LB Preferreds Downgraded by S&P; Outlook Now Stable

Standard & Poor’s has announced:

  • •We believe that the Canadian banking sector is encountering incremental pressure from headwinds facing the Canadian economy, which is heightening economic risk in the banking system.
  • •We also believe industry risk for the Canadian banking sector is increasing. We expect that intensifying competition for loans and deposits will lead to pressure on profitability growth, especially in banks’ retail businesses.
  • •We are lowering our long- and short-term issuer credit ratings on Laurentian Bank to ‘BBB/A-2’ from ‘BBB+/A-2’, and assigning a stable outlook, following our revision of Laurentian Bank’s stand-alone credit profile to ‘bbb’ from ‘bbb+’. In conjunction with these actions, we are also lowering our issue ratings on Laurentian Bank’s senior unsecured debt to ‘BBB’ from ‘BBB+’ and its nondeferrable subordinated debt to ‘BBB-‘ from ‘BBB’, and its preferred shares and hybrids to ‘BB+’ from ‘BBB-‘.
  • •The stable outlook reflects our expectation that Laurentian will maintain its current credit profile across a range of future scenarios.

Our “weak” business position assessment of Laurentian recognizes the bank’s limited diversity of business lines and somewhat concentrated regional focus. Recent acquisitions to expand Laurentian’s B2B franchise may over time contribute to the resilience of Laurentian’s business position, although integration costs and risks offset the potential benefits in the near term.

We view Laurentian Bank’s funding as “above average” and liquidity as “adequate”, given the bank’s relatively low reliance on more expensive and less reliable wholesale funds; competition for retail deposits will likely continue to impose margin pressure on Laurentian, however.

In distinction to their views on CM but similarly to NA, there is no allusion to LB being systemically important and no expectation of government support in times of stress.

S&P’s prior outlook of Negative on LB was reported on PrefBlog.

LB has three issues of preferreds outstanding: LB.PR.D (Series 9); LB.PR.E (Series 10); and LB.PR.F (Series 11). All have been downgraded from P-2(low) to P-3(high).

One Response to “LB Preferreds Downgraded by S&P; Outlook Now Stable”

  1. […] is a DeemedRetractible with a 6.00% coupon. It was last mentioned on PrefBlog when the LB preferreds were downgraded to P-3(high) by S&P in December, 2012. LB.PR.D has been tracked by HIMIPref™, but has been relegated to the […]

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