The logo of Laurentian Bank is seen at its head offices in Montreal, April 1, 2015.CHRISTINNE MUSCHI/Reuters
Laurentian Bank of Canada has ambitious targets: Double its size, in terms of assets, and get its return-on-equity in line with the big banks by 2022.
The two goals were delivered during the bank's investor day on Tuesday, when chief executive officer François Desjardins reviewed some of the bank's recent achievements but also pointed out that big changes are coming.
Canadians are doing more of their banking on their computers and smartphones and they are carrying less cash, pushing the Big Six toward making huge investments in technology to keep up with shifting consumer preferences.
The problem for Laurentian? It is not a big bank. Its assets are just $38-billion – compared with, say, $1.1-trillion for Toronto-Dominion Bank – which suggests that expensive investments could be out of reach.
Adding to the problem is the fact that Laurentian does not have profit-gushing retail banking operations. Retail services generated 43 per cent of the bank's revenue in fiscal 2015, yet accounted for just 14 per cent of its adjusted profit (compared with 50 per cent or more for the big banks).
But Mr. Desjardins' plan is to simplify the bank's retail operations and focus on a few key areas where he believes Laurentian can compete effectively.
"If you try to be good at everything, usually the outcome is that you become average at everything," he said.
Laurentian will focus on areas such as business banking and offering financial advice to retail customers, but will compete less in conducting transactions at branches and offering a wide variety of financial products.
"Today, we have 400 products on our shelves and we administer them at a great cost. We will take that number down significantly," Mr. Desjardins said, without providing a figure.
He also said the bank would double its share of business banking within its current business mix, while cutting corporate expenses.
"That is a combination of things, from the reduction of personnel, but also renegotiation of contracts or just downsizing of certain offices," he said.
The end result: Mr. Desjardins believes Laurentian can nearly double its assets to $70-billion within seven years and drive its return-on-equity to 17 per cent, up from 12 per cent today and in line with the ROEs generated by the Big Six.
"We will continue to think smart, dream big, but act small, stay simple and execute with success," he said.
David Berman