Dec 6, 2017
BNN's Daily Chase: Laurentian plunges amid mortgage ‘documentation issues’, BoC rate decision
By Noah Zivitz
Laurentian Bank’s stock is coming off its worst day since 2009 after the lender disclosed “documentation issues and client misrepresentations” in mortgages sold to a third party. That’s bringing back some memories of the scandal that ultimately pushed Home Capital Group to the brink. It’s early days, but it’s instructive to take note of the exact wording in Laurentian’s disclosure. Specifically:
-“No employees were implicated in any misrepresentations and the documentation issues appear to have been unintentional.”
-“The bank found no significant concentration of mortgages with misrepresentations with any single broker.”
All told, Laurentian said it expects to ultimately be on the hook to repurchase ~$304 in mortgages. We’ll go straight to the source this morning when Laurentian CEO Francois Desjardins joins us at 8:20 a.m. ET.
BANK OF CANADA RATE DECISION
Investors see little chance of any change in policy today, with just a 15.6 per cent implied probability of the bank’s benchmark lending rate going up to 1.25 per cent. The bank took some observers by surprise with an overtly cautious tone at the time of its last rate decision on Oct. 25. NAFTA and inflation (or lack thereof) were top of mind for the bank back then. Here’s some of what the economy has churned out since then:
Key Economic Data
| Date | Data | Actual |
|---|---|---|
| Oct. 31 | August GDP | -0.1% |
| Nov. 3 | October jobs | +35,300 |
| Nov. 3 | September trade deficit | $3.36B |
| Nov. 16 | September manufacturing sales | +0.5% |
| Nov. 17 | October CPI | +1.4% |
| Nov. 23 | September retail sales | +0.1% |
| Dec. 1 | November jobs | +79,500 |
| Dec. 1 | Third-quarter GDP | +0.4% |
| Dec. 5 | October trade deficit | $1.47B |
TRUDEAU IN CHINA
It’s a business-heavy day in China for Prime Minister Justin Trudeau. He attended the Fortune Global Forum, where he kept the door wide open to a free trade deal with China. “As far as trade is concerned, China is the future,” he said. “For strong economic growth, the answer is obvious – we must work together. We can’t afford not to.” Trudeau also held meetings with Apple CEO Tim Cook, Alibaba Founder Jack Ma, and KKR Co-Founder Henry Kravis. Remains to be seen if those conversations yield investments in Canada.
HBC RESULTS
HBC is acknowledging it got tripped up by laying off staff in a sweeping restructuring. "The headcount reductions that were made...caused some operational disruptions, particularly in [our] digital business," the company said in its MDA accompanying its third-quarter results - which show total sales fell 4.2 per cent in the third quarter.
LIVE ON LOCATION
We’re sending Paul Bagnell to CIBC's trading floor in Toronto's financial district for the bank's annual Miracle Day fundraising event, where fees and commissions are donated to children's charities. Watch for interviews today with some senior CIBC execs and a few celebrities who are lending their names to the cause.
OTHER NOTABLE STORIES:
-TSX record high watch: 16,131.79 is the all-time high set on Nov. 7.
-Lots of interesting nuggets in Rogers CFO Anthony Staffieri’s presentation at a UBS conference yesterday. He said Rogers would “consider” a network-sharing agreement with Shaw’s Freedom Mobile, noted the iPhone X price point is driving “many” customers to the iPhone 8, acknowledged the company is “looking at better ways to surface value” from the Toronto Blue Jays and its stake in Cogeco, among other assets.
-WestJet has announced a preliminary memorandum of understanding to cozy up with “enhanced frequent flyer benefits”
NOTABLE RELEASES/EVENTS
-Prime Minister Justin Trudeau in China (through Dec. 7)
-Notable earnings: Hudson's Bay Co., Dollarama, Lululemon
-Notable data: Canadian labour productivity
-9:00 a.m. ET: Home Depot holds investor day meeting
-10:00 a.m. ET: Bank of Canada releases interest rate decision
-12:00 p.m. ET: Genworth MI Canada holds investor day in Toronto
-12:30 p.m. ET: Alberta Energy Minister Margaret McCuaig Boyd and the Alberta Energy Regulator to announce changes to how oil and gas licences are granted
-12:30 p.m. ET: Alebrta Environment Minister Shannon Phillips to announce new rules for large emitters
-2:00 p.m. ET: WestJet hosts investor day webcast
Every morning BNN's Managing Editor Noah Zivitz writes a ‘chase note’ to BNN's editorial staff listing the stories and events that will be in the spotlight that day. Have it delivered to your inbox before the trading day begins by heading to www.bnn.ca/subscribe.
