Laurentian Bank of Canada (TSX:LB) stock was down 3.72% in early afternoon trading on March 1. Shares are now down 16.5% year over year. The company released its first quarter results on February 28.
Net income climbed 23% year over year to $59.7 million and diluted earnings per share increased 8% to $1.41. Residential mortgage loans also rose 19% year over year. Laurentian reported that it had bought bad $268 million in problematic mortgages that it had discovered in December. The Canada Mortgage and Housing Corporation (CMHC) sold back $88 million in mortgages that no longer qualified for portfolio insurance back to Laurentian.
The process of reviewing hundreds of possibly problematic mortgages is still underway as of the end of the first quarter. Since November 2017 Laurentian leadership has assured investors that it has improved underwriting practices in its B2B Bank and branch network. The mortgages make up a small portion of the bank’s $18.6 billion dollar mortgage portfolio, but anxiety over housing in Canada has persisted since the crisis at Home Capital Group Inc. in the spring of 2017.
Laurentian announced a quarterly dividend of $0.63 per share representing a 5.1% dividend yield. Investors should be wary not to catch a falling knife here as the broader stock market also suffers from a slide. Laurentian stock is now down 13% in 2018 and it will be difficult to generate positive sentiment until its mortgage portfolio issues are resolved.
