'About 700 people will be impacted by this decision': Laurentian CEO on Quebec branches closing

Key Concepts

• Strategic Realignment: Laurentian Bank's decision to focus on its core strength in commercial banking.
• Partnerships and Divestiture: The agreement to sell retail lending to National Bank and operate retail deposits under Fairstone Bank.
• Brand Preservation: Laurentian Bank's brand will be maintained as a subsidiary of Fairstone Bank.
• Technological Advancement: The acquisition of better technology for retail customers through National Bank.
• Branch Closures and Employee Impact: The closure of Quebec branches and the impact on approximately 700 employees.
• Shareholder Approval: The necessity of two-thirds shareholder support for the transaction, with CDPQ's endorsement being crucial.
• Customer Transition: A seamless and customer-centric transition process managed by Laurentian Bank.
• Fraud Prevention: Warnings to customers about potential scams related to the announcement.

Agreement Details and Strategic Rationale

Eric Bravo, President and CEO of Laurentian Bank, discusses a significant agreement aimed at reshaping the bank's business model. The core of this strategy, outlined in their May 2024 strategic plan, is to move away from the "big banks model" and concentrate on their identified strength: commercial banking. This focus is a result of years of successful performance in this sector.

The agreement was structured in this manner due to a strong rapport developed with Fairstone Bank. The outcome for Laurentian Bank's retail customers is described as beneficial, as their retail lending will be transferred to National Bank, a Quebec-based institution. This move is expected to provide customers with a broader scope of products and, importantly, much better technology in terms of banking tools.

Brand and Operational Structure

A key aspect of the agreement is the preservation of the Laurentian brand. The bank will continue to operate under the umbrella of Fairstone Bank as a subsidiary. Eric Bravo will continue to lead the team based in Montreal, viewing this as an opportunity to grow in segments where they excel and create future opportunities.

Impact on Branches and Employees

The agreement necessitates the closure of Laurentian Bank's branches in Quebec. This decision, described as the "sad part" of the strategic shift, will result in approximately 700 employees being impacted by the restructuring of their retail activities. This process is contingent on approval from shareholders and regulatory bodies.

Challenges Faced by a Smaller Bank

Bravo highlights two primary challenges faced by Laurentian Bank as a smaller, focused regional bank:

1. Technological Gaps: A lag and gaps in their technological infrastructure.
2. Customer Acquisition and Digital Investment: The inability to attract new customers and the significant investment required for digital tools, where the return on investment was not justifiable.

These challenges underscore the strategic imperative to focus on their strengths and accelerate their plan through this transaction.

Previous Acquisition Attempts and Current Deal's Value

When asked about previous attempts to find buyers about two years ago, Bravo declined to comment on the specifics of those processes, stating only that they "didn't land anywhere." He expressed strong satisfaction with the current conclusion, emphasizing that an acquisition by a large bank would have meant the end of the institution, which has a history of close to 180 years in Quebec. He believes Fairstone recognized the brand and its value, marking a new chapter with a promising future.

Shareholder Support and Approval Process

The transaction requires two-thirds support from shareholders. Laurentian Bank has secured the voting support of its biggest shareholder, CDPQ (Caisse de dépôt et placement du Québec), a long-time supporter. This endorsement is considered major and signals that the transaction is viewed favorably by shareholders. While other shareholders have not been directly consulted yet, CDPQ's support is deemed the most critical.

Customer Transition and Communication

For both individual and commercial clients, the message is that no immediate action is required. Laurentian Bank will manage the transition and migration process in collaboration with National Bank to ensure a simple and easy experience. All operations will continue as before, with staff remaining in branches.

A dedicated Q&A page on the website and a dedicated phone number have been established for customer inquiries. A crucial warning is issued to customers: Laurentian Bank will not reach out via text or email asking them to click on links. Customers are advised to be wary of scams and to expect communication through official channels like paper mail, the bank's application, or website. Customers are encouraged to wait for official updates as the transition progresses.