Adjusting to Adjusting to Succeed Succeed Raym ond Raym ond McManus McManus President & CEO President & CEO National Bank Financial Canadian Financial Services Conference Montreal - April 7, 2004
How we compare How we compare Ì LBC ranks 7 th am ong 416 Total Assets ( $ B) Canadian chartered banks in Q1 2004 316 285 281 265 term s of assets 81 Ì I n term s of operating 17 14 4 revenues, LBC & CW B lag all CWB ATB LBC NBC BMO Scotia CIBC TD RBC other banks as they lack Total operating revenue as a % of ave assets Q1 2004 4,68% critical m ass in w ealth 4,19% 4,14% 3,65% 3,55% 3,51% m anagem ent & brokerage 3,05% 2,91% activities w hich are off balance sheet activities LBC CWB BMO Scotia TD RBC CIBC NBC Ì P&C’s operating revenues P& C Total operating revenue as a % of generate slightly better ave assets Q1 2004 5,67% 4,87% 4,80% 4,81% 4,44% spreads. W e expect this 4,20% 3,54% 3,05% sector to im prove over the next quarters as w e are im plem enting our 3-year CWB LBC BMO RBC CIBC Scotia NBC TD plan TD & CIBC P&C results are calculated over average loans which explains the higher spreads 2
How we compare How we compare Ì LBC ranks second best in I nterest Revenues as a % of ave assets Q1 2004 5,52% 4,88% 4,34% term s of ability to generate 3,73% 3,76% 3,28% 3,23% 2,93% interest revenues Ì How ever, due to its size NBC RBC BMO TD CIBC Scotia LBC CWB and its history of acquiring I nterest Expenses as a % of ave assets Q1 2004 3,06% 3,19% sm all trust com panies, 2,25% LBC’s funding cost is the 1,79% 1,73% 1,65% 1,50% 1,42% highest in the industry Ì Part of LBC’s 3-year plan is BMO NBC RBC CIBC TD Scotia CWB LBC Personal Dem and & Notice Deposits to m odify its portfolio m ix as a % of P& C ave assets Q1 2004 52% to decrease its over reliance 34% 31% on fixed term deposits and 26% 27% 22% 14% increase dem and & notice 5% deposits CWB LBC NBC RBC Scotia CIBC BMO TD 3
How we compare How we compare Ì PCLs are at an acceptable PCL as a % of loans,Bas & reverse Repos Q1 2004 0.38% 0.38% 0.38% level 0.31% 0.25% 0.04% Ì Our cost reduction program has brought non interest TD RBC BMO CWB LBC Scotia CIBC NBC -0.05% expenses in line w ith the rest -0.27% of the industry Non-I nterest Expenses as a % of 2,98% 2,75% ave assets Q1 2004 2,66% 2,32% 2,30% 2,24% Ì Specifically, P&C non interest 1,98% 1,50% expenses are even low er at 18 p.b. under the industry average CWB Scotia LBC TD BMO RBC CIBC NBC P&C Non-I nterest Expenses as a % of ave assets Q1 2004 Ì P&C’s efficiency ratio w hich 3.29% 2.94% 2.84% 2.74% 2.70% 2.64% 2.46% ranks 8 th at 6 9 .6 % is not 1.50% necessarily the best m etric to evaluate the bank’s level of expenses CWB LBC BMO CIBC RBC Scotia NBC TD 4
Smart Moves - Strategic Refocusing Strategic Refocusing Smart Moves - Mar 0 4 B2 B Trust Sale of Privatization branches outside Dec 0 3 Feb 0 4 Quebec Reduction in Mgt Sale of Union Com m ittee VI SA cards arbitration outside process Quebec Aug 0 3 June 0 3 Official 3 -year start of R. repositioning Expense Feb 0 3 plan McManus Reduction Dec 0 2 Program Elim ination of Holding Aug 0 2 Co. concept 5
Our 3-year plan Our 3-year plan W e w ill need the next three years 10% ROE 8% to restore the Bank’s grow th and 5% 4% profitability, and enable it to build all of its operations on truly solid foundations 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 pro forma Ì Clear vision Minim um objectives EPS BI S Capital 3.13 Ì Focussed 15.2 ratios 2.37 13.0 13.0 13.0 approach 10.2 9.5 9.5 9.5 1.44 1.07 Ì Transparen- cy & open- m indedness 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2003 pro 2004 2 0 0 5 2006 Ì Accounta- pro forma forma bility Efficiency PCL ( as a % of ave assets) 0.25% 0.25% 0.24% 78% 77% 73% 69% 0.22% BACK to Basics 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 pro forma pro forma 6
Performance to date on track Performance to date on track 2 0 0 4 Annual Perform ance Measure Q1 2 0 0 4 Target Return on Equity 6% 5% Earnings per share $0.43 $1.44 Total revenue $ 120.5 M $ 503 M Efficiency Ratio 77% 77% Capital Ratios 10.7% Min of 9.5 % - Tier 1 capital ratio 16.0% Min of 13.0 % - Total capital ratio Credit Quality ( PCL ratio) 0.24% 0.22% 7
Performance and Capital ratios Performance and Capital ratios support dividend support dividend Total Capital Ratio Superior total 1 5 .2 1 6 .0 1 3 .5 1 3 .4 1 3 .3 capital ratio 1 2 .4 1 2 .3 1 2 .4 Highest LBC dividend yield in 6 the industry at Bank 4.06 % in Q1 04 2 0 0 1 2 0 0 2 2 0 0 3 Q1 2 0 0 4 W ill m aintain 1.16 1.16 Com m on Share dividends 1.06 dividend at 0.92 0.92 0.94 0.90 0.76 0.76 0.76 0.76 current level if financial targets are m et and Target capital ratios payout: 40-50% rem ain strong 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 8
2004 Achievements to Date 2004 Achievements to Date I n 2003- Roll-out of the Entrepreneurship Ì m odel throughout the branch netw ork 2 0 0 4 the priority Developm ent of a new LBC branch Ì w as given layout and com pletion of an optim ization plan for the branch to the netw ork strategic Launch of our new advertising Ì repositio- cam paign - DARE ! ning of our Sale of our $ 2 8 M VI SA credit card Ì portfolio outside Quebec for $ 4 .6 M retail gain operations Proposed privatization of B2 B Trust Ì expected to close in June 2 0 0 4 9
Retail Financial Services Retail Financial Services New Laurentian Total 3 . 8 8 % Operating operating Bank Signature revenues as revenue as a % of ave 3 . 4 6 % 3 . 3 6 % a % of assets Optim ization of assets Q1 2004 2002 2003 the branch increased in netw ork PCL as a Q1 2 0 0 4 % of 0 . 2 7 % average NI E loan Entrepreneurship 0 . 2 5 % increased 0 . 2 3 % Business Model as w ell but Q1 2004 2003 2002 at a slow er Retailer pace due to NI E as a 3 . 1 0 % approach to % of ave our cost 2 . 8 5 % assets client servicing reduction 2.61% program Q1 2004 2003 2002 10
Retail Financial Services Retail Financial Services Market position Market position 6 7 1 Ranking by num ber of branches in Quebec Q1 2 0 0 4 LBC 3 6 8 ranks 3 rd Q3 2003 Quebec Market Share LBC Desjardins Other Banks in term s 1 5 1 Retail loans 5.2% 44.0% 50.8% 1 4 8 1 3 7 1 3 4 8 2 Commercial loans 3.8% 31.0% 65.2% 4 5 of Deposits 6.2% 45.6% 48.1% Source: Bank of Canada, Statistics Canada and RBC BNC BLC BMO CI BC TD/ CT num ber Scotia Desjardins Banks’ internet site Source: Bank’s internal reports of Ranking of m ost adm ired financial institutions Survey done branches Good 70 in Quebec in 6 1 60 60 59 60 2004 by 5 7 5 6 5 5 55 5 4 in Léger 4 9 50 Marketing. 4 3 42 4 1 4 1 Quebec 40 For LBC it 35 33 represents a 30 30% jum p 20 over last 10 year’s results 0 Bad NBC BMO Desjardins LBC CIBC RBC Scotia TD/CT 2003 2004 11
Retail Financial Services Retail Financial Services New Laurentian Bank Signature - the new branch concept New Laurentian Bank Signature - the new branch concept New standards have been established w ith respect to the design of our branches in order to im prove interaction w ith our clients 12
Retail Financial Services Retail Financial Services Optimization - Working towards the Right Branch Network Optimization - Working towards the Right Branch Network 50% of our High branch Each M a r k e t Pot e nt ia l network Reconfigure I nvest branch will be I nvest Maintain w as classified impacted according by the plan to 4 over 3 quadrants Consolidate Maintain years & we expect to Low open 4 Low High branches Branch Profitability by 2004 13
Retail Financial Services Retail Financial Services Entrepreneurship Business Model Business Model Entrepreneurship Five specific attributes score Proportion of clients w ho claim s... significantly The level of 160 150 higher: satisfaction 140 • Honoring a of our commitment 120 clients • Waiting time at 100 100 N ov 0 2 = 1 0 0 100 w ithin the the counter Nov. 02 • Staff politeness pilot 80 Nov. 03 and courtesy project has • Staff ability to 60 47 answer increased 40 questions over the • Staff knowledge 20 of the bank ’s last 12 products and 0 m onths services Satisfaction has Satisfaction has increased de cr e a se d Source : Ad Hoc Research, telephone survey # 1 conducted from Novem ber 6 to 17, 2002, am ong 757 clients ; 14 telephone survey # 2 conducted from Novem ber 3 to 16, 2003, am ong 503 clients.
Retail Financial Services Retail Financial Services Retailer approach to client servicing - The New LBC Brand Retailer approach to client servicing - The New LBC Brand A new challenger w ith a new attitude Dare ! Dare ! Considered by the French Journal La Presse as a very good cam paign 15
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