MONTREAL - Laurentian Bank of Canada boosted its quarterly dividend for the third time in a year and announced a major acquisition Wednesday as it beat expectations by earning $33.9 million in the second quarter.
The Montreal-based bank said its quarterly dividend will rise two cents, or four per cent, to 47 cents per common share, payable Aug. 1. It previously raised the payout by three cents per share in December and last June.
The latest increase comes as Laurentian recorded its best ever second quarter by earning $1.22 per share for the period ended April 30, up from $1.17 per share, or $31 million in the prior year.
It also announced that its subsidiary B2B Trust will acquire the trust operations of Toronto-based AGF Management Ltd., with the deal set to close in August.
Revenues increased to $198.7 million from $183.2 million in the year-ago period. The contribution from the acquisition of MRS Companies was $10.7 million.
Return on common shareholders' equity was 12.1 per cent, down from 12.7 per cent in the second quarter of 2011.
Excluding transaction and integration costs related to its acquisition of the MRS Companies, which was announced last September, net income grew 17 per cent to $36.3 million or $1.31 diluted per share.
The bank (TSX:LB) was expected to earn $1.19 per share on $194 million of revenues, according to analysts polled by Thomson Reuters.
"I am pleased with our solid performance for the second quarter considering the ongoing economic concerns and the challenging banking environment," stated CEO Rejean Robitaille.
He said the bank again maintained momentum and generated organic loan and deposit growth in all its business lines and benefited from excellent credit quality.
The bank's provision for loan losses decreased 37 per cent to $7.5 million in the quarter, reflecting strong credit conditions in Canada and the quality of the its loan portfolios.
However, the bank said remains cautious amid the ongoing economic uncertainty.
In the latest expansion for Laurentian, the bank's B2B Trust announced it will pay $415.5 million to acquire the trust operation of AGF Management Ltd. (TSX:AGF.B), a Toronto-based mutual fund and wealth management company.
AGF Trust currently provides investment products such as guaranteed investment certificates and lends money for investment and real-estate transactions.
It has been operating through about 20,500 financial advisers and 1,050 mortgage brokers across the country.
"This significant transaction evidences our continued investment in our growth engines in order to further develop the bank's competitive advantage and positioning, improve its profitability and create long-term shareholder value," Robitaille added.
Laurentian secured a $120-million private placement, including $100 million from the Caisse de depot et placement du Quebec and $20 million from Quebec's Solidarity Fund.
"Laurentian Bank has been part of the Quebec landscape for more than 165 years and has carved out a place in the Canadian financial markets, notably through a subsidiary specialized in banking services distribution," stated Normand Provost, executive vice-president of private equity with the Caisse.
At the end of the second quarter, the bank had a record of more than $30 billion of assets.
Total loans and bankers' acceptances stood at $23.1 billion, up $1 billion or five per cent from Oct. 31 and nine per cent from the prior year.
Laurentian Bank Securities partnered with Investissement Quebec to provide financing for a northern Quebec resource company. It also participated in the first investment related to Quebec's Plan Nord development.
Unionized employees approved a six-year agreement that raises salaries by 13 per cent over six years plus up to another one per cent depending on the bank's results in the final two years.
Net interest income increased to $128.3 million from $122.1 million a year ago.
On the Toronto Stock Exchange, Laurentian's shares gained 78 cents, or 1.9 per cent, at $42.02 in morning trading.