why choose the presentation.
Now my pleasure to turn the call Laborde stuff I'm, telling you.
[noise]. Thank you Susan and good morning, everyone today, we reported financial results.
Third quarter of 2020, adjusted net income was 47.1 million.
Three times higher than in the second quarter, and 90% lower than a year ago.
Adjusted he is an oral b, we're adult or two cents and 7.7% respectively, respectively, when compared to last quarter. It reduction is probably going full credit losses from deep elevates, the second quarter level and adjusted lower non interest expenses, reflecting the current environment.
And the cost control measures, we had been implementing contributed to the improvement.
Revenues from capital markets were also higher resulting from strong client activity in fixed income and good markets performed.
When compared to last year higher model, driven pcls, reflecting a deterioration in my quick economy variables use in forward looking scenarios overshadowed improvements on other fronts.
If I didn't make impacted our growth.
It's hard to your long term business customers, so by 6% sequentially, mainly due to lower inventure refinancing volumes.
With many Canadian an American staying close to falling demand increased four RBC and hopes dealers were unable to replenish their inventory.
Manufacturers weren't impacted by production disruptions well fiber both from a credit perspective, I'd dealers repayments were faster than in the far.
It was onsite herbold from a growth perspective, I'd be facilitation race of our customers credit facilities were significantly lower.
Gross is expected to resumed in the fourth quarter, but lower investment refinancing volumes are expected to slightly impacts net interest income and margins.
Mortgage loans were stable during the quarter. Furthermore, the proportion of insured mortgage increased to 53 first then Andy I bridge loan to value was 59% underlining underlying the strong credit quality of the portfolio.
As we navigate through these challenging times.
I've never lost sight of ensuring that health and safety of our customer and employees more than 70% of our workforce continues to provide the productively work from home, where most will remain enthused twentyth when you want.
Those in our branches business centers operation and call centers are well protected through the many measures we have puts in place and are providing our customer with a financial resources and advice they need.
We couldn't do you usually support to our customers with numerous programs, including payment deferrals.
With the economy gradually reopening and individuals and businesses adjusting to the new realities. Many customers requested that that's rose at the beginning of dependent Nick has since resuming the payments.
At the ended the third quarter the loan value of deferred payments stood at 1.8 billion 2.6 billion lower then at the end of this second quarter. This represents 5.5% of the loan portfolio compared to 13.3% last quarter.
Over the course of depending on mix, we have taken measures to preserve the financial strength and stability of defect.
Capital and liquidity I've always didn't manage prudently and continue to be hearing Denise uncertain times, you see one ratio at 924% under standardized basis is strong and is 240 basis points above their regulatory minimum.
Our track record on the credit front is solid and is supported by our rigorous underwriting.
We have minimal exposure to sectors, most impacted by Kobin 19, such as the restaurants travel hotels and office hours.
With respect to our transformation plan, our hundred person advice model continues to gain momentum.
We took the next step during the quarter and replace non advised based position with 70, new assisted advisors slash customers are disposition.
These employees support the client advisor relationship and business development.
We also continue to rightsize, our Quebec retail network as we aim to improve efficiency.
We merged 14 branches, we say that you should know six to be merge into fourth quarter same time, we opened a third Laurentian Bank financial group service poison Lavanya, just north of Montreal, The second most populous city in Quebec.
All service points or office.
Oh, just a multi disciplinary team of retail advisers private bankers commercial account managers and securities brokers like helping our customers improve their financial health, we are sowing the seeds for growth.
In addition to keeping the banking our customers safe and secure we aim is to continue our transformation and we need to improve profitability. We I've started to review our cost structure in our operation as well as all our lines of business and their products segments and Nishu.
All this to improve our performance and generate profitable growth sort of back.
To our employees I would like to express my gratitude for their resilience during these challenging times and their dedication to serving our customer let's see if it goes up when you build out leaving the abuse they'll be in Louisiana, but not that case and now I will ask last one about eight to provide a more in depth review of our third quarter financial risk.
So that's one.
Thank you Stephanie and good morning.
I would like to begin by turning to slide five as Stephen mentioned third quarter net income increased from the prior prior period as the provision for credit losses declined and efficiency improved.
As outlined on slide six adjusting items for the third quarter total 25 cents per share mostly related to severance costs severance costs and provisions for lease terminations sites seven highlights total revenue and a third quarter of 2020 of $248.6 million our four per.
<unk> higher sequentially.
Net interest income increased by $2.8 million compared to last quarter, mainly jokes at wider crime be spread and the additional days into quarter.
This was partially offset by the impact of lower loans to business customers due in part to the effect of that pandemic, which amplified the seasonality of our inventory financing activities.
As shown on slide eight names for that's or in the third quarter 2020 was 1.8 is 6% down two basis points sequentially, reflecting the lower volume of higher yielding loans to business customers.
The proportion of commercial loans and the portfolio on stood at 39% compared to 40% last quarter.
Other income as presented on slide nine total $75.1 million.
The increase from last quarter reflected the strong contribution from capital markets, which increased by $6.4 million in particular, the fixed income business performed very well just strong youre issuances and the highest <unk> high level of client activity.
Capital markets revenues also benefited from strong markets recover experience and a third quarter.
Slide 10 highlights adjusted noninterest expenses of $106 million to $9.2 million.
The 6% sequential decrease was mainly due to lower regulatory costs as well as lower professional fees advertising and business development costs and showing from efficiency measures and the current economic conditions.
Partially offsetting these savings whether compensation charge of $2.7 million related to their banks, former president and CEO his retirement.
We expect that nothing noninterest expenses, and the fourth quarter, well be slightly higher than in the third quarter.
Adjusted efficiency ratio of 68.1% in the third quarter of 2020 improves by improved by 670 basis points trying to second quarter.
We expect this ratio to be slightly higher in the fourth quarter as revenues are anticipated to be slightly lower due to the lower level of loans to business customers and potentially lower revenues from capital markets as and as expenses might be slightly higher.
Slide 11 highlights our well diversified sources of funds in the third quarter of 2020 deposits stood at $24.6 billion down 3% from the second quarter and in line with that debt reduction in homes.
Personal deposits in our branch has continued to gradually increase.
Turning to deposits from brokers and advisors decline as we adjust rates according to our funding needs.
That's all direct to consumer customer deposits stood at about $600 million are relatively inline with expectations.
Slide 12 presents the C. One ratio under the standardized approach.
9.4 million.
9.4% sorry at July 30, Onest, It doesn't 20 compared to 8.8% at April Thirtyth.
The increase mainly reflects the 1 billion dollar reduction and risk weighted assets, resulting from Cowen 19.
CK one also encodes 10 basis points, resulting from the applications Abbas face transitioned all that arrangements for the provisioning of expected credit losses in line with the second quarter.
This level of capital provides a bank with the flexibility to resume growth and supports our strategic plan, while prudently taking into account economic conditions.
Our diversified long portfolio is shown on slide 14 and stands at $32.8 billion.
This 3% decline.
Paired with the end of the second quarter, mainly reflects the impact of coven 19 on inventory financing activities.
Slide 15 highlights our residential mortgage portfolio.
At July 31st 2020, 53% of our mortgages where insured.
Our I'll pay portfolio represented 8% of that total mortgage book and 4% of the total loan portfolio.
Slide 16 highlights our well diversified commercial loan portfolio, which has panned Canadian with the U.S. presence and stood at $12.7 billion at the end of July.
During the quarter launched a business customers declined by $800 million, mostly relates it's at a reduction in inventory financing volumes.
In response to Coven 19, we continue to work with our customers well may need flexibility in managing their loans.
As shown on slide 17 during the third quarter, where new over the five $640 million, where it was authorized.
$812 million was extended for up to an additional three months and $3.3 billion up relief relief expired.
Payment that deferrals that concept for 5.5% of the long portfolio at the end of July compared to 13.3 at the end of April.
Turning to slide 18 in the third quarter of 2020, the provision for credit losses was $22.3 million compared with $54.9 million in the second quarter and $12.1 billion a year ago.
In line with our disciplined approach to modeling expected credit losses, we updated our forward looking economic scenarios to assess collective provisions at July 30, Onest 2020.
These scenarios.
And your scenarios considered the deterioration and economic conditions caused by the spread of that coven 19 pandemic.
They mainly reflect a steeper recession and the so we're expecting an economic recovery.
Three scenarios based upside and downside or a probability weighted with higher and weights assigned to the base and downside scenarios and the smaller residual weight assigned to the upside scenario as part of our approach the determining the expected credit losses as at July 31st It sounds.
20.
Specifically credit losses on personal loans and the third quarter of 2020 decreased by $15.3 million.
This mainly relates to the increase and allowances recorded in the second quarter to reflect this significant increase and credit risk you took over 90. In addition, the sharp rebound during the third quarter and the S&P GSX index, which is a sensitive factor for modeling allowances for personnel investment loans prompted that reverse.
Southern states to win stage, one and two allowances compared to a year ago credit losses decreased by $1.5 million.
Hi, there tosses on residential mortgage loans increased by 1.6 million sequentially and by <unk> point $9 million year over year, reflecting the steeper recession and the so were expected economic recovery.
However, they remain at relatively low levels, reflecting strong underwriting criteria and a robust Canadian housing market.
Credit losses on commercial loans in the third quarter decreased by $18.9 million sequentially.
This decrease is mainly related to the increase in allowances recorded in the second quarter to reflect the higher credit dress due to Kogan 19.
Compared to the third quarter 2019, PCR increased by $10.8 million, reflecting a site on favorable migration of the portfolio as well as individual allowances on that limits and number of newly impaired loan.
Business customers.
As shown on slide 19, the provision for credit losses as a percentage of average loans was 27 basis points for the third quarter of 2020.
Fair to 67 basis points in the previous period.
This ratio continues to compare favorably to the industry, reflecting our discipline underwriting standards and the strength of our collateral.
The magnitude of their coven 19 impact under Canadian and US economies is highly uncertain. Therefore, it remains difficult to predict whether the increase in expected credit losses would result in significant write offs or if the bank will need to recognize additional increases and expected credit losses in subsequent periods.
Impaired loans as shown on our shown on slide 20.
Gross impaired loan.
Totaled $274.3 million up $39.1 million sequentially.
These this sorry, the increase mainly resulted from a few commercial exposure as well as from a slight deterioration and personal loans.
Our term a lot of uncertainty remains regarding the future course of that pandemic and the performance of the economy.
But as you kind of make wanes and we gain greater clarity, we'll update our medium term objectives.
Thank you for your attention and I will now turn the call back to Susan.
Thank you at this point I'd like to turn the call over can you call for the question and answer.
Thank you.
Ladies and gentlemen, if you would like to ask a question today. Please.
And then one on your touched some telephone.
If you are using a speaker phone you might have to pick up the hands Preston mute function.
Henry.
Again that is star.
If you would like.
And today.
And we'll take our first question Meny Grauman from Scotiabank.
Hi, good morning.
Question unborn avian DNA.
There's a line that talks about reduction in low levels may add revenue pressure in the near future and I'm. Just wondering if you could elaborate on that.
What kind of revenue pressure are you anticipating.
The revenue pressure on us announcement on expenses.
Hey, why we because of the lower level of law and many of good morning them any bad given the lower level of business loans in Q3, we expect a rebound on this but because a door level, we expect a lower eni in Q4 for that reason.
As you look out to 220 21 would also be expectation that.
Revenue will be impacted by lower loan level next year.
It's the fund we as we explained to you.
A lot of this is coming from a large points and right now just to give a bit more flavor our dealer lines of physician nor points, our seasonal with average utilization in summers 2018, and 29 thing ranging between 53 in the 56%.
Winter season, Underutilization for 2018, and 19 ranged between 50, 963% respectively.
This summer season was strongly impacted as we said by pulled in 19 changing customer behaviors with increased discretionary spending being redirected toward rvs trailers marine asset driving line utilization through and historical low for north point of 37.4%.
So with the OEM manufacture it hurts his brother since responses this increase demand as well as an expectation that the fall season will slow down the purchase cycle, we didn't expect credit languages Asian, increasing to a more normalized level in Q1 of 2021.
Thanks.
Although up.
Now the I'm wondering about how you're thinking about.
The fall off in government Gordon, especially when you last and also just.
Claimants I do.
What impact do you think that will have on on demand and then also you could have jumped up in the credit.
Thinking about the risk or from those events.
Alaska, Liam Mason commence.
Good morning money. So as you as you rightly pointed out.
The government support was appreciable, we had over 8 million Canadian receding.
Sarah.
And they just obviously recently announced a slight extension to that so we've taken into account that government support as we evaluate our our credit.
Perspective.
Our retail customers I would note that were adequately reserved for that.
Drop off.
We do look as part of our adjudication framework and our disciplined underwriting standards.
Wow Okay.
Customers receive that support and that we spoke about into our considerations around the reserves what I wouldn't say, though is that and I would note the aussie announcement on.
So the bank said originally released speaks to keeping your loans that have deferrals in stage two.
In terms of the clients receiving deferrals is that weve factored in.
Migration of those loans within our reserves and we have an overlay to address that migration. So I would not anticipate a material.
On the on our reserves from that migration, assuming the economic scenarios play out as expected.
Thanks for that and run it back was asking about.
The branch closures I think you talk about.
More land or for Q4 and Im just wondering on the timing there and then.
The outlook going forward beyond that.
The intention to keep the.
The branch count stable after that well.
No question.
He was about them.
Okay. This is the final thing this one the.
As we've mentioned before the bank regularly reviews. This minus your clinic network in order to optimize our geographic presence to better response to its customer behaviors. We're moving away from variance visit to self service platform. This a as you mentioned this has resulted in the decision to reduce the number of clinics by 14 to 69 and we are.
Back to merge an additional six in Q4.
The all these consolation thus we've announced we present locations that are within two or 353 kilometers from each other so.
So hard lines are reacting very wells were 100% advice focused and going forward. We're taking individual decision based on lease that's our need to be renewed and also if desired to change the or are the design of our of our branches.
Two or more modern look so this is what we're doing right though.
In terms of the ability to retain those customers.
Typically those deposits you have any data that you can share on that.
Done a lot of.
Oh.
Thanks, a lot of branches and emerged a lot of branches. So I'm wondering if there's any sort of insight you can provide.
How's that.
I think Gary.
Lately in the last year I would say that the experience I've been very positive in terms of the retention of our deposits in the and clients again, we're doing this in line with a desire of our clients to ER visits less the branches and do more transaction over to phone and with the self service platform that we have I know it's much.
The other things than this one.
No I wouldn't.
I don't have anything else in this.
[noise] tied to this.
Okay. Thank you very much.
Okay.
Next question comes from inception.
Thanks.
Hi, good morning.
Just wanted to talk about the loan growth as you learn banks level detail on what's going on in inventory.
Makes sense.
I'm just wondering about the rest of the portfolio because ER.
Where do you see commercial growth evolving here too.
The big six anyway, whether it's our slot growth quarter over quarter.
After years of double digit growth and that seems to be obvious.
Good luck with UBS.
All that information, but now that that's the person demand is that something that could weigh on your girls and a 24.
Yeah, we're we're not immune right that I think the department or feel our portfolio is different than more points as your as you pointed out.
The gross where we're seeing a we're seeing a pipeline being built up right now in the in real estate commercial real estate. So we feel good about again this portfolio our portfolio in.
In our leasing arm will build as the economy stabilized so we feel good that.
With this portfolio as well.
For the rest of the bank or four with respect of our residential mortgages are portfolio has been stable for the last past few quarters.
There is adamant that has been highly competitive in or appetite is for profitable growth, but still it has been a stable for the last for two quarters. So we feel good about this but as we navigate through dependent make all line of business are focusing on where you.
You can win in order to resume growth answer for your question in terms of business services, we still feel though very positive about our occurrence portfolio. We're not active in industry that that's been mostly impacted by Hogan 19 are obviously with north point, but it's kind of a negative.
Positive type of news so we feel good about our future ability to grow in business services, but also stabilizing the rest of our portfolio.
Okay, no not moving onto the credit the discussion here you mentioned that you commercial accounts drove up.
Those formations in the potency bundle of such as.
Okay.
Robert.
Let's go to millions to answer this one.
Gabriel when I when we look at the uptick in gels and that the specific falls that drove a individual provisions. There's no specific sector. I think you you ask some questions last quarter. It similar considerations, it's one off they're driven by commercial.
Counts largely cash flow files.
Impacted as you know in terms of their revenues by Bayko bed and that's a that's really what's driving it but no specific sector, it's rather diversified.
Okay. How many accounts are regarded about them.
Okay.
In terms of the individual a allowance it with two or three files.
Okay. So those belong to a specific sector double.
Hi, Yes. So you know we I think we talk to the past about some stuff in biomass.
And we've also a there's some stuff in pharma.
That does impact.
Again these are in terms of the aggregate it being an aggregate theme beyond those individual filed in the broader portfolio were allowances.
I'm not seeing it.
Okay and then the other Oh My my question here is on the classification of alone. So I'm hearing the when you're talking about the provision performing provision expense and how you're increasing.
Well the probability of the worst case in base case scenario than them, that's building conservatism, but when I look at how your classifying your loan book.
The total but.
<unk> personal total stage to a balances which are but higher risk performing loans are down sequentially like that make sense.
Some reflection of government support program, but they're down materially from last year last year well good wasn't even on the radar dozens and it makes sense and it does the birds with what I'm, saying elsewhere.
I just think there.
Thanks. Thanks.
Good where we're very comfortable with where we are obviously the government.
The government a advice and now in Q2 had us putting loans with get payments in two stage. One we have reserved for a migration and those accounts into stage, two and thinking about it that longer term.
Business deferrals, right now or <unk>, I really quite quite get there only 3%.
Oh or about 360 million in in terms of skip payments.
We have a very strong portfolio, it's 98% collateralized.
You know also you know we've seen a in terms of that blip last quarter was really driven a as brass rod described in his remarks on the volatility in the equity markets and the investment loan piece, but overall.
The stages reflect a the high credit quality of our portfolio.
Right I get that but we hear about management overlay in this area of scenes, where you could.
Proactively put some accounts at this stage two to.
They'll do that take a higher provision book I'm sitting out there I mean.
No actually for Burberry actually Lisa.
Yeah, No well said Gabriel and I wouldn't know.
They just said we have taken for 100% or the clients in the mortgage book on a second deferral and we unlike somebody other banks did sort of a two stage, we gave three months' worth of.
Skip payment capability and then we allowed another three for those that met the criteria, but we have reserved for a 100% of the clients that are on their second deferral migrating to states you. It may not show up in stage now what we have applied and overlay and for 50% of the mortgages that are insured and in our instead.
Page one we've we've taken a reserve against those I also would note that our loan to value on our mortgage it in the mid Fiftys as that was described.
So we are already taking a management overlay against that away from that on the personal book, we don't have a lot of deferrals mine to our visa book and the rest is flight and I've I said, our businesses referrals are really quite small it only 3% of outstanding. So yes. It is important to take an overlay we don't.
On a cliff effect, we've done that within our reserves and feel comfortable about them.
And maybe talk about that outlines and it's interesting.
I mean can't really see though that overlay in these numbers, but I guess.
We we we out there we have to follow the osprey guidance.
And on keeping that stage, one, but we have so that does that you're right get real estate just don't really reflect.
Like that but we have taken an overlay.
Okay. Thanks.
And our next question comes from Doug Young with <unk> capital markets.
Hi, Good morning immediately I'm, just just on that point can you actually and one of the other banks. Since then but can you actually describer quantified the percentage of your performing loans you see all that is from the overlay is it 10%, 15% can is there anyway to kind of give a quantification of that.
I don't I don't have that the hand.
Just to give you a context within the mortgage portfolio.
Our loan to value in the mid Fiftys on on on that.
50% of the mortgage that are deferred or insured.
So it's like it's not big numbers right, it's not big numbers for us.
And you know, even even with the modest piece.
We have in all our loan to values well below 50, and so we're not we're not talking big numbers.
And then just kind of keeping on what do you see out seem like the impact from migration sounds like you've looked at the deferral, but can you kind of put aside into the performing loans Pcls your expectation that there's going be migration down the stage two for those those loans that are in deferral have you gone through your entire.
Corporate book your business loan book and updated your expectations.
For that book as well.
Oh, absolutely we have our process involves.
Both.
Models.
And obviously.
Some of the challenge the industry's had I'm sure all of you wouldn't great goes back to sort of managed question on the government support Hey, you know you have that I've got that later in that government support into your models, we think about in terms the impact to unemployment and impact.
Terms or how things play out so we absolutely looked at the commercial book, we're highly collateralized and our processing, though involved are driving out the model, which I thought it but we'd get a business by business overview with the business with credit going file by file.
We've done some re rating of a lot of our commercial accounts over the past while that's reflected in our numbers, we're very comfortable with the reserve so absolutely and in this environment you have to do you have to do that it's only prudent are the key question is really how it plays out from here and if the economic scenarios.
Well its expected where we find if not we'll have to adjust our reserves accordingly.
And then just last one on easy outside and what would your E C. L b for performing loans.
If you were 100% downside scenario and I don't I didn't.
The other banks.
Yeah.
The key to this question is not normally information that we disclose but I want to give me a sense of the quantum and and I think I believe this is an R.M. DNA.
If you look at the actual weighted scenario results and you compare them to the results on the base scenario and.
So that's one of our all described we had very high weights on the pessimistic and base scenario in a low weight on the optimistic but that difference is about 23 million or one third higher and it doesn't give you the 100% pessimistic scenario, but it does give you a a view of the quantum.
Okay.
I just wanted to Thanksgiving and I, just find that to be useful way to kind of look at the banks across the group and Obama models are differently and whatnot, but.
And then just Francois just looking number question, the 2.7 million related to the severance or not but but to be pharmacy, leading what's that back down and the unusual items or is that 2.7 million in the adjusted mix.
Oh, it's end of quarter ended and it stays in the core numbers.
Doug.
As stated in the car and then you mentioned that you expected mix to go up next quarter I get the wall lower you know lower capital market by the new when all the other items, but I didn't get a sense of why Nics would go up in the fourth quarters, just a seasonal adjustments as we head into Q4 that there's some true ups to be made or is there other items that are going away.
Yeah on expenses in the fourth quarter.
Wow.
First it did a their revenues side because at the lower level of the.
Nowhere level of their book of especially commercial.
Well.
Well bring a lower and I in Q4 until we rebuild invented the index or the inventory finance.
Gets rebuilt.
So that's one part and the other parts on the expense side, it's mostly the seasonality on salaries and benefits that we we see an uptick in in Q4 for a certain elements from Q3, so when you combine to haul.
We foresee a slight uptick on the efficiency ratio for Q4.
So you.
And increasing the efficiency ratio, but do you expect years, we also expect mix to be higher than the 169.2 is that right. So I get the asante your part but.
Yeah, you meant site will be a bit higher because of this isn't out there, especially on the salary and benefits line.
Okay.
Thank you very much at all.
You're welcome Okay. Thank you.
Our next question comes from Sohrab Movahedi, let's be.
Markets.
Thank you just a couple of quick you certainly oh.
With me for me and I don't know.
Can you give a little bit more color around.
Geographic breakdown of the mortgage really and specifically.
A more more details around.
The 250 60 that you can see where you were this quarter.
So I.
I don't have to hand, a sort of the a geographic distribution or up on.
Well, what I would say predominantly most of our mortgage business is in Ontario, Quebec.
We have about a billion four.
Our aggregate portfolio in Alberta.
And ER other elements across the country and I Wonder what I would say is.
The likely distribution is commensurate with that concentration, Ontario, Quebec, and Oh, we are predominantly focused on a on urban areas with that with with our mortgage lending. So the deferrals I think reflect that demographic.
Just to get clarity and you're saying you're not seeing any.
You need this proportionality well geographically.
That's right sort of I mean, obviously with the Kobin situation one of the things we talked about with with the real estate team was it's going to slow immigration and that will have an impact potentially looking forward.
No growth say in the Vancouver markets.
It's something we're looking at that but there's nothing necessarily in terms of their relief geographically I think it's more a affecting individuals in certain industries a adds a in ice and certainly hospitality, it's been more more impacted.
And then that would.
Most common split would.
Also applied to that and you really provided during the quarter.
Yes, they would they want.
And then I just wanted to go back to their balance sheet trends generally speaking.
I think yeah aside from the North point dynamics that you were talking about if I was just the bigger residential mortgage balances.
Yes.
I think you can you said something along the line just Ah.
As stable as comfortable schools.
But the market is growing I think the markets and participate in our growing so just curious to get a sense of how much more.
I guess market share youre willing to give up or what will it take to want to start growing with the market.
This is the final did this one we yeah. This is a very.
Competitive market as well and we have appetite for profitable growth in certain areas of this market. So for us short term, having being able to stabilize the portfolio is a first step.
Nothing that we will not want to grow but we want this road to be profitable.
[music].
So it's not that it's not inconceivable that that balance sheet trend that we've been seeing or outside of north point I could continue just seems stable maybe been shrinking balance sheets skilled while until its until you get that I guess the profitability that you're targeting.
My comments on the flexibility with the common that they made on Brooks said those they were aimed at the mortgage business I I would expect us to all the business services will soon go back at their growth pace that they had before.
Other <unk> other segment that we have including investment in loans have been stabilizing a bit into last quarter or so so so that's another area that we would like to grow but at the end of the Dave we want to grow where we can win then we want to have profitable groups, but obviously.
Our goal at the end will be to grow our overall portfolio.
Okay. Thank you and one last just one last one on a net interest margin I apologize if you'd mentioned this tonight I missed it the cats did you comment as to what's the outlook for that line item is that over that had you know qualitest foreseeable cultures.
Last month, one night.
That's around in terms of a NIM, you're referring to NIM.
For Q4, we expect it to bed that slightly lower than Q3.
As of the highlighted this situation wakes thing would be.
Lower yielding inventory financing volume at the end of Q3 two started Q4.
Right and that gets.
Just to put a finer point on it hopefully eventually when maybe next year.
You start growing.
Mortgage book and Yeah, I will get and that had been to me.
Correct.
We expect et cetera, it's event, it's a bit a premature to make you bet for next year in this low end by interest environment, but we have been able to maintain our margin.
Sequentially and if the portfolio mix improves for the higher yield and the business growth as Stephen mentioned, they definitely that would help that would should be a positive factor and a NIM going forward and 21 and beyond.
And if the mix of the girl.
Secured stuff starts growing which obviously is is lower risk, but nor a margin I guess that would be an offset as far as margin expansion doing NIM expansion.
Yeah, but we foresee more growth into business service book than any other books.
Okay perfect. Thank you very much.
You're welcome.
And ladies and gentlemen, once again as a reminder, that star and then one if you would like to ask a question over the phone today.
Well move onto our next question.
With me some cap.
Hi, good morning, sorry about that.
Oh, the number questions. So well things maybe just asked a couple and then I'll re queue just to be fair.
The first pretty simple question Stefan is can you remind me.
The status of the a this search you have you had in the interim title what is the what does the board I'm going to announce.
The forever CEO.
[laughter], they sort of course, a mature, but the forever, but.
Oh go comments on via the Internet.
The board of directors progressing within the search of a permanent CEO. As you you mentioned and is their intent is to take the time needed to select it's a next leader or it could be a in internal candidates as well as an external candidates. So.
More to come I would say.
Okay, but there's no there's no timeframe or or.
There's there's no timeframe.
Okay.
And I just wanted to pick up on the commercial growth. So if we exclude north point.
Mentioned that you expect commercial growth to come back.
Uh huh.
One would that be lifted the pipeline look like what are your expectations around that kind of well in terms of talking and antigen.
Thanks, I'll take this one the nerco yeah, we actually grow to come back next year, and we're seeing pipelines being built a the real estate, which is more than half of the portfolio and business services Oh I thought that these since I would say last three.
Months there a pipeline is it went back to the level it was pretty cold in 19.
So that positive in terms of the other a bit up of the other portfolio commercial obviously north point Weve commences, yeah. The leasing portfolio a 50% of this portfolio is in transport. So Ah. So obviously right now it's a big headwinds in that sense.
And the rest so the SMB, Andy syndication portfolio, because we're not active in the most affected industry are affected by cold in 19, we feel that growth should come back.
In 2021.
Okay.
And what kind of broke do you think you could you could mean, if im sorry.
Well, a little glad to share it or the next call will give the all guidance.
Our next and those call.
Okay. Thank you.
Maybe just a question on deferrals.
He is.
The proportion of deferrals more or less I'm also a representative of the amounts of insured versus uninsured mortgages.
Lastly instruments.
Darko in a in the mortgage space, we've got 50% of the deferral is insured and 50% a uninsured and it is down and as a francois a alluded down to edge only 9.2% of our portfolio, we're very comfortable with the reserves.
On on this.
And we yeah, we are factoring those deferral into our allowances.
And I'm gonna that that's all.
But.
No that's similar to our existing portfolio, where insurance, 53% in the portfolio. So there's no much difference between the different book and.
And then does that total book Darko.
And then on the commercial side Darko I as I mentioned, a business deferrals are only about 3% of our book had an outstanding the 364 million that's it down 80% from the Q2 number and we've only seen sort of 25.4 million of.
Those are bounces honest second deferral so.
Are you comfortable with that 70, 80% or in equipment finance with the balance and real estate as I mentioned, so that business deferrals or in a in real good shape.
Okay.
And.
Maybe just a.
On the only mortgage portfolio a couple of questions around it and I promise to talk about anymore, but.
How many are actually unemployment receiving server.
<unk>.
Oh, it's a good question.
I I I've been talking to the team over the past while.
In terms of it and I've got a variety of numbers from some of the bed that I don't want to give specific what I will tell you. Though is that we have have I've looked at it and factored it into our evaluation of the potential migration of those customers what I'm sure you appreciate the industry.
Overall as you know you guys have ask questions. The other banks Oh, the Sarah place I haven't really plays out and how we led the industry deals with the migration back that business as usual our key issues for us, but what I would say is our with our underwriting standards and the approaches the deferrals and reserves, we feel weve appropriately.
Missions for that said that migration and we do take that into account when evaluating their credit quality of our customers.
Okay Fair enough and Oh promised asked one last question, though.
I'll move on.
There is another cohort that another cohort of mortgage borrowers where I have a little concern.
And that would be that group of people that have asked for a deferral. They have not lost their jobs, but they are earnings significantly less than before.
Small business owners, maybe some entrepreneurs and maybe just other than a simply trying to struggled through this but have not lost their job and therefore not on sort of.
Yeah, Yeah, how big that cohort is within the deferral program.
I I don't from you know when when you're talking about.
Business for self type people again, where we factor that in Oh, you know when we're looking at a person or.
Small trade their ability to operate within cobot, if they're making their payments a you know we're gonna have to look how it plays out based on a the economic scenario on how it works but.
I don't I don't have that to hand Darko.
Okay, well I appreciate that thanks very much.
<unk>.
And there are no further questions in the queue at the moment I would like to turn the call back over to.
<unk> for any concluding remarks. Thank you as we navigate through these challenging times I, along with the management team and most appreciative of our employees for their dedication our customers for their loyalty in our investor for their support to conclude Laurentian Bank Scottish position is strong.
Song and its old stay healthy level of liquidity its credit quality ascend with disciplined underwriting well collateralized portfolio and no material exposure to sectors. Most impacted by cold is 90 as such the level of provision is prudent.
The operational flexibility that we have built is allowing us to continue our transformation and progress towards our goal of improving the banks performance. Thank you.
Thank you for joining us today should you have any further questions I'll contact information is included one depressing Olson.
Third quarter 2020 conference call will be held on December four.
Speaking with you know enjoyed along with them.
[noise] and once again, ladies and gentlemen does conclude todays.
Yes.
And today.
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