Laurentian only North American bank with union

Labour talks mean plans delayed: CEO

Laurentian Bank of Canada is facing a unique problem for a North American bank: labour trouble.

Approximately 38 per cent of Montreal-based Laurentian’s employees are unionized, making it the only bank on the continent with organized labour, according to the president of the employees’ union, Sepb-québec.

But the last contract between Laurentian and its unionized employees expired on Dec. 31, 2017. And on Tuesday, the bank said the impasse has bogged down its plan to have branches focus on offering financial advice, as well as move its customers towards online banking.

“The uncertainty associated with the renewal of the collective bargaining agreement ... is impacting this portion of the plan and, for now, is forcing us to review the pace of the conversion to advice-only branches,” the bank said in a third-quarter report to shareholders.

During a conference call with analysts, Laurentian president and chief executive officer François Desjardins added that, until the bank knows the outcome of the labour talks, “we must delay investment in technology and real estate through this sector, including the migration of accounts onto the new core banking platform.”

“We are in negotiations with very slow progress,” he said.

In an email, Loïc Breton, president of the Sepb-québec union that represents Laurentian workers, said the two sides have been in conciliation since March 2018, and that the group had met with the bank fewer than 10 times, “not for lack of availability on our part.”

Breton said that four more days of conciliation have been set aside this month, starting next week.

“The employer has yet to formally reply to our very first list of demands for the renewal of the collective agreement,” he added. “The union did formally reply to the employer’s initial list of demands.”

Breton said the union — whose members work as tellers and financial advisers, among other jobs — has not taken a strike vote, “and none is being considered at this point.”

Laurentian, which has $47 billion in balance-sheet assets and more than 3,700 employees, has been taking steps to digitize and simplify its operations to try to keep up with the pace of change in the banking sector. It is not alone in doing so either, as Canada’s big banks have been investing billions in technology.

In answering an analyst’s question, Desjardins acknowledged that customers “are not really going to branches as they were in the 1980s or ’70s,” leading Laurentian to shift “the physical attributes of the branches, and also the people that work there and what they do.”

But, he added, a large portion of its Quebec branch network is under collective agreements that have yet to be sorted out.

“So we had hoped that this would be behind us by now, and it still isn’t,” Desjardins said. “So for the moment, before putting more money and investments in technology and in real estate, we’d like to know what the rules are.”

As of the end of 2017, Laurentian had merged 46 branches and converted 23 others to advice-only outlets. It also merged another branch in its first quarter and said it plans to merge another seven by the end of its fiscal 2018.

Laurentian’s tally of bank branches remained unchanged from its second to third quarter at 103. The bank, however, says it is making progress on its goal of “becoming a renewed financial institution by 2022.”

Even so, Laurentian cautioned in its results that renegotiating the collective agreement “could result in higher costs which could have a material effect on our business, results of operations and financial condition.”

The situation did not pass unnoticed by analysts.

“Unsuccessful renegotiation of the union contract has also clouded the revenue growth outlook, as we suspect employees are awaiting clarity prior to embracing the advice-only format,” National Bank Financial analyst Gabriel Dechaine said in a note.

On the brighter side, Laurentian noted in its report that the issues identified with mortgages sold to the Canada Mortgage and Housing Corp. and to an unnamed third-party purchaser, which had been hanging over the bank since late last year, “have now been resolved, with no impact on our customers.”

“If I have one key message for you, it’s that we’re now back on plan,” Desjardins said.

Laurentian also reported on Tuesday a profit of $54.9 million for its third quarter ended July 31, which was almost unchanged from a year ago. The bank’s CEO said during the conference call that the lender needs to keep migrating its branch network towards advice and adding financial advisers to help it generate more customers and revenue.

“From my perspective, this quarter’s results are below what we are aiming for,” Desjardins said. “Obviously, I would prefer to report better financial performance, but all things considered, I am happy with the progress we are making.”

Laurentian Bank employees have been unionized since 1967. Sepb-quebec also represents about 4,000 workers at Desjardins Group, which is a credit union.