Laurentian Bank hikes dividend, buys AGF Trust

Laurentian Bank (LB-T) beat the Street in the second quarter and is boosting its dividend. And the bank's subsidiary, B2B Trust is buying AGF Trust for about $416 million in cash.

The bank reported adjusted net income of $36.3 million, or $1.31 per share, well ahead of the consensus estimate.

The bank said it's hiking its quarterly dividend by 2 cents, or four percent, to 47 cents per share.

“I am pleased with our solid performance for the second quarter considering the ongoing economic concerns and the challenging banking environment,” Réjean Robitaille, president and chief executive officer, said in a statement. “Again this quarter, we maintained momentum and generated organic loan and deposit growth in all our business lines and benefited from excellent credit quality.”

Separately, Laurentian announced its subsidiary B2B Trust is buying AGF Trust for about $416 million in cash.

“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 said.

Ratings agency DBRS says the acquisition is consistent with Laurentian's strategy to build out its investment management business. The acquisition will be rolled into Laurentian's B2B Trust business, which also recently acquired MRS Trust in November 2011.

“Given that this is the second acquisition made by Laurentian Bank in the B2B space within the last six months, DBRS is somewhat concerned with the pace of integration,” the ratings agency said in a note to clients. “However, our concerns are partially mitigated by the fact that the Bank’s first acquisition, MRS Trust and related companies, which closed in November 2011, appears to be progressing on schedule with its integration plan.”

Laurentian says the acquisition will incur about $30 to 35 million in integration charges, which will mostly come in 2013. It also says the deal will add about $28 to $30 million in earnings by 2014. Analysts at Desjardins Securities expect the acquisition to add about 40 cents per share to earnings, or 5 percent, in 2014.

Caisse de Depot et Placement du Quebec also says it’s investing $100 million in Laurentian, making it one of the bank's biggest shareholders.