12/07/2011 12:18 EST | Updated 02/06/2012 05:12 EST

Laurentian Bank boosts dividend for third time on higher 2011 profits

MONTREAL - Laurentian Bank is raising its dividend for the third time in the past year amid continuing confidence that its growth strategies will survive the economic slowdown.

The bank said Wednesday that it will increase its quarterly dividend by three cents to 45 cents per share. The move followed a three-cent increase in June and a similar amount last December.

The increase came as the Quebec-based bank achieved a record profit in 2011 by earning $127.5 million, or $4.81 per share compared with $122.9 million or $4.61 per share in 2010.

Revenues increased to $753.6 million from $737.4 million last year, but were short of the $793 million forecast by analysts.

"We have much to show for 2011 and what's more we are energized and engaged and well-positioned to meet the challenges and opportunities of 2012," CEO Rejean Robitaille said Wednesday during a conference call.

He noted that the results improved even when including one-time costs related to the MRS Companies acquisition and mutual fund distribution agreement.

Adjusting for the one-time costs, the bank earned $133.3 million, or $5.05 per share, up 9.1 per cent from last year.

Canada's seventh-largest bank said its earnings fell to $28.6 million in the fourth quarter as it booked an $8.2-million pre-tax charge acquisition charge.

Laurentian (TSX:LB) acquired the MRS companies in September. It also paid compensation for terminating in 2012 an existing distribution agreement for IA Clarington funds and signing a new deal with Mackenzie mutual funds.

The results were equal to $1.06 per share, down from a year-earlier profit of $32.5 million or $1.24 per share. Excluding one-time costs, adjusted earnings per share increased six per cent to $1.31.

Revenue was down to $187.4 million compared with $190 million in the same period in 2010.

Return on common shareholders' equity was 9.4 per cent during the quarter and 11 per cent for the full year.

Analysts had expected $1.20 per share in adjusted earnings in the quarter and $4.98 per share for the full year.

Net interest income decreased to $122.4 million in the quarter from $128.2 million a year ago as strong loan and deposit growth did not fully offset lower interest margins.

Margins decreased by 15 basis points to two per cent because of intense competition in many markets.

Other income increased by five per cent to $65 million on higher securitization income on new mortgage loans and higher credit card revenues. The increases were partially offset by lower income from brokerage operations as a result of the financial market environment.

The provision for loan losses was $12 million in the quarter, down from $16 million a year earlier.

"While no financial institution is immune to global financial instability, our Canadian-based loan portfolio is very sound," Robitaille said, adding the bank has no exposure to European sovereign risk.

Robitaille said Laurentian Bank's net impaired loans as a percentage of all loans is "among the healthiest of the Canadian banks and our risk profile among the lowest."

Although the bank achieved its 2011 profitability objectives even with one-time acquisition costs, it didn't meet its revenue and efficiency goals. That was partly due to external factors exerting pressure on net interest margins and high regulatory and pension costs, the bank said.

For 2012, it hopes revenue growth will exceed five per cent while adjusted diluted earnings per share will range between $4.80 to $5.40 per share.

Robitaille said he expects uncertainty in the Canadian economy and international financial instability may linger. But the bank's revenue growth should accelerate while pressure on margins is partially offset by the MRS revenues and higher other income.

"We anticipate that loan and deposit growth to be as strong as it was in 2011."

Sumit Malhotra of Macquarie Capital Markets said the bank did a good job in managing expenses, an important issue as low interest rates continue to pressure revenue.

"We view this as a solid result from Laurentian, particularly given the tougher operating backdrop" the financial services analyst said in an email.

Shares in Laurentian Bank closed at $44.71, up $1.14 or 2.6 per cent in Wednesday trading on the Toronto Stock Exchange.