Laurentian Bank Q2 FY2025 results: Net income rebounds to C$32.3m, focus on specialization continues

What Were the Key Highlights from Laurentian Bank’s Q2 FY2025 Earnings?

Laurentian Bank of Canada (TSX: LB) has reported a noteworthy return to profitability for the second quarter ended April 30, 2025, booking a net income of C$32.3 million. This marks a sharp reversal from the net loss of C$117.5 million posted in the same quarter a year earlier. Diluted earnings per share came in at C$0.69, up from a loss per share of C$2.71 in Q2 FY2024. On an adjusted basis, net income was C$34.0 million with adjusted diluted EPS of C$0.73, although this reflected a 19% year-over-year drop from C$0.90.

The bank’s return on common shareholders’ equity improved to 4.9%, up from negative 18.6% last year, while the adjusted return stood at 5.2%, a slight contraction from 6.1% in the same quarter last year. These gains reflect the positive impact of restructuring, divestments, and a strategic shift toward specialized commercial banking, even as top-line pressures persist.

How Did Revenues and Margins Perform in the Second Quarter?

Laurentian Bank’s total revenue declined by 4% year-over-year to C$242.5 million, driven primarily by a reduction in non-interest income. Net interest income, however, rose slightly to C$182.2 million, supported by margin improvements and a better business mix. The net interest margin (NIM) for the quarter rose to 1.85%, up five basis points from Q2 FY2024.

The drag came from non-interest income, which fell by C$12.6 million to C$60.3 million. The decline followed the bank’s strategic sale of its full-service and discount brokerage operations under Laurentian Bank Securities (LBS), as well as softer lending fee income due to reduced real estate market activity. These revenue headwinds, though anticipated, highlight the near-term trade-offs of portfolio simplification.

What Is Driving Laurentian Bank’s Cost Discipline and Strategic Restructuring?

Cost efficiency remains a central theme in Laurentian’s “Our Path Forward” strategy. Non-interest expenses for Q2 FY2025 dropped to C$184.5 million, down sharply from C$386.3 million in Q2 FY2024. This decline is largely attributed to the absence of last year’s C$196.8 million in impairment and restructuring charges. On an adjusted basis, expenses fell 2% year-over-year to C$182.3 million.

Salaries and benefits dropped by C$7.1 million to C$92.4 million, aided by headcount reductions and a lower bonus accrual base after the LBS divestitures. Meanwhile, premises and technology costs rose to C$51.8 million, reflecting ongoing investments in digital infrastructure aimed at enhancing customer experience and self-service capabilities.

The adjusted efficiency ratio increased slightly to 75.2%, up from 73.8% a year ago, as lower revenue outpaced cost savings. Management reaffirmed its commitment to further improving this ratio through digital transformation and niche commercial banking expansion.

How Did Laurentian Bank Manage Credit Risk in Q2 FY2025?

Provision for credit losses (PCL) for the quarter came in at C$16.7 million, down from C$17.9 million in Q2 FY2024. This improvement was driven by a notable decline in provisions for impaired loans, particularly within the commercial loan book. The PCL on impaired loans dropped by C$13.8 million to C$14.4 million, while the provision for performing loans rose to C$2.3 million from a C$10.3 million release last year, reflecting macroeconomic caution and adjustments in residential mortgage assumptions.

For the six months ended April 30, 2025, total PCL declined to C$31.9 million from C$34.8 million in H1 FY2024, pointing to stable credit trends and improved portfolio quality. The PCL as a percentage of average loans stood at 0.19% for the quarter.

What Is the Market Sentiment and Stock Performance of Laurentian Bank?

Laurentian Bank’s stock has reacted moderately to its earnings stabilization. As of May 30, 2025, shares traded at C$30.91 on the Toronto Stock Exchange, marking a 7.21% gain over the previous five sessions and a 9.76% rise year-to-date. However, the stock remains below its 12-month high of C$31.74, reflecting investor hesitancy despite the earnings turnaround.

Valuation multiples remain undemanding, with an adjusted trailing P/E ratio of just 8.4x. Book value per share stood at C$57.40, and the bank’s price-to-book ratio remains below 0.55x—suggesting potential value appeal for contrarian investors, especially amid Canadian mid-tier banking consolidation trends.

Institutional sentiment is cautiously optimistic. Raymond James recently trimmed its Q2 earnings estimate from C$0.79 to C$0.69 but still sees full-year FY2025 EPS landing around C$3.03. The broader consensus remains at “Hold,” with a median target price of C$27.13, reflecting tempered growth expectations.

Institutional flows appear stable, with the bank meeting all regulatory capital requirements. The CET1 ratio improved to 11.0%, exceeding the OSFI minimum and signaling a well-capitalized balance sheet. While there’s limited public disclosure on foreign or domestic institutional flows, the stock’s recent uptick suggests that value-oriented investors are cautiously re-engaging.

What Strategic Initiatives Are Shaping Laurentian Bank’s Outlook?

The bank is nearing the one-year anniversary of its strategic transformation plan, which has emphasized the exit from commoditized businesses and a pivot toward specialized lending and commercial finance. The merger of LBC Capital and Northpoint Commercial Finance into a single platform, alongside the divestment of LBS retail and discount brokerage divisions, aligns with this objective.

According to President and CEO Éric Provost, the bank is now leaning into its specialization strategy to support both customer success and shareholder returns. Provost stated that while there is more work to be done, positive momentum in niche commercial segments is becoming increasingly visible.

Looking forward, continued investment in self-service digital platforms and lean operational models will be essential to achieving medium-term ROE and efficiency targets. However, challenges remain. The Canadian housing market has cooled, the Bank of Canada has paused its rate-cutting cycle amid tariff-driven inflation risks, and labor market softness could cap consumer credit growth.

Laurentian Bank’s Q2 FY2025 results showcase a company regaining its financial footing after a bruising prior year. Strategic restructuring, cost management, and a redefined focus on specialized lending are yielding tangible benefits. Yet, revenue softness and investor wariness linger. For value-focused investors, Laurentian offers a turnaround story with measured upside, contingent on sustained execution and macroeconomic stability.