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Laurentian Bank headquarters on April 5, 2022 in Montreal.Ryan Remiorz/The Canadian Press

As Laurentian Bank LB-T struggled to find a path forward for its business in August and September, its clients pulled money out of their chequing and savings accounts at a higher rate than customers of any of its rivals.

The Montreal-based lender’s demand deposits dropped 3.3 per cent, to $8.7-billion, in the first two months of its fourth quarter, according to analyst research by National Bank Financial Markets. At Laurentian’s closest competitor, Canadian Western Bank, the drop over the same period was 2.5 per cent, to $13.2-billion.

Deposits at most of the Big Six banks grew slightly, though Bank of Montreal’s BMO-T levels remained flat and National Bank of Canada’s NTIOF demand deposits fell 0.9 per cent.

Customers pulled their deposits from Laurentian during a time of turmoil for the bank.

Laurentian put itself on the auction block this past summer as part of a strategic review, but called off the sale process after it failed to draw a bid that met its board’s expectations.

A few weeks later, Laurentian’s systems crashed during a scheduled technology upgrade on Sept. 24. Individual and corporate clients were unable to access their accounts or process transactions until Sept. 28. Laurentian said that, as a result of the outage, it would reverse all its monthly service fees for September.

In early October – a period not captured in the data National Bank relied upon for its analysis – Laurentian made an unexpected executive shakeup. It installed head of personal and commercial banking Éric Provost as chief executive officer, ousting Rania Llewellyn, the first woman to run a major Canada-based bank. Board chair Michael Mueller resigned in protest over her sudden dismissal, according to two sources.

The majority of the deposit drop occurred in August. In September, deposit levels remained relatively flat. The bank also lost deposits in July, the same month The Globe and Mail reported that Laurentian was searching for a buyer.

“It is hard to conclude that this decline is attributable to the IT outage that hit the bank in late September, especially since [Canada Western Bank] reported a decline in demand deposits of a similar magnitude,” National Bank analyst Gabriel Dechaine said in a note to clients on Thursday.

Mr. Dechaine lowered his rating on Laurentian to “underperform” in October, after some credit ratings agencies lowered their outlooks on the bank. “Deposit outflows is one of the key risks facing Laurentian that drove our downgrade,” he wrote.

Deposits that are not locked in to fixed-term accounts are easier to extract during times of stress, as demonstrated during the collapses of Silicon Valley Bank and some regional lenders in the United States.

The biggest banks report fourth-quarter earnings at the end of November. Laurentian is scheduled to release its results on Dec. 7.

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