Laurentian Bank LB-T is preparing a digital push, including a high-interest online savings account, as it looks to attract more deposits and reach customers outside Quebec.
Rania Llewellyn, the bank’s president and CEO, said the Montreal-based bank is executing on its strategic plan and is changing processes that used to require customers physically go to one of its branches if they wanted to open an account.
“Last year we had some great (guaranteed investment certificate) rates in the market, but we were limited by the fact that you couldn’t get anything except if you had come to one of our 60 branches,” she said in an interview during the bank’s annual shareholders meeting Tuesday.
Within the next couple of weeks, depositors will be able to open a savings account with a three per cent interest rate online.
She said the account will be advertised through a targeted campaign focused on the interest rate, which she calls one of the best on the market.
The move will also allow the bank, which only has branches in Quebec (it has business services offices in Ontario, Alberta and British Columbia for commercial banking clients), to reach customers outside its home province.
Llewellyn said that’s what the bank managed to do with a recently relaunched line of Visa credit cards, which customers can apply for online.
“What’s interesting is that it’s a 50-50 split between Quebec and the rest of Canada, so we’re starting to attract net new customers to the bank,” she said.
While opening an account online at a large Canadian bank is relatively straightforward, Laurentian Bank’s use of technology had fallen behind its competitors.
When Llewellyn was hired in October 2020, after investors lost patients with her predecessor’s lack of progress at turning the bank around, Laurentian had no mobile application and activating a credit card could take up to 25 days.
Llewellyn said the bank has changed. It now has a mobile application, processes are faster and employee and customer satisfaction has risen.
Earnings per share increased by 14 per cent in 2022, compared with an initial target of five per cent.
Laurentian Bank still faces challenges, said Scotiabank analyst Meny Grauman. For the first half of 2023 fiscal year, management has warned investors to expect higher spending, margins under pressure and slowing growth of its loan portfolio.
“While there is no doubt that the bank is executing well against its objectives, the macro environment is becoming more challenging, and we continue to see more upside elsewhere in the space among the larger banks with more diversified revenue streams,” he said.
Despite inflation and economic disruption caused by the war in Ukraine, Laurentian exceeded its objectives in 2022, Llewellyn said.
She expects that results will be under pressure for the first have of the fiscal year but “will rebound, provided interest rates stabilize.”
The bank is ahead of its intermediate targets, she said, giving it room to maneuver and achieve its goals even if the economy slows, she said. “Our three year metrics are not changing.”
While the bank’s spending was higher than expected during the first quarter, Llewellyn said that will stabilized during the second half of the 2023 fiscal year.
During the first six months of the year, she said significant investments are required, notably to renew its credit care offerings, she said. “For us to improve efficiency, you need to spend money to save money”.
While the bank isn’t know for being particularly adept at controlling expenses, Darko Mihelic, an analyst at RBC Capital Market, said that he’s prepared to give its management the benefit of the doubt.
“Laurentian Bank has historically struggled with expense control but in this situation (a significant strategic overhaul), we are not overly fussed that expenses are ahead of expectations in the first quarter of the second year of a new strategic plan,” he wrote in March.
Editor’s note: In an April 12 story about Laurentian Bank’s AGM and digital strategy, The Canadian Press erroneously reported that the bank is offering a chequing account with a three per cent interest rate. In fact, the account is a savings account.