TORONTO: Laurentian Bank of Canada is slashing its Toronto office space by two-thirds as it leans into a hybrid work model and seeks cost savings amid a broader strategic revamp.
The lender recorded charges of C$13.2mil in the fiscal second quarter “mainly related to the impairment of its premises,” the company said in a statement last Friday.
The reductions wouldn’t affect Laurentian’s Montreal headquarters, corporate offices in Burlington, Ontario, or network of retail bank branches.
Laurentian has about 1,000 employees in Toronto and leases three floors at 199 Bay St, the Commerce Court office tower that formerly housed Canadian Imperial Bank of Commerce’s headquarters.
“For us, hybrid work actually works,” chief executive officer Eric Provost said in an interview.
“We haven’t seen a decline in terms of productivity, and this is what’s important for us. And we’ve been able to measure that and get proof points around that.”
The bank expects to save C$5mil a year by ending its lease on two floors in the building, which employees are only using at a rate of 20%.
Many workers now have longer commutes after moving further afield in the wake of the pandemic, Provost said.
The bank’s approach contrasts with Wall Street firms that made an early push to bring staff back to the office, with JPMorgan Chase & Co CEO Jamie Dimon and Morgan Stanley chairman James Gorman among remote work’s most vocal critics.
Citigroup Inc, HSBC Holdings Plc and Barclays Plc ordered more staffers to report to company offices five days a week as US regulatory changes make it trickier for the finance industry to allow remote work.
Shares of Laurentian tumbled 6.5% to C$24.95 after it reported a net loss of C$117.5mil for the three months through April. The bank earned 90 Canadian cents a share on an adjusted basis in the quarter, higher than the 88-Canadian cent average estimate of analysts in a Bloomberg survey.
The results were affected by impairment and restructuring charges of C$196.8mil, including those related to office space.
Laurentian – Canada’s eighth-biggest bank – held an investor day last Friday in Toronto to unveil a new strategic direction.
The bank has already conducted two recent rounds of job cuts, including eliminating almost 50 roles and doing away with its equity research team earlier this month as it tries to simplify operations.
In April, it sold its retail brokerage business, which had C$2bil of assets under administration.
This is the second strategic overhaul in less than three years for the bank, which announced its previous plan in December 2021 under then-CEO Rania Llewellyn.
After trying to make a deeper push into financial markets, Laurentian said it will now focus on commercial banking – where it has a strong business in inventory financing – and streamline its capital-markets division to focus on fixed-income and foreign-exchange offerings.
“In the last plan, we were still trying to be everything to everyone,” Provost said in the interview.
On retail banking, Laurentian plans to invest more in technology and launch a low to no-fee account option with self-service and digital features.
It will be aimed at middle-class consumers looking for an alternative to Canada’s big six banks, Provost said.
“We need to strengthen our deposit-gathering capabilities,” he said, adding that this will help reduce the bank’s cost of funding.
The lender has almost 60 branches in its home province of Quebec, but those have been limited to offering financial advice for more than five years and don’t have vaults or conduct transactions.
The CEO said it will look to cut the square footage of many locations as leases come up for renewal. The plan will take three to five years to execute, he said, and the hope is to generate double-digit growth in diluted earnings per share as well as adjusted return on equity.
The bank also aims to improve its efficiency and post positive adjusted operating leverage, according to the statement.
Last year Laurentian failed to find a buyer after putting itself up for sale, and later replaced Llewellyn – the first woman to lead a major domestic bank in Canada – following a days-long mainframe outage, which affected customer deposits, bill payments and other services. — Bloomberg
