A sign sits outside the head offices of Laurentian Bank in Montreal, March 19, 2013.Christinne Muschi/Reuters
Laurentian Bank of Canada plans to expand its commercial lending business across the country in coming years, drilling down on industries where it can compete with larger lenders.
The Montreal-based bank is targeting small to mid-sized businesses, and aims to double its 2 per cent market share of the country's $350-billion commercial banking business in the next four years, said Stéphane Therrien, executive vice president of business services at Laurentian.
Commercial banking, which offers services such as financing, lending and investments to businesses, is an area of banking that has become increasingly attractive to lenders as growth in lucrative areas such as personal lines of lending have slowed – it's still possible to achieve high single-digit or even double-digit growth levels in this business line. The market is increasingly competitive, though, especially as it has attracted private-equity players looking to cash in on boomers selling small businesses. Credit unions, foreign banks and other alternative lenders are also active in the space.
The bank also wants to expand geographically. Laurentian has opened an office in Atlantic Canada, and plans to have commercial account managers west of Ontario in the next year. The bank's commercial loan portfolio grew by 16 per cent in the banks third quarter, from the same time last year.
The booming Alberta economy has been a boon for other lenders, including crown corporation ATB Financial, which has benefited even more from higher loan growth than many big banks, thanks to its exposure to sectors such as agriculture, energy and forestry.
Laurentian wants a piece of that business. "But to win out West, we need to be local. And the way we want to enter the market there is definitely through leasing and equipment financing," Mr. Therrien said.
Along with equipment financing, which Mr. Therrien believes will be fuelled by manufacturing companies' investments in machinery to improve productivity, Laurentian also identifies real estate, wind and solar farms, health and pharmaceuticals and agriculture as areas the bank plans to focus on.
To succeed in these markets and business lines, Laurentian has been modernizing its team of account managers, which will now specialize by industry.
"All the investments we're making right now are toward our account managers and our sales force," Mr. Therrien said. That included new management for the group, IT systems to allow managers to work remotely and the use analytics to target prospective new clients, rather than leaving account teams "with the yellow pages, for them to choose in the morning who they would call."
Mr. Therrien joined Laurentian 2012 when other executives were just beginning to shift the bank's focus and investments towards commercial banking, with less emphasis on retail banking.
At first, it was difficult to convince some staff that the bank couldn't be everything to anyone, Mr. Therrien said. But specialization of the sales forces in the banking industry is a "worldwide" trend, as competition intensifies for these dollars.
"I would say that Canada is probably a bit late," said Mr. Therrien, who previously worked at GE Capital, the arm of General Electric that offers mid-market finance solutions and commercial loans. Citing Laurentian's size relative to the Canadian banking industry, he said "it is probably an easier task for us... to pick and choose segments and quickly deploy in those segments versus our largest competitors."