CANACCORD SEES LAURENTIAN MAKING GAINS ON BIG SIX

Canaccord Equity Research says Laurentian Bank’s plan to take more risks is a move in the right direction if the company wants to outperform Canada’s Big Six banks.

In a report released Tuesday, analyst Bart Dziarski initiated coverage of Laurentian by giving Canada’s eighth-largest bank by market capitalization a buy rating and a target more than 12.5- per- cent above the stock’s current price. Dziarski set a target price of $ 54 while the Montreal- based bank closed at $ 49.09 Tuesday on the Toronto Stock Exchange. He says Laurentian’s stock is currently trading at a 25-per-cent discount to the Big Six, compared to a historical 13-per-cent discount.

In January, management presented a sevenyear “Transformation Plan” which aims to increase return on investment from its current 12 per cent to 14 per cent in 2019 and 17 per cent by 2022. The crux of this transformation is a greater emphasis on riskier but higher-margin commercial loans and business- to- business mortgages.

Dziarski says Laurentian also has advantages because of its limited investment in oil and gas, a Canadian footprint focused in Quebec and Ontario, and a bigger exposure in residential mortgages. The five-per-cent dividend yield is also attractive, he says.